
<PAGE>


                                  EXHIBIT  10.38



EXECUTION 5-2-96

This THIRD  AMENDMENT  TO POWER  PURCHASE  AGREEMENT,  effective  the 6th day of
November,  1995, is between MAINE ENERGY RECOVERY COMPANY,  LIMITED  PARTNERSHIP
("Seller") and CENTRAL MAINE POWER COMPANY ("Buyer").

WHEREAS,  Seller and Buyer entered into a Power Purchase Agreement dated January
12, 1984, (together with any amendments thereto, the "Agreement")  governing the
sale of electricity from Seller's Facility located in Biddeford, Maine; and

WHEREAS, the parties to the Agreement entered into a First Amendment dated April
25,  1986,  in order to  establish  an agreed upon  pricing  system for Seller's
deliveries of Firm Energy; and

WHEREAS,  the parties to the  Agreement  entered into a Second  Amendment  dated
February 21, 1991,  in order to facilitate  the  accounting of amounts owed from
Buyer to Seller and from Seller to Buyer by providing Buyer with certain set off
rights; and

WHEREAS,  CL Power  Sales One,  L.L.C.  has agreed to make  certain  payments to
Seller,  in return for which payments  Seller has agreed to enter into a certain
Capacity Purchase Agreement;

NOW,  THEREFORE,  in  consideration of the premises and the mutual covenants and
agreements set forth herein and other good valuable  consideration,  the receipt
and  adequacy  of which  are  hereby  acknowledged,  Buyer and  Seller  agree as
follows:

1. The Agreement is amended by adding to the Table of Contents the following new
Article title:

            XXVI - ARBITRATION

            XXVII - PREPAYMENT OF CAPACITY

2. The Agreement is amended by inserting in Article I the following definitions:

            "Capacity Purchase Agreement" means the agreement between Seller and
      a  third-party  Capacity  Provider  regarding the terms under which Seller
      will sell the entire  capacity  of the  Facility to such  third-party,  as
      permitted pursuant to Article III.

            "Capacity Provider" has the meaning set forth in Article III.

            "Capacity Sales Agreement"  means the agreement  between Buyer and a
      third-party  Capacity Provider  regarding the terms under which Buyer will
      purchase the entire  capacity of the Facility  from such  third-party,  as
      permitted pursuant to Article III.

            "Escrow  Agent"  means  Key  Trust  Company  of Ohio,  N.A.,  or any
      successor escrow agent, under the terms of the Escrow Agreement.

            "Expiration Draw" has the meaning set forth in the Escrow Agreement.

<PAGE>




            "Escrow Agreement" means that certain Escrow Agreement,  dated April
      30, 1996, among Buyer, Seller,  Capacity Provider,  Issuer, and the Escrow
      Agent.

            "ING" has the meaning set forth in Article XIII.

            "Issuer"  means the issuer of the  letter  of credit as set forth in
      Article XIII.

            "ON-PEAK  HOURS"  are the hours  between  8:00 a.m.  and 9:00  p.m.,
      Monday through Friday,  excluding  legal holidays,  during the period from
      April 1 through  October 31, and between 7:00 a.m.  and 9:00 p.m.,  Monday
      through  Friday,  excluding  legal  holidays,  during the remainder of the
      year. All hours during Saturday,  Sunday,  and legal holidays are Off-Peak
      Hours.

            "OFF-PEAK HOURS" include all hours which are not On-Peak Hours.

