U-1/A

                                                                File No. 70-9771



                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                 Second Amended

                           APPLICATION OR DECLARATION

                                       on

                           AMENDMENT NO. 2 TO FORM U-1

                                      under

                 The Public Utility Holding Company Act of 1935


               (Name of company or companies filing this statement
                  and addresses of principal executive offices)

                              THE SOUTHERN COMPANY
                           270 Peachtree Street, N.W.
                             Atlanta, Georgia 30303

MOBILE ENERGY SERVICES COMPANY, L.L.C.     MOBILE ENERGY SERVICES HOLDINGS, INC.
      1155 Perimeter Center West                 1155 Perimeter Center West
        Atlanta, Georgia 30338                     Atlanta, Georgia 30338


                (Name of top registered holding company parent of
                          each applicant or declarant)

                              The Southern Company
                            Tommy Chisholm, Secretary
                           270 Peachtree Street, N.W.
                             Atlanta, Georgia 30303

                   (Names and addresses of agents for service)

        The Commission is requested to mail signed copies of all orders,
                         notices and communications to:

      Gale E. Klappa                            Mark F. Sundback
 Executive Vice President                    Andrews & Kurth L.L.P.
   The Southern Company            1701 Pennsylvania Avenue, N.W., Suite 300
270 Peachtree Street, N.W.                   Washington, D.C. 20006
  Atlanta, Georgia 30303

                                John D. McLanahan
                             Robert P. Edwards, Jr.
                              Troutman Sanders LLP
                     600 Peachtree Street, N.E., Suite 5200
                           Atlanta, Georgia 30308-2216











Item 1.
         Mobile Energy Services Company, L.L.C. ("Mobile Energy"), Mobile Energy
Service Holdings, Inc. ("Holdings"), both of 1155 Perimeter Center West,
Atlanta, Georgia 30338 (collectively the "Debtors"), and The Southern Company
("Southern"), 270 Peachtree Street, N.W., Atlanta, Georgia 30303, a holding
company registered pursuant to the Public Utility Holding Company Act of 1935,
as amended (the "Act") (the three of which are the "Applicants") file this
second amended and restated application and declaration dated August 28, 2002
(the "Second Amended Application") in order for Applicants to obtain that
authorization necessary under the Act to perform those acts and consummate such
transactions contemplated as part of the solicitation and approval process and
implementation of a proposed Third Joint Plan of Reorganization, as Modified,
Proposed by Mobile Energy Services Company, L.L.C. and Mobile Energy Services
Holdings, Inc. ( the "Third Plan, as Modified") to be filed by the Debtors in
their Chapter 11 bankruptcy cases. Specific provisions of the Act and facts
involving the Applicants are discussed in Item 3, Part B., infra. The Third Plan
as Modified will be subject to comment by interested parties, including
creditors, in the course of review by the United States Bankruptcy Court for the
Southern District of Alabama (the "Bankruptcy Court"). The Third Plan as
Modified and the Second Amended Disclosure Statement as Modified, Accompanying
the Third Plan as Modified (the "Second Amended Disclosure Statement as
Modified"), are attached as exhibits hereto. The Third Plan as Modified
supercedes the First Amended Joint Plan of Reorganization dated September 15,
2000 ("First Plan"), the Second Plan of Reorganization filed on February 21,
2001 and the Second Plan of Reorganization, as Modified, filed on April 25,
2001, although it is very similar to those prior plans.
         As was the case for the initial U-1 application and declaration filed
by the Applicants on October 16, 2000 (the "Application") and the amended
application and declaration filed on April 11, 2001 (the "First Amended
Application"), the purposes of the transactions described herein are to (1)
permit Mobile Energy and Holdings to reorganize and emerge from bankruptcy; (2)
maximize the recovery of Mobile Energy's bondholders on their capital
investment; (3) eliminate the direct and indirect equity ownership of Southern
in Mobile Energy and Holdings; and (4) allow Mobile Energy to operate as a
qualifying facility under the Public Utility Regulatory Policies Act of 1978
("PURPA") after the effective date of the Third Plan as Modified, which will
cause Mobile Energy and Holdings to no longer be subject to the Act.
         The Third Plan as Modified has been precipitated by a number of
circumstances. The contemplated reactivation of pulp mill operations by Jubilee
Pulp Inc. (the "New Pulp Mill"), part of the First Plan, has not materialized.
The conditional settlement agreement with Kimberly Clark Corporation (the "KC
Settlement"), another part of the First Plan, has been rendered void ab initio
because of the failure of certain conditions precedent. Additionally, natural
gas prices during the past year reached extremely high levels relative to
previous forecasts and forecasters significantly increased their price estimates
for future periods, which made it more difficult to proceed with a planned 165
megawatt cogeneration project (the "Cogen Project") than previously
contemplated. Therefore, the Second Plan built upon many of the features
incorporated in the First Plan, while eliminating the presence of the New Pulp
Mill, the KC Settlement, or the development and operation of the Cogen Project.1
         The Third Plan as Modified is supported by the Bondholder Steering
Committee, whose members collectively hold in excess of 70% of the taxable bonds
and in excess of 64% of the tax-exempt bonds of Mobile Energy. The Bondholder
Steering Committee includes Wachovia Bank, National Association, formerly known
as First Union National Bank, the indenture trustee for each of the two bond
issuances, as an ex officio member. The indenture trustees represent all of the
bondholders.
         Upon implementation of the Third Plan as Modified (as was true under
the prior plans), the ownership interests of Southern and its affiliates in the
Debtors will be terminated. The effect of Southern's disaffiliation with the
Debtors is beneficial to Southern because Southern has written off its
investment in the Debtors for financial accounting purposes and it removes a
drain on Southern's management's time and attention. Southern and its affiliates
will have substantially reduced obligations going forward with respect to Mobile
Energy and Holdings.
         Mirant Services L.L.C ("Mirant Services"), previously known as Southern
Energy Resources, Inc. ("Southern Energy Resources"), operated Mobile Energy's
facilities through March 31, 2001. Southern guaranteed certain of Mobile
Energy's obligations to its existing customers in 1995, and such guarantees will
remain in place but Mobile Energy will indemnify Southern against any liability
under those guarantees.
         Petitioners request authorization necessary for solicitation2 regarding
the Third Plan as Modified pursuant to Sections 11(g) and 11(f) of the Act, and
authorization necessary under Section 12(e) to solicit consents and approvals
necessary from the holders of securities of Mobile Energy and Holdings, along
with such other ancillary and related authorizations as are necessary to
implement the Third Plan as Modified, as more fully described below in Item 3.
The Debtors expect that implementing the Third Plan as Modified will not have a
negative or positive material impact on the balance sheet of any entity in the
Southern Company system as of the effective date of the Third Plan as Modified.
A.       Overview
1.       Timing of the Transactions under the Third Plan as Modified

         Mobile Energy and Holdings cannot continue to operate as Chapter 11
Debtors indefinitely. Their resources are limited. Expeditious review would be
consistent with the sound policy goals of reducing the period of uncertainty and
maximizing recovery for the creditors. Without the Third Plan as Modified,
bondholders will not enjoy the level of recoveries reflected in the Third Plan
as Modified. Based upon an analysis contained in the Second Amended Disclosure
Statement as Modified (see Article XI thereof), the Debtors believe that parties
in interest will receive more under the Third Plan as Modified than they would
receive in a Chapter 7 liquidation of the Debtors.
2.       Background and History

a.       Identification of Entities

         Southern is a public utility holding company registered under the Act
which holds the securities, directly or indirectly, of six operating public
utility companies.3 It also holds, directly or indirectly, the securities of
energy-related companies, Exempt Telecommunications Companies, Exempt Wholesale
Generators and Foreign Utility Companies and authorized intermediate and special
purpose subsidiaries. The integrated Southern electric system provides electric
power in the majority of the states of Alabama and Georgia and portions of
Florida and Mississippi, operating centrally dispatched electric power
generation transmission and distribution assets. As of June 30, 2002, Southern's
consolidated capitalization (excluding current portions) was approximated $19
billion, comprised of 42.7% common stock equity, 15.9% preferred stock and
preferred securities, and 41.4% debt. Including current portions, as of June 30,
2002, Southern's consolidated capitalization was $23 billion, comprised of 36.5%
common stock equity, 13.6% preferred stock and preferred securities, and 49.9%
debt.4 b. History

i.       Through The Creation of Mobile Energy

         The facilities at issue are located inside a large pulp, paper and
tissue manufacturing complex in Mobile, Alabama (the "Industrial Complex"). Some
of the facilities now owned by Mobile Energy were originally constructed by the
Scott Paper Company in the early 1960s; additional generation capacity was added
in the mid-1980s; and a new recovery boiler was added in 1994. Some of the
facilities (e.g., recovery boiler capacity) were financed with Industrial
Revenue Bonds ("IRB") issued by the Industrial Development Board ("IDB") of the
City of Mobile, Alabama, and leased to Scott Paper. In 1985, the Federal Energy
Regulatory Commission determined the then-existing facilities constituted a
qualifying cogeneration facility under PURPA.5
         In 1993, Scott announced that it was interested in redeploying the
significant capital invested in the energy infrastructure of its enormous mill
operations in the Industrial Complex. To achieve that goal, Scott offered to
sell the energy facilities, black liquor recovery equipment, and related assets,
permits, and agreements (the "Energy Complex"). Negotiations resulted in a
proposal to sell all right, title and interest of Scott in the Energy Complex to
Holdings. On December 13, 1994, the Commission authorized Southern to organize
Holdings as a new subsidiary and acquire all of its common stock. That new
entity would then enter into an asset purchase agreement with Scott for the
Energy Complex. Upon the acquisition of the Energy Complex, the new entity
became an "electric utility company" within the meaning of Section 2(a)(3) of
the Act.6 Holdings entered into three separate 25 year energy services
agreements with the owners of each of the pulp, paper and tissue mills within
the Industrial Complex, pursuant to which Holdings would provide power and steam
processing services to each of those mills and liquor processing services to the
pulp mill (the "Energy Services Agreements"). The December 13, 1994 Commission
order also recognized that under the terms of the acquisition documents,
Holdings and Scott agreed to indemnify each other with respect to environmental
claims relating to the Energy Complex and each of the three mills to the extent
such claims arose after closing of Holdings' acquisition of the Energy Complex.
Southern proposed to guarantee uninsured claims against the new entity under the
terms of the environmental indemnity agreements in an aggregate amount not to
exceed $15 million, as escalated by a measure of inflation.7
         On July 13, 1995, the Commission issued further authorizations relevant
to Mobile Energy and Holdings. Particularly, the Commission authorized Southern
and Holdings to organize Mobile Energy as a limited liability company subsidiary
of Holdings. The Commission also authorized Holdings to transfer ownership of
the Energy Complex and related assets to Mobile Energy, which would assume all
liabilities and obligations of Holdings relating to the Energy Complex.8 The
Commission also authorized issuance by Mobile Energy of First Mortgage Bonds in
one or more series on or before December 31, 1995 with final maturities of from
10 to 22 years from financial closing and a weighted average life from 12 to 15
years. The Commission's July 13, 1995 Order also discussed the tax-exempt bonds
and other sources of capital.9
     Mobile Energy was formed as a limited liability company in the State of
Alabama on July 13, 1995. Mobile Energy acquired ownership from Holdings of the
Energy Complex on July 14, 1995.
ii.      Ownership Structure upon the Creation of Mobile Energy

         At the time of Mobile Energy's formation, Mirant Services' predecessor
Southern Energy Resources became the holder of 1% of the equity interests in
Mobile Energy, which 1% interest has now been transferred to Holdings. Mobile
Energy owns and operates the Energy Complex. Mobile Energy provides power and
steam processing services to the mills located in the Industrial Complex and
processed certain chemicals that were the by-product of the pulp mill, until the
pulp mill ceased producing pulp in September 1999. Prior to the replacement of
Mirant Services as operator as detailed below, Mobile Energy's facilities were
to be operated by Mirant Services pursuant to the Facility Operations and
Maintenance Agreement between Mobile Energy and Mirant Services dated as of
December 12, 1994 (the "Mobile Energy Operating Agreement"). As stated above,
the Mobile Energy Operating Agreement terminated on March 31, 2001. Although the
Mobile Energy Operating Agreement has terminated, Mobile Energy is obligated to
reimburse Mirant Services for certain amounts incurred by Mirant Services in
connection with its operation of the Energy Complex through March 31, 2001.
iii.     Events Precipitating the Bankruptcy Filings

         The mill facilities in the Industrial Complex are vast, covering more
than 700 acres, representing Scott's second largest production facility in the
world measured by tonnage. As noted above, the Energy Complex was constructed
specifically to serve the Scott mill operations. Scott in late 1995 was merged
into a subsidiary of Kimberly Clark Corporation, and the resulting entity was
renamed Kimberly Clark Tissue Company ("KCTC"). As a consequence of the merger,
KCTC became Mobile Energy's largest customer, representing approximately 75% of
Mobile Energy's revenues in 1998. Of that amount, KCTC's pulp mill accounted for
approximately 50% of Mobile Energy's revenues. The pulp mill also provided 85%
of the fuel used by the Energy Complex in the form of biomass and black liquor.
However, in 1998 KCTC notified Mobile Energy that KCTC would close its pulp mill
and terminate its contract to purchase energy services from Mobile Energy for
the pulp mill effective September 1, 1999.
         In sum, closure of the pulp mill meant that the Debtors' revenues would
be significantly reduced while unit costs of electricity produced in the Energy
Complex would be increased. Obviously, the pulp mill closure meant that Mobile
Energy's largest purchaser would cease buying energy services and Mobile Energy
would lose the related revenue. Further, closure of the Pulp Mill also altered
the demand for steam relative to the demand imposed on the Energy Complex for
electricity, with the result that Mobile Energy's cost of electric power
generation was increased. Closure of the KCTC pulp mill meant that the
by-products of pulping operations which had served as a plentiful and
inexpensive source of fuel for the Energy Complex (i.e., biomass and black
liquor) would no longer be available.
         On December 7, 1998, KCTC served on Mobile Energy a Notice of
Arbitration (the "Arbitration") concerning matters related to KCTC's announced
intention to cease pulping operations at the Pulp Mill and to institute a "Pulp
Mill Closure," within the meaning of the Master Operating Agreement, which
Debtors disputed. In response, on December 15, 1998, the Debtors brought an
action in Alabama State court to enjoin the Arbitration. After a hearing on
January 8, 1999, a temporary restraining order against the Arbitration was
issued to stop it from going forward until January 15, 1999.
iv.      The Bankruptcy and Its Aftermath

         The consequences anticipated from the loss of the KCTC pulp mill
operations triggered the filing by Mobile Energy and Holdings of cases under
Chapter 11 of the United States Bankruptcy Code on January 14, 1999. Both
entities filed as debtors in possession continuing their operations; as a
result, no trustee or receiver has been appointed by the Bankruptcy Court. With
the filing of the Chapter 11 cases, the Arbitration and the Debtors' December
15, 1998 action to enjoin the Arbitration were automatically stayed. On the
Petition Date, the Debtors commenced an adversary proceeding against KCTC in the
Bankruptcy Court seeking, among other things, money damages and/or rescission of
Mobile Energy's contracts with KCTC.
         The Bankruptcy Court ultimately ordered that the issues of whether KCTC
had effected a "Pulp Mill Closure" (as defined in the Master Operating
Agreement), and if so, whether Mobile Energy could reinstate the energy services
agreement, under the contracts between KCTC and Mobile Energy be arbitrated, and
a hearing was held before the arbitrator in July 1999. In August 1999, the
parties requested the arbitrator to postpone the announcement of a decision
pending the outcome of settlement discussions between Mobile Energy and KCTC.
Those negotiations led to the KC Settlement Agreement and in the filing with the
Bankruptcy Court of the Motion to Compromise Controversy Involving KCTC on
December 31, 1999, described in Item 1, Part A. 3.a., infra. The KC Settlement
Agreement was approved by the Bankruptcy Court; however, it contained several
conditions and provided that if these conditions were not satisfied that it
would become void ab initio, i.e. it would be treated as if it were never
entered. As discussed below, the KC Settlement Agreement ultimately was unwound
due to a failure of conditions.
         Building upon the progress represented by the KC Settlement Agreement,
the participants, including the Debtors, the Bondholder Steering Committee, KCTC
and Mirant Corp., formerly known as Southern Energy, Inc., subsequently
negotiated the First Plan. The First Plan contemplated resumption, on a reduced
scale, of pulp mill operations under different ownership (thereby increasing
revenues Debtors would have received and providing an important source of fuel
for Mobile Energy's facilities), a more efficient use of resources (e.g., a
recovery boiler) within the Energy Complex (enhancing the cash stream accessible
by Debtors), the possible expansion of electric generating capacity through the
Cogen Project, involving the purchase of a combustion turbine and development of
a 165 megawatt facility (requiring additional investment but also offering the
potential of significantly increased cash flows), and a revised agreement to
provide energy services to the tissue mill within the Industrial Complex.
         Under the First Plan and as part of the KC Settlement, Mobile Energy
would have been paid approximately $30 million by KCTC, would have received real
property and easements necessary to effectuate the First Plan, while Mobile
Energy would have provided KCTC with a warehouse, the No. 6 Power Boiler and a
security interest in certain wires. Additionally, a "New Tissue Mill ESA"
between Mobile Energy and KCTC was premised on the KC Settlement, which would
have superseded the prior Tissue Mill ESA.
         Further, the First Plan contemplated expansion of electric generation
within the Industrial Complex, pursuant to the MESC Cogeneration Development
Agreement (the "Cogeneration Development Agreement"), as amended by CDAA No.1,
as described more fully in Item 1, Part B, infra.
         Additionally, the First Plan incorporated the development and operation
of a new 800 short ton per day pulp mill to be developed with the Industrial
Complex. Jubilee Pulp and Mobile Energy entered into a term sheet concerning
such a pulp mill, and obtained an option from KCTC to acquire certain property
necessary to construct and operate such a pulp mill. Ultimately, development of
the pulp mill did not occur, the KC Settlement Agreement failed because of a
failure of conditions, and the First Plan had to be abandoned. v. Procedural
Developments Contemporaneous With Or Subsequent to the Filing of the Application

         The First Plan and Disclosure Statement Accompanying the First Amended
Joint Plan of Reorganization (as amended and modified, the "Disclosure
Statement") were filed by the Debtors and the Bondholder Steering Committee on
September 15, 2000. As noted above, the First Plan incorporated the terms of the
conditional KC Settlement Agreement. The Application relating to the First Plan
and the Disclosure Statement were filed on October 16, 2000.
     A hearing on the Disclosure Statement was originally set for October 19,
2000. On October 12, 2000, S.D. Warren Company Alabama, L.L.C ("S.D. Warren")
filed an objection to the Disclosure Statement.10
         Thereafter, the Debtors, the Bondholder Steering Committee and S.D.
Warren engaged in discussions regarding the possible resolution of the
objection. In order to allow these discussions to proceed, the Debtors requested
on several occasions that the Court continue the hearing on the Disclosure
Statement. However, after negotiations taking place across several weeks, it
became clear that Debtor, the Bondholder Steering Committee and S.D. Warren
could not find common ground. In addition, it also become clear that certain
conditions to the KC Settlement Agreement could not be satisfied, with the
result that the KC Settlement Agreement, which formed the basis of the First
Plan, could not be finalized.
         As a result, on February 21, 2001, the Second Plan and the First
Amended Disclosure Statement were filed with the Bankruptcy Court. The Second
Plan contemplated the continued operations by the Debtors of the Energy Complex
and the assumption of the Debtors' prepetition energy services agreements with
S.D. Warren and Kimberly Clark Corporation (as successor to KCTC) ("Kimberly
Clark"). It did not contemplate any settlement with S.D. Warren or Kimberly
Clark, nor did it envision a renewal of operations of the New Pulp Mill.
     S.D. Warren and Kimberly Clark filed objections to the First Amended
Disclosure Statement. The Debtors subsequently filed modifications to the Second
Plan and the First Amended Disclosure Statement on April 25, 2001, in part to
address certain of the objections raised by S.D. Warren and Kimberly Clark.
         On May 21, 2001, the Bankruptcy Court held a hearing on the objections
to the First Amended Disclosure Statement. At that hearing, S.D. Warren withdrew
its objection and the Bankruptcy Court overruled the objections of Kimberly
Clark, conditioned on the Debtors making further modifications to the First
Amended Disclosure Statement as announced in court. The Bankruptcy Court further
conditionally approved the First Amended Disclosure Statement, subject to the
review and comment of the Commission and continued the hearing on the First
Amended Disclosure Statement until July 17, 2001.
         On February 7, 2001, the Debtors filed a motion with the Bankruptcy
Court seeking approval of Operational Energy Corp ("OEC") as interim operator of
the Energy Complex in place of Mirant Services, both in an effort to pursue
reduced O&M costs and consistent with contractual obligations with Mirant, as
described below. The motion to approve OEC as operator was approved by the
Bankruptcy Court on March 16, 2001.
         S.D. Warren and KC have reserved their rights to dispute Mobile
Energy's ability to replace the operator of the Energy Complex with OEC,
although S.D. Warren did not oppose the relief requested in the motion heard on
March 16, 2001.
         Because conditions precedent to the full implementation of the KC
Settlement were not realized, and therefore the KC Settlement is by its terms
void ab initio, the arbitration (described in Item I.A.2.b.iv, second paragraph)
between Mobile Energy and Kimberly Clark11 that had been suspended in the wake
of negotiations was resumed. The arbitrator's ruling was unsealed on March 16,
2001. The arbitrator found that there was a Pulp Mill Closure on September 1,
1999 and that KC had taken actions on site that give the right for Mobile Energy
to reinstate the pulp mill Energy Services Agreement as of September 1, 1999.
Consistent with its discussions with KC in 1998 that Mobile Energy intended to
reinstate the Pulp Mill ESA and the MOA because of KC's activities on the Real
Property, on March 28, 2001, Mobile Energy sent a notice to KC that the Pulp
Mill ESA and the MOA were reinstated as of September 1, 1999. Despite the fact
that the Pulp Mill ESA has been reinstated, the chemical pulp mill is no longer
operating and has been demolished.
         On April 23, 2001, Mobile Energy initiated an arbitration proceeding
against KC seeking an award of the approximately $93 million (through December
2001 and inclusive of interest) of Demand Charges Mobile Energy believes is owed
by KC by virtue of the reinstatement of the Pulp Mill ESA. The hearing on this
matter was concluded in October 2001, and a decision was rendered in January
2002. The arbitrator determined that Kimberly-Clark was liable for an additional
approximately $940,000 per month in Demand Charges beginning in March 2000 and
continuing through December 2001. Kimberly Clark has paid the disputed Demand
Charges awarded by the arbitrator.
         On April 24, 2001, Mobile Energy filed another arbitration proceeding
(the "Energy Charge Arbitration") to include a declaratory request that certain
modifications made to the Energy Complex postpetition were proper, that certain
processing charges collected from S.D. Warren were proper and a claim against
Kimberly Clark for increased demand and processing charges as a result of these
modifications. On June 12, 2001, Mobile Energy amended this second arbitration
against Kimberly Clark and S.D. Warren and added a claim seeking to recover the
capital costs for these modifications (approximately $18 million) pursuant to
the provisions of the underlying agreements. After a settlement was reached with
S.D. Warren, as described in more detail below, the hearing on the Energy Charge
Arbitration was held in October 2001, and the arbitrator found that
Kimberly-Clark should pay the disputed processing charges and the disputed
capital costs for the modifications to the Energy Complex. Kimberly Clark has
paid the amounts determined by the arbitrator in the Energy Charge Arbitration
to be due and owing.
         The adversary proceeding against KC instituted by Debtors in the
Bankruptcy Court (described in Item I.A.b.iii) has also been reactivated and on
June 6, 2002, all remaining claims against Kimberly-Clark were dismissed by the
Bankruptcy Court.
         Additionally, on January 12, 2001, Mobile Energy filed an adversary
proceeding in the Bankruptcy Court against KC seeking to avoid approximately
$1.7 million in prepetition transfers made to Kimberly Clark Corporation by
Mobile Energy. Mobile Energy contends that the transfers are avoidable as
preferences under Section 547 of the Bankruptcy Code. Mobile Energy and Kimberly
Clark Corporation have agreed to abate the proceeding pending outcome of the
assumption of the MOA.
         On December 29, 2000, Mirant Services transferred its 1% equity
interest in Mobile Energy to Holdings. This transfer was required under
Amendment No. 1 to the Cogeneration Development Agreement ("CDAA No. 1") and has
the effect of simplifying the Debtors' corporate structure. Holdings now owns
100% of the equity interest in Mobile Energy. The equity ownership of Holdings
was unaffected by the transfer.
     As described below, on May 16, 2001, the Bankruptcy Court approved
Amendment No. 2 to the Cogeneration Development Agreement ("CDAA No. 2"). As a
result of CDAA No. 2, the Debtors received a net amount of $5.0 million in cash
in exchange for the relinquishment to certain contract rights.
         On August 27, 2001, the Debtors filed a motion with the Bankruptcy
Court to approve an agreement between Mobile Energy and S.D. Warren to settle
all disputes between them. The settlement allowed Mobile Energy to retain 100%
of the approximately $13 million in disputed processing charges paid by S. D.
Warren, and provides that S. D. Warren will pay all future processing charges to
Mobile Energy according to the same method as previously billed to S. D. Warren.
It also allowed the Debtors to immediately receive the discounted value of the 6
months of post-termination demand charges payable by S. D. Warren to Mobile
Energy under the Master Operating Agreement, after crediting S. D. Warren for
the disputed demand charges which would not have been billed but for the
existence of the KC Settlement Agreement. Finally, it resolved other wind-down
and potentially disputed business matters between the parties. The settlement
with S.D. Warren also resolved all disputes with S.D. Warren over the
disclosures made in the Second Amended Disclosure Statement as Modified and the
Third Plan as Modified. The Bankruptcy Court approved the settlement with S.D.
Warren on September 24, 2001.
         On May 7, 2002, Mobile Energy filed an arbitration proceeding against
Kimberly-Clark seeking to recover demand charges relating to Kimberly-Clark's
tissue mill. Mobile Energy seeks to recover $2.1 million from Kimberly-Clark.
Kimberly-Clark denies Mobile Energy's claims and it has filed a counterclaim in
the arbitration case against Mobile Energy for approximately $7 million in
amounts it claims it overpaid Mobile Energy. Mobile Energy disputes the
counterclaim filed Kimberly-Clark.
         Comments and interventions with respect to the Application were due
November 10, 2000. No comments or interventions were filed. On April 11, 2001,
the Debtors filed the First Amended Application relating to the Second Plan and
First Amended Disclosure Statement as filed on February 21, 2001. Comments and
interventions were due May 7, 2001. No comments or interventions were filed.
3.       Key Elements of the Third Plan as Modified

         The supporters of the Third Plan as Modified believe that the
transactions proposed therein will provide the best chance to maximize
recoveries to creditors and continue operations at the Energy Complex under the
very difficult circumstances that existed after the pulp mill was shut down and
which continue to this day. To better understand how the elements of the Third
Plan as Modified function together, it is helpful to have a general overview of
important components of the Energy Complex within the Industrial Complex. The
Energy Complex currently is comprised of four power boilers, one recovery
boiler, four turbine generators, two black liquor evaporator sets, various
related waste treatment facilities, fuel and "liquor" storage, station control
facilities and associated feedwater systems, air emissions controls, and other
auxiliary systems. The combined facilities of the Energy Complex are currently
designed to produce approximately 140 megawatts (gross) of electricity and
approximately 2,200,000 lbs/hr of steam. In addition, the Energy Complex
currently is designed to process approximately 2,750,000 lbs/day of virgin black
liquor solids, although the Energy Complex has not processed any black liquor
since the pulp mill ceased operations. During 1998, the Energy Complex provided
100% of the steam processing needs, and 98% of the aggregate power processing
needs, of the mills, and 100% of the black liquor processing needs of the pulp
mill.

         The Industrial Complex is comprised of the Energy Complex, KC's tissue
mill, the pulp mill (which is no longer producing pulp)12 and the paper mill
owned by S.D. Warren.13 As discussed further in this section below, on December
14, 2001, S.D. Warren closed its paper mill. Prior to KCTC's shutdown of pulping
operations at the pulp mill, the Industrial Complex operated as a physically
integrated complex that produced tissue and paper products from timber that was
processed into bleached and unbleached pulp by KCTC's pulp mill. The pulp mill
provided 85% of the fuel used by the Energy Complex in the form of biomass and
black liquor. Following the shutdown of the pulp mill, the paper mill (until it
closed on December 14, 2001) and the tissue mill have obtained the pulp they
require from offsite sources, which is shipped to the site in dried form. Mobile
Energy currently acquires all of the fuel required for the Energy Complex from
offsite sources. Mobile Energy's current fuel sources are natural gas, coal and
biomass.

         Under the Third Plan as Modified, Southern's equity interests in Mobile
Energy will be extinguished and the bondholders will end up as the exclusive
equity interest holders in reorganized Mobile Energy. The allowed claims of
non-insider creditors aside from the bondholders will be paid in full or
reinstated. The claims of insiders of the Debtors are treated by agreement as
set forth in the Third Plan as Modified.
         Because of the unwinding of the KC Settlement, the absence of the New
Pulp Mill and the Cogen Project, the Third Plan as Modified focuses upon
maintaining and furthering operating cost reductions in the context of
continuing to provide services to those mills presently operating in the
Industrial Complex (i.e., KC's tissue mill), under the Energy Services Agreement
in force prior to the negotiation of the KC Settlement (more fully described in
the Second Amended Disclosure Statement as Modified attached as Exhibit A-1
hereto) and the reinstated Pulp Mill ESA. The Debtors have substantially reduced
operating costs for the Energy Complex during their bankruptcy cases. The
Debtors were required to terminate the former operator of the Energy Complex,
Mirant Services (formerly known as Southern Energy Resources), by March 31, 2001
pursuant to the terms of the Cogeneration Development Agreement as amended. As a
result, following a solicitation process OEC, an affiliate of Enron Corp., was
selected as the new O&M operator to assume operation of the Energy Complex on an
interim basis after March 31, 2001, pending confirmation of the Third Plan as
Modified. The new operator has replaced Mirant Services and has implemented cost
reductions.14
         To help assess the merits of the business strategy incorporated in the
Third Plan as Modified, projections to be attached to the Second Amended
Disclosure Statement as Modified, attached hereto as Exhibit A-3, take into
account existing operations realities and cost reductions to be achieved by OEC.
Exhibit A-3 reflects S.D. Warren's closure of its Paper Mill and presumes that
KC curtails tissue mill operations as suggested to the Debtors by KC
representatives (the "Projections").15 The Projections show positive cash flows
and thus value to the bondholders, who will be the future owners of equity
interests in Holdings under the Third Plan as Modified. The Projections also
show greater value to the bondholders under the Third Plan as Modified than they
would receive in a liquidation. A copy of the Debtors' liquidation scenario is
attached as Exhibit A-8.
         Under the Projections, Mobile Energy estimates that it will provide
approximately 1.1 million MMBtus of steam to the tissue mill during 2002 and
approximately 932,000 MMBtus of steam thereafter.16 It also is anticipated that
Mobile Energy will provide approximately 341,000 megawatt hours of electricity
in 2002 to the tissue mill and approximately 400,000 megawatt hours of
electricity thereafter. The estimated usage for steam and power for 2003 and
later years is approximately 55% and 124%, respectively, of the amount of steam
and power provided to the tissue mill during 1998. Mobile Energy also intends to
continue to sell electricity in excess of the mill owners' demands during peak
periods into the wholesale market; an estimate of these additional revenues is
also included in the projections. A schematic of the Debtors' anticipated
operating configuration in this scenario is attached as Exhibit A-4.
         Further, the Third Plan as Modified contemplates that after Southern is
divested of its ownership of Mobile Energy, reorganized Mobile Energy will
qualify as a qualifying facility under the Public Utility Regulatory Policies
Act of 1978 ("PURPA"), such that Mobile Energy will not be a public utility
under PUHCA, and its owners will not be subject to regulation as public utility
holding companies. Mobile Energy previously filed an application with the
Federal Energy Regulatory Commission seeking certification as a qualifying
facility as of the Effective Date of the First Plan; however, the configuration
presumed in the original application has been superceded by the configuration
that serves as the basis for the Third Plan as Modified. An appropriate
application will be made to seek qualification of assets of reorganized Mobile
Energy that satisfy pertinent regulatory tests as a qualifying facility
consistent with the business plan that forms the basis of the Third Plan as
Modified.
4.       The Cogeneration Development Agreement

         In February 2000, the Debtors, Mirant Services and Mirant entered into
the Cogeneration Development Agreement, as referenced above. For several
reasons, including a dramatic rise in long-term (future) natural gas prices that
negatively affected the economics of the Cogen Project from both the Debtors'
and Mirant's point of view, the Cogeneration Development Agreement was amended
twice, with the second amendment, CDAA No. 2, allowing the Debtors to realize
$7.9 million in value by releasing the Debtors' rights to a GE combustion
turbine that was to be contributed by Mirant. The practical effect of CDAA No. 2
is that the Cogen Project will not be developed by Mobile Energy under the Third
Plan as Modified. Because the Cogen Project will not go forward, the projections
attached hereto as Exhibit A-3 do not assume any revenues to be received from
the Cogen Project.
         Under the Cogeneration Development Agreement, Southern, Mirant and
Mirant Services had only limited ongoing obligations to the Debtors. Southern's
existing obligations to the owners of the tissue mill, paper mill, and pulp mill
under the Environmental Guaranty entered into in December 1994 and the Mill
Owner Maintenance Reserve Account Agreement entered into in August 1995 were to
continue. Mobile Energy agreed in the Cogeneration Development Agreement to
compensate and indemnify Southern for any costs it incurred under either
agreement. That compensation obligation is secured by a priority lien on Mobile
Energy's assets. The indemnities in favor of Southern, Mirant and Mirant
Services are described in Exhibit 1 and they continue in effect under CDAA No.
2. The amounts, if any, that may be owed to Southern, Mirant or Mirant Services
under the surviving indemnities are not capable of being quantified at this
time. The Debtors' management is unaware of any current obligations under the
underlying agreements, and in any event, does not believe the Debtors' future
obligations under the indemnities will have a materially adverse effect on the
Debtors' future business operations.
         Under the Cogeneration Development Agreement, Mobile Energy and
Holdings agreed to indemnify Southern from any taxes imposed on Southern which
taxes are attributable to any net taxable income recognized by Mobile Energy or
Holdings which exceed Southern's excess loss account balance with respect to its
stock investment in Holdings as of the beginning of the tax period in which the
excess loss account is triggered. Prior to the time that the excess loss account
is triggered, Southern will remain responsible to pay the taxes which are
attributable to any net taxable income recognized by Mobile Energy or Holdings.
The maximum Southern obligation concerning the excess loss account can be
estimated, recognizing that the balance fluctuates periodically, depending upon,
inter alia, the results of operations of Mobile Energy and Holdings. As of June
30, 2002, the excess loss account is estimated at approximately $51.07 million.
The federal statutory corporate income tax rate is 35%; therefore, under these
circumstances, Southern's maximum potential exposure could approximate $17.87
million.
         The foregoing should be considered in light of Mirant's recent
disaffiliation with Southern. In April 2000, Southern Company announced an
initial public offering of up to 19.9% of Mirant Corporation - - formerly
Southern Energy, Inc. -- and its intentions to spin off the remaining ownership
of Mirant to Southern Company stockholders within 12 months of the initial stock
offering. On October 2, 2000, Mirant completed an initial public offering of
66.7 million shares of common stock. On April 2, 2001, Southern Company made a
tax-free distribution of the remaining ownership of 272 million Mirant shares.
5.       Treatment of Claims under the Plan

         The bondholders under the Third Plan as Modified will receive shares in
reorganized Holdings ("New
Common Stock").
a.       Unsecured Creditors; Others

         Under the Third Plan as Modified, the claims of the general unsecured
creditors and the claims of all other creditors, except Southern, Mirant and
Mirant Services, and the bondholders, will be paid in full. The claims of
unsecured creditors are approximately $431,000, without consideration of proof
of claims (some of which claims have not been quantified by the claimants) from
the mill owners against Debtors. Debtors are contesting the mill owners' proof
of claims.
b.       First Mortgage Bonds

         The First Mortgage Bonds (as defined in the Third Plan as Modified)
were issued by Mobile Energy on August 1, 1995, in the original principal amount
of $255,210,000 due January 1, 2017 and bearing annual interest at 8.665%. All
of Mobile Energy's obligations under the first mortgage bonds are secured by
liens and security interests against Mobile Energy's assets and are
unconditionally guaranteed by Holdings.
         Under the Third Plan as Modified, the First Mortgage Bondholder Claims
are deemed Allowed Claims for purposes of the Third Plan as Modified in the
aggregate principal amount outstanding under the terms of the First Mortgage
Bonds, plus interest accrued and unpaid through the day immediately prior to the
Effective Date, minus (i) payments made to the Indenture Trustee and/or the
Collateral Agent pursuant to orders of the Bankruptcy Court, and (ii) payments
made to the Indenture Trustee and/or the Collateral Agent on account of the
Maintenance Plan Funding Subaccount and the First Mortgage Debt Service Reserve
Account.
         Each Holder of a First Mortgage Bondholder Claim shall receive in
complete settlement, satisfaction and discharge of their First Mortgage
Bondholder Claims, a Pro Rata Share of 72.967% of the New Common Stock of
Holdings.
c.       Tax-Exempt Bonds

         In December, 1983, the IDB issued tax-exempt bonds to finance the
construction of the Number 7 Power Boiler and certain auxiliary systems which
are "solid waste disposal facilities" as such term is defined in the Internal
Revenue Code and the regulations promulgated thereunder (the "Solid Waste
Disposal Facilities"). In December, 1984, the IDB issued tax-exempt bonds to
refund the 1983 tax-exempt bonds.
         Refunding of the 1984 tax-exempt bonds occurred in 1995 by means of
tax-exempt bonds in the original principal amount of $85,000,000 scheduled to
mature January 1, 2020 (the "Tax-Exempt Bonds"). Concurrently with the issuance
of the Tax-Exempt Bonds, Mobile Energy entered into an Amended and Restated
Lease and Agreement with respect to the Solid Waste Disposal Facilities, and its
obligations thereunder are secured by liens and security interests against
Mobile Energy's assets and are unconditionally guaranteed by Holdings.
         Under the Third Plan as Modified, the Tax-Exempt Bondholder Claims are
deemed Allowed Claims for purposes of the Third Plan as Modified in the
aggregate principal amount outstanding under the terms of the Tax-Exempt Bonds,
plus interest accrued and unpaid through the day immediately prior to the
Effective Date, minus (i) payments made to the Tax Exempt Trustee and/or the
Collateral Agent pursuant to orders of the Bankruptcy Court, and (ii) payments
made to the Tax Exempt Trustee and/or the Collateral Agent on account of a
letter of credit posted with respect to the Tax-Exempt Debt Service Account and
a guaranty of the Maintenance Plan Funding Subaccount.
     Holders of Tax-Exempt Bondholder Claims shall receive in complete
settlement, satisfaction and discharge of their Tax-Exempt Bondholder Claims,
(1) a Pro Rata Share of 27.003% of the New Common Stock of Holdings, and (2)
such Holders shall retain a Pro Rata Share of $1,000,000 of their outstanding
Tax-Exempt Bonds.
d.       Southern's, Mirant's and Mirant Services' Claims

         As was described in the Application, Southern, Mirant, and Mirant
Services shall receive the treatment provided in the Cogeneration Development
Agreement, as amended, and in the orders of the Bankruptcy Court, in full
satisfaction of their claims. The Cogeneration Development Agreement is attached
hereto as Exhibit B-1.
         Generally, Southern's claims received one of two different types of
treatment. Southern pre-petition claims are classified for prioritization
purposes as Class 8. The estimated recovery on account of such claims is
approximately 0.3%. As a reflection of that level of recovery, Southern recorded
an expense of approximately $69 million in the third quarter of 1999 to write
down its equity investment in Mobile Energy Services Holdings, Inc. to zero. An
additional expense of approximately $10 million was recorded in the third
quarter of 2000 to reflect additional liabilities under the Cogeneration
Development Agreement and CDAA No. 1. No further material impact on the
consolidated capitalization is expected as a result of the proposed bankruptcy
settlement.
     Southern post-petition claims are assigned to Class 3. Class 3 claims shall
receive 100% payment under the Third Plan as Modified.
e.       Post Reorganization Ownership Structure

         On the effective date of the Third Plan as Modified, Southern's
interest in Holdings shall be canceled and extinguished. As a consequence,
Southern's pre-petition shares in Holdings would no longer have any claim to
voting rights, dividends or in fact any rights with respect to Holdings. Neither
Southern nor any of its affiliates will hold any interest of any kind in either
Holdings or Mobile Energy. The existing bondholders will hold the New Common
Stock which will constitute the entire equity interest in the reorganized
Holdings. Holdings will continue to own 100% of the equity ownership of Mobile
Energy. Some of the existing bondholders may end up owning more than 10% of the
equity ownership of Holdings, and unless otherwise exempted (see, e.g., the
discussion of the qualifying facility exemption under PURPA supra at pp. 14-15),
such ownership may give rise to such holders being subject to regulation under
PUHCA.
6.       Summary of Post-Reorganization Structure

         The First Mortgage Bonds and the Tax-Exempt Bonds will be exchanged for
the New Common Stock of Holdings. The Debtors' proposed post-reorganization
equity ownership structure is depicted in the following diagram:

7.   The Bondholder Steering Committee Supports Approval of the Third Plan as
     Modified

         The ad hoc committee of Holders of Tax-Exempt Bonds and First Mortgage
Bonds has established the Bondholder Steering Committee which is comprised of
certain Holders of Existing Securities as constituted from time to time and
First Union National Bank (ex-officio) as Indenture Trustee and as Tax-Exempt
Trustee. At certain times, the Bondholder Steering Committee has been comprised
of Credit Suisse First Boston Corporation ("CSFB"), Morgan Stanley, and Pan
American Life Insurance Company (each of which holds First Mortgage Bonds);
Franklin Advisors, Inc. and Van Kampen Investment and Advisory Corp. (each of
which holds Tax-Exempt Bonds); and First Union National Bank (ex officio), as
Trustee for the First Mortgage Bonds and Tax-Exempt Bonds. CSFB resigned from
the Bondholder Steering Committee in December 2000 but rejoined the Bondholder
Steering Committee in March 2001. Franklin Advisors, Inc. resigned from the
Bondholder Steering Committee in February 2001. The Bondholder Steering
Committee currently is comprised of CSFB and Morgan Stanley, and Wachovia Bank,
National Association, formerly known as First Union National Bank (ex officio).
The Bondholder Steering Committee previously has retained Debevoise & Plimpton,
McDermott Will & Emery, and Silver, Voit and Thompson as their counsel and CIBC
as their financial advisor. As of March 31, 2001, CIBC is no longer the
financial advisor to the Bondholder Steering Committee and Greenberg Traurig has
replaced McDermott Will & Emery. Silver, Voit and Thompson is currently retained
as local counsel to Greenberg Traurig. The Bondholder Steering Committee, which
collectively hold in excess of 70% of the First Mortgage Bonds and in excess of
64% of the Tax-Exempt Bonds, support confirmation of the Third Plan as Modified.
B.       Bankruptcy Court Approval Process
1.       General

         The Third Plan as Modified was filed with the Bankruptcy Court on
December 14, 2001, along with the Second Amended Disclosure Statement as
Modified. Under Section 1125 of the Bankruptcy Code, the Debtors may not solicit
votes for acceptances of the Third Plan as Modified until the Bankruptcy Court
approves the Second Amended Disclosure Statement as Modified as containing
information of a kind, and in sufficient detail, adequate to enable creditors to
make an informed judgment whether to vote for acceptance or rejection of the
Third Plan as Modified. A hearing was held with the Bankruptcy Court on December
14, 2001, to determine whether the Second Amended Disclosure Statement as
Modified meets the requirements of Section 1125. Subject to Commission review of
this Application, the Bankruptcy Court approved the Second Amended Disclosure
Statement as Modified on January 4, 2002.17
         Upon receipt of requisite approval of the Second Amended Disclosure
Statement as Modified (together with any immaterial modifications thereof), the
Debtors will solicit votes on the Third Plan as Modified. The solicitation
process is expected to take approximately 6 weeks. After the votes are cast, a
confirmation hearing will be scheduled and notice of the hearing will be
provided to creditors and parties-in-interest. Creditors and parties-in-interest
will have an opportunity to object to the confirmation of the Third Plan as
Modified at the confirmation hearing. At the confirmation hearing, the
Bankruptcy Court must determine whether the confirmation of the Third Plan as
Modified meets the requirements of Section 1129 of the Bankruptcy Code. Only if
the Bankruptcy Court determines that the Third Plan as Modified meets the
requirements of Section 1129, may the Bankruptcy Court confirm the Third Plan as
Modified.
         It should be noted that on February 4, 1999, an official committee of
unsecured creditors (the "Committee") was appointed in the Mobile Energy and
Holdings Chapter 11 cases. The Committee has not sought Bankruptcy Court
approval to retain counsel or any other professionals to represent its
interests. The Committee has not been actively involved in these cases.
2.       Feasibility

         One of the prerequisites to confirmation under Section 1129 of the
Bankruptcy Code is that the Bankruptcy Court determine that a plan is not likely
to be followed by the liquidation, or the need for further financial
reorganization, of the debtors or any successor to the debtors under the plan.
This is commonly referred to as the requirement that a plan be "feasible."
         The Debtors believe that the Third Plan as Modified is feasible. See
Second Amended Disclosure Statement as Modified, Section XV.B.2. The material
risks associated with the Third Plan as Modified are described in the Second
Amended Disclosure Statement as Modified in detail (see Article XI thereof). The
First Plan relied upon projections that included revenues derived from the
successful completion of the Cogen Project (with significant anticipated sales
of power into the wholesale market) and the New Pulp Mill, and upon a modified
Energy Services Agreement with KC, the owner of the tissue mill, that placed
fuel price risk on the Debtors (the existing Energy Services Agreements place
fuel price risk on the respective mill owners) in order to make the payments
required to service the $70 million of secured debt that the Debtors would have
issued under the First Plan. As a consequence, fuel price increases,
transmission capacity constraints, and Cogen Project financing risks were all
discussed as risk factors in the original Disclosure Statement.
         The Third Plan as Modified converts all of the claims of the First
Mortgage Bondholders and the Tax-Exempt Bondholders to equity, and the
projections attached to the Second Amended Disclosure Statement as Modified (i)
do not include revenues from the Cogen Project or the New Pulp Mill; and (ii)
assume that the existing Energy Services Agreements (which place the risk of
fuel increases on the Mill Owners) remain in place. As a consequence, the
discussion concerning the above risk factors has been deleted from the Second
Amended Disclosure Statement as Modified.
         The revised capital structure contained in the Third Plan as Modified
(i.e., the elimination of $70 million of secured debt), the Debtors' exclusion
of any revenues attributable to the Cogen Project or the New Pulp Mill in its
projections and the fact that fuel costs are borne by the Mill Owners as opposed
to the Debtors further ensures the feasibility of the Third Plan as Modified.

     The projections attached hereto show that the Debtors can continue to
operate even though S.D. Warren has elected to close its mill.

Item 2.  Fees, Commissions and Expenses
         The fees, commissions and expenses paid or incurred, or to be paid or
incurred, directly or indirectly, in connection with filing of this Amended
Application by Mobile Energy and Holdings are not expected to exceed $150,000
and are expected to be comprised primarily of fees for ordinary legal and
accounting services. None of such fees, commissions or expenses will be paid to
any associate company or affiliate of the Debtors.
         There are set forth below the estimated fees and expenses expected to
be incurred by Debtors in connection with the entire bankruptcy cases, including
without limitation the preparation of the First Plan, the Second Plan, the Third
Plan as Modified, the Disclosure Statement, the First Amended Disclosure
Statement and the Second Amended Disclosure Statement as Modified; the
prosecution of litigation with KC, and this Amended Application and related
transactional documents.
Services of Cabaniss, Johnston, Gardner, et al., counsel
    to Debtors...................................................$400,000.00

Services of Andrews & Kurth L.L.P., special counsel
    to Debtors.................................................$9,500,000.00

Services of Price Waterhouse Coopers.............................$900,000.00

Services of FORCAP  International Inc..........................$1,900,000.00

Miscellaneous, including filing and recording fees,
    postage, travel, telephone and other incidental expenses.......$9,000.00

Total.........................................................$12,209,000.00

The foregoing fees are to be paid by or have been paid by Mobile Energy or
Holdings.

Item 3. .Applicable Statutory Provisions
A........Summary
         Petitioners seek that authorization necessary under the Act to
disseminate the Third Plan as Modified to parties in interest in order to
solicit votes to approve or reject same, including the Commission's report
approving the Third Plan as Modified and Second Amended Disclosure Statement as
Modified under Section 11(g) and the rules promulgated thereunder, and any
related or ancillary authorizations that may be necessary. Petitioners also seek
approval of the ballots and the notice of confirmation date and objection
deadline which will be sent to creditors entitled to vote on the Third Plan as
Modified. The ballots and the notice of confirmation collectively are attached
hereto as Exhibit A-1A.

     Petitioners, therefore, request that authorization under the Act necessary
to the extent applicable to:

     (1) Obtain approval of the Second Amended Disclosure Statement as Modified
and the Third Plan as Modified;

     (2) Observe and perform (if necessary), the indemnities identified in the
Third Plan as Modified, as described above, for the reasons described in Item 3,
Part B. 2, infra;

     (3) Extinguish and void the Southern Company's equity ownership interests
in Holdings and Mobile Energy;

     (4) Take such other actions necessary to consummate the Third Plan as
Modified; and

     (5) Issue a Commission report under Section 11(g) of the Act. Petitioners
request that the Commission waive the filing of a separate Form U-R-1, if
otherwise applicable, since all the requisite information will be included in
the Second Amended Disclosure Statement as Modified and the Third Plan as
Modified filed as exhibits hereto.

         Rule 54 Analysis: The proposed transaction is also subject to Rule 54
which provides that, in determining whether to approve an application which does
not relate to any "exempt wholesale generator" ("EWG") or "foreign utility
company" ("FUCO"), the Commission shall not consider the effect of the
capitalization or earnings of any such EWG or FUCO which is a subsidiary of a
registered holding company if the requirements of Rule 53(a), (b) and (c) are
satisfied. At June 30, 2002, Southern's "aggregate investment," as defined in
Rule 53(a)(1), in EWGs and FUCOs was approximately $119 million, or 2.60% of
Southern's "consolidated retained earnings," also as defined in Rule 53(a)(1),
as of June 30, 2002 ($4.564 billion).18
         In addition, Southern has complied and will continue to comply with the
record-keeping requirements of Rule 53(a)(2), the limitation under Rule 53(a)(3)
on the use of operating company personnel to render services to EWGs and FUCOs,
and the requirements of Rule 53(a)(4) concerning the submission of copies of
certain filings under the Act to retail rate regulatory commissions. Further,
none of the circumstances described in Rule 53(b) has occurred.

B.       Item-Specific Analysis

     1. Approval of the Third Plan as Modified- Sections 11(g), 11(f), 12(e),
12(f), 6(a), and 7 of the Act. Support of the Third Plan as Modified will be
solicited in conjunction with the Bankruptcy Court proceedings. Interested
parties will have an opportunity to comment, and make their positions known to
the Bankruptcy Court prior to that Court's final approval of the Third Plan as
Modified (see Section 11(g) of the Act).

         Further, the solicitation will involve the securities of a subsidiary
company within the meaning of the Act (see Item 1, Part A.2 and 3, supra). While
Applicants are not aware of any rules, regulations or orders under Section 12(e)
of the Act which would be contravened by the proposed transaction, nonetheless,
Applicants seek authorization under Section 12(e) as necessary. Similarly,
Applicants are not aware of any rules, regulations, or orders under Section
12(f) of the Act regarding negotiations or transactions contravened by the
course of negotiations between creditors, the Debtors and customers of Debtors
in conjunction with the Third Plan as Modified (see supra, Item 1, Part A.2.b,
3-5) but nonetheless seek authorization under Section 12(f) as necessary.
Applicants seek authorization under Section 7 of the Act necessary to issue such
securities.
         Moreover, the rights of, priorities, voting power and preferences of
holders of outstanding securities of Holdings may be altered under the Third
Plan as Modified, and Southern's indirect ownership of Mobile Energy will be
extinguished (see Item 1, Part A. 3).
         Section 7(d) of the Act requires the Commission, in reviewing the
issuance of new securities, to consider whether the new security is reasonably
adapted to the security structure of the company issuing the security and other
companies in the registered holding company system. Of course, once the Third
Plan as Modified has been approved, Holdings will no longer be a member of a
registered holding company system. Moreover, the issuance of the new securities
is reasonably adapted to the security structure of reorganized Mobile Energy.
The new securities and other steps contemplated by the Third Plan as Modified
greatly reduce the burden of debt service on the reorganized Debtors arising
from the First Mortgage Bonds and the Tax-Exempt Bonds. Therefore, Debtors will
become de-leveraged under the Third Plan as Modified which will increase cash
flow, and allowing Debtors additional flexibility in their business planning. In
light of the increasingly volatile nature of power prices in the wholesale
electricity markets, thickening the equity component of the capital structure is
appropriate to provide some measure of financial protection from such
volatility.

2. Indemnities and Act-Sections 12(a) and (b) and Rule 45 of the Act

         As part of the effort to develop the Cogen Project, Southern, Mirant,
Mirant Services or its predecessor, Mobile Energy and Holdings exchanged
agreements to reimburse one another for certain costs (see Item 1, Part A.4. and
Exhibit 1 hereto). These agreements could have created liability for Southern if
Southern had triggered a deconsolidation of Holdings from the Southern tax group
prior to July 31, 2001. Under the Cogeneration Development Agreement together
with its amendments, Mirant and Mirant Services (formerly SEI and Southern
Energy Resources) also would be liable to reimburse Holdings and Mobile Energy
for any costs they may incur arising out of their negligence or willful
misconduct.
         Under the caption "Borrowing from other companies in the same system,"
Section 12(a) of the Act makes it unlawful for a registered holding company to
"borrow, or receive any extension of credit or indemnity" from one of its
subsidiary companies or a public utility company in the same holding company
system. In like fashion, under the heading "Loans to other companies in the same
system," Section 12(b) of the Act makes it unlawful for any registered holding
company or subsidiary company thereof to, "lend or in any manner extend its
credit to or indemnify" any company in the holding company system in
contravention of Commission rules, regulations and orders. Applicants are not
aware of Commission rules, regulations or orders issued under Section 12(b) of
the Act that would be contravened by the Third Plan as Modified.
         The reciprocal arrangements here at issue do not involve a proposal to
"borrow, or receive any extension of credit or indemnity" within the meaning of
the Act and are consistent with the standards of the Act, including Section
12(f) of the Act. Section 12 of the Act undertakes to regulate extensions of
credit among subsidiaries and their registered holding company systems. An
indemnification agreement incidental to a lawful transaction between affiliates
would be subject to such conditions as the Commission might prescribe in the
public interest pursuant to Section 12(f) of the Act, but, Applicants
respectfully submit, not Section 12(a). When a party contractually agrees to
bear responsibility for a portion of a transaction, the resulting responsibility
for claims does not constitute an extension of credit and therefore does not
fall within the intended ambit of Section 12(a) of the Act.
         None of the purposes of the Act would be served by construing the
prohibition of extensions of credit by subsidiaries of a registered holding
company in favor of the holding company to prohibit the transactions here at
issue. Section 12(a) was imposed to prohibit "upstream loans" - - loans from an
operating utility to its registered holding company. It was enacted to stop "the
further milking of operating companies in the interest of controlling
holding-company groups." 74th Congressional Committee on Interstate Commerce,
Hearings on S. 1725 at 59 (April 26-29, 1935).
         In this instance, Mobile Energy and Holdings have little in the way of
credit to confer upon Southern. Such benefit as may exist in the relationship is
not the enhancement of Southern's credit by association with Mobile Energy and
Holdings, nor the "milking" of the assets of Mobile Energy and Holdings by
Southern.

         With respect to the construction of Section 12(a), the Commission has
recognized that the creation of bona fide reciprocal obligations does not give
rise to the extensions of credit that the Act was intended to prohibit.
Mississippi Valley Generating Co. v. United States, 175 F. Supp. 505, 520-21
(Ct. Claims 1959), affirming Mississippi Valley Generating Company, HCAR No.
12794 (1955). The legislative history of the Act indicates a concern with public
utility subsidiaries and subsidiary public utility holding companies extending
their credit to a holding company. Section 1(b) of the Act reflects this
legislative history through its findings in subsections 1(b)(2) and 1(b)(3) of
abusive transactions harmful to "subsidiary public-utility companies." Section
1(c) of the Act, in turn directs the Commission to interpret the Act "to meet
the problems and eliminate the evils" as therein enumerated.
         The provisions of the agreements here at issue are not "upstream
loan[s]" as conceived by the legislative history, and therefore are not the type
of transaction that Section 12(a) was designed to prevent. The Second Amended
Application does not present the case of the holding company obtaining any type
of financing from a public utility operating company or sub-holding company. It
simply involves the reimbursement of Southern by Mobile Energy of certain
identified forms of liability caused by Mobile Energy, and reciprocal
obligations by Southern in the event its actions trigger liability for Debtors
prior to July 31, 2001. Provisions such as those here at issue (e.g., based on
environmental claims) are commonplace in arms' length commercial transactions.
Indeed, as noted in the Application (Item No. I, Part A. 2.b.i.), the Commission
in 1994 reviewed underlying environmental agreements between Scott and Holdings;
some of the contractual obligations here at issue would not exist but for the
underlying environmental agreements discussed in the Commission's 1994 order.
Further, as explained supra, the tax de-consolidation agreement works both ways,
making Mobile Energy one of its beneficiaries, and does not involve a unilateral
conveyance to Southern of the credit stature (such as it is) of an entity filing
for bankruptcy court protection. Moreover, the Cogeneration Development
Agreement, as amended, under which the obligations arise here has been reviewed
and approved by the Bankruptcy Court following hearings; the Bankruptcy Court by
statute has the obligation to determine whether the arrangement is fair and
reasonable to creditors while affording the Debtors a reasonable chance to go
forward.
         The Commission considers the substance of a transaction over its
form.19 Southern is not receiving an "extension of credit" or borrowing money
raised on the credit of the Debtors. The statute on its face is focused on
"loans," "borrowing," an "extension of credit" and the like. Southern will
merely receive payment of liability it incurs to a third party from claims
caused by Mobile Energy or Holdings and the latter subsidiaries obtained
comparable rights from Southern. Moreover, the reciprocal agreements here at
issue hasten the day when Debtors will become disaffiliated from Southern, help
untangle the network of obligations and exposure Southern experiences under the
present arrangements, and thus hasten the day when even the theoretical concern
of abusive loans to the holding company will no longer be a concern.
         As described in this Second Amended Application, the Amended
Application and the Application, Southern is in the process of extracting itself
from a wide-ranging series of obligations to the bankrupt entities. These
obligations arose from Southern's various roles and those of its former
subsidiary Mirant, inter alia, as equity interest owner and as party to the
Cogeneration Development Agreement and CDAA No. 1. For instance, under the
Cogeneration Development Agreement (prior to its amendment) Mirant would have
had the obligation to make a significant additional equity investment if called
upon by the bondholders under certain conditions, which investment would have
had to be made through Southern. The process of reducing Southern's exposures
arising from its various roles has been a continuous one that has evolved
through negotiations with the bondholders and others. Southern's present
obligations result from bargaining among stakeholders, and is not the product of
a unilateral determination by Southern of what is appropriate. Thus, when viewed
as part of the process of reducing potential claims upon Southern based upon its
roles as, inter alia, equity interest owner, potential project development
participant, potential financier, facilities operator, etc., the current level
of obligations represents a substantial reduction in the scope of exposures and
obligations. Southern's ability to transition out of its historical roles and
exit as an active participant from day-to-day business operations of bankrupt
entities is conditioned by compliance with the remaining, much-reduced level of
obligations that were negotiated with the bondholders. In this unique historical
environment, the foregoing limited obligations are a reasonable and
commercially-dictated means of transitioning Southern out of its prior, much
more expansive obligations and exposures.

     3. Extinguishment and Voiding of Southern's Equity Interest in Holdings -
Sections 12(d) and 2(a)(23) of the Act

         The Third Plan as Modified specifies that Southern's equity interests
in Holdings will be extinguished. Section 12(d) of the Act makes it unlawful for
any registered holding company to "sell" any security which it owns in any
public utility company, in contravention of Commission rules, regulations or
orders. To the extent that Commission rules, regulations or orders apply to the
extinguishment of equity interests as contemplated by the Third Plan as
Modified, authorization would be necessary. While Applicants do not believe that
Commission rules, regulations and orders reach the fact pattern presented (e.g.,
extinguishment of the existing equity in Holdings), if the Commission reaches a
contrary conclusion, Applicants request such authorization as would be necessary
to effectuate either alternative.

     4. Take such other action as is necessary to consummate the Third Plan as
Modified-Commission Rule 64

         Rule 64 provides that any application for approval of a plan of
reorganization under Section 11 of the Act shall be deemed to include all
applications and declarations under the Act otherwise required as to any action
necessary to consummate such plan. 17 C.F.R. ss. 250.64 (2000). As is evident
from the foregoing, the Third Plan as Modified involves multiple aspects. The
discussion of Sections 11, et al. of the Act, in Item 3, Part B.2, supra,
describes important aspects of the Third Plan as Modified.
5.       Issuance of a Commission Report Under Section 11(g) of the Act.

         Section 11(g) of the Act provides the circumstances under which a plan
of reorganization is to be accompanied by a report on the plan made by the
Commission. As noted supra in the discussion of Section 11 of the Act, the
Applicants will be soliciting the votes of interested parties entitled to vote
on the Third Plan as Modified. Applicants respectfully request that any report
issued by the Commission concerning the Third Plan as Modified determine that
the Third Plan as Modified does not contravene portions of the Act or
regulations issued thereunder, and is fair to investors, as summarized in the
following section.
C.       Macro Analysis
         The Third Plan as Modified and related transactions are reasonable -
indeed the best option available - under the difficult circumstances surrounding
the interested parties. In summary, the Third Plan as Modified provides benefits
to diverse, in some circumstances adverse, economic interests with a stake in
Debtors' future viability. For example, the Third Plan as Modified is fair to
investors in Southern and to Southern itself, will simplify Southern's holding
company structure, free Southern's management from significant commitments of
time to the Debtors' affairs, and eliminate or minimize the burden upon Southern
of a number of significant contingent liabilities. The Debtors will be permitted
to go forward with a business plan that presents the opportunity for continued
operations, eliminating most of the debt burden associated with the First
Mortgage Bonds and Tax-Exempt Bonds as described above and without regulatory
obligations occasioned by Southern's ownership of indirect equity interests in
Mobile Energy. Bondholders, more than 64% of which are already known to support
the Third Plan as Modified, can potentially experience significantly better
recovery under the Third Plan as Modified than under liquidation, and will
obtain the entire indirect equity ownership of Mobile Energy, thus enhancing
their ability to affect management of Mobile Energy. The remaining customer at
the facility will have a supplier of electric and steam processing services with
a much lower level of indebtedness to service.
         Once the Third Plan as Modified is confirmed and the disaffiliation of
Southern and Mobile Energy occurs, Mobile Energy will no longer be able to use
Southern Company Services ("SCS"). Like certain other holding company
structures, Southern utilizes a service company to capture efficiencies by
performing tasks common to multiple operating affiliates. Holdings and Mobile
Energy have not utilized SCS to any material extent, and terminating Mobile
Energy's access is both consistent with its anticipated non-affiliated status
and reduces potential claims upon, and distractions to the central mission of,
SCS.
         Southern as an investor in Mobile Energy has devoted significant
resources and time to the enterprise during the course of its investment, which
level of commitment can be radically reduced upon successful implementation of
the Third Plan as Modified. The Third Plan as Modified also allows Southern to
obtain reimbursement from Mobile Energy secured by a first priority lien on
Mobile Energy's assets for approximately $19 million of contingent obligations
related to guarantees Southern has previously provided of Mobile Energy's
obligations. Particularly, Southern at present is obligated to guarantee Mobile
Energy's separate bi-lateral agreements with mill owners entered into during
1994 whereby Mobile Energy will indemnify the mill owners for environmental
damage under certain circumstances with such guarantee capped at $15 million in
1994 dollars. See, Item 1, Part A. 2. b. supra. At present, that contingent
exposure can approximate $17 million, reflecting adjustments to update the
figure for the effects of inflation. Additionally, under a separate agreement
with Mobile Energy and the owners of these mills, Southern guarantees Mobile
Energy's obligation to provide $2 million to a maintenance fund in the event
Mobile Energy's failure to perform results in the exercise by the mill owners of
certain rights they hold to step in and operate the Energy Complex. Under the
Cogeneration Development Agreement, Southern is indemnified by Mobile Energy
against costs it incurs under these contingent obligations with such indemnity
secured by a first priority lien on Mobile Energy's assets.
         The same conclusion applies if the Third Plan as Modified is analyzed
from the perspective of Southern's investors. Southern's contingent risk
exposure is reduced under the Third Plan as Modified, as described above.
Southern previously has written off the cost of its Holdings common equity. No
further write-off by Southern for its Holdings equity interests is necessary.
Consequently, implementation of the Third Plan as Modified produces no
additional change in Southern's balance sheets.
         Bondholders have good reason to support the Third Plan as Modified as
well. Prior to the closing of the pulp mill, the Debtors generated sufficient
cash to make the annual payments totaling approximately $36 million that were
required to service the pre-petition bondholder debt (which had an outstanding
balance of approximately $300 million as of the petition date). However, now
that the pulp mill has ceased operations, revenues attributable to pulp mill
operations (which accounted for approximately one-half of the Debtors' revenues)
no longer are being received. Moreover, as noted above, the inexpensive source
of fuel for Mobile Energy in the form of biomass and black liquor also was lost
when the pulp mill shut down, increasing Mobile Energy's variable operating
costs on a unit basis, and commensurately reducing the portion of the cash
stream that would remain available to service debt costs. The Debtors are unable
to make the payments required under the existing bonds and, absent reconfiguring
their operations and reducing operating costs, are unable to operate at a
profit. Moreover, S.D. Warren, the owner of the paper mill at the facility,
closed its facility on December 14, 2001. Under the Third Plan as Modified and
related transactions, by virtue of reducing costs, reconfiguring operations and
converting the existing bonds into equity, the Debtors have a better opportunity
to generate cash available for distributions to equity given these
circumstances. In addition, this capital structure enables the Debtors to
continue operations without being in default after S.D. Warren closes its paper
mill, which would not be the case absent this restructure. In other words, the
Third Plan as Modified presents the bondholders with the potential for continued
operations and a greater recovery compared to the scenario without the Third
Plan as Modified. Based upon an analysis contained in the Second Amended
Disclosure Statement as Modified (see Article XI thereof), proponents of the
Third Plan as Modified believe that creditors will receive as much or more under
the Third Plan as Modified as they would receive in a Chapter 7 liquidation.
         Finally, Debtors' long-term debt obligations and the cost of servicing
that debt will be greatly reduced; entities whose prior ownership of Mobile
Energy consisted solely of fixed rate debt now will accept equity interests in
Holdings, reducing inflexible financial payment obligations to them by Mobile
Energy. The Debtors' business also will benefit from reduced regulatory burdens
associated with the Third Plan as Modified (e.g., the cessation of Southern's
ownership interest; qualifying facility status).
         Consequently, the Third Plan as Modified and related transactions
represent the best opportunity, given the facts, for the participants to go
forward and obtain value, or minimize exposure, in admittedly challenging
circumstances.
Item 4.  Regulatory Approval
         a. Authorization for a change in the indirect ownership of Mobile
Energy (via the receipt by the bondholders of equity ownership interests in
Holdings) was received from the Federal Energy Regulatory Commission under
Federal Power Act ("FPA") Section 203. Aside from FPA Section 203 authorization,
to Applicants' knowledge, consistent with the opinions expressed in Exhibit F
attached hereto, no other state or federal regulatory authorization is necessary
in order to implement the transactions contemplated by the Third Plan as
Modified. See also (b).
         b. See (a). Approval of the Bankruptcy Court is being sought for the
Second Amended Disclosure Statement as Modified and Third Plan as Modified;
further, obtaining a determination that existing electric generation facilities
constitute qualifying facilities for purposes of PURPA, may involve regulatory
determinations from or filings with FERC.
Item 5.  Procedure
         (a) Debtors hereby (i) waive a recommended decision by a hearing
officer, (ii) waive a recommended decision by any other responsible officer or
the Commission, and (iii) specify that the Division of Investment Management may
assist in the preparation of the Commission's order and the date on which it is
to become effective.
         The Debtors hereby request that the Commission publish any notice under
Rule 23 the Commission deems necessary with respect to the filing of this
Application as soon as practicable and that the Commission's orders be issued as
soon as possible. A form of amended notice suitable for publication in the
Federal Register is attached hereto as Exhibit H.
         To the extent required, the Debtors respectfully request the
Commission's approval, pursuant to this Second Amended Application, of all
transactions described herein, whether under the sections of the Act and Rules
thereunder enumerated in Item 3 above or otherwise. It is further requested that
the Commission issue an order authorizing the transactions proposed herein at
the earliest practicable date but in any event not later than September 30,
2002. Additionally, the Debtors (i) request that there not be any recommended
decision by a hearing officer or by any responsible officer of the Commission,
(ii) consent to the Office of Public Utility Regulation within the Division of
Investment Management assisting in the preparation of the Commission's decision,
and (iii) waive the 30-day waiting period between the issuance of the
Commission's order and the date on which it is to become effective, since it is
desired that the Commission's order, when issued, become effective immediately.
         Applicants also respectfully request that with respect to 17 C.F.R. ss.
250.24(c)(1)(2000), instead of requiring that transactions authorized by the
Commission be consummated within 60 days, the Commission exercise the discretion
vested in it by that provision and authorize consummation within such time as is
necessary therefor. As the foregoing Second Amended Application attests, the
factual pattern and the bankruptcy process renders consummation of the Third
Plan as Modified cumbersome and time-consuming. Rather than further burdening
the Commission with another review process in the event that consummation of the
Third Plan as Modified is not completed within the precise 60 day limit,
Applicants respectfully request that the Commission authorize the transactions
contemplated by the Third Plan as Modified to be completed in such time frame as
is necessary to successfully complete the transactions.

Item 6.  Exhibits and Financial Statements
         Asterisked (*) items are to be filed by subsequent amendment.
a.       EXHIBITS

A-1  Second Amended Disclosure Statement as Modified (without exhibits)

A-1A Ballots and Notice of Confirmation Hearing

A-2  Third Plan as Modified

A-3  Projections

A-4  Plant Schematic (KC only)

A-5  Common Services chart (previously filed)

A-6  Liquidation Analysis

B-1  Mobile Energy Cogeneration Development Agreement (previously filed)

B-2  CDAA No. 1 (previously filed)

B-3  CDAA No. 2 (previously filed)

E-1  Site Map (paper copy) (previously filed)

E-2  Map of Energy Complex (paper copy) (previously filed)

F    Opinions of Counsel*

H    Form of Notice Suitable for Publication in the Federal Register (previously
     filed)

I.   Summary of Pertinent Indemnities (previously filed)

J.   '99 /'00 Income Statement (previously filed), '01 Income Statement and
     Budget for 2002

b.       FINANCIAL STATEMENTS

     (1)  Mobile Energy and Holdings

          a. Balance Sheets of Mobile Energy Services Company, L.L.C. and Mobile
     Energy Services Holdings Inc. as of July 31, 2002, and pro forma
     (projected) as of December 31, 2002.

          b. Income Statements of Mobile Energy Services Company, L.L.C. and
     Mobile Energy Services Holdings Inc. as of July 31, 2002, and pro forma
     (projected) as of December 31, 2002.

     (2)  Southern Company

          Consolidated balance sheet of The Southern Company at June 30, 2002.
          (Designated in Southern's Form 10-Q for the quarter ended June 30,
          2002, File No. 1-3526.)

          Statements of income and cash flows for The Southern Company for the
          six months ended June 30, 2002. (Designated in Southern's Form 10-Q
          for the quarter ended June 30, 2002, File No. 1-3526.)

          Since June 30, 2002, there have been no material adverse changes, not
          in the ordinary course of business, in the financial condition of the
          subsidiaries or of The Southern Company and its subsidiaries
          consolidated from that set forth in or contemplated by the foregoing
          financial statements.



Item 7. Information as to Environmental Effects

     a. The issuance of an order by the Commission with respect to the proposed
transactions will not constitute a major federal action significantly affecting
the quality of the human environment.

     b. No other federal agency has prepared or is preparing an environmental
impact statement with regard to the proposed transactions.


             [THIS REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]





Signatures


         Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned companies have duly caused this statement
to be signed on their behalf by the undersigned who are duly authorized.

         MOBILE ENERGY SERVICES COMPANY, L.L.C.
         1155 Perimeter Center West
         Atlanta, GA 30338

         By:      MOBILE ENERGY SERVICES HOLDINGS, INC.
         Its:     MANAGING MEMBER

         By:      ______________

         Its:



         MOBILE ENERGY SERVICES HOLDINGS, INC.
         1155 Perimeter Center West
         Atlanta, GA 30338

         By:
                  ------------------

         Its:


         THE SOUTHERN COMPANY
         270 Peachtree Street
         Atlanta, GA 30303

         By:      /s/Tommy Chisholm
                        Tommy Chisolm

         Its:     Secretary








1    The Third Plan as Modified as filed on December 14, 2001, contained an
     election for the bondholders to receive either shares of stock of Holdings,
     or member interests in Mobile Energy. Which election to make depended on a
     variety of factors, including whether the Internal Revenue Service would
     issue a private letter ruling on certain income tax matters. The Internal
     Revenue Service declined to issue any ruling on the matter so the Debtors
     and the bondholders have decided not to pursue a plan with the election to
     receive member interests in Mobile Energy. Consequently, the Third Plan as
     Modified as reflected in Exhibit A-2 provides that the bondholders will
     receive shares of stock of Holdings without an election otherwise. As such,
     the Third Plan as Modified is very similar to the Second Plan of
     Reorganization, as Modified, filed on April 25, 2001.

2    The materials that will be forwarded in conjunction with the solicitation
     include the Third Plan as Modified, the Second Disclosure Statement, and
     exhibits thereto, and the ballots and notice of confirmation hearing. All
     of these materials (except certain of the exhibits to the Second Disclosure
     Statement) are attached as exhibits to this filing.

3    These companies are Alabama Power Company, Georgia Power Company, Gulf
     Power Company, Mississippi Power Company, Savannah Electric and Power
     Company, and Southern Power Company. Alabama Power Company and Georgia
     Power Company each own 50% of Southern Electric Generating Company.

4    The foregoing capital structure does not reflect the incurrence of
     potential liability pursuant to various guarantees and contingent
     obligations described in Item 3.B.2, since the scope and potential exposure
     ultimately incurred (if any) is at present unknown (and may never
     materialize).

5    Scott Paper Co., 32 FERC (CCH)P. 62,175 (1985).

6    SEC Release No. 35-26185 (Dec. 13, 1994).

7    Id.

8    SEC Release No. 35-26330.

9    Id.

10   In the bankruptcy cases, S.D. Warren contended that it has overpaid Mobile
     Energy approximately $2.1 million in Demand Charges (as that term is
     defined in the underlying agreement) under its contract with the Debtors
     between March, 2000 through January, 2001. S.D. Warren further contended
     that it has been improperly charged fuel cost increases by Mobile Energy
     subsequent to the closing of the pulp mill. S.D. Warren and the Debtors
     have settled these matters and the Bankruptcy Court approved the settlement
     agreement on September 24, 2001. The settlement with S.D. Warren is more
     fully described below on pp. 11-12.

11   Kimberly Clark is the successor to Kimberly Clark Tissue Company by
     assignment. All assets and liabilities of KCTC were assigned to Kimberly
     Clark on or about December 31, 2000. KCTC then was dissolved.

12   The pulp mill no longer operates as a chemical pulp mill. The chemical pulp
     mill itself has been demolished by Kimberly Clark. However, Kimberly Clark
     continues to operate components of the Pulp Mill (as defined in the MOA)
     and these pulp mill legacy assets continue to use the services provided by
     Mobile Energy under the Pulp Mill Energy Services Agreement.

13   See also Item 4, Part C for additional discussion of the impact of the
     closure of the paper mill.

14   OEC filed for bankruptcy in December 2001, as did Enron Corp. and other
     affiliates of OEC. OEC continues to operate the Energy Complex pursuant to
     the operating agreement between it and Mobile Energy. As a debtor under
     Chapter 11 of the Bankruptcy Code, OEC could elect to reject the operating
     agreement between it and Mobile Energy. Management of Mobile Energy
     understands that risk and believes that in such event it could replace OEC
     with a new operator that would perform the same functions as OEC, and that
     there would be no interruption in services to Mobile Energy's customers.

15   A Kimberly-Clark representative signed an affidavit stating the anticipated
     future level of steam and power processing services that the Tissue Mill
     would require. However, KC currently is exceeding the levels stated in the
     affidavit. To be conservative, the Projections reflect the levels of
     contemplated services that are lower than the current actual levels used by
     Kimberly-Clark.


