-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S+xAliM6VNMebMXX8JjdF2sqjA/x1r/nXfES35pw/z07n58xRqmGSson/d5dq55U kNWtYgpEbj684dB1SlSw2A== 0001017062-98-002240.txt : 19981116 0001017062-98-002240.hdr.sgml : 19981116 ACCESSION NUMBER: 0001017062-98-002240 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EDISON MISSION ENERGY CENTRAL INDEX KEY: 0000930835 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 954031807 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24890 FILM NUMBER: 98746410 BUSINESS ADDRESS: STREET 1: 18101 VON KARMAN AVE STREET 2: STE 1700 CITY: IRVINE STATE: CA ZIP: 92715 BUSINESS PHONE: 7147525588 MAIL ADDRESS: STREET 1: 18101 VON KARMAN AVE STREET 2: STE 1700 CITY: IRVINE STATE: CA ZIP: 92715 FORMER COMPANY: FORMER CONFORMED NAME: MISSION ENERGY CO DATE OF NAME CHANGE: 19941003 10-Q 1 FOR PERIOD ENDED SEPTEMBER 30, 1998 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 ---------------------------- or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------- ------------------ Commission File Number 1-13434 Edison Mission Energy (Exact name of registrant as specified in its charter) California 95-4031807 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 18101 Von Karman Avenue Irvine, California 92612 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (949) 752-5588 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] Number of shares outstanding of the registrant's Common Stock as of November 13, 1998: 100 shares (all shares held by an affiliate of the registrant). TABLE OF CONTENTS Item Page - ---- ---- PART I - Financial Information 1. Financial Statements....................................................1 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................10 PART II - Other Information 6. Exhibits and Reports on Form 8-K.......................................21 PART III Signatures.............................................................22 PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands)
(Unaudited) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ----------------------- 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Operating Revenues Electric revenues $132,398 $143,919 $ 475,597 $ 546,262 Equity in income from energy projects 81,174 73,857 146,966 135,038 Equity in income from oil and gas 3,155 6,244 13,582 28,970 Operation and maintenance services 10,755 10,525 30,557 30,766 -------- -------- --------- --------- Total operating revenues 227,482 234,545 666,702 741,036 -------- -------- --------- --------- Operating Expenses Fuel 36,817 39,797 126,529 143,552 Plant operations 30,855 31,892 93,324 98,139 Operation and maintenance services 7,725 8,137 22,004 22,578 Depreciation and amortization 20,773 24,027 65,933 80,200 Administrative and general 27,928 39,524 85,090 85,169 -------- -------- --------- --------- Total operating expenses 124,098 143,377 392,880 429,638 -------- -------- --------- --------- Income from operations 103,384 91,168 273,822 311,398 -------- -------- --------- --------- Other Income (Expense) Interest and other income 9,967 9,826 33,186 23,010 Gain on sale of assets -- -- 1,148 26,642 Interest expense (46,930) (53,737) (137,815) (159,614) Dividends on preferred securities (3,304) (3,304) (9,905) (9,864) Minority interest (484) (789) (2,080) (38,494) -------- -------- --------- --------- Total other income (expense) (40,751) (48,004) (115,466) (158,320) -------- -------- --------- --------- Income before income taxes 62,633 43,164 158,356 153,078 Provision (credit) for income taxes 17,855 (2,937) 57,290 41,812 -------- -------- --------- --------- Income before extraordinary loss $ 44,778 $ 46,101 $ 101,066 $ 111,266 Extraordinary loss on early extinguishment of debt, net of income tax benefit -- -- -- (13,126) -------- -------- --------- --------- Net Income $ 44,778 $ 46,101 $ 101,066 $ 98,140 ======== ======== ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 1 EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
(Unaudited) September 30, December 31, 1998 1997 ------------ ----------- Assets Current Assets Cash and cash equivalents $ 668,574 $ 585,883 Accounts receivable - trade 51,982 76,935 Accounts receivable - affiliates 9,254 18,139 Prepaid expenses and other 25,249 13,630 ---------- ---------- Total current assets 755,059 694,587 ---------- ---------- Investments Energy projects 942,125 852,688 Oil and gas 60,303 67,101 ---------- ---------- Total investments 1,002,428 919,789 ---------- ---------- Property, Plant and Equipment 3,105,500 3,142,551 Less accumulated depreciation and amortization 234,569 201,564 ---------- ---------- Net property, plant and equipment 2,870,931 2,940,987 ---------- ---------- Other Assets Long-term receivables 28,339 25,957 Goodwill 316,990 312,606 Restricted cash and other 61,006 91,219 ---------- ---------- Total other assets 406,335 429,782 ---------- ---------- Total Assets $5,034,753 $4,985,145 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 2 EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
(Unaudited) September 30, December 31, 1998 1997 ------------ ----------- Liabilities and Shareholder's Equity Current Liabilities Accounts payable - affiliates $ 14,006 $ 13,381 Accounts payable and accrued liabilities 206,751 208,411 Interest payable 31,307 42,627 Current maturities of long-term obligations 185,368 75,383 ---------- ---------- Total current liabilities 437,432 339,802 ---------- ---------- Long-Term Obligations Net of Current Maturities 2,372,927 2,532,121 ---------- ---------- Long-Term Deferred Liabilities Deferred taxes and tax credits 575,888 517,391 Deferred revenue 483,626 541,176 Other 65,006 68,951 ---------- ---------- Total long-term deferred liabilities 1,124,520 1,127,518 ---------- ---------- Total liabilities 3,934,879 3,999,441 ---------- ---------- Minority Interests 14,877 9,102 ---------- ---------- Company - Obligated Mandatorily Redeemable Security of Partnership Holding Solely Parent Debentures 150,000 150,000 ---------- ---------- Commitments and Contingencies (Note 3) Shareholder's Equity Common stock, no par value; 10,000 shares authorized; 100 shares issued and outstanding 64,130 64,130 Additional paid-in capital 629,406 629,406 Retained earnings 203,382 102,620 Cumulative translation adjustments 38,079 30,446 ---------- ---------- Total shareholder's equity 934,997 826,602 ---------- ---------- Total Liabilities and Shareholder's Equity $5,034,753 $4,985,145 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 3 EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands)
(Unaudited) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ----------------------- 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Net Income $44,778 $ 46,101 $101,066 $ 98,140 Other comprehensive income (expense), net of tax: Foreign currency translation adjustments net of income tax benefit (expense) of $(272) and $2,111 for the three months and $(1,172) and $4,902 for the nine months ended September 30, 1998 and 1997, respectively 6,895 (16,917) 7,633 (36,552) ------- -------- -------- -------- Comprehensive Income $51,673 $ 29,184 $108,699 $ 61,588 ======= ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 4 EDISON MISSION ENERGY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
(Unaudited) Nine Months Ended September 30, ----------------------- 1998 1997 ---------- ---------- Cash Flows From Operating Activities Net income $ 101,066 $ 98,140 Adjustments to reconcile net income to net cash provided by operating activities: Equity in income from energy projects (146,966) (135,038) Equity in income from oil and gas (13,582) (28,970) Distributions from energy projects 97,452 88,203 Dividends from oil and gas 19,537 38,078 Depreciation and amortization 65,933 80,200 Deferred taxes and tax credits 44,447 (41,859) Gain on sale of assets (1,148) (26,642) Extraordinary loss on early extinguishment of debt, net of tax -- 13,126 Decrease in accounts receivable 33,838 10,570 Decrease in prepaid expenses and other 11 2,079 Increase (decrease) in accounts payable and accrued liabilities (7,039) 70,589 Decrease in interest payable (11,320) (11,495) Other, net (9,737) (2,758) ---------- ---------- Net cash provided by operating activities 172,492 154,223 ---------- ---------- Cash Flows From Financing Activities Borrowings on long-term obligations 66,016 1,033,946 Payments on long-term obligations (72,224) (809,472) Cash dividend to parent -- (122,000) ---------- ---------- Net cash provided by (used in) financing activities (6,208) 102,474 ---------- ---------- Cash Flows From Investing Activities Investments in energy projects (9,450) (51,514) Loans to energy projects (42,289) (42,984) Purchase of common stock of acquired companies (4,109) (63,983) Proceeds from sale of assets 4,100 71,166 Capital expenditures (62,725) (65,233) Decrease (increase) in restricted cash 34,169 (15,747) Other, net (2,573) (13,668) --------- ---------- Net cash used in investing activities (82,877) (181,963) --------- ---------- Effect of exchange rate changes on cash (716) (17,111) --------- ---------- Net increase in cash and cash equivalents 82,691 57,623 Cash and cash equivalents at beginning of period 585,883 383,634 --------- ---------- Cash and cash equivalents at end of period $ 668,574 $ 441,257 ========= ==========
The accompanying notes are an integral part of these consolidated financial statements. 5 EDISON MISSION ENERGY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 NOTE 1. GENERAL All adjustments, including recurring accruals, have been made that are necessary to present fairly the consolidated financial position and results of operations for the periods covered by this report. The results of operations for the nine months ended September 30, 1998, are not necessarily indicative of the operating results for the full year. Edison Mission Energy's (EME) significant accounting policies are described in Note 2 to EME's Consolidated Financial Statements as of December 31, 1997 and 1996, included in its 1997 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1998. EME follows the same accounting policies for interim reporting purposes. This quarterly report should be read in connection with such financial statements. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. NOTE 2. INVESTMENTS The following table presents summarized financial information of the investments in energy projects and oil and gas accounted for by the equity method:
(In thousands) (Unaudited) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ----------------------- 1998 1997 1998 1997 -------- -------- ---------- ---------- Energy Projects Operating Revenues $478,516 $447,228 $1,200,618 $1,184,932 Income from Operations 188,294 177,366 343,069 352,244 Net Income 162,535 146,502 265,549 270,605 Oil and Gas Operating Revenues $ 49,232 $ 64,940 $ 155,180 $ 225,215 Income from Operations 8,430 16,700 37,112 78,748 Net Income 6,664 14,286 27,770 58,253
6 NOTE 3. COMMITMENTS AND CONTINGENCIES Firm Commitments for Asset Purchase
Project U.S. ($ in millions) - ------- -------------------- Homer City (i) 1,801
(i) Homer City is a 1,884-MW coal-fired generating plant in the mid-Atlantic region of the United States. A wholly owned subsidiary of EME executed an Asset Purchase Agreement to purchase 100% of the Homer City Electric Generating Station. The closing of the transaction is subject to receipt of various State and Federal regulatory approvals and is expected to be completed by the first quarter of 1999. Approvals have been obtained from the Pennsylvania Public Utility Commission and the New York State Public Service Commission. EME plans to finance the acquisition with a combination of debt secured by the project, corporate debt and cash. Firm Commitments to Contribute Project Equity
Projects Local Currency U.S. ($ in millions) - -------- -------------- -------------------- ISAB (i) 244 billion Italian Lira 148 Paiton (ii) 84 Tri Energy (iii) 25 Doga (iv) 8
(i) ISAB is a 512-MW integrated gasification combined cycle power plant under construction near Siracusa in Sicily, Italy. A wholly owned subsidiary of EME owns a 49% interest. Equity will be contributed at commercial operation, which is currently scheduled for late 1999. (ii) Paiton is a 1,230-MW coal-fired power plant under construction in East Java, Indonesia. A wholly owned subsidiary of EME owns a 40% interest. Equity contributions are currently being made and will continue until commercial operation, which is currently scheduled for the first half of 1999. (iii) Tri Energy is a 700-MW gas-fired power plant under construction in the Ratchaburi Province, Thailand. A wholly owned subsidiary of EME owns a 25% interest. Equity will be contributed at commercial operation, which is currently scheduled for mid 2000. (iv) Doga is a 180-MW gas-fired power plant under construction near Istanbul, Turkey. A wholly owned subsidiary of EME owns an 80% interest. Equity contributions are currently being made and will continue until commercial operation, which is currently scheduled for the first half of 1999. Firm commitments to contribute project equity could be accelerated due to certain events of default as defined in the non-recourse project financing facilities. Management 7 has no reason to believe that these events of default will occur to require acceleration of the firm commitments. Contingent Obligations to Contribute Project Equity
Projects U.S. ($ in millions) - -------- ------------------- Paiton (i) 141 Tri Energy (i) 20 Doga (i) 15 All Other 23
(i) Contingent obligations to contribute additional equity to the project would be based on events principally related to capital cost overruns during plant construction, certain partner obligations or events of default. Management has no reason to believe that these contingent obligations or any other contingent obligations to contribute project equity will be required. Other Commitments and Contingencies Certain of EME's subsidiaries entered into indemnification agreements whereby the subsidiaries agreed to repay capacity payments to the projects' power purchasers, in the event the projects unilaterally terminate their performance or reduce their electric power producing capability during the term of the power contract. Obligations under these indemnification agreements as of September 30, 1998, if payment were required, would be $267 million. Management has no reason to believe that the projects will either terminate their performance or reduce their electric power producing capability during the term of the power contracts. Paiton is a 1,230-MW coal-fired power plant under construction in East Java, Indonesia. A wholly owned subsidiary of EME owns a 40% interest. Construction on the two-unit Paiton project is approximately 97% complete, and commercial operation is expected in the first half of 1999. The tariff is higher in the early years and steps down over time, and the tariff for the Paiton project includes infrastructure to be used in common by other units at the Paiton complex. The plant's output is fully contracted with the state-owned electricity company, PT Perusahaan Listrik Negara (PLN), for payment in U.S. dollars and supported by the Government of Indonesia. The projected rate of growth of the Indonesian economy and the exchange rate of Indonesian Rupiah into U.S. dollars have deteriorated significantly since the Paiton project was contracted, approved and financed. The project received substantial finance and insurance support from the Export-Import Bank of the United States, The Export- Import Bank of Japan, the U.S. Overseas Private Investment Corporation and the Ministry of International Trade and Industry of Japan. The Paiton project's senior debt ratings have been reduced from investment grade to speculative grade based on the rating agencies' perceived increased risk that PLN might not be able to honor the electricity sales contract with Paiton. The 8 Government of Indonesia has arranged to reschedule sovereign debt owed to foreign governments and has entered into discussions about rescheduling sovereign debt owed to private lenders. A presidential decree has deemed some independent power projects, but not including the Paiton project, subject to review, postponement or cancellation. The Government of Indonesia has announced that it will propose a policy with respect to independent power projects, which is expected in the fourth quarter of 1998. The Paiton project continues to discuss the situation in Indonesia with PLN, the Government of Indonesia and its official and commercial lenders. Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in Brooklyn, New York. A wholly owned subsidiary of EME owns 50% of the project. In February 1997, the construction contractor asserted general monetary claims under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners, L.P. (BNY) for damages in the amount of $136.8 million. BNY has asserted general monetary claims against the contractor. In connection with a $407 million non-recourse project refinancing in 1997, EME agreed to indemnify BNY and its partner from all claims and costs arising from or in connection with the contractor litigation, which indemnity has been assigned to the lenders. EME believes that the outcome of this litigation will not have a material adverse effect on its financial position or results of operations. EME's projected construction expenditures that will be funded utilizing non- recourse project financing are $40 million at September 30, 1998. Litigation EME is routinely involved in litigation arising in the normal course of business. While the results of such litigation cannot be predicted with certainty, management, based on advice of counsel, does not believe that the final outcome of any pending litigation will have a material adverse effect on EME's financial position or results of operations. Environmental Matters EME is subject to environmental regulation by federal, state and local authorities in the U.S. and foreign regulatory authorities with jurisdiction over projects located outside the U.S. EME believes that it is in substantial compliance with environmental regulatory requirements and that maintaining compliance with current requirements will not materially affect its financial position or results of operations. EME completed a review of some of its sites in 1995 and does not believe that a material liability exists as of September 30, 1998. The implementation of Clean Air Act Amendments is expected to result in increased operating expenses; however, these increased operating expenses are not expected to have a material impact on EME's financial position or results of operations. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-Q includes certain forward-looking statements, the realization of which may be affected by certain important factors discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" thereunder and elsewhere herein. GENERAL - ------- Edison Mission Energy (EME) is one of the leading global producers of electricity. Through its subsidiaries, EME is engaged in the business of developing, acquiring, owning and operating electric power generation facilities worldwide. EME's investments include 52 projects totaling 9,985 megawatts (MW) of generation capacity, of which 7,363 are in operation and 2,622 are under construction. EME's operating revenues are derived primarily from electric revenues and equity in income from energy projects. Operating revenues also include equity in income from oil and gas investments and revenue attributable to operation and maintenance services. Electric revenues are derived from consolidated results of operations of several international entities. Equity in income from energy projects relates to EME's ownership interest of 50% or less in projects. The equity method of accounting is generally used to account for the operating results of entities over which EME has a significant influence but in which it does not have a controlling interest. With respect to entities accounted for under the equity method, EME recognizes its proportional share of the income or loss of such entities. ACQUISITION - ----------- In May 1997, Mission Energy Development Australia Pty Ltd, a subsidiary of EME, completed a transaction with the State Government of Victoria (State) acquiring the State's 49% interest in the 1,000-MW Loy Yang B Power Station (Loy Yang B). EME, through its subsidiaries, owns 100% of Loy Yang B. The acquisition was accounted for utilizing the purchase method. The consolidated statement of income for the nine months ended September 30, 1997 reflects the operations under the new contracts and the elimination of the minority interest of Loy Yang B beginning in May 1997. RESULTS OF OPERATIONS - --------------------- OPERATING REVENUES Operating revenues decreased $7.1 million and $74.3 million for the third quarter and nine months ended September 30, 1998, respectively, compared with the corresponding periods of 1997, resulting primarily from decreases in electric revenues and equity in income from oil and gas investments, partially offset by 10 increases in equity in income from energy projects. The third quarter decrease in electric revenues is primarily the result of lower Australian currency exchange rates and a scheduled maintenance outage at Roosecote. The decrease for the nine months ended September 30, 1998 is primarily the result of Loy Yang B's new series of power sales-related contracts associated with the 49% acquisition in May 1997 and lower Australian currency exchange rates. The decreases were partially offset by an increase of $19.7 million in revenues from the First Hydro project, attributable to higher energy revenues as a result of higher energy prices for the third quarter and nine months ended September 30, 1998. Equity in income from energy projects increased $7.3 million and $11.9 million for the third quarter and nine months ended September 30, 1998, respectively, compared with the corresponding periods of 1997. These increases were principally due to earnings from a geothermal project which were previously deferred, partially offset by lower electric and steam revenues for several cogeneration projects due to lower oil and gas prices upon which the revenues are based. A significant number of EME's domestic energy projects are located on the West Coast. These projects generally have power sales contracts that provide for higher payments during the summer months. Accordingly, EME's third quarter revenues from energy projects are materially higher than other quarters of the year. Equity in income from oil and gas investments decreased $3.1 million and $15.4 million for the third quarter and nine months ended September 30, 1998, respectively, compared with the same prior year periods. The decreases were primarily due to lower oil and gas prices. OPERATING EXPENSES Operating expenses decreased $19.3 million and $36.8 million for the third quarter and nine months ended September 30, 1998, respectively, compared with the same prior year periods. The decrease for the third quarter was due to lower fuel, depreciation and amortization, and administrative and general expenses. The decrease for the nine months ended September 30, 1998 was primarily due to lower fuel and depreciation and amortization expenses. The third quarter decrease in fuel expense is primarily the result of a scheduled maintenance outage at Roosecote. The decrease in fuel expense for the nine months ended September 30, 1998 is primarily due to the new fuel supply agreement entered into by Loy Yang B related to the 49% acquisition in May 1997, partially offset by higher fuel expense for First Hydro as a result of higher prices and increased generation in 1998. The third quarter decrease in depreciation and amortization expense is primarily the result of lower Australian currency exchange rates. The decrease in depreciation and amortization expense for the nine months ended September 30, 1998 resulted from an extension in the useful life of Loy Yang B's plant and equipment from approximately 30 years, the term of the previous power purchase agreement, to 50 years, the projected economic life of the plant, as a result of the May 1997 acquisition. 11 The administrative and general expense decrease for the third quarter was primarily related to a decrease in compensation expense as a result of charges associated with EME's phantom stock plan. OTHER INCOME (EXPENSE) Interest and other income increased $10.2 million for the nine months ended September 30, 1998 compared with the same prior year period. The increase was primarily due to interest earned on higher cash balances. Gain on sale of assets in 1997 was comprised of an after-tax gain of approximately $14 million on the sale of EME's ownership interest in B.C. Star Partners (B.C. Star) to Remington Energy Ltd. Interest expense, net of capitalized interest, decreased $6.8 million and $21.8 million in the third quarter and nine months ended September 30, 1998, respectively, compared with the corresponding periods in 1997. The decreases were due to lower Australian currency exchange rates, higher capitalized interest in 1998 compared to the same period in 1997 as a result of higher accumulated construction expenditures and a lower principal balance on the $450 million of securities issued by Edison Mission Energy Funding Corp. Minority interest expense decreased $36.4 million for the nine months ended September 30, 1998 compared with the corresponding period in 1997. The decrease resulted from the acquisition of the remaining 49% ownership interest in Loy Yang B in May 1997. PROVISION FOR INCOME TAXES EME recorded an effective tax provision rate of 36% for the nine months ended September 30, 1998, compared with a 27% rate for the same prior year period. The increase in the 1998 effective tax rate was primarily due to a lower reduction in the corporate income tax rates in the United Kingdom (U.K.) in 1998 compared to 1997. In July 1998, the U.K. government decreased the corporate tax rate from 31% to 30%, effective as of April 1999. In August 1997, the U.K. government decreased the corporate tax rate from 33% to 31%, effective as of April 1997. In accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", these reductions in U.K. income tax rates result in one-time reductions in income tax expense of approximately $10 million and $20 million in 1998 and 1997 respectively, to adjust the U.K. deferred income tax liability (primarily First Hydro) to the new lower rates. LIQUIDITY AND CAPITAL RESOURCES For the nine months ended September 30, 1998, net cash provided by operating activities increased to $172.5 million from $154.2 million for the same period in 1997. The 1998 improvement primarily reflects lower income taxes and higher distributions from energy projects, partially offset by an increase in working capital requirements principally due to a decrease in accrued liabilities and lower distributions from oil and gas. Net cash used in financing activities totaled $6.2 million during the first nine months of 1998, compared to net cash provided by financing activities of $102.5 million in 1997. 12 The 1998 decrease is primarily due to the Loy Yang B financing of $964 million (1.265 billion Australian dollars), the proceeds of which were primarily used to repay Loy Yang B's existing debt facilities of $713 million (935.5 million Australian dollars) in May 1997, partially offset by a cash dividend paid to Edison International of $122 million in June 1997. Net cash used in investing activities decreased to $82.9 million for the nine months ended September 30, 1998 from $182.0 million for the nine months ended September 30, 1997. The decrease is primarily due to the purchase of common stock of acquired companies related to the acquisition of the remaining 49% ownership interest in Loy Yang B in May 1997, a reduction in restricted cash balances required for debt payments primarily for the $450 million of securities issued by Edison Mission Energy Funding Corp. and lower investments in energy projects in 1998 primarily for the Paiton project. These were partially offset by the proceeds from the sale of EME's ownership interest in B.C. Star in April 1997. At September 30, 1998, EME had cash and cash equivalents of $668.6 million and had available $410 million of borrowing capacity under a $500 million revolving credit facility that expires in 2001. This borrowing capacity under the revolving credit facility may be reduced by borrowings for firm commitments to contribute project equity and to fund capital expenditures and construction costs of its project facilities. Firm Commitments for Asset Purchase
Project U.S. ($ in millions) - ------- -------------------- Homer City (i) 1,801
(i) Homer City is a 1,884-MW coal-fired generating plant in the mid-Atlantic region of the United States. A wholly owned subsidiary of EME executed an Asset Purchase Agreement to purchase 100% of the Homer City Electric Generating Station, which is currently scheduled to close during the first quarter of 1999. Firm Commitments to Contribute Project Equity
Projects Local Currency U.S. ($ in millions) - -------- -------------- -------------------- ISAB (i) 244 billion Italian Lira 148 Paiton (ii) 84 Tri Energy (iii) 25 Doga (iv) 8
(i) ISAB is a 512-MW integrated gasification combined cycle power plant under construction near Siracusa in Sicily, Italy. A wholly owned subsidiary of EME owns a 49% interest. Equity will be contributed at commercial operation, which is currently scheduled for late 1999. 13 (ii) Paiton is a 1,230-MW coal-fired power plant under construction in East Java, Indonesia. A wholly owned subsidiary of EME owns a 40% interest. Equity contributions are currently being made and will continue until commercial operation, which is currently scheduled for the first half of 1999. (iii) Tri Energy is a 700-MW gas-fired power plant under construction in the Ratchaburi Province, Thailand. A wholly owned subsidiary of EME owns a 25% interest. Equity will be contributed at commercial operation, which is currently scheduled for mid 2000. (iv) Doga is a 180-MW gas-fired power plant under construction near Istanbul, Turkey. A wholly owned subsidiary of EME owns an 80% interest. Equity contributions are currently being made and will continue until commercial operation, which is currently scheduled for the first half of 1999. Firm commitments to contribute project equity could be accelerated due to certain events of default as defined in the non-recourse project financing facilities. Management has no reason to believe that these events of default will occur to require acceleration of the firm commitments. Contingent Obligations to Contribute Project Equity
Projects U.S. ($ in millions) - -------- -------------------- Paiton (i) 141 Tri Energy (i) 20 Doga (i) 15 All Other 23
(i) Contingent obligations to contribute additional equity to the project would be based on events principally related to capital cost overruns during plant construction, certain partner obligations or events of default. Management has no reason to believe that these contingent obligations or any other contingent obligations to contribute project equity will be required. Other Commitments and Contingencies Certain of EME's subsidiaries entered into indemnification agreements whereby the subsidiaries agreed to repay capacity payments to the projects' power purchasers, in the event the projects unilaterally terminate their performance or reduce their electric power producing capability during the term of the power contract. Obligations under these indemnification agreements as of September 30, 1998, if payment were required, would be $267 million. Management has no reason to believe that the projects will either terminate their performance or reduce their electric power producing capability during the term of the power contracts. 14 Brooklyn Navy Yard is a 286-MW gas-fired cogeneration power plant in Brooklyn, New York. A wholly owned subsidiary of EME owns 50% of the project. In February 1997, the construction contractor asserted general monetary claims under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners, L.P. (BNY) for damages in the amount of $136.8 million. BNY has asserted general monetary claims against the contractor. In connection with a $407 million non-recourse project refinancing in 1997, EME agreed to indemnify BNY and its partner from all claims and costs arising from or in connection with the contractor litigation, which indemnity has been assigned to the lenders. EME believes that the outcome of this litigation will not have a material adverse effect on its financial position or results of operations. EME's projected construction expenditures that will be funded utilizing non- recourse project financing are $40 million at September 30, 1998. EME and its subsidiaries may incur additional obligations to make equity and other contributions to projects in the future. EME believes that it will have sufficient liquidity on both a short and long-term basis to fund pre-financing project development costs, make equity contributions to partnerships, pay corporate debt obligations and pay other administrative and general expenses as they are incurred from (1) distributions from energy projects and dividends from investments in oil and gas, (2) proceeds from the repayment of loans to energy projects and (3) funds available from EME's revolving credit facility. CHANGES IN INTEREST RATES, CHANGES IN ELECTRICITY POOL PRICING, FOREIGN CURRENCY FLUCTUATIONS AND OTHER CONTRACTUAL OBLIGATIONS Changes in interest rates, changes in electricity pool pricing and fluctuations in foreign currency exchange rates can have a significant impact on EME's results of operations. Interest rate changes affect the cost of capital needed to construct and finance projects. EME has mitigated the risk of interest rate fluctuations by arranging for fixed rate financing or variable rate financing with interest rate swaps or other hedging mechanisms for the majority of its project financing. Interest expense included $15.6 million and $13.5 million for the nine months ended September 30, 1998 and 1997, respectively, as a result of interest rate swap and collar agreements. EME has entered into several interest rate swap and collar agreements whereby the maturity date of the swaps and collars occurs prior to the final maturity of the underlying debt. EME does not believe that interest rate fluctuations will have a materially adverse effect on its financial position or results of operations. Projects in the U.K. currently sell their electrical energy and capacity through a centralized electricity pool, which establishes a half-hourly clearing price (also referred to as the "pool price") for electrical energy. The pool price is extremely volatile and can vary by as much as a factor of ten or more over the course of a few hours, due to the large differentials in demand according to the time of day. First Hydro mitigates a portion of the market risk of the pool by entering into contracts for differences (electricity rate swap agreements), related to either the selling or purchasing price of power, whereby a contract specifies a price at which the electricity will be traded, and the parties to the agreement 15 make payments, calculated based on the difference between the price in the contract and the pool price for the element of power under contract. These contracts can be sold in two structures: one-way contracts, where a specified monthly amount is received in advance and difference payments are made when the pool price is above the price specified in the contract, and two-way contracts, where the counter party pays First Hydro when the pool price is below that in the contract instead of a specified monthly amount. These contracts act as a means of stabilizing production revenues or purchasing costs by removing an element of First Hydro's net exposure to pool price volatility. First Hydro electric revenues were increased by $35.8 million for the nine month period ended September 30, 1998, compared to a $27.2 million increase for the corresponding period in 1997, as a result of electricity rate swap agreements. On July 29, 1998, the Director General of Electricity Supply proposed to the Minister for Science, Energy and Industry that the current structure of contracts-for-differences and compulsory trading via the pool at half-hour clearing prices bid a day ahead be abolished. He proposed in its place, among other things, the establishment of voluntary forwards and futures markets, organized by independent market operators and evolving in response to demand; a short-term bilateral market operating from 24 to 4 hours before a trading period; a balancing market to enable the system operator to balance generation and demand and resolve any transmission constraints; a settlement process for recovering imbalances between contracted and metered volumes with stronger incentives for being in balance; and a Balancing and Settlement Code Panel to oversee governance of the short-term bilateral and balancing markets. The Minister for Science, Energy and Industry has recommended that the proposal be implemented by April 2000. Further definition of the proposal will be required before the effects of the changes can be evaluated. Implementation of the proposal may also require legislation. Loy Yang B sells their electrical energy through a centralized electricity pool (the National Electricity Market) which provides for a system of generator bidding, central dispatch and a settlements system based on a clearing market for each half-hour of every day. The Victorian Power Exchange, operator and administrator of the pool, determines a system marginal price each half hour. To mitigate the exposure to price volatility of the electricity traded into the pool, Loy Yang B has entered into a number of financial hedges. From May 8, 1997 to December 31, 2000, approximately 53% to 64% of the plant output sold is hedged under "Vesting Contracts" with the remainder of the plant capacity hedged under the "State Hedge" described below. Vesting Contracts were put into place by the State, between each generator and each distributor, prior to the privatization of electric power distributors in order to provide more predictable pricing for those electricity customers that were unable to choose their electricity retailer. Vesting Contracts set base strike prices at which the electricity will be traded, and the parties to the agreement make payments, calculated based on the difference between the price in the contract and the half-hourly pool clearing price for the element of power under contract. These contracts can be sold as one-way or two-way contracts which are structured similar to the electricity rate swap agreements described above. These contracts are accounted for as electricity rate swap agreements. The State Hedge is a long-term contractual arrangement based upon a fixed price commencing May 8, 1997 and terminating October 31, 2016. The State guarantees SECV's obligations under the 16 State Hedge. Loy Yang B's electric revenues were increased by $51.8 million for the nine-month period ended September 30, 1998, compared to a $43.1 million increase for the corresponding period in 1997, as a result of hedging contract arrangements. The State Hedge and Vesting Contracts were entered into in connection with the 49% acquisition of Loy Yang B in May 1997, and therefore electric revenues were not impacted prior to May 1997. Fluctuations in foreign currency exchange rates can affect, on a U.S. dollar equivalent basis, the amount of EME's equity contributions to, and distributions from, its foreign projects. As EME continues to expand into foreign markets, fluctuations in foreign currency exchange rates can be expected to have a greater impact on EME's results of operations in the future. At times, EME has hedged a portion of its current exposure to fluctuations in foreign exchange rates where it deems appropriate through financial derivatives, offsetting obligations denominated in foreign currencies and indexing underlying project agreements to U.S. dollars or other indices reasonably expected to correlate with foreign exchange movements. In addition, EME has used statistical forecasting techniques to help assess foreign exchange risk and the probabilities of various outcomes. There can be no assurance, however, that fluctuations in exchange rates will be fully offset by hedges or that currency movements and the relationship between certain macro economic variables will behave in a manner consistent with historical or forecasted relationships. Construction on the two-unit Paiton project is approximately 97% complete, and commercial operation is expected in the first half of 1999. The tariff is higher in the early years and steps down over time, and the tariff for the Paiton project includes infrastructure to be used in common by other units at the Paiton complex. The plant's output is fully contracted with the state-owned electricity company, PT Perusahaan Listrik Negara (PLN), for payment in U.S. dollars and supported by the Government of Indonesia. The projected rate of growth of the Indonesian economy and the exchange rate of Indonesian Rupiah into U.S. dollars have deteriorated significantly since the Paiton project was contracted, approved and financed. The project received substantial finance and insurance support from the Export-Import Bank of the United States, The Export- Import Bank of Japan, the U.S. Overseas Private Investment Corporation and the Ministry of International Trade and Industry of Japan. The Paiton project's senior debt ratings have been reduced from investment grade to speculative grade based on the rating agencies' perceived increased risk that PLN might not be able to honor the electricity sales contract with Paiton. The Government of Indonesia has arranged to reschedule sovereign debt owed to foreign governments and has entered into discussions about rescheduling sovereign debt owed to private lenders. A presidential decree has deemed some independent power projects, but not including the Paiton project, subject to review, postponement or cancellation. The Government of Indonesia has announced that it will propose a policy with respect to independent power projects, which is expected in the fourth quarter of 1998. The Paiton project continues to discuss the situation in Indonesia with PLN, the Government of Indonesia and its official and commercial lenders. 