            "SCHEDULED  STEOFF HOURS" are those hours in any Calendar Year which
      occur during the following periods: (1) from April 1 through and including
      May 31, any period that includes any hour between  Friday at 9:00 p.m. and
      the  following  Monday  at 8:00  a.m.;  and (2) all  Holiday  Periods  for
      holidays  which fall between the dates of April 1 and  September  15. If a
      holiday falls on or is observed on Monday, the "Holiday Period" shall mean
      the  eighty-three  (83) hour  period  that  begins at 9:00 p.m.  on Friday
      before the holiday and ends at 8:00 a.m. on the Tuesday after the holiday.
      If a holiday  falls on or is observed  on Friday,  then  "Holiday  Period"
      shall mean the  eighty-three  (83) hour period that begins at 9:00 p.m. on
      the Thursday  before the holiday and ends at 8:00 a.m. on the Monday after
      the  holiday.  If a holiday  falls on or is  observed  on a day other than
      Monday or Friday,  then "Holiday  Period" shall mean the thirty-five  (35)
      hour  period  that  begins at 9:00 p.m.  on the day before the holiday and
      ends at 8:00 a.m. on the day after the holiday.  For purposes of Scheduled
      STEOFF Hours, the term "holiday" shall mean any legal holiday in the State
      of Maine, as determined pursuant to 4 M.R.S.A. ss. 1051.

            "SHORT-TERM ENERGY-ONLY RATE" ("STEO") is the rate per kilowatt-hour
      established  by the  Commission  from time to time pursuant to Chapter 36,
      Section 3, of its Rules and Regulations,  or any successor provision,  for
      sales  from a  Qualifying  Facility  of  energy  only to a  utility  on an
      intermittent basis and shall be expressed in cents, rounded to the nearest
      hundredth.  If the Commission has not  established a STEO within  eighteen
      (18) months  preceding the date or dates on which a STEO value is required
      for purposes of this Agreement, Buyer shall calculate STEO consistent with
      the  principles  for  the  calculation  of  such  a rate  utilized  by the
      Commission in the most recent  proceedings to established STEO immediately
      prior to that  eighteen-month  period  using  the most  recently-available
      forecasts of fuel costs, load levels,  and other variables then being used
      by  Buyer  which  variables  are  typically  used  by  the  Commission  in
      determining  a value for STEO.  The  Buyer-calculated  STEO shall serve as
      STEO until the  earlier of (i) the  Commission  establishing  STEO or (ii)
      eighteen (18) months after Buyer's most recent calculation of STEO. If the
      contingency  described in (ii) above occurs,  Buyer shall recalculate STEO
      consistent  with the  methodology  described  herein.  It is the intent of
      Buyer and Seller to have STEO calculated by either the Commission or Buyer
      at least every eighteen months. In the event that Buyer determines a value
      for STEO as provided

                                      -2-

<PAGE>


      hereinabove  and the Commission  subsequently  determines a value for STEO
      which  differs  from  the  Buyer-calculated   value,  there  shall  be  no
      retroactive  adjustment  with respect to any payments made on the basis of
      the Buyer-calculated STEO.

            "SHORT-TERM  ENERGY-ONLY ON-PEAK RATE" (STEON") is a rate determined
      in the manner described in the definition of "STEO" herein, but applicable
      to deliveries of energy during  On-Peak Hours only. If the  Commission has
      not  established a separate STEON rate, then the STEON rate shall be equal
      to STEO x 1.10.

            "SHORT-TERM   ENERGY-ONLY   OFF-PEAK  RATE"  ("STEOFF")  is  a  rate
      determined in the manner described in the definition of "STEO" herein, but
      applicable  to deliveries  of energy  during  Off-Peak  Hours only. If the
      Commission  has not  established a separate  STEOFF rate,  then the STEOFF
      rate shall be equal to STEO x 0.90.

3. The  Agreement  is amended by deleting  ARTICLE  II: TERM and a  substituting
thereof the following:


                                ARTICLE II: TERM

            The term of this  Agreement  commenced  on January 12, 1984 and will
      terminate on December 31, 2012.

            Seller shall purchase Seller's Electrical Usage under one or more of
      the applicable  retail tariffs filed with and approved by the Maine Public
      Utilities Commission. Any reactive demand charges for such purchases shall
      be based  only on the kvar  reading  associated  with the net  inflows  of
      reactive power, if any, at the Point of Delivery.