16   These amounts are consistent with Kimberly-Clark's actual usage from
     January 1, 2002, to date.

17   The Second Amended Disclosure as Modified which is attached hereto as
     Exhibit A-1, contains modifications to the disclosure statement which was
     approved by the Bankruptcy Court on January 4, 2002. Such modifications (1)
     reflect the removal of the election to receive member interests in Mobile
     Energy, and (2) update the disclosure statement for events occurring since
     December 14, 2001. Mobile Energy and Holdings will seek Bankruptcy Court
     approval of the modifications upon approval of this Application.

18   As discussed in Southern's Application on Form U-1 (File No. 70-9727)
     relating to the spin-off of Mirant Corporation ("Mirant"), Southern and
     Mirant reorganized certain energy-related and FUCO activities and Mirant
     completed a tax-free distribution to Southern of these activities on March
     5, 2001 (the "Mini-Spin"). Therefore, the four indirect subsidiaries (EPZ
     Lease, Inc., Dutch Gas Lease, Inc., GAMOG Lease, In and NUON Lease, Inc.)
     obtained through the Mini-Spin are the only remaining FUCO investments held
     by Southern. Although Southern now owns all of the equity in these
     companies as a result of the Mini-Spin, Southern has no direct or indirect
     investment or any aggregate investment within the meaning of Rule 53 in
     these FUCOs, including any direct or indirect guarantees or credit
     positions related to any capital or financing leases. Furthermore, the only
     remaining EWG investment held by Southern after the spin-off is Southern
     Company-Florida LLC which was organized during the first quarter of 2001.
     Southern has executed limited keep-well commitments whereby Southern would
     be required to make capital contributions to Southern Energy Finance
     Capital Corp. or to Southern Energy Finance Company, Inc. in the event of a
     shortfall in the scheduled debt service resulting from certain changes in
     the payments due from Southern under the Southern Company Income Tax
     Allocation Agreement. The maximum potential capital contribution required
     under these commitments is the unamortized balance of the related loans,
     which totaled approximately $377 million as of June 30, 2002.

19   See Mississippi Valley Generating Company, supra, HCAR No. 12794, 1955 SEC
     LEXIS 450. In the Southern Company, HCAR No. 27134 (February 9, 2000) the
     Commission recently applied this principle in order to approve a financing
     subsidiary structured to permit Southern to engage in trust preferred and
     debt financing. In administering the accounting provisions of the Act, the
     Commission adheres to the precept that the substance of a transaction, and
     not its form, should control. See Accounting Treatment of Leases, HCAR No.
     17772 (November 17, 1979). Similarly, despite the apparently absolute
     requirement under Section 9(a)(2) of the Act concerning approval of the
     acquisition of securities of public utilities, when the substance of the
     transaction has involved an acquisition of public-utility assets otherwise
     authorized under the Act, the Commission has looked to the substance
     instead of adhering to the form. See New England Electric System, HCAR No.
     18254, text at n.11 (January 11, 1974) ("the acquisition of stock is simply
     a method of transferring title to the assets").

EX-99

MOBILE ENERGY SERVICES HOLDINGS, INC./MOBILE ENERGY SERVICES COMPANY, LLC
PROFORMA FINANCIAL STATEMENTS


The proforma statements and certain of the proforma entries are based upon
projections. These projections are forward-looking statements that based upon
various estimates and assumptions. Such information and statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions which are difficult to predict, including risk described in public
disclosures. Therefore, actual outcomes and results may differ materially from
what is expressed or forecasted herein. The proforma statements and entries will
not be updated to reflect events or changes, whether the result of new
information, future events or otherwise.

All information contained herein is unaudited.






MOBILE ENERGY SERVICES HOLDINGS, INC./MOBILE ENERGY SERVICES COMPANY, LLC
ASSUMPTIONS TO PROFORMA FINANCIAL STATEMENTS


1.   The results shown in the actual column reflect amounts shown on the
     respective Debtors' financial statement received from the Company

2.   Fresh-start accounting is assumed to apply for MESH but not MESC

3.   The estimated value of MESC's existing property, plant & equipment
     post-Effective Date is assumed to be approximately $14.5 million, although
     no formal valuation has been done to support this assumption

4.   $1 million in Tax-Exempt Bonds will remain outstanding post-confirmation

5.   The proforma statements attached hereto present the proforma effects of the
     plan as if the Effective Date of the plan will be December 31, 2002




MOBILE ENERGY SERVICES COMPANY, LLC
BALANCE SHEET
ACTUAL AND PROFORMA
AS OF JULY 31, 2002
UNAUDITED
(in thousands)





                                                     MESC          Proforma        MESC
                                                  Actual (a)       Entries       Proforma
                                                 (7/31/2002)   (8/1/02-12/31/02)(12/31/2002)
- --------------------------------------------------------------------------------------------

  ASSETS

CURRENT ASSETS
                                                                       
Cash and cash equivalents                          $ 12,986         $ (1,542)   $ 11,444
Restricted deposits                                      68                -          68
Accounts receivable:                                                       -
Trade                                                 4,725                -       4,725
Other                                                   223                -         223
Materials and supplies                                4,175                -       4,175
Prepaid expenses and other                              438                -         438
- -----------------------------------------------------------------------------------------

            Total current assets                     22,615           (1,542)     21,073

PROPERTY, PLANT AND EQUIPMENT                       396,876              800     397,676
Less:  accumulated depreciation                     (94,497)        (287,587)   (382,084)
Construction work in progress                         7,189           (7,189)          -
- -----------------------------------------------------------------------------------------

            Property, plant and equipment, net      309,568         (293,976)     15,592

DEFERRED LOAN COST, net                              10,372          (10,372)          -
- -----------------------------------------------------------------------------------------

            Total assets                          $ 342,555       $ (305,890)   $ 36,665
- -------------------------------------------------===========------===========---=========

   LIABILITIES AND MEMBERS' EQUITY

Liabilities not subject to compromise
CURRENT LIABILITIES
Trade accounts payable                              $ 4,290             (431)      3,859
Other accounts payable                                    -                -           -
Accrued expenses and other liabilities                  267                -         267
- -----------------------------------------------------------------------------------------

            Total current liabilities                 4,557             (431)      4,126

LONG-TERM DEBT                                            -                1           1

Liabilities subject to compromise (b)               169,941         (169,941)          -

MEMBERS' EQUITY                                     168,057         (135,519)     32,538
- -----------------------------------------------------------------------------------------

            Total liabilities and members' equity $ 342,555       $ (305,890)   $ 36,665
                                                  =========       ===========   =========




(a)  The MESC actual column reflects those amounts as shown on the MESC balance
     sheet as of July 31, 2002.

(b)  Liabilities subject to compromise include the following amounts


     First Mortgage Bonds, net of discount of $14,709     124,607
     Pollution Control Bonds, net of discount of $7,575    45,334

                                                        $ 169,941
                                                        =========





MOBILE ENERGY SERVICES COMPANY, LLC
STATEMENT OF OPERATIONS
ACTUAL AND PROFORMA
FOR THE TWELVE MONTHS ENDED JULY 31, 2002
UNAUDITED
(in thousands)



                                             MESC         Proforma       MESC
                                            Actual (a)     Entries     Proforma
                                            (8/1/01-      (8/1/02-    (8/1/01-
                                            7/31/02)      12/31/02)    12/31/02)

OPERATING REVENUES:
                                                              
Demand charges                             $ 44,577       $ 7,315      $ 51,892
Processing charges                           24,117         4,500        28,617
Compressed air                                  331           300           631
Ash hauling                                     699            60           759
Power sales                                       4             -             4
- -------------------------------------------------------------------------------

            Total operating revenues         69,728        12,175        81,903

OPERATING EXPENSES:
Operations and maintenance                   18,812         6,115        24,927
Fuel                                         12,301         4,605        16,906
Depreciation and amortization                13,516         5,500        19,016
- --------------------------------------------------------------------------------

            Total operating expenses         44,629        16,220        60,849

OPERATING LOSS                               25,099        (4,045)       21,054
INTEREST, net                                (2,824           (84)       (2,908)
OTHER                                         1,601             -         1,601
- --------------------------------------------------------------------------------

     Net loss before reorganization items    26,322        (3,961)       22,361

REORGANIZATION ITEMS:
Professional fees                             5,600         1,850         7,450
Litigation settlement proceeds              (16,478             -       (16,478)
Debt forgiveness income                                  (169,940)     (169,940)
Loss on asset writedown                                   299,648       299,648
- --------------------------------------------------------------------------------

     Total reorganization items             (10,878       131,558       120,680
- --------------------------------------------------------------------------------

            Net income (loss)              $ 37,200    $ (135,519)    $ (98,319)
                                           ========    ===========    ==========





(a)  The amounts in the MESC actual column reflect actual operating results for
     the 12-month period ended July 31, 2002 from the MESC income statement.






MOBILE ENERGY SERVICES COMPANY, LLC
STATEMENTS OF MEMBERS' EQUITY AND RETAINED EARNINGS
ACTUAL AND PROFORMA
FOR THE TWELVE MONTHS ENDED JULY 31, 2002
UNAUDITED
(in thousands)




                                        MESC         Proforma       MESC
                                      Actual (a)     Entries     Proforma
                                      (8/1/01-      (8/1/02-    (8/1/01-
                                      7/31/02)      12/31/02)    12/31/02)
           MEMBERS' EQUITY

                                                       
Members' equity at August 1, 2001     $ 81,548          $ -     $ 81,548
Members' equity issued                       -            -            -
- -------------------------------------------------------------------------
Members' equity at July 31, 2002      $ 81,548          $ -     $ 81,548
- -------------------------------------==========--===========---==========

          RETAINED EARNINGS


Retained earnings at August 1, 2001   $ 49,309          $ -     $ 49,309
Net income                              37,200     (135,519)     (98,319)
- -------------------------------------------------------------------------

Retained earnings at July 31, 2002    $ 86,509   $ (135,519)    $ (49,010)
- -------------------------------------==========--===========----==========


TOTAL MEMBERS' EQUITY                $ 168,057   $ (135,519)      $ 32,538
- -------------------------------------==========--===========----==========









MOBILE ENERGY SERVICES COMPANY, LLC
PROFORMA ENTRIES
(in thousands)
UNAUDITED

                                                                                           
1.  Liabilities subject to compromise                                            $ 169,941
            Long-term debt                                                                             $ 1
            Debt forgiveness income                                                              $ 169,940
- -To discharge liabilities subject to compromise as contemplated in the plan of
reorganization

2.  Loss on asset writedown                                                      $ 299,648
            Construction work in progress                                                          $ 7,189
            Accumulated depreciation                                                             $ 282,087
            Deferred loan costs                                                                   $ 10,372
- -To writedown property, plant and equipment to estimated fair market
value and to writeoff deferred loan costs

3.  Operations and maintenance                                                     $ 6,115
Fuel                                                                               $ 4,605
Depreciation and amortization                                                      $ 5,500
Professional Fees                                                                  $ 1,850
Cash                                                                                 $ 689
            Demand charges                                                                         $ 7,315
            Processing charges                                                                     $ 4,500
            Compressed air                                                                            $ 60
            Ash hauling                                                                              $ 300
            Interest, net                                                                             $ 84
            Accrued expenses                                                                       $ 1,000
            Accumulated depreciation                                                               $ 5,500
- -To reflect projected operating results from August 1, 2002 through December 31,
2002

4.  Property, plant & equipment                                                      $ 800
            Cash                                                                                     $ 800
- -To record projected capital expenditures from August 1, 2002 through
December 31, 2002.

5.  Accounts payable-trade                                                           $ 431
     Accrued expenses                                                              $ 1,000
           Cash                                                                                   $ 1,431
- -To reflect payment of certain allowed claims as of the Effective Date of the Plan
of Reorganization













MOBILE ENERGY SERVICES HOLDINGS, INC.
BALANCE SHEET
ACTUAL AND PROFORMA
AS OF JULY 31, 2002
UNAUDITED
(in thousands)




                                                          MESH           Proforma         MESH
                                                        Actual (a)       Entries        Proforma
                                                       (7/31/2002)  (8/1/02-12/31/02)  (12/31/02)
  ASSETS

                                                                              
CURRENT ASSETS
Cash and cash equivalents                               $ 2,209              -         $ 2,209
Accounts receivable:
Trade                                                         -              -               -
Other                                                     2,586              -           2,586
- ----------------------------------------------------------------------------------------------

           Total current assets                           4,795              -           4,795

Investment in subsidiary                                 14,959         17,579          32,538
- ----------------------------------------------------------------------------------------------

           Total assets                                $ 19,754       $ 17,579        $ 37,333
- -------------------------------------------------------=========-----==========-------========

LIABILITIES AND SHARHOLDERS' EQUITY

Liabilities not subject to compromise
CURRENT LIABILITIES
Trade accounts payable                                      $ -              -               -
Other accounts payable                                        -              -               -
Accrued expenses and other liabilities                    2,333              -           2,333
- ----------------------------------------------------------------------------------------------

           Total current liabilities                      2,333              -           2,333

DEFERRED INCOME TAXES                                    30,593        (25,035)          5,558

SHAREHOLDERS' EQUITY (DEFICIT)                          (13,172)        42,614          29,442
- ----------------------------------------------------------------------------------------------

           Total liabilities and shareholders' equity  $ 19,754       $ 17,579        $ 37,333
- -------------------------------------------------------=========-----==========-------========



(a)  The MESH actual column reflects those amounts as shown on the MESH balance
     sheet as of July 31, 2002.





MOBILE ENERGY SERVICES HOLDINGS, INC.
STATEMENT OF OPERATIONS
ACTUAL AND PROFORMA
FOR THE TWELVE MONTHS ENDED JULY 31, 2002
UNAUDITED
(in thousands)




                                    MESH           Proforma           MESH
                                  Actual (a)       Entries          Proforma
                              (8/1/01-7/31/02)(8/1/02-12/31/02)(8/1/01-12/31/02)

                                                         
Loss on investment in subsidiary $ 37,218       $ (136,580)       $ (99,362)

Loss before reorganization items   37,218         (136,580)         (99,362)

Income tax expense                     18                -               18

           Net loss              $ 37,200       $ (136,580)       $ (99,380)
- ---------------------------------=========------===========-------==========

(a)  The amounts in the MESH actual column reflect actual operating results for
     the 12-month period ended July 31, 2002 from the MESH income statement.








MOBILE ENERGY SERVICES HOLDINGS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY AND RETAINED EARNINGS
ACTUAL AND PROFORMA
FOR THE TWELVE MONTHS ENDED JULY 31, 2002
UNAUDITED
(in thousands)





                                                    MESH          Proforma         MESH
                                                   Actual         Entries        Proforma
                                             (8/1/01-7/31/02)(8/1/02-12/31/02)(8/1/01-12/31/02)

    COMMON STOCK

                                                                             
Common stock at August 1, 2001                        $ 1           $ (1)             $ -
Additions                                               -         10,000           10,000
Reductions                                              -                               -

ommon stock at July 31, 2002                         $ 1        $ 9,999         $ 10,000
- -----------------------------------------------===========------=========------===========

  ADDITIONAL PAID-IN CAPITAL

Additional paid-in capital at August 1, 2001     $ 52,776            $ -         $ 52,776
Additions                                                         19,442           19,442
Reductions                                              -        (52,776)         (52,776)
- ------------------------------------------------------------------------------------------

Additional paid-in capital at July 31, 2002      $ 52,776        (33,334)        $ 19,442
- -----------------------------------------------===========------=========------===========


 RETAINED EARNINGS

Retained earnings at August 1, 2001            $ (103,149)           $ -       $ (103,149)
Net income                                         37,200       (136,580)         (99,380)
Elimination of deficit                                  -        202,529          202,529
- ------------------------------------------------------------------------------------------

Retained earnings at July 31, 2002              $ (65,949)      $ 65,949              $ -
- -----------------------------------------------===========------=========------===========

TOTAL SHAREHOLDERS' EQUITY                      $ (13,172)      $ 42,614         $ 29,442
- -----------------------------------------------===========------=========------===========










MOBILE ENERGY SERVICES HOLDINGS, INC.
PROFORMA ENTRIES
UNAUDITED
(in thousands)

                                                                                                     
1.  Loss on investment in subsidiary                                                      $ 136,580
           Investment in subsidiary                                                                        $136,580
- -To reflect projected loss on investment in subsidiary from August 1, 2002
through December 31, 2002
based upon projected loss to be realized by subsidiary

2.   Common stock (old)                                                                         $ 1
Additional paid-in capital (old)                                                            $ 9,999
           Common stock (new)                                                                              $ 10,000
- -To record the exchange of the new common stock for the old common stock

3.  Deferred tax liability                                                                 $ 25,035
           Retained earnings (old)                                                                           25,035
- -To record estimated deferred tax liability

4.   Investment in subsidiary                                                             $ 154,159
Additional paid-in capital (old)                                                           $ 42,777
           Additional paid-in capital (new)                                                                $ 19,442
           Retained earnings (old)                                                                         $177,494
- -To adjust carrying value of subsidiary to reflect current book value of subsidiary's equity and
remove remainder of retained deficit

EX-99

                                                                    Exhibit A-1

                         UNITED STATES BANKRUPTCY COURT
                      FOR THE SOUTHERN DISTRICT OF ALABAMA

In re:                         ss.
                               ss.
MOBILE ENERGY SERVICES         ss.                Case No.  99-10168
COMPANY, L.L.C.,               ss.                 Chapter 11
                 Debtor.       ss.
                               ss.
In re:                         ss.
MOBILE ENERGY SERVICES         ss.                Case No.  99-10170
HOLDINGS, INC.,                ss.                 Chapter 11
                               ss.
                 Debtor.       ss.        (Jointly Administered Under 99-10168)

                SECOND amended DISCLOSURE STATEMENT, AS MODIFIED,
              ACCOMPANYING the THIRD JOINT PLAN OF REORGANIZATION,
     DATED OCTOBER 15, 2001, as modified, PROPOSED BY MOBILE ENERGY SERVICES
            COMPANY, L.L.C. AND MOBILE ENERGY SERVICES HOLDINGS, INC.

         THIS IS NOT A SOLICITATION OF ACCEPTANCES OR REJECTIONS OF THE PLAN.
         ACCEPTANCES OR REJECTIONS OF THE PLAN MAY NOT BE SOLICITED UNTIL A
         DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. THIS
         DOCUMENT IS BEING SUBMITTED TO THE BANKRUPTCY COURT FOR APPROVAL BUT
         HAS NOT BEEN APPROVED BY THE BANKRUPTCY COURT.

DONALD J. STEWART                              JEFFREY E. SPIERS
CABANISS, JOHNSTON, GARDNER,                   DAVID A. ZDUNKEWICZ
DUMAS & O'NEAL                                 ANDREWS & KURTH L.L.P.
700 RIVERVIEW PLAZA                            600 TRAVIS, SUITE 4200
MOBILE, ALABAMA                                HOUSTON, TEXAS 77002
(251) 433-6961                                 (713) 220-4200
(251) 415-7350 (TELECOPY)                      (713) 220-4285 (TELECOPY)

COUNSEL TO THE DEBTORS                         SPECIAL COUNSEL TO THE DEBTOR






                                TABLE OF CONTENTS


I. INTRODUCTION................................................................2
- ---------------

II. NOTICE TO CREDITORS AND HOLDERS OF INTERESTS...............................3
- ------------------------------------------------

III. PLAN SUMMARY..............................................................6
- -----------------
       A.Introduction..........................................................6
       --------------
       B.Summary of Classification and Treatment...............................6
       -----------------------------------------

IV. BUSINESS PLAN.............................................................10
- -----------------
       A.Background...........................................................10
       ------------
       B.Summary of Proposed Post-Effective Date Business Plan................12
       -------------------------------------------------------
              1.    Servicing Existing Customers..............................12
              --    ----------------------------
       C.Summary of Post-Reorganization Structure.............................14
       ------------------------------------------
              1.    Organizational Structure..................................14
              --    ------------------------
              2.    Capital Structure.........................................14
              --    -----------------
       D.Agreements Implementing the Proposed Business Plan...................15
       ----------------------------------------------------
              1.    Project Documents.........................................15
              --    -----------------

V. GENERAL INFORMATION ABOUT THE DEBTORS......................................15
- ----------------------------------------
       A.Corporate Information................................................15
       -----------------------
       B.Description of the Pre-Effective Date Mobile Energy..................17
       -----------------------------------------------------
              1.    The Energy Complex........................................17
              --    ------------------
              2.    The Mobile Facility.......................................18
              --    -------------------
       C.Events Precipitating Chapter 11 Filings..............................18
       -----------------------------------------
       D.Project Documents....................................................21
       -------------------
              1.    Energy Services Agreements and Master Operating
                    Agreement.................................................21
              2.    Operations and Maintenance Agreement......................25
              --    ------------------------------------
              3.    Direct Lease..............................................26
              --    ------------
              4.    Supplementary Lease.......................................27
              --    -------------------
              5.    Utilities Land Sublease...................................28
              --    -----------------------
              6.    Environmental Indemnity Agreements........................29
              --    ----------------------------------
              7.    Common Services Agreement.................................31
              --    -------------------------
              8.    Water Procurement and Effluent Services Agreement.........32
              --    -------------------------------------------------
       E.Planned Post-Effective Date Business Activities of Mobile Energy.....32
       ------------------------------------------------------------------
              1.    Post-Effective Date Energy Complex........................32
              --    ----------------------------------
              2.    Qualifying Facility.......................................33
              --    -------------------
       F.Operating Results....................................................33
       -------------------
       G.Pre-Effective Date Senior Secured Indebtedness.......................34
       ------------------------------------------------
              1.    Working Capital Facility..................................34
              --    ------------------------
              2.    The First Mortgage Bonds..................................35
              --    ------------------------
              3.    The Tax-Exempt Bonds......................................35
              --    --------------------
              4.    Agreements Common to Senior Debt..........................37
              --    --------------------------------
              5.    Effect of Chapter 11 Filings and the Plan on Senior
                    Secured Debt..............................................39
              --    ---------------------------------------------------
       H.IDB Bond Issues......................................................39
       -----------------
              1.    The Mixed-Use Bonds.......................................40
              --    -------------------
              2.    The Environmental Bonds...................................42
              --    -----------------------
              3.    The 1994 Bonds............................................44
              --    --------------

VI. DESCRIPTION OF DEBTORS' ASSETS............................................45
- ----------------------------------
       A.Assets of Mobile Energy..............................................46
       -------------------------
              1.    Property, Plant and Equipment.............................46
              --    -----------------------------
              2.    Personal Property.........................................46
              --    -----------------
       B.Assets of Holdings...................................................46
       --------------------
              1.    Personal Property.........................................46
              --    -----------------
              2.    Interests.................................................47
              --    ---------
       C.Causes of Action Owned by Both Mobile Energy and Holdings............47
       -----------------------------------------------------------

VII. SIGNIFICANT EVENTS PRIOR TO AND DURING CHAPTER 11 CASES..................47
- ------------------------------------------------------------
       A.Pre-petition KC Disputes.............................................47
       --------------------------
              1.    Notice of Termination of Pulp Mill ESA and Closure of
                    Pulp Mill.................................................47
              --    -----------------------------------------------------
              2.    Commencement of Arbitration Proceeding by KC..............48
              --    --------------------------------------------
              3.    Commencement of Lawsuit to Enjoin Arbitration Proceeding
              --    --------------------------------------------------------
                    by Mobile Energy..........................................48
                    -------------
       B.Chapter 11 Petitions and Order Approving Joint Administration........49
       ---------------------------------------------------------------
       C.Certain Post-Petition KC Disputes and the KC Settlement Agreement....49
       -------------------------------------------------------------------
              1.    Debtors' Adversary Proceeding against KC..................49
              --    ----------------------------------------
              2.    Arbitration of the KC Claims..............................50
              --    ----------------------------
              3.    KC Settlement Agreement...................................51
              --    -----------------------
       D.Motion to Approve Cogeneration Development Agreement.................52
       ------------------------------------------------------
       E.The Proposed New Pulp Mill...........................................57
       ----------------------------
       F.Orders Authorizing Use of Cash Collateral and Bar Date for
       ------------------------------------------------------------
              Challenges to Claims............................................58
              --------------------
       G.Order Approving Debtors' Cash Management System and Authorizing
       -----------------------------------------------------------------
              Variances from Bankruptcy Administrator's Investment Guidelines.60
              -----------------------------------------------------
       H.Conversion of Number 7 Recovery Boiler to the Number 8 Power
       --------------------------------------------------------------
              Boiler and Addition of No. 7 Turbine Generator..................61
              ----------------------------------------------
       I.      Engagement Of Professional Persons.............................62
       --      ----------------------------------
              1.    Engagement of Attorneys...................................62
              --    -----------------------
              2.    Engagement of Investment Banker...........................62
              --    -------------------------------
              3.    Engagement of Accountants.................................63
              --    -------------------------
       J.      Southern Payment to Collateral Agent for Deposit in
               Maintenance Plan
       --      ---------------------------------------------------
              Funding Subaccount Pursuant to Guaranty in Connection with
              ----------------------------------------------------------
              First Mortgage Bonds and Tax-Exempt Bonds.......................64
              -----------------------------------------
       K.Appointment of Official Unsecured Creditors' Committee...............64
       --------------------------------------------------------
       L.Establishment of Bondholder Steering Committee.......................64
       ------------------------------------------------
       M.Motions to Extend Exclusivity........................................65
       -------------------------------
       N.Motions to Extend Time to Assume or Reject Real Property Leases......66
       -----------------------------------------------------------------
       O.Motion to Approve Work Force Reduction-Severance Program.............66
       ----------------------------------------------------------
       P.Motion to Approve Key Employee Retention Program.....................67
       --------------------------------------------------
       Q.Motion to Pay Prepetition Wages......................................67
       ---------------------------------
       R.Section 203 Authorization............................................67
       ---------------------------
       S.Motion to Approve Cogeneration Development Agreement Amendment
         No. 1................................................................68
       ----------------------------------------------------------------
       T.First Plan and Disclosure Statement..................................68
       -------------------------------------
       U.U-1 and QF Applications..............................................69
       -------------------------
       V.KC Preference Adversary Proceeding...................................70
       ------------------------------------
       W.KC Conversion Adversary Proceeding...................................70
       ------------------------------------
       X.Transfer of 1% Interest in Mobile Energy to Holdings.................70
       ------------------------------------------------------
       Y.Motion to Approve OEC as Interim Operator............................71
       -------------------------------------------
       Z.Motion for Order Regarding Procedures Relating to Confirmation.......71
       ----------------------------------------------------------------
       AA.    KC True-up Motion...............................................72
       ---    -----------------
       BB.    Motion to Approve Amendment No. 2 to Cogeneration Agreement.....73
       ---    -----------------------------------------------------------
       CC.    Claim Objections................................................74
       ---    ----------------
       DD.    Energy Charge Disputes with KC; Financial Adjustment Event......75
       ---    ----------------------------------------------------------
       EE.    Arbitration Award; Reinstatement of the Pulp Mill ESA and MOA...76
       ---    -------------------------------------------------------------
       FF.    S.D. Warren Settlement Agreement................................77
       ---    --------------------------------
       GG.    Consultants Hired by Mobile Energy..............................78
       ---    ----------------------------------
       HH.    Devery Claim....................................................79
       ---    ------------
       II.    Bonnor/Douglas Claims and Settlement............................80
       ---    ------------------------------------
       JJ.    Settlement of Specific Claims between KC and Mobile Energy......81
       ---    ----------------------------------------------------------
       KK.    New Demand Charge Arbitration against KC........................82
       ---    ----------------------------------------
       LL.    Potential Sale of Mobile Energy Interests or Holdings...........82
       ---    -----------------------------------------------------

VIII. CLASSIFICATION AND TREATMENT OF CLAIMS  AND INTERESTS UNDER THE PLAN....83
- --------------------------------------------------------------------------
       A.General..............................................................83
       ---------
       B.Effective Date of the Plan...........................................83
       ----------------------------
       C.Classification Generally.............................................84
       --------------------------
       D.Unclassified Claims..................................................84
       ---------------------
              1.    Administrative Expenses...................................84
              --    -----------------------
              2.    Priority Tax Claims.......................................85
              --    -------------------
       E.Classified Claims....................................................86
       -------------------
              1.    Class 1:   Priority Non-Tax Claims........................86
              --    ----------------------------------
              2.    Class 2:  Allowed Working Capital Facility Provider
                    Secured Claim.............................................87
              --    ---------------------------------------------------
              3.    Class 3: Allowed Southern Post-Petition Claims............89
              --    ----------------------------------------------
              4.    Class 4:  Allowed First Mortgage Bondholders Claims.......90
              --    ---------------------------------------------------
              5.    Class 5:  Allowed Tax-Exempt Bondholders Claim............90
              --    ----------------------------------------------
              6.    Class 6:  Allowed Other Secured Claims....................91
              --    --------------------------------------
              7.    Class 7:  Allowed Unsecured Claims........................92
              --    ----------------------------------
              8.    Class 8:  Allowed Southern Claims.........................92
              --    ---------------------------------
              9.    Class 9:   Mobile Energy Interests........................95
              --    ----------------------------------
              10.   Class 10:  Holdings Interests.............................96
              ---   -----------------------------

IX. IMPLEMENTATION OF THE PLAN................................................96
- ------------------------------
       A.Administrative Consolidation.........................................96
       ------------------------------
       B.Sources of Funds.....................................................96
       ------------------
       C.Requisite Authority..................................................97
       ---------------------
       D.Distributions to Holders of Allowed Claims...........................98
       --------------------------------------------
       E.Distribution of Cash.................................................99
       ----------------------
       F.Disputed Claims......................................................99
       -----------------
       G.Bar Date for Fee Applications and Objections to Same................100
       ------------------------------------------------------
       H.Description of Post-Effective Date Management.......................101
       -----------------------------------------------
       I.      Description of Post-Effective Date Capital Structure..........102
       --      ----------------------------------------------------
       J.      Issuance of the New Common Stock..............................102
       --      --------------------------------
              1.    Initial Issuance of the New Common Stock Under the Plan..102
              --    -------------------------------------------------------
              2.    Resale of the New Common Stock...........................103
              --    ------------------------------
              3.    Registration Rights......................................103
              --    -------------------
              4.    Listing of the New Common Stock..........................103
              --    -------------------------------
       K.Modification Of Payment Terms.......................................103
       -------------------------------
       L.Treatment Of Executory Contracts....................................104
       ----------------------------------
              1.    General..................................................104
              --    -------
              2.    Collective Bargaining Agreement..........................109
              --    -------------------------------
              3.    Utilities Land Sublease..................................109
              --    -----------------------
       M.Committees..........................................................110
       ------------
       N.Retention Of Jurisdiction...........................................110
       ---------------------------
       O.Conditions To Confirmation and Effectiveness........................110
       ----------------------------------------------
              1.    Conditions To Confirmation...............................110
              --    --------------------------
              2.    Conditions To Effectiveness..............................111
              --    ---------------------------
              3.    Waiver of Conditions.....................................111
              --    --------------------
       P.Effect Of Confirmation..............................................112
       ------------------------
              1.    Discharge................................................112
              --    ---------
              2.    Exculpation..............................................112
              --    -----------
              3.    Releases.................................................114
              --    --------
              4.    Injunction against Interference with Plan................115
              --    -----------------------------------------
              5.    Vesting of Assets........................................115
              --    -----------------
       Q.Consummation And Effectiveness......................................115
       --------------------------------
       R.Amendments to Holdings Articles of Incorporation and Holdings
         By-laws; Amendments to Mobile Energy Articles of Organization and
         Mobile Energy Operating Agreement...................................116
              1.    Amendments to Holdings Articles of Incorporation and
                    Holdings By-laws.........................................116

              2.    Amendments to Mobile Energy Articles of Organization
                    and Mobile Energy Operating Agreement....................116
                    --------------------------
       S.Events of Default...................................................117
       -------------------
       T.Retention of Claims and Causes of Action............................117
       ------------------------------------------

X. RISK FACTORS ASSOCIATED WITH PROPOSED PLAN................................118
- ---------------------------------------------
       A.General.............................................................118
       ---------
       B.Operational Risks...................................................118
       -------------------
       C.Operating and Maintenance Costs.....................................119
       ---------------------------------
       D.Mill Risk; Dependence Upon Mill Owners for Revenue..................120
       ----------------------------------------------------
       E.Demand Charges Owed by KC Due to the Pulp Mill Reinstatement........120
       --------------------------------------------------------------
       F.PUHCA; PURPA........................................................121
       --------------
       G.Environmental Risks.................................................121
       ---------------------
              1.    The Cluster Rule.........................................122
              --    ----------------
              2.    The Combustion Rule......................................122
              --    -------------------
              3.    CERCLA...................................................123
              --    ------
       H.Permitting and Regulatory Matters...................................124
       -----------------------------------
       I.      IDB Approval..................................................126
       --      ------------
       J.      Income Tax Risks..............................................127
       --      ----------------
       K.Failure of Conditions...............................................127
       -----------------------

XI. VALUATION ANALYSIS.......................................................127
- ----------------------
       A.General.............................................................127
       ---------
       B.Liquidation Value...................................................127
       -------------------
       C.Going Concern Value.................................................128
       ---------------------

XII. BANKRUPTCY CAUSES OF ACTION.............................................128
- --------------------------------
       A.Preferences.........................................................128
       -------------
       B.Fraudulent Conveyances..............................................129
       ------------------------

XIII. INCOME TAX ANALYSIS....................................................130
- -------------------------
       A.General.............................................................130
       ----------
       B.Federal Income Tax Consequences to the Debtors......................131
       -------------------------------------------------
              1.    General..................................................131
              --    -------
              2.    Excess Loss Account - Debtors' Indemnity of Southern.....132
              --    -----------------------------------------------------
              3.    Income Tax Effects to Holdings from Collection of
                    Third Party Claims.......................................133
              4.    Cancellation of Indebtedness Income......................134
              --    ------------------------------------
              5.    Uncertainty of Outcome; Risk of Diminution in Value......135
              --    ----------------------------------------------------
              6.    Deductions of Accrued Interest...........................136
              --    ------------------------------
       C.Federal Income Tax Consequences to Holders..........................136
       ---------------------------------------------
              1.    General..................................................136
              --    --------
              2.    Cash Received by Holders of Allowed First Mortgage
                    Bondholders Claims and Holders of Allowed Tax-Exempt
                    Bondholders Claims.......................................137
              3.    Exchange of Allowed First Mortgage Bondholders Claims
                    and Allowed Tax-Exempt Bondholders Claims for New Common
                    Stock....................................................138
       D.Information Reporting and Backup Withholding........................143
       -----------------------------------------------

XIV. VOTING PROCEDURES AND REQUIREMENTS......................................143
- ---------------------------------------
       A.Ballots and Voting Deadline.........................................143
       -----------------------------
       B.Creditors Solicited to Vote.........................................144
       -----------------------------
       C.Definition of Impairment............................................145
       --------------------------
       D.Classes Impaired Under the Plan.....................................146
       ---------------------------------
       E.Vote Required for Class Acceptance..................................146
       ------------------------------------
       F.Distributions Only to Holders of Allowed Claims and Interests.......146
       ---------------------------------------------------------------

XV. CONFIRMATION OF THE PLAN.................................................147
- ----------------------------
       A.Confirmation Hearing................................................147
       ----------------------
       B.Requirements for Confirmation of the Plan...........................149
       -------------------------------------------
              1.    General..................................................149
              --    -------
              2.    Feasibility..............................................151
              --    -----------
              3.    Best Interests Of Creditors And Liquidation Analysis.....152
              --    ----------------------------------------------------
       C.Cramdown............................................................152
       ----------
              1.    No Unfair Discrimination.................................153
              --    ------------------------
              2.    Fair and Equitable Test..................................153
              --    -----------------------








                             INTRODUCTORY STATEMENT

         THIS DISCLOSURE STATEMENT CONTAINS A SUMMARY OF CERTAIN PROVISIONS OF
THE THIRD JOINT PLAN OF REORGANIZATION, AS MODIFIED, DATED AUGUST __, 2002
PROPOSED BY MOBILE ENERGY SERVICES COMPANY, L.L.C. AND MOBILE ENERGY SERVICES
HOLDINGS, INC., AS DEBTORS AND DEBTORS IN POSSESSION (THE "PROPONENTS") AND
SUMMARIES OF CERTAIN OTHER DOCUMENTS RELATING TO THE CONSUMMATION OF THE PLAN OR
THE TREATMENT OF CERTAIN PARTIES-IN-INTEREST AND CERTAIN FINANCIAL INFORMATION
RELATING THERETO. WHILE THE PROPONENTS BELIEVE THAT THESE SUMMARIES PROVIDE
ADEQUATE INFORMATION WITH RESPECT TO THE DOCUMENTS SUMMARIZED, AND THE
BANKRUPTCY COURT HAS APPROVED THIS DISCLOSURE STATEMENT AS CONTAINING ADEQUATE
INFORMATION, SUCH SUMMARIES ARE QUALIFIED TO THE EXTENT THAT THEY DO NOT SET
FORTH THE ENTIRE TEXT OF SUCH DOCUMENTS. IF ANY INCONSISTENCIES EXIST BETWEEN
THE TERMS AND PROVISIONS OF THIS DISCLOSURE STATEMENT AND THE TERMS AND
CONDITIONS OF THE PLAN OR OTHER DOCUMENTS DESCRIBED THEREIN, THE TERMS AND
CONDITIONS OF THE PLAN OR OTHER DOCUMENTS ARE CONTROLLING. EACH HOLDER OF AN
IMPAIRED CLAIM OR AN IMPAIRED INTEREST SHOULD REVIEW THE ENTIRE PLAN ATTACHED TO
THIS DISCLOSURE STATEMENT BEFORE CASTING A BALLOT.

         NO PARTY IS AUTHORIZED BY THE PROPONENTS OR THE BANKRUPTCY COURT TO
PROVIDE ANY INFORMATION WITH RESPECT TO THE PLAN OTHER THAN THAT CONTAINED IN
THIS DISCLOSURE STATEMENT. NEITHER THE PROPONENTS NOR THE BANKRUPTCY COURT HAVE
AUTHORIZED ANY REPRESENTATIONS CONCERNING THE DEBTORS, THE REORGANIZED DEBTORS,
THEIR ANTICIPATED FINANCIAL POSITION OR OPERATIONS AFTER CONFIRMATION OF THE
PLAN, OR THE VALUE OF THEIR BUSINESSES AND PROPERTIES OTHER THAN AS SET FORTH IN
THIS DISCLOSURE STATEMENT. UNLESS STATED OTHERWISE IN THIS DISCLOSURE STATEMENT,
THE DISCLOSURES IN THIS DISCLOSURE STATEMENT ARE MADE BY THE PROPONENTS AND
SHOULD NOT BE CONSTRUED AS BEING MADE BY ANY OTHER PARTY. TO THE EXTENT
INFORMATION IN THIS DISCLOSURE STATEMENT RELATES TO THE DEBTORS, THE DEBTORS
HAVE PROVIDED THE UNDERLYING INFORMATION USED TO PREPARE THIS DISCLOSURE
STATEMENT.

         NOTHING CONTAINED IN THIS DISCLOSURE STATEMENT, EXPRESS OR IMPLIED, IS
INTENDED TO GIVE RISE TO ANY COMMITMENT OR OBLIGATION OF THE DEBTORS OR SHALL
CONFER UPON ANY PERSON ANY RIGHTS, BENEFITS, OR REMEDIES OF ANY NATURE
WHATSOEVER.

         THIS DISCLOSURE STATEMENT CONTAINS PROJECTED FINANCIAL INFORMATION
REGARDING THE DEBTORS, THE REORGANIZED DEBTORS, AND CERTAIN OTHER
FORWARD-LOOKING STATEMENTS, ALL OF WHICH ARE BASED ON VARIOUS ESTIMATES AND
ASSUMPTIONS AND WILL NOT BE UPDATED TO REFLECT EVENTS OCCURRING AFTER THE DATE
HEREOF. SUCH INFORMATION AND STATEMENTS ARE SUBJECT TO INHERENT UNCERTAINTIES
AND TO A WIDE VARIETY OF SIGNIFICANT BUSINESS, ECONOMIC, AND COMPETITIVE RISKS,
INCLUDING, AMONG OTHERS, THOSE DESCRIBED HEREIN. CONSEQUENTLY, ACTUAL EVENTS,
CIRCUMSTANCES, EFFECTS AND RESULTS MAY VARY SIGNIFICANTLY FROM THOSE INCLUDED IN
OR CONTEMPLATED BY SUCH PROJECTED FINANCIAL INFORMATION AND SUCH OTHER
FORWARD-LOOKING STATEMENTS. THE PROJECTED FINANCIAL INFORMATION CONTAINED HEREIN
IS THEREFORE NOT NECESSARILY INDICATIVE OF THE FUTURE FINANCIAL CONDITION OR
RESULTS OF OPERATIONS OF THE DEBTORS OR THE REORGANIZED DEBTORS, WHICH MAY VARY
SIGNIFICANTLY FROM THOSE SET FORTH IN SUCH PROJECTED FINANCIAL STATEMENTS.
CONSEQUENTLY, THE PROJECTED FINANCIAL INFORMATION AND OTHER FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN SHOULD NOT BE REGARDED AS REPRESENTATIONS BY THE
PROPONENTS, THE PROPONENTS' ADVISORS, OR ANY OTHER PERSON THAT THE PROJECTED
FINANCIAL CONDITION OR RESULTS CAN OR WILL BE ACHIEVED.

         THIS DISCLOSURE STATEMENT MAY NOT BE RELIED UPON BY ANY PERSON OR
ENTITY FOR ANY PURPOSE OTHER THAN BY CREDITORS AND INTEREST HOLDERS ENTITLED TO
VOTE ON THE PLAN IN DETERMINING WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN.
NOTHING CONTAINED HEREIN CONSTITUTES AN ADMISSION OF ANY FACT OR LIABILITY BY
ANY PARTY, OR IS ADMISSIBLE IN ANY PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER
PARTY, OR IS CONCLUSIVE EVIDENCE OF THE TAX OR OTHER LEGAL EFFECTS OF THE
REORGANIZATION OF THE DEBTORS OR ON CREDITORS OR INTEREST HOLDERS.

         EXCEPT AS HEREINAFTER NOTED, THE INFORMATION CONTAINED HEREIN IS
GENERALLY INTENDED TO DESCRIBE FACTS AND CIRCUMSTANCES ONLY AS OF AUGUST __,
2002, OR SPECIFIC DATES HEREIN, AND NEITHER THE DELIVERY OF THE DISCLOSURE
STATEMENT NOR THE CONFIRMATION OF THE PLAN WILL CREATE ANY IMPLICATION, UNDER
ANY CIRCUMSTANCES, THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AT ANY TIME AFTER AUGUST __, 2002, OR THAT THE PROPONENTS WILL BE UNDER ANY
OBLIGATION TO UPDATE SUCH INFORMATION IN THE FUTURE.

I.
                                  INTRODUCTION
         The Proponents have prepared this Disclosure Statement in connection
with the Third Joint Plan of Reorganization Proposed by the Debtors, dated as of
October 15, 2001, as modified, (the "Plan"). The Plan has been filed with the
United States Bankruptcy Court for the Southern District of Alabama (the
"Bankruptcy Court") in the Debtors' Chapter 11 Cases now pending under Chapter
11 of 11 U.S.C. ss.ss. 101-1330 (the "Bankruptcy Code"). A copy of the Plan is
attached to this Disclosure Statement as Exhibit "A." The steering committee for
an ad hoc committee formed by certain bondholders of the Debtors' $255,210,000
First Mortgage Bonds due 2017 and the $85,000,000 6.95% Solid Waste Revenue
Refunding Bonds Series 1995 due 2020 (the "Bondholder Steering Committee"),
which collectively hold in excess of 70% of the First Mortgage Bonds and in
excess of 64% of the Tax-Exempt Bonds, support confirmation of the Plan.
         Unless otherwise defined in the Disclosure Statement, definitions have
the meanings ascribed in the Plan or the Bankruptcy Code. In case of an
inconsistency in definitions, the definitions in the Plan govern. If the term is
not defined in the Plan, the Bankruptcy Code governs. If the term is not defined
in the Plan or the Bankruptcy Code, the definition in the Disclosure Statement
governs.
II.
                  NOTICE TO CREDITORS AND HOLDERS OF INTERESTS
         The Proponents submit this Disclosure Statement pursuant to Bankruptcy
Code ss. 1125 in connection with the solicitation of votes in favor of
acceptance of the Plan. The Disclosure Statement will be transmitted to all
Creditors and Holders of Interests. However, as provided by the Bankruptcy Code,
the Proponents are seeking votes in favor of acceptance or rejection of the Plan
from only Holders of Claims classified in Classes 4, 5, and 8 in the Plan, which
are the only Claims that are Impaired under the Plan and entitled to vote.
         All persons receiving this Disclosure Statement and the Plan are
encouraged to review fully the provisions of the Plan and all attached
appendices and exhibits, in addition to reviewing this Disclosure Statement and
all appendices and exhibits attached hereto.
         The Disclosure Statement is not intended to replace careful review and
analysis of the Plan. Rather, it is submitted as an aid and supplement to review
of the Plan and as an effort to explain the terms and implications of the Plan.
Every effort has been made to sufficiently explain the various aspects of the
Plan as they may affect all Creditors and Holders of Interests. Creditors and
Holders of Interests should read this Disclosure Statement and the Plan in their
entirety. If you have any questions, the Proponents urge you to contact Debtors'
legal counsel, and every effort will be made to assist you.
         On ___________________, after notice and a hearing, the Bankruptcy
Court, the Honorable William S. Shulman presiding, entered an order approving
this Disclosure Statement as containing information of a kind, and in sufficient
detail, adequate to enable Creditors whose votes on the Plan are being solicited
to make an informed judgment whether to vote for acceptance or rejection of the
Plan.
         No solicitation of votes on the Plan may be made, except pursuant to
this Disclosure Statement and Section 1125 of the Bankruptcy Code. No party has
been authorized to utilize any information concerning the Debtors or their
businesses or their properties, other than the information contained in this
Disclosure Statement, to solicit votes on the Plan.

                  EXCEPT AS SET FORTH IN THIS DISCLOSURE STATEMENT AND THE
                  APPENDICES AND EXHIBITS ATTACHED HERETO, NO REPRESENTATIONS
                  CONCERNING THE DEBTORS, THE REORGANIZED DEBTORS, THEIR ASSETS,
                  THE PAST OR FUTURE OPERATIONS OF THE DEBTORS OR THE
                  REORGANIZED DEBTORS, OR THE PLAN ARE AUTHORIZED, NOR ARE ANY
                  SUCH REPRESENTATIONS TO BE RELIED UPON IN ARRIVING AT A
                  DECISION WITH RESPECT TO voting on THE PLAN. ANY
                  REPRESENTATIONS MADE TO SECURE ACCEPTANCE OR REJECTION OF THE
                  PLAN OTHER THAN AS CONTAINED IN THIS DISCLOSURE STATEMENT
                  SHOULD BE DISREGARDED AND SHOULD BE REPORTED TO COUNSEL FOR
                  THE PROPONENTS.

                  EXCEPT AS SPECIFICALLY NOTED, THERE HAS BEEN NO INDEPENDENT
                  AUDIT OF THE FINANCIAL INFORMATION CONTAINED IN THIS
                  DISCLOSURE STATEMENT. THE PROPONENTS, AND the proponents'
                  ADVISORS ARE NOT ABLE TO WARRANT OR REPRESENT THAT THE
                  INFORMATION CONTAINED HEREIN IS WITHOUT ANY INACCURACY. THE
                  FACTUAL INFORMATION REGARDING THE DEBTORS, INCLUDING THE
                  ASSETS AND LIABILITIES OF THE DEBTORS, HAS BEEN DERIVED FROM
                  NUMEROUS SOURCES, INCLUDING, BUT NOT LIMITED TO, the DEBTORS'
                  BOOKS AND RECORDS, SCHEDULES, AND DOCUMENTS SPECIFICALLY
                  IDENTIFIED HEREIN.

                  THE INFORMATION CONTAINED IN THE DISCLOSURE STATEMENT is also
                  compiled FROM RECORDS AVAILABLE TO THE proponents, INCLUDING,
                  BUT NOT LIMITED TO, PLEADINGS AND REPORTS ON FILE IN THE
                  BANKRUPTCY COURT, PLEADINGS AND REPORTS ON FILE IN OTHER
                  COURTS AND TRIBUNALS, LOAN AGREEMENTS, AND BUSINESS RECORDS.

                  THE APPROVAL OF THE DISCLOSURE STATEMENT BY THE BANKRUPTCY
                  COURT DOES NOT CONSTITUTE AN ENDORSEMENT BY THE BANKRUPTCY
                  COURT OF THE PLAN OR A GUARANTee OF THE ACCURACY AND
                  COMPLETENESS OF THE INFORMATION CONTAINED IN THis DISCLOSURE
                  STATEMENT.

         After careful review of the Disclosure Statement and all appendices and
Exhibits attached thereto, each Creditor in Classes 4, 5 and 8 (as defined
below) should vote in favor of acceptance or rejection of the Plan on the
enclosed ballot and return the ballot in the enclosed self-addressed return
envelope. The voting deadline is 5:00 p.m. Eastern Time on _______________,
2002. Your ballot, or the Master Ballot executed on your behalf, must be
received by the Balloting Agent by the Voting Deadline. The Balloting Agent is
Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New York, New York
10022. PLEASE NOTE THAT BALLOTS AND MASTER BALLOTS WILL NOT BE ACCEPTED BY
FACSIMILE. A BALLOT OR MASTER BALLOT BEARING AN ORIGINAL SIGNATURE MUST BE
RECEIVED, AND ANY BALLOTS OR MASTER BALLOTS RECEIVED AFTER 5:00 P.M., EASTERN
TIME ON __________________, 2002 WILL NOT BE COUNTED. III.
                                  PLAN SUMMARY
A.       Introduction

         The following is a brief summary of the Plan's treatment of Claims
against and Interests in the Debtors. This summary is qualified in its entirety
by reference to all of the provisions of the Plan. A copy of the Plan is
attached hereto as Exhibit A and incorporated herein by reference. You are urged
to read the Plan in its entirety. TO THE EXTENT THERE IS ANY CONFLICT BETWEEN
THE TERMS OF THIS DISCLOSURE STATEMENT AND THE PLAN, THE TERMS OF THE PLAN
GOVERN.
         The Plan provides for the recapitalization of the Debtors and
continuation of the Debtors' business operations. The proposed recapitalization
extinguishes the long-term secured indebtedness of the Debtors, other than
$1,000,000 of Tax-Exempt Bonds, and provides for the issuance to the Holders of
the Allowed First Mortgage Bondholder Claims and the Allowed Tax-Exempt
Bondholder Claims of New Common Stock.

     The Plan provides for the continuation of the Debtors' existing business
operations through continuation of service to its existing customer,
Kimberly-Clark Corporation ("KC").

B.       Summary of Classification and Treatment


- ---------------- -------------------------------- -----------------------------
CLASS            DESCRIPTION                      TREATMENT
- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Unclassified*    Allowed Administrative           Except to the extent that the
                 Expenses Estimated Claims:       Holder of an Allowed
                 $5,247,055.                      Administrative Expense agrees
                                                  to a different treatment,
                                                  Allowed Administrative
                                                  Expenses shall be paid in full
                                                  in Cash (i) as soon as
                                                  practicable after the date
                                                  upon which such Administrative
                                                  Expense becomes an Allowed
                                                  Administrative Expense, or
                                                  (ii) if incurred in the
                                                  ordinary course of the
                                                  Debtors' businesses, in
                                                  accordance with the terms and
                                                  conditions of the particular
                                                  transaction.
                                                  Estimated Recovery:
                                                  100%
- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Unclassified     Allowed Priority Tax Claims      Except to the extent that the
                 Estimated Claims: $0.00          Holder of an Allowed Priority
                                                  Tax Claim agrees to a
                                                  different treatment or as
                                                  otherwise ordered by the
                                                  Bankruptcy Court, each Holder
                                                  of an Allowed Priority Tax
                                                  Claim shall be paid in full in
                                                  Cash as soon as practicable
                                                  after the date upon which such
                                                  Priority Tax Claim becomes an
                                                  Allowed Priority Tax Claim,
                                                  provided, however, that at
                                                  the option of the Reorganized
                                                  Debtors, the Reorganized
                                                  Debtors may pay Allowed
                                                  Priority Tax Claims over
                                                  a period not exceeding six (6)
                                                  years after the date of
                                                  assessment pursuant to 11
                                                  U.S.C. Section 1129(a)(9)(C).
                                                  Estimated Recovery:  100%
- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Class 1          Allowed Priority Non-Tax Claims  Unimpaired.  Except to the
                 Estimated Claims: $0.00....      extent that the Holder of an
                                                  Allowed Priority Non-Tax
                                                  Claim agrees to a different
                                                  treatment, Allowed Priority
                                                  Non-Tax Claims shall be paid
                                                  in full, in Cash as soon as
                                                  practicable after the date
                                                  upon which such Priority
                                                  Non-Tax Claim becomes an
                                                  Allowed Priority Non-Tax
                                                  Claim.
                                                  Estimated recovery: 100%
- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Class 2          Allowed Working Capital          Unimpaired.  With respect to
                 Facility Provider Claim          the Allowed Claims in Class 2,
                 Estimated Claim: $0.00.....      the Plan may, at the Debtors'
                                                  option:(i) leave unaltered the
                                                  legal, equitable and
                                                  contractual rights of the
                                                  Allowed Working Capital
                                                  Facility Provider Claim; (ii)
                                                  provide for the reinstatement
                                                  of the underlying obligation;
                                                  or (iii) provide Cash in the
                                                  full amount of  such Allowed
                                                  Claim.  The Debtors do not
                                                  believe that any Class 2 Claim
                                                  exists.
                                                  Estimated Recovery: 100%
- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Class 3          Southern Post-Petition Claims    Unimpaired.  The Holders of
                 Estimated Claims:                Allowed Claims in Class 3
                 $4,825,084                       shall receive incomplete
                                                  settlement, satisfaction,and
                                                  discharge of their Class 3
                                                  Claims the treatment
                                                  provided for in the Cogen
                                                  Development Agreement and
                                                  the Court orders approving
                                                  same.  As part of the
                                                  treatment provided for in the
                                                  Cogen Development
                                                  Agreement and Court orders
                                                  approving same, Mobile Energy
                                                  shall execute and deliver the
                                                  Southern Security Agreement,
                                                  and shall take all other
                                                  actions and execute all other
                                                  documents which are reasonably
                                                  necessary to effectuate the
                                                  security interests required
                                                  to be conveyed pursuant to the
                                                  Cogen Development Agreement
                                                  and orders approving them.
                                                  In addition, all indemnities
                                                  delivered by Mobile Energy to
                                                  Mirant, Mirant Services and
                                                  Southern under the Cogen
                                                  Development Agreement and
                                                  Court orders approving same
                                                  shall survive confirmation of
                                                  this Plan and shall be
                                                  enforceable obligations of
                                                  Reorganized Mobile Energy as
                                                  set forth in the Cogen
                                                  Development Agreement and
                                                  Court orders approving same.
                                                  Estimated Recovery: 100%
- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Class 4          Allowed First Mortgage           Impaired.  Each Holder of a
                 Bondholder Claims                First Mortgage Bondholder
                 Estimated Claims:                Claim shall receive in
                 $230,000,000.00*                 complete settlement,
                                                  satisfaction and discharge of
                                                  their First Mortgage
                                                  Bondholder Claims a Pro Rata
                                                  Share of 72.967% of the New
                                                  Common Stock of Holdings.

- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Class 5          Allowed Tax-Exempt Bondholder    Impaired.  Each Holder of a
                 Claims Estimated Claims:         Tax-Exempt Bondholder Claim
                 $85,000,000.00**                 shall receive in complete
                                                  settlement, satisfaction and
                                                  discharge of its Tax-Exempt
                                                  Bondholder Claim, (1) a Pro
                                                  Rata Share of 27.033% of the
                                                  New Common Stock of Holdings,
                                                  and (2) such Holder shall
                                                  retain a Pro Rata Share of
                                                  $1,000,000 of their
                                                  outstanding Tax-Exempt Bonds.

- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Class 6          Allowed Other Secured Claims     Unimpaired.  The Holders of
                 Estimated Claims:                Allowed Claims in Class 6
                 $0.00***                         shall retain, unaltered, their
                                                  legal, equitable and
                                                  contractual rights or shall be
                                                  paid the full amounts of their
                                                  Allowed Claims, in Cash.
                                                  Estimated Recovery: 100%
- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Class 7          Allowed Unsecured Claims         Unimpaired.  Holders of
                 Estimated Claims:$431,286.00**** Allowed Unsecured Claims will
                                                  be paid as soon as practicable
                                                  after such Claim becomes an
                                                  Allowed Claim.
                                                  Estimated Recovery: 100%
- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Class 8          Allowed Southern Claims          Impaired.  Holders of Allowed
                 Estimated Claims:                Claims in Class 8 shall
                 $50,000,000.00                   receive in complete
                                                  settlement, satisfaction, and
                                                  discharge of their Class 8
                                                  Claims the treatment provided
                                                  for in the Cogen Development
                                                  Agreement, and the
                                                  court orders approving them.
                                                  Estimated Recovery: 0.3%
- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Class 9          Mobile Energy Interests          Unimpaired.  Holdings will
                                                  retain its Mobile Energy
                                                  Interests.
                                                  Estimated Recovery: 100%.
- ---------------- -------------------------------- -----------------------------
- ---------------- -------------------------------- -----------------------------
Class 10         Holdings Interests               Impaired.  Holder of Holdings
                                                  Interests shall not receive
                                                  any distributions under the
                                                  Plan and the Holdings
                                                  Interests shall be canceled
                                                  and extinguished.
                                                  Estimated Recovery: 0%
- ---------------- -------------------------------- -----------------------------




- --------
* Estimate does not include any amount for disputed Administrative Expenses
asserted by KC.

* This amount represents the principal amount of the Claims in Class 4 as of the
Petition Date.

** This amount represents the principal amount of the Claims in Class 5 as of
the Petition Date.

*** This amount excludes the 1994 Bonds.

**** Estimate does not include any amount for KC's proof of claim (filed in the
amount of $538,947.10).


                                      IV.
                                  BUSINESS PLAN
A.       Background

         Mobile Energy Services Company, L.L.C. ("Mobile Energy") owns and
operates an energy and chemical recovery complex (the "Energy Complex") located
at the Mobile Facility. The Energy Complex historically provided a variety of
energy related services to the Mills. Currently, the Pulp Mill and Tissue Mill
are owned by KC, successor by merger to KCTC, and the Paper Mill is owned by
S.D. Warren. The Energy Complex used the "black liquor" and biomass fuels
produced by the Pulp Mill, as well as coal and natural gas, to generate
electricity and steam that were used by all three of the Mills. The Energy
Complex received payments for providing the electricity and steam processing
services to the Mills. The Energy Complex also processed "black liquor" into
"green liquor" that was used by the Pulp Mill and received additional revenue
for that processing service. Mobile Energy provided services and received
payments pursuant to three bilateral energy services agreements ("ESA's"), one
with the owner of each of the Mills.
         In May 1998, the Debtors received a notice from KCTC that KCTC planned
to close the Pulp Mill and to terminate the Pulp Mill ESA effective on September
1, 1999. The Debtors recognized that the announced shutdown of the Pulp Mill
eventually would result in Mobile Energy losing its largest customer in terms of
annual revenue and a principal source of inexpensive fuel. In addition, the
suspension of pulping operations at the Mobile Facility created an imbalance
between steam demand and power demand, which effectively raised Mobile Energy's
cost of power generation. Without the inexpensive biomass and black liquor
produced by the Pulp Mill and the revenue derived from providing services to the
Pulp Mill, and due to the increased cost of power generation, the Debtors did
not believe they could meet their financial obligations. As a consequence, the
Debtors filed their Chapter 11 Cases.
         The Plan reflects a revised business plan for operation of the Energy
Complex as a consequence of the loss of the Pulp Mill revenues and other events
described in this Disclosure Statement. In addition, the Plan extinguishes over
$300 million in prepetition secured debt and converts that debt to New Common
Stock. The Proponents believe that the Plan will provide Creditors with the best
recovery under the very difficult circumstances existing after the shut down of
the Pulp Mill.
B.       Summary of Proposed Post-Effective Date Business Plan

1.       Servicing Existing Customers

         Mobile Energy intends to continue to provide services to KC's Pulp Mill
and Tissue Mill as part of on-going operations. The services provided to the
Tissue Mill will be pursuant to the terms of the Tissue Mill ESA and the other
Project Documents; and the services provided to the Pulp Mill will be pursuant
to the terms of the reinstated Pulp Mill ESA and the other Project Documents.
THE PROJECTIONS ASSUME KC WILL MODIFY ITS OPERATIONS AT THE TISSUE MILL IN A
MANNER CONSISTENT WITH STATEMENTS MADE TO THE DEBTORS BY KC REPRESENTATIVES (THE
"PROJECTIONS") AND THAT THE OPERATIONS ON THE PULP MILL PROPERTY WILL CONTINUE
AT THEIR REDUCED LEVEL. THE PROJECTIONS ARE ATTACHED TO THIS DISCLOSURE
STATEMENT AS EXHIBIT "B."
          Under the Projections, Mobile Energy estimates that it will provide
approximately 1.1 million MMBtus of steam in 2002, and approximately 932,000
MMBtus of steam after 2002 to the Tissue Mill and the Pulp Mill, and no steam to
the Paper Mill. It also is anticipated that Mobile Energy will provide
approximately 341,000 megawatt hours of electricity in 2002, and approximately
400,000 megawatt hours of electricity after 2002 to the Tissue Mill and the Pulp
Mill. Mobile Energy also intends to continue to sell electricity in excess of
the Mill Owners' demands during peak periods into the wholesale market.
         2.       Reduction of Operating and Maintenance Costs.
           Because of anticipated reduced revenues as a result of the shutdown
of the chemical pulp mill, the Debtors have been forced to reduce operation and
maintenance ("O&M") costs at the Energy Complex. While the Debtors have
substantially reduced O&M costs at the Energy Complex during the Bankruptcy
Cases, the Debtors believe that further cost reductions are necessary. In
addition, as described in Section VII (Y), the Debtors were required to
terminate the existing operator of the Energy Complex, Mirant Services L.L.C.
(formerly known as Southern Energy Resources), on March 31, 2001. As a result,
Mobile Energy solicited proposals from third parties to act as operator of the
Energy Complex after March 31, 2001. Mobile Energy selected Operational Energy
Corp. ("OEC"), an affiliate of Enron, as the new O&M operator to assume
operation of the Energy Complex on an interim basis after March 31, 2001,
pending confirmation of the Plan. A motion for approval of OEC as interim
operator was approved by the Bankruptcy Court as discussed in detail in Section
VII (Y) below. The new operator replaced Mirant Services and will implement
further cost reductions. The Projections attached to this Disclosure Statement
are based on certain reductions in O&M costs being achieved by OEC. In the event
that KC reduces operations further, O&M cost reductions will be necessary as set
forth in the Curtailed Operations Projections.
         3.       Qualifying Facility
         The Proponents believe that after Southern is divested of its ownership
under the Plan that Reorganized Mobile Energy will qualify as a Qualifying
Facility under the Public Utility Regulatory Policies Act of 1978 ("PURPA"),
which will allow it to sell electricity, which it generates, to the Mills and to
wholesale customers, but not to buy electricity for resale from other wholesale
suppliers. If Qualifying Facility status is achieved, it will mean that
Reorganized Mobile Energy will not be considered a public utility under PUHCA,
and Holdings and its owners will not be subject to regulation as public utility
holding companies. Mobile Energy will file an application with the Federal
Energy Regulatory Commission seeking certification as a Qualifying Facility as
of the Effective Date of the Plan in connection with the filing of the Third
Amended Joint Plan. That application will be filed to seek qualification of
Reorganized Mobile Energy as a Qualifying Facility consistent with the business
plan that forms the basis of this Plan.
C.       Summary of Post-Reorganization Structure

1.       Organizational Structure

         The Debtor's proposed equity ownership is depicted in the following
diagram:


2.       Capital Structure

         The First Mortgage Bonds and the Tax-Exempt Bonds will be exchanged for
the New Common Stock of Holdings and the Holders of the Tax-Exempt Bonds will
retain a Pro Rata Share of $1,000,000 of their outstanding Tax-Exempt Bonds.
D.       Agreements Implementing the Proposed Business Plan

1.       Project Documents

         After the Effective Date, Reorganized Mobile Energy will continue to
provide power processing services and steam processing services to the owner of
the Tissue Mill and the Pulp Mill pursuant to the terms of the Tissue Mill ESA,
the reinstated Pulp Mill ESA, and the MOA. The Projections reflect that S. D.
Warren closed down its Paper Mill in December 2001, and that KC continues its
operations at the announced reduced level. The Proponents assume approximately
$23.894 million in 2003 annual revenues from the Tissue Mill and the Pulp Mill.
These projections include revenues that the Proponents contend are due under the
reinstated Pulp Mill ESA. KC has denied that such funds are owed to Mobile
Energy under the Pulp Mill ESA. The matter will be resolved through the dispute
resolution procedures under the MOA.
         S.D. Warren close its Paper Mill in December 2001. The proposed capital
structure, which converts substantially all of the existing long-term debt into
equity, has been designed to ensure feasibility despite S.D. Warren's shut down
of the Paper Mill and KC reduces operations at the Tissue Mill and the Pulp
Mill.
         KC also has announced publicly that it may curtail some of its
operations at the Tissue Mill, although it has not done so at the time of filing
of this Disclosure Statement. The Projections take into account the potential
reduction in operations at the Tissue Mill and demonstrate how such reduction
could affect the Reorganized Debtors' revenues.
V.
                      GENERAL INFORMATION ABOUT THE DEBTORS
A.       Corporate Information

         Holdings was incorporated in Alabama on August 25, 1994, under the name
of Mobile Energy Services Company, Inc. Its name was changed to Mobile Energy
Services Holdings, Inc. on May 17, 1995. Holdings was formed to acquire the
energy and chemical recovery complex located at the Mobile Facility (the "Energy
Complex") and commenced operations on December 16, 1994. Southern currently is
the Holder of 100% of the voting common stock of Holdings.
         Holdings transferred the Energy Complex to Mobile Energy, those Project
Documents then in existence, and related assets, permits, and agreements on July
14, 1995. Prior to December 29, 2000, Holdings was the owner of 99% of the
equity interest in Mobile Energy, and Southern Energy Resources (now known as
Mirant Services L.L.C.) was the owner of 1% of the equity interest in Mobile
Energy. As noted in Section VII (X) below, on December 29, 2000, Southern Energy
Resources transferred its 1% equity interest in Mobile Energy to Holdings so
that Holdings now owns 100% of the equity interests in Mobile Energy. The
executive offices of Holdings are currently located at 1155 Perimeter Center
West, Atlanta, Georgia 30338.
         Mobile Energy was formed as a limited liability company in the State of
Alabama on July 13, 1995. The executive offices of Mobile Energy are located at
1155 Perimeter Center West, Atlanta, Georgia 30338. Mobile Energy's business
consists exclusively of the ownership and management of the Energy Complex. The
Energy Complex currently is operated by Mirant Services L.L.C. pursuant to the
Facility Operations and Maintenance Agreement between Mobile Energy and Southern
Energy Resources dated as of December 12, 1994 (the "Mobile Energy Operating
Agreement"). As described in Section VII (Y) below, the Debtors have selected
OEC to serve as interim operator pending confirmation of the Plan following
Mirant Services' termination as operator.
         The Debtors filed their voluntary petitions for relief under Chapter 11
of the Bankruptcy Code on January 14, 1999 (the "Petition Date"). The Chapter 11
Cases are being jointly administered, but have not been substantively
consolidated, and the Debtors have remained in control of their assets and
continue to operate their respective businesses as debtors-in-possession in
their Chapter 11 Cases. David T. Gallaspy is the president of both Mobile Energy
and Holdings and a director of Holdings. As noted in Section VII (GG) below,
James Stewart has been hired as an operational consultant to the Debtors and
will become the chief executive officer of the Debtors post-confirmation. As
noted in Section VII (GG) below, Philip Cahoon has been hired as operational
consultant to the Debtors and will become the chief financial officer of the
Debtors post-confirmation.
B.       Description of the Pre-Effective Date Mobile Energy

1.       The Energy Complex

         The Energy Complex currently is comprised of four power boilers, one
recovery boiler, four turbine generators, two black liquor evaporator sets, and
associated feedwater systems, air emissions controls, and other auxiliary
systems. Originally, the Energy Complex was comprised of three power boilers,
two recovery boilers, three turbine generators, two black liquor evaporator
sets, and associated feedwater systems, air emissions controls, and other
auxiliary systems. A schematic of the anticipated operating configuration of the
Energy Complex subsequent to the Effective Date is attached to this Disclosure
Statement as Exhibit "C." The configuration reflects S.D. Warren's
discontinuation of its operations on December 14, 2001 and that KC continues its
operations as the announced reduced operations.
         During 1998, the Energy Complex provided 100% of the steam processing
needs and 98% of the aggregate power processing needs of the Mills.
Additionally, the Energy Complex provided 100% of the black liquor processing
needs of the Pulp Mill. Generally, the type of equipment and technology utilized
at the Energy Complex is standard and has a long operating history in the pulp,
paper, and tissue industry and the electric generation industry.

     The Energy Complex includes a significant amount of cross-connected,
redundant equipment. This configuration enhanced the operational reliability of
the Energy Complex and enabled Mobile Energy to minimize the partial or complete
loss of services to its customers as a result of scheduled and unscheduled
maintenance.