17 The electric power generated by EME's domestic operating projects is generally sold to electric utilities pursuant to long-term (typically, 15 to 30-year) power sales contracts and is expected to result in consistent cash flow under a wide range of economic and operating circumstances. To accomplish this, EME structured its power sales contracts so that fluctuations in fuel costs would produce similar fluctuations in electric and/or steam revenues and entered into long-term fuel supply and transportation agreements. ENVIRONMENTAL MATTERS EME is subject to environmental regulation by federal, state and local authorities in the U.S. and foreign regulatory authorities with jurisdiction over projects located outside the U.S. EME believes that it is in substantial compliance with environmental regulatory requirements and that maintaining compliance with current requirements will not materially affect its financial position or results of operations. EME completed a review of some of its sites in 1995 and does not believe that a material liability exists as of September 30, 1998. The implementation of Clean Air Act Amendments is expected to result in increased operating expenses; however, these increased operating expenses are not expected to have a material impact on EME's financial position or results of operations. YEAR 2000 ISSUE EME has a comprehensive program in place to remediate potential Year 2000 impacts. EME divides its Year 2000 Issue activities into five phases: inventory, impact assessment, remediation, documentation and certification. EME's plan for critical systems is to be 75% complete by year-end 1998, and 100% complete by July 1999. A critical system is defined as those applications and systems, including embedded processor technology, which if not appropriately remediated may have a significant impact on customers, the revenue stream, regulatory compliance, or the health and safety of personnel. EME is currently in the remediation and documentation phase. Assurances from third party operated plants have been received indicating aggressive Year 2000 remediation programs. Monitoring of these efforts is ongoing. Plants under construction have obtained assurances from new construction and development contractors, who have been requested to ensure this is part of their goals. General warranty of plants would likely include any equipment issues that may arise regarding Year 2000 in the coming year. The other essential component of the EME Year 2000 readiness program is to identify and assess vendor products and business partners for Year 2000 readiness. EME has a process in place to identify and contact vendors and business partners to determine their Year 2000 status, and is evaluating the responses. EME's general policy requires that all newly purchased products be Year 2000-ready or otherwise designed to allow EME to determine whether such products present Year 2000 issues. 18 Although EME is confident that its critical systems will be fully remediated prior to year-end 1999, EME believes that prudent business practices call for the development of contingency plans. Such contingency plans shall include developing strategies for dealing with Year 2000-related processing failures or malfunctions due to EME's internal systems or from external parties. EME's contingency plans are expected to be completed by March 1999; therefore, these risk factors are not yet fully known, and EME's reasonably likely worst case scenario also is unknown at this time. EME does not expect the Year 2000 issue to have a material adverse effect on its results of operations or financial position; however, if not effectively remediated, negative effects from Year 2000 issues, including those related to internal systems, vendors, business partners, the independent system operator, the power exchange or customers, could cause results to differ. STATEMENT OF POSITION 98-5 In April 1998, the American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities", which will be effective in January 1999. The Statement requires that certain costs related to start-up activities be expensed as incurred and that certain previously capitalized costs be expensed and reported as a cumulative change in accounting principle. The impact of adopting SOP 98-5 on EME's financial statements has not been quantified at this time. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133 In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", which will be effective in January 2000. The Statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. A derivative's gains and losses for qualifying hedges offset related results on the hedged item in the income statement and a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. The impact of adopting Statement 133 on EME's financial statements has not been quantified at this time. GENERATING STATION ACQUISITION On August 2, 1998, EME entered into agreements to acquire the 1,884-MW Homer City Generating Station, one of the largest coal- fired generating plants in the mid-Atlantic region of the United States, for approximately $1.8 billion. Homer City, jointly owned by subsidiaries of GPU, Inc. and New York State Electric & Gas Corporation, is the only major regional coal-fired facility with direct high voltage interconnection to both the New York Power Pool and the Pennsylvania-New Jersey-Maryland Power Pool. The plant is located approximately 45 miles northeast of Pittsburgh, Pennsylvania. EME will operate the plant, which is one of the lowest-cost generation facilities in the region. 19 The closing of the transaction is subject to receipt of various State and Federal regulatory approvals and is expected to be completed by the first quarter of 1999. Approvals have been obtained from the Pennsylvania Public Utility Commission and the New York State Public Service Commission. EME plans to finance the acquisition with a combination of debt secured by the project, corporate debt and cash. The acquisition is expected to have no effect on earnings in 1999 and a positive effect on earnings in 2000 and beyond. 20 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Nos. Description ------------ ----------- 10.47 Guarantee by EME dated June 30, 1998 in favor of Tri Energy Company Limited and the Sanwa Bank, Limited to guarantee payment of 25% of Tri Energy Company Limited's aggregate capital contributions under the Equity Bridge Loan 10.48 Guarantee by EME dated June 30, 1998 in favor of Tri Energy Company Limited and the Sanwa Bank, Limited to guarantee payment of 37.5% of Tri Energy Company Limited's aggregate capital contributions attributable to Banpu Gas and BANPU 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1998. 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Edison Mission Energy --------------------- (Registrant) Date: November 12, 1998 /s/ JAMES V. IACO, JR. - ----------------------- ---------------------- JAMES V. IACO, JR., Senior Vice President and Chief Financial Officer 22 EX-10.47 2 CAPITAL CONTRIBUTION GUARANTEE EXHIBIT NO. 10.47 Execution Version ================================================================================ CAPITAL CONTRIBUTION GUARANTEE by EME TRI GEN BV and EDISON MISSION ENERGY, Guarantors in favor of TRI ENERGY COMPANY LIMITED and THE SANWA BANK, LIMITED, as Equity Facility Agent ================================================================================ CAPITAL CONTRIBUTION GUARANTEE THIS CAPITAL CONTRIBUTION GUARANTEE (this "Guarantee"), dated as of --------- June 30, 1998, is made by EME Tri Gen BV, a corporation organized and validly existing under the laws of The Netherlands ("ETG" or the "Sponsor"), having its principal address at Croeselaan 18, 3521 CB Utrecht, The Netherlands and Edison Mission Energy, a corporation organized and validly existing under the laws of the State of California ("EME" and together with ETG, the "Guarantors"), having ---------- its principal address at 18101 Von Karman Ave., Suite 1700, Irvine, California 92612-1046 U.S.A., in favor of Tri Energy Company Limited, a limited liability company organized and existing under the laws of Thailand (the "Borrower"), -------- having its registered address at 16th Fl., Grand Amarin Tower, New Petchburi Road, Ratchathewi, Bangkok, 10320 Thailand and The Sanwa Bank, Limited, a banking institution organized under the laws of Japan, acting by and through its Tokyo head office, as Equity Facility Agent (in such capacity, together with its successors and assigns in such capacity, the "Equity Facility Agent") for the --------------------- Equity Bridge Lenders under the Financing Documents. WITNESSETH: ---------- A. The Guarantors. ETG is a sponsor of the Borrower. EME is the parent -------------- corporation of ETG. B. Common Terms Agreement. The Borrower has entered into that certain ---------------------- Amended and Restated Common Terms Agreement, dated as of June 30, 1998, among the Borrower, Credit Suisse First Boston, as Documentation and Coordination Agent and Syndication Agent, the Sanwa Bank, Limited, as Facility Agent, Equity Facility Agent, Offshore Collateral Agent and Technical Agent, Tokyo-Mitsubishi International (Singapore) Ltd., as Insurance Agent, The Sumitomo Bank, Limited, as Onshore Collateral Agent, Citibank, N.A., as a Letter of Credit Facility Lender and a Working Capital Facility Lender, Siam City Bank Public Company Limited, as Guarantee Facility Lender and a Working Capital Facility Lender, The Industrial Finance Corporation of Thailand, as a Working Capital Facility Lender, and NationsBank, N.A., as a Letter of Credit Facility Lender, and all financial institutions and trusts that from time to time become Lenders pursuant to the terms of the Credit Agreement. The Common Terms Agreement sets forth certain common provisions regarding the Loans, including (i) the conditions precedent to the initial drawdown and conditions precedent to subsequent drawdowns of the Credit Facilities and the conditions precedent to the Credit Facility Conversion, (ii) representations and covenants of the Borrower running in favor of the Financing Parties, (iii) common Events of Default, and (iv) reporting and insurance requirements for the Project. C. Financing Documents. The Borrower has entered into (i) that certain ------------------- Equity Bridge Loan Credit Agreement with the Equity Bridge Lenders, the Documentation and Coordination Agent, the Facility Agent, the Equity Facility Agent and Banpu Gas (solely for purposes of Section 2.5.3 thereof), pursuant to -------------- which the Equity Bridge Lenders will provide Equity Bridge Loans to the Borrower during the construction phase of the Project, which are to be guaranteed in part by this Guarantee, (ii) the Credit Agreements with the Lenders and the Agents party thereto, and (iii) certain other Financing Documents. D. Condition to Lending. It is a condition precedent to the Equity -------------------- Bridge Lenders' obligation to make the Equity Bridge Loan Facility available to the Borrower under the Common Terms Agreement and the Equity Bridge Loan Credit Agreement and the Lenders' -2- obligations to make the other Credit Facilities available to the Borrower under the Common Terms Agreement and the other Credit Agreements that the Guarantors enter into this Guarantee. AGREEMENT --------- NOW, THEREFORE, in consideration of the premises set forth above and other good and valuable consideration, receipt of which is hereby acknowledged, and as an inducement to the Equity Bridge Lenders to enter into the Equity Bridge Loan Credit Agreement with the Borrower, and to the Lenders to enter into all other Financing Documents, the Guarantors hereby agree as follows: 1. Capitalized Terms. Capitalized terms used but not otherwise ----------------- defined herein shall have the respective meanings given them in Section 1 of Schedule 1 to the Common Terms Agreement, and the Principles of Construction contained in Section 2 of Schedule 1 to the Common Terms Agreement shall apply hereto. 2. Guarantee of Obligations. ------------------------ (a) The Guarantors hereby, jointly and severally, unconditionally and irrevocably guarantee to the Equity Bridge Lenders and the Equity Facility Agent (for the benefit of the Equity Bridge Lenders) to make on or before the Equity Bridge Loan Repayment Date, whether by acceleration or otherwise, aggregate capital contributions to the Capital Contributions Account of the Borrower equal to twenty-five percent (25%) (the "EME Guaranteed Percentage") of all ------------------------- obligations of the Borrower under the Equity Bridge Loan Credit Agreement and allocable to the Equity Bridge Loans under any other applicable Financing Documents (but, for the avoidance of doubt, not including (i) any obligations by the Borrower in favor of the Offshore Lenders to repay amounts drawn from the Offshore Loans and used to pay interest due on the Equity Bridge Loans, or (ii) any amounts owed by the Borrower to any Hedge Provider under Interest Rate Hedging Agreements entered into by the Borrower with respect to the Equity Bridge Loans) whether for interest, fees, expenses or otherwise, together with all expenses incurred by the Equity Facility Agent or the Equity Bridge Lenders in enforcing any of such obligations or the terms hereof, including reasonable fees and expenses of legal counsel, but specifically limited solely to amounts due to the Equity Facility Agent and the Equity Bridge Lenders and not to include any amounts owed by the Borrower to other Persons under or based upon any other Financing Documents (the EME Guaranteed Percentage of the total of such obligations of the Borrower is referred to herein as the "Guaranteed ---------- Obligations"). The Guarantors agree that if for any reason whatsoever the - ------------- Borrower fails or is unable duly, punctually and fully to pay any such Guaranteed Obligations, the Guarantors shall, upon demand by the Equity Facility Agent (acting at the instructions of the Equity Bridge Lenders), make aggregate capital contributions to the Borrower in the amount of such Guaranteed Obligations by deposit of such capital contributions into the Capital Contributions Account within five (5) Business Days after the date of demand, without regard to any exercise or non-exercise by the Equity Facility Agent or the Equity Bridge Lenders of any right, remedy, power or privilege under or in respect of the Equity Bridge Loan Credit Agreement or any other Financing Document against the Borrower. The Borrower acknowledges and agrees that, upon receipt of such capital contributions, the Offshore Collateral Agent shall be obligated to transfer immediately to the Equity Facility Agent the amount of such capital contributions in payment of the Guaranteed Obligations pursuant to Section 2.1.8 of the Disbursement Agreement to enable the Borrower to repay the Equity Bridge Loans. Each payment made by a Guarantor pursuant to this Section 2(a) in respect of the Guaranteed Obligations shall be deemed to be a capital contribution by the Sponsor to the Borrower. Upon receipt of such capital contribution, the Borrower agrees promptly to issue shares of its Capital Stock to the Sponsor in respect of such capital contribution, in accordance with Section 5.2 of the Shareholders' Agreement and the Charter Documents, and the Sponsor shall, and EME shall cause the Sponsor to, execute Pledge Agreements with respect to -3- such shares of Capital Stock; provided, however, that the failure of the -------- ------- Borrower to deliver such shares of Capital Stock shall not excuse the Guarantors' obligations hereunder. (b) The obligations of the Guarantors under this Guarantee are the Guarantors' primary obligations and are an absolute, unconditional, continuing and irrevocable guarantee of payment and not of collectibility or performance and are in no way conditioned on or contingent upon any attempt to enforce in whole or in part the Borrower's obligations under the Equity Bridge Loan Credit Agreement or the obligations of any Person under any of the other Financing Documents. The obligations of the Guarantors under this Guarantee are not, and shall not be, subject to any defense or right of set-off, counterclaim, deduction, diminution, abatement, recoupment, suspension, deferment or reduction or any other legal or equitable defense which the Guarantors have or hereafter may have, against any other Person (including the Borrower) for any reason whatsoever (including any action, failure to act or circumstance which constitutes, or might constitute or be construed as, an equitable or legal discharge of any or all of the Borrower's obligations under the Equity Bridge Loan Credit Agreement); provided that nothing in this Guarantee shall affect -------- any right the Guarantors may have against any of the Equity Bridge Lenders or the Equity Facility Agent arising out of any gross negligence or willful misconduct of any such Person under the Equity Bridge Loan Credit Agreement, the Common Terms Agreement or this Guarantee. Each failure by the Borrower to pay any Guaranteed Obligations shall give rise to a separate cause of action hereunder, and separate suits may be brought hereunder as each cause of action arises. (c) The Equity Facility Agent, acting pursuant to the Equity Bridge Loan Credit Agreement or the Equity Bridge Lenders may, at any time and from time to time without the consent of or notice to the Guarantors, except such notice as may be required by the Financing Documents or Applicable Law, which cannot be waived, without incurring responsibility to the Guarantors, without impairing or releasing the obligations of the Guarantors hereunder, upon or without any terms or conditions and in whole or in part, (i) change, by mutual agreement with the Borrower, the manner, place and terms of payment or change or extend the time of payment of, renew or alter any Guaranteed Obligations or any obligations (including any hereunder) incurred directly or indirectly in respect hereof, or in any manner by mutual agreement with the Borrower modify, amend or supplement the terms of the Equity Bridge Loan Credit Agreement or any documents, instruments or agreements executed in connection therewith (other than any document to which either Guarantor is a party), and the guarantee herein undertaken shall apply to the Guaranteed Obligations as so changed, extended, renewed, modified, amended, supplemented or altered; (ii) exercise or refrain from exercising any rights against the Borrower or others (including the Guarantors), whether under the Financing Documents or otherwise, or otherwise act or refrain from acting; (iii) add or release any other guarantor or other Person from its obligations under any of the Financing Documents without obtaining the consent of the Guarantors, and without affecting or impairing the obligations of the Guarantors hereunder; (iv) settle or compromise any Guaranteed Obligations and/or any obligations and liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any obligations and liabilities which may be due to the Equity Bridge Lenders or others; (v) sell, exchange, release, surrender, realize upon or otherwise deal with in any manner or in any order any property or assets by whomsoever pledged, transferred, or assigned to secure or howsoever securing the Guaranteed Obligations or any liabilities or obligations (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof and/or any offset thereagainst; (vi) apply any sums by whomsoever paid or howsoever realized to the obligations of the Borrower under the Equity Bridge Loan Credit Agreement in the manner provided for therein regardless of what obligations and liabilities remain unpaid; (vii) consent to or waive any breach of, or any act, omission or default under, the Financing Documents or any of such other instruments or agreements, or with the mutual agreement of the Borrower and (when such Guarantor is a party thereto) each respective Guarantor, amend, modify or supplement the Financing Documents or any -4- of such other instruments or agreements; and/or (viii) act or fail to act in any manner referred to in this Guarantee which may deprive the Guarantors of any right it may otherwise have had to subrogation or reimbursement against the Borrower to recover full indemnity for any payments made pursuant to this Guarantee or of its right of contribution against any other party. (d) No invalidity, irregularity or unenforceability of any or all of the obligations or liabilities hereby guaranteed shall affect, impair, or be a defense to this Guarantee. (e) This is a continuing Guarantee and all obligations to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. The Guarantors hereby waive any right to revoke this Guarantee, and acknowledges that this Guarantee is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. In the event that, notwithstanding the provisions of this Section 2, --------- this Guarantee shall be deemed revocable pursuant to Applicable Law, then any such revocation shall become effective only upon receipt by the Equity Facility Agent of written notice of revocation signed by the Guarantors. No revocation or termination hereof shall affect in any manner rights arising under this Guarantee with respect to Guaranteed Obligations arising prior to receipt by the Equity Facility Agent of written notice of such revocation or termination and the sole effect of revocation and termination hereof shall be to exclude from this Guarantee all Guaranteed Obligations thereafter arising which are unconnected with Guaranteed Obligations theretofore arising or transactions theretofore entered into. (f) Each Guarantor acknowledges and agrees that (i) it will benefit, directly and indirectly, if the Equity Bridge Lenders enter into the Equity Bridge Loan Credit Agreement with the Borrower and (ii) the obligations of such Guarantor hereunder are being incurred concurrently with the obligations of the Borrower under the Financing Documents. (g) The obligations of each Guarantor hereunder shall remain unchanged and in full force and effect in accordance with the terms hereof notwithstanding any transfer or other disposition of any interest (whether direct or indirect) in the Sponsor or any transfer or other disposition by the Sponsor of its interest in the Borrower. (h) Anything in this Guarantee or in any other Financing Document to the contrary notwithstanding, the maximum liability of each Guarantor under this Guarantee shall in no event exceed the amount that can be guaranteed by each Guarantor under applicable U.S. federal and state laws relating to the insolvency of debtors. 