4. The  Agreement  is  amended  by  deleting  ARTICLE  III:  SALE OF  POWER  and
substituting therefor the following:


                           ARTICLE III: SALE OF POWER

            Subject to the  provisions  of the second  paragraph  of Article IX,
      Seller  agrees to sell and Buyer agrees to purchase  the entire  output of
      Firm Energy,  less energy used for  generator  auxiliaries,  from Seller's
      Facility. Subject to the provisions of the second paragraph of Article IX,
      Seller shall at all times during the term of this  Agreement  use its best
      effort to generate and sell Firm Energy up to 150,000,000  kWh per year at
      its  Facility   consistent  with  satisfying  proper  maintenance  of  the
      Facility,  and Prudent Electrical  Practice.  Both parties agree that they
      will  make  all  determinations  called  for  herein  and  carry  out  all
      obligations herein, in good faith and in a reasonable manner.

            Buyer shall pay for  deliveries of Firm Energy for the Calendar Year
      of  generation  at the Total Rate set forth in  Attachment  II,  except as
      otherwise   provided   in  this   Agreement.   However,   the   number  of
      kilowatt-hours subject to Attachment II rates shall not exceed 150,000,000
      in any Calendar  Year.  Once Seller has  delivered  in any  Calendar  Year
      150,000,000  kWh which Buyer is obligated to purchase at the Attachment II
      rates,  deliveries  to Buyer during any On-Peak Hour shall be purchased at
      STEON and

                                      -3-

<PAGE>




      deliveries to Buyer during any Off-Peak Hour shall be purchased at STEOFF.
      Any  deliveries  of Firm Energy  during  Scheduled  STEOFF  Hours shall be
      purchased by Buyer at the STEOFF rate.  The  150,000,000  kWh per Calendar
      Year figure shall be prorated on a daily basis during any partial years.

            If under  Article XI hereof Buyer elects a Special Work Period or an
      Allowable  Work Time that occurs  outside of scheduled  maintenance  hours
      (collectively a "Work Period Curtailment"),  Seller will be deemed to have
      delivered  410,000 kWh of Firm Energy per day for the duration of the Work
      Period  Curtailment,   except  for  those  days  during  the  Work  Period
      Curtailment  on which Seller  actually  delivers  more than 410,000 kWh of
      Firm  Energy,  in which case Seller will be credited for that day with its
      actual   deliveries   for   purposes  of  meeting  its  minimum   delivery
      requirements  under  this  Article  XIII.  Any Firm  Energy  deemed  to be
      delivered  under  this  paragraph  will  not be paid for by  Buyer,  or be
      included in the number of kilowatt  hours  subject to Attachment II rates,
      but will qualify  toward meeting  Seller's  minimum  delivery  requirement
      under Article XIII.

            If Buyer is  obligated,  pursuant to the terms of Article XI, to pay
      Seller  for  Firm  Energy  not  actually   delivered  as  a  result  of  a
      curtailment, interruption or reduction period exceeding the Allowable Work
      Time or, if applicable,  the Special Work Period, the Firm Energy paid for
      pursuant to the terms of Article XI but not  actually  delivered  shall be
      deemed  delivered both for the purpose of determining  (i) compliance with
      the 100,000,000  kWh,  41,369,863 kWh, and 15,000,000 kWh minimum delivery
      obligations  set forth in Article  XIII and (ii) in the number of kilowatt
      hours subject to Attachment II rates.