2.       The Mobile Facility

         The Mobile Facility is comprised of the Energy Complex, the Tissue
Mill, which is owned by KC, the Pulp Mill, which is also owned by KC (KC assumed
all of KCTC's liabilities and acquired all of KCTC's assets when KCTC was
dissolved effective December 31, 2000), and the Paper Mill, which is owned by
S.D. Warren. Attached to this Disclosure Statement as Exhibit "D" is a map of
the Mobile Facility prior to the Petition Date. Prior to KCTC's shutdown of the
Pulp Mill, effective September 1, 1999, the Mobile Facility operated as a
physically integrated complex that produced tissue and paper products from
timber that was processed into bleached and unbleached pulp by the Pulp Mill.
The Pulp Mill provided 85% of the fuel used by the Energy Complex in the form of
biomass and black liquor, a byproduct of the pulping process. Following the
shutdown of the Pulp Mill, the Paper Mill and Tissue Mill have obtained the pulp
they require from offsite sources, which pulp is shipped to the site in dried
form. Mobile Energy currently acquires all of the fuel required for the Energy
Complex from offsite sources. Mobile Energy's current fuel sources are coal,
biomass and natural gas.
C.       Events Precipitating Chapter 11 Filings

         Prior to the shutdown of the Pulp Mill, the Energy Complex used biomass
and black liquor from the Pulp Mill, as well as limited quantities of coal and
natural gas, as fuel to generate electricity and steam. Also prior to the
shutdown of the Pulp Mill, electricity and steam processing services were
purchased by KC for use in the Pulp Mill, by KC for use in the Tissue Mill, and
by S.D. Warren for use in the Paper Mill. The Pulp Mill also purchased liquor
processing services from Mobile Energy. KC continues to purchase the electricity
and steam processing services needed in the Tissue Mill and the Pulp Mill. Also,
the Pulp Mill disposed of the boiler ash generated by the Energy Complex and
provided process water and waste water treatment services to the Energy Complex
and each of the Mills, which are services KC continues to perform. Additionally,
because the Pulp Mill ESA has been reinstated, Mobile Energy has the right to
receive revenues, i.e. demand charges and processing charges, from KC under that
agreement.
         KC had two long-term contracts with S.D. Warren requiring it to provide
the requirements for pulp for the Paper Mill and for its own operations at the
Tissue Mill. In February 1998, S.D. Warren agreed to terminate its long-term
slush pulp off-take contract with KC in exchange for a termination payment of $3
million. Shortly thereafter, in May, 1998, the Debtors received the notice from
KC that it planned to close the Pulp Mill and to terminate the Pulp Mill ESA
effective on September 1, 1999. Upon receipt of that notice, the Debtors and KC
attempted without success to negotiate a resolution of the matters in dispute
related to KC's planned shutdown of the Pulp Mill. KC initiated an arbitration
proceeding (the "Arbitration") seeking to determine, among other things, that
(i) KC's planned termination of the Pulp Mill ESA would be proper, (ii) KC could
install facilities that furnish dry fiber and recycled fiber to the Tissue Mill
without continuing the effectiveness of or reinstating the Pulp Mill ESA, and
(iii) KC could continue to operate (for the Energy Complex and the Mills) water
and wastewater treatment facilities that were defined by the MOA to be part of
the Pulp Mill without continuing the effectiveness of or reinstating the Pulp
Mill ESA.
         On December 15, 1998, the Debtors filed a lawsuit in the Circuit Court
of Mobile County, Alabama to enjoin the Arbitration. At the same time, the
Debtors realized that the shutdown of the Pulp Mill would result in the Debtors
losing their largest customer in terms of annual revenue and a primary source of
inexpensive fuel. Without the revenue derived from providing services to the
Pulp Mill, and due to the increased cost of power generation resulting from the
loss of inexpensive biomass and black liquor, the Debtors would not be able to
meet their financial obligations to the Bondholders, and as a result, they filed
their Chapter 11 Cases.
         On February 8, 2000, the Debtors and KC entered into the KC Settlement
Agreement in connection with the disputes at issue in the Arbitration. However,
the KC Settlement Agreement failed to close, and the KC Settlement Agreement has
become null and void ab initio by its terms. Under Section 19 of the KC
Settlement Agreement, which survives termination, the parties shall be returned
to the status quo ante in respect of the contractual or other legal
relationships between them immediately prior to the entry of the order approving
the KC Settlement Agreement.
         On March 16, 2001, Mobile Energy received the arbitrator's award. The
arbitrator ruled that while a Pulp Mill Closure had occurred under the MOA,
Mobile Energy nevertheless had the right to reinstate the Pulp Mill ESA as of
September 1, 1999, because of KC's continued activities on the Real Property (as
defined in the MOA). On March 28, 2001, Mobile Energy sent notice to KC that,
consistent with the arbitral award, Mobile Energy was reinstating the Pulp Mill
ESA as of September 1, 1999. Mobile Energy contends that the reinstatement of
the Pulp Mill ESA reinstates all of the KC's liabilities under the Pulp Mill
ESA. The parties have provided the accountings to each other of the amounts each
contends is owed by KC to Mobile Energy to return each other to the status quo
ante. As more fully explained below in Section VII (AA) and VII (DD), KC and
MESC could not agree on the amounts which are owed under the original Tissue
Mill ESA and the dispute was submitted to arbitration before the AAA. KC also
disputed whether Mobile Energy could reinstate the Pulp Mill ESA as of September
1, 1999. That dispute also was the subject of an arbitration proceeding. See
Section VII (EE) below. D. Project Documents

         Mobile Energy is a party to various long-term contracts relating to the
operation of the Energy Complex and the purchase of its products and services,
including the Pulp Mill ESA, the Tissue Mill ESA, the Paper Mill ESA, the MOA,
the Direct Lease, the Supplementary Lease, Easement Deeds, the Common Services
Agreement, the Water Procurement and Effluent Services Agreement, the Boiler Ash
Disposal Agreement, the Mill Environmental Indemnity Agreements, and the Scott
Environmental Indemnity Agreement (all as defined herein). A summary of some of
the agreements is provided below. Attached to this Disclosure Statement as
Exhibit "E" is the 1997 Form 10-K which has more complete descriptions of the
agreements. Each of the Project Documents will either be assumed or rejected
under the Plan or has been assumed or rejected by prior order of the Bankruptcy
Court. 1. Energy Services Agreements and Master Operating Agreement

         Mobile Energy is a party to the Pulp Mill ESA and the Tissue Mill ESA
with KC, and Mobile Energy is a party to the Paper Mill ESA with S.D. Warren
(together, the "ESA's"). All three of the ESA's are expected to be assumed under
the Plan and continue in existence after the Effective Date. However, because
S.D. Warren closed the Paper Mill on December 14, 2001, many of S.D. Warren's
obligations under the Paper Mill ESA terminated (but are subject to
reinstatement should S.D. Warren engage in certain activity at the Site). As
more fully discussed in Section X below, the Debtors' Projections reflect that
S.D. Warren closed the Paper Mill on December 14, 2001, and the Projections do
not include future revenues from S.D. Warren.
         Mobile Energy is also a party to the MOA (the "MOA") with KC and S.D.
Warren. The MOA will be assumed under the Plan and will continue in existence
after the Effective Date.
         The MOA and the ESAs set forth the existing obligations of Mobile
Energy to provide, and of KC to pay for, Liquor Processing Services, Steam
Processing Services, and Power Processing Services, to deliver or dispose of
certain waste products or by-products produced by the Energy Complex, and to
manage the operations of the Energy Complex and the Mills. Unless terminated
earlier according to their terms, the ESAs and the MOA each have an initial term
of 25 years, which began on December 16, 1994.
         During the term of each of the ESAs, Mobile Energy is required to
provide Steam Processing Services and Power Processing Services to each of the
Mill Owners and Liquor Processing Services to the Pulp Mill Owner. Each Mill
Owner is obligated to purchase its entire requirements for Processing Services,
up to certain specified capacities, from Mobile Energy unless Mobile Energy
fails to satisfy such requirements due to capacity constraints or for any other
reason. Mobile Energy is obligated to supply each Mill's requirements for the
Processing Services, up to that Mill's specified maximum demand for each
Processing Service and subject to the maximum capacity of the Energy Complex.
         The ESAs permitted Mobile Energy to sell to any person, on an
as-available, fully interruptible basis, any of the services or products that
the Energy Complex is capable of producing in excess of the Mills' requirements
for such services or products at any given time. Mobile Energy is required to
satisfy its obligations to provide Processing Services under the ESAs (up to
specified capacities) before making any Processing Services or steam or
electricity available to any other person.
         The ESAs obligate Mobile Energy to pay liquidated damages to the Mill
Owners if Mobile Energy fails to meet its requirements to provide power, steam,
or liquor processing services. The maximum damages per day that could be
assessed under the ESAs is $10,000 per day, plus a loss of Demand Charges on a
pro rata basis for the period of time such shortfall occurs.
         The ESAs and the MOA obligate each Mill Owner to pay Mobile Energy each
month a Demand Charge for each of the Processing Services that such Mill Owner
is entitled to receive under its ESA and a Processing Charge for the Processing
Services the Mill Owner actually receives in such month. The Demand Charges are
based upon the Demand levels in effect from time to time. For each monthly
billing period, a Mill Owner's then-current Demand for a particular Processing
Service is multiplied by a fixed rate for that Processing Service which
escalates over the term of the applicable ESAs according to a composite
escalator reflecting inflation-based indices for capital equipment, labor, and
materials. KC contends that Mobile Energy's obligation to provide services to
the Mills was reduced by the amount of Demand relinquished and not reserved by
the other Mill Owners after the Pulp Mill closed. However, Mobile Energy firmly
believes that there is no relinquished demand under the MOA.
         The Processing Charges are based upon each Mill's actual monthly usage
of Processing Services. The Processing Charges were designed generally to cover
the balance of Mobile Energy's costs that are not projected to be covered by
Demand Charges, including variable costs such as fuel related expenses. There
can be no assurance, however, that the Processing Charges will at all times
cover such costs, including variable costs such as fuel related expenses. Mobile
Energy may, under certain circumstances, reduce the level of Processing Services
provided to the Mill Owners.
         Each Mill Owner has the right to terminate the applicable ESA upon a
Mill Closure with respect to such Mill Owner's Mill. A terminating Mill Owner is
obligated to provide Mobile Energy and the other Mill Owners six (6) months
prior written notice of its intention to terminate its ESA. Termination is
deemed to occur upon the expiration of such six-month period. The terminating
Mill Owner is obligated to pay Mobile Energy such Mill's Demand Charges (at the
levels in effect immediately prior to the termination) for the greater of (a)
six months from the date of termination; or (b) the remainder of the
then-current Demand Period (as defined in the MOA). All obligations incurred by
the terminating Mill Owner prior to the termination of its ESA (and all
obligations to pay Demand Charges pursuant to the preceding sentence) survive
the termination and must be timely performed or paid by the terminating Mill
Owner. In addition, the terminating Mill Owner must provide reasonable
assistance to Mobile Energy in Mobile Energy's endeavors to create new business
opportunities for the Energy Complex. The terminating Mill Owner however, will
have no additional liability or other monetary obligation to Mobile Energy if
such business opportunities are not available or are not created.
         In May 1998, Mobile Energy received notice from KC of its intention to
close the Pulp Mill and to terminate the Pulp Mill ESA on September 1, 1999,
with Demand Charges continuing for an additional six months until March 1, 2000.
KC's shut-down of the Pulp Mill was the event that led to the filing of these
Chapter 11 Cases and the transactions described in this Disclosure Statement. As
more fully explained below in Section VII.A., the Debtors disputed whether KC
could terminate the Pulp Mill ESA.
         In May 2001, Mobile Energy received notice from S.D. Warren of its
intention to close the Paper Mill and to terminate the Paper Mill ESA on
December 14, 2001. As set forth below in Section VII (FF), the Debtors and S.D.
Warren have resolved the various disputes existing between them and have
resolved certain business issues stemming from the shut down of the Paper Mill.
2.       Operations and Maintenance Agreement

         Mobile Energy and Mirant Services were parties to the Mobile Energy
Operating Agreement (the "Operating Agreement") pursuant to which Mirant
Services was obligated to operate and maintain the Energy Complex and provide
certain related administrative and management services to Mobile Energy. The
Debtors have no employees at the Mobile Facility, as all employees who work at
the Energy Complex were employed by Mirant Services. Pursuant to the Cogen
Development Agreement and the Court orders approving same, Mirant Services
ceased to be the provider of the operation and maintenance services for the
Energy Complex on April 1, 2001. As described in Section VII (Y), below the
Bankruptcy Court approved OEC as the interim operator of the Energy Complex
effective April 1, 2001, pending confirmation of the Plan. OEC is now the
employer of the employees who work at the Energy Complex.
         The Mill Owners may have the right to consent to a replacement operator
in certain circumstances under the Project Documents. The Proponents need
someone to operate the facilities and believe that OEC is a qualified operator
and that the annual cost savings achieved by retaining OEC are a key requirement
of the Debtors' viability going forward. The projections attached to this
Disclosure Statement reflect certain of the anticipated cost savings.
         KC has reserved its rights to challenge Mobile Energy's ability to
replace the operator without its consent but has indicated that it will not
object to the approval of OEC as interim operator. The Tissue Mill ESA provides
that KC's consent must be obtained to replace the operator with a non-Southern
related entity; provided, however, that KC's consent may not be unreasonably
withheld. In this regard, if a proposed replacement operator is experienced in
operating and maintaining facilities with similar scope and complexity to the
Energy Complex, there is a presumption under the Tissue Mill ESA that KC's
consent cannot be withheld. 3. Direct Lease

         Mobile Energy and KC are parties to a lease (including any amendments
thereto, the "Direct Lease") covering two lots comprising approximately 6.9
acres of land owned by KC located in Mobile County, Alabama, on which Mobile
Energy owns, uses, operates, repairs, and maintains the Energy Complex and any
additions or modifications thereto. Base rent during the term of the Direct
Lease is $1.00 per year. In addition, Mobile Energy is required to pay all
expenses related to or arising from the Leased Premises or Mobile Energy's
activities thereon, except as expressly provided otherwise in the Direct Lease.
The term of the Direct Lease commenced on December 16, 1994, and will expire at
11:59 p.m. Eastern Standard Time on December 15, 2019. Mobile Energy has an
option to purchase the Leased Premises for a purchase price of $10.00 at various
times.
         KC has an option to repurchase the Energy Complex from Mobile Energy at
the end of the term of the Direct Lease (the "Repurchase Option"), which may
occur at different points in time. KC may give Mobile Energy notice of its
intention to exercise the Repurchase Option: (a) if the Direct Lease is not
automatically renewed and extended, between July 16, 2014 and November 16, 2014
(the "Earlier Repurchase Option Period"); (b) if the Direct Lease is
automatically renewed and extended, between July 15, 2019 and November 15, 2019
(the "Later Repurchase Option Period"); or (c) if the Direct Lease is terminated
prior to the expiration of the Earlier Repurchase Option Period or the Later
Repurchase Option Period, as applicable, and KC shall not have exercised its
Repurchase Option, within thirty (30) days after the date on which the Direct
Lease terminated. If KC were to exercise the Repurchase Option, it would not
have the right or obligation to assume any debt of Mobile Energy; however,
pursuant to the Consents to Assignment relating to the Direct Lease and the
Supplementary Lease (as hereinafter defined), KC has agreed that the Senior
Secured Parties have no obligation to release the lien and security interests
granted by the Financing Documents until all obligations secured thereby have
been repaid in full. IF KC exercises its option to repurchase the Energy
Complex, KC and Mobile Energy will jointly select an independent real estate
appraiser to determine the fair market value of the Energy Complex (which fair
market value must be within certain minimum and maximum values as specified in
the Direct Lease). If KC and Mobile Energy timely fail to select an appraiser,
an appraiser will be appointed pursuant to the arbitration provisions of the
MOA. The appraiser's determination of the fair market value of the Energy
Complex will be the purchase price to be paid by KC to Mobile Energy, provided
that (a) if the Direct Lease terminates on December 15, 2019, the determined
value cannot exceed $69,080,000 or be less than $50,240,000, and (b) if the
Direct Lease terminates between December 15, 2019 and December 15, 2024, the
determined value cannot exceed $30,000,000 or be less than $22,000,000. If all
of the ESAs (including the Pulp Mill ESA) are extended and renewed pursuant to
such agreements, the Direct Lease will be automatically extended and renewed for
a single five year term beginning on December 16, 2019 and expiring at 11:59
p.m. on December 15, 2024. It appears unlikely that all of the ESAs will be
extended and renewed, especially considering that the Paper Mill has been shut
down and it appears unlikely that the Paper Mill ESA will be extended past its
original term.
         The Direct Lease will be assumed under the Plan and will continue in
effect after the Effective Date.
4.       Supplementary Lease

         Mobile Energy and KC also are parties to a lease (including any
amendments thereto, the "Supplementary Lease") covering land owned by KC located
at the Mobile Facility, on which Mobile Energy owns and operates a black liquor
tank and Mobile Energy's maintenance facility (collectively, with any additions
or modifications thereto, the "Supplementary Facility").
         The Supplementary Lease is identical to the Direct Lease except in the
following respects: (1) the Supplementary Lease covers two portions of one lot
("Lot 11") of the Real Property comprising approximately 3.86 acres (the
"Supplementary Leased Premises"); (2) if Mobile Energy timely exercises and
consummates either its Transfer Option or its End of Term Option to purchase the
Leased Premises under and pursuant to the Direct Lease, the term of the
Supplementary Lease will automatically be renewed for an additional period of 25
years; (3) if the Supplementary Leased Premises are not assessed separately but
instead, assessed as part of a larger tract of land (because the Supplementary
Leased Premises comprise only a portion of Lot 11), KC and Mobile Energy will be
required to apportion any real estate taxes resulting from such assessment; (4)
Mobile Energy shall pay its proportionate share of the real estate taxes to KC,
and KC shall promptly deliver to Mobile Energy proof of KC's timely payment of
the entire amount of such real estate taxes to the applicable taxing
authorities; and (5) neither party has any purchase options under the
Supplementary Lease. As grounds for termination, the Supplementary Lease may be
terminated upon KC's timely exercise and consummation of its Repurchase Option
pursuant to the Direct Lease.
         The Supplementary Lease will be assumed under the Plan and will
continue in effect after the Effective
Date.
5.       Utilities Land Sublease

         KC and the IDB are parties to the Utilities Land Sublease covering land
on which the No. 7 Power Boiler is located. The Utilities Land Sublease has been
assigned to Mobile Energy. The Utilities Land Sublease expires on December 1,
2019, or at such earlier time as there are no longer any of the Tax-Exempt Bonds
outstanding. The Utilities Land Sublease will be assumed under the Plan and will
continue until December 1, 2019, or until the $1,000,000 of Tax-Exempt Bonds are
no longer outstanding.
6.       Environmental Indemnity Agreements

         Mobile Energy is a party to agreements with each of the Pulp Mill Owner
(including any amendments thereto, the "Pulp Mill Environmental Indemnity
Agreement"), the Tissue Mill Owner (including any amendments thereto, the
"Tissue Mill Environmental Indemnity Agreement") and the Paper Mill Owner
(including any amendments thereto, the "Paper Mill Environmental Indemnity
Agreement") pursuant to which Mobile Energy and the applicable Mill Owner are
required to indemnify each other for certain environmental-related conditions
("Environmental Conditions") that give rise to, or could give rise to,
environmental claims or other liabilities ("Environmental Claims") or any
violation of any environmental law ("Environmental Noncompliance"). Each of
these agreements will be assumed under the Plan and will continue in effect
after the Effective Date. (a) Environmental Covenants

         Mobile Energy has agreed not to cause, or suffer the existence of, any
Environmental Conditions or Environmental Noncompliances at the Energy Complex
that could reasonably be expected to lead to any material Environmental Claim or
environmental expense asserted against, or incurred by, a Mill Owner or its
affiliates. Similarly, each Mill Owner has agreed not to cause, or suffer the
existence of, any Environmental Conditions or Environmental Noncompliances at
its Mill that could reasonably be expected to lead to any material Environmental
Claim or environmental expense asserted against, or incurred by, Mobile Energy
or its Affiliates. (b) Environmental Indemnification by Mill Owners and Mobile
Energy

         Each Mill Owner is required to indemnify, defend, and hold harmless
Mobile Energy, its affiliates, and its and their respective officers, directors,
agents, attorneys, and employees from and against any and all Environmental
Claims brought against, and any and all environmental expenses imposed upon or
reasonably incurred by, such indemnified party, in connection with (1) breaches
by such Mill Owner of any representations and warranties, covenants, or other
obligations in its ESA or the MOA; or (2) any Environmental Conditions that give
rise to, or could give rise to, Environmental Claims or other liabilities, or
Environmental Noncompliances located at or otherwise relating to its Mill or
associated facilities, to the extent arising out of facts or circumstances that
occur or come into existence after December 12, 1994 (including without
limitation in the case of the Pulp Mill Owner) any Environmental Condition or
Environmental Noncompliance associated with the present or future use of the two
underground fuel-oil storage tanks owned by KC and located on property leased to
Mobile Energy). If any Mill Owner sells its Mill, such Mill Owner will retain
all of its obligations and liabilities under its Mill Environmental Indemnity
Agreement arising out of any facts or circumstances existing as of or prior to
the date of any such sale (whether known at the time of any such sale or
thereafter discovered as having existed as of the date thereof), and the party
to whom such Mill Owner sells its Mill will be required to assume all
obligations and liabilities of such Mill Owner arising out of facts or
circumstances that occur or come into existence after the date of any such sale.
In addition, in connection with KC's assumption of KCTC's obligations as part of
the dissolution of KCTC, KC is required to enter into similar indemnity
agreements.
         Mobile Energy is required to indemnify, defend, and hold harmless each
Mill Owner, its affiliates, and its and their respective officers, directors,
agents, attorneys, and employees from and against any and all Environmental
Claims brought against, and any and all environmental expenses imposed upon or
reasonably incurred by, any of such indemnified parties, in connection with (1)
breaches by Mobile Energy of any representations and warranties, covenants, or
other obligations of Mobile Energy in any ESA or the MOA, or (2) any
Environmental Conditions that give rise to, or could give rise to, Environmental
Claims or other liabilities, or Environmental Noncompliances located at or
otherwise relating to the Energy Complex, to the extent arising out of facts or
circumstances that occur or come into existence after December 12, 1994. If any
Mill Owner sells its Mill, such Mill Owner will retain all rights of such Mill
Owner arising out of any facts or circumstances existing as of or prior to the
date of any such sale (whether known at the time of any such sale or thereafter
discovered as having existed as of the date thereof), and the party to whom the
Mill Owner sells its Mill will, upon the assumption of the relevant Mill
Environmental Indemnity Agreement by such party, assume all rights of such Mill
Owner arising out of facts or circumstances that occur or come into existence
after the date of any such sale.
         If any Environmental Claims or environmental expenses arise, directly
or indirectly, in whole or in part, out of the joint or concurrent negligence of
a Mill Owner and Mobile Energy, or their respective Affiliates, officers,
directors, agents, attorneys, or employees, each party's liability therefor will
be limited to such party's proportionate degree of fault. The Mill Environmental
Indemnity Agreements provide that Mobile Energy and each of the Mill Owners will
only be liable for direct damages, not for claims of non-party customers, cost
of money, loss of profits, loss of use of capital or revenue, or any other
incidental, special, or consequential loss or damage of any nature, or for
punitive or exemplary damages. 7. Common Services Agreement

         The Common Services Agreement provides for the sharing by Mobile Energy
and the Mill Owners of security services, computerized data concerning the
Energy Complex and the Mills, and maintenance of common roads, as well as
medical services, cafeteria services, and maintenance of certain parking lots,
including, in each case, the cost thereof. The term of the Common Services
Agreement as to any party to it began on December 16, 1994, and will end on the
date of the termination of the MOA with respect to that party, unless otherwise
agreed by the parties.

     The Common Services Agreement will be assumed under the Plan and will
continue in effect after the Effective Date. A chart showing cost allocation for
the services provided under the Common Services Agreement and how those costs
will be allocated is attached hereto as Exhibit "F."

8.       Water Procurement and Effluent Services Agreement

         Mobile Energy and the Mill Owners are parties to the Water Procurement
and Effluent Services Agreement (the "Water Agreement") which, among other
things, defines and allocates among the Mill Owners and Mobile Energy certain
rights and obligations relating to water usage and procurement and the provision
of water treatment-related utilities and services, including wastewater
treatment services. The term of the Water Agreement commenced on December 16,
1994, and will terminate with respect to each party when such party is no longer
a party to the MOA. The Water Agreement will be assumed under the Plan and will
continue in effect after the Effective Date.
E.       Planned Post-Effective Date Business Activities of Mobile Energy

1.       Post-Effective Date Energy Complex

         The Debtors anticipate that Reorganized Mobile Energy will operate its
existing assets to provide services to the Tissue Mill Owner and the Pulp Mill
Owner. Reorganized Mobile Energy will service its customers using two of its
existing power boilers, three of its existing turbine generators, and certain
related equipment. The remaining assets of Reorganized Mobile Energy will be
used for back-up purposes. A chart showing the planned operating configuration
for Reorganized Mobile Energy is attached hereto as Exhibit "C." The
configuration will be a function of KC's continued operations.
2.       Qualifying Facility

         The Proponents believe that on or after the Effective Date the Energy
Complex will qualify as a Qualifying Facility under PURPA, which will allow
Reorganized Mobile Energy to sell electricity that it generates to the Mills and
to wholesale customers, but not to buy electricity from other wholesale
suppliers. If Qualifying Facility status is granted, it will mean that the
Reorganized Debtors will not be regulated as public utilities for purposes of
PUHCA.
F.       Operating Results

         After the Effective Date, operating revenues will consist of the
payment of Demand Charges and Processing Charges by the Pulp Mill Owner and the
Tissue Mill Owner. Future projections of the anticipated revenues and expenses
on an accrual basis for the Debtors, or Reorganized Debtors, for 2002 through
2019 (the "Projections") are attached to this Disclosure Statement as Exhibit
"B." The Debtors' budget for 2002 (the "Budget") on a cash basis is attached to
this Disclosure Statement as Exhibit "G." THE PROJECTIONS AND BUDGET ARE
FORWARD-LOOKING STATEMENTS, ALL OF WHICH ARE BASED ON VARIOUS ESTIMATES AND
ASSUMPTIONS AND WILL NOT BE UPDATED TO REFLECT EVENTS OCCURRING AFTER THE DATE
HEREOF. SUCH INFORMATION AND STATEMENTS ARE SUBJECT TO INHERENT UNCERTAINTIES
AND TO A WIDE VARIETY OF SIGNIFICANT BUSINESS, ECONOMIC, AND COMPETITIVE RISKS,
INCLUDING, AMONG OTHERS, THOSE DESCRIBED HEREIN. CONSEQUENTLY, ACTUAL EVENTS,
CIRCUMSTANCES, EFFECTS, AND RESULTS MAY VARY SIGNIFICANTLY FROM THOSE INCLUDED
IN OR CONTEMPLATED BY SUCH PROJECTIONS AND THE BUDGET. THE PROJECTIONS AND THE
BUDGET, THEREFORE, ARE NOT NECESSARILY INDICATIVE OF THE FUTURE FINANCIAL
CONDITION OR RESULTS OF OPERATIONS OF THE DEBTORS OR THE REORGANIZED DEBTORS,
WHICH MAY VARY SIGNIFICANTLY FROM THOSE SET FORTH IN THE PROJECTIONS AND THE
BUDGET. CONSEQUENTLY, THE PROJECTIONS, THE BUDGET AND OTHER FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN SHOULD NOT BE REGARDED AS REPRESENTATIONS BY THE
PROPONENTS, THE PROPONENTS' ADVISORS, OR ANY OTHER PERSON THAT THE PROJECTIONS
OR THE BUDGET CAN OR WILL BE ACHIEVED.
         Because of the reduction in operating levels of the Pulp Mill and the
shut down of the Paper Mill on December 14, 2001, and the future production
levels from the Tissue Mill, historical revenues and expenses cannot
meaningfully be compared to future (post 2001) projected results. Nevertheless,
for information purposes, income statements for 1999 and 2000 are attached
hereto as Exhibit "H," which reflect the revenues and expenses for those years.
G.       Pre-Effective Date Senior Secured Indebtedness

1.       Working Capital Facility

         In order to provide for Mobile Energy's working capital needs, in
August 1995, Mobile Energy entered into the Working Capital Facility with Banque
Paribas (the "Working Capital Facility Provider"). There is currently no
outstanding indebtedness under the Working Capital Facility, and there has not
been any outstanding indebtedness under the Working Capital Facility since
December 31, 1998. The Working Capital Facility is set to expire in 2002, but
the Debtors anticipate terminating the Working Capital Facility.
         The Working Capital Facility provides for a maximum available amount of
$15.0 million. Borrowings under the Working Capital Facility generally were used
by Mobile Energy to pay for operation and maintenance costs incurred by Mobile
Energy. Each working capital loan was due and payable no later than 90 days from
the date such working capital loan was advanced to Mobile Energy, and no more
than $5.0 million (to be adjusted in proportion to any adjustments to the
maximum available amount under the Working Capital Facility) of working capital
loans may be scheduled to mature during any calendar month.
         As a result of the Chapter 11 Cases, Mobile Energy is currently in
default of the restrictive covenants associated with the Working Capital
Facility. Other defaults under the Working Capital Facility also may exist.
Because the Debtors anticipate that the Working Capital Facility will be
terminated by agreement with the Working Capital Facility Provider, it is not
anticipated that any future borrowings will occur under the Working Capital
Facility.
2.       The First Mortgage Bonds

         On August 1, 1995, Mobile Energy issued the First Mortgage Bonds in the
original principal amount of $255,210,000 due January 1, 2017 and bearing annual
interest at 8.665%. The First Mortgage Bonds were issued pursuant to a Trust
Indenture (the "Indenture") by and among Mobile Energy, Holdings, and First
Union National Bank of Georgia, now known as First Union National Bank (the
"Indenture Trustee"). All of Mobile Energy's obligations under the First
Mortgage Bonds are secured by liens and security interests against the First
Mortgage Bond Collateral and are unconditionally guaranteed by Holdings. The
Indenture Collateral consists of the Shared Collateral, the Debt Service Reserve
Account, and the Indenture Securities Account established under the Indenture.
3.       The Tax-Exempt Bonds

         In December, 1983, the Industrial Development Board of the City of
Mobile, Alabama (the "IDB") issued tax-exempt bonds (the "1983 Tax-Exempt
Bonds") to finance the construction of the Number 7 Power Boiler and certain
auxiliary systems (the "Solid Waste Disposal Facilities"), which are "solid
waste disposal facilities" as such term is defined in the Internal Revenue Code
and the regulations promulgated thereunder. In December, 1984, the IDB issued
tax-exempt bonds (the "1984 Tax-Exempt Bonds") to refund the 1983 Tax-Exempt
Bonds.
         In August, 1995, the IDB issued the Tax-Exempt Bonds in the original
principal amount of $85,000,000 under an Amended and Restated Trust Indenture
dated as of August 1, 1995 (the "Tax-Exempt Indenture") between the IDB and
First Union National Bank of Georgia, now known as First Union National Bank
(the "Tax-Exempt Trustee"). The Tax-Exempt Bonds bear annual interest at 6.95%
and mature on January 1, 2020. The proceeds of the offering of the Tax-Exempt
Bonds were used to refund the 1984 Tax-Exempt Bonds.
         Concurrently with the issuance of the Tax-Exempt Bonds, the IDB and
Mobile Energy entered into an Amended and Restated Lease and Agreement with
respect to the Solid Waste Disposal Facilities (the "IDB Lease Agreement").
Under the IDB Lease Agreement, Mobile Energy makes lease payments to the IDB,
which applies such payments to repay the principal and interest on the
Tax-Exempt Bonds. Since the Petition Date, no payments have been made by Mobile
Energy on the IDB Lease Agreement. The IDB Lease Agreement will be assumed under
the Plan, and the Debtors will seek a waiver from the IDB of any cure amounts
owed under the IDB Lease Agreement.
         All of Mobile Energy's obligations under the IDB Lease Agreement are
secured by liens and security interests against the Tax-Exempt Collateral and
are unconditionally guaranteed by Holdings. The Tax-Exempt Collateral consists
of the Shared Collateral, the Tax-Exempt Debt Service Reserve Account and the
Tax-Exempt Indenture Securities Account established under the Tax-Exempt
Indenture.
         The Tax-Exempt Indenture provides that the Tax-Exempt Debt Service
Reserve Account would be funded in an amount equal to $5,908,000 (the
"Tax-Exempt Debt Service Reserve Account Required Balance"). Mobile Energy was
permitted to fund the Tax-Exempt Debt Service Reserve Account Required Balance
with a letter of credit in such amount with Southern providing a debt service
account guarantee. On March 17, 1999, Tax-Exempt Trustee received payment of
$5,908,000 under that letter of credit for deposit into the Tax-Exempt Debt
Service Reserve Account. This letter of credit was then terminated.
4.       Agreements Common to Senior Debt

a.       Intercreditor Agreement

         On August 1, 1995, the Indenture Trustee, the Tax-Exempt Trustee, the
Working Capital Facility Provider, the Collateral Agent, the IDB, Holdings, and
Mobile Energy entered into the Intercreditor and Collateral Agency Agreement
(the "Intercreditor Agreement") designating the Collateral Agent as the agent
for the Indenture Trustee (on behalf of the Holders of the First Mortgage
Bonds), the Tax-Exempt Trustee (on behalf of the Holders of the Tax-Exempt
Bonds), and the Working Capital Facility Provider (collectively, the "Senior
Secured Parties").
         The Intercreditor Agreement describes the events that shall constitute
events of default, and it provides how the proceeds of any sale, disposition, or
other realization upon any or all of the Shared Collateral will be distributed.
b.       Mortgage

         Mobile Energy, as mortgagor, has entered into a Leasehold Mortgage,
Assignment of Leases, Rents, Issues and Profits and Security Agreement and
Fixture Filing dated as of August 1, 1995 (including any amendments thereto, the
"Mortgage") and has granted to the Collateral Agent and the IDB, as mortgagees,
for the benefit of the Senior Secured Parties, mortgages and security interests
in all real property interests (including fee interests, easement interests, and
leasehold interests, if any) of Mobile Energy to the Energy Complex and the
Easement Deeds and all fixtures, equipment, and improvements thereon, and all
other personal property now owned or hereafter acquired.
         At any time that a Trigger Event (as that term is defined in the
Mortgage and the Intercreditor Agreement) has occurred and is continuing (and,
except in the case of any such Trigger Event that shall have resulted from a
Bankruptcy Event in respect of Mobile Energy or Holdings, the Collateral Agent
shall have received from the requisite senior creditors the notice required by
the Intercreditor Agreement) then, to the maximum extent permitted by law, the
Collateral Agent may exercise any right, power, or remedy permitted to it under
the Mortgage and under certain other security documents or by law, and, without
limiting the generality of the foregoing, the Collateral Agent may, personally
or by its agents, to the maximum extent permitted by law, take possession of the
mortgaged property, sell all or any part of the mortgaged property, protect or
enforce its rights under the Mortgage by suit for specific performance, or
exercise any and all remedies available to a secured party under the Uniform
Commercial Code or other applicable law. Proceeds from the exercise of remedies
will be applied in accordance with the Intercreditor Agreement. The rights of
the Collateral Agent, however, are subject to limitations imposed under the
Consent to Assignment entered into by Mobile Energy and the Collateral Agent
with each of the Mill Owners.
c.       Security Agreement

         Mobile Energy has entered into the Security Agreement dated as of
August 1, 1995 (including any amendments thereto the "Security Agreement") with
the Collateral Agent for the benefit of the Senior Secured Parties, which grants
liens and security interests in all of Mobile Energy's personal property
interests. The Security Agreement does not provide for the granting of a
security interest in Mobile Energy's rights under the Mill Owner Maintenance
Reserve Account and monies on deposit therein.
         Pursuant to the terms of the Security Agreement, the Collateral Agent
may, upon the occurrence of a Trigger Event (as defined in the Intercreditor
Agreement) and satisfaction of certain conditions contained in the Intercreditor
Agreement, take possession of all of the foregoing capital, which also secures
the Working Capital Facility. Proceeds from the exercise of remedies will be
applied in accordance with the Intercreditor Agreement. 5. Effect of Chapter 11
Filings and the Plan on Senior Secured Debt

         The filings by Mobile Energy and Holdings of their Chapter 11 Cases
constituted an event of default under the Indenture, the Tax-Exempt Indenture,
and the Working Capital Facility, as well as a Trigger Event under the
Intercreditor Agreement, the Mortgage, and the Security Agreement. Upon the
filing of these Chapter 11 Cases, the Bankruptcy Code imposed the automatic stay
pursuant to Bankruptcy Code Section 362, which stays certain actions by
Creditors to enforce their Claims against the Debtors. Until the automatic stay
is modified by an order of the Bankruptcy Court, such Creditors are precluded
from enforcing their valid and otherwise enforceable Claims against the Debtors.
Specifically, the Indenture Trustee, the Tax-Exempt Trustee, and the Collateral
Agent are precluded by the automatic stay from enforcing their claims against
the Debtors and their Estates without seeking modification of the automatic
stay. Modification of the automatic stay has not been sought or granted with
respect to such Claims.

     As discussed below, pursuant to an order by the Bankruptcy Court, a bar
date for objections to the Claims of the Holders of the Senior Secured Debt was
set, and the bar date passed without any objections to such claims. Modification
of the automatic stay has not been sought or granted with respect to such
Claims.

H.       IDB Bond Issues
         ---------------

         In addition to the Tax-Exempt Bonds, there are three separate
categories of bonds which were issued by the IDB that relate to the financing of
the Energy Complex. Each of these bonds were issued to enable certain facilities
at the Energy Complex to be exempt from local sales and property taxation. As
explained below, except for the savings resulting from the local sales and
property tax exemptions, the economic impact of these bonds on the Debtors is
minimal.
1.       The Mixed-Use Bonds

         In December 1984, the IDB issued a total of $172,000,000 in aggregate
principle amount of taxable Industrial Development Revenue Bonds due December 1,
2019 (the "Mixed-Use Bonds") to finance the acquisition of certain facilities at
the Energy Complex (the "Energy Complex Equipment") and at the Pulp Mill. The
IDB holds title to the financed facilities (including the Energy Complex
Equipment) and leases them to KC pursuant to a Facilities Lease and Agreement
dated as of December 1, 1984 (as amended, the "Facilities Lease and Agreement").
The Energy Complex Equipment is located on the land on which the north power
house is situated. The term of the Facilities Lease and Agreement is coextensive
with the term of the Mixed-Use Bonds. KC's rent payment obligations under the
facilities Lease and Agreement are calculated to pay all principal and interest
on the Mixed-Use Bonds. KC has an option to purchase the Energy Complex
Equipment at the end of the lease term for $10. The Mixed-Use Bonds are secured
by a security interest in all of the IDB's right, title and interest in and to
the Facilities Lease and Agreement and all revenues accruing to the IDB
thereunder. The Mixed-Use Bonds finance facilities that are not entitled to
tax-exempt treatment under the Internal Revenue Code. However, the financing of
these facilities (as well as the facilities purchased with the Environmental
Bonds and the 1994 Bonds (each as defined below)) by the IDB were structured in
order to entitle such facilities to exemption from sales and property taxation.
The Mixed-Use Bonds are held by Three Rivers Timber Company, a wholly owned
subsidiary of KC (the "KC Subsidiary").
         Pursuant to a Sublease and Assignment Agreement dated as of December
12, 1994 (the "Sublease and Assignment Agreement"), KC, then Scott Paper Co.
(predecessor in interest to KC) ("Scott"), in return for a lump-sum payment by
Holdings to Scott on the Acquisition Closing Date, (i) subleased to Holdings the
Energy Complex Equipment and (ii) assigned to Holdings its right to purchase the
Energy Complex Equipment from the IDB at the expiration of the Facilities Lease
and Agreement. Scott and Holdings also agreed to indemnify each other for
certain losses that may be incurred in connection with the Mixed-Use Bonds, the
Energy Complex Equipment or the Sublease and Assignment Agreement. The KC
Subsidiary, the holder of the Mixed-Use Bonds, has delivered to Holdings an
agreement (the "Estoppel and Nondisturbance Agreement") pursuant to which, among
other things, the KC Subsidiary has agreed (i) to look solely to rent paid by KC
under the Facilities Lease and Agreement for payments due in respect of the
Mixed-Use Bonds and not to seek to recover any such amounts from Holdings or any
successor as sublessee or owner of the Energy Complex Equipment, (ii) at no time
to seek to take possession of, impose a lien on, or interfere with the use or
possession of the Energy Complex Equipment and (iii) not to sell the Mixed-Use
Bonds without Holdings' prior written consent. Holdings assigned to Mobile
Energy all of Holdings' rights to sublease and to purchase the Energy Complex
Equipment and all of its rights under the Estoppel and Nondisturbance Agreement.
One of the effects of the Estoppel and Nondisturbance Agreement is that Mobile
Energy is not required to make payments of cash to the KC Subsidiary under the
Mixed-Use Bonds.
         In order to secure Mobile Energy's right to acquire the Energy Complex
Equipment upon the expiration of the Facilities Lease and Agreement, KC has
granted to Mobile Energy a security interest in all of KC's right, title and
interest in the Energy Complex Equipment and in the Facilities Lease and
Agreement as it relates to the Energy Complex Equipment. In addition, in August
1995 Mobile Energy, the IDB, AmSouth Bank of Alabama, the Collateral Agent and
the KC Subsidiary entered into the Recognition, Cooperation and Consent
Agreement (the "Mixed-Use Bonds Recognition Agreement") pursuant to which the
IDB has agreed (with the consent of the KC Subsidiary and the trustee under the
indenture for the Mixed-Use Bonds) that in the event that the Facilities Lease
and Agreement is rejected by KC or otherwise terminated for any reason it will
either (i) lease the Energy Complex Equipment directly to Mobile Energy for
nominal consideration pursuant to a new facilities lease and agreement for a
term equal to the term of the Facilities Lease and Agreement (with an option of
Mobile Energy to purchase the Energy Complex Equipment at the end of the lease
term for $10) or (ii) sell the Energy Complex Equipment to Mobile Energy for
nominal consideration.

     Under the Plan, the various agreements to which the Debtors are parties
(other than the agreements listed on Exhibit A attached to the Plan) are assumed
to the extent they are Executory Contracts.

2.       The Environmental Bonds

         Between 1973 and 1980, the IDB issued four series of 30-year bonds
having an aggregate principal amount of $24,000,000 (the "Environmental Bonds")
to finance the purchase of certain pollution control equipment at the Energy
Complex (the "Energy Complex Pollution Control Equipment") and the Mills. Title
to the pollution control equipment is held by the IDB but the equipment is
subject to sale to KC pursuant to two Construction, Financing and Installment
Sale Agreements (as supplemented, the "Installment Sale Agreements"). The
Installment Sale Agreements give KC sole use and exclusive possession of the
pollution control equipment and provide that KC is purchasing the equipment
through fixed installment payments that, in sum, equal the principal and
interest due on the applicable Environmental Bonds. When the applicable bonds
have been fully redeemed, the IDB is to transfer to KC title to the applicable
equipment. The bonds of each series are secured by the money payable by KC to
the IDB under the corresponding Installment Sale Agreement. A substantial
portion of the Energy Complex Pollution Control Equipment financed with the
Environmental Bonds is no longer in operation.
         Pursuant to two separate Lease and Assignment Agreements, each dated as
of December 12, 1994 (collectively, the "Lease and Assignment Agreements"), KC,
then Scott, in return for a lump-sum payment, (i) leased to Holdings the Energy
Complex Pollution Control Equipment and (ii) assigned to Holdings its right and
interest in and to the Energy Complex Pollution Control Equipment arising under
the Installment Sale Agreements, including its right to receive instruments of
conveyance from the IDB pursuant to the Installment Sale Agreements, and
Holdings assumed certain obligations of KC under the Installment Sale
Agreements. KC and Holdings also agreed to indemnify each other for certain
losses that may be incurred in connection with the Environmental Bonds, the
Energy Complex Pollution Control Equipment and the Lease and Assignment
Agreements. Holdings subsequently assigned to Mobile Energy all of Holdings'
rights and obligations under the Lease and Assignment Agreements.
         In order to secure Mobile Energy's rights to become the owner of the
Energy Complex Pollution Control Equipment at the end of the terms of the
respective Installment Sale Agreements, KC has granted to Mobile Energy a
security interest in all of KC's rights in the Energy Complex Pollution Control
Equipment and in the Installment Sale Agreements as it relates to the Energy
Complex Pollution Control Equipment.

     Under the Plan, the various agreements to which the Debtors are parties
(other than the agreements listed on Exhibit A attached to the Plan) are assumed
to the extent they are Executory Contracts.

3.       The 1994 Bonds

         The construction of the Number 8 Recovery Boiler and related facilities
(the "Number 8 Recovery Boiler Facilities"), which began operation in 1994, was
financed by Scott and the IDB through the issuance of $117,000,000 principal
amount of Industrial Development Revenue Bonds (Scott Paper Recovery Boiler
Project) 1994 Series A (the "1994 Bonds") due December 1, 2014. The structure of
the 1994 Bonds transaction is similar to that for the Mixed-Use Bonds. The IDB
holds title to the Number 8 Recovery Boiler Facilities and, prior to the
Acquisition, leased it to Scott, pursuant to a Recovery Boiler Lease and
Agreement dated as of December 1, 1994 (the "Recovery Boiler Lease and
Agreement"). The 1994 Bonds were purchased by the KC Subsidiary. The Recovery
Boiler Lease and Agreement gives KC the right to purchase the Number 8 Recovery
Boiler Facilities at the expiration of the lease term for $10 (or earlier upon
the payment of $10 plus an amount equal to all principal, premium, if any, and
interest payable or to be payable with respect to all outstanding 1994 Bonds).
         Pursuant to a Lease Assignment and Assumption Agreement, dated as of
December 12, 1994, between Scott and Holdings (the "1994 Bond Agreement"), KC
(then known as Scott) assigned to Holdings, with the consent of the KC
Subsidiary, all of its right, title and interest in the Recovery Boiler Lease
and Agreement and the Number 8 Recovery Boiler Facilities (including the right
to purchase the Number 8 Recovery Boiler Facilities as provided in the Recovery
Boiler Lease and Agreement). In connection with the assignment of the Recovery
Boiler Lease and Agreement to Holdings, KC caused the KC Subsidiary to transfer
the 1994 Bonds to Holdings pursuant to the Bond Transfer Instrument. Holdings
subsequently assigned the 1994 Bonds and all of its rights under the 1994 Bond
Agreement to Mobile Energy. Therefore, Mobile Energy is currently the holder of
the 1994 Bonds and the de facto obligor thereunder (by virtue of its obligation
to make payments under the Recovery Boiler Lease and Agreement to cover debt
service obligations on the 1994 Bonds). The 1994 Bonds have been pledged to the
Collateral Agent pursuant to the Security Agreement. The Collateral Agent is the
trustee with respect to the 1994 Bonds. Pursuant to the Intercreditor Agreement,
the Collateral Agent is authorized to make payments under the Lease and
Agreement by debiting certain Intercreditor Agreement accounts. Payments made to
Mobile Energy as the holder of the 1994 Bonds will be made immediately following
payments by Mobile Energy under the Lease and Agreement. The Intercreditor
Agreement provides that when Mobile Energy receives such payments on the 1994
Bonds, such monies will be credited to the account or accounts that were debited
by the Collateral Agent (to the extent of any such debit) in order to pay Mobile
Energy's obligations under the Lease and Agreement.
         Under the Plan, the various agreements to which the Debtors are parties
(other than the agreements listed on Exhibit A attached to the Plan) are assumed
to the extent they are Executory Contracts and as an Other Secured Claim, Mobile
Energy's claims will be reinstated.

                                      VI.

                         DESCRIPTION OF DEBTORS' ASSETS

         The following is a brief description of certain assets owned by the
Debtors reflecting book value as of June 30, 2002. All or substantially all of
the assets below are prepetition collateral in which the Senior Secured Parties
have valid and enforceable liens and security interests or collateral in which
the Senior Secured Parties are entitled to "replacement liens" under the terms
of Cash Collateral Orders issued by Bankruptcy Court. The values shown below
represent net book value as of June 30, 2002, and they may vary substantially
from the market value or liquidation value as of the date of the filing of this
Disclosure Statement or as of the Effective Date.
A.       Assets of Mobile Energy

1.       Property, Plant and Equipment

         As of June 30, 2002, the land, buildings and equipment owned by Mobile
Energy consisted of the Energy
Complex having a book value of $31,320,885.
2.       Personal Property

a.       Cash

         As of June 30, 2002, Mobile Energy had cash on hand of $14,528,700, and
restricted deposits of $67,982.
b.       Trade Accounts Receivable

         As of June 30, 2002, Mobile Energy had trade accounts receivable of
$4,410,857.
c.       Office Equipment and Furnishings

     Office equipment and furnishings includes computers, networking equipment,
fax machines, communications equipment, and furnishings located at the Energy
Complex. The book value as of June 30, 2002 was $285,023.

d.       Plant Materials, Supplies and Fuel Stock

         As of June 30, 2002, the book value of this property was $4,132,694.
e.       Prepaid Expenses

     Prepaid expenses primarily include payments of retainers to professionals
and insurance policy premiums. As of June 30, 2002, prepaid expenses totaled
$480,910.

B.       Assets of Holdings

1.       Personal Property

a.       Cash

         As of June 30, 2002, Holdings had cash on hand of $2,205,346.
b.       Accounts Receivable

         As of the Petition Date, Holdings owned accounts receivable of
$2,585,831.00. This amount is the account receivable owed to Holdings under the
Southern Master Tax Sharing Agreement. This amount was subsequently reduced to
approximately $1,300,000 and has been netted against amounts owed by Holdings to
Southern under the Southern Master Tax Sharing Agreement for taxes paid on
behalf of Holdings on taxable income recognized after the Petition Date, and the
remaining amount owed by Holdings has been waived under Cogeneration Development
Agreement Amendment No. 1.
2.       Interests

         As of June 30, 2002, the Mobile Energy Interest of Holdings had a book
value of $14,958,955.
C.       Causes of Action Owned by Both Mobile Energy and Holdings

         The adversary proceedings and other proceedings filed by the Debtors
against KC are discussed in the section entitled Significant Events Prior to and
During the Chapter 11 Cases. VII.
             SIGNIFICANT EVENTS PRIOR TO AND DURING CHAPTER 11 CASES
A.       Pre-petition KC Disputes

1.       Notice of Termination of Pulp Mill ESA and Closure of Pulp Mill

         As described above in Section IV.A., in May 1998, the Debtors received
notice from KC of its intention to close the Pulp Mill and to terminate the Pulp
Mill ESA effective as early as September 1, 1999, with Demand Charges continuing
for an additional six (6) months until March 1, 2000. KC's planned shutdown of
the Pulp Mill, together with the effects on the Debtors arising therefrom, led
to the filing of the Chapter 11 Cases and to the transactions described in this
Disclosure Statement.
2.       Commencement of Arbitration Proceeding by KC

         On December 7, 1998, KC served on Mobile Energy a Notice of Arbitration
concerning matters related to KC's announced intention to cease pulping
operations at the Pulp Mill and to institute a "Pulp Mill Closure," within the
meaning of the MOA (the "Closure Arbitration"). In the Closure Arbitration, KC
sought a ruling that KC (i) would be properly terminating the Pulp Mill ESA
based on the cessation of pulping activities, (ii) could install facilities that
furnish dry fiber and recycled fiber to the Tissue Mill without continuing the
effectiveness of or reinstating the Pulp Mill ESA, and (iii) could continue to
operate (for the Energy Complex and the Mills) water and wastewater treatment
facilities that were defined by the MOA to be part of the Pulp Mill without
continuing the effectiveness of or reinstating the Pulp Mill ESA. The Debtors
asserted that such actions would result in KC's continuing liability under the
Pulp Mill ESA.

     3. Commencement of Lawsuit to Enjoin Arbitration Proceeding by Mobile
Energy

         On December 15, 1998, the Debtors brought an action in the Circuit
Court of Mobile County, Case No. 98-3951, to enjoin the aforementioned
Arbitration on the theory that the issues raised in that Notice were not
arbitrable. KC removed the lawsuit to the District Court, Case No.
CV98-1294-RV-C, and moved in that court to transfer the case to the Southern
District of New York. Mobile Energy opposed the transfer and moved for entry of
a temporary restraining order and/or a preliminary injunction to stop the
Arbitration. After a hearing on January 8, 1999, before Hon. Richard W. Vollmer,
Jr., the District Court entered a temporary restraining order against the
Arbitration to stop it from going forward until January 15, 1999, but did not
rule on KC's motion to transfer the case to New York or Mobile Energy's request
for a preliminary injunction. B. Chapter 11 Petitions and Order Approving Joint
Administration

         On January 14, 1999, the Debtors filed the petitions in their Chapter
11 Cases and a Motion for Order Authorizing Joint Administration of Pending
Cases of Affiliates (the "Joint Administration Motion"). Pursuant to the Joint
Administration Motion, the Debtors sought joint administration of their Chapter
11 Cases, but not substantive consolidation of the Chapter 11 Cases. Mobile
Energy's case is pending in the Bankruptcy Court under Case No. 99-10168 and
Holdings' case is pending in the Bankruptcy Court under Case No. 99-10170. On
January 14, 1999, the Bankruptcy Court entered an order granting the Joint
Administration Motion and ordering that the cases be jointly administered under
Case No. 99-10168.
C.       Certain Post-Petition KC Disputes and the KC Settlement Agreement

1.       Debtors' Adversary Proceeding against KC

         On the Petition Date, the Debtors commenced an adversary proceeding
against KC in the Bankruptcy Court seeking money damages and/or rescission of
Mobile Energy's contracts with KC. In that proceeding, which was subsequently
amended, Holdings and Mobile Energy alleged, among other things, that, if KC's
announced plans to "shutdown" the Pulp Mill were sufficient to allow it to
escape its contractual obligations to Mobile Energy, then Holdings and Mobile
Energy did not receive reasonably equivalent value in purchasing the Energy
Complex at the Mobile Facility and were rendered insolvent by the purchase. In
the alternative, the complaint alleged that KC breached its contract with Mobile
Energy if it refused to meet its obligations to Mobile Energy even while: (1)
continuing to generate and supply pulp to the Tissue Mill by means requiring new
on-site facilities; and (2) continuing to operate process water and waste water
treatment systems that are expressly defined to be part of the Pulp Mill. Mobile
Energy also sought declaratory relief regarding the effectiveness of KC's
announced mill closure and whether KC's planned activities on the Site after
September 1, 1999 would give rise to Mobile Energy's reinstatement rights under
the MOA.
         With the filing of the Chapter 11 Cases, the Arbitration and the case
before Judge Vollmer were automatically stayed. After a scheduling conference on
January 21, 1999, the Bankruptcy Court established May 21, 1999 as the deadline
for completion of discovery in the Adversary Proceeding and scheduled trial of
the Adversary Proceeding to begin on June 21, 1999. At a hearing on March 3,
1999, on a Motion to Expedite Trial filed by Holdings and Mobile Energy, the
Bankruptcy Court advanced the date for the beginning of trial to June 2, 1999.
         Meanwhile, KC moved the Bankruptcy Court: (1) to lift the automatic
stay of the Arbitration; (2) to compel arbitration of certain aspects of
Holdings' and Mobile Energy's complaint; and (3) to stay other claims or to
exercise its discretion to refrain from ruling on them pending the outcome of
Arbitration. By order dated March 23, 1999, the Bankruptcy Court directed that
certain aspects of the Debtors' contract claims be arbitrated and also ruled
that other aspects of Debtors' claims would be heard after the completion of the
Arbitration. The Bankruptcy Court also determined that it would abstain from
hearing other aspects of the Debtors' claims. KC has also moved to dismiss all
counts of the Debtors' complaint, or, in the alternative, to transfer some of
the counts to United States District Court in the Southern District of New York.
KC's motion to dismiss was heard by the Bankruptcy Court in August 2001, and the
motion was granted and the fraudulent transfer claims against KC have been
dismissed.
2.       Arbitration of the KC Claims

         On March 23, 1999, the Bankruptcy Court ordered that several matters be
submitted to arbitration, including whether KC had effected a "Pulp Mill
Closure" (as defined in the MOA) and, if so, whether KC's operations at the Site
would give Mobile Energy the right to reinstate the MOA and the Pulp Mill ESA. A
hearing was held before the arbitrator in July, 1999. In August 1999, the
parties requested the arbitrator to postpone the announcement of a decision
pending the outcome of settlement discussions between Mobile Energy and KC.
Those negotiations culminated in the KC Settlement Agreement and in the filing
of the Joint Motion of Debtors and the Bondholders' Steering Committee for order
Pursuant to Rule 9019(a) of the federal Rules of Bankruptcy Procedure Approving
Settlement and Compromise with Kimberly-Clark Tissue Company (the "KC Settlement
Motion") on December 31, 1999.
3.       KC Settlement Agreement

         The Bankruptcy Court heard the KC Settlement Motion on January 21,
2000, and the Bankruptcy Court granted the KC Settlement Motion on January 24,
2000, over the objection of S.D. Warren, the owner of the Paper Mill. S.D.
Warren appealed the Bankruptcy Court's approval of the KC Settlement Agreement
to the District Court, but the appeal of the order approving the KC Settlement
Agreement became moot because the KC Settlement Agreement is void ab initio by
its terms.
         The KC Settlement Agreement was subject to several conditions before
the settlement would become final. One of those conditions is that a plan of
reorganization must be confirmed on or before October 15, 2000. Although KC and
the Debtors extended the deadlines and agreed to waive other applicable
deadlines in the KC Settlement Agreement on several occasions, for reasons
discussed in Sections VII (E) and VII (T) below, the conditions in the KC
Settlement Agreement could not be met and the settlement agreement has become
void ab initio pursuant to its terms. The parties engaged in the accounting and
dispute procedures required under paragraph 19 of the KC Settlement Agreement,
which survives termination, to be returned to the status quo ante in respect of
the contractual or other legal relationships in effect between them immediately
prior to the entry of the order approving the KC Settlement Agreement.
         Under Section 19 of the KC Settlement Agreement the parties had 45 days
after the agreement terminated to provide an accounting of the amounts which are
owed by KC to Mobile Energy as a result of the KC Settlement Agreement becoming
void ab initio by its terms. KC contended that the net amount it owes Mobile
Energy is approximately $3.6 million. Mobile Energy contended the amount KC owed
was approximately $17.5 million. KC disputed Mobile Energy's amount claiming
that the addition of the No. 7 Turbine Generator and the conversion of the
Number 7 Recovery Boiler to the Number 8 Power Boiler were not prudent. KC also
claimed that it was entitled to setoff against the $17.5 million the alleged
cost of $2.8 million to preserve the Pulp Mill from September 1, 1999 through
August 2000. As described below in this Article VII, Mobile Energy disputed KC's
contentions and filed a motion with the Bankruptcy Court seeking an order
requiring KC to pay the invoice submitted by Mobile Energy. The remaining
disputes relating to the processing charges owed by KC under the Tissue Mill ESA
were submitted to arbitration as described below in this Article VII.
D.       Motion to Approve Cogeneration Development Agreement

         Contemporaneously with the negotiations leading to the KC Settlement
Agreement, the Proponents determined that it was in the best interests of the
Debtors to pursue the development of a 165-megawatt gas-fired cogeneration
facility at the Mobile Facility (the "Cogen Project"). Power produced by the
Cogen Project would primarily be sold through the regional power transmission
system to wholesale customers, providing the Debtors with additional income for
the benefit of creditors.
         The Debtors, the Bondholder Steering Committee, Southern Energy
Resources, and Mirant f/k/a SEI discussed the terms and conditions under which
Mirant and Southern Energy Resources would be willing to oversee the development
of the Cogen Project and under which Mirant, or an affiliate, would potentially
provide the equity funding for the project. The Debtors estimated the cost of
developing the entire Cogen Project to be $87 million. The Debtors and the
Bondholder Steering Committee filed their Motion to Approve the Cogeneration
Development Agreement (the "Cogen Motion") on December 31, 1999, and the
Bankruptcy Court granted the Cogen Motion on January 24, 2000, over S.D.
Warren's objection. S.D. Warren has appealed the order approving the
Cogeneration Development Agreement. Southern Energy Resources and the Debtors
executed the Cogeneration Development Agreement on February 9, 2000, and filed
copies of the executed documents with the Bankruptcy Court. A copy of the
Cogeneration Development Agreement is attached as Exhibit "I" and incorporated
herein by reference. As discussed below, the Cogeneration Development Agreement
has been amended by Cogeneration Development Agreement Amendment No. 1 and by
Amendment No. 2 (subject to Bankruptcy Court approval, and as discussed below in
Section VII(BB)).
         After the Cogeneration Development Agreement was entered into, a
dramatic rise in long-term (future) natural gas prices occurred that negatively
affected the economics of the transaction from the Debtors' and Mirant's point
of view. Continuing with the development of the Cogen Project under the
Cogeneration Development Agreement, and with Mirant (formerly SEI) investing in
the equity under the terms thereunder, would result in Mirant, or its
affiliates, realizing most of the value of the Cogen Project, leaving little
value for the Debtors.
         Under these circumstances the Debtors and the Bondholder Steering
Committee decided that Mobile Energy should undertake development of the Cogen
Project rather than attempting to meet the conditions for Mirant to make the SEI
Equity Investment. However, because Mirant would not be making the SEI Equity
Investment, a $10 million payment by Mobile Energy required under the agreement
would be due as early as July 31, 2000. Thus, rather than continuing with the
transaction as structured under the Cogeneration Development Agreement and
having to make the $10 million payment, the Debtors and the Bondholder Steering
Committee decided to negotiate with Mirant to amend the Cogeneration Development
Agreement.
         A motion was filed with the Bankruptcy Court on August 11, 2000 seeking
Bankruptcy Court approval of Cogeneration Development Agreement Amendment No. 1.
A true and correct copy of Cogeneration Development Agreement Amendment No. 1 is
attached hereto as Exhibit "J" and incorporated herein by reference.
Cogeneration Development Agreement Amendment No. 1 was approved by the
Bankruptcy Court on September 1, 2000. Cogeneration Development Agreement
Amendment No. 1 provides, among other things, that: (1) none of Mirant, Mirant
Services, or any Affiliate thereof would make any additional equity investment
in Mobile Energy or the Cogen Project; (2) upon confirmation of a plan of
reorganization, Mirant's 1% ownership interest of Mobile Energy (if not
transferred earlier to Holdings) and Southern Company's ownership of Holdings
will terminate and the Bondholders will acquire 100% of the ownership of
Holdings pursuant to the terms of the Plan; (3) Mirant Services will waive the
$10 million Equity Option Fee; (4) Mobile Energy will terminate the Operating
Agreement no later than March 31, 2001, and Mobile Energy will pay one-half the
actual cost of a retention and severance program implemented by Mirant Services
up to a total of $2 million paid by Mobile Energy; (5) the Cogen Facility Mobile
Energy Operating Agreement will terminate; (6) Mobile Energy will retain an
option to purchase the GE combustion turbine provided by Mirant to the Debtors
under the Cogeneration Development Agreement, including the rights in related
agreements, upon Mobile Energy's satisfaction of the MESC Transfer Obligations
(as defined in the Cogeneration Development Agreement, as amended by
Cogeneration Development Agreement Amendment No. 1) other than the payment of
the $10 million Equity Option Fee; (7) Mobile Energy will pay Mirant $2.9
million upon the earlier of the exercise of such option, the effective date of
the Plan, or July 31, 2001; (8) Mobile Energy will be allowed to use the $2.1
million held by Holdings in its tax sharing account; (9) Mirant will cause
Southern to pay to the Collateral Agent, and release any claims Southern may
have to, the $2.7 million that is subject to dispute under the Maintenance Plan
Funding Subaccount Southern Guaranty Agreement; and (10) Mobile Energy will
agree to indemnify Southern from Southern's obligations under the Mill Owner
Maintenance Reserve Account Agreement, the Environmental Guaranty, and for
certain income taxes on taxable income of Mobile Energy and Holdings in excess
of Southern's excess loss account related to its investment in Holdings and
payments under the Long Term Service Agreement for Combined Cycle Generating
Plant at MESC Electric Generating Plant. Southern, Mirant Services, and Mirant
will continue to hold a first priority lien on the Debtors' assets and those of
any affiliate set up to own the Cogen Project to secure performance of all
obligations that may be owed to Southern, Mirant Services and Mirant under
Cogeneration Development Agreement Amendment No. 1.
         Mobile Energy arranged for the fabrication of the second major piece of
equipment required for construction of the Cogen Project, a heat recovery steam
generator ("HRSG") by Deltak and has contracted with Deltak for Deltak to
perform certain work on the construction of the HRSG. That contract required
Mobile Energy to provide, or cause to be provided, to Deltak letters of credit
to secure Mobile Energy's payment to Deltak. Pursuant to the Letter of Credit
Procurement Agreement between Mobile Energy and Mirant executed as of March 15,
2000 (the "LC Procurement Agreement"), Mirant has caused letters of credit to be
posted in the aggregate amount of $5.5 million to secure the amounts owed by
Mobile Energy to Deltak. Letters of credit of up to an aggregate of $11 million
have been posted under the LC Procurement Agreement. Under the terms of the LC
Procurement Agreement, Mobile Energy must provide Mirant with cash collateral
equal to the letters of credit Mirant Services arranges to be provided to
Deltak. Approximately $10,941,00 million has either been paid to Deltak or
reserved for payment as of the filing of the Plan. Most of the equipment that
comprises the HRSG has been delivered to Mobile Energy. Because Mobile Energy
does not intend to develop the Cogen Project, it intends to sell the HRSG.
         The GE combustion turbine required for the Cogen Project was to be
acquired by Mobile Energy from Mirant pursuant to the Cogen Development
Agreement. Under the Cogeneration Development Agreement Amendment No. 1, on
December 29, 2000, Mobile Energy notified Mirant that it intended to purchase
the CT, and Mobile Energy must pay the full purchase price of $28 million for
the CT within two days of Mirant's notifying Mobile Energy that Mirant has paid
General Electric Company for the CT in order to obtain title to the turbine. If
the Debtors do not pay Mirant, they do not receive the turbine and do not owe
the $28 million purchase price but still owe the $2.9 million payment. Upon
payment of that amount by Mobile Energy, Mirant will transfer the CT to Mobile
Energy and Mirant will assign its remaining rights under its contract with GE
for the CT to Mobile Energy. Also pursuant to Cogeneration Development Agreement
Amendment No. 1, Mirant will assign to Mobile Energy Mirant's rights under the
Long Term Service Agreement for Combined Cycle Generating Plant at MESC Electric
Generating Plant made effective March 26, 1999 (the "LTSA") between Mirant and
General Electric International, Inc. ("GEII"). In addition to the $28 million
purchase price for the CT, Mobile Energy will be required to pay GEII under the
LTSA $3 million in 2001. Under the LTSA, Mobile Energy also will be required to
pay GEII approximately $4 million per year for parts and maintenance on the CT
beginning once the Cogen Project begins operations and for a term of twelve (12)
years. If the turbine contract and the LTSA are assigned to Mobile Energy,
Mirant will remain liable to GEII and Mobile Energy will indemnify Mirant for
any cost Mirant incurs to GEII under the LTSA. All of Mobile Energy's
obligations under Cogeneration Development Agreement Amendment No. 1 to Mirant
will be secured by a first priority lien in favor of Mirant, Mirant Services,
and Southern. Such lien in favor of Mirant, Mirant Services, and Southern may be
junior to the liens of an entity that provides financing for the Cogen Project.
         The failure of Jubilee Pulp to proceed with the development of the New
Pulp Mill coupled with the termination of the KC Settlement Agreement and the
increase in natural gas prices have made it more difficult to proceed with the
Cogen Project as previously contemplated. The Debtors explored the possibilities
regarding the Cogen Project to maximize its value to the Debtors' estates and
decided to enter into Amendment No. 2 as discussed below in Section VII(BB).
E.       The Proposed New Pulp Mill

         In connection with the transactions proposed in the First Amended Plan
filed on September 15, 2000, the Debtors contemplated that a new 800 short ton
per day pulp mill would be developed at the Mobile Facility pursuant to the Pulp
Mill Acquisition Term Sheet between Mobile Energy and Jubilee Pulp (the "Term
Sheet"). The transactions necessary to develop the new pulp mill included (a)
consummation of the KC Settlement Agreement; (b) consummation of certain
agreements with the Debtors to effect the transfer of the No. 8 Recovery Boiler
to a new limited liability company which was expected to yield approximately
$4.8 million per year to Holdings; and (c) new energy services agreements
between Mobile Energy and the developer of the New Pulp Mill, which was expected
to provide payments of between $1.5 million and $4.5 million annually to Mobile
Energy.
         Pursuant to the KC Settlement Agreement, KC granted Mobile Energy a
transferable option to acquire certain assets from KC that could be used to
develop the new pulp mill. Mobile Energy agreed to assign this option to Jubilee
Pulp. The Term Sheet represented the realization of this piece of the
consideration received by the Debtors in the KC Settlement.
         The Term Sheet, which was binding on Jubilee Pulp, provided that
Jubilee Pulp would provide an initial letter of credit of $12.5 million, which
at the closing of the Acquisition, as defined in the Term Sheet, would increase
to $30 million, or such amount required of Jubilee Pulp to satisfy the Equity
Investment, as defined in the Term Sheet, required under the Term Sheet, less
any amounts already invested by Jubilee Pulp (the "Letter of Credit"). On August
11, 2000, the Debtors filed the Motion to Approve Sale and Overbid Procedures
and Reimbursement of Expenses with the Bankruptcy Court. The Debtors sought
Bankruptcy Court approval of the procedures by which other potential bidders
would have an opportunity to enter into the same, or a substantially similar,
transaction with the Debtors as the proposed transaction with Jubilee Pulp under
the Term Sheet. The motion was approved on August 30, 2000.
         Under the Term Sheet, Jubilee Pulp was required to post a letter of
credit in the amount of $12.5 million within five (5) business days of the
approval of the Term Sheet by the Bankruptcy Court. Jubilee Pulp was required to
fund the Letter of Credit by September 8, 2000. Jubilee Pulp failed to post the
letter of credit as required by the Term Sheet. The Debtors consider Jubilee
Pulp to be in breach of its obligations under the Term Sheet.

     As a result of this default and the issues discussed in Section VII(D)
above and VII(T) below, the KC Settlement Agreement became void ab initio by its
terms.

     F. Orders Authorizing Use of Cash Collateral and Bar Date for Challenges to
Claims

         On the Petition Date, the Debtors filed their Motion for an Order
Authorizing Use of Cash Collateral Pursuant to Section 363 of the Bankruptcy
Code (the "Cash Collateral Motion"). On March 15, 1999, the Bankruptcy Court
granted the Cash Collateral Motion and authorized the Debtors' use of cash
collateral pursuant to the First Final Cash Collateral Order. The First Final
Cash Collateral Order, and each subsequent order, provides for replacement liens
in the Debtors' assets in favor of the Senior Secured Lenders to the extent of
an actual diminution in value of the Senior Secured Lenders' collateral. The
Debtors currently have the authority to use cash collateral pursuant to the
Twelfth Final Cash Collateral Order entered on July 30, 2002. The Debtors'
authority to use cash collateral continues up through and including October 31,
2002.
         With the first authorization of the Debtors' use of cash collateral,
the Bankruptcy Court set a bar date for objecting to the Claims of the Senior
Secured Parties and for challenging their liens. The date set by the Bankruptcy
Court was May 15, 1999, and no objections were timely filed. Accordingly, the
Claims of the Senior Secured Parties will be allowed and paid pursuant to the
Plan.
         In connection with the issuance of the First Mortgage Bonds, the
Indenture required that a debt service reserve account be established for the
benefit of the Holders of the First Mortgage Bonds (the "First Mortgage Debt
Service Reserve Account"). Additionally, in connection with the issuance of the
Tax-Exempt Bonds, the Tax-Exempt Bonds Indenture required that a debt service
reserve account be established for the benefit of the Holders of the Tax-Exempt
Bonds (the "Tax-Exempt Debt Service Reserve Account"). The First Mortgage Debt
Service Reserve Account was funded in an amount equal to $21.9 million (the
"First Mortgage Debt Service Reserve Account Required Balance"). Prior to March
15, 1999, Mobile Energy funded the First Mortgage Debt Service Reserve Account
with a guaranty from Southern in an amount equal to the First Mortgage Debt
Service Reserve Account Required Balance. On March 15, 1999, Southern paid $21.9
million to First Union National Bank, as trustee under the Indenture, for
deposit in the Debt Service Reserve Account. That payment terminated the
Southern guaranty. Prior to March 17, 1999, the Tax-Exempt Debt Service Reserve
Account was funded with a letter of credit in an amount equal to $5.9 million.
On March 17, 1999, First Union National Bank, as trustee under the Tax-Exempt
Indenture, received payment of $5.9 million under that letter of credit for
deposit into the Tax-Exempt Debt Service Reserve Account. Additionally, pursuant
to an order of the Bankruptcy Court the Debtors made cash payments to the
Collateral Agent for further distribution under the terms of the Intercreditor
Agreement and the Indenture and the Tax-Exempt Indenture (discussed below in
Section VII (J)). Between June, 1999 and June, 2002, the Debtors made payments
thereunder totaling $87,633,850.99.

     G. Order Approving Debtors' Cash Management System and Authorizing
Variances from Bankruptcy Administrator's Investment Guidelines

         On the Petition Date, the Debtors filed their Motion for an Order
Modifying Investment Guidelines of 11 U.S.C. ss. 345 (the "Investment Guidelines
Motion"). Pursuant to the Investment Guidelines Motion, the Debtors sought
modifications of the investment guidelines established in Section 345 of the
Bankruptcy Code. The Order granting the Investment Guidelines Motion was entered
on January 15, 1999.
         To maximize the value of the Debtors' Estates, the Debtors deemed it
advisable that the Cash be maintained in income producing investments to the
fullest extent possible, and in accordance with the Debtors' pre-petition
investment policies. Those investment policies permitted investments in
relatively low-risk, short-term investment instruments. Although such
investments were somewhat higher in risk than the investments permitted by
Section 345 of the Bankruptcy Code, the Debtors received a substantially higher
rate of return. The Debtors thereby maximized the value of their assets, with
little appreciable additional risk. H. Conversion of Number 7 Recovery Boiler to
the Number 8 Power Boiler and Addition of No. 7 Turbine
         Generator

         In the summer of 1999, the Debtors determined that in order to ensure
the continued viability of the Energy Complex after the Pulp Mill shutdown,
which was scheduled to occur on September 1, 1999, the Debtors were required to
reconfigure the Energy Complex. A large portion of the reconfiguration work
involved transforming one of the two existing recovery boilers, the Number 7
Recovery Boiler, to function as a power boiler. The Number 7 Recovery Boiler
burned black liquor from the Pulp Mill to create steam that ultimately was used
to create electricity. Because the fuel used by the Number 7 Recovery Boiler,
black liquor, would be discontinued when the Pulp Mill closed on September 1,
1999, Mobile Energy decided to reconfigure the Number 7 Recovery Boiler to burn
natural gas only, instead of black liquor and natural gas, to create the steam
needed to generate electricity and in order to meet the energy demands of the
remaining Mills. As reconfigured, the Number 7 Recovery Boiler was re-named the
Number 8 Power Boiler.
         After the Pulp Mill was shutdown, the Energy Complex was left with a
mix of assets that could not service the power and steam processing needs of the
Mills. The Energy Complex was left with an imbalance of high pressure steam and
existing turbines that did not have sufficient condensing capacity to make use
of that high pressure steam. The installation of the Number 7 Turbine Generator,
a condensing turbine, greatly reduced the imbalance problem, and its
implementation at the Energy Complex allowed Mobile Energy to satisfy its
requirements under the ESAs.
         As reconfigured, the Number 8 Power Boiler, together with the addition
of the Number 7 Turbine Generator, allowed the Energy Complex to meet the energy
needs of the remaining Mills and also allowed Mobile Energy to sell electricity
to wholesale customers. The conversion of the Number 7 Recovery Boiler and the
addition of the Number 7 Turbine Generator was approved by the Bankruptcy Court.
The Number 8 Power Boiler, which will be used as back-up, and the Number 7
Turbine Generator will continue to be used in the Debtors' operations
post-confirmation.
I.       Engagement Of Professional Persons

1.       Engagement of Attorneys

         On the Petition Date, the Debtors filed with the Bankruptcy Court
applications to employ Cabaniss, Johnston, Gardner, Dumas & O'Neal ("Cabaniss,
Johnston") as general bankruptcy counsel, and Andrews & Kurth L.L.P. ("A&K") as
special bankruptcy counsel. An order granting the Cabaniss, Johnston and A&K
applications was signed that same day. Pursuant to the terms of the employment
application, the Debtors have agreed to pay Cabaniss, Johnston's and A&K's legal
fees on an hourly rate basis at the hourly rates customarily charged by them for
the services of the professionals involved. The Debtors have also agreed to
reimburse Cabaniss, Johnston and A&K for all reasonable and necessary expenses
incurred by them in performing services for the Debtors. Payment of such fees
and expenses is subject to the approval of the Bankruptcy Court in accordance
with the standards of Sections 327 through 330 of the Bankruptcy Code.
2.       Engagement of Investment Banker

         On the Petition Date, the Debtors filed an application to retain FORCAP
International Inc. ("FORCAP") to provide financial advisory and investment
banking services in connection with the Chapter 11 Cases (the "FORCAP
Application"). By Order entered on March 22, 1999, the Bankruptcy Court approved
the Debtor's employment of FORCAP pursuant to the terms of an engagement letter
(the "Engagement Letter") between FORCAP and Mobile Energy. The Engagement
Letter provides for the payment of $125,000 per month in advisory fees, all or a
portion of which may be offset against FORCAP's Transaction Fee. All of the
amounts paid to FORCAP are subject to further approval of the Bankruptcy Court.
Commencing with the February 14, 2000 payment, the advisory fees due FORCAP were
reduced to $25,000 per month.
         On June 29, 2000, FORCAP filed its interim fee application seeking
preliminary approval of its fees and expenses for the period January 1, 2000
through April 30, 2000. The Debtors and the Bondholder Steering Committee have
objected to FORCAP's interim fee application. On July 20, 2000, Mobile Energy
gave FORCAP thirty days notice of the termination of the Engagement Letter for
cause, and FORCAP's engagement was terminated on August 19, 2000. FORCAP
disputes that cause existed for its termination. The objection to the FORCAP Fee
Application has been resolved by an agreed order which will allow FORCAP to
receive an additional $25,000 provided that it is treated pari passu with other
administrative claimants.
3.       Engagement of Accountants

         The Debtors filed an application (the "PricewaterhouseCoopers
Application") for employment of PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") to perform accounting services on behalf of the
Debtors. Pursuant to the terms of the employment application, the Debtors agreed
to pay PricewaterhouseCoopers' fees for services on an hourly rate basis at the
hourly rates customarily charged by it for the services of the professionals
involved. The Debtors also agreed to reimburse PricewaterhouseCoopers for all
reasonable and necessary expenses incurred by it in performing services for the
Debtors. Payment of such fees and expenses is subject to the approval of the
Bankruptcy Court. By Order entered on the Petition Date, the Bankruptcy Court
approved the Debtors' employment of PricewaterhouseCoopers pursuant to the terms
of the PricewaterhouseCoopers Application.

     J. Southern Payment to Collateral Agent for Deposit in Maintenance Plan
Funding Subaccount Pursuant to Guaranty in Connection with First Mortgage Bonds
and Tax-Exempt Bonds

         Upon its establishment in August, 1995, at the time of the issuance of
the First Mortgage Bonds and the Tax-Exempt Bonds, the Maintenance Plan Funding
Subaccount established under the Intercreditor Agreement was credited in an
amount equal to $11.0 million. In lieu of funding the Maintenance Plan Funding
Subaccount with Cash at that time, Mobile Energy provided instead a guaranty
from Southern in an amount equal to $11.0 million. In March, 1999, Southern paid
$8.3 million to the Collateral Agent under that guaranty for deposit into the
Maintenance Plan Funding Subaccount. Substantially all of these moneys were
distributed by the Collateral Agent to the Indenture Trustee and the Tax-Exempt
Trustee pursuant to the terms of the Intercreditor Agreement. Southern had
asserted that because of a payment of $2.7 million into the Maintenance Plan
Funding Subaccount in 1996 from funds borrowed under the revolving credit
facility maintained by Southern with Banque Paribas (separate from the Working
Capital Facility described above), no further amount was available under the
Southern guaranty. Under Cogeneration Development Agreement Amendment No. 1 the
matter has been resolved by Southern paying $2.7 million to the Collateral
Agent.
K.       Appointment of Official Unsecured Creditors' Committee

     On February 4, 1999, the Bankruptcy Adminstrator filed a Notice of
Appointment of Creditor's Committee, appointing the following members to the
Official Unsecured Creditors' Committee: Hargrove and Associates, Inc.,
Iberville Insulations, Inc., Industrial Value, and Smith Industrial Service.

L.       Establishment of Bondholder Steering Committee

         The ad hoc committee of Holders of Tax-Exempt Bonds and First Mortgage
Bonds have established the Bondholder Steering Committee which is comprised of
certain Holders of Existing Securities as constituted from time to time and
First Union National Bank (ex-officio) as Indenture Trustee and as Tax-Exempt
Trustee. At certain times, the Bondholder Steering Committee has been comprised
of Credit Suisse First Boston Corporation ("CSFB"), Morgan Stanley Investment
Management (formerly known as Miller Anderson & Sherrerd, LLP) ("Morgan
Stanley"), and Pan American Life Insurance Company (each of which holds First
Mortgage Bonds); Franklin Advisors, Inc. and Van Kampen Investment and Advisory
Corp. (each of which holds Tax-Exempt Bonds); and Wachovia Bank, National
Association ("Wachovia Bank"), formerly known as First Union National Bank (ex
officio), as Trustee for the First Mortgage Bonds and Tax-Exempt Bonds. CSFB
resigned from the Bondholder Steering Committee in December 2000, but rejoined
the Bondholder Steering Committee in February 2001. Franklin Advisors, Inc.
resigned from the Bondholder Steering Committee in February 2001 when it
assigned its claims to CSFB. The Bondholder Steering Committee currently is
comprised of CSFB, Morgan Stanley, and Wachovia Banak (ex officio). The
Bondholder Steering Committee has retained Debevoise & Plimpton, McDermott Will
& Emery, Greenberg Traurig, and Silver, Voit and Thompson as their counsel and
CIBC as their financial advisor. As of March 31, 2001, CIBC is no longer the
financial advisor to the Bondholder Steering Committee. The Bondholder Steering
Committee, whose members collectively hold in excess of 70% of the First
Mortgage Bonds and in excess of 64% of the Tax-Exempt Bonds, support
confirmation of the Plan.
M.       Motions to Extend Exclusivity

         Under Section 1121 of the Bankruptcy Code, the Debtors originally had
the exclusive right until May 14, 1999, to file a plan of reorganization, and
until July 13, 1999, to solicit acceptances of such plan. The Debtors requested
the Bankruptcy Court to extend the exclusive periods pending the negotiation of
the business arrangements that are the foundation of the Plan. The Bankruptcy
Court granted the Debtors' requests and the exclusive periods for the Debtors to
file and solicit a plan of reorganization were extended through July 31, 2000,
and September 29, 2000, respectively. The extensions of the exclusive periods
did not apply either to the Bondholder Steering Committee or to S.D. Warren.
N.       Motions to Extend Time to Assume or Reject Real Property Leases

         Under Section 365(d)(4) of the Bankruptcy Code, the Debtors originally
had until March 15, 1999, to decide whether to assume or reject leases of real
property. The Bankruptcy Court has granted the Debtors' requests to extend the
time period to decide whether to assume or reject their real property leases
until the confirmation of a plan of reorganization.
O.       Motion to Approve Work Force Reduction-Severance Program

         As a result of the cessation of the Pulp Mill's operations that
occurred on or about September 1, 1999, the number of hourly employees of
Southern Energy Resources who worked at the Mobile Facility needed to be
reduced. In order to facilitate an organized and controlled reduction in the
hourly employee workforce, Southern Energy Resources negotiated the terms and
conditions of the Workforce Reduction Severance Program (the "Program") with the
hourly employees' union representatives. The Debtors were authorized to
reimburse Southern Energy Resources for the costs of the Program by order of the
Bankruptcy Court on October 29, 1999.
         Under the Program, the hourly employees elected to either receive a
voluntary severance or remain in the employ of Southern Energy Resources subject
to its right to terminate employment involuntarily. Those hourly employees that
elected to take a voluntary severance could have elected a Lump Sum Payment
("LSP") or alternatively to be party to an Employee Transition Program ("ETP").
The election took place between November 1, 1999 and November 12, 1999.
Twenty-three employees were terminated under the LSP, four employees chose the
ETP without recall rights, and four employees were terminated involuntarily. To
date, the Debtors have reimbursed Southern Energy Resources approximately $1.3
million under the Program.
P.       Motion to Approve Key Employee Retention Program

         In order to keep important salaried employees employed at the Mobile
Facility to assist with the reorganization effort, the Debtors sought Bankruptcy
Court approval to reimburse Southern Energy Resources for the costs of the Key
Employee Retention Program (the "Key Employee Retention Program"). On June 30,
1999, the Bankruptcy Court approved the Key Employee Retention Program. The Key
Employee Retention Program provided that salaried employees would continue with
their current salary and benefits, provided for a severance payment under
certain circumstances, and provided for a retention bonus if an employee
continues employment through May 28, 1999. All payments under the Key Employee
Retention Program were paid by Southern Energy Resources and reimbursed by
Mobile Energy pursuant to the Mobile Energy Operating Agreement.
Q.       Motion to Pay Prepetition Wages

     On the Petition Date, the Debtors filed a motion with the Bankruptcy Court
to allow the reimbursement to Southern Energy Resources for payment of
prepetition wages and salaries owed to the employees of Southern Energy
Resources who work at the Mobile Facility. The Bankruptcy Court approved the
motion on February 22, 1999.