3. Waiver. To the fullest extent permitted by Applicable Law, each ------ Guarantor hereby expressly waives and relinquishes all rights and remedies accorded by Applicable Law to sureties or guarantors and agrees not to assert or take advantage of any such rights or remedies, including (i) any right to require the Equity Facility Agent or the Equity Bridge Lenders to proceed against the Borrower or any other Person or to proceed against or exhaust any security held by the Equity Facility Agent, on behalf of the Equity Bridge Lenders, or by the Equity Bridge Lenders at any time or to pursue any other remedy in the Equity Facility Agent's or the Equity Bridge Lenders' power before proceeding against such Guarantor; (ii) any right to elect trial by jury, the benefit of the statute of limitations in any action hereunder or in any action for the collection or performance of any obligations hereunder or of the Borrower under the Equity Bridge Loan Credit Agreement; (iii) any defense to any indebtedness or obligation based on a statute of limitations (as to the time period within which an action may be brought); (iv) any defense that may arise by reason of the incapacity, lack of power or authority, dissolution, merger or termination of the Borrower or any other Person or the failure of the Equity Facility Agent or the Equity Bridge Lenders to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of the Borrower or any other Person; (v) any defense based on any act, failure to act, -5- delay or omission whatsoever on the part of the Borrower, the Equity Facility Agent or the Equity Bridge Lenders or the failure of the Borrower, the Equity Facility Agent or the Equity Bridge Lenders to do any act or thing or to observe or perform any covenant, condition or agreement to be observed or performed by it under the Financing Documents; (vi) diligence, demand, presentment, protest and notice of any kind, including notice of acceptance of this Guarantee and of any obligation to which it applies or may apply, and notice of the existence, creation or incurrence of any new or additional indebtedness or obligation or of any default, indulgence, enforcement or other action or non-action on the part of the Borrower, any endorser or creditor of each Guarantor or the Borrower or on the part of any other Person under this or any other instrument in connection with any obligation or evidence of indebtedness held by the Equity Facility Agent, on behalf of the Equity Bridge Lenders, or the Equity Bridge Lenders as collateral or in connection with any obligations hereunder; (vii) any defense based upon an election of remedies by the Equity Facility Agent or the Equity Bridge Lenders, including an election to proceed by non-judicial rather than judicial foreclosure, which destroys or otherwise impairs the subrogation rights of the such Guarantor or the right of such Guarantor to proceed against the Borrower for reimbursement; (viii) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (ix) any duty on the part of the Equity Facility Agent or the Equity Bridge Lenders to disclose to such Guarantor any facts that the Equity Facility Agent or the Equity Bridge Lenders may now or hereafter know about the Borrower, such Guarantor or any other Person, regardless of whether the Equity Facility Agent or the Equity Bridge Lenders have reason to believe that any such facts materially increase the risk beyond that which such Guarantor intends to assume, or have reason to believe that such facts are unknown to such Guarantor, or have a reasonable opportunity to communicate such facts to such Guarantor, since each Guarantor acknowledges that such Guarantor is fully responsible for being and keeping informed of the financial condition of the Borrower and of all circumstances bearing on the risk of non-payment of any obligations and liabilities hereby guaranteed; (x) the fact that EME may at any time in the future transfer or dispose of all or part of its direct or indirect interest in the Sponsor and the Sponsor may at any time in the future transfer or dispose of all or part of its direct or indirect interest in the Borrower; (xi) any defense based on any change in the time, manner or place of any payment under, or in any other term of, the Equity Bridge Loan Credit Agreement or any other amendment, renewal, extension, acceleration, compromise or waiver of or any consent or departure from the terms of the Equity Bridge Loan Credit Agreement ; and (xii) any defense based on any offset against any amounts which may be owed by any Person to such Guarantor for any reason whatsoever. No delay on the part of the Equity Facility Agent or the Equity Bridge Lenders in exercising any of their rights (including those hereunder) and no partial or single exercise thereof and no action or non-action by the Equity Facility Agent or the Equity Bridge Lenders, with or without notice to such Guarantor or anyone else, shall constitute a waiver of any rights or shall affect or impair this Guarantee. 4. Subrogation. Until the indefeasible payment and satisfaction in ----------- full of all Guaranteed Obligations or termination of this Guarantee pursuant to Section 18, each Guarantor agree not to assert any claim or other rights which - ---------- it may now have or hereafter acquire, directly or indirectly, against the Borrower that arise from the existence or performance of such Guarantor's obligations under this Guarantee, including any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim, right or remedy of the Equity Facility Agent or the Equity Bridge Lenders against the Borrower or the Sponsor, or any security now or hereafter held by the Equity Facility Agent or the Equity Bridge Lenders, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, by any payment made hereunder or otherwise, including the right to take or receive from the Borrower or the Sponsor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. 5. Bankruptcy. ---------- -6- (a) So long as any of the Guaranteed Obligations remain outstanding, the Guarantors shall not, without the prior written consent of the Equity Facility Agent, commence, or join with any other Person in commencing, any bankruptcy, reorganization, or insolvency proceeding against the Borrower. The obligations of the Guarantors under this Guarantee shall not be altered, limited or affected by any proceeding, voluntary or involuntary, involving the bankruptcy, reorganization, insolvency, receivership, liquidation or arrangement of the Borrower, or by any defense which the Borrower may have by reason of any order, decree or decision of any court or administrative body resulting from any such proceeding. (b) So long as any of the Guaranteed Obligations remain outstanding, to the extent of such Guaranteed Obligations, the Guarantors shall file, in any bankruptcy or other proceeding in which the filing of claims is required or permitted by law, all claims which the Guarantors may have against the Borrower relating to any indebtedness of the Borrower to the Guarantors and each Guarantor hereby assigns to the Equity Facility Agent, on behalf of the Equity Bridge Lenders, all rights of such Guarantor thereunder. If the Guarantors do not file any such claim, the Equity Facility Agent, as attorney-in-fact for such party, is hereby authorized to do so in the name of the Guarantors or, in the Equity Facility Agent's discretion, to assign the claim to a nominee, to cause proofs of claim to be filed in the name of the Equity Facility Agent's nominee and to vote or otherwise deal with such party's interests in connection with or with respect to all matters in any proceeding. The foregoing power of attorney is coupled with an interest and cannot be revoked. The Equity Facility Agent or its nominee(s) shall have the sole right to accept or reject any plan proposed in any such proceeding and to take any other action, which a party filing a claim is entitled to take. In all such cases, whether in administration, bankruptcy or otherwise, the Person authorized to pay such a claim shall pay the same to the Equity Facility Agent, and, to the full extent necessary for that purpose, each Guarantor hereby assigns to the Equity Facility Agent all of its rights to all such payments or distributions to which such Guarantor would otherwise be entitled; provided, however, that the obligations hereunder shall -------- ------- not be satisfied except to the extent that the Equity Facility Agent receives cash by reason of any such payment or distribution. If the Equity Facility Agent receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guarantee. (c) Without limiting the generality of any of the foregoing provisions of this Guarantee, each Guarantor irrevocably waives, to the fullest extent permitted by Applicable Law and for the benefit of, and as a separate undertaking with the Equity Facility Agent and each Equity Bridge Lender, any defense to the performance of this Guarantee which may be available to such Guarantor as a consequence of any proceeding seeking to adjudicate the Borrower as bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement, protection, relief or composition of the Borrower or the debts of the Borrower under any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors. 6. Subordination. Except as otherwise specifically provided in this ------------- Guarantee, all existing and future indebtedness of the Borrower to the Guarantors and the right of the Guarantors to withdraw any capital invested by the Guarantors in the Borrower, are hereby subordinated to the prior and indefeasible payment in full of all Guaranteed Obligations. Without the prior written consent of the Equity Facility Agent, such subordinated indebtedness shall not be paid or withdrawn in whole or in part, nor shall either Guarantor accept any payment of or on account of any such indebtedness or as a withdrawal of capital while this Guarantee is in effect. If any amount shall be paid to the Guarantors in violation of this Guarantee, and there are outstanding Guaranteed Obligations, such amount shall be deemed to have been paid to the Guarantors for the benefit of, and held in trust for the Equity Facility Agent and the Equity Bridge Lenders, and the Guarantors shall cause the same to be paid to the Equity Facility Agent for the benefit of the Equity -7- Bridge Lenders immediately upon demand by the Equity Facility Agent to be credited and applied toward payment of the outstanding Guaranteed Obligations, whether matured or unmatured. 7. Taxes. ----- (a) All sums payable by the Guarantors under this Guarantee shall be paid (i) free of any restriction or condition, (ii) free and clear of and (except to the extent required by law) without any deduction or withholding on account of any taxes, levies, imposts, duties or other charges of whatever nature (excluding taxes on the overall net income or franchise taxes imposed on the Equity Facility Agent or the Equity Bridge Lenders by the jurisdiction of their incorporation or in which their lending offices are located) (all such non-excluded taxes and other amounts being hereinafter referred to as "taxes") and (iii) without deduction or withholding (except to the extent required by Applicable Law) on account of any other amount, whether by way of setoff or otherwise. (b) If (i) either Guarantor is required by law to make any deduction or withholding on account of any such taxes or other amount as is referred to in Section 7(a) from any sum paid or payable by such Guarantor under this Guarantee - ------------ or (ii) any other party to any of the Financing Documents (or any Person on its behalf) is required by Applicable Law to make any deduction or withholding from, or (except on account of taxes on the overall net income or franchise taxes imposed on the Equity Facility Agent or the Equity Bridge Lenders by their jurisdiction of incorporation or the jurisdiction in which their lending offices are located) any payment on or calculated by reference to the amount of, any sum payable by such Guarantor under this Guarantee: (w) each Guarantor shall notify the Equity Facility Agent of any such requirement or any change in any such requirement as soon as it becomes aware of it; (x) each Guarantor shall pay any such taxes or other amount before the date on which penalties attach thereto, such payment to be made (if the liability is imposed on any other party to any of the Financing Documents) on behalf of and in the name of that party; and (y) the sum payable by the Guarantors in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, that party receives on the due date and retains (free from any liability in respect of any such deduction, withholding or payment including additional income taxes payable as a consequence of the payment of any additional amounts) a net sum equal to what it would have received and so retained had no such deduction, withholding or payment been required or made. 8. Representations and Warranties of the Guarantors. The Guarantors ------------------------------------------------ make the representations and warranties contained in this Section 8 for the --------- benefit of the Equity Facility Agent and each Equity Bridge Lender. Each such representation and warranty shall be deemed made as of the date hereof, as of the date of Financial Close and as of the date of each subsequent Disbursement under the Equity Bridge Loan Credit Agreement , as applicable, except with respect to those representations and warranties which by their express terms relate solely to an earlier date. The representations and warranties contained herein shall survive the execution and delivery of this Guarantee. (a) Organization and Existence. Each Guarantor is a corporation duly -------------------------- organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has the corporate power and authority to execute and deliver this Guarantee and to perform its -8- obligations under this Guarantee and is in good standing in each jurisdiction material to the Project in which the character of the properties owned or leased by it or in which the transaction of its business as presently conducted or proposed to be conducted makes such qualification necessary or desirable. (b) Corporate Action. Each Guarantor has taken all necessary corporate ---------------- action to authorize its execution and delivery of this Guarantee and the performance of its obligations under this Guarantee and this Guarantee has or by the date of Financial Close will have been duly authorized, executed and delivered. (c) Binding Effect. This Guarantee constitutes the legal, valid and -------------- binding obligation of each Guarantor, enforceable against each Guarantor, in accordance with its terms, except to the extent the enforceability thereof may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally and by general equitable principles regardless of whether the issue of enforceability is considered in a proceeding in equity or at law. (d) No Breach. The execution, delivery and performance of this --------- Guarantee by each Guarantor will not (i) violate any organizational documents of such Guarantor; (ii) require any consent or approval (including any approval of any Governmental Authority) which has not been obtained; (iii) result in any contravention or violation of any Applicable Law; or (iv) result in any contravention or violation or breach of any provision of, or constitute a default under, or result in the creation or imposition of any Lien on any of the assets of such Guarantor (except as contemplated hereunder) pursuant to the provisions of, any mortgage, indenture, contract, agreement or other undertaking to which such Guarantor is a party or which purports to be binding upon such Guarantor or upon any of its assets. (e) No Defaults. Neither Guarantor is in default under any term of ----------- this Guarantee or any other agreement to which it is a party which could reasonably be expected to have a Material Adverse Effect. (f) No Litigation. There is no pending or, to its knowledge, ------------- threatened, action or proceeding at law or in equity affecting either Guarantor before any court, Governmental Authority or arbitrator, which, if adversely determined, could, either individually or in the aggregate, reasonably be expected to materially impair its ability to perform the obligations under this Agreement. (g) Financial Statements. All financial statements of EME delivered in -------------------- accordance with Section 3.1.16 or 5.4.3 of the Common Terms Agreement are and, -------------------- ----- in the case of financial statements to be delivered after the date hereof, will be, true, correct and complete in all respects as of the date of such statements. (h) Tax Information. Each Guarantor has filed, or caused to be filed, --------------- all tax and informational returns that are required to have been filed by it in all jurisdictions, which failure could reasonably be expected to have a Material Adverse Effect, and has paid all taxes shown to be due and payable on such returns and all any other taxes and assessments payable by it, to the extent the same have become due and payable (other than those taxes that it is contesting in good faith and by appropriate proceedings, with adequate, segregated reserves established for such taxes in accordance with generally accepted accounting principles in the jurisdiction of its incorporation, if applicable), the failure of which to pay could reasonably be expected to have a Material Adverse Effect. To the extent such taxes are not due, each Guarantor has established reserves that are adequate for the payment thereof and are as required by generally accepted -9- accounting principles in the jurisdiction of its incorporation, except to the extent that the failure to establish such reserves would not be reasonably expected to have a Material Adverse Effect. (i) No Fees. Other than amounts that have been paid in full or will ------- have been paid in full by the Borrower, the Sponsor or the Guarantors prior to Financial Close, no fees or taxes, including stamp, transaction, registration or similar taxes, are required to be paid in connection with the execution and delivery of this Guarantee. (j) Compliance with Applicable Law. None of the Guarantors or any of ------------------------------ such Guarantor's officers, directors, employees, agents or affiliates, acting on such Guarantor's behalf, has taken any action in connection with the Project that violates any Applicable Laws, including the Corrupt Practices Laws, the violation of which could be reasonably expected to have a Material Adverse Effect. (k) Pension Plans. ------------- (i) The withdrawal by either Guarantor or any of such Guarantor's Subsidiaries or any entity under common control within the meaning of Section 4001 of ERISA from all Multiemployer Plans in which they participate would not have a Material Adverse Effect on the consolidated financial condition of such Guarantor and its Subsidiaries taken as a whole. (ii) Neither Guarantor has been notified that any Multiemployer Plan to which it or any of its Subsidiaries or any entity under common control within the meaning of Section 4001 contributed is either in reorganization or insolvent. (iii) All single employer plans which are subject to ERISA maintained by either Guarantor, its Subsidiaries or any entity under common control within the meaning of Section 4001 of ERISA are in material compliance with all applicable requirements of ERISA. The sum of the value of all accrued benefits vested under all single employer plans as of December 31, 1906 did not exceed the value of the assets of such plans allocable to such vested benefits as determined by the plan actuaries. (l) Investment Company Act of 1940. Neither Guarantor is an ------------------------------ "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940. (m) Regulation. Neither of the Guarantors nor such Guarantor's ---------- Affiliates is or will be, solely as a result of the participation by such party separately or as a group in the transactions contemplated hereby or by any other Financing Document, or as a result of the ownership, use or operation of the Project, subject to regulation by any Governmental Authority of the United States as a "public utility," an "electric utility," an "electric utility holding company," a "public utility holding company," a "holding company," or an "electric corporation" or a Subsidiary or Affiliate of any of the foregoing; provided, however, that Edison International, the ultimate parent of EME, will - -------- ------- continue to be subject to an annual reporting requirement and other requirements applicable to holding companies exempt under Section 3 of PUHCA, pursuant to Sections 3, 9(a)(2), 10, 16, 26, 32 and 33 of PUHCA, and that Southern California Edison Company, a wholly-owned subsidiary of Edison International and an Affiliate of EME, as a public utility company that is an "associate company" of a foreign utility company within the meaning of Section 2(a)(10) of PUHCA, may be subject to reporting requirements prescribed by the Securities and Exchange Commission pursuant to Section 33(e)(1) of PUHCA. The Guarantors are not subject to regulation as a "subsidiary company" or an "affiliate" of a holding company under (and as defined in) PUHCA. Neither Guarantor has taken any action which, (i) if and so long as the -10- owner and operator of the Project is an "exempt wholesale generator" under Section 32 of PUHCA, could reasonably be expected to result in the Project failing to meet the definition of an "eligible facility" under paragraph 32(a)(2) of PUHCA or (ii) if and so long as the owner and operator of the Project is a "foreign utility company" under Section 33 of PUHCA, could reasonably be expected to result in the Project not satisfying the requirements set forth in paragraph 33(a)(3) of PUHCA. (n) Margin Stock. No Guarantor is engaged in the business of extending ------------ credit for the purpose of purchasing or carrying margin stock within the meaning of Regulations G, T and X issued by the Board of Governors of the Federal Reserve System. (o) Conditions Precedent. Upon the execution and delivery hereof, -------------------- there are no conditions precedent to the effectiveness of this Guarantee that have not been satisfied or waived. 