            If  written  consent  is  given  by  Buyer,  Seller  may  sell  to a
      third-party  ("Capacity  Provider")  the entire  capacity of the  Facility
      until May 31, 2007 ("Capacity  Sale").  If such Capacity Sale takes place,
      the  Agreement  shall remain in effect  between  Buyer and Seller  without
      amendment  or  modification,  except as provided  herein.  Buyer shall pay
      Seller for  deliveries of energy from the  effective  date of the Capacity
      Sale until May 31,  2007 at the Energy  Rate set forth in  Attachment  II,
      except for  deliveries  during  Scheduled  STEOFF Hours and  deliveries in
      excess of 150,000,000 kWh per Calendar Year, which will be paid for at the
      rates set forth in the second paragraph of this Article. In the event of a
      Capacity Sale, Buyer and Capacity Provider shall determine the terms under
      which capacity  payments will be paid to Capacity Provider and Buyer shall
      have no obligation,  so long as this Agreement is in effect, to pay Seller
      for  capacity  until June 1, 2007.  Seller  shall not receive the Capacity
      Rate for the scheduled term of any such Capacity  Sale,  regardless of the
      performance  or  non-performance  of Capacity  Provider under its Capacity
      Purchase Agreement. It is expressly understood that Firm Energy during the
      term of such Capacity  Sale shall be provided as follows:  both energy and
      capacity will be delivered to Buyer (energy pursuant to this Agreement and
      capacity  pursuant to a Capacity Sales  Agreement),  but Seller shall sell
      only  energy to Buyer and the  Capacity  Provider  will sell  capacity  to
      Buyer.  During any Capacity Sale, Seller shall have no obligation to Buyer
      to provide  the  capacity  portion of Firm  Energy.  Buyer will during any
      Capacity  Sale look solely to the Capacity  Provider to provide  capacity,
      and Seller shall have only the obligations regarding capacity as set forth
      in the Capacity

                                      -4-

<PAGE>




      Purchase  Agreement.  It is agreed that Buyer is expressly not an intended
      third-party  beneficiary  having  any right of action  under any  Capacity
      Purchase Agreement.

            In the event of a Capacity Sale pursuant to the previous  paragraph,
      if Buyer  subsequently  materially  breaches,  including  by  rejection in
      bankruptcy,  its Capacity Sales Agreement with Capacity  Provider and such
      Capacity Sales  Agreement is terminated as a result of such breach,  Buyer
      shall be deemed to have  materially  breached  this  Agreement  and Seller
      shall have the right,  for a period of 395 days following such termination
      of the Capacity Sales Agreement, to terminate this Agreement. In the event
      that Seller materially breaches, including by rejection in bankruptcy, its
      Capacity Purchase Agreement with Capacity Provider, Seller shall be deemed
      to have materially breached this Agreement and Buyer shall have the right,
      so long as such breach is not cured,  to  terminate  this  Agreement.  For
      purposes of this  paragraph,  "reject" shall mean: (a) that the applicable
      agreement is rejected by or on behalf of either  Buyer or Seller  (whether
      by a trustee,  the debtor in possession,  or otherwise) and such rejection
      is  approved,  as  applicable,  pursuant to Section 365 of the  Bankruptcy
      Code, 11 U.S.C. ss. 101, et seq., or any other provision of the Bankruptcy
      Code or of any other  bankruptcy  or  insolvency  law, now or hereafter in
      effect, which similarly provides for the rejection of executory contracts,
      and any right of reconsideration,  review and appeal has been exhausted or
      is otherwise  waived or barred or (b) if, as of the time  distribution  of
      the assets of the estate of Buyer and Seller, as applicable,  whether in a
      liquidation  pursuant to a confirmed  Chapter 11 plan or  otherwise,  such
      agreement  has not been  assigned  to and  assumed  by a party  capable of
      performing thereunder.

            Buyer  hereby  consents  to  Seller's  sale to CL Power  Sales  One,
      L.L.C.,  pursuant to the Capacity Purchase  Agreement dated as November 6,
      1995 (the "Capacity  Purchase  Agreement"),  of the entire capacity of the
      Facility until May 31, 2007, and Buyer,  without  waiving any other rights
      now available or hereafter arising with respect to Seller,  agrees that it
      shall  not seek to  amend,  modify  or  terminate  any of its  obligations
      hereunder by virtue of a claim or assertion arising under Article XX(A) or
      otherwise  that the sale of  capacity  by Seller to  Capacity  Provider is
      inconsistent  with the status of the Facility as a Qualifying  Facility as
      defined in 16 U.S.C. Section 796(17)(c) and 35-A MRSA Section 3303(7).