R.       Section 203 Authorization

         The Federal Regulatory Commission ("FERC") has authority under Section
203 of the Federal Power Act, to review and, if consistent with the public
interest, approve certain transactions involving the securities of public
utilities. The Debtors, who are subject to the Federal Power Act, sought
approval from the FERC and in December of 2000, the FERC authorized a change in
the identity of the equity owners in Holdings, from its current owners to the
Bondholders. The authorization was received in response to an application filed
in November 2000 by Mobile Energy and Holdings, which summarized the
transactions then contemplated in the First Amended Plan and described in the
disclosure statement filed with the Bankruptcy Court on September 15, 2000.
S.       Motion to Approve Cogeneration Development Agreement Amendment No. 1

         As more fully described above in Section VII (D), on August 11, 2000,
the Debtors filed the Motion to Approve Cogeneration Development Agreement
Amendment No. 1 to MESC Cogeneration Development Agreement with the Bankruptcy
Court. The Debtors sought Bankruptcy Court approval to enter Cogeneration
Development Agreement Amendment No. 1, and the Motion was approved on August 30,
2000. The current status of the Cogen Project is discussed above in Section
VII(D).
T.       First Plan and Disclosure Statement

         On September 15, 2000, the Debtors and the Bondholder Steering
Committee filed their First Amended Joint Plan of Reorganization and the
Disclosure Statement Accompanying the First Amended Joint Plan of
Reorganization. The fundamental components of the First Amended Plan were the KC
Settlement and the transactions resulting from such settlement. The KC
Settlement, as proposed, allowed for Mobile Energy to pursue the development of
the New Pulp Mill as well as the Cogen Project. In pursuit of the efforts to
close the KC Settlement and after the First Amended Plan was filed the Debtors
had several discussions with S.D. Warren to attempt to resolve its concerns.
Meanwhile, the Debtors pursued the development of the New Pulp Mill with Jubilee
Pulp. After approval of the Term Sheet by the Court, Jubilee Pulp defaulted on
the Pulp Mill Term Sheet by failing to post the letter of credit casting serious
doubt on Jubilee Pulp's ability to develop the New Pulp Mill. In addition, the
discussions with S.D. Warren failed to yield a satisfactory result. These
events, coupled with the increase in long term natural gas prices forecasts,
materially adversely affected the projections of the future revenues to be
derived from the Cogen Project. Despite the Debtors' diligent efforts and as a
consequence of these events outside the Debtors' control, the KC Settlement
failed to close and the KC Settlement Agreement, by its terms, has become void
ab initio.
U.       U-1 and QF Applications

         Because the Debtors are indirectly owned by the Southern Company, they
are subject to regulation under PUHCA. The SEC generally takes the position that
entities subject to PUHCA, must obtain approval from the SEC of a disclosure
statement before a plan of reorganization may be solicited to those persons
entitled to vote. On October 16, 2000, the Debtors filed their U-1 application
with the SEC seeking approval of the disclosure statement filed on September 15,
2000. Because the structure of the Reorganized Debtors and their business plan
is substantially different from that contemplated in the First Amended Plan, an
amended U-1 application was filed on April 11, 2001, and again in August 2002.
An unopposed amended U-1 could be approved within approximately thirty (30) days
from the date that the amended U-1 is filed. U-1 applications are subject to
public notice and comments. The thirty-day time period is an estimate and the
actual time to obtain approval could be longer.
         On October 25, 2000, the Debtors filed an application with the FERC
seeking a certification of certain facilities and equipment as a Qualifying
Facility. As explained in Section V(E), the certification as a Qualifying
Facility has certain benefits to Mobile Energy. The application has been
withdrawn because of the change in the operating configuration of Mobile
Energy's equipment. The Debtors anticipate filing a new application soon after
the filing of this Disclosure Statement and hope to obtain a favorable ruling
prior to confirmation of the Plan. For a discussion of the risk factors
associated with the Qualifying Facility status, see Section X(I) below.
V.       KC Preference Adversary Proceeding

     On January 12, 2001, Mobile Energy filed an adversary proceeding in the
Bankruptcy Court against KC seeking to avoid approximately $1.7 million in
prepetition transfers made to KC by Mobile Energy. Mobile Energy contends that
the transfers are avoidable as preferences under Section 547 of the Bankruptcy
Code. The trial has been continued until a final order is entered on the
assumption of the MOA and the ESAs.

W.       KC Conversion Adversary Proceeding
         ----------------------------------

         Prior to January 14, 1999, Mobile Energy acquired a pressure vessel
identified as a spray water condenser for use as a spare component on the No. 7
Boiler operated by Mobile Energy. Sometime after January 14, 1999, KC conveyed
and transferred the condenser to M&E Salvage, L.L.C. ("M&E Salvage"). Upon
information and belief, M&E Salvage reduced the Condenser to scrap. The Debtors
did not give KC permission to transfer the Condenser nor did they give M&E
Salvage permission to destroy the Condenser. On March 20, 2001, the Debtors
filed an Adversary Complaint against KC and M&E Salvage asserting claims for
turnover and conversion in the amount of $184,896 (the fair market value of the
Condenser) plus interest. The Debtors served the summons and the complaint on
March 29, 2001. KC has refused to pay the $184,896 plus interest and denies that
it is liable for the destruction of the Condenser. The trial of this proceeding
was held in early 2002, and a decision is currently pending before the
Bankruptcy Court.
X.       Transfer of 1% Interest in Mobile Energy to Holdings

         On December 29, 2000, Mirant Services, then known as SERI, transferred
its 1% equity interest in Mobile Energy to Holdings. This transfer was required
under the Cogen Development Agreement and has the effect of simplifying the
Debtors' corporate structure. Holdings now owns 100% of the equity interest in
Mobile Energy. The equity ownership of Holdings was unaffected by the transfer.
Y.       Motion to Approve OEC as Interim Operator

         On February 7, 2001, the Debtors filed a motion with the Bankruptcy
Court seeking approval of OEC as interim operator of the Energy Complex. A
hearing on the Motion was held on March 9, 2001. The motion was required because
under the Cogen Development Agreement the Debtors were required to terminate the
existing O&M Agreement with SERI no later than March 31, 2001. The Debtors are
unable to operate the Energy Complex without an operator and they require OEC's
assistance to act as interim operator until the Plan is confirmed. At the
hearing on March 9, 2001, OEC was approved as interim operator of the Energy
Complex. In December 2001, OEC filed a Chapter 11 petition under the Bankruptcy
Code. It is uncertain at this time whether OEC will seek to assume or reject the
operating agreement between it and Mobile Energy. If OEC seeks to reject its
agreement with Mobile Energy, Mobile Energy is confident that a new operator of
the Energy Complex can be obtained and that service to Mobile Energy's customers
will not be adversely affected. Mobile Energy currently is reviewing its
alternatives under its agreement with OEC and under applicable law. In any
event, Mobile Energy does not believe that OEC's bankruptcy will have any
adverse impact on the continued operation of the Energy Complex. Z. Motion for
Order Regarding Procedures Relating to Confirmation

         On March 21, 2001, the Debtors filed their Motion For Order (1) Setting
Various Dates in Connection with the Confirmation Hearing; (2) Approving Forms
of Ballots; (3) Approving Solicitation Procedures and employment of a Balloting
Agent; (4) Approving Procedures for Vote Tabulation; (5) Approving the
Assumption and Cure Procedures for Executory Contracts and Unexpired Leases; And
(6) Approving Form and Manner of Notice (the "Procedures Motion"). The
Procedures Motion seeks to establish certain important dates and procedures in
connection with the confirmation of the Second Plan. The Debtors requested that
the Bankruptcy Court establish assumption and cure procedures that would enable
the Debtors to resolve many of KC's and S.D. Warren's alleged claims (the
procedures would be equally applicable to any other non-debtor party to an
assumed executory contract or unexpired lease). The Bondholder Steering
Committee supported approval of the Procedures Motion. Both KC and S.D. Warren
objected to the Procedures Motion. Although KC does not contend that Mobile
Energy owes it money to cure any defaults under the agreements, KC does contend
that there are issues which must be resolved in connection with the assumption
of the agreement and that those issues should be resolved through the dispute
resolution procedures under the MOA. A hearing on the motion was held on April
11, 2001 and the assumption and cure procedure is still under consideration by
the Bankruptcy Court. The Court entered an order granting the other relief
sought by the Debtors.
         On April 25, 2001, the Debtors decided to proceed with the arbitration
of certain of the disputed issues pertaining to the cure disputes with KC and
S.D. Warren. The Debtors filed an arbitration proceeding seeking an award that
the amounts charged to S.D. Warren (and paid by S.D. Warren) and the amounts
invoiced to KC from August 1999 to the present (but not paid by KC), and
continuing into the future, are appropriate. The substance of the dispute is
more fully discussed in Section VII (DD) below.
AA.      KC True-up Motion

         On March 29, 2001, the Debtors filed their Motion to Enforce Contract
Provisions Surviving the Termination of the KC Settlement Agreement and the New
Tissue Mill Energy Services Agreement (the "True-up Motion"). When the KC
Settlement Agreement became void ab initio pursuant to its terms, the parties to
the KC Settlement Agreement were returned to the status quo ante in respect of
the contractual or other legal relationships in effect between them immediately
prior to the entry of the order approving the KC Settlement Agreement. Thus, the
New Tissue Mill ESA became void ab initio by its terms along with the KC
Settlement Agreement. However, section 11(e) of the New Tissue Mill ESA and
paragraph 19 of the KC Settlement Agreement survived the New Tissue Mill ESA and
the KC Settlement Agreement becoming void ab initio. As a result of the
foregoing, KC is obligated to pay Mobile Energy the difference between: (i) what
KC paid under the New Tissue Mill ESA; and (ii) what KC would have had to pay
under the original Tissue Mill ESA (the "True-up Amount"). The Debtors assert
that KC must pay $17,549,050 as the True-up Amount without setoff and despite
any dispute to the contrary. The Debtors made a formal demand that KC pay the
True-up Amount. The Bondholder Steering Committee supported the relief requested
by the Debtors in the True-up Motion. However, KC disputed the amount; and
originally only paid approximately $3.6 million of the $17,549,050 it owed
Mobile Energy. A hearing was held in the Bankruptcy Court on the True-up Motion
on May 21, 2001. At the hearing, KC agreed to pay $2.4 million, in addition to
the approximately $3.6 million previously paid to Mobile Energy. The $2.4
million amount is approximately equal to the amounts that KC had previously paid
to Mobile Energy, but which KC later disputed. The $2.4 million paid by KC to
Mobile Energy was paid under protest and the dispute was resolved through the
arbitration proceeding described below in Section VII (DD).
BB.      Motion to Approve Amendment No. 2 to Cogeneration Agreement

         On April 25, 2001, the Debtors filed their Motion for Approval of
Amendment No. 2 to Cogeneration Development Agreement Pursuant to Bankruptcy
Code Section 363 (the "Amendment No. 2 Motion"). Mobile Energy currently is a
party to the Cogen Development Agreement, that provides the terms by which
Mobile Energy will develop a 165 MW cogeneration facility at the Mobile
Facility. For a number of reasons, the value of the cogeneration project
declined such that it was not economically viable to proceed with the
cogeneration project under the original Cogeneration Development Agreement.
Under these changed circumstances, the Debtors and the Bondholder Steering
Committee negotiated Cogeneration Development Agreement Amendment No. 1.
However, due to continued changing circumstances, the Debtors and the Steering
Committee negotiated the Amendment No. 2 to the Cogen Development Agreement that
enabled the Debtors to realize $7.9 million in value. A copy of the Amendment
No. 2 is attached hereto as Exhibit "M." Pursuant to Amendment No. 2, Mirant
paid to Mobile Energy the amount of $7,900,000 (which was netted against the
$2,900,000 option fee). In return Mobile Energy irrevocably waived and released
any and all rights Mobile Energy may have under the Cogen Development Agreement
and related agreements or otherwise in the GE Cogen Turbine. Also, in exchange
for the waiver and release provided by Mobile Energy, Mirant and Mirant Services
waived and released Mobile Energy from any obligation that Mobile Energy may
have to pay (a) any and all GE Turbine Costs, and (b) any and all other amounts
whatsoever in connection with, arising out of or relating to the GE Cogen
Turbine and related agreements (other than the $2,900,000 option fee). Amendment
No. 2 also modified the timing under the Cogen Development Agreement by
providing that Mirant and Mirant Services agree to stay those rights (until at
the latest May 31, 2001) under the Cogen Development Agreement, whereby they can
require Mobile Energy to purchase the GE Cogen Turbine or lose its rights to the
GE Cogen Turbine. The Bankruptcy Court approved Amendment No. 2 on May 16, 2001.
CC.      Claim Objections

         Mobile Energy has filed objections to the proofs of claim filed by KC
and by S.D. Warren. KC asserts a claim for approximately $540,000 (the "KC
Claim"). Approximately $261,000 of that amount relates to the amount owed by
Mobile Energy for January 1999 goods and services provided by KC to Mobile
Energy. The remainder of the claim relates to KC installation of a piece of
equipment that KC contends Mobile Energy should pay a share of. Mobile Energy
has objected to the KC Claim because it does not owe KC for the equipment KC
installed, because the claim is subject to setoff by Mobile Energy of claims
that far exceed the amount of the KC Claim, and because the claim should be
disallowed under Section 502(d) of the Bankruptcy Code. This claim was resolved
in the settlement with KC discussed below in Section VII (JJ).

     S.D. Warren filed proofs of claim against both Debtors (the "S.D. Warren
Claim"). The Debtors objected to the S.D. Warren Claims because the claim is
vague and because no amounts were owed by the Debtors to S.D. Warren as of the
petition date. As described below in Section VII (FF) the S.D. Warren Claim has
been settled.

         The Debtors' objection to the KC Claim was resolved by the parties
agreeing that the prepetition disputes under the MOA and the ESAs shall be
subject to dispute resolution under the procedures set forth in the MOA.
DD.      Energy Charge Disputes with KC; Financial Adjustment Event

         KC and the Debtors were in dispute over the amount of Demand Charges
and other amounts owed by KC to Mobile Energy (the "Energy Charge Dispute"). KC
contended that it did not owe approximately $13 million to Mobile Energy under
the Tissue Mill ESA because KC contended that Mobile Energy acted
inappropriately in converting the No. 7 Recovery Boiler to the Number 8 Power
Boiler and adding the No. 7 Turbine Generator. KC challenged Mobile Energy's
right to include fuel cost increases subsequent to the shut down of the Pulp
Mill in the Processing Charges and that the fuel mix used by Mobile Energy
resulted in higher charges that should not be allowed under the MOA and the
ESAs. Mobile Energy denied KC's contentions.
         Mobile Energy and KC also were in dispute over whether a Financial
Adjustment Event (as defined in the MOA) had occurred by virtue of the
activities at the Pulp Mill which caused the cessation of the production of
black liquor (the "Financial Adjustment Event Dispute"). KC disputed the
existence of a Financial Adjustment Event. The dispute with S.D. Warren over the
Financial Adjustment Event has been resolved as part of the S.D. Warren
settlement. Mobile Energy contended that it should be allowed to recover the
capital costs associated with the addition of the No. 7 Turbine Generator and
the conversion of the No. 7 Recovery Boiler from KC. The amount of that dispute
was approximately $18 million.
         The Energy Charge Dispute and the Financial Adjustment Dispute were
submitted to an arbitrator in the Fall 2001, and in January 2002 the arbitrator
ruled that Mobile Energy should recover the full amounts claimed by Mobile
Energy against KC, or approximately $26 million, including interest. In February
2002, KC paid the full amount set forth in the arbitration award.
EE.      Arbitration Award; Reinstatement of the Pulp Mill ESA and MOA

         In addition to the disputes with KC described above, and as a
consequence of the KC Settlement Agreement not closing, the arbitration award in
the Closure Arbitration was received by Mobile Energy on March 16, 2001. The
arbitrator ruled that a Pulp Mill Closure had occurred under the MOA, but that
KC was conducting activities on the Real Property (as defined in the MOA) on and
after September 1, 1999, that gave rise to Mobile Energy's right to reinstate
the MOA and the Pulp Mill ESA. Consistent with its discussions with KC in 1998
that Mobile Energy intended to reinstate the Pulp Mill ESA and the MOA because
of KC's activities on the Real Property, on March 28, 2001, Mobile Energy sent a
notice to KC that the Pulp Mill ESA and the MOA were reinstated as of September
1, 1999. On April 23, 2001, Mobile Energy initiated an arbitration proceeding
(the "Demand Charge Arbitration") against KC seeking an award of the
approximately $93 million (through December 2001 and inclusive of interest) of
Demand Charges Mobile Energy believed was owed by KC by virtue of the
reinstatement of the Pulp Mill ESA. The hearing on this matter was concluded in
October 2001, and in January 2002, the arbitrator in the Demand Charge
Arbitration awarded Mobile Energy approximately $26 million on its claims
against KC, and in February 2002 KC paid the full amount awarded by the
arbitrator.
FF.      S.D. Warren Settlement Agreement

         S.D. Warren, the owner of the Paper Mill, and the Debtors were involved
in several disputes during these Bankruptcy Cases which involved the operation
of the Energy Complex. S.D. Warren also disputed the entry of the KC Settlement
Agreement and the Debtors and S.D. Warren were in dispute over the amount and
nature of S.D. Warren's claim in the Bankruptcy Cases. S.D. Warren also disputed
the amount of processing charges and demand charges that were owed under the MOA
and the Paper Mill ESA and S.D. Warren was a party to the arbitration proceeding
described above in Section VII (DD).
         In May 2001 S.D. Warren and Mobile Energy began settlement discussions
and eventually the parties negotiated a settlement of their disputes. Mobile
Energy filed a motion with the Bankruptcy Court to approve the settlement in
August 2001, and the Bankruptcy Court approved the settlement at a hearing on
September 24, 2001.
         The settlement with S.D. Warren provides that Mobile Energy is entitled
to retain all of the processing charges it had billed S.D. Warren that were in
dispute. The amount of the disputed charges was approximately $13 million. The
settlement also provides that Mobile Energy will look to KC for reimbursement
for the Financial Adjustment Event. The settlement also provides that Mobile
Energy will give full credit to S.D. Warren for certain demand charges that were
previously billed to S.D. Warren while the KC Settlement Agreement was pending
that S.D. Warren contended it did not owe. After the reinstatement of the Pulp
Mill ESA as of September 1, 1999, Mobile Energy agreed that S.D. Warren would
not owe such demand charges and such disputed demand charges were setoff against
the post-closure demand charges due under the MOA, which S.D. Warren agreed to
pay in full at the closing of the settlement. The settlement also provided that
S.D. Warren waive all pre- and post-petition claims against the Debtors. The
settlement also allowed S.D. Warren to resolve the business disputes surrounding
the announced December 14, 2001, shut down of it's Paper Mill. The settlement
will allow S.D. Warren to use a de minimus amount of power processing and steam
processing services without triggering a reinstatement of the Paper Mill ESA.
However, if S.D. Warren operates above the agreed upon levels, Mobile Energy
will have the right under Section 13.1 of the MOA to reinstate the Paper Mill
ESA.
GG.      Consultants Hired by Mobile Energy

         On November 27, 2000, the Debtors entered into a consulting and an
employment agreement with James Stewart to (1) assist with the day-to-day
operations of the Energy Complex, (2) assist in the ongoing discussions and
negotiations with the Mill Owners, and (3) explore and evaluate opportunities
for the Debtors to preserve the value of their assets or create additional value
through various potential business opportunities. Mr. Stewart has extensive
experience in the operation of facilities similar to the Energy Complex. The
Debtors believe Mr. Stewart's hiring to be an ordinary course transaction as a
consequence of the gradual withdrawal of Mirant Services management support
pursuant to the Cogen Development Agreement. Mr. Stewart will be the CEO of the
Reorganized Debtors post-confirmation. A copy of the letter agreement setting
forth the terms and conditions of his employment with the Reorganized Debtors is
attached as Exhibit "K."

     On April 2, 2001, Mobile Energy hired Philip Cahoon to assist with the
financial aspects of Mobile Energy's business. Mr. Cahoon will be the Chief
Financial Officer of the Reorganized Debtors post-confirmation. A copy of the
letter agreement setting forth the terms and conditions of his employment with
the Reorganized Debtors is attached as Exhibit "L."

HH.      Devery Claim
         ------------

         On May 21, 2001, Mobile Energy and Mirant Services were sued in the
Circuit Court of Mobile County, Alabama by a former employee of Mirant Services,
Ronald J. Devery. Mr. Devery alleges that he was terminated by Mirant Services
in February 2001 in violation of the employment policies existing under the
collective bargaining agreement between the IBEW Local 2129 and Mirant Services.
Mr. Devery further alleges that Mobile Energy is liable because he contends that
Mobile Energy was also his employer in addition to Mirant Services. Mr. Devery
seeks approximately $2.5 million in damages. Mirant Services and Mobile Energy
vigorously deny that Mr. Devery was terminated in violation of the collective
bargaining agreement or that his termination was otherwise improper. They also
contend that Mr. Devery did not exhaust his administrative remedies under the
collective bargaining agreement. Finally, Mobile Energy contends that it has no
liability to Mr. Devery in any event because it was never Mr. Devery's employer.
         After filing the lawsuit in Mobile state court, Mirant Services removed
the claims asserted against it to the United States District Court for the
Southern District of Alabama. Mobile Energy had previously removed the claims
asserted against it to the Bankruptcy Court. Both Mirant Services and Mobile
Energy have filed motions to dismiss the lawsuit and the motions are currently
pending. Mirant Services has a potential indemnity claim against Mobile Energy
under the O&M Agreement between Mirant Services and Mobile Energy if Mirant
Services is liable to Mr. Devery that is not the result of gross negligence or
willful misconduct on the part of Mirant Services.

     If Mr. Devery prevails in his lawsuit against Mobile Energy his claim will
receive administrative priority to the extent of the damage award. Although the
litigation is at its initial stages, Mobile Energy does not believe that Mr.
Devery will prevail in his claims against Mobile Energy. The Projections
attached hereto as Exhibit C assume that no money is paid to Mr. Devery in
connection with his claims.

II.      Bonnor/Douglas Claims and Settlement
         ------------------------------------

         Mirant Services and the Paper, Allied-Industrial Chemical and Energy
Workers-International Union and its Local 423 ("PACE") were parties to a certain
collective bargaining agreement ("PACE Agreement"). Two employees of Mirant
Services, Mollie Bonnor ("Bonnor") and Sara Douglas ("Douglas") who were members
of the bargain unit covered by the PACE Agreement were terminated from
employment on or about January 1997. PACE alleged that Bonnor and Douglas were
improperly terminated and initiated an arbitration proceeding under the PACE
Agreement. On or about March 29, 1998, the arbitrator ruled in favor of PACE and
ordered that Bonnor and Douglas be reinstated with back-pay.
         On or about April 10, 1998, Mobile Energy filed an action in the United
States District Court for the Southern District of Alabama seeking to overturn
the arbitrator's award. The District Court proceeding was pending without a
decision when Mobile Energy initiated these Bankruptcy Cases. The proceeding has
been stayed by the automatic stay provided by Section 362 of the Bankruptcy
Code.
         On or about April 25, 2002, PACE filed a motion with the Bankruptcy
Court seeking relief from the automatic stay so that Mobile Energy's action in
the District Court could proceed to judgment. After the motion was filed the
parties began settlement discussions. In August 2002, the parties reached a
settlement of the dispute and filed a motion with the Bankruptcy Court seeking
approval of the settlement. If approved by the Bankruptcy Court, the settlement
will result in Bonnor and Douglas each receiving a $40,000.00 unsecured claim in
Mobile Energy's Bankruptcy Case and they will waive all other claims against
Mobile Energy and its current and former affiliates. Pursuant to the settlement,
the claims will be paid in the same manner as all other unsecured claims in
Mobile Energy's Bankruptcy Case.
JJ.      Settlement of Specific Claims between KC and Mobile Energy

         KC and Mobile Energy were involved in several disputes related to the
day-to-day operations of the Energy Complex and certain other disputes relating
to the Settlement Agreement becoming void ab initio. Those disputes were
resolved pursuant to a settlement agreement between KC and Mobile Energy that
was approved by the Bankruptcy Court on May 22, 2002. Other disputes between the
parties were not resolved by the settlement agreement and remain unresolved. See
e.g., Section VII (KK) below.
         The sum total of the various claims by Mobile Energy against KC which
were settled totaled approximately $1.2 million. Mobile Energy's claims against
KC which were settled included: (1) KC's refusal to pay certain of approximately
$300,000 of gas costs incurred by Mobile Energy in 1997 and in September 1999,
(2) compensation for processing black liquor KC trucked-in to the plant in 1996
and 1997 for approximately $250,000, (3) reimbursement of monies Mobile Energy
paid KC for costs KC incurred to preserve the Pulp Mill from September 1, 2000
to January 31, 2001 totaling approximately $706,000. The sum total of the
various claims by KC against Mobile Energy which were settled totaled
approximately $3.2 million. KC's claims against Mobile Energy which were settled
included (1) costs KC incurred to preserve the Pulp Mill from September 1, 1999
to August 30, 2000, and from February 1, 2001 through February 26, 2001, for
approximately $2.8 million, (2) payment of MESC's pro rata share of the costs KC
incurred to install the South Primary Clarifier at the Water Treatment Plant for
approximately $246,000, and (3) compensation for KC's spare parts MESC used when
it operated the biomass facilities during 2000, for approximately $90,000. The
settlement resulted in the mutual release of the claims described above in
consideration of a net payment by KC to Mobile Energy of $675,000.
KK.      New Demand Charge Arbitration against KC

         After the awards were issued in the Demand Charge Arbitration and the
Energy Charge Arbitration in January 2002, KC, for the first time, raised an
objection to the amount of Demand Charges that Mobile Energy was billing KC. KC
is paying the full amount billed by Mobile Energy under protest while the
dispute is being resolved through arbitration. KC argues that the level of
Demand Charges billed by Mobile Energy is greater than the amount allowed under
the MOA and the ESAs. KC argues that it is entitled to a refund of Demand
Charges of approximately $7,400,000. Mobile Energy strongly denies KC's claims
and contends that KC's arguments, if accepted, would allow KC to receive free
energy services and it would directly contradict the award in the Demand Charge
Arbitration. Also, Mobile Energy claims that KC owes an additional $2.1 million
in Demand Charges that Mobile Energy erroneously credited to KC. Mobile Energy
initiated an arbitration proceeding in May 2002 to resolve these two disputes
(the "New Demand Charge Arbitration"). A decision in the New Demand Charge
Arbitration is expected in October 2002. If KC prevails in the New Demand Charge
Arbitration it will adversely affect the Projections. While the Projections will
be adversely affected if KC prevails in the New Demand Charge Arbitration,
Mobile Energy firmly believes that the Plan will be feasible in such event. LL.
Potential Sale of Mobile Energy Interests or Holdings

         During these Bankruptcy Cases the Debtors' management has been
exploring and pursuing a variety of potential business opportunities aimed at
maximizing the value of the Debtors' assets and operations. Included in those
efforts is the possible sale of Mobile Energy or Holdings, or their assets. Two
potential purchasers have been identified and the Debtors are engaged in
discussions with those potential purchasers. No binding agreements have been
entered into as of the time of this disclosure statement. It is anticipated that
any sale of Mobile Energy member interests, Holdings' stock, or their assets,
will be consummated after the Effective Date. There is no assurance that any
such sale will take place nor can it be predicted at this time what amount may
be realized from such sale.
VIII.
                     CLASSIFICATION AND TREATMENT OF CLAIMS
                          AND INTERESTS UNDER THE PLAN

A.       General

         The general description of the Plan below is for informational purposes
only. Creditors and Holders of Interests should not rely solely on this
description for voting purposes, but should read the Plan in its entirety. THE
TERMS OF THE PLAN ARE CONTROLLING IN THE EVENT OF ANY INCONSISTENCY BETWEEN THE
CONTENTS OF THE PLAN AND THE CONTENTS OF THIS DISCLOSURE STATEMENT.
B.       Effective Date of the Plan

         The "Effective Date" of the Plan determines when the performance of
many of the obligations under the Plan are due. Essentially, the Effective Date,
means a date selected by the Debtors that is no more than ten (10) business days
following the date on which all conditions to effectiveness set forth in Article
XII of the Plan have either (a) been satisfied or (b) if capable of being duly
and expressly waived pursuant to Section 12.04 of the Plan, waived; provided,
however, that the Effective Date may be extended upon the written agreement of
the Debtors with the Bondholder Consent. Except where earlier performance by the
Debtors is expressly required by the Plan, the Debtors' performance under the
Plan will be due on the Effective Date, if not stated otherwise. Nevertheless,
the Debtors will have the right, but not the obligation, to render any or all of
such performance prior to the Effective Date if the Debtors deem it appropriate
to do so. C. Classification Generally

     The Plan divides Claims against, and Interests in, the Debtors into ten
(10) separate Classes that the Proponents believe are in accordance with the
requirements of the Bankruptcy Code. Unless otherwise expressly stated in the
Plan, distributions to Holders of Allowed Claims are in full discharge and
satisfaction of those Allowed Claims. All Claims against the Debtors arising
prior to entry of the Confirmation Order will be discharged as of the Effective
Date pursuant to Bankruptcy Codess.1141(d) and Article XIII of the Plan.

D.       Unclassified Claims
         -------------------

1.       Administrative Expenses

         This category of Claims consists of all Allowed Claims for the costs of
administration of the Chapter 11 Cases. Included in this Class are all Claims
for administrative expenses entitled to priority under Section 507(a)(1) of the
Bankruptcy Code, such as the actual and necessary expenses of preserving the
Debtors' Estates as approved by the Bankruptcy Court, including, but not limited
to, any actual and necessary expenses of operating the Debtors' businesses.
Administrative Expenses also include fees and expenses of Professional Persons,
including without limitation attorneys, valuation consultants, auditors, and
other Professional Persons employed by the Debtors as approved by the Bankruptcy
Court. In addition, Administrative Expenses include the fees and charges
assessed against the Debtors under Section 1930 of Title 28 of the United States
Code.
         It is difficult to estimate the amount of the Administrative Expenses
due to uncertainties such as the amount of attorneys' fees the Debtors may incur
in the Chapter 11 Cases. Unpaid Allowed Administrative Expenses are estimated to
be approximately $5,247,055 as of the Effective Date (subject to revision prior
to the Disclosure Statement hearing), exclusive of payments made from time to
time in the ordinary course of business operations during the Chapter 11 Cases
(other than fuel costs, which are included), and exclusive of amounts required
to be paid in order to assume Executory Contracts.
         Pursuant to the Plan, each Allowed Administrative Expense will be paid
in full as soon as practicable after the later of the Effective Date or the date
upon which such Administrative Expense becomes an Allowed Administrative
Expense. Any Administrative Expense that is an Allowed Administrative Expense
representing a liability incurred in the ordinary course of the Debtors'
business will be paid in full in the ordinary course of business. The Debtors
will pay all outstanding Allowed Administrative Expenses on the Effective Date
and will reserve sufficient cash to pay estimated and Disputed Administrative
Expenses.

     On the Effective Date, the Indenture Trustee and the Tax-Exempt Trustee
shall be entitled to an Administrative Expense and Secured Claim as provided for
in the Plan. The Claims of the Indenture Trustee and the Tax-Exempt Trustee
shall be Allowed Claims. The estimates contained in this Disclosure Statement
assume that these Claims will be satisfied from cash distributed or paid to the
Collateral Agent during the Bankruptcy Cases.

2.       Priority Tax Claims

         This category of Claims consists of all Allowed Priority Tax Claims of
governmental units entitled to priority under Bankruptcy Code Section 507(a)(8).
As of the date hereof, the Debtors estimate that there will be no Allowed
Priority Tax Claims. If, as of the Effective Date, no Creditor actually holds an
Allowed Priority Tax Claim, the Debtor will not reserve any Cash to pay such
Claims.
         Pursuant to the Plan and unless otherwise agreed to by the parties,
each Holder of a Priority Tax Claim will receive Cash equal to the unpaid
portion of such Priority Tax Claim on or as soon as practicable after the later
the Effective Date, or the date on which such Claim becomes an Allowed Claim;
provided, however, that at the option of the Reorganized Debtors, the
Reorganized Debtors may pay Priority Tax Claims over a period not exceeding six
(6) years after the date of assessment of the Priority Tax Claim as provided in
Section 1129(a)(9)(C) of the Bankruptcy Code. If the Reorganized Debtors elect
this option as to any Priority Tax Claim, then the payment of such Priority Tax
Claim shall be made in equal semiannual installments, with the first installment
due on the latest of (i) the Effective Date; (ii) 30 calendar days after the
date on which an order allowing such Priority Tax Claim becomes a Final Order;
or (iii) such other time as may be agreed to by the Holder of such Priority Tax
Claim and the Reorganized Debtors. Each installment shall include simple
interest on the unpaid portion of such Priority Tax Claim, without penalty of
any kind, at the statutory rate of interest provided for such taxes under
applicable nonbankruptcy law; provided, however, that the Reorganized Debtors
shall reserve the right to pay any Priority Tax Claim, or any remaining balance
of such Priority Tax Claim, in full, at any time on or after the Effective Date,
without premium or penalty.
E.       Classified Claims

1.       Class 1:   Priority Non-Tax Claims

         Class 1 consists of all Allowed Priority Non-Tax Claims that are
unsecured and entitled to priority under Bankruptcy Code Section 507(a)(3) and
(4), such as: (i) Unsecured Claims for accrued employee compensation, including
vacation, severance, and sick leave pay, earned within 90 days prior to the
Petition Date to the extent of $4,300 per employee; and (ii) Unsecured Claims
for contributions to an employee benefit plan arising from services rendered
within the 180-day period immediately preceding the Petition Date, but only for
such plans to the extent of (a) the number of employees covered by such plan
multiplied by $4,300, less (b) the aggregate amount paid to such employees for
accrued employee compensation.
         As of the date hereof, the Debtors have executive officers but do not
have any employees. The executive officers have received and continue to receive
compensation in respect of services performed by such persons in their
capacities as officers of the Debtors from Mirant Services, their employer and
an Affiliate of the Debtors. These salaries, including a portion of the overhead
costs associated with each, are paid by Mirant Services, and Mirant Services is
reimbursed by Mobile Energy, in accordance with a services agreement between
Mobile Energy and Mirant Services. The executive officers receive no cash or
non-cash compensation as a result of these arrangements beyond that which they
would otherwise receive from Mirant Services for the services performed by them
for Mirant Services. Accordingly, the Debtors estimate that there will be no
Allowed Priority Non-Tax Claims. If, as of the Effective Date, no Creditor
actually holds an Allowed Priority Non-Tax Claim, the Debtor will not reserve
any Cash to pay such claims.
         Pursuant to the Plan, each Allowed Priority Non-Tax Claim, except to
the extent that the Holder of an Allowed Priority Non-Tax Claim agrees to a
different treatment (or as otherwise ordered by the Bankruptcy Court), will be
paid as soon as practicable after the later of the Effective Date or the date
such Priority Non-Tax Claim becomes an Allowed Priority Non-Tax Claim.
2.       Class 2:  Allowed Working Capital Facility Provider Secured Claim

         Class 2 consists of the Allowed Secured Working Capital Facility
Provider Claim. The Debtors do not believe that the Working Capital Facility
Provider has a Claim entitled to allowance, and the Working Capital Facility
Provider has not filed a proof of Claim. However, to the extent the Working
Capital Facility Provider is determined to have an Allowed Claim, it shall be
treated as follows:
(i) Treatment. At the option of the Debtors (i) the Plan may leave unaltered the
legal, equitable and contractual rights of the Allowed Working Capital Facility
Provider Claim; or (ii) notwithstanding any contractual provision or applicable
law that entitles the Working Capital Facility Provider to demand or receive
accelerated payment of the Allowed Working Capital Facility Provider Claim after
the occurrence of a default, the Debtors shall (A) cure any such default, other
than a default of a kind specified in Section 365(b)(2) of the Bankruptcy Code;
(B) reinstate the maturity of such Claim as such maturity existed before such
default; (C) compensate the Working Capital Facility Provider for any damages
incurred as a result of any reasonable reliance by such Holder on any
contractual provision creating a default other than a default of a kind
specified in Section 365(b)(2) of the Bankruptcy Code; and (D) not otherwise
alter the legal, equitable, or contractual rights to which such Claim entitles
the Holder thereof; or (iii) as soon as practicable on the later of the
Effective Date or the date on which the Claim of the Working Capital Facility
Provider becomes an Allowed Working Capital Facility Provider Claim, the Debtors
may pay the Working Capital Facility Provider, in full, or upon such less
favorable terms as may be agreed to in writing between the Working Capital
Facility Provider and the Debtors or the Reorganized Debtors.
(ii) Retention of Lien. The Working Capital Facility Provider will retain its
Liens. Except as modified by the terms of this Plan, the existing documentation
evidencing the Claim and Liens of the Working Capital Facility Provider will
remain in effect.
(iii) Status. The Working Capital Facility Provider is unimpaired under the
Plan. Acceptance of the Plan from the Working Capital Facility Provider is
conclusively presumed, and the Creditor in Class 2 is not entitled to vote on
the Plan.
3.       Class 3: Allowed Southern Post-Petition Claims

         Class 3 consists of the Allowed Southern Post-Petition Claim. As of the
date hereof, the Debtors estimate that the amount of the Allowed Southern
Post-Petition Claims is $4,825,084.
          (i) Treatment of Allowed Southern Post-Petition Claims. Pursuant to
the Plan, each Holder of an Allowed Claim in Class 3 shall receive in complete
settlement, satisfaction, and discharge of its Southern Post-Petition Claims,
the treatment provided for in the Cogen Development Agreement and the orders of
the Court approving same. Each Holder of an Allowed Claim in Class 3 shall
retain, unaltered, the legal, equitable, and contractual rights provided for in
the Cogen Development Agreement and the orders approving same, including without
limitation, liens securing such Allowed Claims to the extent provided for in the
Cogen Development Agreement and the orders approving same. As part of the
treatment provided for in the Cogen Development Agreement and the orders of the
Court approving same, Mobile Energy shall execute and deliver the Southern
Security Agreement, and shall take all other actions and execute all other
documents which are reasonably necessary to effectuate the security interests
required to be conveyed pursuant to the Cogen Development Agreement and the
orders of the Court approving same. In addition, all indemnities delivered by
Mobile Energy to Mirant, Mirant Services or Southern under the Cogen Development
Agreement and the orders of the Court approving same shall survive confirmation
of this Plan and shall be enforceable obligations of Reorganized Mobile Energy
as set forth in the Cogen Development Agreement and the orders of the Court
approving same.
                  (ii) Retention of Lien. The payment to the Holder of the
Allowed Claims in Class 3 shall be in full satisfaction of the Allowed Southern
Post-Petition Claim and Southern, Mirant, and Mirant Services shall retain their
liens on the Reorganized Debtors' assets to secure Mobile Energy's obligations
existing and set forth under the Cogen Development Agreement and Court orders
approving same, including certain indemnity obligations.

     (iii) Status. The Creditor in Class 3 is unimpaired. Acceptance of the Plan
from such Creditor is conclusively presumed, and the Creditor in Class 3 is not
entitled to vote on the Plan.

4.       Class 4:  Allowed First Mortgage Bondholders Claims

         The First Mortgage Bondholder Claims are deemed Allowed Claims for
purposes of the Plan in the aggregate principal amount outstanding under the
terms of the First Mortgage Bonds plus interest accrued and unpaid through the
day immediately prior to the Effective Date, minus (i) payments made to the
Indenture Trustee and/or the Collateral Agent pursuant to orders of the
Bankruptcy Court, and (ii) payments made to the Indenture Trustee and/or the
Collateral Agent on account of guaranties of the Maintenance Plan Funding
Subaccount and the First Mortgage Debt Service Reserve Account.
         Each Holder of a First Mortgage Bondholder Claim shall receive in
complete settlement, satisfaction and discharge of their First Mortgage
Bondholder Claims a Pro Rata Share of 72.967% of the New Common Stock of
Reorganized Holdings.
5.       Class 5:  Allowed Tax-Exempt Bondholders Claim

         The Tax-Exempt Bondholder Claims are deemed Allowed Claims for purposes
of the Plan in the aggregate principal amount outstanding under the terms of the
Tax-Exempt Bonds plus interest accrued and unpaid through the day immediately
prior to the Effective Date, minus (i) payments made to the Tax Exempt Trustee
and/or the Collateral Agent pursuant to orders of the Bankruptcy Court, and (ii)
payments made to the Tax Exempt Trustee and/or the Collateral Agent on account
of a letter of credit posted with respect to the Tax-Exempt Debt Service Account
and a guaranty of the Maintenance Plan Funding Subaccount.
         Each Holder of a Tax-Exempt Bondholder Claim shall receive in complete
settlement, satisfaction and discharge of its Tax-Exempt Bondholder Claim (1) a
Pro Rata Share of 27.033% of the New Common Stock of Reorganized Holdings, and
(2) such Holder shall retain a Pro Rata Share of $1,000,000 of its outstanding
Tax-Exempt Bonds.
6.       Class 6:  Allowed Other Secured Claims

         Class 6 consists of all Allowed Other Secured Claims. Each Other
Secured Claim is deemed to be a separate subclass of Class 6. As of the date
hereof, the Debtors estimate that there are no Other Secured Claims other than
the Debtors' claims under the 1994 Bonds.
         On the Effective Date, the Indenture Trustee and the Tax-Exempt Trustee
shall be entitled to an Administrative Expense and Secured Claim as provided for
in the Plan. The Claims of the Indenture Trustee and the Tax-Exempt Trustee
shall be Allowed Claims.
(i) Treatment. Each Holder of an Allowed Claim in Class 6 will (i) retain,
unaltered, the legal, equitable, and contractual rights, including, without
limitation, any liens that secure such Allowed Claim, to which such Allowed
Claim entitles the Holder; or (ii) be paid in full, in Cash, at the election of
the Proponents, and with the Bondholder Steering Committee Consent; provided,
however, that each person holding an Allowed Claim in Class 6 may only exercise
such rights and remedies with respect to the assets and property that secure
such Allowed Claim, without recourse of any kind against the Debtors. The excess
of any Allowed Claim in Class 6 over the value of the Assets securing such
Allowed Claim will become, and will be treated for all purposes under this Plan,
as an Allowed Unsecured Claim and shall be classified as a Class 7 Claim.
(ii) Retention of Lien. The Holders of Allowed Other Secured Claims shall retain
their Liens. Except as modified by the terms of this Plan, the existing
documentation evidencing the Claims and Liens of such Holders shall remain in
effect.

     (iii) Status. Creditors in Class 6 are unimpaired. Acceptance of the Plan
from such Creditors is conclusively presumed, and Creditors in Class 6 are not
entitled to vote on the Plan. 7. Class 7: Allowed Unsecured Claims

         Class 7 consists of Allowed Unsecured Claims against the Debtor. The
Proponents estimate that the number of Allowed Unsecured Claims will be
approximately 90 and that the aggregate amount of Allowed Unsecured Claims will
be approximately $431,286.00. This amount does not include any amounts for
claims, if any, of KC or S.D. Warren.
(i) Treatment of Allowed Unsecured Claims. Each Creditor holding an Allowed
Unsecured Claim shall receive payment in full in Cash as soon as practicable
after the later of the Effective Date and the date such Claim becomes an Allowed
Claim.

     (ii) Impairment of Allowed Unsecured Claims and Voting Rights. Allowed
Unsecured Claims are unimpaired under the Plan, and acceptance of the Plan is
conclusively presumed. The Debtors will not solicit the votes of the Creditors
holding Unsecured Claims.

8.       Class 8:  Allowed Southern Claims

         Class 8 consists of the Allowed Southern Claims. Proofs of Claim were
filed by Southern asserting unliquidated and contingent Claims in the purported
amount of approximately $50 million arising from (a) the Environmental Guaranty
of a maximum of $15,000,000 (in 1994 dollars) dated as of December 12, 1994,
between Southern as guarantor and Scott Paper Company as owner of the Pulp Mill
and Tissue Mill and S. D. Warren Company as owner of the Paper Mill as the
beneficiaries (the "Environmental Guaranty"); (b) the First Mortgage Debt
Service Reserve Account Southern Guaranty Agreement of a maximum of $21,936,000
dated as of August 1, 1995, between Southern as guarantor and the Indenture
Trustee as the beneficiary (the "Debt Service Reserve Account Southern Guaranty
Agreement"); (c) the Maintenance Plan Funding Subaccount Southern Guaranty
Agreement of a maximum of $11,000,000 dated as of August 1, 1995, between
Southern as guarantor and Bankers Trust (Delaware) as collateral agent under the
Intercreditor Agreement as beneficiary (the "Maintenance Plan Funding Subaccount
Southern Guaranty Agreement"); and (d) the Mill Owner Maintenance Reserve
Account Agreement of a maximum of $2,000,000 between Southern as guarantor and
Kimberly Clark Company and S.D. Warren Company as beneficiaries (the "Mill Owner
Maintenance Reserve Account Agreement").
         Pursuant to Section 2.5 of the Environmental Guaranty, Southern has
agreed to irrevocably waive any and all rights of subrogation to the rights of
the Pulp Mill Owner, the Tissue Mill Owner, and the Paper Mill Owner against
Mobile Energy and any and all rights of reimbursement, assignment,
indemnification, or implied contract, or any similar rights against Mobile
Energy or against any endorser or other guarantor of all or any part of the
payment obligations of Mobile Energy under the Mill Environmental Indemnity
Agreements until such payment obligations (up to the maximum guaranteed amount
of $15,000,000 (in 1994 dollars)) have been paid in full. If any amount is paid
to Southern on account of such subrogation rights at any time when the payment
obligations of Mobile Energy under the Mill Environmental Indemnity Agreements
(up to the maximum guaranteed amount of $15,000,000) have not been paid in full,
Southern must hold such amount in trust for the Pulp Mill Owner, the Tissue Mill
Owner, and the Paper Mill Owner, segregated from other funds of Southern, and
must turn such amount over to the Pulp Mill Owner, the Tissue Mill Owner, and
the Paper Mill Owner to be applied against the payment obligations of Mobile
Energy under the Mill Environmental Indemnity Agreements, whether matured or
unmatured, in such order as the Pulp Mill Owner, the Tissue Mill Owner, and the
Paper Mill Owner may determine.
         Pursuant to Section 4 of the First Mortgage Debt Service Reserve
Account Southern Guaranty Agreement, Southern has agreed to irrevocably waive
any and all rights of subrogation to the rights of the Indenture Trustee against
Mobile Energy and any and all rights of reimbursement, assignment,
indemnification, or implied contract, or any similar rights against Mobile
Energy or against any endorser or other guarantor of all or any part of the
payment obligations of Mobile Energy under Section 4.6(c) of the Indenture until
such payment obligations (up to the maximum guaranteed amount of $21,936,000)
have been paid in full. As of the filing of the Plan the maximum amount has been
paid in full.
         Pursuant to Section 4 of the Maintenance Plan Funding Subaccount
Southern Guaranty Agreement, Southern has agreed to irrevocably waive any and
all rights of subrogation to the rights of the Collateral Agent against Mobile
Energy and any and all rights of reimbursement, assignment, indemnification, or
implied contract, or any similar rights against Mobile Energy or against any
endorser or other guarantor of all or any part of the payment obligations of
Mobile Energy under Section 3.15(c)(i) of the Intercreditor Agreement until such
payment obligations (up to the maximum guaranteed amount of $11,000,000) have
been paid in full. The full amount was paid when Mirant Services paid the $2.7
million to the Collateral Agent pursuant to the Cogen Development Agreement and
the Court orders approving same. If any amount is paid to Southern on account of
such subrogation rights at any time when the payment obligations of Mobile
Energy under Section 3.15(c)(i) of the Intercreditor Agreement (up to the
maximum guaranteed amount of $11,000,000) have not been paid in full, Southern
must hold such amount in trust for the Collateral Agent, segregated from other
funds of Southern, and must turn such amount over to the Collateral Agent to be
applied against the payment obligations of Mobile Energy under Section
3.15(c)(i) of the Intercreditor Agreement, whether matured or unmatured, in such
order as the Collateral Agent may determine.
         Pursuant to Section 3 of the Mill Owner Maintenance Reserve Account
Agreement, Southern agreed under certain circumstances to make certain deposits
into the Mill Owner Maintenance Reserve Account Agreement, not to exceed an
aggregate total of $2,000,000. Pursuant to Section 9 of the Mill Owner
Maintenance Reserve Account Agreement, Southern has agreed to irrevocably waive
any and all rights of subrogation or contribution arising by contract or
operation of law by reason of any payment under Section 3 of the Mill Owner
Maintenance Reserve Account Agreement and further agreed with Mobile Energy for
the benefit of the latter's creditors, including the Pulp Mill Owner, the Tissue
Mill Owner, and the Paper Mill Owner, that any payment by Southern under Section
3 would be a contribution of capital to Mobile Energy.
(iii) Treatment of Allowed Southern Claims. Southern shall receive in complete
settlement, satisfaction, and discharge of its Southern Claims, the treatment
provided for in the Cogen Development Agreement and the orders of the Court
approving same.

     (iv) Impairment of Allowed Southern Claims and Voting Rights. The Allowed
Southern Claims are impaired under the Plan, and the Debtors will solicit the
vote of the Creditor holding the Southern Claims.

9.       Class 9:   Mobile Energy Interests

         Class 9 consists of the Mobile Energy Interests.
(i) Treatment of Mobile Energy Interests. The Holder of Mobile Energy Interests
shall receive, in complete settlement, satisfaction, and discharge of such
Interests, 100% of the Reorganized Mobile Energy Interests. (ii) Impairment of
Mobile Energy Interests and Voting Rights. Class 9 Mobile Energy Interests are
Unimpaired by the Plan and the Holders of Class 9 Mobile Energy Interests are
deemed to have accepted the Plan under Section 1126(g) of the Bankruptcy Code.
10.      Class 10:  Holdings Interests

         Class 10 consists of the Holdings Interests.

(i) Treatment of Holdings Interests. The Holder of Holdings Interests will not
receive any distributions under the Plan and the Holdings Interests will be
canceled and extinguished.

(ii) Impairment of Holdings Interests and Voting Rights. Class 10 Holdings
Interests are Impaired by the Plan, and are deemed to have rejected the Plan.

                                      IX.
                           IMPLEMENTATION OF THE PLAN
A.       Administrative Consolidation

     Under the Plan, the claims against Mobile Energy and Holdings are
considered together for the purposes of confirming one joint plan of
reorganization.

B.       Sources of Funds

         The Reorganized Debtors will use Cash on hand of the Debtors as of the
Effective Date to make the payments to or reserves on account of Claims of
Creditors, including the payments and reserves to be made with respect to
Administrative Expenses, Priority Tax Claims, Priority Non-Tax Claims, the
Southern Post-Petition Claims, the Allowed First Mortgage Bondholders Claims,
the Allowed Tax-Exempt Bondholders Claims, Other Secured Claims, and Allowed
Unsecured Claims. Cash on hand will also be the source of funding of all
reserves and escrows provided for under the Plan, all amounts required to be
paid in connection with the assumption by the Debtors of Executory Contracts
assumed pursuant to the Plan, and all other payments required under the Plan. C.
Requisite Authority
         The entry of the Confirmation Order shall constitute authorization for
the Proponents and the Reorganized Debtors to take or cause to be taken all
corporate actions necessary or appropriate to consummate and implement the
provisions of the Plan prior to, on, and after the Effective Date, and all such
actions taken or caused to be taken shall be deemed to have been authorized and
approved by the Bankruptcy Court. All such actions shall include, but not be
limited to, all actions required to implement the transactions provided for
under this Plan, including, without limitation, (i) in connection with Holdings,
the adoption and filing of the Amended and Restated Holdings Articles of
Incorporation and Amended and Restated Holdings By-laws, and (ii) in connection
with Mobile Energy, the adoption and filing of the Mobile Energy Amended and
Restated Articles of Organization and the Mobile Energy Amended and Restated
Operating Agreement, or similar constituent documents for the Reorganized
Debtors, the selection of officers or managers for the Reorganized Debtors, and
the distribution of Cash, the adoption, execution, delivery and implementation
of all contracts, instruments, releases, indentures and other agreements
relating to the treatment of Claims and Interests and distributions under the
Plan. All such actions shall be deemed to have occurred and shall be in effect
pursuant to applicable nonbankruptcy law and the Bankruptcy Code, without any
requirement of further action by the members, partners, stockholders or
directors of the Debtors or the Reorganized Debtors. On the Effective Date, the
appropriate officers, partners, members, and directors of the Debtors and the
Reorganized Debtors are authorized and directed to execute and deliver the
agreements, documents, and instruments contemplated by the Plan and Plan
Documents in the name and on behalf of the Debtors and the Reorganized Debtors.
D.       Distributions to Holders of Allowed Claims

         As of the Effective Date, the First Mortgage Bonds and the Tax-Exempt
Bonds (except for the $1,000,000 of Tax-Exempt Bonds that will be retained) will
be canceled and exchanged for the New Common Stock, which shall be transferred
to the Disbursing Agent. On the Effective Date, and immediately after all the
other events that shall occur on the Effective Date, the Disbursing Agent shall
make distributions of the New Common Stock to the Exchange Agent for
distribution to Holders of Claims classified in Classes 4 and 5 as of the
Distribution Record Date as provided in Sections 5.01 and 5.02 of the Plan. Any
New Common Stock that are not claimed by the Holder of Allowed Claims in Classes
4 and 5 will be delivered to the Exchange Agent for distribution to the
remaining Holders of Class 4 or 5 Claims for distribution.
         Unless otherwise specifically set forth in the Plan, any Cash or other
consideration to be distributed to the Holder of an Allowed Claim, on or after
the Effective Date, will be distributed directly by the Disbursing Agent in
accordance with the Plan and only to Holders of Allowed Claims.
         If any payment or distribution date would otherwise fall due on any day
that is not a Business Day then such due date will fall on the next Business
Day. Payment or distribution dates may also be extended by the mutual written
agreement of the Reorganized Debtors and the party or parties affected.
         Other than to Holders of Claims classified in Classes 4 and 5, the
Reorganized Debtors will make distributions to Holders of Allowed Claims at the
addresses set forth on the proofs of Claim, if any, filed by such Holders or at
the last known addresses of such Holders. If any such Holder's distribution is
returned as undeliverable, no further distribution will be made to such Holder
unless and until the Reorganized Debtors are notified of such Holder's
then-current address, at which time all undeliverable distributions will be made
to such Holder, without interest, and the Reorganized Debtors will have no duty
to locate such Holder and no liability arising therefrom.

     Except with respect to Holders of Claims classified in Classes 3, 4 and 5,
each Holder of an Allowed Secured Claim that is to receive a distribution under
the Plan shall not receive such distribution until such Holder executes and
delivers any documents necessary to release all Liens arising under any
applicable security agreement or nonbankruptcy law (in recordable form if
appropriate) in connection with such Secured Claim and such other documents as
the Debtors or the Reorganized Debtors, as applicable, may reasonably request.

E.       Distribution of Cash
         --------------------
         The Reorganized Debtors will ensure that on the Effective Date they
will have sufficient Cash on hand to make the payments required to be made under
the Plan. Payments required to be made under this Plan may be made in Cash.
F.       Disputed Claims

a. Objection Deadline. Objections to Claims, Administrative Expenses, and Claims
arising from the rejection of Executory Contracts must be filed by no later than
(i) in the case of Administrative Expenses seventy-five (75) days after the
Effective Date, and (ii) sixty (60) days after the Effective Date for all other
Claims.

b. Resolution of Disputed Claims. No distribution or payment may be made on
account of a Disputed Claim or an Administrative Expense until such Disputed
Claim or Administrative Expense becomes an Allowed Claim or Allowed
Administrative Expense. After the Effective Date, the Reorganized Debtors will
be successors-in-interest to the Debtors with respect to any objections to
Claims or Administrative Expenses pending as of the Effective Date. Parties
filing objections must file and serve a copy of each objection upon the Holder
of the Claim to which an objection is made, counsel for the Debtors, counsel for
the Bondholder Steering Committee, counsel for CSFB, and counsel for Morgan
Stanley as soon as practicable.

c. Distributions Relating to Disputed Claims and Reserved Funds Upon Allowance
or Disallowance of Disputed Claims. At such time as all or any portion of a
Disputed Claim or Disputed Administrative Expense becomes an Allowed Claim or
Allowed Administrative Expense, respectively, the Debtors shall pay from
available funds the Allowed Claim or Allowed Administrative Expense in Cash.

G.       Bar Date for Fee Applications and Objections to Same
         Unless otherwise ordered by the Bankruptcy Court, all Professional
Persons requesting compensation or reimbursement of a Fee Claim for services
rendered or costs incurred on or before the Effective Date must file and serve
on the Debtors, their counsel, the Bondholder Steering Committee, its counsel,
counsel to CSFB, counsel to Morgan Stanley, and the Bankruptcy Administrator, a
Fee Application for final allowance of compensation and reimbursement of
expenses, not later than forty-five (45) days after the Effective Date. The
Debtors and Reorganized Debtors shall reserve for all estimated Administrative
Expenses, including Fee Claims. All such Fee Claims for which application is not
timely filed shall be forever barred. Objections to such Fee Applications must
be filed no later than seventy-five (75) days after the Effective Date. Under
the Plan, the Bankruptcy Court will retain jurisdiction to determine all such
Fee Claims.
H.       Description of Post-Effective Date Management

         Mirant Services will not be the operator of the Energy Complex after
the Effective Date. After receiving bids by third parties to operate the Energy
Complex the Debtors and the Bondholder Steering Committee have selected OEC as
the new operator of the Energy Complex. A motion was filed with the Bankruptcy
Court to approve OEC as the interim operator of the Energy Complex. The motion
was granted and as of April 1, 2001, a new operating and maintenance agreement
was in place between the Debtors and OEC pursuant to which OEC is the interim
operator of the Energy Complex. The Plan constitutes a motion to approve OEC as
the post-confirmation operator of the Energy Complex pursuant to the terms of
the Operation and Maintenance Agreement between Mobile Energy Services Company,
L.L.C. and Operational Energy Corp.
         The Plan also constitutes a motion to approve James Stewart as Chief
Executive Officer of the Reorganized Debtors pursuant to the letter agreement
attached as Exhibit "K" and to approve Philip Cahoon as Chief Financial Officer
of the Reorganized Debtors pursuant to the letter agreement attached as Exhibit
"L."
         The composition of the board of directors of Reorganized Holdings,
including the identity of each of the nominees, shall be announced prior to the
commencement of the Confirmation hearing. Such persons shall be deemed elected
pursuant to the Confirmation Order, and such election shall be effective on and
after the Effective Date, without any requirements of further action by the
shareholders of the Reorganized Debtors. The initial chairman of the board of
directors shall be chosen by the board of directors of Reorganized Holdings
after the Effective Date. Reorganized Holdings shall remain the manager of
Reorganized Mobile Energy. I. Description of Post-Effective Date Capital
Structure

         The First Mortgage Bonds and the Tax-Exempt Bonds, except for the
$1,000,000 of Tax-Exempt Bonds that will remain outstanding, will be exchanged
for New Common Stock which authorized and issued amount will be set forth in
Reorganized Holdings' Articles of Incorporation or By-Laws.
J.       Issuance of the New Common Stock

         THE ISSUANCE OF THE NEW COMMON STOCK UNDER THE PLAN RAISES CERTAIN
SECURITIES LAWS ISSUES UNDER THE BANKRUPTCY CODE AND FEDERAL AND STATE
SECURITIES LAWS, WHICH ARE DISCUSSED IN THIS SECTION. THIS SECTION SHOULD NOT BE
CONSIDERED APPLICABLE TO ALL SITUATIONS OR ALL HOLDERS OF ALLOWED CLAIMS
RECEIVING NEW COMMON STOCK UNDER THE PLAN. HOLDERS OF CLAIMS SHOULD CONSULT
THEIR OWN LEGAL COUNSEL CONCERNING THE FACTS AND CIRCUMSTANCES WITH RESPECT TO
THE ISSUANCE AND TRANSFER OF THE NEW COMMON STOCK IN THEIR PARTICULAR CASE. 1.
Initial Issuance of the New Common Stock Under the Plan

         Section 1145 of the Bankruptcy Code provides that the securities
registration and qualification requirements of federal and state securities laws
do not apply to the offer or sale of stock or other securities by a debtor if
the offer or sale occurs under a plan of reorganization and the securities are
transferred in exchange (or principally in exchange) for a claim against or
interest in a debtor. The Proponents believe that the initial issuance of the
New Common Stock to the Bondholders will be exempt from the registration and
qualification requirements of federal and state securities laws under Section
1145 of the Bankruptcy Code. The issuance of the New Common Stock pursuant to
the Plan shall be exempt from registration under the Securities Act of 1933, as
amended, and similar state laws pursuant to Section 1145 of the Bankruptcy Code.
2. Resale of the New Common Stock

         Any Bondholder who is not an "underwriter" under Section 1145 of the
Bankruptcy Code may resell the New Common Stock received under the Plan without
registering such sale under the Securities Act of 1933, as amended (the
"Securities Act"). To the extent that persons deemed "underwriters" receive
securities pursuant to the Plan, resales by such persons would not be exempted
by Section 1145 of the Bankruptcy Code from the registration requirements of the
Securities Act. GIVEN THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER
A PARTICULAR HOLDER MAY BE AN "UNDERWRITER," THE PROPONENTS MAKE NO
REPRESENTATIONS CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN THE NEW COMMON
STOCK. THE PROPONENTS RECOMMEND THAT POTENTIAL RECIPIENTS OF THE NEW COMMON
STOCK CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE SUCH
SECURITIES. 3. Registration Rights

     Reorganized Holdings shall use its best efforts to file a registration
statement pursuant to the Registration Rights Agreement, unless otherwise
instructed by the Bondholder Steering Committee.

4.       Listing of the New Common Stock

     Reorganized Holdings shall use its best efforts to list the New Common
Stock on a nationally recognized exchange.

K.       Modification Of Payment Terms

         The Proponents reserve the right to modify the treatment of any Allowed
Claim at any time after the Effective Date with the Bondholder Consent and the
consent of the Creditor whose Allowed Claim treatment is being modified,
provided, however, that the Proponents may not by any such modification treat
any Creditor in a particular Class more favorably than other Creditors in the
same Class.
L.       Treatment Of Executory Contracts

1.       General

         The Bankruptcy Code gives the Debtors the power, subject to the
approval of the Bankruptcy Court, to assume or reject executory contracts and
unexpired leases (collectively defined as "Executory Contracts" under the Plan).
Rejection or assumption may be effected either pursuant to the Plan or by order
of the Bankruptcy Court entered upon motion of the Debtors after notice and a
hearing. If an Executory Contract is rejected, the other party to the contract
or lease may file a Claim for damages incurred by reason of the rejection within
such time as the Bankruptcy Court may allow. In the case of rejection of
employment agreements and leases of real property, the damages allowable to
non-debtor parties are limited under the Bankruptcy Code. In the case of
assumption of an Executory Contract, the Bankruptcy Code requires that the
Debtor promptly cure, or provide adequate assurance that it promptly will cure,
any existing defaults (other than certain defaults based solely upon the Chapter
11 Cases, or the Debtors' financial condition).
         On the Effective Date, all Executory Contracts that exist between the
Debtors and any Person that (i) have not expired or terminated pursuant to their
own terms; or (ii) have not previously been assumed, assumed and assigned, or
rejected pursuant to a Final Order of the Bankruptcy Court on or prior to the
Confirmation Date; or (iii) are not the subject of pending motions to assume, or
assume and assign, or reject as of the Confirmation Date; or (iv) are not
rejected pursuant to the terms of the Plan; or (v) are not specified in Exhibit
A to the Plan, will be deemed assumed in accordance with the provisions and
requirements of Section 365 of the Bankruptcy Code, including without limitation
all Executory Contracts with the Tissue Mill Owner and the Paper Mill Owner;
provided, however, that the Proponents shall have the right, at any time prior
to the Confirmation Date to amend Exhibit A to the Plan: (a) to delete any
Executory Contract listed therein, thus providing for its assumption pursuant to
Section 8.01 of the Plan; or (b) to add any Executory Contract thereto, thus
providing for its rejection pursuant to Section 8.01 of the Plan. The contracts
listed on Exhibit "A" to the Plan are rejected. The Confirmation Order (except
as otherwise provided therein) shall constitute an order of the Bankruptcy Court
pursuant to Section 365 of the Bankruptcy Code, approving such assumptions,
assumptions and assignments, and rejections pursuant to this Plan. The rejection
of the Executory Contracts set forth in Exhibit A shall occur on the Effective
Date, but the rejection shall be deemed to be effective as of the Petition Date.
This Plan constitutes a motion under Section 365 of the Bankruptcy Code to
assume, assume and assign, or reject, as the case may be, such Executory
Contracts. Each contract and lease assumed or rejected pursuant to Section 8.01
of the Plan shall be assumed or rejected only to the extent that any such
contract or lease constitutes an Executory Contract and the Debtors do not admit
that any agreement on Exhibit "A" to the Plan is an Executory Contract. All
Executory Contracts that are assumed will be assumed under their present terms
or upon such terms as are agreed to between the applicable Debtor and the other
party or parties to the Executory Contract. Each Executory Contract that is
assumed and relates to the use, ability to acquire, or occupancy of real
property shall include: (A) all modifications, amendments, supplements,
restatements, or other agreements made directly or indirectly by any agreement,
instrument, or other document that in any manner affect such Executory Contract;
and (B) all Executory Contracts appurtenant to the premises, including to the
extent applicable all easements, licenses, permits, rights, privileges,
immunities, options, rights of first refusal, powers, uses, reciprocal easement
agreements, vaults, tunnel or bridge agreements, or franchises, and any other
interests in real estate or rights in rem related to such premises, unless any
of the foregoing agreements has been to the extent applicable rejected pursuant
to an order of the Bankruptcy Court.
         Claims created by the rejection of Executory Contracts must be filed
with the Bankruptcy Court and served upon counsel for the Debtors and the
Bondholder Steering Committee not later than thirty (30) days after the earlier
of service of (i) notice of entry of the Confirmation Order, or (ii) other
notice that such Executory Contract has been rejected. Any Claims not filed
within such time will be forever barred pursuant to the Plan from assertion
against the Debtors or their Assets.
         All cure and any other monetary default payments required by Section
365(b)(1) of the Bankruptcy Code shall be satisfied by the Reorganized Debtors
(to the extent such obligations are enforceable under the Bankruptcy Code and
applicable nonbankruptcy law) pursuant to Section 365(b)(1) of the Bankruptcy
Code: (a) at the option of the Reorganized Debtors, by payment of such
undisputed cure amount, without interest, in Cash within sixty (60) days
following the Effective Date; (b) by payment of such other amount as ordered by
the Bankruptcy Court; or (c) by payment on such other terms as agreed to by the
parties to such Executory Contract.
         As described above in Section VII (Z), Mobile Energy filed the
Procedures Motion requesting that the Court adopt certain procedures for the
parties to assert alleged cure amounts relating to the assumption of any
Executory Contract. Mobile Energy requested that the Court enter an order
setting a scheduling conference on issues relating to the assumption of
Executory Contracts for May 21, 2001, and to permit the determination of certain
disputes with KC and S.D. Warrant to proceed to arbitration.
         The resolution of disputes relating to the cure amount allegedly owed
by Mobile Energy shall not affect the Debtors' assumption of Executory Contracts
that are subject of such a dispute, but rather shall affect only the "cure"
amount the Debtors must pay in order to assume such contract or lease.
Notwithstanding the immediately preceding sentence, if the Debtors in their
discretion determine that the amount asserted by the objecting party or parties
to be the necessary "cure" amount would, if ordered by the Bankruptcy Court,
make the assumption of the contract or lease imprudent, then the Debtors may
elect to (1) reject the contract or lease pursuant to Section 8.01 hereof; or
(2) request an expedited hearing on the resolution of the "cure" dispute,
exclude assumption or rejection of the contract or lease from the scope of the
Confirmation Order, and retain the right to reject the contract or lease
pursuant to Section 8.01 hereof pending the outcome of such dispute.
         The Bankruptcy Court shall determine any objections to any proofs of
Claim filed in accordance with Section 8.04 of the Plan at a hearing to be held
at a date to be determined by the Bankruptcy Court. Allowed Claims arising out
of the rejection of Executory Contracts shall, pursuant to Section 502(g) of the
Bankruptcy Code, be Class 7 Unsecured Claims entitled to treatment pursuant to
Section 4.05 of the Plan.

         Unless otherwise ordered by the Court, any party (A) objecting to the
Debtors' proposed assumption, assumption and assignment, or rejection of any
Executory Contract; (B) contending that any transaction, cancellation of debt,
or exchange under the Plan shall cause a termination under the terms of any
Executory Contract after the Effective Date; or (C) (i) objecting to the amount
of any cure payments set forth in Exhibit B to the Plan, if any (which is the
only monetary cure amount, if any, that the Debtors shall be obligated to pay in
connection with the assumption of any such Executory Contract unless the
Bankruptcy Court orders otherwise); (ii) objecting to the ability of the
Reorganized Debtors to provide "adequate assurance of future performance"
(within the meaning of Section 365 of the Bankruptcy Code) under the Executory
Contract or lease to be assumed; or (iii) objecting to any other matter
pertaining to assumption or the cure payments required by Section 365(b)(1) of
the Bankruptcy Code, shall file with the Bankruptcy Court and serve a written
objection on counsel for the Debtors, counsel for the Bondholder Steering
Committee, counsel for CSFB, and counsel for Morgan Stanley, and provide other
notice required by the Bankruptcy Code, Bankruptcy Rules, Local Rules, or other
applicable law to the assumption or rejection of such Executory Contract or the
cure payments, if any, that the Debtors propose to make in connection with such
assumption on or before the deadline set by the Bankruptcy Court for filing
objections to confirmation of the Plan. Failure to file and serve an objection
within the time period set forth above with respect to the assumption of an
Executory Contract shall constitute (i) consent to the assumption and revestment
of those contracts and leases, including an acknowledgment that the proposed
assumption provided adequate assurance of future performance; (ii) consent to
the cure amount, if any, set forth in Exhibit B, and if no amount is listed, a
conclusive admission that no amount is owed; and (iii) an acknowledgment that
such cure amount is the only amount necessary to cover any and all outstanding
defaults under the respective Executory Contract to be assumed and an
acknowledgment that no other defaults exist under said contract or lease. To the
extent that any objections to the cure amounts are timely filed and served and
such objections are not resolved between the Proponents and the objecting
parties, the Bankruptcy Court shall resolve such disputes at the Confirmation
Hearing or such other hearing as the Bankruptcy Court may order. The resolution
of such disputes shall not affect the Debtors' assumption of Executory Contracts
that are subject of such a dispute, but rather shall affect only the "cure"
amount the Debtors must pay in order to assume such contract or lease.
Notwithstanding the immediately preceding sentence, if the Debtors in their
discretion determine that the amount asserted by the objecting party or parties
to be the necessary "cure" amount would, if ordered by the Bankruptcy Court,
make the assumption of the contract or lease imprudent, then the Debtors may
elect to (1) reject the contract or lease pursuant to Section 8.01 of the Plan;
or (2) request an expedited hearing on the resolution of the "cure" dispute,
exclude assumption or rejection of the contract or lease from the scope of the
Confirmation Order, and retain the right to reject the contract or lease
pursuant to Plan Section 8.01 pending the outcome of such dispute.

2.       Collective Bargaining Agreement

         Mobile Energy has contended that it is not a party to the collective
bargaining agreement (the "Mirant Services CBA") by which Mirant Services
employed certain employees represented by IBEW Local 2129. The union has
disagreed with Mobile Energy. A new collective bargaining agreement was
negotiated between the new operator of the Energy Complex, OEC, and IBEW Local
2129, which will govern the terms and conditions of employment between OEC and
the employees represented by the IBEW Local 2129. As of April 1, 2001, the IBEW
Local 2129 entered into a termination agreement with Mobile Energy. The
termination between the IBEW Local 2129 and Mobile Energy provides, among other
things, that Mobile Energy is not employer of the employees represented by the
IBEW Local 2129, that the Mirant Services CBA is terminated, and that the IBEW
Local 2129 waives any claim for rejection damages under Section 365 of the
Bankruptcy Code. In consideration for the execution of the termination
agreement, Mobile Energy agreed to pay certain employees of OEC severance
payments which could total approximately $250,000 over two years.
3.       Utilities Land Sublease

         The Utilities Land Sublease will be assumed under the Plan and shall
continue in existence after the Effective Date. The entry of the Confirmation
Order shall constitute a final determination that for the purposes of paragraph
2 of Amendment No. 3 to the Utilities Land Sublease, the Tax-Exempt Bonds remain
outstanding after the Effective Date. The term of the Utilities Land Sublease
shall continue until December 1, 2019 or such earlier date as there are no
longer any of the Tax-Exempt Bonds outstanding.
M.       Committees

         The appointment of any committee pursuant to Bankruptcy Code Section
1102, including the Creditors' Committee during the Chapter 11 Cases will
automatically terminate, without further order of the Bankruptcy Court, on the
Effective Date.
N.       Retention Of Jurisdiction

     As set forth in Section 11.01 of the Plan, the Bankruptcy Court shall
retain jurisdiction over all matters arising out of, or related to, the Chapter
11 Cases and the Plan for the purpose of determining all disputes relating to
Claims, Interests, and other issues presented by or arising under the
interpretation, implementation, or enforcement of the Plan. The Plan also
provides for the retention of jurisdiction by the Bankruptcy Court to determine
all other matters properly before the Bankruptcy Court.

O.       Conditions To Confirmation and Effectiveness
         --------------------------------------------

1.       Conditions To Confirmation

         The Plan provides that the Confirmation Order must contain the
following provisions:
(a)                        authorizing Holdings to adopt and file the Amended
                           and Restated Holdings Articles of Incorporation and
                           Amended and Restated By-laws and Mobile Energy to
                           adopt and file Mobile Energy Amended and Restated
                           Articles of Organization and Mobile Energy Amended
                           and Restated Operating Agreement;

(b)      authorizing the issuance of the New Common Stock;

(c) authorizing all of the other transactions contemplated by the Plan in order
to effectuate the Plan;

(d) exempting the New Common Stock from registration under the Securities Act of
1933 and state and local laws pursuant to 11 U.S.C. Section 1145;

(e) findings that the Mirant Services Pension Plan is not an Executory Contract
of the Debtors, that no Claims exist under the Mirant Services Pension Plan, and
that neither Debtor is a party to the Mirant Pension Plan;

(f) findings that all Executory Contracts, except those listed on Exhibit A to
the Plan, are assumed, that no cure amounts are owed under such contracts, or
that such amounts are waived; and

(g) making the provisions of the Confirmation Order non-severable and mutually
dependent.

2.       Conditions To Effectiveness

         The conditions precedent to the effectiveness of the Plan are as
follows:

(a) The Confirmation Order shall have been entered, shall have become a Final
Order, and such order shall not have been vacated, reversed, stayed, modified,
enjoined, or restrained by order of a court of competent jurisdiction;

(b) All documents and agreements required to be executed or delivered under the
Plan on or prior to the Effective Date shall have been approved as evidenced by
the Bondholder Consent and been executed and delivered by the parties thereto
including, without limitation, the Plan Documents;

(c) All authorizations, consents, and regulatory approvals required, if any, in
connection with the Plan's effectiveness shall have been obtained;

(d) No court of competent jurisdiction shall have entered an order that remains
in effect restraining the Debtors from consummating the Plan;

(e) None of the persons or entities that will receive shares of New Common Stock
will be required to register as a "holding company" under PUHCA, as amended, and
the rules and regulations thereunder; and

(f) All transactions scheduled to occur on the Effective Date that are necessary
for Mobile Energy to become a Qualifying Facility shall have occurred other than
cancellation of the Existing Securities (except for $1,000,000 of the Tax-Exempt
Bonds) and the distribution of the New Common Stock.