9. Covenants of the Guarantor. So long as any of the Guaranteed -------------------------- Obligations are outstanding, each Guarantor hereby covenants and agrees that it shall faithfully observe and fulfill, and shall cause to be observed and fulfilled, each and all of the following covenants: (a) Governmental Approvals. It will maintain in full force and effect ---------------------- all approvals or authorizations or Permits from any Governmental Authority that are required to be obtained by it with respect to this Guarantee (if any) and will obtain any that may become necessary in the future. (b) Compliance with Applicable Law. It will comply in all respects ------------------------------ with all Applicable Laws to which it may be subject, the noncompliance with which could be reasonably expected to have a Material Adverse Effect. (c) Financial Statements. As soon as available, EME will deliver to -------------------- the Facility Agent copies of the annual (which shall be audited) and quarterly financial statements (consisting of a balance sheet and the related statements of income and cash flows) in accordance with the requirements of Section 5.4.3 ------------- of the Common Terms Agreement. (d) Litigation. Promptly, and in any event within five (5) Business ---------- Days after an Authorized Officer obtains knowledge thereof, each Guarantor will give to the Equity Facility Agent and the Facility Agent notice of the occurrence of any event or of any litigation or governmental proceeding pending (i) against it or any of its Affiliates which could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (e) Transfer of Interests. It shall not permit a Change of Control as --------------------- a result of actions taken by the Sponsor in contravention of Section 6.19 of the ------------ Common Terms Agreement or a transfer of interests in contravention of Section ------- 23.13 of the Power Purchase Agreement. - ----- (f) Regulation. It shall not take any action which could reasonably ---------- be expected to result in (i) it being subject to regulation by any Governmental Authority of the United States as a "public utility," an "electric utility," an "electric utility holding company," a "public utility holding company," a "holding company," or an "electric corporation" or a Subsidiary or Affiliate of any of the foregoing, (ii) it being subject to regulation as a "subsidiary company" or an "affiliate" of a holding company under (and as defined in) PUHCA or (iii) if and so long as the owner and operator of the Project is an "exempt wholesale generator" under Section 32 of PUHCA, the Project failing to meet the definition of an "eligible facility" under paragraph 32(a)(2) of PUHCA, or, if and so long as the owner and operator of the Project is a "foreign utility company" under Section 33 of PUHCA, the Project is not satisfying the requirements set forth in paragraph -11- 32(a)(3) of PUHCA; provided, however, that Edison International, the ultimate -------- ------- parent of EME, will continue to be subject to an annual reporting requirement and other requirements applicable to holding companies exempt under Section 3 of PUHCA, pursuant to Sections 3, 9(a)(2), 10, 16, 26, 32 and 33 of PUHCA, and that Southern California Edison Company, a wholly-owned subsidiary of Edison International and an Affiliate of EME, as a public utility company that is an "associate company" of a foreign utility company within the meaning of Section 2(a)(10) of PUHCA, may be subject to reporting requirements prescribed by the Securities and Exchange Commission pursuant to Section 33(e)(1) of PUHCA. (g) Corporate Existence. Each Guarantor shall preserve and maintain in ------------------- full force and effect its corporate existence, rights (charter and statutory), franchises and privileges and qualify and remain qualified, as a corporation in good standing in each jurisdiction in which such qualification is from time to time necessary, except for such jurisdictions where the failure to so qualify would not have a Material Adverse Effect; provided, however, that neither -------- ------- Guarantor shall be required to preserve any right, privilege or franchise if the board of directors thereof shall determine in good faith that such right, privilege or franchise is no longer useful in the conduct of the business of such Guarantor, and the loss thereof is not disadvantageous in any material respect to the Equity Facility Agent and the Equity Bridge Lenders. (h) Notice of Defaults. Promptly upon any Specified Officer (as ------------------ defined below) of either Guarantor obtaining knowledge thereof, such Guarantor shall give notice to the Equity Facility Agent of any development, including any litigation, investigation or proceeding affecting such Guarantor, which has a Material Adverse Effect, could reasonably be expected to have a Material Adverse Effect or, in the case of any litigation, investigation or other proceeding, which could, if adversely decided, reasonably be expected to have a Material Adverse Effect. For the purpose of this Section 9(h), the term "Specified ------------ --------- Officer" shall mean the Chairman, any Vice Chairman, the President, the Chief - ------- Executive Officer, the Chief Financial Officer, any Senior Vice President, any Vice President, the Secretary, the Treasurer or equivalent officers of such Guarantor. (i) Merger, Acquisition or Sales of Assets. Neither Guarantor shall -------------------------------------- consolidate or merge into, or transfer its properties and assets substantially as an entirety to, another Person, unless (i) the surviving Person, if other than such Guarantor, or the transferee, assumes by supplemental agreement satisfactory in form and substance to the Equity Bridge Lenders all the Guaranteed Obligations and (ii) after giving effect to such assumption, there would not exist any Default or Event of Default. (j) Further Assurances. It will deliver such other documents and other ------------------ information reasonably requested by the Equity Facility Agent. 10. Action by Equity Facility Agent. ------------------------------- (a) The Equity Facility Agent shall be entitled to rely on any notice received by it from the Equity Bridge Lenders stating that an Event of Default shall have occurred under the Financing Documents and shall not be under any duty or responsibility to make any independent verification of such statement. Notwithstanding any provisions to the contrary in this Guarantee, if any action to be taken by the Equity Facility Agent under this Guarantee is to be taken on a day which is not a Business Day, such action shall be taken on the next succeeding Business Day. (b) Each Guarantor hereby agrees to pay all costs, including reasonable attorneys' fees, incurred with respect to the enforcement of such provisions of this Guarantee against such Guarantor, which enforcement costs, regardless of when incurred, shall be payable by -12- such Guarantor on the earlier of (i) the date on which a judgment shall be obtained against such Guarantor with respect to this Guarantee and (ii) the date on which such Guarantor and the Equity Facility Agent shall have otherwise resolved (including by way of settlement) any dispute with respect to the enforcement of this Guarantee against such Guarantor. 11. Successors and Assigns. ---------------------- (a) This Guarantee shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors or permitted assigns. (b) Notwithstanding any transfer of its interests permitted under Section 6.19 of the Common Terms Agreement, Section 23.13 of the Power Purchase - ------------ ------------- Agreement or any other provision of the Financing Documents, each Guarantor shall remain liable for any and all of its obligations under this Guarantee and shall not assign its obligations hereunder to any other Person without the written consent of the Required Equity Voting Parties, and any purported assignment in violation of this provision shall be void. (c) The Equity Facility Agent and any Equity Bridge Lender may transfer, assign or grant its rights hereunder in connection with an assignment or transfer of all or any part of its interest in the Guaranteed Obligations held by it to any other Person in accordance with the provisions of the Financing Documents; provided that any such assignee has agreed to be bound by -------- the terms of the Financing Documents, including this Guarantee. 12. Interpretation. The section headings in this Guarantee are for the -------------- convenience of reference only and shall not affect the meaning or construction of any provision hereof. 13. Notices. All notices and other communications provided for ------- hereunder shall be made in the English language and (a) in writing (including telecopier) and (b) telecopied or sent by overnight courier (if for inland delivery) or international courier (if for overseas delivery) to a party hereto at its address and contact number specified below, or at such other address and contact number as is designated by such party in a written notice to the other parties hereto or, if not specified below, at the address and contact number for such Person set forth in Schedule 16 of the Common Terms Agreement. ----------- All such notices and communications shall be effective (a) if sent by telecopier, when sent (on receipt of confirmation) and (b) if sent by courier, (i) one day after timely deposit with an overnight courier if for inland delivery and (ii) five (5) days after timely deposit with an international courier if for overseas delivery; provided, however, that no notice or -------- ------- communication to any Lender or Agent shall be effective until received by such Lender or Agent. (a) The address of EME is: Edison Mission Energy 18101 Von Karman Ave., Suite 1700 Irvine California 92612-1046 U.S.A. Attention: General Counsel Telephone No.: 1-949-752-5588 Telecopier No.: 1-949-752-1420 (b) The address of ETG is: EME Tri Gen BV -13- Croeselaan 18 3521 CB Utrecht The Netherlands Attention: Ms. Hetty Solberg Telephone No.: 31-30-216-1944 Telecopier No.: 31-30-216-1250 (c) The address of TECO is: Tri Energy Company Limited 1550 Grand Amarin Tower, 16th Floor New Petchburi Road Ratchathewi, Makkasan Bangkok 10320 Thailand Attention: Khun Rawi Corsiri President Telephone No.: (662) 207-0307 Telecopier No.: (662) 207-0315 (d) The address of the Equity Facility Agent is: The Sumitomo Bank, Limited 11th Floor, Ramaland Building 952 Rama IV Road Kwaeng Suriyawong Khet Bangrak Bangkok 10500 Thailand Telephone No.: (662) 632-9210 Telecopier No.: (662) 632-9208 Attention: Mr. Anuphap Tharavanij, Assistant Vice President Mr. Shouichi Yamashiro, Assistant Vice President 14. Amendments. Notwithstanding anything contained herein that may be ---------- construed to the contrary, this Guarantee may be amended only in writing with the written consent of the Equity Facility Agent and each Guarantor. 15. English Language. This Guarantee is made in the English language. ---------------- Any translation of this Guarantee not approved by the Equity Facility Agent shall have no legal validity. 16. Jurisdiction. ------------ (a) THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK OTHER THAN THE CONFLICT OF LAWS RULES THEREOF (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). ANY LEGAL ACTION OR PROCEEDING AGAINST EACH GUARANTOR WITH RESPECT TO THIS GUARANTEE, ANY CREDIT AGREEMENT, OR ANY OTHER FINANCING DOCUMENT (AS DEFINED IN SCHEDULE 1 OF THE COMMON TERMS AGREEMENT) TO WHICH IT IS A PARTY MAY BE BROUGHT - ---------- IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS GUARANTEE, EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS -14- PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH GUARANTOR AGREES THAT A JUDGMENT, AFTER EXHAUSTION OF ALL AVAILABLE APPEALS, IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND BINDING UPON IT, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION, INCLUDING BY A SUIT UPON SUCH JUDGMENT, A CERTIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE JUDGMENT. EACH GUARANTOR HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND AGENT WITH RESPECT TO ANY ACTION OR PROCEEDING IN NEW YORK TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AN ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING AND AGREES THAT THE FAILURE OF SUCH AGENT TO GIVE ANY ADVICE OF ANY SUCH SERVICE OF PROCESS TO SUCH GUARANTOR SHALL NOT IMPAIR OR AFFECT THE VALIDITY OF SUCH SERVICE OR OF ANY BASED THEREON. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH GUARANTOR AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK CITY ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION ACCEPTABLE TO THE EQUITY FACILITY AGENT AND THE EQUITY BRIDGE LENDERS. EACH GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH GUARANTOR AND CT CORPORATION SYSTEM, AT THEIR RESPECTIVE ADDRESSES SET FORTH ABOVE AND IN SECTION ------- 13, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING - -- HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST SUCH GUARANTOR IN THAILAND OR IN ANY OTHER COURT OR TRIBUNAL HAVING JURISDICTION. (b) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS OR ANY OTHER FINANCING DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN SECTION 16(a) ABOVE AND HEREBY ------------- FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. 17. Judgment Currency. ----------------- (a) The Guarantors' obligations hereunder to make payments in Dollars (the "Obligation Currency") shall not be discharged or satisfied by any tender ------------------- or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency, except to the extent that such tender or recovery results in the effective receipt by the Equity Facility Agent or the Equity Bridge Lenders, as applicable, of the full amount of the Obligation -15- Currency expressed to be payable to such party under this Guarantee. If for the purpose of obtaining or enforcing judgment against the Guarantors in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than the Obligation Currency (such other currency being hereinafter referred to as the "Judgment Currency") an amount due in the ----------------- Obligation Currency, the conversion shall be made, at the Dollar Equivalent, in the case of Baht, and, in the case of other currencies, at the rate of exchange (as quoted by the Facility Agent which shall be market competitive or if the Facility Agent fails to quote a rate of exchange on such currency, by a known dealer in such currency designated by the Facility Agent) determined, in each case, as of the day on which the judgment is given (such Business Day being hereinafter referred to as the "Judgment Currency Conversion Date"). --------------------------------- (b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Guarantors covenant to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount), as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date. (c) For purposes of determining the Dollar Equivalent or rate of exchange under this Section 17, such amounts shall include any premium and costs ---------- payable in connection with the purchase of the Obligation Currency. 18. Termination; Reinstatement of Guarantee. --------------------------------------- (a) Subject to the provisions of Section 18(b), this Guarantee shall ------------- terminate upon the indefeasible payment and satisfaction in full of all Guaranteed Obligations and termination of all Commitments under the Equity Bridge Loan Facility. (b) Notwithstanding the provisions of Section 18(a), this Guarantee ------------- shall be reinstated if at any time following the termination of this Guarantee under Section 18(a), any payment by each Guarantor under this Guarantee is ------------- rescinded or must otherwise be returned by the Equity Facility Agent or any other Person upon the insolvency, bankruptcy, reorganization, dissolution or liquidation of such Guarantor or otherwise, and is so rescinded or returned to the Person making such payment, all as though such payment had not been made. Such period of reinstatement shall continue until satisfaction of the conditions contained in, and shall continue to be subject to, the provisions hereof, including this Section 18. ---------- 19. Interest. Any amount required to be paid by the Guarantors pursuant to -------- the terms hereof shall bear interest at the Default Rate or the maximum rate permitted by law, whichever is less, from the date due until paid in full. 20. Entire Agreement. This Guarantee, including the documents referred ---------------- to herein, embodies the entire agreement and understanding of the parties hereto and supersedes all prior agreements and understandings of the parties hereto relating to the subject matter herein contained. 21. Execution in Counterparts. This Guarantee may be signed in one or ------------------------- more duplicate counterparts, and when executed and delivered by all of the parties listed below shall constitute a single binding agreement. Any party hereto may execute this Guarantee by signing any such counterpart (including by facsimile). Signature pages may be detached from multiple separate -16- counterparts and attached to a single counterpart so that all signatures are physically attached to the same counterpart. 22. Severability. Any provision of this Guarantee which is prohibited ------------ or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability, but shall not invalidate the remaining provisions of this Guarantee or affect such provision in any other jurisdiction. 