5. The Agreement is amended by deleting ARTICLE IX:  DELIVERIES and substituting
therefor the following:


                             ARTICLE IX: DELIVERIES

            Seller  shall  deliver  all Firm  Energy in  excess of the  Seller's
      Electrical Usage of the Facility at the Point of Delivery in the form of 3
      phase 34,500 volts 60 Hertz electricity up to a maximum capacity of 25,000
      kVA,  which  Firm  Energy  shall be  delivered  to  Buyer at the  Point of
      Delivery as described in Attachment I hereof.  It is expressly  understood
      and agreed that Seller  shall sell to Buyer and Buyer shall  purchase  the
      Gross Generation of Firm Energy from the Facility  although Seller is only
      obligated  to deliver the Net  Generation  of the  Facility.  Seller shall
      enter into a separate contract to

                                      -5-

<PAGE>


      purchase Seller's Electrical Usage.  Notwithstanding any of the foregoing,
      Buyer shall have no obligation  to pay for  deliveries in excess of 25,000
      kWh per hour.

            Subject to its  obligation  to deliver  Firm Energy,  Seller  shall,
      during the  following  time  periods,  have the right to deliver  and sell
      energy from the Facility to another purchaser: (1) during Scheduled STEOFF
      Hours;  and (2) at any  time  during  a  Calendar  Year  once  Seller  has
      delivered to Buyer 150,000,000 kWh which Buyer is obligated to purchase at
      the Attachment II rates. If Seller desires to transact  wholesale sales of
      energy from the  Facility  in the  aforementioned  situations,  then Buyer
      shall  accommodate  such sales by  providing  transmission  services  over
      Buyer's  transmission   facilities.   The  rates,  terms,  and  conditions
      pertaining to Buyer's  provision of such  transmission  services to Seller
      shall be  consistent  with the final  rulings  promulgated  by the Federal
      Energy  Regulatory  Commission  ("FERC")  in FERC  Docket No.  RM95-8-000,
      Promoting  Wholesale  Competition  Through Open Access  Non-Discriminatory
      Transmission by Public Utilities, and FERC Docket No. RM94-7-001, Recovery
      of Stranded Costs by Public  Utilities and Transmitting  Utilities,  or at
      Seller's  option,  Buyer's most  favorable  then  currently  available and
      applicable  transmission  tariff. In consideration of Buyer's agreement to
      permit sales of excess energy  during the periods set forth above,  and in
      consideration  of Buyer's  agreement to provide  transmission  services to
      accommodate  such sales,  Seller agrees that Buyer shall have the right of
      first refusal to purchase any energy  proposed to be sold to a third party
      under this paragraph for use in Buyer's  service  territory.  Seller shall
      offer the  exercise  of this right to Buyer by delivery to Buyer of a copy
      of a firm offer to buy energy for use in Buyer's service territory,  prior
      to entry into any agreement for sale of energy for use in Buyer's  service
      territory. Buyer shall have ten business days after receipt of the copy of
      the firm offer to substitute itself for the proposed  purchaser under such
      firm offer.  If Buyer  elects to purchase  energy,  it may do so under the
      terms and conditions of the firm offer, except that the price shall be the
      time-differentiated  STEO  rate  in  effect  at the  time  the  energy  is
      delivered,  so that deliveries  during any On-Peak Hour shall be purchased
      at STEON and  deliveries  during any  Off-Peak  Hour shall be purchased at
      STEOFF.

6. The  Agreement  is amended by deleting  the first  paragraph of ARTICLE X and
substituting therefor the following:

            Seller  shall  during  the  term  of  this  Agreement  maintain  the
      Facility,  including  Seller's  Interconnection  Equipment and  protective
      relay  equipment,  in accordance with Prudent  Electrical  Practice.  With
      respect  to   scheduling   maintenance   of  the   Facility  and  Seller's
      Interconnection  Equipment,  Seller  shall  provide  to Buyer on the first
      business  day of  September  of each  year a list of  dates,  in  order of
      priority, in which Seller would like to schedule maintenance. For purposes
      of this  Agreement,  "business day" shall mean any day from Monday through
      Friday,  except for any legal holiday in the State of Maine, as determined
      pursuant to 4 M.R.S.A.  ss.  1051.  Within one month Seller and Buyer will
      agree  on  dates   for   maintenance   of  the   Facility   and   Seller's
      Interconnection  Equipment.  Seller shall  schedule all major  maintenance
      projects (projects  reasonably  expected to have a duration of longer than
      three (3) days)  between the dates of April 1 and June 15, and between the
      dates of  September  15 and November 30. If Seller and Buyer are unable to
      agree upon a date, or if the parties agree upon a date and Seller