3.       Waiver of Conditions

     The conditions in Section 12.02 and 12.03 of the Plan may be waived at any
time in whole or in part by a writing signed by an authorized representative of
each of: (1) the Debtors; and (2) the Bondholder Steering Committee, as
evidenced by the Bondholder Consent. The waivers described in Section 12.04 of
the Plan may be made without notice or order of the Bankruptcy Court, or any
further action other than proceeding to consummation of the Plan. The Debtors,
with the Bondholder Consent, shall provide written notice of the Effective Date.

P.       Effect Of Confirmation
         ----------------------

1.       Discharge

         The Plan provides that the entry of the Confirmation Order discharges
and releases, as of the Effective Date, the Debtors and all property of the
Estates of the Debtors from all Claims, debts, Liens, security interests,
encumbrances, and Interests that arose at any time before the Effective Date
including, without limitation, any Claim of the kind specified in Sections
502(g), 502(h), or 502(i) of the Bankruptcy Code, except as otherwise provided
for in the Plan. The discharge of the Debtors under the Plan will be effective
as to any Claim against the Debtors, regardless of whether a proof of Claim or
proof of Interest thereof was scheduled or filed, whether the Claim is an
Allowed Claim, or whether the Holder thereof votes to accept or reject the Plan.
To the fullest extent permitted by applicable law (including, without
limitation, Section 105 of the Bankruptcy Code), from and after the Effective
Date, all Holders of Claims or Interests will be barred and enjoined from
asserting against the Debtors, the Reorganized Debtors, or any of their Assets
any such Claim, debt, Lien, security interest, encumbrance, or Interest, except
as otherwise provided for in the Plan.
         Except as provided in the Confirmation Order or the Plan, the
provisions of the Plan will not constitute a release or waiver of any Claim or
cause of action or affect the liability of any other Person which is or may be
liable with the Debtors on account of any Allowed Claim.
2.       Exculpation

         Under Section 13.05 of the Plan, none of the Debtors, the Reorganized
Debtors, CSFB, Morgan Stanley, Franklin Advisors, Inc., Pan American Life
Insurance Company and Van Kampen Investment and Advisory Corp., the Bondholder
Steering Committee, the Indenture Trustee, the Tax-Exempt Trustee, the
Collateral Agent or their respective affiliates, former, current and future
members, officers, directors, employees, consultants, agents, advisors, members,
attorneys, accountants, financial advisors, other representatives or any of
their respective former, current and future officers, directors, employees,
consultants, agents, advisors, members, attorneys, accountants, financial
advisors, other representatives and Professional Persons, nor any Professional
Person employed by any of them (collectively, the "Exculpated Persons"), shall
have or incur any liability to any Person for any act taken or omission made in
good faith in connection with or in any way related to (a) the filing,
negotiating, prosecuting, administrating, formulating, implementing, confirming,
or consummating the Plan; or (b) the property to be distributed under the Plan,
including all prepetition and post-petition activities leading to the
promulgation and confirmation of the Plan, the Disclosure Statement (including
any information provided or statement made in the Disclosure Statement or
omitted therefrom), or any contract, instrument, release or other agreement or
document created in connection with or related to the Plan or the administration
of the Debtors, their Estates, or these Chapter 11 Cases. The Exculpated Persons
shall have no liability to any Person for actions taken under the Plan, in
connection therewith, or with respect thereto, in good faith, including, without
limitation, failure to obtain confirmation of the Plan or to satisfy any
condition or conditions, or refusal to waive any condition or conditions
precedent to confirmation or to the occurrence of the Effective Date. In
addition, except as set forth in the Plan and the Plan Documents, the Exculpated
Persons will not have or incur any liability to any Holder of a Claim, Holder of
an Interest, or party-in-interest herein or any other Person for any act or
omission in connection with or arising out of: (i) administration of the Plan;
(ii) the property to be distributed under the Plan; (iii) the post-Petition Date
management and operations or activities of the Debtors and the Reorganized
Debtors; (iv) any of the transactions provided for, or contemplated in, the
Plan; (v) any action taken in connection with either the enforcement of the
Debtors' rights against any Entities or the defense of Claims asserted against
the Debtors with regard to the Chapter 11 Cases; or (vi) the administration of
the Plan or the assets and property to be distributed pursuant to the Plan,
except for gross negligence or willful misconduct as finally determined by a
Final Order of the Bankruptcy Court, and the Exculpated Persons are entitled to
rely on, and act or refrain from acting on, all information provided by other
Exculpated Persons without any duty to investigate the veracity or accuracy of
such information.
3.       Releases

         If so elected on a ballot submitted by a person voting on the Plan,
certain persons will be released from certain claims. If such an election is
made, the Plan provides that effective as of the Confirmation Date, but subject
to the occurrence of the Effective Date, and except as otherwise provided in the
Plan, the Plan Documents, or the Confirmation Order, (i) each Holder (as well as
the trustees and agents on behalf of each Holder) of a Claim or Interest and
each Person who so elects, and any affiliate of any such Holder or Person, in
consideration of the obligations of the Debtors under this Plan and the
consideration to be provided by Releasees, shall be deemed to have forever
waived, released, and discharged the Releasees, from any and all claims,
obligations, suits, judgments, damages, rights, causes of action or liabilities
whatsoever, whether in tort, for fraud, in contract, whether in law or equity or
otherwise, violations of federal or state securities laws, or otherwise, whether
known or unknown, whether foreseen or unforeseen, existing or hereafter arising,
based in whole or in part upon any act or omission, transaction, or other
occurrence taking place on or before the Effective Date in any way relating to
the Debtors, their Estates, the Chapter 11 Cases, or the Plan, including the
transactions to be entered into under the Plan, which may have directly or
indirectly impacted or harmed in any way the value of any Claim against or
Interest in any of the Debtors or their Affiliates, and (ii) the Confirmation
Order will enjoin the prosecution by any Entity, whether directly, derivatively,
or otherwise, of any claim, debt, right, cause of action, or liability that was
or could have been asserted against the Releasees, except as otherwise provided
in the Plan.
4.       Injunction against Interference with Plan

     The Plan provides that from the Effective Date, all Holders of Claims and
other parties in interest, along with their respective present or former
employees, agents, officers, directors, or principals, will be enjoined from
taking any actions to interfere with the implementation or consummation of the
Plan.

5.       Vesting of Assets

         Upon the Effective Date, pursuant to Bankruptcy Code Section 1141(b)
and (c), all property of each Debtor's Estate will vest in the respective
Reorganized Debtor free and clear of all Claims, Liens, encumbrances, charges,
rights of setoff or recoupment, and other interests of Creditors, except as
otherwise provided for in the Plan. The Reorganized Debtors may operate their
businesses free of any restrictions imposed by the Bankruptcy Code and in all
respects as if there were no pending case under any chapter or provision of the
Bankruptcy Code, except as provided for in the Plan.
Q.       Consummation And Effectiveness

         The Plan will be substantially consummated on the Effective Date. The
Effective Date of the Plan will be a date selected by the Debtors that is no
more than ten (10) business days following the date on which all conditions to
effectiveness set forth in Article XII of the Plan have either occurred or been
waived to the extent permitted by Section 12.04 of the Plan.

R. Amendments to Holdings Articles of Incorporation and Holdings By-laws;
Amendments to Mobile Energy Articles of Organization and Mobile Energy Operating
Agreement

1.       Amendments to Holdings Articles of Incorporation and Holdings By-laws

         The Confirmation Order will provide, to the extent required,
authorization for Holdings to file and for Judge of Probate of Montgomery
County, Alabama to accept the filing by Holdings of the Amended and Restated
Holdings Articles of Incorporation and Amended and Restated Holdings By-laws,
which, in addition to the amendments described below, may substantially amend
and restate existing provisions of the Holdings Articles of Incorporation and
Holdings By-laws, including, but not limited to, provisions granting limitation
of liability and indemnification of officers and directors to the full extent
permitted under the laws of the State of Alabama. The Holdings Articles of
Incorporation and Holdings By-laws will be amended to provide, among other
items, for the issuance of the New Common Stock, for the prohibition against the
issuance of non-voting stock, and for such other changes necessary to effectuate
other provisions of the Plan and 11 U.S.C. Section 1123(a)(6). 2. Amendments to
Mobile Energy Articles of Organization and Mobile Energy Operating Agreement

         The Confirmation Order shall provide authorization for Mobile Energy to
file and for the Judge of Probate of Montgomery County, Alabama to accept the
filing by Mobile Energy of the Amended and Restated Mobile Energy Articles of
Organization and the Restated Mobile Energy Operating Agreement, which, in
addition to the amendments described below, may substantially amend and restate
existing provisions of the Mobile Energy Articles of Organization and Operating
Agreement, including, but not limited to, provisions granting limitation of
liability and indemnification of officers and directors to the full extent
permitted under the laws of the State of Alabama. The Mobile Energy Articles of
Organization and the Operating Agreement will be amended to provide, among other
items, for the prohibition against the issuance of non-voting equity interests,
and for such other changes necessary to effectuate other provisions of the Plan
and 11 U.S.C. Section 1123(a)(6). S. Events of Default

         In the event of a default under the provisions of the Plan (as opposed
to a default under the documents executed to implement the Plan, which documents
shall provide independent and exclusive bases for relief), any party in interest
desiring to assert such a default must provide the Reorganized Debtors with
written notice of the alleged default. The Reorganized Debtors have sixty (60)
days from receipt of the written notice in which to cure the default. Such
notice must be delivered by certified mail, return receipt requested to the
Reorganized Debtors and their attorneys, counsel for the Bondholder Steering
Committee, counsel for CSFB, and counsel for Morgan Stanley at the addresses
identified in the Plan. If the default is not timely cured, any Creditor or
other party in interest may thereafter file and serve upon the Reorganized
Debtors and their attorneys a motion to compel compliance with applicable
provisions of the Plan. The Bankruptcy Court, upon finding a material default,
will issue such orders compelling compliance with the pertinent provisions of
the Plan. T. Retention of Claims and Causes of Action

         Pursuant to Bankruptcy Code Section 1123(b)(3), the Reorganized Debtors
will retain and may enforce any and all claims and causes of action of the
Debtors which are believed to be meritorious, including, but not limited to, any
claims for contribution or indemnification, and any Avoidance Claims, unless
such claims have been released, settled, or time-barred. The KC preference claim
and fraudulent transfer claim asserted in the KC Adversary Proceeding are the
only Avoidance Claims that the Debtors believe exist. Additionally, the Debtors
retain and may enforce any and all causes of action that may result from the
arbitration described above in Section VII (A).
X.
                   RISK FACTORS ASSOCIATED WITH PROPOSED PLAN
A.       General

     In considering whether to vote for or against the Plan, Holders of Claims
or Interests in Impaired Classes should consider the following: there can be no
assurance that the Plan as proposed will be accepted by the requisite number of
Holders or amounts of Claims or approved by the Bankruptcy Court, and there can
be no assurance that the Plan will not be modified up to and through the
Confirmation Date. Notwithstanding Bankruptcy Court approval, it is possible
that the Plan may not be consummated because of other external factors that may
adversely affect the funding of the distributions provided therein and/or the
making of distributions.

B.       Operational Risks
         -----------------

         In general, as with any sophisticated energy and chemical recovery
plant, operation of the Energy Complex involves many risks, including, among
other things, the risk of equipment breakdown, failure, fuel availability or
pricing, or explosion. Mobile Energy is subject to various risks and
uncertainties that may be outside its control, including, among other things:

     (i) governmental, statutory, regulatory or administrative changes or
initiatives affecting Mobile Energy, or its contracts, including economic and
environmental regulation;

     (ii) changes in current prices and future prices of natural gas and power
that affect Mobile Energy's economic assumptions and predictions regarding price
levels and demand for power;

     (iii) permitting requirements and limitations for the Energy Complex and
its contracts;

     (iv) more streamlined operations may impact the reliability of the Energy
Complex and the result could lead to penalties under the ESA's;

     (v) operating risks, including equipment failure, environmental compliance
issues, dispatch or transmission levels, heat rate and output, transmission
credits and the amounts and timing of revenues and expenses;

     (vi) changes in costs of ownership of the facilities, including property
and franchise taxes and taxes on gross receipts;

     (vii) the cost and availability of fuel and transmission service for the
Energy Complex;

     (viii) the enforceability of the ESAs;

     (ix) the financial viability of the Mills, including any negative impact
that the increase in natural gas and other fuel prices may have on their
financial performance;

     (x) the ongoing creditworthiness of customers;

     (xi) the price of power products in Mobile Energy's market regions;

     (xii) competition from other power plants, including new power plants and
new technologies that may be developed in the future;

     (xiii) labor disputes or other events such as fires, hurricanes, floods,
droughts, other acts of God, changes in law or acts of eminent domain that could
disrupt or disable Mobile Energy's operations; and

     (xiv) legal risk that entities will comply with their agreements with the
Debtors.

C.       Operating and Maintenance Costs
         -------------------------------

         Historically, operating and maintenance costs have been a significant
component of Mobile Energy's costs. Mirant Services has been operating the
Energy Complex, but it ceased to operate the Energy Complex on March 31, 2001.
The Projections and Budget attached to this Disclosure Statement assume annual
cost savings beyond those already achieved by Mobile Energy. OEC's estimates
generally are consistent with the assumed costs in the Projections and Budget.
If the Facility cannot be operated in line with the assumed costs, the results
set forth in the Projections will not be obtained.
D.       Mill Risk; Dependence Upon Mill Owners for Revenue

         Mobile Energy is highly dependent on the revenues and cost structure
provided under the ESA's. Risk of adverse consequences to Mobile Energy exists
if any of the counterparties to an ESA fails to comply with its obligations
thereunder. S.D. Warren closed the Paper Mill on December 14, 2001, and the
Projections assume no future revenues from S.D. Warren. KC has the ability to
reduce its operations or to close the Tissue Mill and the Pulp Mill or terminate
the Tissue Mill ESA or the Pulp Mill ESA. If the Tissue Mill ESA or the Pulp
Mill ESA is terminated because of a Mill Closure, it will significantly reduce
the revenues payable to Mobile Energy unless it is accompanied by a
corresponding decrease in operating costs, which is unlikely. If Tissue Mill or
Pulp Mill reduces its operations it may also reduce the revenues payable to
Mobile Energy.
         If natural gas prices increase the Projections and Budget could be
negatively impacted because the fuel costs are passed through to the Mill
Owners, and higher energy prices could make the remaining Mills less profitable
and thereby increase the likelihood that a Mill would shut down.
E.       Demand Charges Owed by KC Due to the Pulp Mill Reinstatement

         As more fully described in Section VII (KK), Mobile Energy and KC are
in dispute about the amount of Demand Charges KC owes to Mobile Energy after
reinstatement of the Pulp Mill ESA. Mobile Energy contends that the matter was
settled by the Energy Charge and Financial Adjustment Arbitration and the Demand
Charge Arbitration. KC has been paying the full amount billed by Mobile Energy
under protest. The Projections attached as Exhibits B assume that Mobile Energy
will collect the full amount of Demand Charges and Processing Charges it claims
are due from KC by reason of the reinstatement. If Mobile Energy is unable to
collect such amounts from KC, the projections will be materially adversely
affected. However, Mobile Energy believes that even if it does not collect such
amounts from KC, it will be a viable business entity and the Plan will be
feasible.
F.       PUHCA; PURPA

         Mobile Energy will file with the FERC to have the Energy Complex
qualified as a Qualifying Facility under the Public Utility Regulatory Policies
Act of 1978 ("PURPA"). The FERC has established certain criteria to determine
whether a facility is a Qualifying Facility. A Qualifying Facility must meet
specified thermal energy output ratios and an efficiency standard. Based upon
operating data that are available, the Proponents believe Mobile Energy
currently meets, and will continue to meet, the requirements to become a
Qualifying Facility, but there can be no assurance that Mobile Energy will
continue to meet the requirements in the future. Qualifying Facility status
could be jeopardized if a steam customer closes its Mill and it results in a
loss of a customer. The significance of achieving the Qualifying Facility status
is that Mobile Energy will not be a public utility under PUHCA. If Qualifying
Facility status is not achieved, those entities owning at least 10% (including
the aggregation of any affiliated holdings) of the equity of Mobile Energy and
Holdings may be subject to reporting requirements, and they likely will be
required to register as public utility holding companies under PUHCA. G.
Environmental Risks

         Mobile Energy is subject to comprehensive federal, state, and local
environmental laws and regulations, which are subject to constant change,
including those governing air emissions, waste water discharges, and hazardous
and non-hazardous waste disposal. Mobile Energy recognizes that both it and the
Mills may incur capital and operating costs in the future to comply with
currently existing laws and regulations, new regulatory requirements and
possible new statutory requirements.
1.       The Cluster Rule

         The Cluster Rule, which was promulgated by the EPA in April, 1998,
provides for (1) certain effluent limitation guidelines and standards for the
control of waste water pollutants; and (2) national emission standards for
hazardous air pollutants from mills that chemically pulp wood fiber using kraft,
sulfite, soda, or semi-chemical methods. The Cluster Rule would principally
apply to the Mills and could require significant capital expenditures by, and
significant modifications to, the Mills. The Cluster Rule also may require
capital expenditures for additional air emission controls at the Energy Complex.
None of the Mills is contractually obligated to Mobile Energy to comply with the
Cluster Rule or any other environmental regulation. Thus, the Mills could choose
to close entirely rather than incur the costs imposed by the Cluster Rule. KC
cited the cost of complying with the Cluster Rule as one of the reasons for
shutting down the Pulp Mill. As such, the failure by the Mills to spend the
monies necessary to comply with the Cluster Rule could, indirectly, have a
material adverse impact on Mobile Energy's results of operations.
2.       The Combustion Rule

         The Combustion Rule was proposed by the EPA in April 1998, when the
Cluster Rule was promulgated. If promulgated in the same form, the Combustion
Rule (which would principally apply to the Energy Complex) could require
significant capital expenditures by Mobile Energy and equipment and operational
modifications to the Energy Complex. Mobile Energy is still in the process of
studying the potential impacts of the rule and cannot estimate the expense
required to comply with such a rule.
         Under the MOA, Mobile Energy generally is permitted to charge the Paper
Mill Owner and the Tissue Mill Owner a portion of the reasonable cost of capital
expenditures or Operation and Maintenance expenses incurred by Mobile Energy as
a result of the Combustion Rule or the Cluster Rule. Nevertheless, there can be
no assurance that the Paper Mill Owner and the Tissue Mill Owner will comply
with their obligations under the MOA with respect to the Combustion Rule. As
such, the promulgation of the Combustion Rule, or the failure by the Paper Mill
Owner and the Tissue Mill Owner to comply with such obligations under the MOAs,
could have a material adverse effect on the financial condition of Mobile Energy
and the Debtors' ability to consummate the Plan.
3.       CERCLA

         Another law that could affect Mobile Energy is the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), also known as
the "Superfund" law, which imposes liability, without regard to fault or the
legality of the original conduct, on certain classes of persons who are
considered to be responsible for the release of a "hazardous substance" into the
environment. These persons include the owner or operator of a disposal site or
sites where the release occurred and companies that disposed or arranged for
disposal of the hazardous substances found at a site. Under CERCLA, such persons
may be subject to joint and several liability for the costs of cleaning up the
hazardous substances, for damages to natural resources, and for the costs of
certain health studies. Furthermore, it is not uncommon for neighboring
landowners and other third parties to file claims for personal injury and
property damage allegedly caused by hazardous substances or other pollutants
released into the environment. At this time, Mobile Energy is unaware of any
conditions on its property that would trigger CERCLA liability. Of course,
conditions might currently exist or might occur in the future which could expose
Mobile Energy to potential liability under CERCLA.
H.       Permitting and Regulatory Matters

         As with any project comparable in size and nature to the Energy
Complex, the Debtors are required to comply with the constantly changing
provisions of numerous statutes and regulations relating to the safety and
health of employees and the public during the operation of the Energy Complex,
including: emergency response and remediation or cleanup in connection with
hazardous and toxic materials or other substances associated with the Energy
Complex; limits on noise emissions from the Energy Complex; safety and health
standards; practices and procedures applicable to the operation of the Energy
Complex; environmental protection requirements (such as standards relating to
the discharge of pollutants into the air, water, and land); compliance with
pipeline safety requirements; and employment, hiring, and anti-discrimination
requirements. Compliance with such requirements may impose significant
additional costs on the Debtors. Failure to comply with any such statutes or
regulations could have material adverse effects on the Debtors and their
financial condition, including civil or criminal liability, imposition of
clean-up liens and fines, and expenditures of funds to bring the Energy Complex
into compliance. There can be no assurance that the Debtors at all times will be
in compliance with all applicable statutes and regulations or that steps to
bring Mobile Energy into compliance would not materially adversely affect the
Debtors' financial position. Additionally, there can be no assurance that the
Mills or the Mill Owners at all times will be in compliance with applicable
statutes and regulations. Due to the integrated nature of the Mills and the
Energy Complex, failure by the Mills or the Mill Owners to comply with
applicable statutes and regulations could have a materially adverse impact on
the Debtors and their financial condition.
         The Debtors also are obligated to comply with the constantly changing
provisions of the numerous federal, state, and local statutory and regulatory
regimes specifically applicable to its operations and to obtain and maintain
numerous governmental approvals pursuant to applicable laws.
         The Debtors and Mirant have obtained all material discretionary
governmental approvals required as of the date hereof in order to operate the
Energy Complex. Although not currently required, additional governmental
approvals, including without limitation, renewals, extensions, transfers,
assignments, reissuances or similar actions regarding governmental approvals,
may be required in the future due to a change in law, a change in the Debtors'
customers, a change in the configuration of the Energy Complex, or for other
reasons. If the Debtors were to sell electricity or steam to more than a limited
number of end users, the Debtors (and such sales) could be subject to rate and
other regulation by the Alabama Public Service Commission, which could
materially adversely affect the Reorganizing Debtors' revenues, costs, or
flexibility in providing services. However, no assurance can be given that the
Debtors will be able to obtain and/or maintain all required governmental
approvals that it does not yet have or that it may in the future require, or
that the Debtors will be able to obtain any necessary modifications to existing
governmental approvals. Delay in obtaining or failure to obtain and maintain in
full force and effect any such governmental approvals, or amendments thereto, or
delay or failure to satisfy any such conditions or other applicable
requirements, could prevent operation of the Energy Complex, sales to persons
other than the Mill Owners or delivery of fuel or ash disposal, or could result
in additional costs to the Company.
         The Debtors' business also could be materially and adversely affected
as a result of statutory or regulatory changes or judicial or administrative
interpretations of existing laws that impose more comprehensive or stringent
requirements on the Energy Complex, the use or transportation of fuel, or the
transportation or disposal of ash. Any such changes could substantially increase
the cost of the Debtors' operations or decrease the Debtors' revenues, and
thereby impair the Debtors' ability to pay dividends on the New Common Stock.
         Under Chapter 14 of Title 37 of the Code of Alabama (the "Alabama
Territorial Law"), which regulates service territories for electric suppliers,
APCo is the primary electric supplier in the City of Mobile. Secondary electric
suppliers are prohibited from extending facilities to serve existing or new
premises within the city limits. The Mobile Facility lies within the city
limits. At the time Mobile Energy acquired the Energy Complex from KC, Mobile
Energy obtained a statement from APCo (which relied upon Mobile Energy's
certification that it would not extend any transmission or distribution
facilities from the Mills) to the effect that by providing electric power to the
existing Mobile Facility, Mobile Energy would not be in violation of the Alabama
Territorial Law. However, there can be no assurance that the same conclusion
will apply to sales by Mobile Energy after the Effective Date or that the
Alabama Public Service Commission would reach the same conclusion if presented
with the issue at this time or in the future. If the Alabama Territorial Law
were found to prohibit Mobile Energy from providing Power Processing Services to
the Mills, Mobile Energy's revenues and its ability to pay dividends on the New
Common Stock would be materially and adversely affected. I. IDB Approval

     Certain of the transactions contemplated under the Plan will require the
approval of the IDB or the waiver of certain cure amounts relating to the
assumption of certain agreements. The IDB has not yet approved the Plan or the
transactions contemplated thereby. While the Proponents expect that the IDB will
approve the transactions contemplated by the Plan and waive any cure payments,
there is no guarantee that it will do so.

J.       Income Tax Risks
         ----------------

         As set forth in greater detail below in Section XIII there is the risk
that the Internal Revenue Service
may challenge some of the transactions contemplated by the Plan.
K.       Failure of Conditions

         There is a risk that the Third Plan will never become effective because
of the failure to fulfill the conditions to confirmation or the conditions to
effectiveness. If the Plan does become effective, then this risk factor will not
exist.
XI.
                               VALUATION ANALYSIS
A.       General

         The Proponents believe that the Plan and the debt restructuring
contemplated therein will enable the Reorganized Debtors to continue to operate
their businesses on a going concern basis. In the course of the Chapter 11
Cases, the Proponents have considered alternatives to the Plan, including
liquidation under Chapter 7 of the Bankruptcy Code. Attached hereto as Exhibit
"N" is the Proponents' liquidation analysis. The Proponents believe that the
Plan provides the greatest possible recovery to all Creditors and is in the best
interests of the creditors.
         The Proponents believe that the value of the distributions to Creditors
under the Plan, as of the Effective Date, exceeds the value such Holders would
receive in a liquidation of the Debtors' assets under Chapter 7 of the
Bankruptcy Code.

B.       Liquidation Value

         The Proponents have considered the alternative of liquidating the
Debtors' assets in a Chapter 7 case under the Bankruptcy Code. The Proponents
have concluded that the best estimate of the value available for distribution to
unsecured creditors under this scenario would be zero. A shut-down of the Energy
Complex and disposition of available assets in a Chapter 7 case would not, in
the Debtors' view, yield an amount sufficient to repay the Southern
Post-Petition Claims, the First Mortgage Bondholder Claims, and the Tax-Exempt
Bondholder Claims. Furthermore, the value available for distribution to the
First Mortgage Bondholders and the Tax-Exempt Bondholders under this scenario
would be less than the anticipated value they would receive under the Plan.
Unsecured Creditors would receive no distributions under this scenario.

     Accordingly, the Debtors and the Bondholder Steering Committee believe that
a liquidation under Chapter 7 of the Bankruptcy Code would result in smaller
distributions to the First Mortgage Bondholders, the Tax-Exempt Bondholders, and
to General Unsecured Creditors than those distributions provided for under the
Plan.

C.       Going Concern Value
         -------------------

         The Proponents prepared a going concern valuation based on the
Projections. The going concern valuation is included in the Projections. The
going concern valuation shows a value in the amount of approximately $116
million under the Projections assuming a 10% discount rate.
XII.
                           BANKRUPTCY CAUSES OF ACTION
A.       Preferences

         Pursuant to Section 547 of the Bankruptcy Code, a debtor may recover
certain transfers of property, including cash, made while the debtor was
insolvent during the ninety (90) days immediately prior to the filing of its
bankruptcy petition on account of pre-existing debts to the extent the
transferee received more than it would have on account of the pre-existing debt
had the debtor been liquidated under Chapter 7 of the Bankruptcy Code (a
"Preferential Transfer"). The recovery period is one (1) year if the recipient
of the Preferential Transfer is an insider of the debtor. There are certain
defenses to Preferential Transfer Causes of Action. Transfers made in the
ordinary course of the debtor's and the transferee's business according to the
ordinary business terms in the industry are not recoverable. Furthermore, if the
transferee extended credit subsequent to the transfer (and prior to the
commencement of the bankruptcy case) for which the transferee was not repaid,
the transferee is entitled to an offset against any otherwise recoverable
transfer of property. If a transfer is recovered by the debtor, the transferee
has a general unsecured claim against the debtor to the extent of the recovery.
The Debtors reviewed their books and records and determined that the transfers
made by the Debtor within the preference period to KC were the only transfers
that were both preferential and large enough to justify the filing of a
complaint to avoid such transfers. The Debtors are seeking to avoid transfers
totaling $1.7 million which were made to KC within the preference period.
B.       Fraudulent Conveyances

         Under the Bankruptcy Code and under various state laws, a debtor may
recover certain transfers of property, including the grant of a security
interest in property, made while insolvent or which rendered it insolvent if and
to the extent the debtor received less than fair value for such property. The
Debtors have examined their books and records for other transfers and determined
that no other fraudulent transfers exist.
         Prior to the filing of the Cogen Motion, the Bondholder Steering
Committee and the Debtors investigated whether potential fraudulent transfer
causes of action could be asserted against Southern or its affiliates. Prior to
the announced shutdown of the Pulp Mill by KC, Southern had received dividends
from Holdings. The Proponents investigated whether the payment of such dividends
could be a fraudulent under the Bankruptcy Code or under applicable state law.
All such claims were released by the Debtors and by certain bondholders in
connection with the Cogen Project and the value of such claims was taken into
account in the negotiations surrounding the Cogen Project.
XIII.
                               INCOME TAX ANALYSIS

A.       General.

         The following discussion summarizes certain federal income tax
consequences of the Plan to the Debtors, the Reorganized Debtors, and Holders of
Allowed First Mortgage Bondholders Claims and Allowed Tax-Exempt Bondholders
Claims (the "Holders") based upon the Internal Revenue Code of 1986, as amended
(the "Tax Code"), the Treasury regulations promulgated thereunder, judicial
authorities and current administrative rulings and practices now in effect, all
of which are subject to change at any time by legislative, judicial or
administrative action. Any such change could be retroactively applied in a
manner that could adversely affect the Debtors, the Reorganized Debtors, and the
Holders. In addition, certain aspects of the following discussion are based on
proposed Treasury regulations. The federal income tax consequences of certain
aspects of the Plan are uncertain due to the lack of applicable legal authority
and differing possible interpretations of certain factual issues and may be
subject to administrative or judicial determinations that differ from those
discussed below.
         The Debtors do not expect to receive a tax ruling from the Internal
Revenue Service (the "IRS"), nor will any opinion of counsel be obtained by the
Debtors, with respect to any tax consequences of the Plan. Consequently, there
can be no assurance that the treatment set forth in the following discussion
will be accepted by the IRS. Further, the federal income tax consequences to the
Debtors, the Reorganized Debtors and the Holders may be affected by matters not
discussed below.
         The following discussion does not address state, local or foreign tax
considerations that may be applicable to the Debtors, the Reorganized Debtors or
the Holders, and, except as otherwise indicated, does not address the tax
consequences of the Plan to certain types of Holders (including foreign persons,
financial institutions, life insurance companies, tax-exempt organizations,
retirement plans, brokers, dealers in securities, partnerships or other pass
through entities, Holders holding their claims or interests as part of a hedging
or conversion transaction or straddle and Holders that may be subject to the
alternative minimum tax).
         THE DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION
ONLY. THE DEBTORS AND THEIR RESPECTIVE COUNSEL ARE NOT MAKING ANY
REPRESENTATIONS REGARDING THE PARTICULAR TAX CONSEQUENCES OF CONFIRMATION AND
CONSUMMATION OF THE PLAN, WITH RESPECT TO THE DEBTORS, THE REORGANIZED DEBTORS,
OR THE HOLDERS, NOR ARE THEY RENDERING ANY FORM OF LEGAL OPINION OR TAX ADVICE
ON SUCH TAX CONSEQUENCES. THE TAX LAWS APPLICABLE TO CORPORATIONS IN BANKRUPTCY
ARE EXTREMELY COMPLEX, AND THE FOLLOWING SUMMARY IS NOT EXHAUSTIVE. HOLDERS ARE
STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING TAX CONSEQUENCES OF
THE PLAN, INCLUDING FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.
B.       Federal Income Tax Consequences to the Debtors.
1.       General
         For federal income tax purposes Mobile Energy is currently disregarded
as a separate entity and all of its assets, liabilities (including its
liabilities with respect to the Claims), income, gains, deductions, losses and
other tax attributes are treated as being assets, liabilities, income, gains,
deductions, losses and other tax attributes of Holdings. Although the IDB is the
issuer of the Tax-Exempt Bonds, the Debtors believe, and this discussion assumes
except where otherwise noted, that the Tax-Exempt Bonds should be considered
obligations of Mobile Energy, and, accordingly, as discussed above, of Holdings,
for federal income tax purposes.

     As discussed below, Holdings may incur significant federal income tax
obligations as a result of the implementation of the Plan.

2.       Excess Loss Account - Debtors' Indemnity of Southern.

         Under the federal income tax regulations governing the filing of
consolidated federal income tax returns (the "consolidated return regulations")
Southern's tax basis in its investment in stock of Holdings must be adjusted
pursuant to a complex set of rules. For example, Southern's stock basis in
Holdings is increased by Holdings' taxable income and decreased by taxable
losses and distributions with respect to the stock. If the negative adjustments
exceed the original stock basis increased by positive adjustments, the excess is
referred to as an "excess loss account." The excess loss account must be
"recaptured" or reported as taxable income by Southern if certain events,
including the disposition of the Holdings stock, occurs. Holdings expects that
the excess loss account will be recaptured upon consummation of the Plan,
although under the consolidated return regulations the recapture could occur
earlier.
         Also, under the consolidated return regulations Southern and each other
member of its consolidated group for federal income tax purposes are severally
liable for the federal income taxes of the consolidated group. Pursuant to
Section 28 of the Cogen Development Agreement Amendment No. 1, the Debtors and
Southern entered into a Tax Indemnity Agreement dated September 2, 2000. Under
this Tax Indemnity Agreement, the Debtors agreed to indemnify Southern for each
tax period beginning after December 31, 1999, for all federal income taxes
imposed upon Southern that are attributable to any net taxable income recognized
by the Debtors in excess of the greater of: (a) zero or (b) Southern's excess
loss account in Holdings as of the beginning of such tax period. Thus, the
Debtors must pay to Southern the amount of any federal income taxes imposed upon
Southern that are attributable to net taxable income recognized by the Debtors
after December 31, 1999, that is in excess of Southern's excess loss account.
The Debtors made no indemnity payment to Southern with respect to the years 2000
and 2001 because the Debtors had a taxable loss for the years 2000 and 2001. As
discussed below, however, Holdings may recognize significant taxable income in
connection with or prior to the consummation of the Plan. Depending on the
particular circumstances, including the size of Southern's excess loss account,
if any, at the time Holdings recognizes such income, the Debtors' liability to
Southern could be substantial.
         According to information provided by Southern, at December 31, 2000,
Southern's excess loss account in Holdings stock was approximately $74 million.
There can be no assurance, however, that the IRS will agree with Southern
regarding the size of the excess loss account or that events will not occur or
have not already occurred that could affect the existence of the excess loss
account and, consequently, the amount of the Debtors' liability.
3.         Income Tax Effects to Holdings from Collection of Third Party Claims.

         The Debtors have made certain claims against one or more third parties
that are presently being arbitrated. The Debtors anticipate that collection of
the claims will produce taxable income. Whether all or a portion of this
anticipated taxable income will result in an indemnification obligation to
Southern under the Tax Indemnity Agreement will depend upon the amount of claims
collected, the final balance of the excess loss account, the date the excess
loss account must be recaptured, the taxable income or taxable loss generated by
the Debtors' operations and possible other events. During 2002 the Debtors have
collected approximately $53 million for arbitrated claims. This amount will be
included in Holding's federal taxable income for the year 2002 and, therefore,
may result in a substantial decrease in Southern's excess loss account in
Holdings stock. 4. Cancellation of Indebtedness Income.

         The Tax Code, with certain exceptions, requires taxpayers that realize
a "cancellation of indebtedness" (i.e., debt extinguishment in exchange for a
payment having a value less than the debt extinguished) to include the amount of
cancelled indebtedness in gross income. The Tax Code and applicable regulations
further provide, however, that where the taxpayer is in a bankruptcy case and
the cancellation of indebtedness is pursuant to a plan approved by the
bankruptcy court, with the exception of certain cancellations of indebtedness
between affiliates filing a consolidated federal income tax return, such
cancellation of indebtedness will not be included in gross income, but the
taxpayer must generally reduce tax attributes in an amount equal to the
cancelled indebtedness in a specified order.
         The Debtors expect that Holdings will realize a material amount of
cancellation of indebtedness ("COD") income as a result of the Plan. With
certain exceptions, to the extent any creditor receives from the Debtors a
distribution under the Plan in an amount less than such creditor's Claim,
Holdings will realize COD income in an amount equal to such excess. Because the
Debtors are in bankruptcy, Holdings will not be required to include COD income
in taxable income (with the exception of COD income attributable to the
intercompany receivable due to Southern, described below), but rather will be
required to reduce, by the amount of the COD income, certain tax attributes,
including the tax basis of its assets. Tax attributes must be reduced in the
following order: (i) net operating loss carry-overs, (ii) business credits,
(iii) minimum tax credits, (iv) capital loss carry-overs, (v) tax basis in
assets, (vi) passive activity losses and credits, and (vii) foreign tax credit
carry-overs. Holdings has little or no such tax attributes, other than the tax
basis in its assets (including the assets of Mobile Energy). Therefore, Holdings
will reduce the tax basis of its assets (including the assets of Mobile Energy)
by the amount of the COD income. It is likely that the basis of these assets
will be reduced to zero.
         Part of Holdings' COD income will arise from cancellation of an
intercompany receivable due Southern, with whom, until the date of consummation
of the Plan, Holdings has filed and will continue to file a consolidated federal
income tax return. Under the consolidated return regulations, the COD income
attributable to the intercompany receivable must be included in Holdings'
taxable income. Correspondingly, Southern should be able to take a federal
income tax deduction in an amount equal to Southern's basis in the intercompany
receivable cancelled.
         Depending on how certain interpretative issues relating to the Tax
Indemnity Agreement are resolved, the Debtors could be required to indemnify
Southern with respect to any federal income taxes payable on income recognized
by Holdings that is attributable to the intercompany receivable - even though
Southern should receive a corresponding deduction - should such income, alone or
together with other income recognized by Holdings, exceed Southern's excess loss
account in Holdings' stock.
         Under the Plan, Holdings will have COD income equal to the excess of
the amount of indebtedness outstanding under the Existing Securities (excluding
$1 million of Tax-Exempt Bonds that will remain outstanding (the "Retained
Tax-Exempt Bonds") and any cash payments applied to the Existing Securities)
over the fair market value of the New Common Stock distributed by Holdings to
the Holders. This COD income will be subject to the treatment described above.
5.       Uncertainty of Outcome; Risk of Diminution in Value.

         Because (i) the law as it applies to the federal income tax
consequences of the contemplated transaction is complex and in many respects
unclear, (ii) the Tax Indemnity Agreement is subject to differing
interpretations with respect to various fact patterns, and (iii) the IRS could
make various arguments regarding alternative characterizations (including
alternative ordering of steps) of the contemplated transactions under the Plan,
substantial uncertainty exists as to the Debtors' federal income tax exposure
under the Tax Indemnity Agreement or otherwise. Accordingly, no assurance can be
given that the Debtors will not incur responsibility for significant additional
taxes to those discussed herein, resulting in a substantial current or future
diminution in the value of interests in Holdings held by current Holders after
the Plan is consummated. 6. Deductions of Accrued Interest

         To the extent that cash or New Common Stock issued to Holders pursuant
to the Plan are attributable to accrued and unpaid interest, Holdings should be
entitled to interest deductions in the amount of such accrued interest to the
extent it has not already deducted such amounts. The amount of COD income
recognizable by Holdings will be reduced to the extent of such interest
deductions.
C.       Federal Income Tax Consequences to Holders.

1.       General.

         The federal income tax consequences of the implementation of the Plan
to a Holder will depend, among other things, upon the origin of the Holder's
Claim, when the Holder's Claim becomes an Allowed Claim, when the Holder
receives payment in respect of such Claim, whether the Holder reports income
using the accrual or cash method of accounting, whether the Holder has taken a
bad debt deduction or worthless security deduction with respect to such Claim,
and whether the Holder's Claim constitutes a "security" for federal income tax
purposes. In addition, the Debtors express no views with respect to whether
interest income derived from any Retained Tax-Exempt Bond subsequent to
implementation of the Plan will be exempt from federal income tax.
         As described in Sections VIII.E(4) and (5), Holders of Allowed First
Mortgage Bondholders Claims will receive Pro Rata Shares of 72.967% of the New
Common Stock under the Plan. Holders of Allowed Tax-Exempt Bondholders Claims
will receive Pro Rata Shares of 27.033% of the New Common Stock under the Plan
and will retain a Pro Rata Share of the Retained Tax-Exempt Bonds.

2. Cash Received by Holders of Allowed First Mortgage Bondholders Claims and
Holders of Allowed Tax-Exempt Bondholders Claims

         On June, 2002, the Trustee distributed approximately $70 million
dollars to Holders of Allowed First Mortgage Bondholders Claims and Holders of
Allowed Tax-Exempt Bondholders Claims in partial payment of such claims. With
respect to such amounts, if any, properly allocable to accrued but unpaid
interest, each Holder received interest income for federal income tax purposes
to the extent that (x) any amounts received were paid to such Holder in respect
of a claim for accrued but unpaid interest and (y) such Holder has not
previously included such amounts in income under its method of accounting. Such
interest income, if any, is taxed as ordinary income except that if the interest
income derived from a Tax-Exempt Bond, it is exempt from federal income tax to
the same extent any other interest paid on a Tax-Exempt Bond is exempt from
federal income tax. If any Claim had accrued market discount, as described below
in Section XIII.C.3(e), payments not allocable to interest would represent
ordinary income to the extent of such accrued market discount not previously
recognized. Any amounts not allocable to interest or accrued market discount
would represent a repayment of the respective Claim, non-taxable to the extent
allocable to the basis of the Claim and taxable gain to the extent of the
excess, if any. Except as described below in Section XIII.C.3(f), any such gain
generally should be characterized as capital gain, if the Claim constitutes a
capital asset in the Holder's hands. This analysis assumes that this cash
distribution is not considered a part of the exchange for New Common Stock under
the Plan, the consequences of which are described in Section XIII.C.3 below.

3. Exchange of Allowed First Mortgage Bondholders Claims and Allowed Tax-Exempt
Bondholders Claims for New Common Stock.

(a) Classification of Claims as "Securities" for Federal Income Tax Purposes.

         Whether or not realized gain or loss will be recognized (i.e., included
in the Holder's taxable income) for federal income tax purposes will depend in
part upon whether such exchange qualifies as a recapitalization or other
"reorganization" as defined in the Tax Code, which may in turn depend upon
whether the Claim exchanged is classified as a "security" issued by one of the
Debtors for federal income tax purposes. The term "security" is not defined in
the Tax Code or in the Treasury Regulations. One of the most significant factors
considered in determining whether a particular debt instrument is a security is
its original term. In general, the longer the term of an instrument, the greater
the likelihood that it will be considered a security. As a general rule, a debt
instrument having an original term of 10 years or more will be classified as a
security. The Debtors express no views with respect to, and each Holder that
receives New Common Stock in exchange for an Allowed Claim should consult its
own tax advisor to determine, whether an Allowed Claim constitutes a security
for federal income tax purposes and whether, in the case of the Tax-Exempt
Bonds, an Allowed Claim constitutes a security issued by one of the Debtors.

(b) If the Existing Securities Do Not Constitute "Securities" for Federal Income
Tax Purposes.

         Each Holder of an Allowed First Mortgage Bondholders Claim and Allowed
Tax-Exempt Bondholders Claim that does not constitute a "security" for federal
income tax purposes, will recognize gain or loss in an amount equal to the
difference between (i) the amount of cash and the fair market value of the New
Common Stock received by such Holder in excess of the amount allocated, if any,
to accrued but unpaid interest and (ii) the Holder's adjusted tax basis (after
reduction by the amount of basis allocable to cash previously received) in its
Allowed First Mortgage Bondholders Claim or Allowed Tax-Exempt Bondholders Claim
reduced by the adjusted tax basis allocable to the Holder's share of the
Retained Tax-Exempt Bond, as the case may be. A Holder's tax basis in the New
Common Stock will be its fair market value.

(c) If the Existing Securities Constitute "Securities" for Income Tax Purposes.

         The Existing Securities could constitute "securities" for federal
income tax purposes. The First Mortgage Bonds were issued by Mobile Energy and
guaranteed by Holdings. The Tax-Exempt Bonds were issued by the IDB although the
sole source of payment is from amounts payable by the Debtors and certain
guaranties. For federal income tax purposes it is not clear whether, assuming
the Tax-Exempt Bonds are "securities," they should be treated as issued by one
of the Debtors. If an Existing Security constitutes a "security" issued by one
of the Debtors for federal income tax purposes, the receipt of the New Common
Stock in satisfaction of the related Allowed First Mortgage Bondholders Claim or
Allowed Tax-Exempt Bondholders Claim will constitute a "recapitalization" for
federal income tax purposes subject to the "tax-free" reorganization provisions
of the Tax Code. In that case, (i) any realized loss will not be recognized for
federal income tax purposes and (ii) any realized gain will be recognized in an
amount equal to the lesser of (a) the gain realized or (b) the amount of cash
and the fair market value of any other property (other than New Common Stock)
received in excess of the amount allocated to accrued but unpaid interest.
         Also, in the case of a recapitalization, a Holder's aggregate tax basis
in the New Common Stock received in satisfaction of its Allowed First Mortgage
Bondholders Claim or Allowed Tax-Exempt Bondholders Claim will equal the
Holder's aggregate adjusted tax basis in its First Mortgage Bonds or Tax-Exempt
Bonds (including any Claim for accrued but unpaid interest but reduced by the
amount of basis allocable to cash previously received), increased by any gain or
interest income recognized in respect of its Allowed First Mortgage Bondholders
Claim or Allowed Tax-Exempt Bondholders Claim and decreased by the amount of
cash received and, as to any Allowed Tax-Exempt Bondholders Claim, decreased by
the portion of the Holder's adjusted tax basis in the claim allocable to the
Retained Tax-Exempt Bond. In general, the Holder's holding period for the New
Common Stock received will include the Holder's holding period for a First
Mortgage Bond or a Tax-Exempt Bond, except to the extent the New Common Stock
was issued in respect of a Claim for accrued but unpaid interest.
(d)      Amounts Allocable to Interest.

         Whether or not the Existing Securities constitute securities for
federal income tax purposes, with respect to amounts, if any, allocable to
accrued but unpaid interest, a Holder will be deemed to be in receipt of
interest income for federal income tax purposes to the extent that (x) any
amounts received are paid to such Holder in respect of a claim for accrued but
unpaid interest and (y) such Holder has not previously included such amounts in
income under its method of accounting. Such interest income, if any, will be
taxed as ordinary income except that if the interest income derives from a
Tax-Exempt Bond, it will be exempt from federal income tax to the same extent
any other interest paid on a Tax-Exempt Bond is exempt from federal income tax.
(e) Market Discount.

         Market discount is defined generally in the Tax Code as the excess, if
any, of (i) the "stated redemption price at maturity" of a debt obligation over
(ii) the adjusted basis of the debt obligation in the hands of a Holder
immediately after its acquisition. In the case of any bond having original issue
discount, the stated redemption price at maturity is treated as equal to its
revised issue price. A market discount bond is defined as any bond having market
discount. Debt instruments in the hands of original holders are not market
discount bonds, if bought at the issue price. Moreover, under a de minimis
exception, there is no market discount if the excess of the stated redemption
price at maturity of a debt instrument over the Holder's adjusted basis in the
debt instrument is less than 0.25% of the stated redemption price at maturity
multiplied by the number of complete years after the acquisition date to the
date of maturity. Under the Tax Code the revised issue price means the issue
price of the debt instrument increased by the sum of all original issue
discount, if any, includible in gross income by all prior owners determined
without regard to any holder's acquisition premium, or in the case of a
tax-exempt obligation, the amount of original issue discount which would have
accrued, if the obligation were taxable, determined without regard to any
holder's acquisition premium. Unless the holder elects otherwise, the accrued
market discount for a debt instrument generally is the amount calculated by
multiplying the market discount for such debt instrument by a factor, the
numerator of which is the number of days a debt instrument has been held by the
holder and the denominator of which is the number of days after the acquisition
of a debt instrument up to and including its maturity date.
         Holders in whose hands such Existing Securities are market discount
bonds will be required to treat as ordinary income any gain recognized on the
exchange of such instruments pursuant to the Plan to the extent of the market
discount accrued during the Holder's period of ownership and not previously
recognized, unless the Holder has elected to include the market discount in
income as it accrued. Except as described below in Section XIII.C.3(f), any
additional gain generally would be characterized as capital gain, if the
Existing Security exchanged constitutes a capital asset in the Holder's hands.
         The Treasury Department is authorized to promulgate regulations that
will provide that any accrued "market discount" not treated as ordinary income
upon a tax-free exchange of market discount bonds would carry over to the
nonrecognition property received in the exchange. If such regulations are
promulgated and applicable to the Plan and if an Existing Security constitutes a
"security" of one of the Debtors, any Holder of such Existing Security which has
accrued market discount would carry over such accrued market discount to the New
Common Stock received pursuant to the Plan, such that any gain recognized by the
Holder upon a subsequent disposition of the New Common Stock also would be
treated as ordinary income to the extent of any accrued market discount not
previously included in income.

     Holders of Existing Securities having market discount are urged to consult
their own tax advisors regarding the application of the market discount rules to
their particular situation.

(f)      Other Considerations.

         In addition to the possible recognition of ordinary income due to the
market discount rules discussed above, any gain recognized by a Holder upon
receipt of cash, the New Common Stock pursuant to the Plan in satisfaction of
the Holder's Claims, or upon a subsequent taxable disposition of New Common
Stock, may be treated as ordinary income to the extent of (i) any bad debt
deductions (or additions to a bad debt reserve) claimed with respect to its
Claims and any ordinary loss deduction incurred upon satisfaction of such
Claims, less upon a subsequent taxable disposition any income (other than
interest income) recognized by the Holder upon satisfaction of such Claims, and
(ii) with respect to a cash-basis Holder, also any amounts which would have been
included in its gross income if the Holder's Claims had been satisfied in full
but which was not included by reason of the cash method of accounting, less upon
a subsequent taxable disposition any income (other than interest income)
recognized by the Holder upon satisfaction of such Claims.
D.       Information Reporting and Backup Withholding.

         Under the backup withholding rules of the Tax Code, Holders may be
subject to backup withholding at a rate of 30% in 2002 with respect to
distributions or payments made pursuant to the Plan, unless such Holder (i)
comes within certain exempt categories (generally including corporations) and,
when required, demonstrates this fact, or (ii) provides a correct taxpayer
identification number and certifies under penalty of perjury that the taxpayer
identification number is correct and that the Holder is not subject to backup
withholding because of a failure to report all dividend and interest income.
Backup withholding is not an additional tax, but is merely an advance payment,
which may be refunded to the extent it results in an overpayment of tax. Holders
may be required to establish exemption from backup withholding or to make
arrangements with respect to the payment of backup withholding.
         THE FOREGOING IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME
TAX ASPECTS OF THE PLAN AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND
ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER. XIV.
                       VOTING PROCEDURES AND REQUIREMENTS
A.       Ballots and Voting Deadline

         A ballot to be used for voting to accept or reject the Plan is enclosed
with this Disclosure Statement mailed to Creditors entitled to vote. A Creditor
must (1) carefully review the ballot and instructions thereon; (2) execute the
ballot; and (3) return the ballot in the envelope provided. Your ballot, or the
master ballot executed on your behalf, must be received by the Balloting Agent
no later than 5:00 p.m. Eastern Time on or before the Voting Deadline. If you
received a return envelope addressed to a broker, bank, nominee, or proxy
intermediary, you must return your ballot early enough for your vote to be
processed by your broker, bank, nominee, or proxy intermediary on a master
ballot and then to be forwarded to the Balloting Agent by the Voting Deadline.
Therefore, please allow additional time. The Balloting Agent is

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022
                        Toll Free Telephone: 877-750-2689
                      Banks and Brokers Call: 212-750-5833

         The record date for determining which Holders of public securities are
entitled to vote on the Plan is ________________, 2002. The Indenture Trustee
for the First Mortgage Bonds and the Tax-Exempt Bonds may not and will not vote
on behalf of the Holders of these securities. Holders must submit their own
ballots. Do not return your securities with your ballots.
                  YOU MAY NOT CHANGE YOUR VOTE AFTER IT IS CAST UNLESS THE
                  BANKRUPTCY COURT PERMITS YOU TO DO SO AFTER NOTICE AND A
                  HEARING TO DETERMINE WHETHER SUFFICIENT CAUSE EXISTS TO PERMIT
                  THE CHANGE. TO BE COUNTED, BALLOTS MUST BE RECEIVED NO LATER
                  THAN 5:00 P.M., eastern time ON ________________, 2002.

                  THE PLAN HAS BEEN FILED BY THE PROPONENTS. THE PROPONENTS
                  RECOMMEND THAT ALL CREDITORS ENTITLED TO VOTE ON THE PLAN CAST
                  THEIR BALLOTS in favor of acceptance of tHE PLAN. THE
                  PROPONENTS BELIEVE THAT THE PLAN PROVIDES THE GREATEST
                  POSSIBLE RECOVERIES TO CREDITORS. THE PROPONENTS FURTHER
                  BELIEVE THAT ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS
                  OF the Debtors, the debtors' estates, and ALL PARTIES IN
                  INTEREST.

B.       Creditors Solicited to Vote

         Any Creditor of the Debtors whose Claim is Impaired under the Plan is
being solicited to vote, if either (i) its Claim has been scheduled by the
Debtors and such Claim or Interest is not scheduled as disputed, contingent, or
unliquidated; or (ii) it has filed (or in the case of the Holders of the First
Mortgage Bonds and the Tax-Exempt Bonds, a claim has been filed on their behalf)
a proof of Claim on or before the last date set by the Bankruptcy Court for such
filings. Any Claim as to which an objection has been filed, and such objection
is still pending on the voting deadline date, is not entitled to have its vote
counted, unless the Bankruptcy Court estimates the Claim for voting purposes
upon motion by such Creditor. Such motion must be heard and determined by the
Bankruptcy Court prior to the date and time established by the Bankruptcy Court
for the Confirmation Hearing. In addition, a Creditor's vote may be disregarded
if the Bankruptcy Court determines that such Holder's ballot in favor of
acceptance or rejection was not solicited or procured in good faith or in
accordance with the provisions of the Bankruptcy Code.
C.       Definition of Impairment

         Under Section 1124 of the Bankruptcy Code, a class of claims or equity
interests is impaired under a plan of reorganization unless with respect to each
claim or equity interest of such class, the plan:

     1. leaves unaltered the legal, equitable, and contractual rights of the
Holder of such claim or interest; or

     2. notwithstanding any contractual provision or applicable law that
entitles the Holder of a claim or interest to receive accelerated payment of his
claim or interest after the occurrence of a default:

     (a)  cures any such default that occurred before or after the commencement
          of the case under the Bankruptcy Code, other than a default of a kind
          specified in Section 365(b)(2) of the Bankruptcy Code;

     (b)  reinstates the maturity of such claim or interest as it existed before
          the default;

     (c)  compensates the Holder of such claim or interest for damages incurred
          as a result of reasonable reliance on such contractual provision or
          applicable law; and

     (d)  does not otherwise alter the legal, equitable, or contractual rights
          to which such claim or equity interest entitles the Holder of such
          claim or interest.

D.       Classes Impaired Under the Plan

         Administrative Expenses, Priority Tax Claims, and Claims and Interests
in Classes 1, 2, 3, 6, 7 and 9 are UNIMPAIRED under the Plan, and the Holders of
Administrative Expenses, Priority Tax Claims, and Claims and Interests in
Classes 1, 2, 3, 6, 7, and 9 are not solicited to vote on the Plan pursuant to
11 U.S.C. Section 1126(f).
         Claims in Classes 4, 5, and 8 are IMPAIRED under the Plan, and the
votes of Holders of such Claims are being solicited in favor of acceptance of
the Plan.
         Interests in Class 10 will not receive any distributions under the
Plan, and are IMPAIRED under the Plan. The voters of Interests in Class 10 are
not solicited to vote on the Plan because such Interests are deemed to have
rejected the Plan.
E.       Vote Required for Class Acceptance

         The Bankruptcy Code defines acceptance of a plan by a class of
creditors as both acceptance by Holders of two-thirds (2/3) in dollar amount and
acceptance by a majority in number of the Claims of that class actually casting
ballots in favor of acceptance or rejection of the plan.
         The Bankruptcy Code defines acceptance of a plan by a class of
interests as acceptance by Holders of two-thirds (2/3) in amount of the allowed
interests of such class casting ballots in favor of acceptance or rejection of
the plan.
F.       Distributions Only to Holders of Allowed Claims and Interests

         A Claim will receive a distribution under the Plan only if it is an
"Allowed Claim". An "Allowed Claim" means a Claim against the Debtors to the
extent a proof of Claim was filed with the Bankruptcy Court on or before the Bar
Date (May 3, 1999), or for a particular Claim, within such other time as the
Bankruptcy Court shall have set for such other Claim if different from the Bar
Date (or, in the case of Administrative Expenses, subject to Bankruptcy Court
approval), or which have been listed by the Debtors as liquidated in amount and
not disputed or contingent, and, in either case, a Claim as to which no
objection to the allowance thereof has been interposed within the period of time
fixed by the Plan, or which has been determined by an order or judgment of any
court of competent jurisdiction that is a Final Order, or which has been allowed
pursuant to the terms of the Plan.
         The Allowed Mobile Energy Interest which is owned by Holdings is an
Allowed Interest and will retain its Interest under the Plan. The Allowed
Interests of Holdings will receive no distributions under the Plan.

XV.
                            CONFIRMATION OF THE PLAN
         Under the Bankruptcy Code, the following steps must be taken to confirm
the Plan:
A.       Confirmation Hearing

         Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court,
after notice, to hold a hearing on confirmation of the Plan (the "Confirmation
Hearing"). Section 1128(b) provides that any party in interest may object to
confirmation of the Plan if a written objection is timely filed with the
Bankruptcy Court.
         By order of the Bankruptcy Court dated __________________, 2002, the
Confirmation Hearing has been scheduled for ___________________, 2002 at ____
_.m., United States Bankruptcy Court, Southern District of Alabama, 201 St.
Louis, Mobile, Alabama 36602. The Confirmation Hearing may be adjourned from
time to time by the Bankruptcy Court without further notice, except for an
announcement made at the Confirmation Hearing or any adjournment thereof. Any
objection to confirmation must be made in writing and filed with the Bankruptcy
Court, 201 St. Louis, Mobile, Alabama 36602 with proof of service and served
upon each of the following parties on or before ____________________, 2002:

Debtors: ANDREWS & KURTH L.L.P.
                          600 Travis, Suite 4200
                          Houston, Texas 77002
                           (713) 220-4200
                           (713) 220-4285-Telecopy
                          Attn: Jeffrey E. Spiers

                          CABANISS, JOHNSTON, GARDNER,
                          DUMAS & O'NEAL
                          700 Riverview Plaza
                          Mobile, Alabama  36602
                          (251) 433-6961
                          (251) 415-7350 - Telecopy
Attn:  Donald J. Stewart

Bondholder Steering Committee:  GREENBERG TRAURIG
                                77 W. Wacker, Suite 2500
                                Chicago, Illinois  60601
                                (312) 236-4350
                                (312) 456-8435
                                 Attn:  David D. Cleary


CSFB:                            STROOCK STROOCK & LAVAN
                                 180 Maiden Lane
                                 New York, NY  10038
                                 (212) 806-6460
                                 (212) 806-6006
                                 Attn:  Michael J. Sage

Morgan Stanley:                   MORGAN, LEWIS & BOCKIUS LLP
                                  1701 Market Street
                                  Philadelphia, PA  19103-2921
                                  (215) 963-5032
                                  (215) 963-5299 - Telecopy
                                  Attn:  Michael A. Bloom



UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY FILED AND SERVED, IT WILL NOT BE
CONSIDERED BY THE BANKRUPTCY COURT, AND THE COURT MAY ENTER AN ORDER CONFIRMING
THE PLAN PREPARED BY COUNSEL FOR THE PROPONENTS WITHOUT FURTHER NOTICE.

B.       Requirements for Confirmation of the Plan

1.       General

         At the Confirmation Hearing, the Bankruptcy Court must determine
whether the confirmation requirements of Section 1129 of the Bankruptcy Code
have been satisfied, in which event the Bankruptcy Court shall enter an order
confirming the Plan. These applicable requirements are as follows:

          1.   The Plan complies with the applicable provisions of the
               Bankruptcy Code.

          2.   The Proponents of the Plan have complied with the applicable
               provisions of the Bankruptcy Code.

          3.   The Plan is proposed in good faith and not by any means forbidden
               by law.

          4.   Any payment made or to be made by the Debtors, or by a person
               issuing securities or acquiring property under the Plan for
               services, costs or expenses in connection with the Chapter 11
               Cases or the Plan has been disclosed to the Bankruptcy Court, and
               any such payment made before confirmation of the Plan is
               reasonable, or if such payment is to be fixed after confirmation
               of the Plan, such payment is approved by or is subject to
               approval by the Bankruptcy Court as reasonable.

          5.   The Debtors have disclosed the identity and affiliations of any
               individual proposed to serve, after confirmation of the Plan, as
               a director, officer or voting trustee of the Debtors, an
               affiliate of the Debtors participating in the Plan with the
               Debtors, or a successor to the Debtors under the Plan, and (B)
               that the appointment to, or continuance in, such office of such
               individual is consistent with the interests of the Holders of
               Claims and Interests and with public policy.

          6.   The Debtors have disclosed the identity of any insider who will
               be employed or retained by the Reorganized Debtors, and the
               nature of any compensation for such insider.

          7.   With respect to each Class of Impaired Claims or Impaired
               Interests, either each Holder of a Claim or Interest of such
               Class has accepted the Plan, or will receive or retain under the
               Plan on account of such Claim or Interest property of a value, as
               of the Effective Date of the Plan, that is not less than the
               amount that such Holder would so receive or retain if the Debtors
               were liquidated on such date under Chapter 7 of the Bankruptcy
               Code.

          8.   Each Class of Claims or Interests has either accepted the Plan or
               is not impaired under the Plan.

          9.   Except to the extent that the Holder of an Administrative Expense
               or Priority Claim has agreed to a different treatment of such
               Claim, the Plan provides that such Administrative Expense or
               Priority Claim (other than Priority Tax Claims) will be paid in
               full within fifteen (15) days of the Effective Date and that the
               Priority Tax Claim will receive on account of such Claim deferred
               Cash payments over a period not exceeding six years after the
               date of assessment of such Claim, of a value as of the Effective
               Date, equal to the Allowed amount of such Claim.

          10.  If a Class of Claims is Impaired by the Plan, at least one class
               of Claims has accepted the Plan, determined without including any
               acceptance of the Plan by any insider holding a Claim of such
               Class.

          11.  Confirmation of the Plan is not likely to be followed by the
               liquidation, or the need for further financial reorganization, of
               the Debtors or any successor to the Debtors, under the Plan,
               unless such liquidation or further reorganization is proposed in
               the Plan.

          12.  The Plan provides for the payment of all fees payable under 28
               U.S.C. Section1930, as determined by the Bankruptcy Court at the
               hearing on confirmation of the Plan, on the Effective Date.

          13.  Under the Bankruptcy Code, a plan provides for the continuation,
               on the effective date of the plan, of payment of all retiree
               benefits, as that term is defined in Section1114 of the
               Bankruptcy Code, at the level established pursuant to subsection
               (e)(1)(B) or (G) of Section1114 of the Bankruptcy Code, at any
               time prior to confirmation of the Plan, for the duration of the
               period the debtors have obligated themselves to provide such
               benefits. The Debtors are not party to any such plans.

          14.  Any governmental regulatory commission with jurisdiction, after
               confirmation of the plan, over the rates of the debtor has
               approved any rate change provided for in the plan, or such rate
               change is expressly conditioned on such approval.

         The Bankruptcy Court also may confirm the Plan if all of the above
requirements are met except the requirement set forth in subpart (8) above, as
described more fully in Section XV.C. below in the discussion of the "Cram Down"
provisions of the Bankruptcy Code.
           Class 11 is deemed to have rejected the Plan and is impaired.
Therefore, the Proponents cannot meet the requirement of Section 1129(a), that
all Classes be unimpaired or accept the Plan. Accordingly, the Proponents must
seek confirmation under the "Cram Down" provisions of the Bankruptcy Code
pursuant to Section 1129(b) to confirm the Plan.
2.       Feasibility

         The Bankruptcy Code requires, as a condition to confirmation, that the
Bankruptcy Court find that liquidation of the Debtors or the need for future
reorganization is not likely to follow after confirmation. For the purpose of
determining whether the Plan meets this requirement, the Debtors have analyzed
their ability to meet their obligations under the Plan. As part of such
analysis, the Proponents have prepared projections of, among other things, the
Debtors' financial performance (assuming the transactions contemplated by the
Plan are consummated) for the 19-year period ending in 2019. The Projections and
Budget are set forth in Exhibits "B" to this Disclosure Statement. The
Projections and Budget are forward-looking statements, all of which are based on
various estimates and assumptions and will not be updated to reflect events
occurring after the date hereof. Such information and statements are subject to
inherent uncertainties and to a wide variety of significant business, economic
and competitive risks, including, among others, those described herein.
Consequently, actual events, circumstances, effects and results may vary
significantly from those included in or contemplated by such Projections OR
BUDGET. The Projections AND BUDGET, therefore, are not necessarily indicative of
the future financial condition or results of operations of the Debtors or the
Reorganized Debtors, which may vary significantly from those set forth in the
Projections AND BUDGET. Consequently, the Projections, budget and other
forward-looking statements contained herein should not be regarded as
representations by the Proponents, the Proponents' advisors, or any other person
that the Projections can or will be achieved.

     Based on the Projections and the Budget, the Proponents reasonably believe
that the Reorganized Debtors will be able to make all payments required to be
made pursuant to the Plan.

3.       Best Interests Of Creditors And Liquidation Analysis

         Under Bankruptcy Code Section 1129(a)(7), the Plan must provide that
Creditors and Holders of Interests receive under the Plan as much as or more
than they would receive in a Chapter 7 liquidation of the Debtors. For purposes
of determining whether the Plan meets this requirement, the Debtors have
prepared projections of the estimated distributions to Creditors and Holders of
Interests in a liquidation under Chapter 7 of the Bankruptcy Code. These
projections are described under "Liquidation Analysis" provided in Article XI of
this Disclosure Statement. Based upon such Liquidation Analysis, the Proponents
believe that the Plan satisfies the requirements of Bankruptcy Code Section
1129(a)(7) because Creditors and Holders of Interests will receive as much or
more under the Plan than they would receive in a Chapter 7 liquidation of the
Debtors. C. Cramdown

         The Bankruptcy Court can confirm the Plan at the request of the
Proponents if all the requirements of Section 1129(a) of the Bankruptcy Code
except Section 1129(a)(8) are met and at least one class of Claims or Interests
Impaired by the Plan has accepted the Plan, and if, as to each Impaired class
which has not accepted the Plan, the Plan "does not discriminate unfairly" and
is "fair and equitable." As noted above, Class 10 (which includes the Holders of
Interests in Holdings) are deemed to have rejected the Plan. If any of Classes
4, 5 or 8 vote to accept the Plan, the Proponents will seek confirmation of the
Plan pursuant to Section 1129(b). The Plan may be confirmed under Section
1129(b)(2)(C) because there are no junior interests classified in Classes 9 or
10 that will receive or retain any property under the Plan.
1.       No Unfair Discrimination

         A plan of reorganization does not discriminate unfairly if: (i) the
legal rights of a nonaccepting Class are treated in a manner that is consistent
with the treatment of other Classes of equal rank; and (ii) no Class receives
payments in excess of those which it is legally entitled to receive for its
Claims or Interests. The Proponents believe that under the Plan: (a) all Classes
of Impaired Claims and Impaired Interests are treated in a manner which is
consistent with the treatment of other similar Classes of Claims and Interests;
and (b) no Class of Claims or Interests will receive payments or property with
an aggregate value greater than the sum of the Allowed Claims and Allowed
Interests in such Class. The Proponents believe that the Plan does not
discriminate unfairly as to any Impaired Class of Claims or Interests.
2.       Fair and Equitable Test

         "Fair and equitable" has different meanings for secured and unsecured
claims and Holders of interests. For a class of secured claims, "fair and
equitable" means that the plan provides (a) (i) that the Holders of secured
claims retain the liens securing such claims, whether the property subject to
such liens is retained by the debtor or transferred to another entity, to the
extent of the allowed amount of such claims; and (ii) that the Holder of a claim
of such class receive on account of such claim deferred cash payments totaling
at least the allowed amount of such claim, of a value, as of the effective date
of the plan, of at least the value of such Holder's interest in the estate's
interest in such property; (b) for the sale of any property that is subject to
the liens securing such claims, free and clear of such liens, with such liens to
attach to the proceeds of such sale, and the treatment of such liens on proceeds
under (a) or (c) of this subsection; or (c) for the realization by such Holders
of the "indubitable equivalent" of such claims.
         For a class of unsecured claims, "fair and equitable" means that the
plan provides (a) that the Holder of the claim receive or retain on account of
such claim, property of a value, as of the effective date of the plan, equal to
the allowed amount of the claim; or (b) the Holder of any claim that is junior
to the claims of such class will not receive or retain on account of such junior
claim any property.
         For a class of equity interests, "fair and equitable" means either (i)
each impaired equity interest receives or retains on account of such interest
property of a value equal to the greatest of the allowed amount of any fixed
liquidation preference to which such Holder is entitled, any fixed redemption
price to which such Holder is entitled, or the value of such interest; or (ii)
the Holder of any interest that is junior to the interest of such class will not
receive or retain under the Plan on account of such junior interest any
property. The Proponents believe that the Plan satisfies the "fair and
equitable" test and does not discriminate unfairly with respect to any Impaired
Class.






Dated:   Mobile, Alabama
            August __, 2002
MOBILE ENERGY SERVICES HOLDINGS, INC.
By:      _____________________________________________________
Its:     _____________________________________________________
MOBILE ENERGY SERVICES COMPANY, L.L.C.
By:      _____________________________________________________
Its:     _____________________________________________________
                           CABANISS, JOHNSTON, GARDNER,
                                 DUMAS & O'NEAL


                     By:__________________________________________________
                     Donald J. Stewart
                     700 Riverview Plaza
                     Mobile, Alabama  36602
                     (251) 433-6961 - Telephone
                     (251) 415-7350 - Telecopy

                     COUNSEL FOR THE DEBTORS



                     ANDREWS & KURTH L.L.P.


                     By:__________________________________________________
                     Jeffrey E. Spiers
                     David A. Zdunkewicz
                     600 Travis, Suite 4200
                     Houston, Texas  77002
                      (713) 220-4200 - Telephone
                      (713) 220-4285 - Telecopy

                     SPECIAL COUNSEL FOR THE DEBTORS











                              SELECTED DEFINITIONS
          "AAA" means the American Arbitration Association.

          "Aggregate Demand" means the sum of the Mills' Demand levels for a
particular Processing Service.

          "APCo" means Alabama Power Company.

         "Closure Arbitration" means the arbitration proceeding initiated by KC
on or about December 7, 1998, with the AAA and assigned case No.
30-181-00785098.

          "Bankruptcy Event" means, with respect to any person, (1) such
Person's general inability, or its admission of its inability, to pay its debts
as such debts become due, (2) the application by such Person for or its consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(3) the commencement by such Person of a voluntary case under the Bankruptcy
Code, (4) the making by such Person of a general assignment for the benefit of
its creditors, (5) the filing of a petition by such Person seeking to take
advantage as a debtor of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement, winding-up or
readjustment of debts, (6) the failure by such Person to controvert in a timely
and appropriate manner, or its acquiescence in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code, (7) the taking of
any corporate or other action by such Person for the purpose of effecting any of
the foregoing, (8) the commencement of a proceeding or case, without the
application or consent of such Person, in any court seeking (A) such Person's
reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (B) the appointment of a trustee,
receiver, custodian, liquidator, examiner or the like of such Person or all or
any substantial part of its property or (C) similar relief in respect of such
Person under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect for a period of 60 or more days, or (9) an order for relief against such
Person shall be entered in an involuntary case under the Bankruptcy Code.

          "Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in Mobile, Alabama are authorized or required by law
to close.

          "Cogen Facility" means the approximately 165 megawatt cogeneration
facility which may be developed in whole or in part by Mobile Energy or
Reorganized Mobile Energy.

         "Debevoise & Plimpton" means the law firm of Debevoise & Plimpton,
co-counsel to the Bondholder Steering Committee.

          "Deltak" means Deltak, L.L.C.

         "Demand Charges" means the fixed capacity charges based upon formulas
set forth in the MOA.

          "Easement Deeds" means the bilateral easement deeds among the Mill
Owners and Mobile Energy which grant access, use and encroachment rights to
operate the Mills and the Energy Complex.

          "End of Term Option" means Mobile Energy's option to purchase the
premises leased to Mobile Energy under the Direct Lease at the end of the Direct
Lease term.

         "EPA" means the Environmental Protection Agency.

         "Equity Account" means the Account so designated and established
pursuant to the Intercreditor Agreement.

          "Exempt Wholesale Generator" means an exempt wholesale generator as
defined in Section 32 of the Public Utilities Holding Company Act, 15 U.S.C. ss.
78z-5(a).

          "Governmental Rule" means any rule, regulation, ordinance, order,
code, permit, interpretation, judgment, decree, directive, guideline, policy or
similar decision of any governmental authority having the effect and force of
law.

         "Gulf Power" means Gulf Power Company, an affiliate of SCS.

          "Injunction Litigation" means the litigation initiated by Mobile
Energy in the Circuit Court of Mobile County, Alabama, seeking to enjoin the
Arbitration, which case was subsequently removed to the District Court and was
assigned Case No. CV 98-1294-RV-C.

          "Jubilee Pulp" means Jubilee Pulp, Inc., a South Carolina corporation.

          "KC Settlement Agreement" means the Settlement Agreement by and among
KC, Mobile Energy, and Holdings, entered into as of February 8, 2000, including
the exhibits thereto, any and all waivers and amendments related thereto.


         "Leased Premises" means the property leased to Mobile pursuant to the
Direct Lease.

          "Liquor Processing Services" means the processing of weak black liquor
produced by the Pulp Mill into green liquor as described in the Disclosure
Statement.

          "McDermott Will & Emery" means the law firm of McDermott, Will &
Emery, co-counsel to the Bondholder Steering Committee.

         "MESC Transfer Obligations" has the meaning given to it in the Cogen
Development Agreement.

         "Mill Closure" has the meaning given the term in the Master Operating
Agreement.

         "Mill Environmental Indemnity Agreements" has the same meaning given
the term in Mobile Energy's 1997 Form 10-K a copy of which is attached hereto as
Exhibit "E" and incorporated herein by reference.

          "Mills" means the Pulp Mill, the Tissue Mill and the Paper Mill.

     "Mobile Energy" means the debtor, Mobile Energy Services Company, L.L.C.,
and it refers to the Reorganized Debtor as the context may require.

     "Mobile Planning Commission" means the City of Mobile Planning Commission.

          "New Common Stock Transfer Restriction" means that no transfer of New
Common Stock shall be made to the extent that such transfer would result in the
failure to satisfy the following condition (specified in a current agreement
between GEII and Mirant) precedent to Mirant's right to assign to reorganized
Mobile Energy all of Mirant's rights under the LTSA.

         "OEC" means Operational Energy Corp. a California corporation.

          "Option Agreement" means the option to purchase certain property
granted to Mobile Energy under the option agreement by and between Mobile Energy
and KC dated as of February 8, 2000, and attached to the KC Settlement Agreement
attached as Exhibit S-2 to the Plan.

          "Paper Mill ESA" means the Paper Mill Energy Services Agreement dated
as of December 12, 1994 between S.D. Warren, in its capacity as Paper Mill
Owner, and Mobile Energy, as amended.

          "Power Processing Services" means the processing of various fuels and
water provided by the Mills together with other fuel obtained by Mobile Energy
into electricity.

          "Processing Charges" has the meaning given to it in Section V (1) of
this Disclosure Statement.

         "Processing Services" means has the meaning given to it in Section V
(1) of this Disclosure Statement.

          "Pulp Mill ESA" means the Pulp Mill Energy Services Agreement, dated
as of December 12, 1994 between KC, in its capacity as Pulp Mill Owner, and
Mobile Energy.

         "Qualifying Facility" means a qualifying facility as defined in
Sections 201 and 210 of the Public Utilities Regulatory Policies Act of 1978,
and any regulations promulgated thereunder.

          "Scott Environmental Indemnity Agreement" has the same meaning given
the term in Mobile Energy's 1997 Form 10-K, a copy of which is attached hereto
as Exhibit E and incorporated herein by reference.

          "Scott" means Scott Paper Company.

          "SEI Equity Investment" has the meaning set forth in the Cogen
Development Agreement.

         "Senior Debt" means the First Mortgage Bonds, the Tax-Exempt Bonds, and
the Working Capital Facility.

          "Southern Entities" means collectively, Southern, Mirant, Mirant
Services, SCS or any other Southern affiliate.

          "Steam Processing Services" means the processing of various fuels and
water provided by the Mills together with other fuel obtained by Mobile Energy
into steam.