23. Joint and Several Liability. The obligations of the Guarantors --------------------------- under this Guarantee shall be joint and several. -17- IN WITNESS WHEREOF, each Guarantor has caused this Capital Contribution Guarantee to be duly executed and delivered as of the day and year first written above. EDISON MISSION ENERGY, as a Guarantor By: /s/ ROBERT E. DRISCOLL ----------------------- Name: Robert E. Driscoll Title: Vice President EME TRI GEN BV, as a Guarantor By: /s/ ROBERT E. DRISCOLL ----------------------- Name: Robert E. Driscoll Title: Attorney AGREED AND ACCEPTED: THE SANWA BANK, LIMITED, as Equity Facility Agent for the Equity Bridge Lenders By: --------------------------- Name: ------------------------- Title: ------------------------ ACKNOWLEDGED AND AGREED as to Section 2 only: TRI ENERGY COMPANY LIMITED, as the Borrower By: /s/ RAWI CORSIRI ---------------------------- Name: RAWI CORSIRI -------------------------- Title: Director & President ------------------------- [LOGO OF TRI ENERGY COMPANY LIMITED] By: /s/ MARTIN DENIS CONSIDINE ---------------------------- Name: MARTIN DENIS CONSIDINE -------------------------- Title: DIRECTOR ------------------------- IN WITNESS WHEREOF, each Guarantor has caused this Capital Contribution Guarantee to be duly executed and delivered as of the day and year first written above. EDISON MISSION ENERGY, as a Guarantor By: -------------------- Name: Robert E. Driscoll Title: Vice President EME TRI GEN BV, as a Guarantor By: -------------------- Name: Robert E. Driscoll Title: Attorney AGREED AND ACCEPTED: THE SANWA BANK, LIMITED, as Equity Facility Agent for the Equity Bridge Lenders By: /s/ Yoshihiro Kubo ----------------------- Name: YOSHIHIRO KUBO --------------------- Title: MANAGER -------------------- ACKNOWLEDGED AND AGREED as to Section 2 only: TRI ENERGY COMPANY LIMITED as the Borrower By: ----------------------- Name: --------------------- Title: -------------------- By: ----------------------- Name: --------------------- Title: -------------------- EX-10.48 3 BANPU GAS BACK-UP CAPITAL CONTRIBUTION GUARANTEE Exhibit No. 10.48 Execution Version ================================================================================ BANPU GAS BACK-UP CAPITAL CONTRIBUTION GUARANTEE by EME TRI GEN BV and EDISON MISSION ENERGY, Guarantors in favor of TRI ENERGY COMPANY LIMITED and THE SANWA BANK, LIMITED, as Equity Facility Agent ================================================================================ BANPU GAS BACK-UP CAPITAL CONTRIBUTION GUARANTEE THIS BANPU GAS BACK-UP CAPITAL CONTRIBUTION GUARANTEE (this "Back-up ------- Guarantee"), dated as of June 30, 1998, is made by EME Tri Gen BV, a corporation - --------- organized and validly existing under the laws of The Netherlands ("ETG" or the "Sponsor"), having its principal address at Croeselaan 18, 3521 CB Utrecht, The Netherlands, and Edison Mission Energy, a corporation organized and validly existing under the laws of the State of California ("EME" and together with ETG, the "Guarantors"), having its principal address at 18101 Von Karman Ave., Suite ---------- 1700, Irvine California 92612-1046 U.S.A., in favor of Tri Energy Company Limited, a limited liability company organized and existing under the laws of Thailand (the "Borrower"), having its registered address at 16th Fl., Grand -------- Amarin Tower, New Petchburi Road, Ratchathewi, Bangkok, 10320 Thailand and The Sanwa Bank, Limited, a banking institution organized under the laws of Japan, acting by and through its Tokyo head office, as Equity Facility Agent (in such capacity, together with its successors and assigns in such capacity, the "Equity ------ Facility Agent") for the Equity Bridge Lenders under the Financing Documents. - -------------- WITNESSETH: ---------- A. The Guarantors. ETG is a Shareholder of the Borrower. EME is the -------------- Ultimate Parent of ETG. B. Common Terms Agreement. The Borrower has entered into that certain ---------------------- Amended and Restated Common Terms Agreement, dated as of June 30, 1998, among the Borrower, Credit Suisse First Boston, as Documentation and Coordination Agent and Syndication Agent, the Sanwa Bank, Limited, as Facility Agent, Equity Facility Agent, Offshore Collateral Agent and Technical Agent, Tokyo-Mitsubishi International (Singapore) Ltd., as Insurance Agent, The Sumitomo Bank, Limited, as Onshore Collateral Agent, Citibank, N.A., as a Letter of Credit Facility Lender and a Working Capital Facility Lender, Siam City Bank Public Company Limited, as Guarantee Facility Lender and a Working Capital Facility Lender, The Industrial Finance Corporation of Thailand, as a Working Capital Facility Lender, and NationsBank, N.A., as a Letter of Credit Facility Lender, and all financial institutions and trusts that from time to time become Lenders pursuant to the terms of the Credit Agreement. The Common Terms Agreement sets forth certain common provisions regarding the Loans, including (i) the conditions precedent to the initial drawdown and conditions precedent to subsequent drawdowns of the Credit Facilities and the conditions precedent to the Credit Facility Conversion, (ii) representations and covenants of the Borrower running in favor of the Financing Parties, (iii) common Events of Default, and (iv) reporting and insurance requirements for the Project. C. Financing Documents. The Borrower has entered into (i) that certain ------------------- Equity Bridge Loan Credit Agreement with the Equity Bridge Lenders, the Documentation and Coordination Agent, the Facility Agent, the Equity Facility Agent and Banpu Gas (solely for purposes of Section 2.5.3 thereof), pursuant to ------------- which the Equity Bridge Lenders will provide Equity Bridge Loans to the Borrower during the construction phase of the Project, which are to be guaranteed by the Capital Contribution Guarantees, including this Back-up Guarantee, (ii) the Credit Agreements with the Lenders and the Agents party thereto, and (iii) certain other Financing Documents. D. Other Capital Contribution Guarantees. In addition to this Back-up ------------------------------------- Guarantee, (i) Shareholder Banpu Gas and its Ultimate Parent BANPU Public Company Limited have entered into the Banpu Gas Capital Contribution Guarantee pursuant to which they have jointly and severally guaranteed to make capital contributions to the Borrower equal to thirty seven point -1- five percent (37.5%) of all amounts due under the Equity Bridge Loan Credit Agreement as of the Equity Bridge Loan Repayment Date, (ii) Shareholder TTEC I and its Ultimate Parent Texaco, Inc. have entered into the TTEC I Capital Contribution Guarantee pursuant to which they have jointly and severally guaranteed to make capital contributions to the Borrower equal to thirty seven point five percent (37.5%) of all amounts due under the Equity Bridge Loan Credit Agreement as of the Equity Bridge Loan Repayment Date, and (iii) ETG and EME have entered into the separate ETG Capital Contribution Guarantee pursuant to which they have jointly and severally guaranteed to make capital contributions to the Borrower equal to twenty five percent (25%) of all amounts due under the Equity Bridge Loan Credit Agreement as of the Equity Bridge Loan Repayment Date. E. Back-up Capital Contribution Guarantee. Banpu Gas and BANPU Public -------------------------------------- Company Limited have requested, and ETG and EME have agreed to provide, this Back-up Guarantee to guarantee on a back-up basis a portion of the amount guaranteed on a first demand basis by Banpu Gas and BANPU Public Company Limited pursuant to the Banpu Gas Capital Contribution Guarantee. F. Condition to Lending. It is a condition precedent to the Equity -------------------- Bridge Lenders' obligation to make the Equity Bridge Loan Facility available to the Borrower under the Common Terms Agreement and the Equity Bridge Loan Credit Agreement and the Lenders' obligations to make the other Credit Facilities available to the Borrower under the Common Terms Agreement and the other Credit Agreements that the Guarantors enter into this Back-up Guarantee. AGREEMENT --------- NOW, THEREFORE, in consideration of the premises set forth above and other good and valuable consideration, receipt of which is hereby acknowledged, and as an inducement to the Equity Bridge Lenders to enter into the Equity Bridge Loan Credit Agreement with the Borrower, and to the Lenders to enter into all other Financing Documents, the Guarantors hereby agree as follows: 1. Capitalized Terms. Capitalized terms used but not otherwise ----------------- defined herein shall have the respective meanings given them in Section 1 of Schedule 1 to the Common Terms Agreement, and the Principles of Construction contained in Section 2 of Schedule 1 to the Common Terms Agreement shall apply hereto. 2. Guarantee of Obligations. ------------------------- (a) The Guarantors hereby, jointly and severally, unconditionally and irrevocably guarantee to the Equity Bridge Lenders and the Equity Facility Agent (for the benefit of the Equity Bridge Lenders) to make on or before the Equity Bridge Loan Repayment Date, whether by acceleration or otherwise, aggregate capital contributions to the Capital Contributions Account of the Borrower equal to an amount (the "Guaranteed Obligations") which shall be ---------------------- calculated as follows: 37.5% of the Equity Bridge Loan Repayment Amount less (Banpu Gas Pledged Deposit Amount + Accrued Interest) less Banpu Gas Additional Capital Contribution Amount ------------------------------------------------------- = Guaranteed Obligations Where, "37.5%" means thirty seven point five percent; ----- "Equity Bridge Loan Repayment Amount" means the amount in Dollars of all ----------------------------------- obligations of the Borrower under the Equity Bridge Loan Credit Agreement and allocable to the Equity -2- Bridge Loans under any other applicable Financing Documents (but, for the avoidance of doubt, not including (i) any obligations by the Borrower in favor of the Offshore Lenders to repay amounts drawn from the Offshore Loans and used to pay interest due on the Equity Bridge Loans, or (ii) any amounts owed by the Borrower to any Hedge Provider under Interest Rate Hedging Agreements entered into by the Borrower with respect to the Equity Bridge Loans) whether for interest, fees, expenses or otherwise, together with all expenses incurred by the Equity Facility Agent or the Equity Bridge Lenders in enforcing any of such obligations or the terms hereof, including reasonable fees and expenses of legal counsel, but specifically limited solely to amounts due to the Equity Facility Agent and the Equity Bridge Lenders and not to include any amounts owed by the Borrower to other Persons under or based upon any other Financing Documents; "Banpu Gas Pledged Deposit Amount" means $18,000,000, the amount pre-funded -------------------------------- by Banpu Gas for capital contributions to the Borrower and deposited with the Equity Facility Agent on the date of Financial Close pursuant to the terms of the Equity Bridge Loan Credit Agreement, the Disbursement Agreement, and the Singapore Security Document, whether or not such Banpu Gas Pledged Deposit Amount is applied to repayment of the Equity Bridge Loans; "Accrued Interest" means any interest in Dollars which has accrued on the ---------------- Banpu Gas Pledged Deposit Amount held by the Equity Facility Agent from the date of Financial Close and continuing to, but not including, the Equity Bridge Loan Repayment Date in accordance with the terms of the Equity Bridge Loan Credit Agreement and the Singapore Security Document, whether or not such Accrued Interest is applied to repayment of the Equity Bridge Loans; and "Banpu Gas Additional Capital Contribution Amount" means the amount in ------------------------------------------------ Dollars of (i) any capital contributions to the Borrower made by Banpu Gas or any Person on behalf of Banpu Gas to the Capital Contributions Account of the Borrower on or before the Equity Bridge Loan Repayment Date, plus ---- (ii) without duplication of any amount set forth in the foregoing clause (i), any amounts actually paid under the Banpu Gas Capital Contribution Guarantee. (b) It is acknowledged and agreed that the Equity Facility Agent has sole custody of the Banpu Gas Pledged Deposit Amount. The Guarantors do not have any control over or rights in the Banpu Gas Pledged Deposit Amount, and, notwithstanding any other provision of this Back-up Guarantee, the Guaranteed Obligations of the Guarantors hereunder shall not be increased or otherwise affected if, for any reason, any portion of the Banpu Gas Pledged Deposit Amount plus the Accrued Interest is not applied to repayment of the Equity Bridge Loans. (c) The Guarantors agree that: (i) if for any reason whatsoever the Borrower fails or is unable duly, punctually and fully to pay any such Guaranteed Obligations, (ii) if the Equity Facility Agent shall have made a prior written demand upon Banpu Gas and BANPU Public Company Limited for payment of capital contributions to the Borrower they owe pursuant to the terms of the Banpu Gas Capital Contribution Guarantee, and (iii) if five (5) Business Days after the date of such demand the amount owed under the Banpu Gas Capital Contribution Guarantee shall not have been paid in full, the Guarantors shall, upon further written demand by the Equity Facility Agent (acting at the instructions of the Equity Bridge Lenders), make aggregate capital contributions to the Borrower in the amount of such Guaranteed Obligations by deposit of such capital contributions into the Capital Contributions Account within five (5) Business Days after the date of demand, without regard to any exercise or non- exercise by the Equity Facility Agent or the Equity Bridge Lenders of any other right, remedy, power or privilege under or in respect of the Equity Bridge Loan Credit Agreement or any other Financing Document against the Borrower. -3- (d) The Borrower acknowledges and agrees that, upon receipt of such capital contributions from a Guarantor, the Offshore Collateral Agent shall be obligated to transfer immediately to the Equity Facility Agent the amount of such capital contributions in payment of the Guaranteed Obligations pursuant to Section 2.1.8 of the Disbursement Agreement to enable the Borrower to repay the Equity Bridge Loans. Each payment made by a Guarantor pursuant to this Section 2(a) in respect of the Guaranteed Obligations shall be deemed to be a capital contribution by the Sponsor to the Borrower. Upon receipt of such capital contribution, the Borrower agrees promptly to issue shares of its Capital Stock to the Sponsor in respect of such capital contribution, in accordance with Section 5.2 of the Shareholders' Agreement and the Charter Documents, and the Sponsor shall, and EME shall cause the Sponsor to, execute Pledge Agreements with respect to such shares of Capital Stock; provided, however, that the -------- ------- failure of the Borrower to deliver such shares of Capital Stock shall not excuse the Guarantors' obligations hereunder. (e) The obligations of the Guarantors under this Back-up Guarantee are, except as otherwise expressly set forth herein, the Guarantors' primary obligations and are an absolute, unconditional, continuing and irrevocable guarantee of payment and not of collectibility or performance and are, except for the obligation of the Equity Facility Agent to make a prior written demand upon Banpu Gas and BANPU Public Company Limited pursuant to the Banpu Gas Capital Contribution Guarantee for a five (5) Business Day period as set forth in Sections 2(c)(ii) and (iii), in no way conditioned on or contingent upon any attempt to enforce in whole or in part the Borrower's obligations under the Equity Bridge Loan Credit Agreement or the obligations of any Person under any of the other Financing Documents. The obligations of the Guarantors under this Back-up Guarantee are not, and shall not be, subject to any defense or right of set-off, counterclaim, deduction, diminution, abatement, recoupment, suspension, deferment or reduction or any other legal or equitable defense which the Guarantors have or hereafter may have, against any other Person (including the Borrower) for any reason whatsoever (including any action, failure to act or circumstance which constitutes, or might constitute or be construed as, an equitable or legal discharge of any or all of the Borrower's obligations under the Equity Bridge Loan Credit Agreement ); provided that nothing in this Back-up -------- Guarantee shall affect any right the Guarantors may have against any of the Equity Bridge Lenders or the Equity Facility Agent arising out of any gross negligence or willful misconduct of any such Person under the Equity Bridge Loan Credit Agreement, the Common Terms Agreement or this Back-up Guarantee. Each failure by the Borrower to pay any Guaranteed Obligations shall give rise to a separate cause of action hereunder, and separate suits may be brought hereunder as each cause of action arises. (f) Subject to Section 2(b), the Equity Facility Agent, acting pursuant to the Equity Bridge Loan Credit Agreement or the Equity Bridge Lenders may, at any time and from time to time without the consent of or notice to the Guarantors, except such notice as may be required by the Financing Documents or Applicable Law, which cannot be waived, without incurring responsibility to the Guarantors, without impairing or releasing the obligations of the Guarantors hereunder, upon or without any terms or conditions and in whole or in part, (i) change, by mutual agreement with the Borrower, the manner, place and terms of payment, or change or extend the time of payment of, renew or alter any Guaranteed Obligations or any obligations (including any hereunder) incurred directly or indirectly in respect hereof, or in any manner by mutual agreement with the Borrower modify, amend or supplement the terms of the Equity Bridge Loan Credit Agreement or any documents, instruments or agreements executed in connection therewith (other than any document to which either Guarantor is a party), and the guarantee herein undertaken shall apply to the Guaranteed Obligations as so changed, extended, renewed, modified, amended, supplemented or altered; (ii) exercise or refrain from exercising any rights against the Borrower or others (including the Guarantors), whether under the Financing Documents or otherwise, or otherwise act or refrain from acting; (iii) add or release any other guarantor or other Person from its obligations under any of the Financing Documents without obtaining the consent of the Guarantors, and without affecting or impairing the obligations of the Guarantors hereunder; (iv) settle or compromise any Guaranteed Obligations and/or any obligations and liabilities -4- (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any obligations and liabilities which may be due to the Equity Bridge Lenders or others; (v) sell, exchange, release, surrender, realize upon or otherwise deal with in any manner or in any order any property or assets by whomsoever pledged, transferred, or assigned to secure or howsoever securing the Guaranteed Obligations or any liabilities or obligations (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof and/or any offset thereagainst; (vi) apply any sums by whomsoever paid or howsoever realized to the obligations of the Borrower under the Equity Bridge Loan Credit Agreement in the manner provided for therein regardless of what obligations and liabilities remain unpaid; (vii) consent to or waive any breach of, or any act, omission or default under, the Financing Documents or any of such other instruments or agreements, or with the mutual agreement of the Borrower and (when such Guarantor is a party thereto) each respective Guarantor, amend, modify or supplement the Financing Documents or any of such other instruments or agreements; and/or (viii) act or fail to act in any manner referred to in this Back-up Guarantee which may deprive the Guarantors of any right it may otherwise have had to subrogation or reimbursement against the Borrower to recover full indemnity for any payments made pursuant to this Back-up Guarantee or of its right of contribution against any other party. (g) No invalidity, irregularity or unenforceability of any or all of the obligations or liabilities hereby guaranteed shall affect, impair, or be a defense to this Back-up Guarantee. (h) This is a continuing guarantee and all obligations to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. The Guarantors hereby waive any right to revoke this Back-up Guarantee, and acknowledges that this Back-up Guarantee is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. In the event that, notwithstanding the provisions of this Section 2, this Back-up Guarantee shall be deemed revocable pursuant to - --------- Applicable Law, then any such revocation shall become effective only upon receipt by the Equity Facility Agent of written notice of revocation signed by the Guarantors. No revocation or termination hereof shall affect in any manner rights arising under this Back-up Guarantee with respect to Guaranteed Obligations arising prior to receipt by the Equity Facility Agent of written notice of such revocation or termination and the sole effect of revocation and termination hereof shall be to exclude from this Back-up Guarantee all Guaranteed Obligations thereafter arising which are unconnected with Guaranteed Obligations theretofore arising or transactions theretofore entered into. (i) Each Guarantor acknowledges and agrees that (i) it will benefit, directly and indirectly, if the Equity Bridge Lenders enter into the Equity Bridge Loan Credit Agreement with the Borrower and (ii) the obligations of such Guarantor hereunder are being incurred concurrently with the obligations of the Borrower under the Financing Documents. (j) The obligations of each Guarantor hereunder shall remain unchanged and in full force and effect in accordance with the terms hereof notwithstanding any transfer or other disposition of any interest (whether direct or indirect) in the Sponsor or any transfer or other disposition by the Sponsor of its interest in the Borrower. (k) Anything in this Back-up Guarantee or in any other Financing Document to the contrary notwithstanding, the maximum liability of each Guarantor under this Back-up Guarantee shall in no event exceed the amount that can be guaranteed by each Guarantor under applicable U.S. federal and state laws relating to the insolvency of debtors. 