                                      -6-

<PAGE>


      subsequently  fails to perform on the agreed  upon date,  without  Buyer's
      agreement,  Seller  shall lose the one percent  adjustment  for  scheduled
      maintenance for the Calendar Year in which such  maintenance was scheduled
      to  occur.  Buyer  shall  establish   reasonable   scheduled   maintenance
      guidelines  that set  forth  procedures  for  matters  such as the  timely
      communication  of  modification  by  Seller  of  previously   agreed  upon
      scheduled  maintenance dates and operating  parameters (e.g.,  ramp-up and
      ramp-down  periods) to be applied in determining  whether Seller performed
      on the  agreed  upon  date.  Seller  agrees  to  accept  Buyer's  existing
      scheduled maintenance guidelines for small power producers as reasonable.

7. The  Agreement is amended by adding the  following  paragraphs  to the end of
ARTICLE XIII:

            Beginning  in  Calendar  Year  1996,   notwithstanding  any  of  the
      foregoing,  if Seller  fails to deliver to the Point of Delivery (or to be
      deemed to have delivered  under the terms hereof) at least  15,000,000 kWh
      during  any  Calendar  Year,  Seller  will be  deemed  to have  materially
      breached this  Agreement and Buyer may terminate  this Agreement and shall
      not have any  further  liabilities  or  obligations  to Seller  under this
      Agreement.  The  15,000,000 kWh per Calendar Year figure shall be prorated
      on a daily  basis  during  any  partial  years.  In the  event  of a Force
      Majeure,  the  15,000,000  kWh per  Calendar  Year shall be prorated on an
      hourly  basis to account  for the period of time that the  Facility is not
      available.

            If Seller  breaches  this  Agreement by failure to deliver (or to be
      deemed to have  delivered  under the terms hereof) the minimum  15,000,000
      kWh per year and  Buyer  terminates  this  Agreement  on  account  of such
      failure, Buyer will be injured both by loss of an expected reliable source
      of energy and on account of the loss of value of a portion of the payments
      made in  connection  with the Capacity  Sales  Agreement  and the Capacity
      Purchase  Agreement.  The  amount  of such  injury  will be  difficult  to
      calculate  with  certainty  at the time of the  breach  and  difficult  to
      predict at the time of formation of this Third Amendment, given the length
      of the Term. Accordingly, the parties have agreed to liquidate the loss to
      Buyer arising out of such breach and  termination,  as follows:  upon such
      termination,  Seller  shall  pay to  Buyer  the  difference  between:  (a)
      Forty-Five  Million  Dollars  ($45,000,000),  and (b) the  product  of (i)
      $3,750,000  and (ii) the  number  of  completed  Calendar  Years  from and
      including 1996 to the date of termination of this Agreement.

            Notwithstanding  any provision of this Agreement,  no termination of
      this Agreement by Seller shall constitute a waiver or otherwise affect any
      statutory right (as existing at the time of termination) of Seller to sell
      or any statutory  obligation (as existing at the time of  termination)  of
      Buyer to negotiate a new  agreement  to purchase  capacity and energy from
      the Facility after such termination.

            Buyer  anticipates  that  Seller  will  deliver  to  Buyer  at least
      150,000,000  kWh of energy per Calendar year from the Facility  under this
      Agreement.  If energy  delivered  falls  substantially  below that amount,
      Buyer will be injured in an amount that is  difficult  to  calculate  with
      certainty at the time of breach and difficult to predict, given the length

                                      -7-

<PAGE>


      of the Term. Accordingly, the parties have agreed to liquidate the loss to
      Buyer  arising  out  of  substantial  under-deliveries  of  energy  in any
      Calendar  Year prior to January 1, 2007,  or during the partial  year from
      January 1, 2007, through May 31, 2007, as follows: If the amount of energy
      delivered  or  deemed  to be  delivered  by  Seller  to Buyer  under  this
      Agreement falls below  100,000,000 kWh in any Calendar Year after 1995 and
      before January 1, 2007, or if energy  delivered or deemed  delivered falls
      below 41,369,863 kWh between January 1 and May 31, 2007, then Seller shall
      pay  Buyer the sum of  $3,750,000.00  with  respect  to each year or final
      partial year when such shortfall occurs.