          "Tissue Mill ESA" means the Tissue Mill Energy Services Agreement
dated as of December 12, 1994 between KC, in its capacity as Tissue Mill Owner,
and Mobile Energy.

          "Transaction Fee" means Fee paid to a Professional Person pursuant to
a Bankruptcy Court order.

          "Uniform Commercial Code" means the Uniform Commercial Code of the
jurisdiction the law of which governs the document in which such term is used.

          "Water Agreement" has the definition given to it in Section V.D.7 of
the Disclosure Statement.

EX-99

                                                                    Exhibit A-1a
                                               Class 4 Beneficaial Holder Ballot

             NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INSTRUCTIONS
            OR ADVICE OR TO MAKE ANY REPRESENTATION, OTHER THAN WHAT
             IS CONTAINED IN THE MATERIALS MAILED WITH THIS BALLOT.

                      IN THE UNITED STATES BANKRUPTCY COURT
                      FOR THE SOUTHERN DISTRICT OF ALABAMA

In re:                            ss.
MOBILE ENERGY SERVICES            ss.            Case No. 99-10168
COMPANY, L.L.C.,                  ss.            Chapter 11
                  Debtor.         ss.
In re:                            ss.
MOBILE ENERGY SERVICES            ss.            Case No. 99-10170
HOLDINGS, INC.,                   ss.            Chapter 11
                  Debtor.         ss.   (Jointly Administered Under 99-10168)

               BENEFICIAL HOLDER BALLOT FOR ACCEPTING OR REJECTING
                   THIRD AMENDED JOINT PLAN OF REORGANIZATION
                       DATED OCTOBER 15, 2001, AS MODIFIED
             PROPOSED BY MOBILE ENERGY SERVICES COMPANY, L.L.C., AND
                      MOBILE ENERGY SERVICES HOLDINGS, INC.

     Class 4 - Holders of First Mortgage Bondholder Claims - CUSIP #607358AA6

             PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
                     CAREFULLY BEFORE COMPLETING THE BALLOT.

              PLEASE CHECK THE APPROPRIATE SPACE BELOW TO INDICATE
             YOUR ACCEPTANCE OR REJECTION OF THE THIRD AMENDED PLAN.

                PLEASE CONSIDER WHETHER TO CHECK THE APPROPRIATE
                     SPACE BELOW TO MAKE THE ELECTION UNDER
                    SECTION 13.04 OF THE THIRD AMENDED PLAN.

- -------------------------------------------------------------------------------

YOU HAVE RECEIVED A RETURN ENVELOPE ADDRESSED TO A BROKER, BANK, NOMINEE, OR
PROXY INTERMEDIARY. YOU MUST RETURN YOUR BALLOT TO YOUR BROKER, BANK, NOMINEE,
OR PROXY INTERMEDIARY EARLY ENOUGH FOR YOUR VOTE TO BE PROCESSED AND THEN
FORWARDED BY THE BROKER, BANK, NOMINEE, OR PROXY INTERMEDIARY TO INNISFREE M&A
INCORPORATED, 501 MADISON AVENUE, 20TH FLOOR, NEW YORK, NEW YORK 10022 (THE
"BALLOTING AGENT") BY 5:00 P.M. EASTERN TIME ON __________________, 2002 (THE
"VOTING DEADLINE"). THEREFORE, PLEASE ALLOW ADDITIONAL TIME.
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------

         The Bankruptcy Court has approved the Disclosure Statement (the
"Disclosure Statement") with the regard to the Third Amended Joint Plan of
Reorganization Dated October 15, 2001, as modified, Proposed by Mobile Energy
Services Company, L.L.C., and Mobile Energy Services Holdings, Inc. (the "Third
Amended Plan"). The Disclosure Statement provides information to assist you in
deciding how to vote your Ballot. If you do not have a Disclosure Statement, you
may obtain a copy from the Balloting Agent or from counsel for the Debtors.
Bankruptcy Court approval of the Disclosure Statement does not indicate approval
of the Third Amended Plan by the Bankruptcy Court.

         You should review the Disclosure Statement and the Third Amended Plan
before you vote. You may wish to seek legal advice concerning the Third Amended
Plan and your classification and treatment under the Third Amended Plan. Your



Claim has been placed in Class 4 under the Third Amended Plan. If you hold
Claims in more than one Class, you will receive a Ballot for each Class in which
you are entitled to vote. If your Ballot is not received by the Balloting Agent
on or before 5:00 p.m. Eastern Time, on _______________, 2002, your vote will
not count as either an acceptance or rejection of the Third Amended Plan. If the
Third Amended Plan is confirmed by the Bankruptcy Court, it will be binding on
you whether or not you vote.

Item 1 - Amount of First Mortgage Bondholder Claim.

         On_______________, 2002, the Record Date, the undersigned was the
Beneficial Holder of $____________________ of the Debtors' First Mortgage Bonds.

Item 2 - Class 4 Vote.

         The Beneficial Holder of the First Mortgage Bondholder Claims set forth
in Item 1 votes as follows (please check one):

         ________  To Accept (VOTE FOR) the Third Amended Plan

         ________  To Reject (VOTE AGAINST) the Third Amended Plan

Item 3 - Certification as to First Mortgage Bondholder Claim.

 ----------------------------------- ---------------------------------------
   Name of Record Holder*                   Current Principal Amount
 ----------------------------------- ---------------------------------------
 ----------------------------------- ---------------------------------------

 ----------------------------------- ---------------------------------------
 ----------------------------------- ---------------------------------------

 ----------------------------------- ---------------------------------------
 ----------------------------------- ---------------------------------------

 ----------------------------------- ---------------------------------------
 ----------------------------------- ---------------------------------------

 ----------------------------------- ---------------------------------------
 ----------------------------------- ---------------------------------------

 ----------------------------------- ---------------------------------------

- -------------------------------------------------------------------------------
* Insert your name if the First Mortgage Bondholder Claims identified on this
Ballot are held by you in record name or, if held by a nominee or agent, please
insert the name of the nominee or agent through which you own your First
Mortgage Bondholder Claims.

Item 4 - Certifications.

         By signing this Ballot, the undersigned certifies:

         (a) that no other Ballots have been cast with respect to the First
Mortgage Bondholder Claims identified in Item 1, or if earlier Ballots were
cast, such earlier Ballots are hereby revoked;

         (b) that a copy of the Disclosure Statement relating to the Third
Amended Plan, together with a copy of the Third Amended Plan, has been provided
to and reviewed by the undersigned; and

         (c) that as the Beneficial Holder of the amount of First Mortgage
Bondholder Claims set forth in Item 1, the undersigned has full power and
authority to vote to accept or reject the Third Amended Plan and to make the
election in Item 5 below. The undersigned also acknowledges that this
solicitation is subject to all the terms and conditions set forth in the
Disclosure Statement relating to the Third Amended Plan.





Item 5 - Releases

         The Beneficial Holder of the First Mortgage Bondholder Claims set forth
in Item 1 elects:

                  Check this box if you wish to release, waive, and forever
discharge your rights, if any, against certain persons and entities as set forth
in Section 13.04 of the Plan and as described in Article IX P.3. of the
Disclosure Statement. You are under no obligation to check this box. The
treatment of your claim as defined in the Third Amended Plan will not be
affected by your election not to check this box.

Item 6 - You are urged to vote to accept the Third Amended Plan.


Dated:                  Name of Voter:
       ------------                    ------------------------------
                                          (Print or Type)

                        Social Security or Tax I.D. No.:
                                                         ------------

                        Signature:
                                   ----------------------------------

                        By:
                            -----------------------------------------
                                          (If Appropriate)

                        Title:
                               --------------------------------------
                                          (If Appropriate)

                        Street Address:
                                        -----------------------------

                        City, State, and Zip Code:
                                                   ------------------

                        Telephone No.:
                                       ------------------------------

                        DTC Participant No.:
                                             ------------------------







                               VOTING INSTRUCTIONS

                         PLEASE COMPLETE, SIGN, AND DATE
                       YOUR BALLOT AND RETURN IT PROMPTLY.

              YOUR BALLOT MUST BE RECEIVED BY THE BALLOTING AGENT:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

          BY 5:00 P.M. EASTERN TIME, ON OR BEFORE _____________, 2002,
                        OR YOUR VOTE WILL NOT BE COUNTED.

       CONSEQUENTLY, IT IS IMPORTANT FOR YOU TO TIMELY RETURN YOUR BALLOT.

                     INSTRUCTIONS FOR COMPLETING THE BALLOT

         1. All capitalized terms used in the Ballot or Voting Instructions, but
not otherwise defined therein, shall have the meanings ascribed to them in the
Third Amended Plan.

         2. The Third Amended Plan can be confirmed by the Bankruptcy Court and
thereby made binding upon you if it is accepted by the Holders of at least
two-thirds in amount and more than one-half in number of the Claims in each
Impaired Class of Claims that vote on the Third Amended Plan and by the Holders
of at least two-thirds in amount of the Equity Interests in each Impaired Class
of Equity Interests that vote on the Third Amended Plan, and if the Third
Amended Plan otherwise satisfies the requirements of Section 1129(a) of the
Bankruptcy Code. If the requisite acceptances are not obtained, the Bankruptcy
Court may nonetheless confirm the Third Amended Plan if it finds that the Third
Amended Plan provides fair and equitable treatment to, and does not discriminate
unfairly against, the Class or Classes of Claims or Equity Interests rejecting
it, and otherwise satisfies the requirements of Section 1129(b) of the
Bankruptcy Code. As described in Article XV of the Disclosure Statement, the
Proponents will seek confirmation of the Third Amended Plan under Section
1129(b) of the Bankruptcy Code (known as the cramdown section) because of the
deemed non-acceptance of the Holders of Equity Interests in Class 10. The
Proponents also reserve the right to proceed under Section 1129(b) if any
Impaired Class of Claims or Equity Interests do not accept the Third Amended
Plan. IF YOUR BALLOT IS NOT RECEIVED BY THE BALLOTING AGENT PRIOR TO THE VOTING
DEADLINE, THEN YOUR VOTE IN FAVOR OF ACCEPTANCE OR REJECTION OF THE THIRD
AMENDED PLAN WILL NOT BE COUNTED.

         3. To ensure that your vote is counted, you must (i) complete your
Ballot; (ii) indicate your decision either to accept or reject the Third Amended
Plan in the spaces provided in Item 2 of the Ballot; (iii) sign and return the
Ballot to the address set forth on the enclosed prepaid envelope. Your Ballot
must be received by the Balloting Agent at Innisfree M&A Incorporated, 501
Madison Avenue, 20th Floor, New York, New York 10022 not later than
____________, 2002, 5:00 p.m. Eastern Time (the "Voting Deadline"). If a Ballot
is received after the Voting Deadline, it will not be counted. BECAUSE YOU
RECEIVED A RETURN ENVELOPE ADDRESSED TO A BROKER, BANK, NOMINEE, OR PROXY
INTERMEDIARY, YOU MUST RETURN YOUR BALLOT TO YOUR BROKER, BANK, NOMINEE, OR
PROXY INTERMEDIARY EARLY ENOUGH FOR YOUR VOTE TO BE PROCESSED AND THEN FORWARDED
BY THE BROKER, BANK, NOMINEE, OR PROXY INTERMEDIARY TO THE BALLOTING AGENT BY
THE VOTING DEADLINE. THEREFORE, PLEASE ALLOW ADDITIONAL TIME.

         4. If multiple Ballots are received from a Beneficial Holder of First
Mortgage Bondholder Claims with respect to the same First Mortgage Bondholder
Claim prior to the Voting Deadline, the last Ballot timely received will
supersede and revoke any earlier received Ballots.

         5. Your Ballot may not be used for any purpose other than to vote to
accept or reject the Third Amended Plan and elect treatment for the
distributions on account of your Claims under the Third Amended Plan.

     6. Your Ballot does not constitute, and shall not be deemed to be, a proof
of Claim or an assertion or admission of a Claim.

         7. Please be sure to sign and date your Ballot. If you are completing
the Ballot on behalf of an entity, indicate your relationship with such entity



and the capacity in which you are signing. In addition, please provide your name
and mailing address if different from that set forth on the attached mailing
label or if no such mailing label is attached to your Ballot.

         8. If you hold Claims in more than one Class under the Third Amended
Plan, you may receive more than one Ballot, one for each different Class. Each
Ballot votes only your Claims indicated on that Ballot. Please complete and
return each Ballot that you receive.

         9. The Ballot must be returned in sufficient time to allow it to be
RECEIVED by the Balloting Agent by no later than 5:00 p.m. Eastern Time, on or
before the Voting Deadline. If you believe you have received the wrong Ballot,
please contact the Balloting Agent, counsel for the Debtors, or your broker or
bank immediately.

                        PLEASE MAIL YOUR BALLOT PROMPTLY

    IF YOU HAVE ANY QUESTIONS REGARDING THIS BALLOT OR THE VOTING PROCEDURES,
PLEASE CONTACT THE BALLOTING AGENT, AND EVERY EFFORT WILL BE MADE TO ASSIST YOU:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022




                                                           Class 4 Master Ballot


             NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INSTRUCTIONS
               OR ADVICE OR TO MAKE ANY REPRESENTATION, OTHER THAN
               WHAT IS CONTAINED IN THE MATERIALS MAILED WITH THIS
                                 MASTER BALLOT.

                      IN THE UNITED STATES BANKRUPTCY COURT
                      FOR THE SOUTHERN DISTRICT OF ALABAMA

In re:                          ss.
MOBILE ENERGY SERVICES          ss.                 Case No. 99-10168
COMPANY, L.L.C.,                ss.                 Chapter 11
                  Debtor.       ss.
In re:                          ss.
MOBILE ENERGY SERVICES          ss.                 Case No. 99-10170
HOLDINGS, INC.,                 ss.                 Chapter 11
                  Debtor.       ss.        (Jointly Administered Under 99-10168)

                    MASTER BALLOT FOR ACCEPTING OR REJECTING
                   THIRD AMENDED JOINT PLAN OF REORGANIZATION
                      DATED OCTOBER 15, 2001, AS MODIFIED,
             PROPOSED BY MOBILE ENERGY SERVICES COMPANY, L.L.C., AND
                      MOBILE ENERGY SERVICES HOLDINGS, INC.

    Class 4 - Holders of First Mortgage Bondholder Claims - CUSIP #607358AA6

         This Master Ballot may not be used for any purpose other than for
casting votes in favor of acceptance or rejection of the Third Amended Joint
Plan of Reorganization Dated October 15, 2001, as modified, Proposed by Mobile
Energy Services Company, L.L.C., and Mobile Energy Services Holdings, Inc. (the
"Third Amended Plan") and for reporting the elections made by Beneficial Holders
of Allowed First Mortgage Bondholder Claims. All capitalized terms used in the
Master Ballot or Voting Instructions, but not otherwise defined therein, shall
have the meanings ascribed to them in the Third Amended Plan.

         This Master Ballot is being sent to brokers, proxy intermediaries, and
other nominees of Beneficial Holders ("Banks and Brokers") and is to be used by
Banks and Brokers for purposes of casting votes in favor of acceptance or
rejection of the Third Amended Plan on behalf of and in accordance with the
Ballot/Voting Instructions cast by the Beneficial Holders holding Allowed First
Mortgage Bondholder Claims and to report the results of the elections made by
such Holders under Section 13.04 of the Third Amended Plan. Master Ballots must
be received by Innisfree M&A Incorporated, 501 Madison Avenue, 20th Floor, New
York, New York 10022 (the "Balloting Agent"), by 5:00 p.m. Eastern Time on
_________________, 2002 (the "Voting Deadline") in order to be counted.

             PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
                 CAREFULLY BEFORE COMPLETING THIS MASTER BALLOT.

              PLEASE CHECK THE APPROPRIATE SPACE BELOW TO INDICATE
               ACCEPTANCE OR REJECTION OF THE THIRD AMENDED PLAN.

             PLEASE IDENTIFY THE RESPECTIVE CUSTOMER ACCOUNT NUMBERS
                OR THE RESPECTIVE SEQUENCE NUMBERS OF THE HOLDERS
                 WHO HAVE MADE THE ELECTION SET FORTH IN SECTION
                               13.04 OF THE PLAN.

Item 1 - Amount of First Mortgage Bondholder Claims.

         On ______________, 2002, the Record Date, the undersigned was the
record holder of $___________________ of the Debtors' First Mortgage Bonds ( the
"First Mortgage Bondholder Claims") for which voting instructions have been
received from beneficial holders (the "Beneficial Holders") as listed in Item 3
below.




Item 2 - Class 4 Vote.

         As instructed by the Beneficial Holders of the aggregate number of
First Mortgage Bondholder Claims as set forth in Item 1 above, the undersigned
transmits the following votes of such Beneficial Holders in respect of their
First Mortgage Bondholder Claims.

To Accept (Vote FOR) the Third Amended Plan.


Aggregate Amount of First Mortgage Bondholder Claims Aggregate number of Holders


To Reject (Vote AGAINST) the Third Amended Plan.


Aggregate Amount of First Mortgage Bondholder Claims Aggregate number of Holders

Item 3 - Number of Beneficial Holders of First Mortgage Bondholder Claims.

         The undersigned certifies that the following vote of the Beneficial
Holders of First Mortgage Bondholder Claims, as identified by their respective
customer account numbers or the respective sequence numbers set forth below, has
been delivered to the undersigned by Ballots casting the following votes
(indicate the aggregate current principal amount for each respective account
under the appropriate column):

- --------------------------------------------------------------------------------
                                 Insert Amounts
- --------------------------------------------------------------------------------
- ---------------------------------------- --------------------------- -----------
       Customer Account No.         Accept the First          Reject the Third
       and/or Customer Name           Amended Plan              Amended Plan
    for each Beneficial Holder         (VOTE FOR)              (VOTE AGAINST)
- --------------------------------- ------------------------ ---------------------
- --------------------------------- ------------------------ ---------------------
1.
- --------------------------------- ------------------------ ---------------------
- --------------------------------- ------------------------ ---------------------
2.
- --------------------------------- ------------------------ ---------------------
- --------------------------------- ------------------------ ---------------------
3.
- --------------------------------- ------------------------ ---------------------
- --------------------------------- ------------------------ ---------------------
4.
- --------------------------------- ------------------------ ---------------------
- --------------------------------- ------------------------ ---------------------
5.
- --------------------------------- ------------------------ ---------------------

Item 4 - Certification.

         By signing this Master Ballot, the undersigned certifies:

(a) that each Beneficial Holder of an Allowed First Mortgage Bondholder Claim
whose votes are being transmitted by this Master Ballot has been provided with a
copy of the Disclosure Statement relating to the Third Amended Plan, together
with a copy of the Third Amended Plan; and

(b) that the undersigned is the registered or record owner of the aggregate
amount of First Mortgage Bondholder Claims set forth in Item 1 and has full
power and authority to vote to accept or reject the Third Amended Plan on behalf
of the Beneficial Holders identified in Item 3. The undersigned also
acknowledges that the solicitation of votes herein is subject to all the terms
and conditions set forth in the Disclosure Statement.


Item 5 - Releases.

         The undersigned certifies that the following Beneficial Holders of
First Mortgage Bondholder Claims, as identified by their respective customer
account numbers or the respective sequence numbers set forth below, have made
the election set forth in Section 13.04 of the Plan and described in Article IX
P.3. of the Disclosure Statement (indicate the Customer Account Number and/or
the Customer Name for each Beneficial Holder):


 --------------------------------------------
             Customer Acct. No.
            and/or Customer Name
         for each Beneficial Holder
 --------------------------------------------
 --------------------------------------------
 1.
 --------------------------------------------
 --------------------------------------------
 2.
 --------------------------------------------
 --------------------------------------------
 3.
 --------------------------------------------
 --------------------------------------------
 4.
 --------------------------------------------
 --------------------------------------------
 5.
 --------------------------------------------



Dated:             Name of Voter:
       ------------               --------------------------------------
                                     (Print or Type)

                   Social Security or Tax I.D. No.:
                                                    --------------------

                   Signature:
                              ------------------------------------------

                   By:
                       -------------------------------------------------
                                     (If Appropriate)

                   Title:
                          ----------------------------------------------
                                     (If Appropriate)

                   Street Address:
                                   -------------------------------------

                   City, State, and Zip Code:
                                              --------------------------

                   Telephone No.:
                                  --------------------------------------

                   DTC Participant No.:
                                        --------------------------------


           THIS MASTER BALLOT MUST BE RECEIVED BY THE BALLOTING AGENT:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

          BY 5:00 P.M. EASTERN TIME, ON OR BEFORE _____________, 2002,
                        OR YOUR VOTE WILL NOT BE COUNTED.





           THIS MASTER BALLOT MUST BE RECEIVED BY THE BALLOTING AGENT:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

          BY 5:00 P.M. EASTERN TIME, ON OR BEFORE _____________, 2002,
                        OR YOUR VOTE WILL NOT BE COUNTED.

                  INSTRUCTIONS FOR COMPLETING THE MASTER BALLOT

         The Proponents are soliciting the votes of Holders of Allowed First
Mortgage Bondholder Claims with respect to the Third Amended Plan referred to in
the Disclosure Statement (a copy of which is enclosed herewith).

         The Third Amended Plan can be confirmed by the Bankruptcy Court and
thereby made binding upon Creditors if it is accepted by the Holders of at least
two-thirds in amount and more than one-half in number of the Claims in each
Impaired Class of Claims that vote on the Third Amended Plan and by the Holders
of at least two-thirds in amount of the Equity Interests in each Impaired Class
of Equity Interests that vote on the Third Amended Plan, and if the Third
Amended Plan otherwise satisfies the requirements of Section 1129(a) of the
Bankruptcy Code. If the requisite acceptances are not obtained, the Bankruptcy
Court may nonetheless confirm the Third Amended Plan if it finds that the Third
Amended Plan provides fair and equitable treatment to, and does not discriminate
unfairly against, the Class or Classes of Claims or Equity Interests rejecting
it, and otherwise satisfies the requirements of Section 1129(b) of the
Bankruptcy Code. As described in Article XV of the Disclosure Statement, the
Proponents will seek confirmation of the Third Amended Plan under Section
1129(b) of the Bankruptcy Code (known as the cramdown section) because of the
deemed non-acceptance of the Holders of Equity Interests in Class 10. The
Proponents also reserve the right to proceed under Section 1129(b) if any
Impaired Class of Claims or Equity Interests do not accept the Third Amended
Plan. To have the votes of your Beneficial Holders count, you must complete and
return this Master Ballot by the Voting Deadline (as defined below).

         You should deliver the Beneficial Holder Ballot and other documents
relating to the Third Amended Plan, including the Disclosure Statement
(collectively, "Solicitation Materials") to each Beneficial Holder of First
Mortgage Bondholder Claims and take any action required to enable each such
Beneficial Holder to vote the First Mortgage Bondholder Claims held by such
Beneficial Holder. With regard to any Beneficial Holder Ballots returned to you,
to have the vote of your Beneficial Holder count, you must not later than
____________, 2002, 5:00 p.m. Eastern Time (the "Voting Deadline") either: (i)
forward such Beneficial Holder Ballots to the Balloting Agent at Innisfree M&A
Incorporated, 501 Madison Avenue, 20th Floor, New York, New York 10022
indicating the appropriate authority to vote from such Beneficial Holder Ballot
submitted; or (ii)(a) retain such Beneficial Holder Ballots in your files and
transfer the requested information from each such Beneficial Holder Ballot onto
the attached Master Ballot or your computer generated version of the Master
Ballot that contains the same information (b) execute the Master Ballot, and (c)
arrange for delivery by courier, overnight delivery, U.S. Mail, or by hand
delivery of such Master Ballot to the Balloting Agent at Innisfree M&A
Incorporated, 501 Madison Avenue, 20th Floor, New York, New York 10022. Please
keep any records of the voting instructions received from Beneficial Holders,
including all Beneficial Holder Ballots, until December 31, 2003 (or such other
date as is set by subsequent Bankruptcy Court order).

         To properly complete the Master Ballot, take the following steps:

     1. provide appropriate information for each of the items on the Master
Ballot. Please note that Item 3 requests information for each individual
beneficial holder for whom you hold First Mortgage Bondholder Claims in your
name (the "Beneficial Holders"). To identify such Beneficial Holders without
disclosing their names, please use the customer account number assigned by you
to identify each such Beneficial Holder or, if no such customer account number
exists, please use the sequential numbers provided (making sure to retain a
separate list of each Beneficial Holder and his or her assigned sequential
number);

     2. vote to accept or reject the Third Amended Plan in Item 2 for the First
Mortgage Bondholder Claims held by you as the registered holder on behalf of the
Beneficial Holders;

     3. identify the Beneficial Holders who made the elections set forth in
Section 13.04 of the Plan;

     4. sign and date your Master Ballot;

     5. if you are completing this Master Ballot on behalf of another entity,
state the title of such entity; and




     6. provide your name and mailing address if different from the preprinted
address on the Master Ballot or if no preprinted address appears on the Master
Ballot.

     The Debtor requests that you retain in your files the Ballots received from
the Beneficial Holders at least until December 31, 2003 (or such other date as
is set by subsequent Bankruptcy Court order).

     o    You should deliver the green-colored Ballot to each Beneficial Holder
          of First Mortgage Bondholder Claims and take any action required to
          enable each such Beneficial Holder to vote its respective First
          Mortgage Bondholder Claims in favor of acceptance or rejection of the
          Third Amended Plan. With regard to any Ballots returned to you, you
          must either (i) forward such Ballots to the Balloting Agent; or
          (ii)(a) retain such Ballots in your files and transfer the requested
          information from each such Ballot onto the attached Master Ballot; (b)
          execute the Master Ballot; and (c) arrange for delivery of such Master
          Ballot to the Balloting Agent at the address above.

     o    If you are both the registered holder and Beneficial Holder of any of
          the First Mortgage Bondholder Claims and you wish to vote such First
          Mortgage Bondholder Claims, you may return either a Ballot or a Master
          Ballot.

     o    YOUR MASTER BALLOT MUST BE DELIVERED TO THE BALLOTING AGENT BY
          COURIER, OVERNIGHT DELIVERY, U.S. MAIL, OR HAND DELIVERY PRIOR TO THE
          VOTING DEADLINE. IF YOUR MASTER BALLOT IS NOT RECEIVED BY THE
          BALLOTING AGENT PRIOR TO THE VOTING DEADLINE, THEN YOUR VOTE IN FAVOR
          OF ACCEPTANCE OR REJECTION OF THE THIRD AMENDED PLAN WILL NOT BE
          COUNTED. YOUR MASTER BALLOT MUST CONTAIN AN ORIGINAL SIGNATURE.
          OTHERWISE SUCH MASTER BALLOT WILL NOT BE COUNTED. FACSIMILE COPIES OF
          YOUR MASTER BALLOT WILL NOT BE ACCEPTED OR COUNTED.

IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES,
PLEASE CONTACT THE BALLOTING AGENT, AND EVERY EFFORT WILL BE MADE TO ASSIST YOU:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

         NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU
OR ANY OTHER PERSON THE AGENT OF THE PROPONENTS OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH
RESPECT TO THE THIRD AMENDED PLAN, OTHER THAN THE STATEMENTS CONTAINED IN THE
DOCUMENTS ENCLOSED HEREWITH.





                                                       Class 5 Beneficial Holder

             NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INSTRUCTIONS
            OR ADVICE OR TO MAKE ANY REPRESENTATION, OTHER THAN WHAT
             IS CONTAINED IN THE MATERIALS MAILED WITH THIS BALLOT.

                      IN THE UNITED STATES BANKRUPTCY COURT
                      FOR THE SOUTHERN DISTRICT OF ALABAMA

In re:                            ss.
MOBILE ENERGY SERVICES            ss.             Case No. 99-10168
COMPANY, L.L.C.,                  ss.             Chapter 11
                  Debtor.         ss.
In re:                            ss.
MOBILE ENERGY SERVICES            ss.             Case No. 99-10170
HOLDINGS, INC.,                   ss.             Chapter 11
                  Debtor.         ss.    (Jointly Administered Under 99-10168)

               BENEFICIAL HOLDER BALLOT FOR ACCEPTING OR REJECTING
                   THIRD AMENDED JOINT PLAN OF REORGANIZATION
                      DATED OCTOBER 15, 2001, AS MODIFIED,
             PROPOSED BY MOBILE ENERGY SERVICES COMPANY, L.L.C., AND
                      MOBILE ENERGY SERVICES HOLDINGS, INC.

      Class 5 - Holders of Tax-Exempt Bondholders Claims - CUSIP #607168AY7

             PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
                     CAREFULLY BEFORE COMPLETING THE BALLOT.

              PLEASE CHECK THE APPROPRIATE SPACE BELOW TO INDICATE
             YOUR ACCEPTANCE OR REJECTION OF THE THIRD AMENDED PLAN.

                PLEASE CONSIDER WHETHER TO CHECK THE APPROPRIATE
                     SPACE BELOW TO MAKE THE ELECTION UNDER
                    SECTION 13.04 OF THE THIRD AMENDED PLAN.

- -------------------------------------------------------------------------------

YOU HAVE RECEIVED A RETURN ENVELOPE ADDRESSED TO A BROKER, BANK, NOMINEE, OR
PROXY INTERMEDIARY. YOU MUST RETURN YOUR BALLOT TO YOUR BROKER, BANK, NOMINEE,
OR PROXY INTERMEDIARY EARLY ENOUGH FOR YOUR VOTE TO BE PROCESSED AND THEN
FORWARDED BY THE BROKER, BANK, NOMINEE, OR PROXY INTERMEDIARY TO INNISFREE M&A
INCORPORATED, 501 MADISON AVENUE, 20TH FLOOR, NEW YORK, NEW YORK 10022 (THE
"BALLOTING AGENT") BY 5:00 P.M. EASTERN TIME ON __________________, 2002 (THE
"VOTING DEADLINE"). THEREFORE, PLEASE ALLOW ADDITIONAL TIME.
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------

         The Bankruptcy Court has approved the Disclosure Statement (the
"Disclosure Statement") with the regard to the Third Amended Joint Plan of
Reorganization Dated October 15, 2001, as modified, Proposed by Mobile Energy
Services Company, L.L.C., and Mobile Energy Services Holdings, Inc. (the "Third
Amended Plan"). The Disclosure Statement provides information to assist you in
deciding how to vote your Ballot. If you do not have a Disclosure Statement, you
may obtain a copy from the Balloting Agent or from counsel for the Debtors.
Bankruptcy Court approval of the Disclosure Statement does not indicate approval
of the Third Amended Plan by the Bankruptcy Court.

         You should review the Disclosure Statement and the Third Amended Plan
before you vote. You may wish to seek legal advice concerning the Third Amended
Plan and your classification and treatment under the Third Amended Plan. Your
Claim has been placed in Class 5 under the Third Amended Plan. If you hold



Claims in more than one Class, you will receive a Ballot for each Class in which
you are entitled to vote. If your Ballot is not received by the Balloting Agent
on or before 5:00 p.m. Eastern Time, on _______________, 2002, your vote will
not count as either an acceptance or rejection of the Third Amended Plan. If the
Third Amended Plan is confirmed by the Bankruptcy Court, it will be binding on
you whether or not you vote.

Item 1 - Amount of Tax-Exempt Bondholders Claim.

         On_______________, 2002, the Record Date, the undersigned was the
Beneficial Holder of $_____________________ of the Debtors' Tax-Exempt Bonds.

Item 2 - Class 5 Vote.

         The Beneficial Holder of the Tax-Exempt Bondholders Claim set forth in
Item 1 votes as follows (please check one):

         ________  To Accept (VOTE FOR) the Third Amended Plan

         ________  To Reject (VOTE AGAINST) the Third Amended Plan

Item 3 - Certification as to Tax-Exempt Bondholders Claim.

- ------------------------------------ ---------------------------------------
        Name of Record Holder*              Current Principal Amount
- ------------------------------------ ---------------------------------------
- ------------------------------------ ---------------------------------------

- ------------------------------------ ---------------------------------------
- ------------------------------------ ---------------------------------------

- ------------------------------------ ---------------------------------------
- ------------------------------------ ---------------------------------------

- ------------------------------------ ---------------------------------------
- ------------------------------------ ---------------------------------------

- ------------------------------------ ---------------------------------------
- ------------------------------------ ---------------------------------------

- ------------------------------------ ---------------------------------------

- -------------------------------------------------------------------------------
* Insert your name if the Tax-Exempt Bondholders Claims identified on this
Ballot are held by you in record name or, if held by a nominee or agent, please
insert the name of the nominee or agent through which you own your Tax-Exempt
Bondholders Claims.

Item 4 - Certifications.

         By signing this Ballot, the undersigned certifies:

         (a) that no other Ballots have been cast with respect to the Tax-Exempt
Bondholders Claims identified in Item 1, or if earlier Ballots were cast, such
earlier Ballots are hereby revoked;

         (b) that a copy of the Disclosure Statement relating to the Third
Amended Plan, together with a copy of the Third Amended Plan, has been provided
to and reviewed by the undersigned; and

         (c) that as the Beneficial Holder of the amount of Tax-Exempt
Bondholders Claims set forth in Item 1, the undersigned has full power and
authority to vote to accept or reject the Third Amended Plan and to make the
election in Item 5 below. The undersigned also acknowledges that this
solicitation is subject to all the terms and conditions set forth in the
Disclosure Statement relating to the Third Amended Plan.


Item 5 - Releases

         The Beneficial Holder of the Tax-Exempt Claims set forth in Item 1
elects:




                  Check this box if you wish to release, waive, and forever
discharge your rights, if any, against certain persons and entities as set forth
in Section 13.04 of the Plan and as described in Article IX P.3. of the
Disclosure Statement. You are under no obligation to check this box. The
treatment of your claim as defined in the Third Amended Plan will not be
affected by your election not to check this box.


Item 6 - You are urged to vote to accept the Third Amended Plan.


Dated:               Name of Voter:
       --------------               ---------------------------------------
                                       (Print or Type)

                     Social Security or Tax I.D. No.:
                                                      ---------------------

                     Signature:
                                -------------------------------------------

                     By:
                         --------------------------------------------------
                                       (If Appropriate)

                     Title:
                            -----------------------------------------------
                                       (If Appropriate)

                     Street Address:
                                     --------------------------------------

                     City, State, and Zip Code:
                                                ---------------------------

                     Telephone No.:
                                    ---------------------------------------

                     DTC Participant No.:
                                          ---------------------------------







                               VOTING INSTRUCTIONS

                         PLEASE COMPLETE, SIGN, AND DATE
                       YOUR BALLOT AND RETURN IT PROMPTLY.

              YOUR BALLOT MUST BE RECEIVED BY THE BALLOTING AGENT:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

          BY 5:00 P.M. EASTERN TIME, ON OR BEFORE _____________, 2002,
                        OR YOUR VOTE WILL NOT BE COUNTED.

       CONSEQUENTLY, IT IS IMPORTANT FOR YOU TO TIMELY RETURN YOUR BALLOT.

                     INSTRUCTIONS FOR COMPLETING THE BALLOT

         1. All capitalized terms used in the Ballot or Voting Instructions, but
not otherwise defined therein, shall have the meanings ascribed to them in the
Third Amended Plan.

         2. The Third Amended Plan can be confirmed by the Bankruptcy Court and
thereby made binding upon you if it is accepted by the Holders of at least
two-thirds in amount and more than one-half in number of the Claims in each
Impaired Class of Claims that vote on the Third Amended Plan and by the Holders
of at least two-thirds in amount of the Equity Interests in each Impaired Class
of Equity Interests that vote on the Third Amended Plan, and if the Third
Amended Plan otherwise satisfies the requirements of Section 1129(a) of the
Bankruptcy Code. If the requisite acceptances are not obtained, the Bankruptcy
Court may nonetheless confirm the Third Amended Plan if it finds that the Third
Amended Plan provides fair and equitable treatment to, and does not discriminate
unfairly against, the Class or Classes of Claims or Equity Interests rejecting
it, and otherwise satisfies the requirements of Section 1129(b) of the
Bankruptcy Code. As described in Article XV of the Disclosure Statement, the
Proponents will seek confirmation of the Third Amended Plan under Section
1129(b) of the Bankruptcy Code (known as the cramdown section) because of the
deemed non-acceptance of the Holders of Equity Interests in Class 10. The
Proponents also reserve the right to proceed under Section 1129(b) if any
Impaired Class of Claims or Equity Interests do not accept the Third Amended
Plan. IF YOUR BALLOT IS NOT RECEIVED BY THE BALLOTING AGENT PRIOR TO THE VOTING
DEADLINE, THEN YOUR VOTE IN FAVOR OF ACCEPTANCE OR REJECTION OF THE THIRD
AMENDED PLAN WILL NOT BE COUNTED.


         3. To ensure that your vote is counted, you must (i) complete your
Ballot; (ii) indicate your decision either to accept or reject the Third Amended
Plan in the spaces provided in Item 2 of the Ballot; (iii) sign and return the
Ballot to the address set forth on the enclosed prepaid envelope. Your Ballot
must be received by the Balloting Agent at Innisfree M&A Incorporated, 501
Madison Avenue, 20th Floor, New York, New York 10022 not later than
____________, 2002, 5:00 p.m. Eastern Time (the "Voting Deadline"). If a Ballot
is received after the Voting Deadline, it will not be counted. BECAUSE YOU
RECEIVED A RETURN ENVELOPE ADDRESSED TO A BROKER, BANK, NOMINEE, OR PROXY
INTERMEDIARY, YOU MUST RETURN YOUR BALLOT TO YOUR BROKER, BANK, NOMINEE, OR
PROXY INTERMEDIARY EARLY ENOUGH FOR YOUR VOTE TO BE PROCESSED AND THEN FORWARDED
BY THE BROKER, BANK, NOMINEE, OR PROXY INTERMEDIARY TO THE BALLOTING AGENT BY
THE VOTING DEADLINE. THEREFORE, PLEASE ALLOW ADDITIONAL TIME.

         4. If multiple Ballots are received from a Beneficial Holder of
Tax-Exempt Bondholders Claims with respect to the same Tax-Exempt Bondholders
Claim prior to the Voting Deadline, the last Ballot timely received will
supersede and revoke any earlier received Ballots.

         5. Your Ballot may not be used for any purpose other than to vote to
accept or reject the Third Amended Plan and to make the election provided under
the Third Amended Plan.

     6. Your Ballot does not constitute, and shall not be deemed to be, a proof
of Claim or an assertion or admission of a Claim.

         7. Please be sure to sign and date your Ballot. If you are completing
the Ballot on behalf of an entity, indicate your relationship with such entity



and the capacity in which you are signing. In addition, please provide your name
and mailing address if different from that set forth on the attached mailing
label or if no such mailing label is attached to your Ballot.

         8. If you hold Claims in more than one Class under the Third Amended
Plan, you may receive more than one Ballot, one for each different Class. Each
Ballot votes only your Claims indicated on that Ballot. Please complete and
return each Ballot that you receive.

         9. The Ballot must be returned in sufficient time to allow it to be
RECEIVED by the Balloting Agent no later than 5:00 p.m. Eastern Time, on or
before the Voting Deadline. If you believe you have received the wrong Ballot,
please contact the Balloting Agent, counsel for the Debtors, or your broker or
bank immediately.

                        PLEASE MAIL YOUR BALLOT PROMPTLY

    IF YOU HAVE ANY QUESTIONS REGARDING THIS BALLOT OR THE VOTING PROCEDURES,
PLEASE CONTACT THE BALLOTING AGENT, AND EVERY EFFORT WILL BE MADE TO ASSIST YOU:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022






                                                           Class 5 Master Ballot

             NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INSTRUCTIONS
               OR ADVICE OR TO MAKE ANY REPRESENTATION, OTHER THAN
               WHAT IS CONTAINED IN THE MATERIALS MAILED WITH THIS
                                 MASTER BALLOT.

                      IN THE UNITED STATES BANKRUPTCY COURT
                      FOR THE SOUTHERN DISTRICT OF ALABAMA

In re:                           ss.
MOBILE ENERGY SERVICES           ss.              Case No. 99-10168
COMPANY, L.L.C.,                 ss.              Chapter 11
                  Debtor.        ss.
In re:                           ss.
MOBILE ENERGY SERVICES           ss.              Case No. 99-10170
HOLDINGS, INC.,                  ss.              Chapter 11
                  Debtor.        ss.     (Jointly Administered Under 99-10168)

                    MASTER BALLOT FOR ACCEPTING OR REJECTING
                   THIRD AMENDED JOINT PLAN OF REORGANIZATION
                      DATED OCTOBER 15, 2001, AS MODIFIED,
             PROPOSED BY MOBILE ENERGY SERVICES COMPANY, L.L.C., AND
                      MOBILE ENERGY SERVICES HOLDINGS, INC.

      Class 5 - Holders of Tax-Exempt Bondholders Claims - CUSIP #607168AY7

         This Master Ballot may not be used for any purpose other than for
casting votes in favor of acceptance or rejection of the Third Amended Joint
Plan of Reorganization Dated October 15, 2001, as modified, Proposed by Mobile
Energy Services Company, L.L.C., and Mobile Energy Services Holdings, Inc. (the
"Third Amended Plan") and reporting the election set forth in Section 13.04 of
the Third Amended Plan. All capitalized terms used in the Master Ballot or
Voting Instructions, but not otherwise defined therein, shall have the meanings
ascribed to them in the Third Amended Plan.

         This Master Ballot is being sent to brokers, proxy intermediaries, and
other nominees of Beneficial Holders ("Banks and Brokers") and is to be used by
Banks and Brokers for purposes of casting votes in favor of acceptance or
rejection of the Third Amended Plan on behalf of and in accordance with the
Ballot/Voting Instructions cast by the Beneficial Holders holding Tax-Exempt
Bondholders Claims. Additionally, this Master Ballot is to be used by Banks and
Brokers to identify the elections made under Section 13.04 of the Third Amended
Plan. Master Ballots must be received by Innisfree M&A Incorporated, 501 Madison
Avenue, 20th Floor, New York, New York 10022 (the "Balloting Agent"), by 5:00
p.m. Eastern Time on _________________, 2002 (the "Voting Deadline") in order to
be counted.

             PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
                 CAREFULLY BEFORE COMPLETING THIS MASTER BALLOT.

              PLEASE CHECK THE APPROPRIATE SPACE BELOW TO INDICATE
               ACCEPTANCE OR REJECTION OF THE THIRD AMENDED PLAN.

             PLEASE IDENTIFY THE RESPECTIVE CUSTOMER ACCOUNT NUMBERS
                OR THE RESPECTIVE SEQUENCE NUMBERS OF THE HOLDERS
                 WHO HAVE MADE THE ELECTION SET FORTH IN SECTION
                               13.04 OF THE PLAN.

Item 1 - Amount of Tax-Exempt Bondholders Claims.

         On ______________, 2002, the Record Date, the undersigned was the
record holder of $___________________ of the Debtors' Tax-Exempt Bonds ( the
"Tax-Exempt Bondholders Claims") for which voting instructions have been
received from beneficial holders (the "Beneficial Holders") as listed in Item 3
below.





Item 2 - Class 5 Vote.

         As instructed by the Beneficial Holders of the aggregate number of
Tax-Exempt Bondholders Claims as set forth in Item 1 above, the undersigned
transmits the following votes of such Beneficial Holders in respect of their
Tax-Exempt Bondholders Claims.

To Accept (Vote FOR) the Third Amended Plan.


Aggregate Amount of Tax-Exempt Bondholders Claims   Aggregate number of Holders


To Reject (Vote AGAINST) the Third Amended Plan.


Aggregate Amount of Tax-Exempt Bondholders Claims   Aggregate number of Holders

Item 3 - Number of Beneficial Holders of Tax-Exempt Bondholders Claims.

         The undersigned certifies that the following vote of the Beneficial
Holders of Tax-Exempt Bondholders Claims, as identified by their respective
customer account numbers or the respective sequence numbers set forth below, has
been delivered to the undersigned by Ballots casting the following votes
(indicate the aggregate current principal amount for each respective account
under the appropriate column):

- --------------------------------------------------------------------------------
                                 Insert Amounts
- --------------------------------------------------------------------------------
- ------------------------------------- ---------------------- -------------------
       Customer Account No.              Accept the Third       Reject the Third
       and/or Customer Name                Amended Plan           Amended Plan
    for each Beneficial Holder              (VOTE FOR)           (VOTE AGAINST)
- ------------------------------------- ---------------------- -------------------
- ------------------------------------- ---------------------- -------------------
1.
- ------------------------------------- ---------------------- -------------------
- ------------------------------------- ---------------------- -------------------
2.
- ------------------------------------- ---------------------- -------------------
- ------------------------------------- ---------------------- -------------------
3.
- ------------------------------------- ---------------------- -------------------
- ------------------------------------- ---------------------- -------------------
4.
- ------------------------------------- ---------------------- -------------------
- ------------------------------------- ---------------------- -------------------
5.
- ------------------------------------- ---------------------- -------------------


Item 4 - Certification.

         By signing this Master Ballot, the undersigned certifies:

     (a) that each Beneficial Holder of an Allowed Tax-Exempt Bondholders Claim
whose votes are being transmitted by this Master Ballot has been provided with a
copy of the Disclosure Statement relating to the Third Amended Plan, together
with a copy of the Third Amended Plan; and

     (b) that the undersigned is the registered or record owner of the aggregate
amount of Tax-Exempt Bondholders Claims set forth in Item 1 and has full power
and authority to vote to accept or reject the Third Amended Plan on behalf of
the Beneficial Holders identified in Item 3. The undersigned also acknowledges
that the solicitation of votes herein is subject to all the terms and conditions
set forth in the Disclosure Statement.


Item 5 - Releases.

         The undersigned certifies that the following Beneficial Holders of
First Mortgage Bondholder Claims, as identified by their respective customer
account numbers or the respective sequence numbers set forth below, have made
the election set forth in Section 13.04 of the Plan and described in Article IX



P.3. of the Disclosure Statement (indicate the Customer Account Number and/or
the Customer Name for each Beneficial Holder):

         --------------------------------------------
                     Customer Acct. No.
                    and/or Customer Name
                 for each Beneficial Holder
         --------------------------------------------
         --------------------------------------------
         1.
         --------------------------------------------
         --------------------------------------------
         2.
         --------------------------------------------
         --------------------------------------------
         3.
         --------------------------------------------
         --------------------------------------------
         4.
         --------------------------------------------
         --------------------------------------------
         5.
         --------------------------------------------




Dated:                 Name of Voter:
       ------------                   -------------------------------------
                                         (Print or Type)

                       Social Security or Tax I.D. No.:
                                                        -------------------

                       Signature:
                                  -----------------------------------------

                       By:
                           ------------------------------------------------
                                         (If Appropriate)

                       Title:
                              ---------------------------------------------
                                         (If Appropriate)

                       Street Address:
                                       ------------------------------------

                       City, State, and Zip Code:
                                                  -------------------------

                       Telephone No.:
                                      -------------------------------------

                       DTC Participant No.:
                                            -------------------------------


           THIS MASTER BALLOT MUST BE RECEIVED BY THE BALLOTING AGENT:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

          BY 5:00 P.M. EASTERN TIME, ON OR BEFORE _____________, 2002,
                        OR YOUR VOTE WILL NOT BE COUNTED.





           THIS MASTER BALLOT MUST BE RECEIVED BY THE BALLOTING AGENT:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

          BY 5:00 P.M. EASTERN TIME, ON OR BEFORE _____________, 2002,
                        OR YOUR VOTE WILL NOT BE COUNTED.

                  INSTRUCTIONS FOR COMPLETING THE MASTER BALLOT

         The Proponents are soliciting the votes of Holders of Allowed
Tax-Exempt Bondholders Claims with respect to the Third Amended Plan referred to
in the Disclosure Statement (a copy of which is enclosed herewith).

         The Third Amended Plan can be confirmed by the Bankruptcy Court and
thereby made binding upon Creditors if it is accepted by the Holders of at least
two-thirds in amount and more than one-half in number of the Claims in each
Impaired Class of Claims that vote on the Third Amended Plan and by the Holders
of at least two-thirds in amount of the Equity Interests in each Impaired Class
of Equity Interests that vote on the Third Amended Plan, and if the Third
Amended Plan otherwise satisfies the requirements of Section 1129(a) of the
Bankruptcy Code. If the requisite acceptances are not obtained, the Bankruptcy
Court may nonetheless confirm the Third Amended Plan if it finds that the Third
Amended Plan provides fair and equitable treatment to, and does not discriminate
unfairly against, the Class or Classes of Claims or Equity Interests rejecting
it, and otherwise satisfies the requirements of Section 1129(b) of the
Bankruptcy Code. As described in Article XV of the Disclosure Statement, the
Proponents will seek confirmation of the Third Amended Plan under Section
1129(b) of the Bankruptcy Code (known as the cramdown section) because of the
deemed non-acceptance of the Holders of Equity Interests in Class 10. The
Proponents also reserve the right to proceed under Section 1129(b) if any
Impaired Class of Claims or Equity Interests do not accept the Third Amended
Plan. To have the votes of your Beneficial Holders count, you must complete and
return this Master Ballot by the Voting Deadline (as defined below).

         You should deliver the Beneficial Holder Ballot and other documents
relating to the Third Amended Plan, including the Disclosure Statement
(collectively, "Solicitation Materials") to each Beneficial Holder of Tax-Exempt
Bondholders Claims and take any action required to enable each such Beneficial
Holder to vote the Tax-Exempt Bondholders Claims held by such Beneficial Holder.
With regard to any Beneficial Holder Ballots returned to you, to have the vote
of your Beneficial Holder count, you must not later than ____________, 2002,
5:00 p.m. CDT (the "Voting Deadline") either: (i) forward such Beneficial Holder
Ballots to the Balloting Agent at Innisfree M&A Incorporated, 501 Madison
Avenue, 20th Floor, New York, New York 10022 indicating the appropriate
authority to vote from such Beneficial Holder Ballot submitted; or (ii)(a)
retain such Beneficial Holder Ballots in your files and transfer the requested
information from each such Beneficial Holder Ballot onto the attached Master
Ballot or your computer generated version of the Master Ballot that contains the
same information (b) execute the Master Ballot, and (c) arrange for delivery by
courier, overnight delivery, U.S. Mail, or by hand delivery of such Master
Ballot to the Balloting Agent at Innisfree M&A Incorporated, 501 Madison Avenue,
20th Floor, New York, New York 10022. Please keep any records of the voting
instructions received from Beneficial Holders, including all Beneficial Holder
Ballots, until December 31, 2003 (or such other date as is set by subsequent
Bankruptcy Court order).

         To properly complete the Master Ballot, take the following steps:

     1. provide appropriate information for each of the items on the Master
Ballot. Please note that Item 3 requests information for each individual
beneficial holder for whom you hold Tax-Exempt Bondholders Claims in your name
(the "Beneficial Holders"). To identify such Beneficial Holders without
disclosing their names, please use the customer account number assigned by you
to identify each such Beneficial Holder or, if no such customer account number
exists, please use the sequential numbers provided (making sure to retain a
separate list of each Beneficial Holder and his or her assigned sequential
number);

     2. vote to accept or reject the Third Amended Plan in Item 2 for the
Tax-Exempt Bondholders Claims held by you as the registered holder on behalf of
the Beneficial Holders;

     3. identify in Item 5 the Beneficial Holders who made the election set
forth in Section 13.04 of the Third Amended Plan;

     4. sign and date your Master Ballot;

     5. if you are completing this Master Ballot on behalf of another entity,
state the title of such entity; and




     6. provide your name and mailing address if different from the preprinted
address on the Master Ballot or if no preprinted address appears on the Master
Ballot.

     The Debtor requests that you retain in your files the Ballots received from
the Beneficial Holders at least until December 31, 2003, (or such other date as
is set by subsequent Bankruptcy Court order).

     o    You should deliver the beige-colored Ballot to each Beneficial Holder
          of Tax-Exempt Bondholders Claims and take any action required to
          enable each such Beneficial Holder to vote its respective Tax-Exempt
          Bondholders Claims in favor of acceptance or rejection of the Third
          Amended Plan. With regard to any Ballots returned to you, you must
          either (i) forward such Ballots to the Balloting Agent; or (ii)(a)
          retain such Ballots in your files and transfer the requested
          information from each such Ballot onto the attached Master Ballot; (b)
          execute the Master Ballot; and (c) arrange for delivery of such Master
          Ballot to the Balloting Agent at the address above.

     o    If you are both the registered holder and Beneficial Holder of any of
          the Tax-Exempt Bondholders Claims and you wish to vote such Tax-Exempt
          Bondholders Claims, you may return either a Ballot or a Master Ballot.

     o    YOUR MASTER BALLOT MUST BE DELIVERED TO THE BALLOTING AGENT BY
          COURIER, OVERNIGHT DELIVERY, U.S. MAIL, OR HAND DELIVERY PRIOR TO THE
          VOTING DEADLINE. IF YOUR MASTER BALLOT IS NOT RECEIVED BY THE
          BALLOTING AGENT PRIOR TO THE VOTING DEADLINE, THEN YOUR VOTE IN FAVOR
          OF ACCEPTANCE OR REJECTION OF THE THIRD AMENDED PLAN WILL NOT BE
          COUNTED. YOUR MASTER BALLOT MUST CONTAIN AN ORIGINAL SIGNATURE.
          OTHERWISE SUCH MASTER BALLOT WILL NOT BE COUNTED. FACSIMILE COPIES OF
          YOUR MASTER BALLOT WILL NOT BE ACCEPTED OR COUNTED.

IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING PROCEDURES,
PLEASE CONTACT THE BALLOTING AGENT, AND EVERY EFFORT WILL BE MADE TO ASSIST YOU:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

         NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU
OR ANY OTHER PERSON THE AGENT OF THE PROPONENTS OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH
RESPECT TO THE THIRD AMENDED PLAN, OTHER THAN THE STATEMENTS CONTAINED IN THE
DOCUMENTS ENCLOSED HEREWITH.





                                                                  Class 8 Ballot

             NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INSTRUCTIONS
            OR ADVICE OR TO MAKE ANY REPRESENTATION, OTHER THAN WHAT
             IS CONTAINED IN THE MATERIALS MAILED WITH THIS BALLOT.

                      IN THE UNITED STATES BANKRUPTCY COURT
                      FOR THE SOUTHERN DISTRICT OF ALABAMA

In re:                         ss.
MOBILE ENERGY SERVICES         ss.                 Case No. 99-10168
COMPANY, L.L.C.,               ss.                 Chapter 11
                  Debtor.      ss.
In re:                         ss.
MOBILE ENERGY SERVICES         ss.                 Case No. 99-10170
HOLDINGS, INC.,                ss.                 Chapter 11
                  Debtor.      ss.        (Jointly Administered Under 99-10168)

                        BALLOT FOR ACCEPTING OR REJECTING
                   THIRD AMENDED JOINT PLAN OF REORGANIZATION
                      DATED OCTOBER 15, 2001, AS MODIFIED,
             PROPOSED BY MOBILE ENERGY SERVICES COMPANY, L.L.C., AND
                      MOBILE ENERGY SERVICES HOLDINGS, INC.

                      Class 8 - Holders of Southern Claims

         This Ballot may not be used for any purpose other than for casting
votes in favor of acceptance or rejection of the Third Amended Joint Plan of
Reorganization Dated October 15, 2001, as modified, Proposed by Mobile Energy
Services Company, L.L.C., and Mobile Energy Services Holdings, Inc. (the "Third
Amended Plan") and for making the election set forth in Section 13.04 of the
Third Amended Plan. All capitalized terms used in the Ballot or Voting
Instructions, but not otherwise defined therein, shall have the meanings
ascribed to them in the Third Amended Plan.

             PLEASE READ AND FOLLOW THE ENCLOSED VOTING INSTRUCTIONS
                    CAREFULLY BEFORE COMPLETING THIS BALLOT.

               PLEASE CHECK THE APPROPRIATE BOX BELOW TO INDICATE
               ACCEPTANCE OR REJECTION OF THE THIRD AMENDED PLAN.

                PLEASE CONSIDER WHETHER TO CHECK THE APPROPRIATE
                     SPACE BELOW TO MAKE THE ELECTION UNDER
                    SECTION 13.04 OF THE THIRD AMENDED PLAN.

Item 1 - Amount of Southern Claim.

         On ______________, 2002, the undersigned was the Holder of
$___________________ of Southern Claims (the "Southern Claim").

Item 2 - Class 8 Vote.

         The undersigned transmits the following vote of with respect to its
Southern Claim.

         ________  To Accept (VOTE FOR) the Third Amended Plan

         ________  To Reject (VOTE AGAINST) the Third Amended Plan




Item 3 - Certification

         By signing this Ballot, the undersigned certifies:

     (a) that such Holder of a Southern Claim whose vote is being transmitted by
this Ballot has been provided with a copy of the Disclosure Statement relating
to the Third Amended Plan, together with a copy of the Third Amended Plan; and

     (b) that the undersigned is the Holder of the Southern Claim set forth in
Item 1 and has full power and authority to vote to accept or reject the Third
Amended Plan on account of such Southern Claim. The undersigned also
acknowledges that the solicitation of votes herein is subject to all the terms
and conditions set forth in the Disclosure Statement.


Item 4 - Releases

         The Holder of the Southern Claim elects:

                  Check this box if you wish to release, waive, and forever
discharge your rights, if any, against certain persons and entities as set forth
in Section 13.04 of the Plan and as described in Article IX P.3. of the
Disclosure Statement. You are under no obligation to check this box. The
treatment of your claim as defined in the Third Amended Plan will not be
affected by your election not to check this box.





Dated:             Name of Voter:
       --------                   ---------------------------------------
                                     (Print or Type)

                   Social Security or Tax I.D. No.:
                                                    ---------------------

                   Signature:
                              -------------------------------------------

                   By:
                       --------------------------------------------------
                                     (If Appropriate)

                   Title:
                          -----------------------------------------------
                                     (If Appropriate)

                   Street Address:
                                   --------------------------------------

                   City, State, and Zip Code:
                                              ---------------------------

                   Telephone No.:
                                  ---------------------------------------


              THIS BALLOT MUST BE RECEIVED BY THE BALLOTING AGENT:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

          BY 5:00 P.M. EASTERN TIME, ON OR BEFORE _____________, 2002,
                        OR YOUR VOTE WILL NOT BE COUNTED.





              THIS BALLOT MUST BE RECEIVED BY THE BALLOTING AGENT:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

          BY 5:00 P.M. EASTERN TIME, ON OR BEFORE _____________, 2002,
                        OR YOUR VOTE WILL NOT BE COUNTED.

       CONSEQUENTLY, IT IS IMPORTANT FOR YOU TO TIMELY RETURN YOUR BALLOT.

                     INSTRUCTIONS FOR COMPLETING THE BALLOT

         The Proponents are soliciting the votes of Holders of Southern Claims
with respect to the Third Amended Plan referred to in the Disclosure Statement
(a copy of which is enclosed herewith).

         The Third Amended Plan can be confirmed by the Bankruptcy Court and
thereby made binding upon you if it is accepted by the Holders of at least
two-thirds in amount and more than one-half in number of the Claims in each
Impaired Class of Claims that vote on the Third Amended Plan and by the Holders
of at least two-thirds in amount of the Equity Interests in each Impaired Class
of Equity Interests that vote on the Third Amended Plan, and if the Third
Amended Plan otherwise satisfies the requirements of Section 1129(a) of the
Bankruptcy Code. If the requisite acceptances are not obtained, the Bankruptcy
Court may nonetheless confirm the Third Amended Plan if it finds that the Third
Amended Plan provides fair and equitable treatment to, and does not discriminate
unfairly against, the Class or Classes of Claims or Equity Interests rejecting
it, and otherwise satisfies the requirements of Section 1129(b) of the
Bankruptcy Code. As described in Article XV of the Disclosure Statement, the
Proponents will seek confirmation of the Third Amended Plan under Section
1129(b) of the Bankruptcy Code (known as the cramdown section) because of the
deemed non-acceptance of the Holders of Equity Interests in Class 10. The
Proponents also reserve the right to proceed under Section 1129(b) if any
Impaired Class of Claims or Equity Interests do not accept the Third Amended
Plan. To have your vote count, you must complete and return this Ballot not
later than ____________, 2002, 5:00 p.m. Eastern Time (the "Voting Deadline") to
the Balloting Agent at Innisfree M&A Incorporated, 501 Madison Avenue, 20th
Floor, New York, New York 10022 (the "Balloting Agent") by courier, overnight
delivery, U.S. Mail, or by hand delivery of this Ballot

     To properly complete this Ballot, take the following steps:

     1. provide appropriate information for each of the items on this Ballot;

     2. vote to accept or reject the Third Amended Plan in Item 2 on account of
your Southern Claim;

     3. sign and date your Ballot;

     4. if you are completing this Ballot on behalf of another entity, state the
title of such entity; and

     5. provide your name and mailing address if different from the preprinted
address on the Ballot or if no preprinted address appears on the Ballot.

YOUR BALLOT MUST BE DELIVERED TO THE BALLOTING AGENT BY COURIER, OVERNIGHT
DELIVERY, U.S. MAIL, OR HAND DELIVERY PRIOR TO THE VOTING DEADLINE. YOUR BALLOT
MUST CONTAIN AN ORIGINAL SIGNATURE. OTHERWISE SUCH BALLOT WILL NOT BE COUNTED.
FACSIMILE COPIES OF YOUR BALLOT WILL NOT BE ACCEPTED OR COUNTED.

IF YOU HAVE ANY QUESTIONS REGARDING THIS BALLOT OR THE VOTING PROCEDURES, PLEASE
CONTACT THE BALLOTING AGENT, AND EVERY EFFORT WILL BE MADE TO ASSIST YOU:

                           Innisfree M&A Incorporated
                         501 Madison Avenue, 20th Floor
                            New York, New York 10022

         NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU
OR ANY OTHER PERSON THE AGENT OF THE PROPONENTS OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH
RESPECT TO THE THIRD AMENDED PLAN, OTHER THAN THE STATEMENTS CONTAINED IN THE
DOCUMENTS ENCLOSED HEREWITH.





                                                  Notice of Confirmation Hearing

                      IN THE UNITED STATES BANKRUPTCY COURT
                      FOR THE SOUTHERN DISTRICT OF ALABAMA

IN RE:                        ss.
                              ss.
MOBILE ENERGY SERVICES        ss.                 Case No. 99-10168
COMPANY, L.L.C.,              ss.                   (Chapter 11)
                              ss.
              Debtor.         ss.
                              ss.
IN RE:                        ss.                 Case No. 99-10170
MOBILE ENERGY SERVICES        ss.                   (Chapter 11)
HOLDINGS, INC.,               ss.
                              ss.
              Debtor.         ss.
                              ss.       (Jointly Administered Under 99-10168)

                         NOTICE OF CONFIRMATION HEARING

                  PLEASE TAKE NOTICE that a hearing (the "Confirmation Hearing")
will be held to consider confirmation of the Debtors' Third Amended Joint Plan
of Reorganization (the "Plan") on ______, 2002, beginning at ________ __.m.
before the Honorable Judge William Shulman, United States Bankruptcy Judge, 201
St. Louis, Mobile, Alabama 36602. The Confirmation Hearing may be adjourned from
time to time without further notice, except for an announcement made at the
Confirmation Hearing.
                  PLEASE TAKE FURTHER NOTICE that the date to be used for
purposes of determining which holders of the First Mortgage Bonds and the Tax
Exempt Bonds are eligible to vote in favor of acceptance or rejection of the
Plan (the "Record Date") is _____, 2002.
                  PLEASE TAKE FURTHER NOTICE that any and all objections to the
Plan must be filed with the Clerk, United States Bankruptcy Court, 201 St.
Louis, Mobile Alabama 36602, and a copy delivered to the parties listed below,
together with a proof of service, so as to be received no later than 4:00 p.m.
(Central Time) on _____________, 2002 (the "Objection Deadline"):




                  (1)      ANDREWS & KURTH L.L.P.
                           Attorneys for the Debtor and Debtor in Possession
                           600 Travis, Suite 4200
                           Houston, Texas 77002-3090
                           Attn: Jeffrey E. Spiers, Esq.

                  (2)      CABANISS, JOHNSTON, GARDNER,
                           DUMAS & O'NEAL
                           700 Riverview Plaza
                           Mobile, Alabama  36602
                           Attn:  Donald J. Stewart

                  (3)      GREENBERG TRAURIG
                           77 W. Wacker, Suite 2500
                           Chicago, Illinois  60601
                           Attn:  David D. Cleary

                  (4)      STROOCK STROOCK & LAVAN
                           180 Maiden Lane
                           New York, NY  10038
                           Attn:  Michael J. Sage

                  (5)      MORGAN, LEWIS & BOCKIUS LLP
                           1701 Market Street
                           Philadelphia, PA  19103-2921
                           Attn:  Michael A. Bloom

                  (6)      Greenberg Traurig
                           77 W. Wacker Drive, Suite 2500
                           Chicago, IL  60601
                           Attn:  David D. Cleary

                  (7)      OFFICE OF THE BANKRUPTCY ADMINISTRATOR
                           Travis Bedsole
                           182 St. Francis St.
                           Mobile, Alabama  36602

                  PLEASE TAKE FURTHER NOTICE that in order to be considered at
the Confirmation Hearing any and all objections to confirmation of the Plan must
(a) be in writing, (b) state the name and address of the objecting party and the
amount of its claim or the nature of its equity interest in Debtors, and (c)



specify the basis and the nature of the objection, and (d) be filed and served
by the Objection Deadline.
                  PLEASE TAKE FURTHER NOTICE that, in accordance with Rule
3017(a) of the Federal Rules of Bankruptcy Procedure, any party in interest may
obtain a copy of the Disclosure Statement from the Debtors' counsel during
regular business hours.
DATED:            _____________, 2002
Mobile, Alabama

                                         -------------------------------------
                                             UNITED STATES BANKRUPTCY JUDGE

EX-99

                                                                     Exhibit A-2


                         UNITED STATES BANKRUPTCY COURT
                      FOR THE SOUTHERN DISTRICT OF ALABAMA

In re:                         ss.
MOBILE ENERGY SERVICES         ss.                 Case No. 99-10168
         COMPANY, L.L.C.,      ss.                 Chapter 11
         Debtor.               ss.
                               ss.
In re:                         ss.
                               ss.
MOBILE ENERGY SERVICES         ss.                 Case No. 99-10170
         HOLDINGS, INC.,       ss.                 Chapter 11
                               ss.
         Debtor.               ss.        (Jointly Administered Under 99-10168)

                       THIRD JOINT PLAN OF REORGANIZATION
                  DATED OCTOBER 15, 2001, AS MODIFIED, PROPOSED
                  BY MOBILE ENERGY SERVICES COMPANY, L.L.C. AND
                      MOBILE ENERGY SERVICES HOLDINGS, INC.

DONALD J. STEWART                                     JEFFREY E. SPIERS
CABANISS, JOHNSTON, GARDNER,                          DAVID A. ZDUNKEWICZ
DUMAS & O'NEAL                                        ANDREWS & KURTH L.L.P.
700 RIVERVIEW PLAZA                                   600 TRAVIS, SUITE 4200
MOBILE, ALABAMA                                       HOUSTON, TEXAS 77002
(251) 433-6961                                        (713) 220-4200
(251) 415-7350 (TELECOPY)                             (713) 220-4285 (TELECOPY)

COUNSEL TO DEBTORS                                    SPECIAL COUNSEL TO DEBTORS














                                TABLE OF CONTENTS

ARTICLE I...........................................................2
- ---------
     1.01   Definitions.............................................2
     ----   -----------
     1.02   Rules of Interpretation: Computation of Time and
     ----   -------------------------------------------------
             Governing Laws........................................23
             --------------

ARTICLE II.........................................................25
- ----------
     2.01   Administrative Expenses................................25
     ----   -----------------------
     2.02   Bar Date for Administrative Expenses...................25
     ----   ------------------------------------
     2.03   Priority Tax Claims....................................26
     ----   -------------------

ARTICLE III........................................................27
- -----------
     3.01   Class 1 - Priority Non-Tax Claims......................27
     ----   ---------------------------------
     3.02   Class 2 - Working Capital Facility Provider Claims.....27
     ----   --------------------------------------------------
     3.03   Class 3 - Southern Post-Petition Claims................27
     ----   ---------------------------------------
     3.04   Class 4 - First Mortgage Bondholder Claims.............27
     ----   ------------------------------------------
     3.05   Class 5 - Tax-Exempt Bondholder Claims.................27
     ----   --------------------------------------
     3.06   Class 6 - Other Secured Claims.........................27
     ----   ------------------------------
     3.07   Class 7 - Unsecured Claims.............................27
     ----   --------------------------
     3.08   Class 8 - Southern Claims..............................27
     ----   -------------------------
     3.09   Class 9 - Mobile Energy Interests......................28
     ----   ---------------------------------
     3.10   Class 10 - Holdings Interests..........................28
     ----   -----------------------------
     3.11   Summary of Treatment of Claims and Interests...........28
     ----   --------------------------------------------

ARTICLE IV.........................................................29
- ----------
     4.01   Class 1 - Priority Non-Tax Claims......................29
     ----   ---------------------------------
     4.02   Class 2 - Working Capital Facility Provider Claims.....29
     ----   --------------------------------------------------
     4.03   Class 3 - Southern Post-Petition Claims................30
     ----   ---------------------------------------
     4.04   Class 6 - Other Secured Claims.........................30
     ----   ------------------------------
     4.05   Class 7 - Unsecured Claims.............................31
     ----   --------------------------
     4.06   Class 9- Mobile Energy Interests.......................31
     ----   --------------------------------

ARTICLE V..........................................................31
- ---------
     5.01   Class 4 - First Mortgage Bondholder Claims.............31
     ----   ------------------------------------------
     5.02   Class 5 - Tax-Exempt Bondholder Claims.................31
     ----   --------------------------------------
     5.03   Class 8 - Southern Claims..............................32
     ----   -------------------------
     5.04   Class 10 - Holdings Interests..........................32
     ----   -----------------------------

ARTICLE VI.........................................................32
- ----------
     6.01   Presumed Acceptance of Plan............................32
     ----   ---------------------------
     6.02   Deemed Non-Acceptance of Plan..........................32
     ----   -----------------------------
     6.03   Voting Classes.........................................33
     ----   --------------
     6.04   Non-Consensual Confirmation............................33
     ----   ---------------------------

ARTICLE VII........................................................33
- -----------
     7.01   Distribution Determination Date........................33
     ----   -------------------------------
     7.02   Classes 4 and 5 Distributions..........................33
     ----   -----------------------------



     7.03   Delivery of Distributions..............................34
     ----   -------------------------
     7.04   Method of Cash Distributions...........................34
     ----   ----------------------------
     7.05   Failure to Negotiate Checks............................34
     ----   ---------------------------
     7.06   Unclaimed Distributions................................35
     ----   -----------------------
     7.07   Limitation on Distribution Rights......................36
     ----   ---------------------------------
     7.08   Fractional Dollars.....................................36
     ----   ------------------
     7.09   Denominations of New Common Stock......................36
     ----   ---------------------------------
     7.10   Compliance With Tax Requirements.......................36
     ----   --------------------------------
     7.11   De Minimis Distributions...............................37
     ----   ------------------------
     7.12   Setoffs................................................37
     ----   -------
     7.13   Documentation Necessary to Release Liens...............37
     ----   ----------------------------------------
     7.14   Allocation Between Principal and Accrued Interest......38
     ----   -------------------------------------------------
     7.15   Modification of Payment Terms..........................38
     ----   -----------------------------

ARTICLE VIII.......................................................38
- ------------
     8.01   Treatment of Executory Contracts and Unexpired Leases..38
     ----   -----------------------------------------------------
     8.02   Collective Bargaining Agreements.......................40
     ----   --------------------------------
     8.03   Utilities Land Sublease................................40
     ----   -----------------------
     8.04   Cure of Defaults for Assumed Contracts and Leases......40
     ----   -------------------------------------------------
     8.05   Resolution of Objections to Assumption or Rejection of
     ----   -------------------------------------------------------
             Executory Contracts; Cure Payments....................41
             ----------------------------------
     8.06   Claims for Rejection Damages...........................42
     ----   ----------------------------
     8.07   Objections to and Treatment of Rejection Claims........43
     ----   -----------------------------------------------
     8.08   Executory Contracts Entered Into and Other Obligations
     ----   -------------------------------------------------------
             Incurred After the Petition Date......................43
             --------------------------------
     8.09   Benefit Programs.......................................43
     ----   ----------------

ARTICLE IX.........................................................43
- ----------
     9.01   Corporate Action.......................................43
     ----   ----------------
     9.02   Issuance of New Common Stock...........................44
     ----   ----------------------------
     9.03   Amended Project Agreements.............................45
     ----   --------------------------
     9.04   Rights of Indenture Trustee and the Tax-Exempt Trustee
     ----   -------------------------------------------------------
             Under Existing Indenture..............................45
             ------------------------
     9.05   Operations Between the Confirmation Date and the
     ----   -------------------------------------------------
             Effective Date........................................45
             --------------
     9.06   Revesting of Assets....................................45
     ----   -------------------
     9.07   Sources of Funds.......................................46
     ----   ----------------
     9.08   Rights of Action.......................................46
     ----   ----------------
     9.09   Cancellation of Holdings Interests.....................47
     ----   ----------------------------------
     9.10   Section 1145 Exemption.................................47
     ----   ----------------------
     9.11   Approval of Operational Energy Corp. ("OEC") as Operator47
     ----   --------------------------------------------------------
     9.12   Powers and Duties of the Reorganized Debtors With
     ----   --------------------------------------------------
             Respect to Confirmation of the Plan...................47
             -----------------------------------
     9.13   Registration Rights....................................47
     ----   -------------------
     9.14   Listing of the New Common Stock........................48
     ----   -------------------------------

ARTICLE X..........................................................48
- ---------
     10.01  Disputed Claims........................................48
     -----  ---------------


ARTICLE XI.........................................................49
- ----------
     11.01  Jurisdiction of the Bankruptcy Court...................49
     -----  ------------------------------------

ARTICLE XII........................................................51
- -----------
     12.01  Confirmation Order.....................................51
     -----  ------------------
     12.02  Conditions to Confirmation.............................51
     -----  --------------------------
     12.03  Conditions to Effectiveness............................52
     -----  ---------------------------
     12.04  Waiver of Conditions...................................53
     -----  --------------------

ARTICLE XIII.......................................................53
- ------------
     13.01  Discharge..............................................53
     -----  ---------
     13.02  Distributions in Complete Satisfaction.................54
     -----  --------------------------------------
     13.03  Injunction.............................................54
     -----  ----------
     13.04  Releases...............................................56
     -----  --------
     13.05  Exculpation............................................56
     -----  -----------
     13.06  Other Documents and Actions............................58
     -----  ---------------------------
     13.07  Term of Injunctions or Stays...........................58
     -----  ----------------------------
     13.08  Preservation of Insurance..............................58
     -----  -------------------------
     13.09  Waiver of Subordination Rights.........................58
     -----  ------------------------------
     13.10  No Successor Liability.................................59
     -----  ----------------------

ARTICLE XIV........................................................59
- -----------
     14.01  Provisions for Management..............................59
     -----  -------------------------

ARTICLE XV.........................................................60
- ----------
     15.01  Events of Default......................................60
     -----  -----------------

ARTICLE XVI........................................................61
- -----------
     16.01  Revocation.............................................61
     -----  ----------
     16.02  Amendments.............................................61
     -----  ----------
     16.03  Successors and Assigns.................................62
     -----  ----------------------
     16.04  No Interest............................................62
     -----  -----------
     16.05  No Attorneys' Fees.....................................62
     -----  ------------------
     16.06  Post-Confirmation Effect of Evidence of Claims or
     -----  ---------------------------------------------------
             Interests.............................................62
             ---------
     16.07  Committees.............................................62
     -----  ----------
     16.08  Additional Assurances..................................63
     -----  ---------------------
     16.09  Reorganized Debtors....................................63
     -----  -------------------
     16.10  Notices................................................63
     -----  -------









         Mobile Energy Services Holdings, Inc., an Alabama corporation
("Holdings"), and Mobile Energy Services Company, L.L.C., an Alabama limited
liability company ("Mobile Energy" and, collectively, the "Debtors" or the
"Proponents") hereby propose this joint plan of reorganization (the "Plan")
pursuant to the provisions of Chapter 11 of Title 11, United States Code,
Sections 101-1330 for the resolution of all Claims against and Interests in the
Debtors. Under the Plan, the Claims against Mobile Energy and Holdings are
considered together for the purposes of confirming one joint plan of
reorganization. The steering committee for an ad hoc committee formed by certain
bondholders of the Debtors' $255,210,000 First Mortgage Bonds due 2017 and the
$85,000,000 6.95% Solid Waste Revenue Refunding Bonds Series 1995 due 2020 (the
"Bondholder Steering Committee"), support confirmation of the Plan. Reference is
made to the Second Amended Disclosure Statement filed in connection with the
Plan (the "Disclosure Statement"), for a discussion of the Debtors' history,
businesses, properties, results of operations, and for a summary and analysis of
the Plan and certain related matters. All Holders of Claims against and
Interests in the Debtors entitled to vote on the Plan are encouraged to read the
Plan and Disclosure Statement in their entirety before voting to accept or
reject the Plan. NO SOLICITATION MATERIALS, OTHER THAN THE DISCLOSURE STATEMENT
AND RELATED MATERIALS TRANSMITTED THEREWITH AND APPROVED BY THE BANKRUPTCY
COURT, HAVE BEEN AUTHORIZED BY THE BANKRUPTCY COURT FOR USE IN SOLICITING
ACCEPTANCES OR REJECTIONS OF THIS PLAN. Subject to certain restrictions and
requirements set forth in Section 1127 of the Bankruptcy Code, Bankruptcy Rule
3019, and the Plan, the Proponents reserve the right to alter, modify, revoke,
or withdraw the Plan prior to its consummation.