3. Waiver. To the fullest extent permitted by Applicable Law but ------ subject to Section 2(b), each Guarantor hereby expressly waives and relinquishes all rights and remedies accorded by Applicable Law to sureties or guarantors and agrees not to assert or take advantage of -5- any such rights or remedies, including (i) except for the obligation of the Equity Facility Agent to make a prior written demand upon Banpu Gas and BANPU Public Company Limited pursuant to the Banpu Gas Capital Contribution Guarantee for a five (5) Business Day period as set forth in Sections 2(c)(ii) and (iii), any right to require the Equity Facility Agent or the Equity Bridge Lenders to proceed against the Borrower or any other Person or to proceed against or exhaust any security held by the Equity Facility Agent, on behalf of the Equity Bridge Lenders, or by the Equity Bridge Lenders at any time or to pursue any other remedy in the Equity Facility Agent's or the Equity Bridge Lenders' power before proceeding against such Guarantor; (ii) any right to elect trial by jury, the benefit of the statute of limitations in any action hereunder or in any action for the collection or performance of any obligations hereunder or of the Borrower under the Equity Bridge Loan Credit Agreement; (iii) any defense to any indebtedness or obligation based on a statute of limitations (as to the time period within which an action may be brought); (iv) any defense that may arise by reason of the incapacity, lack of power or authority, dissolution, merger or termination of the Borrower or any other Person or the failure of the Equity Facility Agent or the Equity Bridge Lenders to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of the Borrower or any other Person; (v) any defense based on any act, failure to act, delay or omission whatsoever on the part of the Borrower, the Equity Facility Agent or the Equity Bridge Lenders or the failure of the Borrower, the Equity Facility Agent or the Equity Bridge Lenders to do any act or thing or to observe or perform any covenant, condition or agreement to be observed or performed by it under the Financing Documents, except for the obligation of the Equity Facility Agent to make a prior written demand upon Banpu Gas and BANPU Public Company Limited pursuant to the Banpu Gas Capital Contribution Guarantee for a five (5) Business Day period as set forth in Sections 2(c)(ii) and (iii); (vi) diligence, demand, presentment, protest and notice of any kind, including notice of acceptance of this Back-up Guarantee and of any obligation to which it applies or may apply, and notice of the existence, creation or incurrence of any new or additional indebtedness or obligation or of any default, indulgence, enforcement or other action or non-action on the part of the Borrower, any endorser or creditor of each Guarantor or the Borrower or on the part of any other Person under this or any other instrument in connection with any obligation or evidence of indebtedness held by the Equity Facility Agent, on behalf of the Equity Bridge Lenders, or the Equity Bridge Lenders as collateral or in connection with any obligations hereunder; (vii) any defense based upon an election of remedies by the Equity Facility Agent or the Equity Bridge Lenders, including an election to proceed by non-judicial rather than judicial foreclosure, which destroys or otherwise impairs the subrogation rights of such Guarantor or the right of such Guarantor to proceed against the Borrower for reimbursement; (viii) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (ix) any duty on the part of the Equity Facility Agent or the Equity Bridge Lenders to disclose to such Guarantor any facts that the Equity Facility Agent or the Equity Bridge Lenders may now or hereafter know about the Borrower, such Guarantor or any other Person, regardless of whether the Equity Facility Agent or the Equity Bridge Lenders have reason to believe that any such facts materially increase the risk beyond that which such Guarantor intends to assume, or have reason to believe that such facts are unknown to such Guarantor, or have a reasonable opportunity to communicate such facts to such Guarantor, since each Guarantor acknowledges that such Guarantor is fully responsible for being and keeping informed of the financial condition of the Borrower and of all circumstances bearing on the risk of non-payment of any obligations and liabilities hereby guaranteed; (x) the fact that EME may at any time in the future transfer or dispose of all or part of its direct or indirect interest in the Sponsor and the Sponsor may at any time in the future transfer or dispose of all or part of its direct or indirect interest in the Borrower; (xi) any defense based on any change in the time, manner or place of any payment under, or in any other term of, the Equity Bridge Loan Credit Agreement or any other amendment, renewal, extension, acceleration, compromise or waiver of or any consent or departure from the terms of the Equity Bridge Loan Credit Agreement; and (xii) any defense based on any offset against any amounts which may be owed by any Person to such Guarantor for any reason whatsoever. No delay on the part of the Equity Facility Agent or the Equity Bridge Lenders in exercising any of their rights (including those hereunder) and no partial or single exercise thereof -6- and no action or non-action by the Equity Facility Agent or the Equity Bridge Lenders, with or without notice to such Guarantor or anyone else, shall constitute a waiver of any rights or shall affect or impair this Back-up Guarantee. 4. Subrogation. Until the indefeasible payment and satisfaction in ----------- full of all Guaranteed Obligations or termination of this Back-up Guarantee pursuant to Section 18, each Guarantor agrees not to assert any claim or other ---------- rights which it may now have or hereafter acquire, directly or indirectly, against the Borrower that arise from the existence or performance of such Guarantor's obligations under this Back-up Guarantee, including any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, any right to participate in any claim, right or remedy of the Equity Facility Agent or the Equity Bridge Lenders against the Borrower or the Sponsor, or any security now or hereafter held by the Equity Facility Agent or the Equity Bridge Lenders, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, by any payment made hereunder or otherwise, including the right to take or receive from the Borrower or the Sponsor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. 5. Bankruptcy. ---------- (a) So long as any of the Guaranteed Obligations remain outstanding, the Guarantors shall not, without the prior written consent of the Equity Facility Agent, commence, or join with any other Person in commencing, any bankruptcy, reorganization, or insolvency proceeding against the Borrower. The obligations of the Guarantors under this Back-up Guarantee shall not be altered, limited or affected by any proceeding, voluntary or involuntary, involving the bankruptcy, reorganization, insolvency, receivership, liquidation or arrangement of the Borrower, or by any defense which the Borrower may have by reason of any order, decree or decision of any court or administrative body resulting from any such proceeding. (b) So long as any of the Guaranteed Obligations remain outstanding, to the extent of such Guaranteed Obligations, the Guarantors shall file, in any bankruptcy or other proceeding in which the filing of claims is required or permitted by law, all claims which the Guarantors may have against the Borrower relating to any indebtedness of the Borrower to the Guarantors and each Guarantor hereby assigns to the Equity Facility Agent, on behalf of the Equity Bridge Lenders, all rights of such Guarantor thereunder. If the Guarantors do not file any such claim, the Equity Facility Agent, as attorney-in-fact for such party, is hereby authorized to do so in the name of the Guarantors or, in the Equity Facility Agent's discretion, to assign the claim to a nominee, to cause proofs of claim to be filed in the name of the Equity Facility Agent's nominee and to vote or otherwise deal with such party's interests in connection with or with respect to all matters in any proceeding. The foregoing power of attorney is coupled with an interest and cannot be revoked. The Equity Facility Agent or its nominee(s) shall have the sole right to accept or reject any plan proposed in any such proceeding and to take any other action, which a party filing a claim is entitled to take. In all such cases, whether in administration, bankruptcy or otherwise, the Person authorized to pay such a claim shall pay the same to the Equity Facility Agent, and, to the full extent necessary for that purpose, each Guarantor hereby assigns to the Equity Facility Agent all of its rights to all such payments or distributions to which such Guarantor would otherwise be entitled; provided, however, that the -------- ------- obligations hereunder shall not be satisfied except to the extent that the Equity Facility Agent receives cash by reason of any such payment or distribution. If the Equity Facility Agent receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Back- up Guarantee. (c) Without limiting the generality of any of the foregoing provisions of this Back-up Guarantee, each Guarantor irrevocably waives, to the fullest extent permitted by Applicable Law and for the benefit of, and as a separate undertaking with the Equity Facility Agent -7- and each Equity Bridge Lender, any defense to the performance of this Back-up Guarantee which may be available to such Guarantor as a consequence of any proceeding seeking to adjudicate the Borrower as bankrupt or insolvent or seeking liquidation, winding up, reorganization, arrangement, protection, relief or composition of the Borrower or the debts of the Borrower under any law relating to bankruptcy, insolvency or reorganization or relief or protection of debtors. 6. Subordination. Except as otherwise specifically provided in this ------------- Back-up Guarantee, all existing and future indebtedness of the Borrower to the Guarantors and the right of the Guarantors to withdraw any capital invested by the Guarantors in the Borrower, are hereby subordinated to the prior and indefeasible payment in full of all Guaranteed Obligations. Without the prior written consent of the Equity Facility Agent, such subordinated indebtedness shall not be paid or withdrawn in whole or in part, nor shall either Guarantor accept any payment of or on account of any such indebtedness or as a withdrawal of capital while this Back-up Guarantee is in effect. If any amount shall be paid to the Guarantors in violation of this Back-up Guarantee, and there are outstanding Guaranteed Obligations, such amount shall be deemed to have been paid to the Guarantors for the benefit of, and held in trust for the Equity Facility Agent and the Equity Bridge Lenders, and the Guarantors shall cause the same to be paid to the Equity Facility Agent for the benefit of the Equity Bridge Lenders immediately upon demand by the Equity Facility Agent to be credited and applied toward payment of the outstanding Guaranteed Obligations, whether matured or unmatured. 7. Taxes. ----- (a) All sums payable by the Guarantors under this Back-up Guarantee shall be paid (i) free of any restriction or condition, (ii) free and clear of and (except to the extent required by law) without any deduction or withholding on account of any taxes, levies, imposts, duties or other charges of whatever nature (excluding taxes on the overall net income or franchise taxes imposed on the Equity Facility Agent or the Equity Bridge Lenders by the jurisdiction of their incorporation or in which their lending offices are located) (all such non-excluded taxes and other amounts being hereinafter referred to as "taxes") and (iii) without deduction or withholding (except to the extent required by Applicable Law) on account of any other amount, whether by way of setoff or otherwise. (b) If (i) either Guarantor is required by law to make any deduction or withholding on account of any such taxes or other amount as is referred to in Section 7(a) from any sum paid or payable by such Guarantor under ------------ this Back-up Guarantee or (ii) any other party to any of the Financing Documents (or any Person on its behalf) is required by Applicable Law to make any deduction or withholding from, or (except on account of taxes on the overall net income or franchise taxes imposed on the Equity Facility Agent or the Equity Bridge Lenders by their jurisdiction of incorporation or the jurisdiction in which their lending offices are located) any payment on or calculated by reference to the amount of, any sum payable by such Guarantor under this Back-up Guarantee: (w) each Guarantor shall notify the Equity Facility Agent of any such requirement or any change in any such requirement as soon as it becomes aware of it; (x) each Guarantor shall pay any such taxes or other amount before the date on which penalties attach thereto, such payment to be made (if the liability is imposed on any other party to any of the Financing Documents) on behalf of and in the name of that party; and (y) the sum payable by the Guarantors in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, that party receives on the -8- due date and retains (free from any liability in respect of any such deduction, withholding or payment including additional income taxes payable as a consequence of the payment of any additional amounts) a net sum equal to what it would have received and so retained had no such deduction, withholding or payment been required or made. 8. Representations and Warranties of the Guarantors. The Guarantors ------------------------------------------------ make the representations and warranties contained in this Section 8 for the --------- benefit of the Equity Facility Agent and each Equity Bridge Lender. Each such representation and warranty shall be deemed made as of the date hereof, as of the date of Financial Close and as of the date of each subsequent Disbursement under the Equity Bridge Loan Credit Agreement, as applicable, except with respect to those representations and warranties which by their express terms relate solely to an earlier date. The representations and warranties contained herein shall survive the execution and delivery of this Back-up Guarantee. (a) Organization and Existence. Each Guarantor is a corporation -------------------------- duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has the corporate power and authority to execute and deliver this Back-up Guarantee and to perform its obligations under this Back-up Guarantee and is in good standing in each jurisdiction material to the Project in which the character of the properties owned or leased by it or in which the transaction of its business as presently conducted or proposed to be conducted makes such qualification necessary or desirable. (b) Corporate Action. Each Guarantor has taken all necessary ---------------- corporate action to authorize its execution and delivery of this Back-up Guarantee and the performance of its obligations under this Back-up Guarantee and this Back-up Guarantee has or by the date of Financial Close will have been duly authorized, executed and delivered. (c) Binding Effect. This Back-up Guarantee constitutes the legal, -------------- valid and binding obligation of each Guarantor, enforceable against each Guarantor, in accordance with its terms, except to the extent the enforceability thereof may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally and by general equitable principles regardless of whether the issue of enforceability is considered in a proceeding in equity or at law. (d) No Breach. The execution, delivery and performance of this --------- Back-up Guarantee by each Guarantor will not (i) violate any organizational documents of such Guarantor; (ii) require any consent or approval (including any approval of any Governmental Authority) which has not been obtained; (iii) result in any contravention or violation of any Applicable Law; or (iv) result in any contravention or violation or breach of any provision of, or constitute a default under, or result in the creation or imposition of any Lien on any of the assets of such Guarantor (except as contemplated hereunder) pursuant to the provisions of, any mortgage, indenture, contract, agreement or other undertaking to which such Guarantor is a party or which purports to be binding upon such Guarantor or upon any of its assets. (e) No Defaults. Neither Guarantor is in default under any term of ----------- this Back-up Guarantee or any other agreement to which it is a party which could reasonably be expected to have a Material Adverse Effect. (f) No Litigation. There is no pending or, to its knowledge, ------------- threatened, action or proceeding at law or in equity affecting either Guarantor before any court, Governmental Authority or arbitrator, which, if adversely determined, could, either individually or in the aggregate, reasonably be expected to materially impair its ability to perform the obligations under this Agreement. -9- (g) Financial Statements. All financial statements of EME -------------------- delivered in accordance with Section 3.1.16 or 5.4.3 of the Common Terms -------------- ----- Agreement are and, in the case of financial statements to be delivered after the date hereof, will be, true, correct and complete in all respects as of the date of such statements. (h) Tax Information. Each Guarantor has filed, or caused to be --------------- filed, all tax and informational returns that are required to have been filed by it in all jurisdictions, which failure could reasonably be expected to have a Material Adverse Effect, and has paid all taxes shown to be due and payable on such returns and all any other taxes and assessments payable by it, to the extent the same have become due and payable (other than those taxes that it is contesting in good faith and by appropriate proceedings, with adequate, segregated reserves established for such taxes in accordance with generally accepted accounting principles in the jurisdiction of its incorporation, if applicable), the failure of which to pay could reasonably be expected to have a Material Adverse Effect. To the extent such taxes are not due, each Guarantor has established reserves that are adequate for the payment thereof and are as required by generally accepted accounting principles in the jurisdiction of its incorporation, except to the extent that the failure to establish such reserves would not be reasonably expected to have a Material Adverse Effect. (i) No Fees. Other than amounts that have been paid in full or ------- will have been paid in full by the Borrower, the Sponsor or the Guarantors prior to Financial Close, no fees or taxes, including stamp, transaction, registration or similar taxes, are required to be paid in connection with the execution and delivery of this Back-up Guarantee. (j) Compliance with Applicable Law. None of the Guarantors or any ------------------------------ of such Guarantor's officers, directors, employees, agents or affiliates, acting on such Guarantor's behalf, has taken any action in connection with the Project that violates any Applicable Laws, including the Corrupt Practices Laws, the violation of which could be reasonably expected to have a Material Adverse Effect. (k) Pension Plans. ------------- (i) The withdrawal by either Guarantor or any of such Guarantor's Subsidiaries or any entity under common control within the meaning of Section 4001 of ERISA from all Multiemployer Plans in which they participate would not have a Material Adverse Effect on the consolidated financial condition of such Guarantor and its Subsidiaries taken as a whole. (ii) Neither Guarantor has been notified that any Multiemployer Plan to which it or any of its Subsidiaries or any entity under common control within the meaning of Section 4001 contributed is either in reorganization or insolvent. (iii) All single employer plans which are subject to ERISA maintained by either Guarantor, its Subsidiaries or any entity under common control within the meaning of Section 4001 of ERISA are in material compliance with all applicable requirements of ERISA. The sum of the value of all accrued benefits vested under all single employer plans as of December 31, 1996 did not exceed the value of the assets of such plans allocable to such vested benefits as determined by the plan actuaries. (l) Investment Company Act of 1940. Neither Guarantor is an ------------------------------ "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940. (m) Regulation. Neither of the Guarantors nor such Guarantor's ---------- Affiliates is or will be, solely as a result of the participation by such party separately or as a group -10- in the transactions contemplated hereby or by any other Financing Document, or as a result of the ownership, use or operation of the Project, subject to regulation by any Governmental Authority of the United States as a "public utility," an "electric utility," an "electric utility holding company," a "public utility holding company," a "holding company," or an "electric corporation" or a Subsidiary or Affiliate of any of the foregoing; provided, -------- however, that Edison International, the ultimate parent of EME, will continue to - ------- be subject to an annual reporting requirement and other requirements applicable to holding companies exempt under Section 3 of PUHCA, pursuant to Sections 3, 9(a)(2), 10, 16, 26, 32 and 33 of PUHCA, and that Southern California Edison Company, a wholly-owned subsidiary of Edison International and an Affiliate of EME, as a public utility company that is an "associate company" of a foreign utility company within the meaning of Section 2(a)(10) of PUHCA, may be subject to reporting requirements prescribed by the Securities and Exchange Commission pursuant to Section 33(e)(1) of PUHCA. The Guarantors are not subject to regulation as a "subsidiary company" or an "affiliate" of a holding company under (and as defined in) PUHCA. Neither Guarantor has taken any action which, (i) if and so long as the owner and operator of the Project is an "exempt wholesale generator" under Section 32 of PUHCA, could reasonably be expected to result in the Project failing to meet the definition of an "eligible facility" under paragraph 32(a)(2) of PUHCA or (ii) if and so long as the owner and operator of the Project is a "foreign utility company" under Section 33 of PUHCA, could reasonably be expected to result in the Project not satisfying the requirements set forth in paragraph 33(a)(3) of PUHCA. (n) Margin Stock. No Guarantor is engaged in the business of extending ------------ credit for the purpose of purchasing or carrying margin stock within the meaning of Regulations G, T and X issued by the Board of Governors of the Federal Reserve System. (o) Conditions Precedent. Upon the execution and delivery hereof, -------------------- there are no conditions precedent to the effectiveness of this Back-up Guarantee that have not been satisfied or waived. 