            Any  reference  in  this   Agreement  to  Seller's   performance  or
      nonperformance of delivery  obligations  established hereby at 100,000,000
      kWh and  15,000,000  kWh per Calendar  Year,  and  41,369,863  kWh between
      January  1 and May 31,  2007,  shall be  deemed  to  include  and refer to
      adjustments  of  such   performance   levels  by:  (a)  including  in  the
      computation  of total  deliveries  the  "deemed"  deliveries  for any Work
      Period  Curtailment under Article III, and (b) reducing the required level
      of  performance  pro rata for each hour of Force  Majeure  excuse  validly
      claimed under Article XIX. Such adjustments shall apply whether or not the
      provision  in  question   specifically  refers  to  prorations  or  deemed
      deliveries.

            In order to secure  Seller's  obligations  under this Article to pay
      liquidated  damages to Buyer,  Seller shall assure that a Qualified Letter
      of Credit is issued and  outstanding,  in an amount  equal to the  damages
      then  applicable on failure to deliver  15,000,000  kWh at all times until
      May 31, 2007 other than  following an  Expiration  Draw,  and at all times
      after  May 31,  2007  that a  dispute  exists  between  Buyer  and  Seller
      regarding  an attempt by Buyer to draw under an existing  letter of credit
      which attempt to draw occurred prior to May 31, 2007. For purposes of this
      paragraph,  a "Qualified  Letter of Credit"  shall mean a letter of credit
      issued by a financial institution meeting the following criteria:

            (i) if Internationale Nederlanden (U.S.) Capital Corporation ("ING")
            is the issuer, and if the Guaranty dated as of April 30, 1996 issued
            by ING  Capital  Holdings  to the Escrow  Agent with  respect to the
            Issuer's  obligations  remains  in  effect,  then a letter of credit
            shall be a  Qualified  Letter  of  Credit  so long as an ING  Credit
            Event, as hereinafter defined, has not occurred; and

            (ii) If any  other  financial  institution  having  an office in the
            United  States  where the letter of credit is payable is the issuer,
            then a letter of credit shall be a Qualified Letter of Credit if the
            long-term debt of the issuer (or of a bank holding company parent of
            the issuer) is rated not less than A by both  Moody's and Standard &
            Poor's.

If an issued and outstanding letter of credit ceased to be a Qualified Letter of
Credit on account of an adverse change in the financial condition of the issuer,
then Seller  shall  provide  alternative  credit  support  within 270 days after
demand by Buyer or such  shorter  time as  provided  in the  definition  of "ING
Credit  Event" set forth below.  If Seller shall fail to so provide  alternative
support,  then Buyer shall make all payments  otherwise due under this Agreement
to the Escrow Agent to be held under the same terms as  applicable  to cash held
following an Expiration Draw. If Seller subsequently provides alternative credit
support as provided  herein,  Buyer shall cease

                                      -8-

<PAGE>




making  payments  into escrow and any amounts held in escrow shall be dealt with
pursuant to the Escrow Agreements. Seller may provide alternative credit support
by using any of the following mechanisms:

            (i) provide a replacement Qualified Letter of Credit;

            (ii)  provide  a  confirming  letter  of  credit  from  a  financial
            institution  from  which a  letter  of  credit  would  constitute  a
            Qualified Letter of Credit; or

            (iii)  deposit  cash with the Escrow Agent in an amount equal to the
            outstanding letter of credit under the terms set forth in the Escrow
            Agreement, but without reference to the Issuer.