                                CONSOLIDATED PLAN

         The Plan is being proposed as a joint plan of reorganization for both
of the Debtors. Claims against, and Interests in, the Debtors (other than
Administrative Expenses and Priority Tax Claims) are classified in Article III
hereof and treated in Article IV hereof.
ARTICLE I
                    DEFINITIONS, INTERPRETATION AND EXHIBITS

1.01.....Definitions.
         -----------
         Unless the context requires otherwise, the following terms with initial
capital letters shall have the following meanings whether presented in the Plan
or the Disclosure Statement unless the context clearly requires otherwise. As
used herein:
         "Administrative Expense" means a Claim against either of the Debtors
for payment of an administrative expense of a kind specified in Section 503(b)
of the Bankruptcy Code and referred to in Section 507(a)(1) of the Bankruptcy
Code, including, without limitation, the actual, necessary costs and expenses
incurred after the Petition Date of preserving the Estates and operating the
business of the Debtors, including wages, salaries, or commissions for services,
compensation for legal, financial advisory, accounting, and other services, and
reimbursement of expenses awarded or allowed under Sections 330(a) or 331 of the
Bankruptcy Code, and all fees and charges assessed against either or both of the
Estates under Chapter 11 of Title 28, United States Code.

     "Affiliate" has the same definition herein as in Section 101(2) of the
Bankruptcy Code.

     "Allowed Administrative Expense" means all or that portion of an
Administrative Expense which either (a) has been allowed by a Final Order as an
Administrative Expense, or (b) was incurred by either or both Debtors in the
ordinary course of business during these Chapter 11 Cases and is determined by
the Debtors to be due, owing, valid, and enforceable against either or both
Debtors.



         "Allowed Claim" means all or that portion of any Claim, other than an
Administrative Expense, (a) as to which (i) no proof of Claim has been filed
with the Bankruptcy Court; and (ii) the liquidated, noncontingent and undisputed
amount of which is identified in either or both of the Debtors' Schedules filed
in the Chapter 11 Cases; or (b) as to which a proof of Claim has been timely
filed in a liquidated amount with the Bankruptcy Court pursuant to the
Bankruptcy Code or any order of the Bankruptcy Court, or late filed with leave
of the Bankruptcy Court after notice and a hearing, provided that: (i) no
objection to the allowance of such proof of Claim or motion to expunge such
Claim has been timely interposed; or (ii) if such objection or motion has been
filed, such objection or motion has been overruled by a Final Order (but only to
the extent such objection or motion has been overruled); or (c) as to which a
Final Order has been entered allowing the Claim alleged in such proof of Claim;
or (d) which is deemed Allowed by this Plan.

         "Allowed Interest" means an interest that is of record as of the Record
Date in a register that is maintained by or on behalf of the Debtors.

     "Allowed Priority Non-Tax Claim" means any Priority Non-Tax Claim which is
an Allowed Claim.

     "Allowed Priority Tax Claim" means any Priority Tax Claim which is an
Allowed Claim.

     "Allowed Unsecured Claim" means any Unsecured Claim which is an Allowed
Claim.

     "Allowed Working Capital Facility Provider Claim" means the Working Capital
Facility Provider Claim to the extent that such Claim is allowed by the Plan or
a Final Order of the Bankruptcy Court.




         "Amended and Restated Holdings Articles of Incorporation" means the
Amended and Restated Articles of Incorporation of Reorganized Holdings, and
shall be substantially in the form set forth in an exhibit to be filed with the
Bankruptcy Court prior to the distribution of the Disclosure Statement to the
persons entitled to vote to accept or reject this Plan, and incorporated herein
by reference.

         "Amended and Restated Holdings By-laws" means the Amended and Restated
By-laws of Reorganized Holdings, and shall be substantially in the form set
forth in an the exhibit to be filed with the Bankruptcy Court prior to the
distribution of the Disclosure Statement to the persons entitled to vote to
accept or reject this Plan, and incorporated herein by reference.

          "Amended Project Agreements" means those Project Documents that
require amendment to conform to the Plan Documents.

     "Amendment No. 3 to Utilities Land Sublease" means the Amendment No. 3 to
Utilities Land Sublease dated as of August 1, 1995, between Scott Paper company,
and the Industrial Development Board of the City of Mobile, Alabama.

          "Assets" has the broadest possible meaning permitted by applicable
law, and includes all of the Debtors' assets or the Reorganized Debtors' assets,
as the case may be, wherever located.

         "Avoidance Claim" means any Cause of Action or right that a trustee,
debtor-in-possession, bankruptcy estate, or other duly appointed authorized
estate representative may have or assert under one or more of Sections 502, 510,
522(f), 522(h), 542, 543, 544, 547, 548, 549, 550, 551, 553, and 724(a) of the
Bankruptcy Code (other than those which are released or dismissed as part of and
pursuant to the Plan or prior order of the Bankruptcy Court), including the
Debtors' rights of setoff, recoupment, contribution, reimbursement, subrogation,
or indemnity (as those terms are defined by applicable bankruptcy or applicable



non-bankruptcy law), and any other indirect claim of any kind whatsoever,
whenever and wherever arising or asserted.

         "Bankruptcy Code" means Title 11, United States Code, Sections
101-1330, together with all amendments, modifications, and replacements thereto
as the same may exist upon any relevant date to the extent applicable to the
Chapter 11 Cases.
         "Bankruptcy Court" means the United States Bankruptcy Court for the
Southern District of Alabama, and, to the extent it may exercise jurisdiction in
the Chapter 11 Cases, the United States District Court for the Southern District
of Alabama, or if either such court ceases to exercise jurisdiction over the
Chapter 11 Cases, such other court that exercises jurisdiction over the Chapter
11 Cases.
         "Bankruptcy Rule" or "Bankruptcy Rules" generally means, respectively,
the particular Federal Rule of Bankruptcy Procedure or Local Bankruptcy Rule of
the Southern District of Alabama referred to and the Federal Rules of Bankruptcy
Procedure or Local Bankruptcy Rules of the Southern District of Alabama,
together with all amendments, modifications, and replacements thereto as the
same may exist upon any relevant date to the extent applicable to the Chapter 11
Cases.
         "Bar Date" means May 3, 1999, the date fixed by the Bankruptcy Court by
which proofs of Claim were to be filed in the Chapter 11 Cases.

     "Beneficial Holder" means the Person holding the beneficial interest in a
Claim or Interest.

     "Bondholder Steering Committee" means both the prepetition and postpetition
unofficial committee of certain Holders of Existing Securities as constituted
from time to time and Wachovia Bank (ex-officio) as Indenture Trustee and as
Tax-Exempt Trustee.




         "Bondholder Consent" means the consent of the Holders of Existing
Securities who collectively hold more than 51% of the principal amount of each
issue of the Existing Securities, which consent shall not require any formal or
informal solicitation of, or notice to, all Holders of Existing Securities.

     "Bondholders" means the Holders of the First Mortgage Bonds and the
Tax-Exempt Bonds. "Cases" or "Chapter 11 Cases" means the above-captioned
Chapter 11 bankruptcy cases of the Debtors. "Cash" means money, currency, coins,
checks, drafts, other negotiable instruments, balances in bank accounts, and
other lawful currency of the United States of America and its equivalents.

     "Causes of Action" means any and all actions, claims, rights, defenses,
third-party claims, damages, executions, demands, crossclaims, counterclaims,
suits, causes of action, choses in action, controversies, agreements, promises,
rights to legal remedies, rights to equitable remedies, rights to payment and
claims whatsoever, whether known, unknown, reduced to judgment, not reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured, and whether asserted or assertable
directly, indirectly, or derivatively, at law, in equity, or otherwise, accruing
to the Debtors, including, but not limited to, the Avoidance Claims.

         "Claim" means, as against either of the Debtors, (i) any right to
payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured; or (ii) any right to an equitable remedy
for breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured.




         "Claims Register" means the register completed and maintained by the
Clerk of the Bankruptcy Court identifying proofs of Claim filed in the Chapter
11 Cases.

     "Class" means any category of Holders of Claims or Interests as classified
in Article III of the Plan. "Clerk" means the clerk of the Bankruptcy Court.
"Cogen Development Agreement" means the MESC Cogeneration Development Agreement
entered into as of February 9, 2000, by and among Mirant Services, Mirant,
Mobile Energy, and Holdings, as such agreement may be amended from time to time,
including without limitation the Cogen Development Agreement Amendment No. 1 and
Cogen Development Agreement Amendment No. 2.

     "Cogen Development Agreement Amendment No. 1" means Amendment No. 1 to the
Cogeneration Development Agreement, which is attached as an exhibit to the
Disclosure Statement.

     "Cogen Development Agreement Amendment No. 2" means Amendment No. 2 to the
Cogeneration Development Agreement, which is attached as an exhibit to the
Disclosure Statement.

         "Collateral Agent" means Bankers Trust (Delaware), a Delaware banking
corporation, or any other Person appointed as a substitute or replacement
Collateral Agent under the Intercreditor Agreement.

         "Collateral Agent Claims" means the Claims of the Collateral Agent
against either or both of the Debtors.




          "Confirmation Date" means the date on which the Clerk of the
Bankruptcy Court enters the Confirmation Order on the docket of the Bankruptcy
Court with respect to the Chapter 11 Cases within the meaning of the Bankruptcy
Rules 5003 and 9021.

         "Confirmation Hearing" means the hearing or hearings at which the
Bankruptcy Court considers confirmation of the Plan pursuant to Sections 1128
and 1129 of the Bankruptcy Code.

         "Confirmation Order" means the order entered by the Bankruptcy Court
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code.

         "Creditor" has the same definition herein as in Section 101(10) of the
         Bankruptcy Code. "CSFB" means Credit Suisse First Boston Corporation.

         "Debt Service Reserve Account" means the account so designated and
         established pursuant to the Indenture. "Debtor" means Mobile Energy or
         Holdings, or both, as the context requires, as debtors and
debtors-in-possession.

     "Debtors" means Mobile Energy and Holdings, collectively, as debtors and
debtors-in-possession. "Disallowed" means (a) with respect to an Interest or any
portion thereof, an Interest which is not an Allowed Interest; (b) with respect
to an Administrative Expense, any claimed Administrative Expense that is
disallowed by a Final Order of the Bankruptcy Court; and (c) with respect to any
Claim or any portion thereof, any Claim which (i) has been disallowed, in whole
or part, by a Final Order of the Bankruptcy Court; (ii) has been withdrawn by
agreement of the Debtors and the Holder thereof, in whole or in part; (iii) has
been withdrawn, in whole or in part, by the Holder thereof; (iv) is listed in



the Schedules as zero or as disputed, contingent, or unliquidated and in respect
of which a proof of Claim has not been timely filed or deemed timely filed
pursuant to the Plan, the Bankruptcy Code, any Final Order of the Bankruptcy
Court, or other applicable bankruptcy law; (v) has been reclassified, expunged,
subordinated, or estimated to the extent that such reclassification,
expungement, subordination, or estimation results in a reduction in the filed
amount of any proof of Claim; or (vi) is evidenced by a proof of Claim which has
been filed, or which has been deemed to be filed under applicable law or order
of the Bankruptcy Court, or which is required to be filed by order of the
Bankruptcy Court, but as to which such proof of Claim was not timely or properly
filed. In each case a Disallowed Claim or a Disallowed Interest is Disallowed
only to the extent of disallowance, withdrawal, reclassification, expungement,
subordination, or estimation.

     "Disallowed Administrative Expense" means any claimed Administrative
Expense that is Disallowed.

     "Disallowed Claim" means a Claim, or any portion thereof, that is
Disallowed.

     "Disallowed Interest" means an Interest, or any portion thereof, that is
Disallowed.

     "Disbursing Agent" means the Reorganized Debtors or such other entity that
is designated by the Reorganized Debtors to disburse Assets pursuant to the
Plan.

         "Disclosure Statement" means the disclosure statement relating to the
Plan to be filed by the Proponents with respect to the Plan, together with all
exhibits and schedules attached thereto, as it may be amended or supplemented
and approved by the Bankruptcy Court pursuant to Section 1125 of the Bankruptcy
Code and Bankruptcy Rule 3017.
         "Disputed Claim" or "Disputed Administrative Expense" means a Claim or
Administrative Expense, or any portion thereof, that is not an Allowed Claim, an
Allowed Administrative Expense, a Disallowed Claim or a Disallowed
Administrative Expense.



         "Disputed Interest" means an Interest, or any portion thereof, that is
not an Allowed Interest or a Disallowed Interest.
         "Distribution Determination Date" means the date established by order
of the Bankruptcy Court for purposes of determining the identity of Beneficial
Holders of the Existing Securities who will receive distributions under the
Plan.

     "District Court" means the United States District Court for the Southern
District of Alabama.

     "DTC" means the Depository Trust Company, New York, New York, and its
successors and assigns.

     "Effective Date" means a date selected by the Debtors that is no more than
ten (10) business days following the date on which all conditions to
effectiveness set forth in Article XII have either (a) been satisfied or (b) if
capable of being duly and expressly waived, waived; provided, however, that the
Effective Date may be extended upon the written agreement of the Debtors with
the Bondholder Consent.

     "Energy Complex" means the energy and chemical recovery complex located at
the Mobile Facility.

     "Entity" has the same definition herein as in Section 101 of the Bankruptcy
Code.

     "Estates" or "Debtors Estates" means the estates created in these Chapter
11 Cases pursuant to Section 541 of the Bankruptcy Code upon commencement of the
Chapter 11 Cases.

         "Exchange Agent" means an entity to be designated by the Debtors not
less than ten (10) days prior to the commencement of the Confirmation Hearing.




         "Executory Contract" means any executory contract or unexpired lease of
real or personal property, within the meaning of Section 365 of the Bankruptcy
Code, in effect on the Petition Date, between the Debtors (or either Debtor) and
any other Entity or Entities.

     "Existing Securities" means the First Mortgage Bonds and the Tax-Exempt
Bonds.

         "Fee Applications" means the applications of Professional Persons under
Sections 330, 331, or 503 of the Bankruptcy Code for allowance of Fee Claims.
         "Fee Claim" means a Claim against either of the Debtors by Professional
Persons under Sections 330, 331, or 503 of the Bankruptcy Code for allowance of
compensation and/or reimbursement of expenses in the Chapter 11 Cases.
         "Final Order" means an order of the Bankruptcy Court (a) as to which
the time to appeal, petition for certiorari, or move for reargument, rehearing,
or new trial has expired, and as to which no appeal, petition for certiorari, or
other proceedings for reargument, rehearing, or new trial are then pending; or
(b) in the event that an appeal, writ of certiorari, reargument, rehearing, or
new trial has been sought, as to which (i) such order of the Bankruptcy Court
shall have been affirmed by the highest court to which such order can be
appealed; (ii) certiorari has been denied as to such order on a final and no
longer appealable basis; or (iii) reargument or rehearing or new trial from such
order has been denied by a final and no longer appealable order.

     "First Mortgage Bondholder" means an Entity that is the Holder of a First
Mortgage Bond.

     "First Mortgage Bondholder Claims" means the Claims of First Mortgage
Bondholders against either or both of the Debtors in the principal amount
outstanding under the terms of the First Mortgage Bonds, plus accrued and unpaid
interest through the day immediately prior to the Effective Date.



         "First Mortgage Bonds" means $255,210,000 original principal amount of
8.665% First Mortgage Bonds due 2017 issued by Mobile Energy and unconditionally
guaranteed by Holdings.
         "Holder" means the Beneficial Holder of a Claim or Interest and, when
used in conjunction with a Class or type of Claim or Interest, means a Holder of
a Claim or Interest in such Class or of such type.

     "Holdings" means Mobile Energy Services Holdings, Inc., an Alabama
corporation.

         "Holdings Articles of Incorporation" means the prepetition Articles of
Incorporation of Holdings in effect as of the Confirmation Date.
         "Holdings By-Laws" means the prepetition by-laws of Holdings in effect
         as of the Confirmation Date. "Holdings Interest" means the prepetition
         shares of common stock issued by Holdings and owned by
Southern.
         "IDB" means the Industrial Development Board of the City of Mobile,
Alabama.
         "Impaired" means, when used with reference to a Claim or Interest, a
Claim or Interest that is impaired within the meaning of Section 1124 of the
Bankruptcy Code.
         "Impaired Claim" means a Claim that is Impaired. "Impaired Interest"
         means an Interest that is Impaired.
         "Indenture" means the Trust Indenture dated as of August 1, 1995, among
Mobile Energy, Holdings, and the Indenture Trustee.
         "Indenture Accounts" means the following accounts so designated and
created pursuant to the Indenture and which are pledged to the Indenture Trustee
as security for the First Mortgage Bonds: (i) the Indenture Securities Account;
(ii) Debt Service Reserve Account; and (iii) any Additional Debt Service Reserve
Account with respect to the Indenture Securities.




         "Indenture Collateral" means, collectively, (i) the Shared Collateral;
and (ii) the Indenture Accounts and the monies on deposit therein.
         "Indenture Securities" means the First Mortgage Bonds.

     "Indenture Securities Account" means the Indenture Securities Account
established under the Indenture.

     "Indenture Trustee" means Wachovia Bank, or any other Entity appointed as
successor trustee pursuant to the terms of the Indenture.

         "Indenture Trustee Claims" means the Claims of the Indenture Trustee
against either of the Debtors under the Indenture.
         "Intercreditor Agreement" means the Intercreditor and Collateral Agency
Agreement dated as of August 1, 1995, by and among Bankers Trust (Delaware) as
the collateral agent, Mobile Energy, Holdings, the Indenture Trustee, the
Tax-Exempt Trustee, the IDB, and the Working Capital Facility Provider.
         "Intercreditor Agreement Accounts" means (i) the Completion Account;
(ii) the Revenue Account; (iii) the Mill Owner Reimbursement Account; (iv) the
Working Capital Facility Account; (v) the Operating Account; (vi) the
Maintenance Reserve Account; (vii) the Loss Proceeds Account; (viii) the
Subordinated Debt Account; (ix) the Subordinated Fee Account; and (x) the
Distribution Account, each as so designated, established and/or governed by the
Intercreditor Agreement.



         "Interest" means an ownership interest in either of the Debtors,
whether or not transferable or denominated as "stock" or any similar security.
Interests include the Mobile Energy Interests and the Holdings Interests.
         "KC" means Kimberly-Clark Corporation, a Delaware corporation. "KCTC"
          means Kimberly-Clark Tissue Company, a Pennsylvania corporation.
          "Lien" means, with respect to the Assets, any mortgage, lien, pledge,
charge, security interest, encumbrance, right of setoff, or other legally
cognizable security device of any kind affecting such Assets.
         "Loss Proceeds Account" means the account so designated and established
pursuant to the Intercreditor Agreement.
         "Master Operating Agreement" means the Amended and Restated Master
Operating Agreement among Mobile Energy, KCTC, and the Mill Owners dated July
13, 1995, governing the provision of services by Mobile Energy at the Energy
Complex and coordinating operations at the Mobile Facility.
         "Mill Owners" means, collectively, the Pulp Mill Owner, the Tissue Mill
         Owner, and the Paper Mill Owner. "Mill Owner Maintenance Reserve
         Account" means the account so designated and established pursuant to
         the
Master Operating Agreement.
         "Mill Owner Reimbursement Account" means the account so designated and
established pursuant to the Intercreditor Agreement.

     "Mirant" means Mirant Corporation, which was known as Southern Energy, Inc.
from January 2, 1998 through January 18, 2001, and was known as SEI Holdings,
Inc. prior to January 2, 1998.


     "Mirant Services" means Mirant Services L.L.C., which was known as Southern
Energy Resources, Inc. from January 2, 1998 through January 18, 2001, and was
known as Southern Energy, Inc. from October 1996 through January 1, 1998, and
was known as Southern Electric International Inc. prior to October 1996.

     "Mirant Services Pension Plan" means the Southern Electric International,
Inc. Hourly Operations Pension Plan, effective January 1, 1995.

     "Mobile Energy" means Mobile Energy Services Company, L.L.C., an Alabama
limited liability company.

     "Mobile Energy Amended and Restated Articles of Organization" means the
Amended and Restated Articles of Organization of Reorganized Mobile Energy, and
shall be substantially in the form set forth in an exhibit to be filed with the
Bankruptcy Court prior to the distribution of the Disclosure Statement to the
persons entitled to vote to accept or reject this Plan, and incorporated herein
by reference.

         "Mobile Energy Interests" means the prepetition member interests issued
by Mobile Energy, and owned by Holdings as of the Record Date.

         "Mobile Facility" means the integrated pulp, paper, and tissue
manufacturing facility in Mobile, Alabama, comprised of the Pulp Mill, the
Tissue Mill, the Paper Mill, and the Energy Complex.

     "Morgan Stanley" means Morgan Stanley Investment Management, formerly known
as Miller Anderson LLP.

     "New Common Stock" means the shares of Common Stock, par value $0.01 per
share, of Reorganized Holdings, authorized pursuant to the Amended and Restated
Holdings Articles of Incorporation, to be issued and distributed in accordance
with the Plan.

         "1994 Bond Claims" means all Claims arising under the $117,000,000
principal amount of Industrial Development Bonds (Scott Paper Recovery Boiler
Project) 1994 Series A Bonds due December 1, 2014.
         "Operating Account" means the account so designated and established
pursuant to the Intercreditor Agreement.
         "Other Secured Claim" means a Secured Claim against either of the
Debtors, including, but not limited to, the Indenture Trustee Claims, the 1994
Bond Claims, and Tax-Exempt Trustee Claims, but excluding the Working Capital
Facility Provider Claims, the First Mortgage Bondholder Claims, the Tax-Exempt
Bondholder Claims, and the Southern Post-Petition Claims.
         "Paper Mill" means the paper mill located at the Mobile Facility.
         "Paper Mill Owner" means S. D. Warren.
         "Person" means any individual, corporation, general partnership,
limited partnership, limited liability company, association, joint stock
company, joint venture, estate, trust, unincorporated organization, government,
or any agency or political subdivision thereof, or other entity.
         "Petition Date" means January 14, 1999.
         "Plan" means this Third Joint Chapter 11 Plan of Reorganization
proposed by the Proponents, dated October 15, 2001, including all exhibits,
appendices, schedules, and annexes, if any, attached hereto, including any plan
supplements, as submitted by the Proponents, as such Plan may be altered,
amended, supplemented, or modified from time to time in accordance with the
provisions of the Bankruptcy Code, the Bankruptcy Rules, the Confirmation Order,
and the terms and conditions of this Plan.



         "Plan Documents" means the documents to be provided on an exhibit to be
filed with the Bankruptcy Court prior to the conclusion of the hearing on the
Disclosure Statement.
         "Priority Non-Tax Claim" means any Claim that is entitled to priority
of payment pursuant to Section 507 of the Bankruptcy Code, excluding
Administrative Expenses and Priority Tax Claims.
         "Priority Tax Claim" means a Claim that is entitled to priority of
payment under Section 507(a)(8) of the Bankruptcy Code.
         "Professional Person" means any Person retained or to be compensated
pursuant to Sections 326, 327, 328, 330, 331, 503(b), or 1103 of the Bankruptcy
Code.
         "Project Documents" means those documents executed in connection with
the transactions that occurred in 1994 and 1995 whereby Mobile Energy acquired
the Energy Complex from Scott Paper Company and entered into the energy services
agreements with the Pulp Mill Owner, the Paper Mill Owner, and the Tissue Mill
Owner, including, but not limited to, any and all documents related to the
financing thereof.
         "Proponents" means the Debtors.
         "Pro Rata Share" means a proportionate share, so that the ratio of the
consideration distributed on account of an Allowed Claim or Allowed Interest in
a Class to the amount of such Allowed Claim or Allowed Interest is the same as
the ratio of the amount of the consideration distributed on account of all
Allowed Claims or Allowed Interests in such Class to the amount of all Allowed
Claims or Allowed Interests in such Class.
         "Pulp Mill" means the pulp mill located at the Mobile Facility.

     "Pulp Mill Owner" means KC, successor to KCTC.



         "Qualifying Facility" means a qualifying facility as defined in
Sections 201 and 210 of the Public Utilities Regulatory Policies Act of 1978,
and any regulations promulgated thereunder.
         "Record Date" means the date established by the Court that identifies
those Holders entitled to vote for acceptance or rejection of the Plan.
         "Registration Rights Agreement" means, to the extent required by the
Bondholder Steering Committee, the Registration Rights Agreement substantially
in the form set forth in an exhibit to be filed with the Bankruptcy Court prior
to the conclusion of the hearing on the Disclosure Statement.

     "Releasees" means the Debtors, Southern, Mirant, Mirant Services, Southern
Company Services, Inc., the Bondholder Steering Committee, CSFB, Morgan Stanley,
Franklin Advisors, Inc., Pan American Life Insurance Company and Van Kampen
Investment and Advisory Corp., the Indenture Trustee, the Tax-Exempt Trustee,
the Collateral Agent, and each of their respective former, current and future
members, officers, directors, employees, consultants, agents, advisors,
attorneys, accountants, financial advisors, other representatives and
professionals, in their official and individual capacities, and each of their
respective successors, executors, administrators, heirs and assigns.

     "Reorganized Debtors" means Reorganized Holdings and Reorganized Mobile
Energy.

         "Reorganized Holdings" means Holdings, as reorganized under and
pursuant to the Plan from and after the Effective Date.
         "Reorganized Mobile Energy" means Mobile Energy, as reorganized under
and pursuant to the Plan from and after the Effective Date.



     "Reorganized Mobile Energy Interests" means the member interests in
Reorganized Mobile Energy.

     "Revenue Account" means the account so designated and established pursuant
to the Intercreditor Agreement.

         "Schedules" means the schedules of assets and liabilities and
statements of financial affairs filed by the Debtors with the Bankruptcy Court
as they may have been or may be amended or supplemented in accordance with
Bankruptcy Rule 1009 or any Final Order of the Bankruptcy Court.

     "S. D. Warren" means S. D. Warren Alabama, L.L.C., an Alabama limited
liability company.

     "Secured Claim" means the portion of any Claim that arose prior to the
Effective Date and that is secured, in whole or in part, as of the Petition
Date, by a valid, unavoidable, enforceable, and otherwise perfected Lien,
whether arising by contract, operation of law, or otherwise, as determined in
accordance with Section 506(a) of the Bankruptcy Code.

         "Senior Secured Parties" means the Working Capital Facility Provider,
the Indenture Trustee (for itself and the Holders of the First Mortgage Bonds),
and the Tax-Exempt Trustee (for itself and the Holders of the Tax-Exempt Bonds).

         "Shared Collateral" means all Assets subject to Liens of the Senior
Secured Parties, including but not limited to the following: (i) all real
property owned or leased by Mobile Energy; (ii) all personal property owned or
leased by Mobile Energy (including equipment, receivables, certain insurance and
other tangible and intangible assets, but excluding monies on deposit in the
Indenture Accounts and the Tax-Exempt Indenture Accounts and monies on deposit
in the Mill Owner Maintenance Reserve Account); (iii) all of Mobile Energy's
right, title, and interest in and to all Project Contracts that have been or may



be entered into by Mobile Energy; (iv) all Revenues (as defined in the operative
documents) of Mobile Energy and all Intercreditor Agreement Accounts and all
monies on deposit therein; and (v) all permits and other governmental approvals
to the extent permitted by law.
         "Site" means, collectively, the real property (including any leased
premises) located at the Mobile Facility, the Pulp Mill, the Tissue Mill, the
Paper Mill, and the Energy Complex.
         "Solid Waste" means solid waste generally consisting of biomass and
sludge having certain characteristics.
         "Southern" means The Southern Company, a Delaware corporation.
         "Southern Claim" means all Claims of Southern, Mirant, and Mirant
Services, and their respective affiliates which arose prior to the Petition Date
against either or both of the Debtors, excluding only the Southern Post-Petition
Claim and including, without limitation, all Claims against either or both of
the Debtors asserted by Southern, Mirant, and/or Mirant Services, or their
respective predecessors and affiliates in any proofs of Claim arising from the
following agreements: (a) the Environmental Guaranty of a maximum amount of
$15,000,000 dated as of December 12, 1994, by and between Southern as guarantor
and Scott Paper Company as owner of the Pulp Mill and Tissue Mill and S. D.
Warren Company as owner of the Paper Mill as the beneficiaries; (b) the Debt
Service Reserve Account Southern Guaranty Agreement of a maximum amount of
$21,936,000 dated as of August 1, 1995, between Southern as guarantor and the
Indenture Trustee as the beneficiary; (c) the Maintenance Plan Funding
Subaccount Southern Guaranty Agreement of a maximum of $11,000,000 dated as of
August 1, 1995, between Southern as guarantor and Bankers Trust (Delaware), as
collateral agent under the Intercreditor Agreement as beneficiary; and (d) the



Mill Owner Maintenance Reserve Account Agreement of a maximum of $2,000,000
between Southern as guarantor and Kimberly Clark Company and S.D. Warren Company
as beneficiaries. The Southern Claim is liquidated pursuant to agreement with
Mirant and Mirant Services as set forth in the Cogen Development Agreement.
         "Southern Post-Petition Claim" means all Claims of Southern, Mirant, or
Mirant Services arising under the Cogen Development Agreement.
         "Southern Security Agreement" means the security agreement and other
instruments, documents or agreements to be executed by the appropriate party to
evidence the secured Claims of Southern, Mirant, or Mirant Services as described
in and arising under the Cogen Development Agreement and orders of the Court
approving same.
         "Subordinated Debt Account" means the account so designated and
established pursuant to the Intercreditor Agreement.
         "Subordinated Fee Account" means the account so designated and
established pursuant to the Intercreditor Agreement.
         "Tax" means any tax, charge, fee, levy, impost or other assessment by
any federal, state, local, or foreign governmental unit, including, without
limitation, income, excise, property, sales, transfer, employment, payroll,
franchise, profits, license, use ad valorem, estimated, severance, stamp,
occupation and withholding tax, together with any interest, penalty, fines, or
additions attributable to, imposed on, or collected by any such federal, state,
local, or foreign governmental unit.
         "Tax-Exempt Bondholder" means a Person that is the owner of a
Tax-Exempt Bond.
         "Tax-Exempt Bondholder Claims" means the Claims of Tax-Exempt
Bondholders against either or both of the Debtors in the principal amount
outstanding under the terms of the Tax-Exempt Bonds, plus accrued and unpaid
interest through the day immediately prior to the Effective Date.



         "Tax-Exempt Bonds" means $85,000,000 original principal amount of 6.95%
Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C.
Project) Series 1995 due 2020 issued by the IDB.
         "Tax-Exempt Collateral" means (i) the Shared Collateral; and (ii) the
Tax-Exempt Indenture Accounts and the monies on deposit therein.
         "Tax-Exempt Indenture" means the Amended and Restated Trust Indenture
dated August 1, 1995, by and between the IDB and the Tax-Exempt Trustee pursuant
to which the Tax-Exempt Bonds were issued.
         "Tax-Exempt Indenture Accounts" means the following accounts so
designated under the Tax-Exempt Indenture: (i) the Tax-Exempt Indenture
Securities Account; (ii) the Tax-Exempt Debt Service Reserve Account; and (iii)
any Additional Debt Service Reserve Account with respect to the Tax-Exempt
Bonds.
         "Tax-Exempt Trustee" means Wachovia Bank, or any other Person duly
         appointed as successor trustee. "Tax-Exempt Trustee Claims" means the
         Claims of the Tax-Exempt Trustee against either of the Debtors
under the Tax-Exempt Indenture.
         "Tissue Mill" means the tissue mill located at the Mobile Facility.
         "Tissue Mill Owner" means KC.
         "Unclaimed Property" means property, other than property distributed to
Holders of Class 4 and 5 Claims, that is not claimed by the Holders of an
Allowed Claim and that will re-vest in the Reorganized Debtors pursuant to
Section 7.06 of this Plan.



         "Unimpaired" means, when used in reference to a Claim or Interest, a
Claim or Interest that is not impaired within the meaning of Section 1124 of the
Bankruptcy Code.
         "Unsecured Claim" means any Claim against the Debtors that arose prior
to the Effective Date and that is not an Administrative Expense, Priority Tax
Claim, Priority Non-Tax Claim, First Mortgage Bondholder Claim, Tax-Exempt
Bondholder Claim, Working Capital Facility Provider Claim, Southern
Post-Petition Claim, Other Secured Claim, or Southern Claim.
         "Utilities Land Sublease" means the Utilities Land Sublease dated
December 1, 1983, between Scott Paper Company and the Industrial Development
Board of the City of Mobile, Alabama, as amended.
         "Wachovia Bank" means the Wachovia Bank, National Association, formerly
known as the First Union National Bank, formerly known as First Union National
Bank of Georgia, which is the Indenture Trustee and the Tax-Exempt Trustee.
         "Working Capital Facility" means the credit agreement between Mobile
Energy and Banque Paribas executed in August 1995.
         "Working Capital Facility Account" means, prior to the Effective Date,
the account so designated and established pursuant to the Intercreditor
Agreement.

         "Working Capital Facility Provider" means Banque Paribas.

     "Working Capital Facility Provider Claim" means the Claims against any of
the Debtors of the Working Capital Facility Provider under the Working Capital
Facility arising prior to the Effective Date.

1.02     Rules of Interpretation: Computation of Time and Governing Laws.
         ---------------------------------------------------------------

     (a) Rules of Interpretation. For purposes of the Plan: (a) whenever from
the context it is appropriate, each term, whether stated in the singular or the



plural, shall include both the singular and the plural; (b) any reference in the
Plan to a contract, instrument, release, indenture, or other agreement or
document being in a particular form or on particular terms and conditions means
that such document shall be substantially in such form or substantially on such
terms and conditions; (c) any reference in the Plan to an existing document or
exhibit filed or to be filed means such document or exhibit, as it may have been
or may be amended, modified, or supplemented; (d) if the Plan's description of
the terms of an exhibit is inconsistent with the terms of the exhibit, the terms
of the exhibit shall control; (e) unless otherwise specified, all references in
the Plan to Articles, Sections, Clauses, Schedules, and Exhibits are references
to Articles, Sections, Clauses, Schedules, and Exhibits of or to the Plan; (f)
the words "herein" and "hereto" refer to the Plan in its entirety rather than to
a particular portion of the Plan; (g) captions and headings to Articles and
Sections are inserted for convenience of reference only and are not intended to
be a part of or to affect the interpretation of the Plan; (h) the rules of
construction set forth in Section 102 of the Bankruptcy Code shall apply to the
extent such rules are not inconsistent with any other provision in this Plan;
and (i) if any term is not specifically defined herein, it shall have the same
meaning as provided in the Bankruptcy Code or other applicable law.

     (b) Computation of Time. In computing any period of time prescribed or
allowed by the Plan, the method for computing time described in Bankruptcy Rule
9006(a) shall apply.

     (c) Governing Law. Except to the extent that the Bankruptcy Code or
Bankruptcy Rules are applicable, and subject to the provisions of any contract,
instrument, release, indenture, or other agreement or document entered into in
connection with the Plan, the rights and obligations arising under the Plan



shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York without giving effect to the principles of conflicts of
law thereof.

                                   ARTICLE II

                 ADMINISTRATIVE EXPENSES AND PRIORITY TAX CLAIMS

     In accordance with Section 1123(a)(1) of the Bankruptcy Code,
Administrative Expenses, and Priority Tax Claims, as described below, have not
been classified.

2.01     Administrative Expenses.
         -----------------------

         Unless otherwise agreed to by the parties, each Holder of an Allowed
Administrative Expense shall receive Cash equal to the unpaid portion of such
Allowed Administrative Expense as soon as practicable after the later of the
Effective Date, or the date on which such Claim becomes an Allowed
Administrative Expense; provided, however, that the Administrative Expenses that
represent liabilities incurred by the Debtors in the ordinary course of their
business or in connection with transactions approved by the Bankruptcy Court
during the Chapter 11 Cases shall be paid in the ordinary course of business and
in accordance with any terms and conditions of any agreements relating thereto.

2.02     Bar Date for Administrative Expenses.
         ------------------------------------

     (a) Pre-Effective Date Claims and Expenses. All applications for final
compensation of Professional Persons for services rendered on or before, and
reimbursement of expenses incurred on or before, the Effective Date and all
other requests for payment of administrative costs and expenses incurred on or
before the Effective Date under Sections 507(a)(1) or 507(b) of the Bankruptcy
Code (except only for Claims incurred in the ordinary course of business and
claims under 28 U.S.C. ss. 1930) shall be filed no later than 45 days after the
Effective Date. Any compensation for Professional Persons for services rendered



and reimbursement of expenses incurred for the time period after the Effective
Date may be paid the Reorganized Debtors without order of the Bankruptcy Court.

     (b) Effect of Failure to Timely File Claim or Request for Payment. Any
request for payment of an Administrative Expense which is not filed by the
applicable deadline set forth above shall be barred. Under no circumstance will
the applicable deadlines set forth above be extended by order of the Bankruptcy
Court or otherwise. Any Holders of Administrative Expenses who are required to
file a claim or request for payment of such Claims or expenses and who do not
file such Claims or requests by the applicable bar date shall be forever barred
from asserting such Claims or expenses (i) against the Debtors or any property
of the Debtors or (ii) for any distributions under the Plan.

     2.03 Priority Tax Claims. Unless otherwise agreed to by the parties, each
Holder of a Priority Tax Claim will receive Cash equal to the unpaid portion of
such Priority Tax Claim as soon as practicable after the later of the Effective
Date, or the date on which such Claim becomes an Allowed Claim; provided,
however, that at the option of the Reorganized Debtors, the Reorganized Debtors
may pay Priority Tax Claims over a period not exceeding six (6) years after the
date of assessment of the Priority Tax Claim as provided in Section
1129(a)(9)(C) of the Bankruptcy Code. If the Reorganized Debtors elect this
option as to any Priority Tax Claim, then the payment of such Priority Tax Claim
shall be made in equal semiannual installments, with the first installment due
on the latest of (i) the Effective Date; (ii) 30 calendar days after the date on
which an order allowing such Priority Tax Claim becomes a Final Order; or (iii)
such other time as may be agreed to by the Holder of such Priority Tax Claim and
the Reorganized Debtors. Each installment shall include simple interest on the



unpaid portion of such Priority Tax Claim, without penalty of any kind, at the
statutory rate of interest provided for such taxes under applicable
nonbankruptcy law; provided, however, that the Reorganized Debtors shall reserve
the right to pay any Priority Tax Claim, or any remaining balance of such
Priority Tax Claim, in full, at any time on or after the Effective Date, without
premium or penalty.

                                  ARTICLE III

                     CLASSIFICATION OF CLAIMS AND INTERESTS

     The classification of the Claims and Interests listed below shall be for
all purposes, including voting, confirmation, and distribution pursuant to the
Plan. A Claim or Interest is in a particular class only to the extent that the
Claim or Interest is an Allowed Claim or Allowed Interest in that class and has
not been paid, released, or otherwise satisfied before the Effective Date. A
Claim or Interest which is not an Allowed Claim or Allowed Interest is not in
any class, notwithstanding the allegation by a Holder of a Claim or Interest.

     3.01 Class 1 - Priority Non-Tax Claims. Class 1 consists of all Priority
Non-Tax Claims.

     3.02 Class 2 - Working Capital Facility Provider Claims. Class 2 consists
of all Working Capital Facility Provider Claims.

     3.03 Class 3 - Southern Post-Petition Claims. Class 3 consists of all
Southern Post-Petition Claims.

     3.04 Class 4 - First Mortgage Bondholder Claims. Class 4 consists of all
First Mortgage Bondholder Claims.

     3.05 Class 5 - Tax-Exempt Bondholder Claims. Class 5 consists of all
Tax-Exempt Bondholder Claims.

     3.06 Class 6 - Other Secured Claims. Class 6 consists of all Other Secured
Claims.

     3.07 Class 7 - Unsecured Claims. Class 7 consists of all Unsecured Claims.

     3.08 Class 8 - Southern Claims. Class 8 consists of all Southern Claims.




     3.09 Class 9 - Mobile Energy Interests. Class 9 consists of all Mobile
Energy Interests.

     3.10 Class 10 - Holdings Interests. Class 10 consists of all Holdings
Interests.

     3.11 Summary of Treatment of Claims and Interests.

CLASS    DESCRIPTION                        STATUS

Class 1  Priority Non-Tax Claims            Unimpaired; deemed to have
                                            accepted the Plan

Class 2  Working Capital Facility           Unimpaired; deemed to have accepted
                                            Provider Claims the Plan

Class 3  Southern Post-Petition Claims      Unimpaired;  deemed to have accepted
                                            the Plan.

Class 4  First Mortgage Bondholder Claims   Impaired; entitled to vote

Class 5  Tax-Exempt Bondholder Claims       Impaired; entitled to vote

Class 6  Other Secured Claims               Unimpaired;  deemed to have accepted
                                            the Plan.

Class 7  Unsecured Claims                   Unimpaired;  deemed to have accepted
                                            the Plan

Class 8  Southern Claims                    Impaired; entitled to vote

Class 9  Mobile Energy Interests            Unimpaired;  deemed to have accepted
                                            the Plan

Class 10 Holdings Interests                 Impaired;  deemed  to have  rejected
                                            the Plan.


                                   ARTICLE IV
                 TREATMENT OF CLASSES UNIMPAIRED UNDER THE PLAN.

     4.01 Class 1 - Priority Non-Tax Claims. Allowed Class 1 Claims are
Unimpaired. Unless otherwise agreed to by the parties, each Holder of an Allowed
Claim in Class 1 shall be paid the allowed amount of such Claim in full in cash
as soon as practicable after the later of the Effective Date or the date such
Claim becomes an Allowed Claim.

     4.02 Class 2 - Working Capital Facility Provider Claims. Allowed Class 2
Claims are Unimpaired. At the option of the Debtors, (i) the Plan may leave
unaltered the legal, equitable, and contractual rights of the Allowed Working
Capital Facility Provider Claim; or (ii) notwithstanding any contractual
provision or applicable law that entitles the Working Capital Facility Provider
to demand or receive accelerated payment of the Allowed Working Capital Facility
Provider Claim after the occurrence of a default, the Debtors shall (A) cure any
such default, other than a default of a kind specified in Section 365(b)(2) of
the Bankruptcy Code; (B) reinstate the maturity of such Claim as such maturity
existed before such default; (C) compensate the Working Capital Facility
Provider for any damages incurred as a result of any reasonable reliance by such
Holder on any contractual provision creating a default other than a default of a
kind specified in Section 365(b)(2) of the Bankruptcy Code; and (D) not
otherwise alter the legal, equitable, or contractual rights to which such Claim
entitles the Holder thereof; or (iii) as soon as practicable after the later of
the Effective Date or the date on which the Claim of the Working Capital
Facility Provider becomes an Allowed Working Capital Facility Provider Claim,
the Debtors may pay the Working Capital Facility Provider, in full, or upon such
less favorable terms as may be agreed to in writing between the Working Capital
Facility Provider and the Debtors or the Reorganized Debtors. On or prior to the
Effective Date, with respect to the Allowed Working Capital Facility Provider



Claim, the Debtors shall notify the Working Capital Facility Provider in writing
as to the treatment option chosen by the Debtors which the Debtors have elected
to apply to the Working Capital Facility Provider.

     4.03 Class 3 - Southern Post-Petition Claims. Allowed Class 3 Claims are
Unimpaired. Each Holder of an Allowed Claim in Class 3 shall retain, unaltered,
the legal, equitable, and contractual rights provided for in the Cogen
Development Agreement and the orders approving same, including without
limitation, liens securing such Allowed Claims to the extent provided for in the
Cogen Development Agreement and the orders approving same. As part of the
treatment provided for in the Cogen Development Agreement and the orders of the
Court approving same, Mobile Energy shall execute and deliver the Southern
Security Agreement, and shall take all other actions and execute all other
documents which are reasonably necessary to effectuate the security interests
required to be conveyed pursuant to the Cogen Development Agreement and the
orders of the Court approving same. In addition, all indemnities delivered by
Mobile Energy to Mirant, Mirant Services or Southern under the Cogen Development
Agreement and the orders of the Court approving same shall survive confirmation
of this Plan and shall be enforceable obligations of Reorganized Mobile Energy
as set forth in the Cogen Development Agreement and the orders of the Court
approving same.

     4.04 Class 6 - Other Secured Claims. Allowed Class 6 Claims are Unimpaired.
Each Holder of an Allowed Claim in Class 6 shall (i) retain, unaltered, the
legal, equitable, and contractual rights, including, without limitation, any
liens that secure such Allowed Claims, to which such Allowed Claim entitles the
Holder; or (ii) be paid in full, in Cash, at the election of the Proponents, and
with the Bondholder Consent; provided, however, that each person holding an
Allowed Claim in Class 6 may only exercise such rights and remedies with respect
to the assets and property that secure such Allowed Claim, without recourse of
any kind against the Debtors. The excess of any Allowed Claim in Class 6 over



the value of the Assets securing such Allowed Claim shall become, and shall be
treated for all purposes under this Plan, as an Allowed Unsecured Claim and
shall be classified as a Class 7 Claim.

     4.05 Class 7 - Unsecured Claims. Allowed Claims in Class 7 are Unimpaired.
Each Holder of an Allowed Claim in Class 7 shall be paid the allowed amount of
such Claim in full in Cash as soon as practicable after the later of the
Effective Date, or the date such Claim becomes an Allowed Claim.

     4.06 Class 9- Mobile Energy Interests. The Holder of Mobile Energy
Interests is Unimpaired. The Holder of Mobile Energy Interests shall receive, in
complete settlement, satisfaction, and discharge of its Interests, 100% of the
Reorganized Mobile Energy Interests.

                                   ARTICLE V

                  TREATMENT OF CLASSES IMPAIRED UNDER THE PLAN


     5.01 Class 4 - First Mortgage Bondholder Claims. The First Mortgage
Bondholder Claims are deemed Allowed Claims for purposes of the Plan in the
aggregate principal amount outstanding under the terms of the First Mortgage
Bonds, plus interest accrued and unpaid through the day immediately prior to the
Effective Date, minus (i) payments made to the Indenture Trustee and/or the
Collateral Agent pursuant to orders of the Bankruptcy Court, and (ii) payments
made to the Indenture Trustee and/or the Collateral Agent on account of the
Maintenance Plan Funding Subaccount and the First Mortgage Debt Service Reserve
Account.

     Each Holder of a First Mortgage Bondholder Claim shall receive in complete
settlement, satisfaction and discharge of their First Mortgage Bondholder Claims
a Pro Rata Share of 72.967% of the New Common Stock of Holdings.

     5.02 Class 5 - Tax-Exempt Bondholder Claims. The Tax-Exempt Bondholder
Claims are deemed Allowed Claims for purposes of the Plan in the aggregate
principal amount outstanding under the terms of the Tax-Exempt Bonds, plus



interest accrued and unpaid through the day immediately prior to the Effective
Date, minus (i) payments made to the Tax Exempt Trustee and/or the Collateral
Agent pursuant to orders of the Bankruptcy Court, and (ii) payments made to the
Tax Exempt Trustee and/or the Collateral Agent on account of guaranties of a
letter of credit posted with respect to the Tax-Exempt Debt Service Account and
a guaranty of the Maintenance Plan Funding Subaccount.

     Each Holder of a Tax-Exempt Bondholder Claim shall receive in complete
settlement, satisfaction and discharge of its Tax-Exempt Bondholder Claim (1) a
Pro Rata Share of 27.033% of the New Common Stock of Holdings, and (2) such
Holder shall retain a Pro Rata Share of $1,000,000 of its outstanding Tax-Exempt
Bonds.

     5.03 Class 8 - Southern Claims. Allowed Claims in Class 8 are Impaired. The
Holders of Southern Claims shall receive the treatment provided for in the Cogen
Development Agreement and the orders of the Court approving same in complete
settlement, satisfaction, and discharge of their Southern Claims.

     5.04 Class 10 - Holdings Interests. The Holder of Holdings Interests is
Impaired. The Holder of Holdings Interests will not receive any distributions
under the Plan and the Holdings Interests will be canceled and extinguished.

                                   ARTICLE VI

                  ACCEPTANCE OR REJECTION OF THE PLAN: CRAMDOWN

     6.01 Presumed Acceptance of Plan. Classes 1, 2, 3, 6, 7, 9 are Unimpaired
under the Plan, and, therefore, conclusively are presumed to have accepted the
Plan in accordance with Section 1126(f) of the Bankruptcy Code.

     6.02 Deemed Non-Acceptance of Plan. Class 10 is deemed to have rejected the
Plan.




     6.03 Voting Classes. Each Holder of an Allowed Claim in Classes 4, 5 and 8
shall be entitled to vote to accept or reject the Plan.

     6.04 Non-Consensual Confirmation. In the event that any Impaired Class of
Claims or Interests does not accept the Plan in accordance with Section 1126 of
the Bankruptcy Code, the Proponents hereby request that the Bankruptcy Court
confirm the Plan in accordance with Section 1129(b) of the Bankruptcy Code.
Subject to Section 1127 of the Bankruptcy Code and the provisions set forth in
this Plan, the Proponents with the Bondholder Consent, reserve the right to
modify or withdraw the Plan to the extent that confirmation requires
modification.

                                  ARTICLE VII

                PROVISIONS GOVERNING DISTRIBUTIONS UNDER THE PLAN

     7.01 Distribution Determination Date. As of the Effective Date, all
transfer ledgers, transfer books, registers, and any other records maintained by
the designated transfer agents with respect to ownership of the First Mortgage
Bonds and the Tax-Exempt Bonds will be closed, and for purposes of the Plan,
there shall be no further changes in the record holders of the First Mortgage
Bonds and the Tax-Exempt Bonds. The Disbursing Agent and the Exchange Agent
shall have no obligation to recognize the transfer of any First Mortgage Bonds
and the Tax-Exempt Bonds occurring after the Distribution Determination Date,
and will be entitled for all purposes to recognize and deal only with those
Holders of the First Mortgage Bonds and the Tax-Exempt Bonds as of the close of
business on the Distribution Determination Date, as reflected on such ledgers,
books, registers, or records.

     7.02 Classes 4 and 5 Distributions. As of the Effective Date, the First
Mortgage Bonds and the Tax-Exempt Bonds, except for the $1,000,000 of such
Tax-Exempt Bonds that will be retained by the Tax-Exempt Bondholders and will



remain outstanding, will be canceled and exchanged for the New Common Stock. As
soon as practicable after the Effective Date, and after all the other events
that shall occur on the Effective Date, the Disbursing Agent shall make
distributions of the New Common Stock to Holders of Claims classified in Classes
4 and 5 as of the Distribution Determination Date as provided in Sections 5.01
and 5.02 hereof. Any New Common Stock that are not claimed by the Holder of
Allowed Claims in Classes 4 and 5 will be delivered to the Exchange Agent for
distribution to the remaining Holders of Class 4 or 5 Claims for distribution.

     7.03 Delivery of Distributions. Other than to Holders of Claims classified
in Classes 4 and 5, the Reorganized Debtors will make distributions to Holders
of Allowed Claims at the addresses set forth on the proofs of Claim, if any,
filed by such Holders or at the last known addresses of such Holders. If any
such Holder's distribution is returned as undeliverable, no further distribution
will be made to such Holder unless and until the Reorganized Debtors are
notified of such Holder's then-current address, at which time all undeliverable
distributions will be made to such Holder, without interest, and the Reorganized
Debtors will have no duty to locate such Holder and no liability arising
therefrom.

     7.04 Method of Cash Distributions. Any Cash payment to be made pursuant to
the Plan may be made by Cash, draft, check, other negotiable instruments, wire
transfer, or as otherwise required or provided in any relevant agreement or
applicable law at the option of the Reorganized Debtors.

     7.05 Failure to Negotiate Checks. Checks issued in respect of distributions
under the Plan shall be null and void if not negotiated within sixty (60) days
after the date of issuance. Any amounts returned to the Reorganized Debtors in
respect of such non-negotiated checks shall be held by the Reorganized Debtors.



Requests for reissuance for any such check shall be made directly to the
Reorganized Debtors by the Holder of the Allowed Claim with respect to which
such check originally was issued. All amounts represented by any voided check
will be held until one (1) year after the later of (A) the Effective Date; or
(B) the date that a particular Claim is Allowed; and all requests for reissuance
by the Holder of the Allowed Claim in respect of a voided check are required to
be made prior to such date. Thereafter, all such amounts shall be deemed to be
Unclaimed Property in accordance with Section 7.06 of the Plan, and all Claims
to Unclaimed Property and the underlying distributions shall be forever barred,
estopped and enjoined from assertion in any manner against the Debtors, their
respective Properties, the Reorganized Debtors, or their respective Properties.

7.06 Unclaimed Distributions. Other than distributions to Holders of Claims
classified in Classes 4 and 5, all Property distributed on account of Claims
must be claimed within the later of (a) one (1) year after the Effective Date;
or (b) one (1) year after such distribution is made to such Holder or, in the
case of a distribution made in the form of a check, must be negotiated and a
request for reissuance be made as provided for in Section 7.05 of the Plan.
Except as presented in Section 7.02, all Unclaimed Property will be retained by
and will revest in Reorganized Mobile Energy. All full or partial payments made
by the Disbursing Agent and received by the Holder of a Claim prior to the
Effective Date will be deemed to be payments under the Plan for purposes of
satisfying the obligations of Debtors pursuant to the Plan. Nothing contained in
the Plan shall require the Reorganized Debtors to attempt to locate any Holder
of an Allowed Claim other than by reviewing the records of the Reorganized
Debtors (except as to Classes 4 and 5, in which case the provisions of Section
7.02 will control). Pursuant to Section 1143 of the Bankruptcy Code, all Claims
in respect of Unclaimed Property shall be deemed Disallowed and the Holder of
any Claim Disallowed in accordance with this Section 7.06 will be forever



barred, expunged, estopped, and enjoined from assertion in any manner against
the Debtors, or their respective Properties, the Reorganized Debtors, or their
respective Properties.

     7.07 Limitation on Distribution Rights. If a Person holds more than one
Claim in any one Class, all Allowed Claims of that Person in that Class will be
aggregated into one Allowed Claim and one distribution will be made with respect
to the aggregated Allowed Claim.

     7.08 Fractional Dollars. Notwithstanding any other provision of the Plan,
Cash distributions of fractions of dollars will not be made; rather, whenever
any payment of a fraction of a dollar would be called for, the actual payment
made shall reflect a rounding of such fraction to the nearest whole dollar (up
or down), with half dollars ($0.50) being rounded down and any amount over half
dollars (greater than $0.50) being rounded up. To the extent that Cash remains
undistributed as a result of the rounding of such fraction to the nearest whole
cent (according to the same rounding rules set forth above for fractional
dollars), such Cash shall be treated as Unclaimed Property pursuant to Section
7.06 of this Plan.

     7.09 Denominations of New Common Stock. The New Common Stock shall be
issued only in whole shares and shall be rounded down to the nearest whole
share.

     7.10 Compliance With Tax Requirements. In connection with each distribution
with respect to which the filing of an information return (such as an Internal
Revenue Service Form 1099 or 1042) or withholding is required, the Reorganized
Debtors shall file such information return with the Internal Revenue Service and
provide any required statements in connection therewith to the recipients of
such distribution or effect any such withholding and deposit all moneys so
withheld as required by law. With respect to any Person from whom a tax
identification number, certified tax identification number, or other tax
information required by law to avoid withholding has not been received by the



Reorganized Debtors within thirty (30) days from the date of such request, the
Reorganized Debtors may, at their option, withhold the amount required and
distribute the balance to such Person or decline to make such distribution until
the required information is received.

     7.11 De Minimis Distributions. No Cash payment of less than five ($5.00)
dollars shall be made to any Holder of a Claim on account of its Allowed Claim.
Such payment shall be deemed Unclaimed Property in accordance with Section 7.06
of this Plan.

     7.12 Setoffs. Except for any Claim that is Allowed in an amount set forth
in the Plan (including, but not limited to, Claims classified in Classes 3, 4
and 5), the Debtors or the Reorganized Debtors, as applicable, may, but shall
not be required to, set off against any Claims and the payments or distributions
to be made pursuant to the Plan in respect of such Claims, any and all debts,
liabilities, and Claims of every type and nature whatsoever that the Estates,
the Debtors, or the Reorganized Debtors may have against the Holders of such
Claims, but neither the failure to do so nor the allowance of any such Claims,
whether pursuant to the Plan or otherwise, shall constitute a waiver or release
by the Debtors of any such claims that the Estates, the Debtors, or the
Reorganized Debtors may have against such Holders, and all such claims shall be
reserved to, vest in, and be retained by the Reorganized Debtors.

     7.13 Documentation Necessary to Release Liens. Except with respect to
Holders of Claims classified in Classes 3, 4 and 5, each Holder of an Allowed
Secured Claim that is to receive a distribution under the Plan shall not receive
such distribution until such Holder executes and delivers any documents
necessary to release all Liens arising under any applicable security agreement
or nonbankruptcy law (in recordable form if appropriate) in connection with such



Secured Claim and such other documents as the Debtors or the Reorganized
Debtors, as applicable, may reasonably request.

     7.14 Allocation Between Principal and Accrued Interest. Except with respect
to Holders of Claims classified in Classes 4 or 5, on the Effective Date the
aggregate consideration paid to Holders in respect of their Claims shall be
treated as allocated first to the principal amount of such Claims and then to
the accrued interest thereon.

     7.15 Modification of Payment Terms. The Proponents reserve the right to
modify the treatment of any Allowed Claim at any time after the Effective Date
with the Bondholder Consent and the consent of the Creditor whose Allowed Claim
treatment is being modified, provided, however, that the Proponents may not by
any such modification treat any Creditor in a particular Class more favorably
than other Creditors in the same Class.

                                  ARTICLE VIII

           EXECUTORY CONTRACTS AND UNEXPIRED LEASES; BENEFIT PROGRAMS

     8.01 Treatment of Executory Contracts and Unexpired Leases. On the
Effective Date, all Executory Contracts that exist between the Debtors and any
Person that (i) have not expired or terminated pursuant to their own terms; or
(ii) have not previously been assumed, assumed and assigned, or rejected
pursuant to a Final Order of the Bankruptcy Court on or prior to the
Confirmation Date; or (iii) are not the subject of pending motions to assume, or
assume and assign, or reject as of the Confirmation Date; or (iv) are not
rejected pursuant to the terms of the Plan; or (v) are not specified in Exhibit
A to this Plan, will be deemed assumed in accordance with the provisions and
requirements of Section 365 of the Bankruptcy Code, including without limitation
all Executory Contracts with the Tissue Mill Owner and the Paper Mill Owner;



provided, however, that the Proponents shall have the right, at any time prior
to the Confirmation Date to amend Exhibit A: (a) to delete any Executory
Contract listed therein, thus providing for its assumption pursuant to this
Section 8.01; or (b) to add any Executory Contract thereto, thus providing for
its rejection pursuant to this Section 8.01. The contracts listed on Exhibit "A"
are rejected. The Confirmation Order (except as otherwise provided therein)
shall constitute an order of the Bankruptcy Court pursuant to Section 365 of the
Bankruptcy Code, approving such assumptions, assumptions and assignments, and
rejections pursuant to this Plan. The rejection of the Executory Contracts set
forth in Exhibit A shall occur on the Effective Date, but the rejection shall be
deemed to be effective as of the Petition Date. This Plan constitutes a motion
under Section 365 of the Bankruptcy Code to assume, assume and assign, or
reject, as the case may be, such Executory Contracts. Each contract and lease
assumed or rejected pursuant to this Section 8.01 shall be assumed or rejected
only to the extent that any such contract or lease constitutes an Executory
Contract and the Debtors do not admit that any agreement on Exhibit "A" is an
Executory Contract. All Executory Contracts that are assumed will be assumed
under their present terms or upon such terms as are agreed to between the
applicable Debtor and the other party or parties to the Executory Contract. Each
Executory Contract that is assumed and relates to the use, ability to acquire,
or occupancy of real property shall include: (A) all modifications, amendments,
supplements, restatements, or other agreements made directly or indirectly by
any agreement, instrument, or other document that in any manner affect such
Executory Contract; and (B) all Executory Contracts appurtenant to the premises,
including to the extent applicable all easements, licenses, permits, rights,
privileges, immunities, options, rights of first refusal, powers, uses,
reciprocal easement agreements, vaults, tunnel or bridge agreements, or
franchises, and any other interests in real estate or rights in rem related to



such premises, unless any of the foregoing agreements has been to the extent
applicable rejected pursuant to an order of the Bankruptcy Court.

     8.02 Collective Bargaining Agreements. Mobile Energy is not a party to the
collective bargaining agreement by which Mirant Services employed certain
employees represented by IBEW Local 2129 prior to April 1, 2001. Mobile Energy
also is not a party to the collective bargaining agreement by which OEC employs
certain employees represented by IBEW Local 2129 after March 31, 2001.

     8.03 Utilities Land Sublease. The Utilities Land Sublease, which is one of
the Executory Contracts assumed under this Plan, shall continue in existence
after the Effective Date. The entry of the Confirmation Order shall constitute a
final determination that for the purposes of paragraph 2 of Amendment No. 3 to
the Utilities Land Sublease, the Tax-Exempt Bonds remain outstanding after the
Effective Date. The term of the Utilities Land Sublease shall continue until
December 1, 2019 or such earlier date as there are no longer any of the
Tax-Exempt Bonds outstanding.

     8.04 Cure of Defaults for Assumed Contracts and Leases. All cure and any
other monetary default payments required by Section 365(b)(1) of the Bankruptcy
Code shall be satisfied by the Reorganized Debtors (to the extent such
obligations are enforceable under the Bankruptcy Code and applicable
nonbankruptcy law) pursuant to Section 365(b)(1) of the Bankruptcy Code: (a) if
the amount required to cure defaults is undisputed, at the option of the
Reorganized Debtors, by payment of such undisputed cure amount, without
interest, in Cash within sixty (60) days following the Effective Date; (b) by
payment of such other amount as ordered by the Bankruptcy Court; or (c) by
payment on such other terms as agreed to by the parties to such Executory
Contract.


     8.05 Resolution of Objections to Assumption or Rejection of Executory
Contracts; Cure Payments. Unless otherwise ordered by the Court, any party (A)
objecting to the Debtors' proposed assumption, assumption and assignment, or
rejection of any Executory Contract; (B) contending that any transaction,
cancellation of debt, or exchange under this Plan shall cause a termination
under the terms of any Executory Contract after the Effective Date; or (C) (i)
objecting to the amount of any cure payments set forth in Exhibit B to this
Plan, if any (which is the only monetary cure amount, if any, that the Debtors
shall be obligated to pay in connection with the assumption of any such
Executory Contract unless the Bankruptcy Court orders otherwise); (ii) objecting
to the ability of the Reorganized Debtors to provide "adequate assurance of
future performance" (within the meaning of Section 365 of the Bankruptcy Code)
under the Executory Contract or lease to be assumed; or (iii) objecting to any
other matter pertaining to assumption or the cure payments required by Section
365(b)(1) of the Bankruptcy Code, shall file with the Bankruptcy Court and serve
a written objection on counsel for the Debtors, counsel for the Bondholder
Steering Committee, counsel for CSFB, and counsel for Morgan Stanley, and
provide other notice required by the Bankruptcy Code, Bankruptcy Rules, Local
Rules, or other applicable law to the assumption or rejection of such Executory
Contract or the cure payments, if any, that the Debtors propose to make in
connection with such assumption on or before the deadline set by the Bankruptcy
Court for filing objections to confirmation of the Plan. Failure to file and
serve an objection within the time period set forth above with respect to the
assumption of an Executory Contract shall constitute (i) consent to the
assumption and revestment of those contracts and leases, including an
acknowledgment that the proposed assumption provided adequate assurance of
future performance; (ii) consent to the cure amount, if any, set forth in
Exhibit B, and if no amount is listed, a conclusive admission that no amount is



owed; and (iii) an acknowledgment that such cure amount is the only amount
necessary to cover any and all outstanding defaults under the respective
Executory Contract to be assumed and an acknowledgment that no other defaults
exist under said contract or lease. To the extent that any objections to the
cure amounts are timely filed and served and such objections are not resolved
between the Proponents and the objecting parties, the Bankruptcy Court shall
resolve such disputes at the Confirmation Hearing or such other hearing as the
Bankruptcy Court may order. The resolution of such disputes shall not affect the
Debtors' assumption of Executory Contracts that are subject of such a dispute,
but rather shall affect only the "cure" amount the Debtors must pay in order to
assume such contract or lease. Notwithstanding the immediately preceding
sentence, if the Debtors in their discretion determine that the amount asserted
by the objecting party or parties to be the necessary "cure" amount would, if
ordered by the Bankruptcy Court, make the assumption of the contract or lease
imprudent, then the Debtors may elect to (1) reject the contract or lease
pursuant to Section 8.01 hereof; or (2) request an expedited hearing on the
resolution of the "cure" dispute, exclude assumption or rejection of the
contract or lease from the scope of the Confirmation Order, and retain the right
to reject the contract or lease pursuant to Section 8.01 hereof pending the
outcome of such dispute.

     8.06 Claims for Rejection Damages. Proofs of Claim for damages allegedly
arising from the rejection pursuant to the Plan or the Confirmation Order, or
any independent motion for rejection of any Executory Contract shall be filed
with the Bankruptcy Court and served on counsel for the Debtors, counsel for the
Bondholder Steering Committee, counsel for CSFB, and counsel for Morgan Stanley
not later than thirty (30) days after the earlier of service of (i) notice of
entry of the Confirmation Order; or (ii) other notice that such Executory
Contract has been rejected. Any Holder of a Claim arising from the rejection of
any Executory Contract that fails to file and serve such proof of Claim on or



before the date specified in this paragraph shall be forever barred, estopped,
and enjoined from asserting such Claims in any manner against the Debtors, the
Reorganized Debtors or their properties, and the Debtors and the Reorganized
Debtors shall be forever discharged from all indebtedness or liability with
respect to such Claims, and such Holders shall not be permitted to vote on the
Plan or to participate in any distribution in these Chapter 11 Cases on account
of such Claims or to receive further notices regarding such Claims, and such
Holders shall be bound by the terms of the Plan.

     8.07 Objections to and Treatment of Rejection Claims. The Bankruptcy Court
shall determine any objections to any proofs of Claim filed in accordance with
Section 8.04 hereof at a hearing to be held at a date to be determined by the
Bankruptcy Court. Allowed Claims arising out of the rejection of Executory
Contracts shall, pursuant to Section 502(g) of the Bankruptcy Code, be Class 7
Unsecured Claims entitled to treatment pursuant to Section 4.05 of the Plan.

     8.08 Executory Contracts Entered Into and Other Obligations Incurred After
the Petition Date. On the Effective Date, all contracts, leases, and other
agreements entered into by any or all of the Debtors on or after the Petition
Date, which agreements have not been terminated in accordance with their terms
on or before the Confirmation Date, shall revest in and remain in full force and
effect as against and inure to the benefit of the Reorganized Debtors and the
other parties to such contracts, leases, and other agreements.

     8.09 Benefit Programs. The Debtors are not parties to any employee
compensation and benefit programs subject to Sections 1114 and 1129(a)(13) of
the Bankruptcy Code.

                                   ARTICLE IX

                      MEANS FOR IMPLEMENTATION OF THE PLAN

     9.01 Corporate Action. The entry of the Confirmation Order shall constitute
authorization for the Proponents and the Reorganized Debtors to take or cause to



be taken all corporate actions necessary or appropriate to consummate and
implement the provisions of the Plan prior to, on, and after the Effective Date,
and all such actions taken or caused to be taken shall be deemed to have been
authorized and approved by the Bankruptcy Court. All such actions shall include,
but not be limited to, all actions required to implement the transactions
provided for under this Plan, including, without limitation, (i) in connection
with Holdings, the adoption and filing of the Amended and Restated Holdings
Articles of Incorporation and Amended and Restated Holdings By-laws, and (ii) in
connection with Mobile Energy, the adoption and filing of the Mobile Energy
Amended and Restated Articles of Organization and the Mobile Energy Amended and
Restated Operating Agreement or similar constituent documents for the
Reorganized Debtors, the selection of officers or managers for the Reorganized
Debtors, and the distribution of Cash, the adoption, execution, delivery and
implementation of all contracts, instruments, releases, indentures and other
agreements relating to the treatment of Claims and Interests and distributions
under the Plan. All such actions shall be deemed to have occurred and shall be
in effect pursuant to applicable nonbankruptcy law and the Bankruptcy Code,
without any requirement of further action by the members, partners, stockholders
or directors of the Debtors or the Reorganized Debtors. On the Effective Date,
the appropriate officers, partners, members, and directors of the Debtors and
the Reorganized Debtors are authorized and directed to execute and deliver the
agreements, documents, and instruments contemplated by the Plan and Plan
Documents in the name and on behalf of the Debtors and the Reorganized Debtors.

     9.02 Issuance of New Common Stock. On the Effective Date, all of the issued
and outstanding Existing Securities, except for $1,000,000 of the Tax-Exempt
Bonds, shall be canceled, annulled, extinguished and exchanged for the New



Common Stock in accordance with Sections 5.01 and 5.02 of the Plan. Holders of
the New Common Stock will not receive certificates representing their ownership
interests therein, which will be shown on, and transfers thereof will be
effected only through, records maintained by DTC and its participants. The
Existing Securities, except for $1,000,000 of the Tax-Exempt Bonds, will be
canceled and the New Common Stock will be credited to the accounts maintained on
behalf of the Holders thereof at DTC.

     9.03 Amended Project Agreements. The Amended Project Agreements will be
effective on the Effective Date.

     9.04 Rights of Indenture Trustee and the Tax-Exempt Trustee Under Existing
Indenture. On the Effective Date, the Indenture Trustee and the Tax-Exempt
Trustee shall be entitled to an Administrative Expense and Secured Claim as
provided for in the Plan. The Claims of the Indenture Trustee and the Tax-Exempt
Trustee shall be Allowed Claims.

     9.05 Operations Between the Confirmation Date and the Effective Date. The
Debtors shall continue to operate as debtors-in-possession, subject to the
supervision of the Bankruptcy Court, during the period from the Confirmation
Date through and until the Effective Date.

     9.06 Revesting of Assets. Except as otherwise expressly provided in the
Plan, pursuant to Sections 1123(a)(5), 1123(b)(3) and 1141 (b) of the Bankruptcy
Code, all property comprising the Estates of each Debtor, including, but not
limited to, all Causes of Action shall automatically be retained and revest in
the relevant Reorganized Debtor or its respective successor, free and clear of
all Claims, Liens, contractually-imposed restrictions, charges, encumbrances and
Interests of Holders of Claims and equity security Holders on the Effective Date



with all such Claims, Liens, contractually-imposed restrictions, charges,
encumbrances and Interests being extinguished, except for the liens securing the
Southern Post-Petition Claims and except as otherwise provided in the Plan. As
of the Effective Date, each Reorganized Debtor may operate its business and use,
acquire and dispose of property and settle and compromise Claims or Interests
without supervision of the Bankruptcy Court free of any restrictions of the
Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly
imposed by the Plan and Confirmation Order. Without limiting the foregoing, each
Reorganized Debtor may pay the charges it incurs for professional fees,
disbursements, expenses, or related support services incurred after the
Effective Date without any application to the Bankruptcy Court.

     9.07 Sources of Funds. The Reorganized Debtors will use Cash on hand of the
Debtors as of the Effective Date to make the payments to or reserves on account
of Claims, including the payments and reserves to be made with respect to
Administrative Expenses, Priority Tax Claims, Priority Non-Tax Claims, the
Allowed First Mortgage Bondholders Claims, the Allowed Tax-Exempt Bondholders
Claims, Other Secured Claims, Southern Post-Petition Claim, and Allowed
Unsecured Claims. Cash on hand shall also be the source of funding of all
reserves and escrows provided for under the Plan, all amounts required to be
paid in connection with the assumption by the Debtors of Executory Contracts
assumed pursuant to the Plan, and all other payments required under the Plan.

     9.08 Rights of Action. Except as otherwise provided in the Plan and Plan
Documents, all Causes of Action shall automatically be retained and preserved
and will revest in the Reorganized Debtors. Pursuant to Section 1123(b)(3) of
the Bankruptcy Code, the Reorganized Debtors (as representatives of the Debtors'
Estates) will retain and have the exclusive right to enforce and prosecute such
Causes of Action against any Entity that arose before the Effective Date, other



than those expressly released or compromised as part of or pursuant to the Plan
or Plan Documents.

     9.09 Cancellation of Holdings Interests. On the Effective Date, the
Holdings Interests shall be canceled, annulled, and extinguished.

     9.10 Section 1145 Exemption. The issuance of the New Common Stock pursuant
to this Plan shall be exempt from registration under the Securities Act of 1933,
as amended, and similar state laws pursuant to Section 1145 of the Bankruptcy
Code.

     9.11 Approval of Operational Energy Corp. ("OEC") as Operator. The Plan
constitutes a motion for approval of OEC as operator of the Energy Complex.
Accordingly, upon confirmation OEC is approved as the operator of the Energy
Complex under the terms of the operating agreement between OEC and Mobile
Energy.

     9.12 Powers and Duties of the Reorganized Debtors With Respect to
Confirmation of the Plan. The Debtors and Reorganized Debtors shall be empowered
to: (a) take all steps and execute all instruments and documents necessary to
effectuate the Plan; (b) make the distributions contemplated by the Plan; (c)
comply with the Plan and the obligations thereunder; (d) employ, retain, or
replace attorneys and other advisors to represent it with respect to its
responsibilities; and (e) exercise such other powers as may be vested in the
Reorganized Debtors pursuant to the Plan or order of the Bankruptcy Court or as
the Reorganized Debtors deem necessary and proper to carry out the provisions of
the Plan. The Reorganized Debtors shall have the duty of carrying out the
provisions of the Plan, which shall include the taking or not taking of any
action that the Reorganized Debtors deem to be in furtherance of the Plan.

     9.13 Registration Rights. Reorganized Holdings shall use commercially
reasonable efforts to file a registration statement with the Securities and
Exchange Commission pursuant to the Registration Rights Agreement, unless the



Bondholder Steering Committee otherwise instructs Reorganized Holdings on or
before the Effective Date.

     9.14 Listing of the New Common Stock. Reorganized Holdings shall use
commercially reasonable efforts to list the New Common Stock on a nationally
recognized exchange, unless the Bondholder Steering Committee otherwise
instructs Reorganized Holdings on or before the Effective Date.

                                   ARTICLE X

                      PROVISIONS GOVERNING DISPUTED CLAIMS

     10.01 Disputed Claims.

     (a) Objection Deadline. Objections to Claims, Administrative Expenses and
Claims arising from the rejection of Executory Contracts must be filed by no
later than (i) in the case of Administrative Expenses seventy-five (75) days
after the Effective Date, and (ii) sixty (60) days after the Effective Date for
all other Claims.

     (b) Resolution of Disputed Claims. No distribution or payment shall be made
on account of a Disputed Claim or Administrative Expense until such Disputed
Claim or Administrative Expense becomes an Allowed Claim or an Allowed
Administrative Expense. After the Effective Date, the Reorganized Debtors shall
be successors-in-interest to the Debtors with respect to any objections to
Claims or Administrative Expense pending as of the Effective Date and the
Proponents shall continue to have the rights of the Debtors to object to any and
all Claims or Administrative Expenses. Parties filing objections shall file and
serve a copy of each objection upon the Holder of the Claim to which an
objection is made as soon as practicable.

     (c) Distributions Relating to Disputed Claims and Reserved Funds Upon
Allowance or Disallowance of Disputed Claims. At such time as all or any portion
of a Disputed Claim or Disputed Administrative Expense becomes an Allowed Claim



or Allowed Administrative Expense, respectively, the Reorganized Debtors shall
pay from available funds the Allowed Claim or Allowed Administrative Expense
pursuant to the provisions of this Plan. The Reorganized Debtors shall reserve
and hold in escrow sufficient funds to provide for a complete distribution to
all Holders of Disputed Claims and all Holders of Disputed Administrative
Expenses in the event such Disputed Claims and Disputed Administrative Expenses
are allowed in full. To the extent requested by the Debtors (if prior to
confirmation of the Plan) or the Reorganized Debtors (if after confirmation of
the Plan), the Bankruptcy Court may estimate the amount to be placed in escrow
on account of any Disputed Claim or Disputed Administrative Expense.

     (d) Distributions After Disallowance. If any reserved or escrowed funds
remain after all objections to Disputed Claims and Administrative Expense Claims
have been resolved, any remaining funds shall be distributed to Reorganized
Mobile Energy.