9. Covenants of the Guarantor. So long as any of the Guaranteed -------------------------- Obligations are outstanding, each Guarantor hereby covenants and agrees that it shall faithfully observe and fulfill, and shall cause to be observed and fulfilled, each and all of the following covenants: (a) Governmental Approvals. It will maintain in full force and effect ---------------------- all approvals or authorizations or Permits from any Governmental Authority that are required to be obtained by it with respect to this Back-up Guarantee (if any) and will obtain any that may become necessary in the future. (b) Compliance with Applicable Law. It will comply in all respects ------------------------------ with all Applicable Laws to which it may be subject, the noncompliance with which could be reasonably expected to have a Material Adverse Effect. (c) Financial Statements. As soon as available, EME will deliver to -------------------- the Facility Agent copies of the annual (which shall be audited) and quarterly financial statements (consisting of a balance sheet and the related statements of income and cash flows) in accordance with the requirements of Section 5.4.3 ------------- of the Common Terms Agreement. (d) Litigation. Promptly, and in any event within five (5) Business ---------- Days after an Authorized Officer obtains knowledge thereof, each Guarantor will give to the Equity Facility Agent and the Facility Agent notice of the occurrence of any event or of any litigation or governmental proceeding pending (i) against it or any of its Affiliates which could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (e) Transfer of Interests. It shall not permit a Change of Control as --------------------- a result of actions taken by the Sponsor in contravention of Section 6.19 of the ------------ Common Terms -11- Agreement or a transfer of interests in contravention of Section 23.13 of the ------------- Power Purchase Agreement. (f) Regulation. It shall not take any action which could reasonably be ---------- expected to result in (i) it being subject to regulation by any Governmental Authority of the United States as a "public utility," an "electric utility," an "electric utility holding company," a "public utility holding company," a "holding company," or an "electric corporation" or a Subsidiary or Affiliate of any of the foregoing, (ii) it being subject to regulation as a "subsidiary company" or an "affiliate" of a holding company under (and as defined in) PUHCA or (iii) if and so long as the owner and operator of the Project is an "exempt wholesale generator" under Section 32 of PUHCA, the Project failing to meet the definition of an "eligible facility" under paragraph 32(a)(2) of PUHCA, or, if and so long as the owner and operator of the Project is a "foreign utility company" under Section 33 of PUHCA, the Project is not satisfying the requirements set forth in paragraph 32(a)(3) of PUHCA; provided, however, that -------- ------- Edison International, the ultimate parent of EME, will continue to be subject to an annual reporting requirement and other requirements applicable to holding companies exempt under Section 3 of PUHCA, pursuant to Sections 3, 9(a)(2), 10, 16, 26, 32 and 33 of PUHCA, and that Southern California Edison Company, a wholly-owned subsidiary of Edison International and an Affiliate of EME, as a public utility company that is an "associate company" of a foreign utility company within the meaning of Section 2(a)(10) of PUHCA, may be subject to reporting requirements prescribed by the Securities and Exchange Commission pursuant to Section 33(e)(1) of PUHCA. (g) Corporate Existence. Each Guarantor shall preserve and maintain in ------------------- full force and effect its corporate existence, rights (charter and statutory), franchises and privileges and qualify and remain qualified, as a corporation in good standing in each jurisdiction in which such qualification is from time to time necessary, except for such jurisdictions where the failure to so qualify would not have a Material Adverse Effect; provided, however, that neither -------- ------- Guarantor shall be required to preserve any right, privilege or franchise if the board of directors thereof shall determine in good faith that such right, privilege or franchise is no longer useful in the conduct of the business of such Guarantor, and the loss thereof is not disadvantageous in any material respect to the Equity Facility Agent and the Equity Bridge Lenders. (h) Notice of Defaults. Promptly upon any Specified Officer (as ------------------ defined below) of either Guarantor obtaining knowledge thereof, such Guarantor shall give notice to the Equity Facility Agent of any development, including any litigation, investigation or proceeding affecting such Guarantor, which has a Material Adverse Effect, could reasonably be expected to have a Material Adverse Effect or, in the case of any litigation, investigation or other proceeding, which could, if adversely decided, reasonably be expected to have a Material Adverse Effect. For the purpose of this Section 9(h), the term "Specified ------------ --------- Officer" shall mean the Chairman, any Vice Chairman, the President, the Chief - ------- Executive Officer, the Chief Financial Officer, any Senior Vice President, any Vice President, the Secretary, the Treasurer or equivalent officers of such Guarantor. (i) Merger, Acquisition or Sales of Assets. Neither Guarantor shall -------------------------------------- consolidate or merge into, or transfer its properties and assets substantially as an entirety to, another Person, unless (i) the surviving Person, if other than such Guarantor, or the transferee, assumes by supplemental agreement satisfactory in form and substance to the Equity Bridge Lenders all the Guaranteed Obligations and (ii) after giving effect to such assumption, there would not exist any Default or Event of Default. (j) Further Assurances. It will deliver such other documents and other ------------------ information reasonably requested by the Equity Facility Agent. 10. Action by Equity Facility Agent. ------------------------------- -12- (a) The Equity Facility Agent shall be entitled to rely on any notice received by it from the Equity Bridge Lenders stating that an Event of Default shall have occurred under the Financing Documents and shall not be under any duty or responsibility to make any independent verification of such statement. Notwithstanding any provisions to the contrary in this Back-up Guarantee, if any action to be taken by the Equity Facility Agent under this Back-up Guarantee is to be taken on a day which is not a Business Day, such action shall be taken on the next succeeding Business Day. (b) Each Guarantor hereby agrees to pay all costs, including reasonable attorneys' fees, incurred with respect to the enforcement of such provisions of this Back-up Guarantee against such Guarantor, which enforcement costs, regardless of when incurred, shall be payable by such Guarantor on the earlier of (i) the date on which a judgment shall be obtained against such Guarantor with respect to this Back-up Guarantee and (ii) the date on which such Guarantor and the Equity Facility Agent shall have otherwise resolved (including by way of settlement) any dispute with respect to the enforcement of this Back- up Guarantee against such Guarantor. 11. Successors and Assigns. ---------------------- (a) This Back-up Guarantee shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors or permitted assigns. (b) Notwithstanding any transfer of its interests permitted under Section 6.19 of the Common Terms Agreement, Section 23.13 of the Power Purchase - ------------ ------------- Agreement or any other provision of the Financing Documents, each Guarantor shall remain liable for any and all of its obligations under this Back-up Guarantee and shall not assign its obligations hereunder to any other Person without the written consent of the Required Equity Voting Parties, and any purported assignment in violation of this provision shall be void. (c) The Equity Facility Agent and any Equity Bridge Lender may transfer, assign or grant its rights hereunder in connection with an assignment or transfer of all or any part of its interest in the Guaranteed Obligations held by it to any other Person in accordance with the provisions of the Financing Documents; provided that any such assignee has agreed to be bound by -------- the terms of the Financing Documents, including this Back-up Guarantee. 12. Interpretation. The section headings in this Back-up Guarantee are -------------- for the convenience of reference only and shall not affect the meaning or construction of any provision hereof. 13. Notices. All notices and other communications provided for ------- hereunder shall be made in the English language and (a) in writing (including telecopier) and (b) telecopied or sent by overnight courier (if for inland delivery) or international courier (if for overseas delivery) to a party hereto at its address and contact number specified below, or at such other address and contact number as is designated by such party in a written notice to the other parties hereto or, if not specified below, at the address and contact number for such Person set forth in Schedule 16 of the Common Terms Agreement. ----------- All such notices and communications shall be effective (a) if sent by telecopier, when sent (on receipt of confirmation) and (b) if sent by courier, (i) one day after timely deposit with an overnight courier if for inland delivery and (ii) five (5) days after timely deposit with an international courier if for overseas delivery; provided, however, that no notice or -------- ------- communication to any Lender or Agent shall be effective until received by such Lender or Agent. -13- (a) The address of EME is: Edison Mission Energy 18101 Von Karman Ave., Suite 1700 Irvine California 92612-1046 U.S.A. Attention: General Counsel Telephone No.: 1-949-752-5588 Telecopier No.: 1-949-752-1420 (b) The address of ETG is: EME Tri Gen BV Croeselaan 18 3521 CB Utrecht The Netherlands Attention: Ms. Hetty Solberg Telephone No.: 31-30-216-1944 Telecopier No.: 31-30-216-1250 (c) The address of TECO is: Tri Energy Company Limited 1550 Grand Amarin Tower, 16th Floor New Petchburi Road Ratchathewi, Makkasan Bangkok 10320 Thailand Attention: Khun Rawi Corsiri President Telephone No.: (662) 207-0307 Telecopier No.: (662) 207-0315 (d) The address of the Equity Facility Agent is: The Sumitomo Bank, Limited 11th Floor, Ramaland Building 952 Rama IV Road Kwaeng Suriyawong Khet Bangrak Bangkok 10500 Thailand Telephone No.: (662) 632-9210 Telecopier No.: (662) 632-9208 Attention: Mr. Anuphap Tharavanij, Assistant Vice President Mr. Shouichi Yamashiro, Assistant Vice President 14. Amendments. Notwithstanding anything contained herein that may be ---------- construed to the contrary, this Back-up Guarantee may be amended only in writing with the written consent of the Equity Facility Agent and each Guarantor. 15. English Language. This Back-up Guarantee is made in the English ---------------- language. Any translation of this Back-up Guarantee not approved by the Equity Facility Agent shall have no legal validity. 16. Jurisdiction. ------------ -14- (a) THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK OTHER THAN THE CONFLICT OF LAWS RULES THEREOF (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). ANY LEGAL ACTION OR PROCEEDING AGAINST EACH GUARANTOR WITH RESPECT TO THIS GUARANTEE, ANY CREDIT AGREEMENT, OR ANY OTHER FINANCING DOCUMENT (AS DEFINED IN SCHEDULE 1 OF THE COMMON TERMS AGREEMENT) TO WHICH IT IS A PARTY MAY BE BROUGHT - ---------- IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS GUARANTEE, EACH GUARANTOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH GUARANTOR AGREES THAT A JUDGMENT, AFTER EXHAUSTION OF ALL AVAILABLE APPEALS, IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND BINDING UPON IT, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION, INCLUDING BY A SUIT UPON SUCH JUDGMENT, A CERTIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE JUDGMENT. EACH GUARANTOR HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS ITS DESIGNEE, APPOINTEE AND AGENT WITH RESPECT TO ANY ACTION OR PROCEEDING IN NEW YORK TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AN ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING AND AGREES THAT THE FAILURE OF SUCH AGENT TO GIVE ANY ADVICE OF ANY SUCH SERVICE OF PROCESS TO SUCH GUARANTOR SHALL NOT IMPAIR OR AFFECT THE VALIDITY OF SUCH SERVICE OR OF ANY BASED THEREON. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH GUARANTOR AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK CITY ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION ACCEPTABLE TO THE EQUITY FACILITY AGENT AND THE EQUITY BRIDGE LENDERS. EACH GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH GUARANTOR AND CT CORPORATION SYSTEM, AT THEIR RESPECTIVE ADDRESSES SET FORTH ABOVE AND IN SECTION ------- 13, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING - -- HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST SUCH GUARANTOR IN THAILAND OR IN ANY OTHER COURT OR TRIBUNAL HAVING JURISDICTION. (b) EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS OR ANY OTHER FINANCING DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN SECTION 16(a) ABOVE AND HEREBY ------------- FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. -15- (c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. 17. Judgment Currency. ----------------- (a) The Guarantors' obligations hereunder to make payments in Dollars (the "Obligation Currency") shall not be discharged or satisfied by any tender ------------------- or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency, except to the extent that such tender or recovery results in the effective receipt by the Equity Facility Agent or the Equity Bridge Lenders, as applicable, of the full amount of the Obligation Currency expressed to be payable to such party under this Back-up Guarantee. If for the purpose of obtaining or enforcing judgment against the Guarantors in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than the Obligation Currency (such other currency being hereinafter referred to as the "Judgment Currency") an amount due in the ----------------- Obligation Currency, the conversion shall be made, at the Dollar Equivalent, in the case of Baht, and, in the case of other currencies, at the rate of exchange (as quoted by the Facility Agent which shall be market competitive or if the Facility Agent fails to quote a rate of exchange on such currency, by a known dealer in such currency designated by the Facility Agent) determined, in each case, as of the day on which the judgment is given (such Business Day being hereinafter referred to as the "Judgment Currency Conversion Date"). --------------------------------- (b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Guarantors covenant to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount), as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date. (c) For purposes of determining the Dollar Equivalent or rate of exchange under this Section 17, such amounts shall include any premium and costs ---------- payable in connection with the purchase of the Obligation Currency. 18. Termination: Reinstatement of Guarantee. --------------------------------------- (a) Subject to the provisions of Section 18(b), this Back-up Guarantee ------------- shall terminate upon the indefeasible payment and satisfaction in full of all Guaranteed Obligations and termination of all Commitments under the Equity Bridge Loan Facility. (b) Notwithstanding the provisions of Section 18(a), this Back-up ------------- Guarantee shall be reinstated if at any time following the termination of this Back-up Guarantee under Section 18(a), any payment by each Guarantor under this ------------- Back-up Guarantee is rescinded or must otherwise be returned by the Equity Facility Agent or any other Person upon the insolvency, bankruptcy, reorganization, dissolution or liquidation of such Guarantor or otherwise, and is so rescinded or returned to the Person making such payment, all as though such payment had not been made. Such period of reinstatement shall continue until satisfaction of the conditions contained in, and shall continue to be subject to, the provisions hereof, including this Section 18. ---------- 19. Interest. Any amount required to be paid by the Guarantors pursuant -------- to the terms hereof shall bear interest at the Default Rate or the maximum rate permitted by law, whichever is less, from the date due until paid in full. -16- 20. Entire Agreement. This Back-up Guarantee, including the documents ---------------- referred to herein, embodies the entire agreement and understanding of the parties hereto and supersedes all prior agreements and understandings of the parties hereto relating to the subject matter herein contained. 21. Execution in Counterparts. This Back-up Guarantee may be signed in ------------------------- one or more duplicate counterparts, and when executed and delivered by all of the parties listed below shall constitute a single binding agreement. Any party hereto may execute this Back-up Guarantee by signing any such counterpart (including by facsimile). Signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signatures are physically attached to the same counterpart. 22. Severability. Any provision of this Back-up Guarantee which is ------------ prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability, but shall not invalidate the remaining provisions of this Back-up Guarantee or affect such provision in any other jurisdiction. 23. Joint and Several Liability. The obligations of the Guarantors --------------------------- under this Backup Guarantee shall be joint and several. -17- IN WITNESS WHEREOF, each Guarantor has caused this Back-up Guarantee to be duly executed and delivered as of the day and year first written above. EDISON MISSION ENERGY, as a Guarantor By: /s/ ROBERT E. DRISCOLL ----------------------- Name: Robert E. Driscoll Title: Vice-President EME TRI GEN BV, as a Guarantor By: /s/ ROBERT E. DRISCOLL ----------------------- Name: Robert E. Driscoll Title: Attorney AGREED AND ACCEPTED: THE SANWA BANK, LIMITED, as Equity Facility Agent for the Equity Bridge Lenders By: --------------------------- Name: ------------------------- Title: ------------------------ ACKNOWLEDGED AND AGREED as to Section 2 only: TRI ENERGY COMPANY LIMITED, as the Borrower By: /s/ RAWI CORSIRI ---------------------------- Name: RAWI CORSIRI -------------------------- Title: Director & President ------------------------- [LOGO OF TRI ENERGY COMPANY LIMITED] By: /s/ MARTIN DENIS CONSIDINE ---------------------------- Name: MARTIN DENIS CONSIDINE -------------------------- Title: DIRECTOR ------------------------- IN WITNESS WHEREOF, each Guarantor has caused this Back-up Guarantee to be duly executed and delivered as of the day and year first written above. EDISON MISSION ENERGY, as a Guarantor By: -------------------- Name: Robert E. Driscoll Title: Vice-President EME TRI GEN BV, as a Guarantor By: -------------------- Name: Robert E. Driscoll Title: Attorney AGREED AND ACCEPTED: THE SANWA BANK, LIMITED, as Equity Facility Agent for the Equity Bridge Lenders By: /s/ Yoshihiro Kubo ----------------------- Name: YOSHIHIRO KUBO --------------------- Title: MANAGER -------------------- ACKNOWLEDGED AND AGREED as to Section 2 only: TRI ENERGY COMPANY LIMITED. as the Borrower By: ----------------------- Name: --------------------- Title: -------------------- By: ----------------------- Name: --------------------- Title: -------------------- EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EDISON MISSION ENERGY AND SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JUL-01-1998 SEP-30-1998 668,574 0 51,982 0 0 755,059 3,105,500 234,569 5,034,753 437,432 2,372,927 150,000 0 64,130 870,867 5,034,753 0 506,154 0 241,857 0 0 147,720 158,356 57,290 0 0 0 0 101,066 0 0
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