                                   ARTICLE XI

                            RETENTION OF JURISDICTION

     11.01 Jurisdiction of the Bankruptcy Court. Notwithstanding the entry of
the Confirmation Order or the Effective Date having occurred, the Bankruptcy
Court shall retain, after the Effective Date, exclusive jurisdiction of all
matters arising out of, arising in, or related to, the Chapter 11 Cases to the
fullest extent permitted by applicable law, including, without limitation,
jurisdiction:

     (a) To hear and determine any and all pending applications for the
rejection, assumption, or assumption and assignment of any Executory Contract,
any objection to any Claim resulting therefrom, and the allowance, reduction,
expungement, or compromise of any Claim resulting therefrom;




     (b) To hear and determine any motion, application, adversary proceeding,
contested matter, and any other litigated matter pending on the Effective Date;

     (c) To ensure that the distributions to Holders of Allowed Claims are
accomplished as provided in the Plan;

     (d) To hear and determine any objection to any Claim filed, either before
or after the Effective Date; to allow or disallow, in whole or in part, any
Disputed Claim; and to estimate the reserve or escrow appropriate for any
Disputed Claim or Administrative Expense Claim pending allowance or disallowance
thereof.

     (e) To enter, implement, or enforce such orders as may be appropriate in
the event confirmation is for any reason stayed, reversed, revoked, modified, or
vacated;

     (f) To hear and determine all Claims for, and objections to requests for,
professional fees;

     (g) To hear any application to modify the Plan in accordance with Section
1127 of the Bankruptcy Code, and remedy any defect or omission or reconcile any
inconsistency in the Plan, the Disclosure Statement, or the Confirmation Order
in such manner as may be necessary to carry out the purposes and effects
thereof;

     (h) To hear and determine disputes arising in connection with the Plan or
the implementation of the Plan;

     (i) To construe, to take any action, and issue such orders, prior to and
following the Effective Date, as may be necessary for the enforcement,
implementation, execution and consummation of the Plan or for the maintenance of
the integrity of the Plan following consummation;




     (j) To determine such other matters and for such other purposes as may be
provided in the Confirmation Order;

     (k) To hear and determine any motions or contested matters involving Taxes,
tax refunds, tax attributes, and tax benefits, and similar or related matters,
with respect to the Debtors or their Estates arising prior to or relating to
periods or events up to and including the Effective Date or relating to the
period of administration of the Chapter 11 Cases or implementation of the Plan,
including, without limitation, the applicability and effect of Bankruptcy Code
Section 1146;

     (l) To hear and determine any other matters related hereto and not
inconsistent with Chapter 11 of the Bankruptcy Code; and

     (m) To enter a final decree closing the Chapter 11 Cases.

                                   ARTICLE XII

             CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVENESS

     12.01 Confirmation Order. The Confirmation Order shall not be entered
unless and until the form and substance thereof, as well as the Plan, any
amendments to the Plan and Plan Documents, is approved by the Debtors and the
Bondholder Consent has been received.

     12.02 Conditions to Confirmation. It is a condition to Confirmation of the
Plan that:

          (a) The Confirmation Order include provisions, including, but not
     limited to:

               (i) authorizing Holdings to adopt and file the Amended and
          Restated Holdings Articles of Incorporation and Amended and Restated
          Holdings By-laws and Mobile Energy to adopt and file the Mobile Energy
          Amended and Restated Articles of Organization and Mobile Energy
          Amended and Restated Operating Agreement;

               (ii) authorizing the issuance of the New Common Stock;




               (iii) authorizing all of the other transactions contemplated by
          the Plan in order to effectuate the Plan;

               (iv) exempting the New Common Stock from registration under the
          Securities Act of 1933 and state and local laws pursuant to 11 U.S.C.
          Section 1145;

               (v) findings that the Mirant Services Pension Plan is not an
          Executory Contract of the Debtors, that no Claims exist under the
          Mirant Services Pension Plan, and that the Debtors are not a party to
          the Mirant Services Pension Plan;

               (vi) findings that all Executory Contracts, except those listed
          in Exhibit "A" to this Plan, are assumed, that none of the exchanges
          or transactions under this Plan shall cause a termination of such
          Executory Contracts, that no cure amounts are owed under such
          contracts, or that such amounts are waived; and

               (vii) making the provisions of the Confirmation Order
          non-severable and mutually dependent.

     12.03 Conditions to Effectiveness. In addition to the conditions expressly
set forth throughout the Plan, the Plan shall not become effective, and the
Effective Date shall not occur, unless and until:

     (a) The Confirmation Order shall have been entered, shall have become a
Final Order, and such order shall not have been vacated, reversed, stayed,
modified, enjoined or restrained by order of a court of competent jurisdiction;

     (b) All documents and agreements required to be executed or delivered under
the Plan on or prior to the Effective Date shall have received the Bondholder
Consent and been executed and delivered by the parties thereto including,
without limitation, the Plan Documents;




     (c) All authorizations, consents, and regulatory approvals required, if
any, in connection with the Plan's effectiveness shall have been obtained;

     (d) No court of competent jurisdiction shall have entered an order that
remains in effect restraining the Debtors from consummating the Plan;

     (e) None of the persons or entities that will receive shares of New Common
Stock will be required to register as a "holding company" under the Public
Utility Holding Company Act of 1935, as amended, and the rules and regulations
thereunder; and

     (f) All transactions scheduled to occur on the Effective Date that are
necessary for Mobile Energy to become a Qualifying Facility shall have occurred
other than cancellation of the Existing Securities and the distribution of the
New Common Stock. 12.04 Waiver of Conditions. The conditions in Section 12.02
and 12.03 may be waived at any time in whole or in part by a writing signed by
an authorized representative of each of the Debtors with the Bondholder Consent.
The waivers described in this Section 12.04 may be made without notice or order
of the Bankruptcy Court, or any further action other than proceeding to
consummation of the Plan. The Debtors with the Bondholder Consent shall provide
written notice of the Effective Date.

                                  ARTICLE XIII

            EFFECTS OF CONFIRMATION; PROPERTY AND DISCHARGE; RELEASES

     13.01 Discharge. To the fullest extent permitted by applicable law
(including, without limitation, Section 105 of the Bankruptcy Code), and except
as otherwise provided in the Plan, the Plan Documents, or in the Confirmation
Order, (A) on the Effective Date, the Confirmation Order shall operate as a
discharge under Section 1141(d)(1) of the Bankruptcy Code, and release of any
and all Claims, debts (as such term is defined in Section 101(12) of the
Bankruptcy Code), Liens, security interests, and encumbrances of and against all



Assets of the respective Estates and the Debtors that arose before the Effective
Date, including, without limitation, any Claim of the kind specified in Sections
502(g), 502(h) or 502(i) of the Bankruptcy Code, and all principal and interest,
whether accrued before, on or after the Petition Date, regardless of whether (i)
a proof of Claim in respect of such Claim has been filed or deemed filed; (ii)
such Claim has been Allowed pursuant to Section 502 of the Bankruptcy Code; or
(iii) the Holder of such Claim has voted on the Plan or has voted to reject the
Plan; and (B) from and after the Effective Date, all Holders of such Claims,
debts, Liens, security interests and encumbrances shall be barred and enjoined
from asserting against the Persons entitled to such discharge pursuant to this
Section 13.01 or their properties, any such Claims, debts, Liens, security
interests, and encumbrances.

     13.02 Distributions in Complete Satisfaction. The distributions and rights
provided under the Plan shall be in complete satisfaction, discharge, and
release, effective as of the Effective Date, of (a) all Claims against and
Interests in the Debtors and the Estates; and (b) all Liens upon any property of
the Estates or the Reorganized Debtors except for Liens that continue pursuant
to the terms of the Plan that are specified in documents executed pursuant to
the terms of the Plan.

     13.03 Injunction. Except as otherwise expressly provided for in the Plan,
Plan Documents, or the Confirmation Order and to the fullest extent authorized
or provided by the Bankruptcy Code, including Sections 524 and 1141 thereof, the
entry of the Confirmation Order shall, provided that the Effective Date occurs,
permanently enjoin all Entities that have held, currently hold or may hold a
Claim or other debt or liability that is subject to the Plan or who have held,
currently hold, or may hold an Interest that is subject to the Plan from taking
any of the following actions in respect of such Claim, debt, or liability, or
such terminated Interest: (a) commencing, conducting, or continuing in any



manner, directly or indirectly, any suit, action, or other proceeding of any
kind against the Debtors or the Reorganized Debtors; (b) enforcing, levying,
attaching, collecting, or otherwise recovering in any manner or by any means,
whether directly or indirectly, any judgment, award, decree, or order against
the Debtors or the Reorganized Debtors; (c) creating, perfecting, or enforcing
in any manner directly or indirectly, any Lien or encumbrance of any kind
against the Debtors or the Reorganized Debtors; (d) asserting any setoff,
offset, right of subrogation, or recoupment of any kind, directly or indirectly,
against any debt, liability or obligation due to the Debtors or the Reorganized
Debtors; and (e) proceeding in any manner in any place whatsoever, including
employing any process, that does not conform to or comply with or is
inconsistent with the provisions of the Plan. The Confirmation Order shall
constitute an injunction enjoining any Entity from enforcing or attempting to
enforce any cause of action against the Debtors, the Debtors' property, and any
Releasee to the extent released under Section 13.04 below, based on, arising
from, or relating to, in whole or in part, any act, omission, or other
occurrence taking place on or prior to the Effective Date with respect to or in
any way relating to the Chapter 11 Cases, this Plan and the transactions
approved pursuant to this Plan, all of which causes of action will be deemed
released on the Effective Date; provided, however, that this injunction shall
not apply to (i) any Claims that Holders may assert under the Plan to the extent
allowed by the Bankruptcy Code, or (ii) any Claims that the Holders of Claims or
other third parties may have against each other, which claims are not related to
the Debtors and the Reorganized Debtors or to the transactions approved
hereunder, it being understood, however, that any defenses, offsets, or
counterclaims of any kind or nature whatsoever which the Debtors may have or
assert in respect of any of the claims of the type described in (i) or (ii) of
this proviso are fully preserved.



     13.04 Releases. If so elected on a ballot submitted by a person voting on
the Plan, effective as of the Confirmation Date, but subject to the occurrence
of the Effective Date, and except as otherwise provided in the Plan, the Plan
Documents, or the Confirmation Order, (i) each Holder (as well as the trustees
and agents on behalf of each Holder) of a Claim or Interest and each Holder who
so elects, and any affiliate of any such Holder, in consideration of the
obligations of the Debtors under this Plan and the consideration to be provided
by Releasees, shall be deemed to have forever waived, released, and discharged
the Releasees, from any and all claims, obligations, suits, judgments, damages,
rights, causes of action or liabilities whatsoever, whether in tort, for fraud,
in contract, whether in law or equity or otherwise, violations of federal or
state securities laws, or otherwise, whether known or unknown, whether foreseen
or unforeseen, existing or hereafter arising, based in whole or in part upon any
act or omission, transaction, or other occurrence taking place on or before the
Effective Date in any way relating to the Debtors, their Estates, the Chapter 11
Cases, or the Plan, including the transactions to be entered into under the
Plan, which may have directly or indirectly impacted or harmed in any way the
value of any Claim against or Interest in any of the Debtors or their
Affiliates, and (ii) if so elected on a ballot submitted by a person voting on
the Plan, the Confirmation Order will enjoin the prosecution by any Entity,
whether directly, derivatively, or otherwise, of any claim, debt, right, cause
of action, or liability that was or could have been asserted against the
Releasees, except as otherwise provided in the Plan.

     13.05 Exculpation. None of the Debtors, the Reorganized Debtors, the
Bondholder Steering Committee, CSFB, Morgan Stanley, Franklin Advisors, Inc.,
Pan American Life Insurance Company and Van Kampen Investment and Advisory
Corp., the Indenture Trustee, or the Tax-Exempt Trustee, the Collateral Agent,
or their respective Affiliates, former, current and future members, officers,
directors, employees, consultants, agents, advisors, members, attorneys,



accountants, financial advisors, other representatives or any of their
respective former, current and future officers, directors, employees,
consultants, agents, advisors, members, attorneys, accountants, financial
advisors, other representatives and Professional Persons, nor any Professional
Persons employed by any of them (collectively, the "Exculpated Persons"), shall
have or incur any liability to any Person for any act taken or omission made in
good faith in connection with or in any way related to (a) the filing,
negotiating, prosecuting, administrating, formulating, implementing, confirming,
or consummating the Plan; or (b) the property to be distributed under the Plan,
including all prepetition and postpetition activities leading to the
promulgation and confirmation of the Plan, the Disclosure Statement (including
any information provided or statement made in the Disclosure Statement or
omitted therefrom), or any contract, instrument, release or other agreement or
document created in connection with or related to the Plan or the administration
of the Debtors, their Estates, or these Chapter 11 Cases. The Exculpated Persons
shall have no liability to any Person for actions taken under the Plan, in
connection therewith, or with respect thereto, in good faith, including, without
limitation, failure to obtain confirmation of the Plan or to satisfy any
condition or conditions, or refusal to waive any condition or conditions
precedent to confirmation or to the occurrence of the Effective Date. Further,
except as set forth in the Plan Documents, the Exculpated Persons will not have
or incur any liability to any Holder of a Claim, Holder of an Interest, or
party-in-interest herein or any other Person for any act or omission in
connection with or arising out of: (i) administration of the Plan; (ii) the
property to be distributed under the Plan; (iii) any of the transactions
provided for, or contemplated in, the Plan; (iv) any action taken in connection
with either the enforcement of the Debtors' rights against any Entities or the
defense of Claims asserted against the Debtors with regard to the Chapter 11



Cases; or (v) the administration of the Plan or the assets and property to be
distributed pursuant to the Plan, except for gross negligence or willful
misconduct as finally determined by a Final Order of the Bankruptcy Court, and
the Exculpated Persons are entitled to rely on, and act or refrain from acting
on, all information provided by other Exculpated Persons without any duty to
investigate the veracity or accuracy of such information.

     13.06 Other Documents and Actions. The Debtors and the Reorganized Debtors
are authorized to execute such documents and take such other action as is
necessary to effectuate the transactions provided for in the Plan.

     13.07 Term of Injunctions or Stays. Unless otherwise provided herein or in
the Confirmation Order, all injunctions or stays provided for in the Chapter 11
Cases under Sections 105(a) or 362 of the Bankruptcy Code, or otherwise, and in
existence on the Confirmation Date, shall remain in full force and effect until
the Effective Date.

     13.08 Preservation of Insurance. Except as necessary to be consistent with
the Plan, the Plan and the discharge provided herein shall not diminish or
impair (A) the enforceability of insurance policies that may cover Claims
against the Debtors or any other Entity or (B) the continuation of workers'
compensation programs in effect, including self-insurance programs.

     13.09 Waiver of Subordination Rights. Any distributions under the Plan
shall be received and retained free of and from any obligations to hold or
transfer the same to any other Person, and shall not be subject to levy,
garnishment, attachment, or other legal process by any Holder by reason of
claimed contractual subordination rights, and the Confirmation Order shall
constitute an injunction enjoining any Entity from enforcing or attempting to
enforce any contractual, legal, or equitable subordination rights to property
distributed under the Plan, in each case other than as provided in the Plan.




     13.10 No Successor Liability. Except as otherwise expressly provided in the
Plan, the Debtors and the Reorganized Debtors do not, pursuant to the Plan or
otherwise, agree to assume, agree to perform, pay, or indemnify any Entity or
otherwise have any responsibilities for any liabilities or obligations of the
Debtors relating to or a arising out of the operations of or Assets of the
Debtors, whether arising prior to, on, or after the Confirmation Date. The
Reorganized Debtors are not, nor shall be, successors to the Debtors by reason
of any theory of law or equity, and none shall have any successor or transferee
liability of any kind or character, except that the Reorganized Debtors shall
assume the obligations specified in the Plan and the Confirmation Order.

                                   ARTICLE XIV

                            PROVISIONS FOR MANAGEMENT

     14.01 Provisions for Management.

     Upon the Effective Date, the operation of the Reorganized Debtors shall
become the general responsibility of the applicable board of directors and
managers who shall, thereafter, have the responsibility for management, control
and operation of the applicable Reorganized Debtor. The Plan constitutes a
motion for approval of James Stewart as Chief Executive Officer of the
Reorganized Debtors and of Philip Cahoon as Chief Financial Officer of the
Reorganized Debtors. Accordingly, upon confirmation of the Plan, Mr. Stewart
will be approved as Chief Executive Officer, effective as of the Effective Date,
pursuant to the terms and conditions of his employment agreement dated November
27, 2000, and Mr. Cahoon will be approved as Chief Financial Officer, effective
as of the Effective Date, pursuant to the terms and conditions of his employment
agreement dated April 2, 2001.

     The composition of the board of directors of Reorganized Holdings,
including the identity of each of the nominees, shall be announced prior to the
commencement of the Confirmation hearing. Such persons shall be deemed elected



pursuant to the Confirmation Order, and such election shall be effective on and
after the Effective Date, without any requirements of further action by the
shareholders of the Reorganized Debtors. The initial chairman of the board of
directors shall be chosen by the board of directors of Reorganized Holdings
after the Effective Date. Reorganized Holdings shall remain the manager of
Reorganized Mobile Energy.

                                   ARTICLE XV

                                EVENTS OF DEFAULT

     15.01 Events of Default. In the event of a default under the provisions of
the Plan (as opposed to a default under the documents executed to implement the
Plan, which documents shall provide independent and exclusive bases for relief),
any party in interest desiring to assert such a default shall provide the
Reorganized Debtors, the counsel to the Bondholder Steering Committee, counsel
for CSFB, and counsel for Morgan Stanley with written notice of the alleged
default. The Reorganized Debtors shall have sixty (60) days from receipt of the
written notice in which to cure the default. Such notice shall be delivered by
certified mail, return receipt requested to the Reorganized Debtors and their
attorneys at the addresses identified in the Plan. If the default is not cured,
any party in interest may thereafter file with the Bankruptcy Court and serve
upon the Reorganized Debtors and their attorneys, the counsel to the Bondholder
Steering Committee, counsel to CSFB, and counsel to Morgan Stanley a motion to
compel compliance with applicable provisions of the Plan. The Bankruptcy Court,
upon finding a material default, shall issue such orders compelling compliance
with the pertinent provisions of the Plan.



                                  ARTICLE XVI

                            MISCELLANEOUS PROVISIONS

     16.01 Revocation. The Proponents with Bondholder Consent, whether one or
more of them, reserve the right to revoke and withdraw the Plan prior to the
Effective Date of the Plan. If the Proponents revoke or withdraw the Plan, then
the Plan shall be null and void and, in such event, nothing contained herein
shall be deemed to constitute a waiver or release of any Claim by or against the
Debtors or any other Entity or to prejudice in any manner the rights of any of
the Debtors or any Entity in any further proceedings involving the Debtors.
16.02 Amendments.

     (a) Plan Modifications. The Plan or Plan Documents may only be amended,
modified, or supplemented by the Proponents with the Bondholder Consent, before
or after the Confirmation Date, in the manner provided for by Section 1127 of
the Bankruptcy Code or as otherwise permitted by applicable law without
additional disclosure pursuant to Section 1125 of the Bankruptcy Code. In
addition, after the Confirmation Date and prior to substantial consummation of
the Plan, so long as such action does not adversely affect the treatment of
Holders of Claims or Interests under the Plan, the Proponents, with the
Bondholder Consent, may institute proceedings in the Bankruptcy Court to remedy
any defect or omission or reconcile any inconsistencies in the Plan or the
Confirmation Order, and with respect to such matters as may be necessary to
carry out the purposes and effects of the Plan.

     (b) Other Amendments. In addition, prior to the Effective Date, the
Proponents with the Bondholder Consent, may make appropriate technical
adjustments and modifications to other documents the purpose of which is the



implementation of the Plan without further order or approval of the Bankruptcy
Court, provided that such technical adjustments and modifications are consented
to by the other parties to such documents and do not adversely affect in a
material way the treatment of Holders of Claims or Interests.

     16.03 Successors and Assigns. The Plan and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and all
persons party to, or asserting Claims or Interests against the Debtors, their
Estates, or in the Chapter 11 Cases, and their respective successors and
assigns.

     16.04 No Interest. Except as otherwise provided in the Plan, the
Confirmation Order, or Allowed by a Final Order of the Bankruptcy Court, no
interest, penalty, or late charge is to be Allowed on any Claim or Interest
subsequent to the Petition Date.

     16.05 No Attorneys' Fees. No attorneys' fees will be paid by the Debtors or
Reorganized Debtors with respect to any Claim or Interest addressed under this
Plan, except as otherwise provided in the Plan, the Confirmation Order or
Allowed by a Final Order of the Bankruptcy Court.

     16.06 Post-Confirmation Effect of Evidence of Claims or Interests. Except
as otherwise provided for in the Plan, effective upon the Effective Date, all
evidence of Claims or Interests addressed under this Plan, including without
limitation, any proofs of Claim filed in the Chapter 11 Cases, shall represent
only the right to participate in the distributions, if any, provided for under
the Plan.

     16.07 Committees. The appointment of any committee during the Chapter 11
Cases pursuant to Bankruptcy Code Section 1102 automatically terminates, without
further order of the Bankruptcy Court on the Effective Date.




     16.08 Additional Assurances. The Debtors, Reorganized Debtors, and Senior
Secured Parties will execute such other and further documents as are necessary
to implement any of the provisions of the Plan.

     16.09 Reorganized Debtors. The Plan shall be liberally construed for the
benefit of the Debtors and Reorganized Debtors regarding the interchangeableness
of the term "Debtors" and "Reorganized Debtors".

     16.10 Notices. Any notice required or permitted to be provided under the
Plan shall be in writing and served by either (a) certified mail, return receipt
requested, postage prepaid; (b) hand delivery; or (c) reputable overnight
delivery service, freight prepaid, to be addressed as follows:

                  (a)      Mobile Energy Services Holdings, Inc.
                           c/o David Rozier
                           1155 Perimeter Center West
                           Atlanta, Georgia 30338

                           Mobile Energy Services Company, L.L.C.
                            c/o David Rozier
                           1155 Perimeter Center West
                           Atlanta, Georgia 30338

                           - and -

                           Donald J. Stewart
                           CABANISS, JOHNSON, GARDNER, DUMAS & O'NEIL 700
                           Riverview Plaza Mobile, Alabama 36602 (251) 433-6961
                           - Telephone (251) 415-7350 - Telecopy Counsel to the
                           Debtors

                           -and-


                           Jeffrey E. Spiers
                           ANDREW & KURTH L.L.P.
                           600 Travis Street, Suite 4200
                           Houston, Texas 77002
                           (713) 220-4200
                           (713) 220-4285 - Telecopy
                           Special Counsel to the Debtors

                           -and-

                           David D. Cleary
                           GREENBERG TRAURIG
                           77 W. Wacker, Suite 2500
                           Chicago, Illinois  60601
                           (312) 236-4350
                           (312) 456-8435
                           Counsel to the Bondholder Steering Committee

                           -and-

                           Michael J. Sage STROOCK STROOCK & LAVAN 180 Maiden
                           Lane New York, New York 10038 (212) 806-6460 (212)
                           806-6006 - Telecopy Counsel to CSFB

                           Michael A. Bloom MORGAN, LEWIS & BOCKIUS LLP 1701
                           Market Street Philadelphia, PA 19103-2921 (215)
                           963-5032 (215) 963-5299 - Telecopy Counsel to Morgan
                           Stanley








DATED: AUGUST __, 2002

MOBILE ENERGY SERVICES HOLDINGS, INC.
By:                        .........
         --------------------------------------------
Its:                       .........
         --------------------------------------------

MOBILE ENERGY SERVICES COMPANY, L.L.C.
By:                        .........
         --------------------------------------------
Its:                       .........
         --------------------------------------------



                                          CABANISS, JOHNSTON, GARDNER,
                                          DUMAS & O'NEAL

                                          Donald J. Stewart
                                          700 Riverview Plaza
                                          Mobile, Alabama 36652
                                          (334) 433-6961
                                          (334) 415-7350 (telecopy)

                                          COUNSEL TO THE DEBTORS

                                          ANDREWS & KURTH L.L.P.

                                          Jeffrey E. Spiers
                                          David A. Zdunkewicz
                                          600 Travis, Suite 4200
                                          Houston, Texas 77002
                                          (713) 220-4200
                                          (713) 220-4285 (telecopy)

                                          SPECIAL COUNSEL TO THE DEBTORS





                                    EXHIBIT A

     1.   Tax Allocation Agreement, dated December 29, 1981, as amended, to
          which Southern, Holdings and certain other Affiliates of Southern are
          parties (the "Tax Allocation Agreement").

     2.   The Labor Agreement by and Between Southern Energy, Inc. Mobile
          Service Company and International Brotherhood of Electrical Work,
          Local 2129, Effective June 1, 1997 through October 31, 2002 to the
          extent that the Debtors are parties.

     3.   The Agreement between Southern Company Services, Inc. and Mobile
          Energy Services Company, L.L.C. dated July 14, 1995.








                                    EXHIBIT B

     The Debtors believe that no amounts are owed by the Debtors to cure any
defaults existing under any of the Executory Contracts assumed under the Plan.

EX-99

MOBILE ENERGY SERVICES COMPANY L.L.C.
ASSUMPTIONS TO FINANCIAL PROJECTIONS


KC Affidavit Curtailed Operations Case:


Revenues:

1)   Pricing will be based upon the Existing ESAs.

2)   No Cogen Facility will be developed.

3)   Annual Demand Levels will be based upon the following usage levels:

     KC Tissue Mill                                   2003-2019
                                                    -------------
        Steam                                       932,000 MMBtu
        Energy                                      400,000 MwH
     Sappi Paper Mill
        Steam                                          0    MMBtu
        Energy                                         0    MwH

4)   $461,000 of grid sales are projected in 2003 and escalates at 3% annually
     thereafter. Grid sales are recorded net of related fuel costs and O&M
     expenses.

Fuel Expenses:

1)   MESC will serve KC using primarily No. 7 Power Boiler. No. 8 Power Boiler
     will not be operated but will be available to be activated when needed.

2)   Average gas prices for 2002 was assumed to be $3.75 per MMBtu and escalates
     at 1.5% annually thereafter.

3)   Costs for biomass used as fuel are assumed to be credited against amounts
     due from the KC.

O&M and Capital Expenditures:

1)   MESC assumes reduction in its O&M costs from previous years as a result of
     OEC lowering the labor cost, including staff reductions as a result of
     negotiated labor contacts, as well as a reduction in O&M costs consistent a
     reduction in levels of operation.

2)   2003 O&M on an annual basis is projected to be $11,183,000 and grow at 1.5%
     annually thereafter.

3)   Capital Expenditures are projected to be $1,464,000 on an annual basis in
     2003 due to the reduction in operating levels. Capex amounts escalate at
     1.5% per year thereafter.

Other

1)   Minimum cash on hand is assumed to be $5 million, with an average of $2
     million held in a non-interest bearing account. Excess cash for the
     purposes of valuation is assumed to be the amount in excess of $5 million
     from the lowest cash balance during the forecast period.



                     Mobile Energy Services Company, L.L.C.
                           Summary Financial Analysis
                                ($ in thousands)



             Mobile Energy Services -- Projected Operating Results





Income Statement Summary          2003      2004      2005      2006       2007      2008     2009      2010      2011      2012
- ------------------------
REVENUES

                                                                                          
Electricity                   $ 14,403  $ 14,147  $ 14,409  $ 14,675   $ 14,947  $ 15,224 $ 15,508  $ 15,797  $ 16,092  $ 16,394
Steam                            9,030     6,321     6,451     5,932      6,058     6,187    6,319     6,454     6,593     6,735
Grid Sales                         461       468       475       482        489       496      503       511       519       527
- --------------------------------------------------------------------------------------------------------------------------------
     Total Revenues             23,894    20,469    20,860    20,607     21,005    21,411   21,827    22,251    22,685    23,128
- --------------------------------------------------------------------------------------------------------------------------------

EXPENSES

Fuel
Natural Gas                      1,798     1,825     1,852     1,880      1,908     1,937    1,966     1,996     2,025     2,056
Biomass                              -         -         -         -          -         -        -         -         -         -
Coal                             3,944     4,003     4,063     4,124      4,186     4,249    4,313     4,378     4,444     4,511
Purchased Power Cost                 -         -         -         -          -         -        -         -         -         -
- --------------------------------------------------------------------------------------------------------------------------------
     Total Fuel                  5,742     5,828     5,915     6,004      6,094     6,186    6,279     6,374     6,469     6,567
- --------------------------------------------------------------------------------------------------------------------------------

 O&M - MESC                     11,183    11,351    11,521    11,694     11,869    12,047   12,228    12,411    12,597    12,786

- --------------------------------------------------------------------------------------------------------------------------------
     Total Expenses             16,925    17,179    17,436    17,698     17,963    18,233   18,507    18,785    19,066    19,353
- --------------------------------------------------------------------------------------------------------------------------------


     EBITDA                    $ 6,969   $ 3,290   $ 3,424   $ 2,909    $ 3,041   $ 3,179  $ 3,320   $ 3,466   $ 3,618   $ 3,775
- ------------------------========================================================================================================









Income Statement Summary           2013      2014      2015      2016     2017      2018       2019
- ------------------------

REVENUES

                                                                      
Electricity                    $ 16,702  $ 17,016  $ 17,336  $ 17,664 $ 17,999  $ 18,340   $ 18,689
Steam                             6,880     7,028     7,181     7,336    7,496     7,660      7,827
Grid Sales                          535       543       551       559      567       576        585
     Total Revenues              23,581    24,044    24,517    25,000   25,495    25,999     26,516
- ---------------------------------------------------------------------------------------------------

EXPENSES

Fuel
Natural Gas                       2,087     2,118     2,150     2,182    2,215     2,248      2,282
Biomass                               -         -         -         -        -         -          -
Coal                              4,579     4,648     4,718     4,789    4,861     4,934      5,008
Purchased Power Cost                  -         -         -         -        -         -          -
- ---------------------------------------------------------------------------------------------------
     Total Fuel                   6,666     6,766     6,868     6,971    7,076     7,182      7,290

 O&M - MESC                      12,978    13,173    13,371    13,572   13,776    13,983     14,193
- ---------------------------------------------------------------------------------------------------

     Total Expenses              19,644    19,939    20,239    20,543   20,852    21,165     21,483
- ---------------------------------------------------------------------------------------------------

     EBITDA                     $ 3,938   $ 4,105   $ 4,278   $ 4,457  $ 4,643   $ 4,835    $ 5,033
- ------------------------===========================================================================









                     Mobile Energy Services Company, L.L.C.
                           Summary Financial Analysis
                                ($ in thousands)


             Mobile Energy Services -- Projected Operating Results





                                         2003      2004      2005      2006       2007      2008     2009      2010      2011
                                      ----------------------------------------------------------------------------------------
                                                                                           
EBITDA                                $ 6,969   $ 3,290   $ 3,424   $ 2,909    $ 3,041   $ 3,179  $ 3,320   $ 3,466   $ 3,618

Tax Depreciation                          116       265       418       575        738       905    1,077     1,255     1,437
Interest Expense                           67        67        67        67         67        67       67        67        67
Taxable Income                        $ 6,786   $ 2,959   $ 2,940   $ 2,267    $ 2,237   $ 2,207  $ 2,176   $ 2,145   $ 2,115

Less: Taxes                             2,596     1,132     1,124       867        856       844      832       821       809
- ------------------------------------------------------------------------------------------------------------------------------

     Cash Flow After Tax Before CapEx   4,306     2,091     2,233     1,976      2,119     2,268    2,421     2,579     2,743

Less:  MESC Capital Expenditures        1,464     1,508     1,553     1,600      1,648     1,697    1,748     1,801     1,855
- ------------------------------------------------------------------------------------------------------------------------------

     Cash Flow After CapEx and Taxes    2,842       583       680       376        471       571      673       778       888

Interest Income, net of tax                60        60        60        60         60        60       60        60        60
Changes in Working Capital                643       521       (66)       47        (20)      (21)     (22)      (23)      (24)
- ------------------------------------------------------------------------------------------------------------------------------
                                          703       581        (6)      107         40        39       38        37        36

Net Cash Flow                           3,545     1,164       674       483        511       610      711       815       924

Beginning Cash Balance                $ 5,000   $ 8,545   $ 9,710  $ 10,384   $ 10,866  $ 11,378 $ 11,987  $ 12,698  $ 13,514
     Change in Cash                     3,545     1,164       674       483        511       610      711       815       924
- ------------------------------------------------------------------------------------------------------------------------------
Ending Cash Balance                   $ 8,545   $ 9,710  $ 10,384  $ 10,866   $ 11,378  $ 11,987 $ 12,698  $ 13,514  $ 14,438
- -------------------------------------=========================================================================================







                                        2012     2013      2014      2015      2016      2017       2018       2019
                                     ------------------------------------------------------------------------------
                                                                                    
EBITDA                               $ 3,775  $ 3,938   $ 4,105   $ 4,278   $ 4,457   $ 4,643    $ 4,835    $ 5,033

Tax Depreciation                       1,654    1,703     1,754     1,808     1,862     1,917      1,975      2,034
Interest Expense                          67       67        67        67        67        67         67         67
Taxable Income                       $ 2,055  $ 2,168   $ 2,284   $ 2,404   $ 2,529   $ 2,660    $ 2,793    $ 2,933

Less: Taxes                              786      829       874       920       967     1,017      1,068      1,122
- -------------------------------------------------------------------------------------------------------------------

     Cash Flow After Tax Before CapEx  2,923    3,042     3,164     3,292     3,424     3,560      3,700      3,845

Less:  MESC Capital Expenditures       1,910    1,968     2,027     2,087     2,150     2,214      2,281      2,349
- -------------------------------------------------------------------------------------------------------------------

     Cash Flow After CapEx and Taxes   1,013    1,075     1,138     1,205     1,274     1,345      1,419      1,495

Interest Income, net of tax               60       60        60        60        60        60         60         60
Changes in Working Capital               (25)     (26)      (27)      (28       (29)      (30)       (31)       (32
- -------------------------------------------------------------------------------------------------------------------
                                          35       34        33        32        31        30         29         28

Net Cash Flow                          1,048    1,109     1,171     1,237     1,305     1,375      1,448      1,523

Beginning Cash Balance                14,438 $ 15,486  $ 16,594  $ 17,765  $ 19,002  $ 20,306   $ 21,682   $ 23,130
     Change in Cash                    1,048    1,109     1,171     1,237     1,305     1,375      1,448      1,523
- -------------------------------------------------------------------------------------------------------------------
Ending Cash Balance                   15,486 $ 16,594  $ 17,765  $ 19,002  $ 20,306  $ 21,682   $ 23,130   $ 24,653
- -------------------------------------==============================================================================




                     Mobile Energy Services Company, L.L.C.
                           Summary Financial Analysis
                                ($ in thousands)

             Mobile Energy Services -- Projected Operating Results





Demand                                     2003      2004      2005      2006       2007      2008     2009      2010      2011
- ------                                     ------------------------------------------------------------------------------------
                                                                                             
Electricity (MWh)
Tissue                                  400,000   400,000   400,000   400,000    400,000   400,000  400,000   400,000   400,000
Pulp (a)                                      -         -         -         -          -         -        -         -         -
Paper                                         -         -         -         -          -         -        -         -         -
- -------------------------------------------------------------------------------------------------------------------------------
Total Electricity Demand                400,000   400,000   400,000   400,000    400,000   400,000  400,000   400,000   400,000

Steam (mmbtu)
Tissue                                  932,000   932,000   932,000   932,000    932,000   932,000  932,000   932,000   932,000
Pulp (a)                                      -         -         -         -          -         -        -         -         -
Paper                                         -         -         -         -          -         -        -         -         -
- -------------------------------------------------------------------------------------------------------------------------------
   Total Steam Demand                   932,000   932,000   932,000   932,000    932,000   932,000  932,000   932,000   932,000

Revenues
Electricity
Tissue                                 $ 14,403  $ 14,147  $ 14,409  $ 14,675   $ 14,947  $ 15,224 $ 15,508  $ 15,797  $ 16,092
Pulp (a)                                      -         -         -         -          -         -        -         -         -
Paper                                         -         -         -         -          -         -        -         -         -
- -------------------------------------------------------------------------------------------------------------------------------
Total Power Revenues before Grid Sales $ 14,403  $ 14,147  $ 14,409  $ 14,675   $ 14,947  $ 15,224 $ 15,508  $ 15,797  $ 16,092

Steam
Tissue                                  $ 9,030   $ 6,321   $ 6,451   $ 5,932    $ 6,058   $ 6,187  $ 6,319   $ 6,454   $ 6,593
Pulp (a)                                      -         -         -         -          -         -        -         -         -
Paper                                         -         -         -         -          -         -        -         -         -
- -------------------------------------------------------------------------------------------------------------------------------
   Total Steam Revenues                 $ 9,030   $ 6,321   $ 6,451   $ 5,932    $ 6,058   $ 6,187  $ 6,319   $ 6,454   $ 6,593






(a)  Demand and Processing charges for the
     Pulp Mill Assets are for waste water
     treatment activities.







Demand                                     2012     2013      2014      2015      2016     2017      2018      2019
- ------                                 ----------------------------------------------------------------------------
Electricity (MWh)
                                                                                    
Tissue                                  400,000  400,000   400,000   400,000   400,000  400,000   400,000   400,000
Pulp (a)                                      -        -         -         -         -        -         -         -
Paper                                         -        -         -         -         -        -         -         -
- -------------------------------------------------------------------------------------------------------------------
Total Electricity Demand                400,000  400,000   400,000   400,000   400,000  400,000   400,000   400,000

Steam (mmbtu)
Tissue                                  932,000  932,000   932,000   932,000   932,000  932,000   932,000   932,000
Pulp (a)                                      -        -         -         -         -        -         -         -
Paper                                         -        -         -         -         -        -         -         -
- -------------------------------------------------------------------------------------------------------------------
   Total Steam Demand                   932,000  932,000   932,000   932,000   932,000  932,000   932,000   932,000

Revenues
Electricity
Tissue                                 $ 16,394 $ 16,702  $ 17,016  $ 17,336  $ 17,664 $ 17,999  $ 18,340  $ 18,689
Pulp (a)                                      -        -         -         -         -        -         -         -
Paper                                         -        -         -         -         -        -         -         -
- -------------------------------------------------------------------------------------------------------------------
Total Power Revenues before Grid Sales $ 16,394 $ 16,702  $ 17,016  $ 17,336  $ 17,664 $ 17,999  $ 18,340  $ 18,689

Steam
Tissue                                  $ 6,735  $ 6,880   $ 7,028   $ 7,181   $ 7,336  $ 7,496   $ 7,660   $ 7,827
Pulp (a)                                      -        -         -         -         -        -         -         -
Paper                                         -        -         -         -         -        -         -         -
- -------------------------------------------------------------------------------------------------------------------
   Total Steam Revenues                 $ 6,735  $ 6,880   $ 7,028   $ 7,181   $ 7,336  $ 7,496   $ 7,660   $ 7,827



(a)  Demand and Processing charges for the
     Pulp Mill Assets are for waste water
     treatment activities.




                     Mobile Energy Services Company, L.L.C.
                           Summary Financial Analysis
                                ($ in thousands)

             Mobile Energy Services -- Projected Operating Results





                         2003      2004      2005      2006       2007      2008     2009      2010      2011      2012     2013
- --------------------------------------------------------------------------------------------------------------------------------

                                                                                          
Natural Gas             1,798     1,825     1,852     1,880      1,908     1,937    1,966     1,996     2,025     2,056    2,087
Biomass                     0         0         0         0          0         0        0         0         0         0        0
Coal                    3,944     4,003     4,063     4,124      4,186     4,249    4,313     4,378     4,444     4,511    4,579
Purchased Power Cost        0         0         0         0          0         0        0         0         0         0        0
- --------------------------------------------------------------------------------------------------------------------------------
Total Fuel Cost       $ 5,742   $ 5,828   $ 5,915   $ 6,004    $ 6,094   $ 6,186  $ 6,279   $ 6,374   $ 6,469   $ 6,567  $ 6,666






                         2014      2015      2016     2017      2018      2019
- ------------------------------------------------------------------------------

                                                       
Natural Gas             2,118     2,150     2,182    2,215     2,248     2,282
Biomass                     0         0         0        0         0         0
Coal                    4,648     4,718     4,789    4,861     4,934     5,008
Purchased Power Cost        0         0         0        0         0         0
- ------------------------------------------------------------------------------
Total Fuel Cost       $ 6,766   $ 6,868   $ 6,971  $ 7,076   $ 7,182   $ 7,290







                     Mobile Energy Services Company, L.L.C.
                           Summary Financial Analysis
                                ($ in thousands)

             Mobile Energy Services -- Projected Operating Results





                                                  2003      2004      2005      2006       2007      2008     2009      2010
- -----------------------------------------------------------------------------------------------------------------------------
Steam & Power Market Price Calculation
                                                                                             
Tissue Steam Demand Payment                    $ 5,749   $ 2,957   $ 3,001   $ 2,395    $ 2,431   $ 2,467  $ 2,504   $ 2,542
Pulp Steam Demand Payment (a)
Paper Steam  Demand Payment
Tissue Power Demand Payment                    $ 7,424   $ 7,017   $ 7,122   $ 7,229    $ 7,338   $ 7,448  $ 7,559   $ 7,673
Pulp Power Demand Payment (a)                        -         -         -         -          -         -        -         -
Paper Power Demand Payment                           -         -         -         -          -         -        -         -
Demand Growth                                    1.50%     1.50%     1.50%     1.50%      1.50%     1.50%    1.50%     1.50%
Variable O&M Growth                              1.50%     1.50%     1.50%     1.50%      1.50%     1.50%    1.50%     1.50%
Steam Variable O&M (per mmbtu of steam)         $ 0.30    $ 0.30    $ 0.31    $ 0.31     $ 0.32    $ 0.32   $ 0.33    $ 0.33
Power Variable O&M (per KWhr of power used)     $ 0.01    $ 0.01    $ 0.01    $ 0.01     $ 0.01    $ 0.01   $ 0.01    $ 0.01
Power Variable O&M  Growth                       1.50%     1.50%     1.50%     1.50%      1.50%     1.50%    1.50%     1.50%
Tissue Power % of Total Fuel Costs              58.35%    58.35%    58.35%    58.35%     58.35%    58.35%   58.35%    58.35%
Pulp Power % of Total Fuel Costs                 0.00%     0.00%     0.00%     0.00%      0.00%     0.00%    0.00%     0.00%
Paper Power % of Total Fuel Costs                0.00%     0.00%     0.00%     0.00%      0.00%     0.00%    0.00%     0.00%
Tissue Steam % of Total Fuel Costs              41.65%    41.65%    41.65%    41.65%     41.65%    41.65%   41.65%    41.65%
Pulp Steam % of Total Fuel Costs                 0.00%     0.00%     0.00%     0.00%      0.00%     0.00%    0.00%     0.00%
Paper Steam % of Total Fuel Costs                0.00%     0.00%     0.00%     0.00%      0.00%     0.00%    0.00%     0.00%


Steam Demand (mmbtu)
     Tissue                                    932,000   932,000   932,000   932,000    932,000   932,000  932,000   932,000
     Pulp                                            0         0         0         0          0         0        0         0
     Paper                                           0         0         0         0          0         0        0         0
Electric (MWh)
     Tissue                                    400,000   400,000   400,000   400,000    400,000   400,000  400,000   400,000
     Pulp                                            0         0         0         0          0         0        0         0
     Paper                                           0         0         0         0          0         0        0         0
Total Fuel Cost                                $ 5,742   $ 5,828   $ 5,915    $6,004     $6,094    $6,186   $6,278    $6,373
Fuel Index Pricing
     Coal                                       $ 2.10    $ 2.16    $ 2.23    $ 2.29     $ 2.36    $ 2.43   $ 2.51    $ 2.58
     Biomass                                    $ 1.73    $ 1.78    $ 1.83    $ 1.89     $ 1.95    $ 2.00   $ 2.06    $ 2.13
Fuel Pass Through Amounts
     Coal                                      $ 5,413   $ 5,575   $ 5,743   $ 5,915    $ 6,092   $ 6,275  $ 6,463   $ 6,657
     Natural Gas                               $ 1,798   $ 1,825   $ 1,852   $ 1,880    $ 1,908   $ 1,937  $ 1,966   $ 1,996
     Biomass                                   $ 6,439   $ 6,641   $ 6,847   $ 7,052    $ 7,258   $ 7,464  $ 7,699   $ 7,934
     Less: Biomass Credit                     $ (6,439) $ (6,641) $ (6,847) $ (7,052)  $ (7,258) $ (7,464)$ (7,699) $ (7,934)
     Purchased Power                               $ -       $ -       $ -       $ -        $ -       $ -      $ -       $ -
Total Fuel Pass Through                        $ 7,211   $ 7,400   $ 7,595   $ 7,795    $ 8,000   $ 8,212  $ 8,429   $ 8,653
Tissue Revenue
     Steam                                     $ 6,027   $ 3,239   $ 3,287   $ 2,685    $ 2,726   $ 2,767  $ 2,808   $ 2,850
     Power                                      10,195     9,830     9,977    10,127     10,279    10,433   10,589    10,748
     Fuel                                        7,211     7,400     7,595     7,795      8,000     8,212    8,429     8,653
- -----------------------------------------------------------------------------------------------------------------------------
        Total                                 $ 23,433  $ 20,469  $ 20,860  $ 20,607   $ 21,005  $ 21,411 $ 21,827  $ 22,251
Contract Prices Tissue
- -----------------------------------------------------------------------------------------------------------------------------
     Steam ($/mmbtu)                            $ 9.69    $ 6.78    $ 6.92    $ 6.37     $ 6.50    $ 6.64   $ 6.78    $ 6.93
     Power ($/MWh)                             $ 36.01   $ 35.37   $ 36.02   $ 36.69    $ 37.37   $ 38.06  $ 38.77   $ 39.49
- -----------------------------------------------------------------------------------------------------------------------------



(a) Demand and processing charges for the
     Pulp Mill Assets are for waste water
     treatment activities.







                                                2011      2012     2013      2014      2015      2016     2017      2018      2019
- -----------------------------------------------------------------------------------------------------------------------------------
Steam & Power Market Price Calculation
                                                                                                
Tissue Steam Demand Payment                  $ 2,580   $ 2,619  $ 2,658   $ 2,698   $ 2,738   $ 2,779  $ 2,821   $ 2,864   $ 2,906
Pulp Steam Demand Payment (a)
Paper Steam  Demand Payment
Tissue Power Demand Payment                  $ 7,788   $ 7,905  $ 8,023   $ 8,144   $ 8,266   $ 8,390  $ 8,515   $ 8,643   $ 8,773
Pulp Power Demand Payment (a)                      -         -        -         -         -         -        -         -         -
Paper Power Demand Payment                         -         -        -         -         -         -        -         -         -
Demand Growth                                  1.50%     1.50%    1.50%     1.50%     1.50%     1.50%    1.50%     1.50%     1.50%
Variable O&M Growth                            1.50%     1.50%    1.50%     1.50%     1.50%     1.50%    1.50%     1.50%     1.50%
Steam Variable O&M (per mmbtu of steam)       $ 0.34    $ 0.34   $ 0.35    $ 0.35    $ 0.36    $ 0.36   $ 0.37    $ 0.37    $ 0.38
Power Variable O&M (per KWhr of power used)   $ 0.01    $ 0.01   $ 0.01    $ 0.01    $ 0.01    $ 0.01   $ 0.01    $ 0.01    $ 0.01
Power Variable O&M  Growth                     1.50%     1.50%    1.50%     1.50%     1.50%     1.50%    1.50%     1.50%     1.50%
Tissue Power % of Total Fuel Costs            58.35%    58.35%   58.35%    58.35%    58.35%    58.35%   58.35%    58.35%    58.35%
Pulp Power % of Total Fuel Costs               0.00%     0.00%    0.00%     0.00%     0.00%     0.00%    0.00%     0.00%     0.00%
Paper Power % of Total Fuel Costs              0.00%     0.00%    0.00%     0.00%     0.00%     0.00%    0.00%     0.00%     0.00%
Tissue Steam % of Total Fuel Costs            41.65%    41.65%   41.65%    41.65%    41.65%    41.65%   41.65%    41.65%    41.65%
Pulp Steam % of Total Fuel Costs               0.00%     0.00%    0.00%     0.00%     0.00%     0.00%    0.00%     0.00%     0.00%
Paper Steam % of Total Fuel Costs              0.00%     0.00%    0.00%     0.00%     0.00%     0.00%    0.00%     0.00%     0.00%


Steam Demand (mmbtu)
     Tissue                                  932,000   932,000  932,000   932,000   932,000   932,000  932,000   932,000   932,000
     Pulp                                          0         0        0         0         0         0        0         0         0
     Paper                                         0         0        0         0         0         0        0         0         0
Electric (MWh)
     Tissue                                  400,000   400,000  400,000   400,000   400,000   400,000  400,000   400,000   400,000
     Pulp                                          0         0        0         0         0         0        0         0         0
     Paper                                         0         0        0         0         0         0        0         0         0
Total Fuel Cost                               $6,468    $6,565   $6,664    $6,764    $6,865    $6,968   $7,072    $7,179    $7,286
Fuel Index Pricing
     Coal                                     $ 2.66    $ 2.74   $ 2.82    $ 2.91    $ 2.99    $ 3.08   $ 3.18    $ 3.27    $ 3.37
     Biomass                                  $ 2.19    $ 2.26   $ 2.32    $ 2.39    $ 2.47    $ 2.54   $ 2.62    $ 2.69    $ 2.77
Fuel Pass Through Amounts
     Coal                                    $ 6,857   $ 7,063  $ 7,275   $ 7,493   $ 7,718   $ 7,949  $ 8,188   $ 8,433   $ 8,686
     Natural Gas                             $ 2,025   $ 2,056  $ 2,087   $ 2,118   $ 2,150   $ 2,182  $ 2,215   $ 2,248   $ 2,282
     Biomass                                 $ 8,169   $ 8,404  $ 8,668   $ 8,933   $ 9,197   $ 9,462  $ 9,756  $ 10,050  $ 10,343
     Less: Biomass Credit                   $ (8,169) $ (8,404)$ (8,668) $ (8,933) $ (9,197) $ (9,462)$ (9,756)$ (10,050)$ (10,343)
     Purchased Power                             $ -       $ -      $ -       $ -       $ -       $ -      $ -       $ -       $ -
Total Fuel Pass Through                      $ 8,882   $ 9,119  $ 9,362   $ 9,611   $ 9,868  $ 10,131 $ 10,403  $ 10,681  $ 10,968
Tissue Revenue
     Steam                                   $ 2,893   $ 2,936  $ 2,980   $ 3,025   $ 3,070   $ 3,117  $ 3,163   $ 3,211   $ 3,259
     Power                                    10,910    11,073   11,239    11,408    11,579    11,753   11,929    12,108    12,289
     Fuel                                      8,882     9,119    9,362     9,611     9,868    10,131   10,403    10,681    10,968
- -----------------------------------------------------------------------------------------------------------------------------------
        Total                               $ 22,685  $ 23,128 $ 23,581  $ 24,044  $ 24,517  $ 25,000 $ 25,495  $ 25,999  $ 26,516
Contract Prices Tissue
- -----------------------------------------------------------------------------------------------------------------------------------
     Steam ($/mmbtu)                          $ 7.07    $ 7.23   $ 7.38    $ 7.54    $ 7.70    $ 7.87   $ 8.04    $ 8.22    $ 8.40
     Power ($/MWh)                           $ 40.23   $ 40.98  $ 41.75   $ 42.54   $ 43.34   $ 44.16  $ 45.00   $ 45.85   $ 46.72
- -----------------------------------------------------------------------------------------------------------------------------------





(a) Demand and processing charges for the
     Pulp Mill Assets are for waste water
     treatment activities.







                     Mobile Energy Services Company, L.L.C.
                           Summary Financial Analysis
                                ($ in thousands)

             Mobile Energy Services -- Projected Operating Results







                           2003      2004      2005      2006       2007      2008     2009      2010      2011      2012     2013
- ----------------------------------------------------------------------------------------------------------------------------------

                                                                                         
Total MESC O&M         $ 11,183  $ 11,351  $ 11,521  $ 11,694   $ 11,869  $ 12,047 $ 12,228  $ 12,411  $ 12,597  $ 12,786 $ 12,978

Capital Expenditures
     MESC               $ 1,464   $ 1,508   $ 1,553   $ 1,600    $ 1,648   $ 1,697  $ 1,748   $ 1,801   $ 1,855   $ 1,910  $ 1,968







                           2014      2015      2016     2017      2018      2019
- --------------------------------------------------------------------------------

                                                      
Total MESC O&M         $ 13,173  $ 13,371  $ 13,572 $ 13,776  $ 13,983  $ 14,193

Capital Expenditures
     MESC               $ 2,027   $ 2,087   $ 2,150  $ 2,214   $ 2,281   $ 2,349









                     Mobile Energy Services Company, L.L.C.
                           Summary Financial Analysis
                                ($ in thousands)

             Mobile Energy Services -- Projected Operating Results









                                                                  2003     2004     2005    2006     2007    2008     2009    2010
- -----------------------------------------------------------------------------------------------------------------------------------

                                                                                                   
EBITDA                                                         $ 6,969  $ 3,290 $ 3,424  $ 2,909 $ 3,041  $ 3,179 $ 3,320  $ 3,466

Less: Interest Expense                                              67       67      67       67      67       67      67       67
Less: Tax Depreciation                                             116      265     418      575     738      905   1,077    1,255
- -----------------------------------------------------------------------------------------------------------------------------------

Taxable Income                                                   6,786    2,959   2,940    2,267   2,237    2,207   2,176    2,145

Less: Taxes                                 38.25%               2,596    1,132   1,124      867     856      844     832      821
- -----------------------------------------------------------------------------------------------------------------------------------

Cash Flow After Taxes Before CapEx                               4,306    2,091   2,233    1,976   2,119    2,268   2,421    2,579

Less:  MESC Capital Expenditures                                 1,464    1,508   1,553    1,600   1,648    1,697   1,748    1,801
- -----------------------------------------------------------------------------------------------------------------------------------
       Cash Flow After CapEx                                     2,842      583     680      376     471      571     673      778

Plus:  Other Income (1)                                             60       60      60       60      60       60      60       60
Less:  Miscellaneous (2)                                           643      521     (66)      47     (20)     (21)    (22)     (23)
- -----------------------------------------------------------------------------------------------------------------------------------
                                                                   703      581      (6)     107      40       39      38       37

Net Cash Flow                                                    3,545    1,164     674      483     511      610     711      815
Present Value of Cash Flow                  10.0%               $3,223     $962    $506     $330    $317     $344    $365     $380
Present Value of Cash Flows @ 10%                  $10,115
Present Value of Terminal EBITDA Multiple   5.5x   $ 5,477
Excess Cash as of December 31, 2002                $ 8,653
                                                   -------
NPV @ 10%                                          $24,245

Present Value of Cash Flow                  15.0%               $3,083     $880    $443     $276    $254     $264    $267     $267
Present Value of Cash Flows @ 12%                  $ 8,131
Present Value of Terminal EBITDA Multiple   5.5x   $ 2,573
Excess Cash as of July 31, 2002                    $ 8,653
                                                   -------
NPV @ 12%                                          $19,356




(1) Reflects mainly interest income
(2) Includes changes in working capital







                                                           2011     2012    2013     2014    2015     2016    2017     2018    2019
- ------------------------------------------------------------------------------------------------------------------------------------

                                                                                                 
EBITDA                                                   $3,618  $ 3,775 $ 3,938  $ 4,105 $ 4,278  $ 4,457 $ 4,643  $ 4,835 $ 5,033

Less: Interest Expense                                       67       67      67       67      67       67      67       67      67
Less: Tax Depreciation                                    1,437    1,654   1,703    1,754   1,808    1,862   1,917    1,975   2,034
- ------------------------------------------------------------------------------------------------------------------------------------

Taxable Income                                            2,115    2,055   2,168    2,284   2,404    2,529   2,660    2,793   2,933

Less: Taxes                                 38.25%          809      786     829      874     920      967   1,017    1,068   1,122
- ------------------------------------------------------------------------------------------------------------------------------------

Cash Flow After Taxes Before CapEx                        2,743    2,923   3,042    3,164   3,292    3,424   3,560    3,700   3,845

Less:  MESC Capital Expenditures                          1,855    1,910   1,968    2,027   2,087    2,150   2,214    2,281   2,349
- ------------------------------------------------------------------------------------------------------------------------------------
       Cash Flow After CapEx                                888    1,013   1,075    1,138   1,205    1,274   1,345    1,419   1,495

Plus:  Other Income (1)                                      60       60      60       60      60       60      60       60      60
Less:  Miscellaneous (2)                                    (24)     (25)    (26)     (27)    (28)     (29)    (30)     (31)    (32)
- ------------------------------------------------------------------------------------------------------------------------------------
                                                             36       35      34       33      32       31      30       29      28

Net Cash Flow                                               924    1,048   1,109    1,171   1,237    1,305   1,375    1,448   1,523
Present Value of Cash Flow                  10.0%          $392     $404    $389     $373    $358     $344    $329     $315    $301
Present Value of Cash Flows @ 10%                  $10,115
Present Value of Terminal EBITDA Multiple   5.5x   $ 5,477
Excess Cash as of December 31, 2002                $ 8,653
                                                   -------
NPV @ 10%                                          $24,245

Present Value of Cash Flow                  15.0%          $263     $259    $238     $219    $201     $184    $169     $155    $142
Present Value of Cash Flows @ 12%                  $ 8,131
Present Value of Terminal EBITDA Multiple   5.5x   $ 2,573
Excess Cash as of July 31, 2002                    $ 8,653
                                                   -------
NPV @ 12%                                          $19,356




(1) Reflects mainly interest income
(2) Includes changes in working capital

EX-99

                                                                    Exhibit A-4


                              MESC PLANT SCHEMATIC



                                 Surplus Assets

                      No. 5 Power        No. 6 Power                No. 8
No. 3 Turbine           Boiler              Boiler                 Recovery
 Generator             Fuel: Gas        Fuel: Biomass, Gas          Boiler
____________         ______________    ______________________     Fuel: Gas
                               |              |               __________________
                               |              |                       |
                               |______________|                       |
                                              |                       |
        N. 8 Power        No. 7 Power         |                       |
          Boiler            Boiler            |                       |
        Fuel: Gas     Fuel: Coal, Biomass,    |                       |
                              Gas             |                       |
      ______________  ________________________|                       |
            |                         |                               |
            |                         |                               |
       Hot Pressure Steam       High Pressure Steam         High Pressure Steam
            |                         |                               |
            |                         |                               |
      ______|_________________________|_______________________________|_______
            |               |                   |
            |               |                   |
            |               |                   |
            |               |                   |
No. 7 Turbine---------No. 6 Turbine--------No. 5 Turbine---------------
  Generator             Generator            Generator              | |
                            |                   |                   | |
                            |                   |                   | |
                            |                   |                   | |
                        ____|___________________|____               | |
                                      |                             | |
                                      |                             | |
                               Low Pressure Steam                   | |
                                      |                             | |
                                      |                             | |
                                      |                             | |
                                      |                             | |
                                      |                             | |
                                      |                             | |
                                      |                            Power
                                      |                             Grid
                                      |                               |
                                      KC                              |
                                  (Tissue Mill-------------------------

                                 and Pulp Mill)

EX-99

                                                           Exhibit A-6

                             Mobile Energy Services
                         Chapter 7 Liquidation Analysis
                             As of December 31, 2002

                                  Introduction


         Returns to each holder of an Impaired Claim in a hypothetical
liquidation under Chapter 7 of the Bankruptcy Code have been estimated. The
results of such estimate are set forth below.

         The Liquidation Analysis was prepared using the Debtors' projected
assets as of December 31, 2002. The Liquidation Analysis is based on a number of
estimates and assumptions that are inherently subject to significant economic
and competitive uncertainties and contingencies beyond the control of the
Debtors and/or any Chapter 7 trustee. Additionally, various liquidation
decisions, which are based on certain assumptions and estimates employed in
determining the liquidation values of the Debtors' assets, will impact the
actual amount of proceeds which would be realized were the Debtors to commence
an actual liquidation. The actual amounts of claims against the estates could
vary significantly from these estimates, depending on the claims asserted during
the Chapter 7 case. This liquidation analysis does not include liabilities that
may arise as a result of liquidation, any new tax assessments or other potential
claims. This analysis also does not include potential recoveries from avoidance
actions.

          ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE VALUES REFLECTED IN
THE LIQUIDATION ANALYSIS WOULD BE REALIZED IF THE DEBTORS WERE, IN FACT, TO
COMMENCE SUCH A CHAPTER 7 LIQUIDATION, AND ACTUAL RESULTS COULD VARY MATERIALLY
FROM THOSE SHOWN HERE.

         THE ESTIMATES AND ASSUMPTIONS EMPLOYED IN THIS LIQUIDATION ANALYSIS
INCLUDE DISCOUNTS TO ASSETS BASED ON THE POSSIBILITY OF OFFSETS AND DEFENSES
BEING ASSERTED BY COUNTERPARTIES, INCLUDING WITHOUT LIMITATION, S.D. WARREN AND
KC. THE DEBTORS DO NOT ADMIT THE EXISTENCE OR VALIDITY OF ANY SUCH OFFSETS OR
DEFENSES.

         These values have not been subject to any review or audit by any
independent accounting firm.

Major Assumptions.
- -----------------

         1. The Debtors' fixed assets are assumed to be sold in whole or in part
to maximize value in the liquidation process. The Debtors' operations are
assumed to be discontinued as of December 31, 2002.



     2. Mechanical equipment is assumed to be properly maintained awaiting sale.
Security and insurance for the Energy Complex are assumed to be maintained for
the 12 months preceding final distribution.

     3. The severance and pension plan benefits are assumed to be paid by
non-Debtor affiliates of the Debtors except as provided as part of the SEI
Senior Lien Claim.

     4. All assets are assumed to be sold within an average of nine months. All
liquidation proceeds are stated in actual dollar terms and have not been
discounted to present values.

     5. If implementation of the liquidation process is delayed, significant
changes in the Debtors' assets and liabilities may occur during the interim
period until the liquidation is completed, and the net liquidation value could
be significantly below that estimated herein.

     6. Upon liquidation, actual liabilities may vary significantly from those
reflected on the Debtors' projected December 31, 2002 balance sheet (the
"Balance Sheet") and in this Liquidation Analysis, because Claims presently
unknown to the Debtors may be asserted. It is not possible to predict with any
certainty the inevitable increase in liabilities resulting from contingent
and/or unliquidated Claims. Actual amounts may vary materially from these
estimates.

     7. Liquidation values are predicated upon the Balance Sheet that was
provided by the Debtors. The analysis does not take into account the effect of
adjustments to the unaudited financial statements subsequent to the date of the
Balance Sheet, or changes in assets and liabilities after that date, except for
specific adjustments described in the assumptions or notes to the Liquidation
Analysis.

     8. This Liquidation Analysis assumes that no new litigation is instituted
against the Debtors and the Debtors incur no on-going litigation expenses.


     9. This Liquidation Analysis assumes that Debtors' ability to collect its
accounts receivable is negatively impacted by a liquidation.

     10. Certain of the Debtors' fixed assets were specifically configured for
the Debtors and thus may have limited resale value.







Note A - Book Value

The projected book value used in this Liquidation Analysis is the projected
unaudited depreciated book values as of the date of the Balance Sheet.

Note B - Cash and Cash Equivalents

Cash and Cash Equivalents are those shown on the Balance Sheet.

Note C - Accounts Receivable

The majority of the accounts receivable are from KC. A 75% collection rate was
assumed on those accounts because KC would likely assert offsets against MESC in
a liquidation.

Note D - Prepaid Expenses

The bulk of the prepaid expenses are deposits made to secure transmission for
summer power sales and insurance. It is assumed that most of the summer power
sales deposits would be refunded in a liquidation because the contract would
terminate without penalty. No refund is assumed to result from the remainder of
the prepaid expenses.

Note E - Fuel Stock

Most of the fuel inventory is wood that is assumed to have no value. A small
portion of the fuel stock is coal that is assumed to have limited resale value
although discounted heavily due to transportation costs.

Note F - Plant, Material and Supplies

These assets are spare parts, batteries, gloves, etc. which is assumed to have
relatively higher resale value particularly since other parties located at the
site might have use for these assets.

Note G - Restricted Deposits

This is accrued interest on bank deposits that is owed to the Debtors. A 90%
collection rate is assumed since the banks may have some offsetting fees and
expenses.







Note H - Utility Plant, Property and Equipment

The major plant, property and equipment are the boilers and turbine generators
which are assumed to have some resale value although that value has been
discounted heavily for transportation. The remainder of the plant, property and
equipment is relatively old and is assumed to have limited resale value net of
transportation costs.

Note I - Construction Work in Process

The main item in the construction work in progress amount shown on the balance
sheet relates to a heat recovery steam generator purchased by the Company. This
asset has been assigned no liquidation value.

Note J - Land

The land is leased and thus is assumed to have no value in a liquidation.

Note K - Non- Utility Property

This category includes telephones, computer equipment, rolling stock and other
non-plant property that is assumed to have a limited resale value.

Note L - Acquisition Costs

These assets are the result of the amortization of certain costs and are assumed
to have no value in a liquidation.

Note M - Chapter 7 Trustee

The Chapter 7 Trustee is assumed to receive 3% of the gross proceeds of any
sale.


Note N - Trustee Professionals

Professional fees of $1 million for the legal advisors and $1 million for the
financial advisors to the Trustee are assumed in the Chapter 7.

Note O - Mothballing Costs/Unwind Expenses

Mothballing costs are assumed to be $175,000 per month for nine months. In
addition, expenses for personnel necessary to the liquidation of the business
are assumed at a lump sum of $750,000.

Note P - Chapter 11 Expenses




These costs are based on the projected Chapter 11 costs and expenses outstanding
as of December 31, 2002. Some or all of these costs might not be allowed as
priority claims in the bankruptcy.

Note Q - Mirant Senior Liens

As of December 31, 2002, all liquidated claims of Mirant will have been paid.
Certain contingent claims still exist as discussed in the Plan, although no
payment for these claims is contemplated herein.

Note R - First Mortgage and Tax-Exempt Bonds

This is the amount of the Allowed Claims of the First Mortgage and Tax-Exempt
Bonds as of the Petition Date.





                   MOBILE ENERGY SERVICES
          PROJECTED CHAPTER 7 LIQUIDATION ANALYSIS
                  AS OF DECEMBER 31, 2002
                          ($000s)




                                                      Projected    Percentage     Projected
Assets:                                            Book Value (A)   Recovery    Gross Proceeds

Current Assets:
- --------------

                                                                         
Cash and Cash Equivalents (B)                           $13,653      100%         $13,653
Accounts Receivable (C)                                   4,948       75%           3,711
Prepaid Expenses (D)                                        438       37%             161
Fuel Inventory (E)                                           17        5%               1
Plant Material and Supplies (F)                           4,158       25%           1,040
Restricted Deposits (G)                                      68       90%              61

Plant, Property and Equipment:
- -----------------------------

Major Utility Plant, Property and Equipment (H)         149,161      7.5%          11,187
Other Utility Plant, Property and Equipment (H)         151,000        2%           3,020
Construction Work in Process (I)                          7,189        0%               -
Land (J)                                                  2,000        0%               -
Non - Utility Property (K)                                  218       15%              33

Other Assets:
- ------------

Acquisition Costs and Deferred Deposits (L)              10,372        0%               -
- -----------------------------------------------------------------------------------------

                                         Total:        $343,222                   $32,866










                   MOBILE ENERGY SERVICES
          PROJECTED CHAPTER 7 LIQUIDATION ANALYSIS
                  AS OF DECEMBER 31, 2002
                          ($000s)






Liabilities:

Chapter 7 Costs:
- ----------------

                                                                                   
Chapter 7 Trustee (M)                                                                 986
 (3%  gross proceeds)
Trustee Professional (N)                                                            2,000
Mothballing Costs (O)                                                               2,550

Priority/Administrative Claims:
- ------------------------------

Chapter 11 Expenses and Claims (P)                                                  5,557
Potential Claims by Mill Owners                                                    14,250

Net Proceeds Available for Secured Claims                                          $7,523

Secured Claims:
- --------------

Mirant Senior Liens (Q)                                                                 0

Net Proceeds Available for Senior Bonds                                            $7,523

Senior Bonds (R)                                                                  316,000

Percentage Recovery - Secured Claims                                                2.38%

Net Proceeds Available - Unsecured Claims                                               0

EX-99

   MESH Consololidated Summary Income Statement for Current and YTD vs. Budget





                                    MESC USD
                           Period: Dec-01 currency USD
                          Submitted: 28-AUG-02 09:22:39
- ------------------------------------------------------------------------------------------------------------------------------------
                         --------------Current Period----------             -------------Year to Date-------------            Annual
                             Actual     Budget        Variance   Variance %     Actual       Budget     Variance   Variance % Budget
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    
Demand Charges             987,746.00     0.00        987,746.00     n/m    18,697,053.00     0.00    18,697,053.00     n/m    0.00
Processing Charges       1,796,069.00     0.00      1,796,069.00     n/m    40,716,008.00     0.00    40,716,008.00     n/m    0.00
Biomass Credit                   0.00     0.00              0.00     n/m    (1,515,010.00)    0.00     1,515,010.00     n/m    0.00
Grid Power Sales                 0.00     0.00              0.00     n/m         3,728.00     0.00         3,728.00     n/m    0.00
Compressed Air              34,354.00     0.00         34,354.00     n/m       521,595.00     0.00       521,595.00     n/m    0.00
Ash Disposal Revenue        61,577.00     0.00         61,577.00     n/m       678,811.00     0.00       678,811.00     n/m    0.00
Misc Revenue                     0.00     0.00              0.00     n/m             0.00     0.00             0.00     n/m    0.00

Total Revenues           2,879,746.00     0.00      2,879,746.00     n/m    59,102,186.00     0.00    59,102,186.00     n/m    0.00

Purchased Coal             349,003.00     0.00       (349,003.00)    n/m     6,366,355.00     0.00    (6,366,355.00)    n/m    0.00
Purchased Gas              607,945.00     0.00       (607,945.00)    n/m    21,468,219.00     0.00   (21,468,219.00)    n/m    0.00
Compressed Air                   0.00     0.00              0.00     n/m             0.00     0.00             0.00     n/m    0.00
Hauling Ash                 66,444.00     0.00        (66,444.00)    n/m       712,865.00     0.00      (712,865.00)    n/m    0.00

Total Fuel Expenses      1,023,392.00     0.00     (1,023,392.00)    n/m    28,547,440.00     0.00   (28,547,440.00)    n/m    0.00

Salaries & Wages           511,465.00     0.00       (511,465.00)    n/m     4,194,662.00     0.00    (4,194,662.00)    n/m    0.00
Maintenance              1,080,447.00     0.00     (1,080,447.00)    n/m     3,882,803.00     0.00    (3,882,803.00)    n/m    0.00
Major Maintenance              650.00     0.00           (650.00)    n/m        10,270.00     0.00       (10,270.00)    n/m    0.00
  Insurance                 34,104.00     0.00        (34,104.00)    n/m       552,269.00     0.00      (552,269.00)    n/m    0.00
Training                        30.00     0.00            (30.00)    n/m        32,771.00     0.00       (32,771.00)    n/m    0.00
  Operations               248,208.00     0.00       (248,208.00)    n/m     2,454,684.00     0.00    (2,454,684.00)    n/m    0.00
G&A                      4,938,129.00     0.00     (4,938,129.00)    n/m    10,101,690.00     0.00   (10,101,690.00)    n/m    0.00
Taxes Other than Income    539,236.00     0.00       (539,236.00)    n/m     1,118,501.00     0.00    (1,118,501.00)    n/m    0.00
Shared Services             16,548.00     0.00        (16,548.00)    n/m       189,175.00     0.00      (189,175.00)    n/m    0.00
Water & Effluent             9,376.00     0.00         (9,376.00)    n/m        66,473.00     0.00       (66,473.00)    n/m    0.00
Information Systems          1,065.00     0.00         (1,065.00)    n/m        34,801.00     0.00       (34,801.00)    n/m    0.00

Total O&M Expenses       7,379,258.00     0.00     (7,379,258.00)    n/m    22,638,100.00     0.00   (22,638,100.00)    n/m    0.00


EBITDA                  (5,522,904.00)    0.00     (5,522,904.00)    n/m     7,916,646.00     0.00     7,916,646.00     n/m    0.00


Depreciation             1,229,298.00     0.00     (1,229,298.00)    n/m    13,495,316.00     0.00   (13,495,316.00)    n/m    0.00
  Interest Income -
    Temp Investments      (582,086.00)    0.00        582,086.00     n/m    (1,065,926.00)    0.00     1,065,926.00     n/m    0.00
Amortization               179,688.00     0.00       (179,688.00)    n/m     2,200,046.00     0.00    (2,200,046.00)    n/m    0.00
Gain on Sale of Assets   1,582,032.00     0.00     (1,582,032.00)    n/m     1,582,032.00     0.00    (1,582,032.00)    n/m    0.00

Income (Loss) Before Tax(7,931,836.00)    0.00     (7,931,836.00)    n/m    (8,294,822.00)    0.00    (8,294,822.00)    n/m    0.00

Income Tax Exp (Benefit)        48.00     0.00            (48.00)    n/m        25,761.00     0.00       (25,761.00)    n/m    0.00


Net Income (Loss)       (7,931,884.00)    0.00     (7,931,884.00)    n/m    (8,320,582.00)    0.00    (8,320,582.00)    n/m    0.00

- ------------------------------------------------------------------------------------------------------------------------------------




MOBILE ENERGY SERVICES COMPANY, L.L.C.
ASSUMPTIONS TO OPERATING CASH REQUIREMENTS
FOR PERIOD 8/1/2002 To 12/31/2002


1)   Effective Date of the Plan of Reorganization will be December 31, 2002.

2)   A fee of $112,500 per quarter will be paid to the new operator under the
     terms of the proposed contract. These payments will be made in March, June,
     September and December.

3)   Natural gas prices for 2002 fuel costs are based upon projected gas costs
     for each month in $/MMBtu as shown below:

    August                    $ 3.75
    September                 $ 3.75
    October                   $ 3.75
    November                  $ 3.75
    December                  $ 3.75

4)   Interest rate on cash balances is assumed for the forecast period to be:
     1.50%

5)   Confirmation costs consist of the following:
                  Professional fee reserve            1,000,000
                  Pre-Petition Trade Claims             431,286
                                                   -------------

                                                     $ 1,431,286
                                                   =============

6)   Amounts in the projected O&M costs include the following items in
     additional to normal O&M costs:

  Month             Item                 Amount
 ------------------------------------------------

 October      Cold Outage Costs          $250,000
 November     Cold Outage Costs           300,000
 December     Cold Outage Costs           250,000
 December     Property Tax Payments       550,000





Mobile Energy Services Company, L.L.C.
Projected Cash Flows
For the Five Months Ending December 31, 2002





                                        Month Ending    Month Ending   Month Ending    Month Ending    Month Ending       Total
                                          08/31/02        09/30/02       10/31/02        11/30/02        12/31/02         Period
                                       --------------------------------------------------------------------------------------------

Beginning Cash Balance
                                                                                                    
   MESC                                $ 12,985,978    $ 13,303,066   $ 13,553,051    $ 13,590,849    $ 13,532,837    $ 12,985,978
   MESH                                   2,209,098       2,209,098      2,209,098       2,209,098       2,209,098       2,209,098
                                       --------------------------------------------------------------------------------------------
                       Total             15,195,076      15,512,164     15,762,149      15,799,947      15,741,935      15,195,076

Revenues Collected                        2,400,000       2,450,000      2,500,000       2,425,000       2,400,000      12,175,000
Interest Income                              16,232          16,629         16,941          16,989          16,916          83,707
Other Cash Receipts                                                                                                              -
Fuel Costs                                 (915,000)       (895,000)      (920,000)       (925,000)       (950,000)     (4,605,000)
O&M Costs                                  (909,144)     (1,021,644)    (1,184,144)     (1,250,000)     (1,750,000)     (6,114,932)
Operating Capex                            (125,000)       (150,000)      (175,000)       (175,000)       (175,000)       (800,000)
                                       --------------------------------------------------------------------------------------------
   Net Cash Flow from Operations            467,088         399,985        237,797          91,989        (458,084)        738,775

Bankruptcy Items
Professional fees                          (150,000)       (150,000)      (200,000)       (150,000)       (200,000)       (850,000)
   Confirmation expenses                          -               -              -               -      (1,431,286)     (1,431,286)
                                       --------------------------------------------------------------------------------------------
   Net Cash Flow after Bankruptcy costs     317,088         249,985         37,797         (58,011)     (2,089,370)     (1,542,511)

Reserve for Income Taxes                          -               -              -               -               -               -
                                       --------------------------------------------------------------------------------------------

   Net Cash Flow after Tax                  317,088         249,985         37,797         (58,011)     (2,089,370)     (1,542,511)

Ending Cash Balance
                                       --------------------------------------------------------------------------------------------
   MESC                                  13,303,066      13,553,051     13,590,849      13,532,837      11,443,467      11,443,467
MESH                                      2,209,098       2,209,098      2,209,098       2,209,098       2,209,098       2,209,098
                                       --------------------------------------------------------------------------------------------

Total                                  $ 15,512,164    $ 15,762,149   $ 15,799,947    $ 15,741,935    $ 13,652,565    $ 13,652,565
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