In the event a replacement  Qualified Letter of Credit or other alternate credit
support  is issued by an  entity  other  than  ING,  then  such  replacement  or
alternate  entity must also enter into agreements with the Escrow Agent,  Buyer,
Seller,  Capacity  Provider,  and the Note Purchasers in substantially  the same
form and content as the  agreements  with such  parties  entered  into by ING in
connection with the Capacity Sale to CL Power Sales One contemplated hereunder.

The Escrow Agent shall surrender the outstanding letter of credit upon tender of
a replacement  Qualified  Letter of Credit or other  alternative  credit support
that satisfies the requirements set forth above.

For  purpose of this  Article,  an "ING  Credit  Event"  shall be deemed to have
occurred if any of the following occurs and is continuing:

            (i)  failure by ING or  Internationale  Nederlanden  (U.S.)  Capital
            Holdings  Corporation  ("ING  Capital  Holdings") to pay a letter of
            credit  draft  or  guarantee   demand  in  an  amount  greater  than
            $10,000,000,  unless  such draft or demand is the  subject of a bona
            fide dispute (in such event, Seller shall provide alternative credit
            support within 120 days after demand by Buyer);

            (ii) the rating assigned to the unsecured  senior debt securities of
            the  direct or  indirect  banking  institution  parent of ING having
            publicly  rated debt,  exclusive of ratings  assigned to debt issues
            that are based  primarily on  collateral  adequacy and not on issuer
            creditworthiness   (i.e.,   non-recourse   asset-backed   securities
            ratings) (the "ING Bank Debt Rating") is downgraded to A2/P2 AND has
            a long-term rating less than A assigned by both Moody's and Standard
            & Poor's (in such event,  Seller shall  provide  alternative  credit
            support within 180 days after demand by Buyer);

            (iii) the ING Bank Debt Rating is  downgraded to either A2/P2 (i.e.,
            both short term ratings are reduced) OR has a long-term  rating less
            than A from either Moody's or Standard & Poor's (i.e., either of the
            long-term  ratings  is less  than A) (in such  event,  Seller  shall
            provide  alternative  credit support within 270 days after demand by
            Buyer); or

                                      -9-

<PAGE>

            (iv) ING notifies Buyer that the Revolving Credit Facility Agreement
            dated July 13, 1993 provided ING Bank N.V. to the direct or indirect
            U.S.  parent ING either has a remaining  term of less than two years
            or the aggregate  commitment  thereunder is reduced below $4 billion
            (in such event,  Seller shall  provide  alternative  credit  support
            within 270 days after demand by Buyer).

If more than one ING Credit Event has  occurred,  the shortest  applicable  time
frame for providing  alternative  credit support shall govern.  If an ING Credit
Event is triggered by an ING Bank Debt Rating  reduction  that is later restored
before the time for credit support replacement has expired,  then the ING Credit
Event shall be deemed  "cured".  If ING or ING Capital  Holdings shall receive a
long-term  debt  rating of not less  than A from both  Moody's  and  Standard  &
Poor's,  then the ING Credit  Events set forth above  shall no longer  apply and
Seller shall be required to provide  alternative  credit support within 270 days
after  either of such  ratings  is  reduced  below A. If the dual "A"  rating is
received by ING,  then the Guaranty by ING Capital  Holdings may be canceled and
the  Letter  of  Credit  issued by ING will be  deemed  Qualified  without  such
Guaranty.

            If the  terms  of a  Qualified  Letter  of  Credit  require  Buyer's
certification  of annual  levels  of  electricity  production  from  Seller  (or
certification  that the  100,000,000  kWh  requirement has been met), then Buyer
agrees to review promptly a draft  certificate  prepared by Seller. In the event
that Seller  executes and delivers such a certificate but Buyer refuses to do so
for more than 30 days, the dispute will be resolved by arbitration hereunder. If
Seller  prevails  in such  arbitration  Buyer  will be liable to Seller  for the
incremental  cost of the Letter of Credit caused by Buyer's  wrongful refusal to
certify production.

            In order to further  secure the payment of  liquidated  damages from
Seller to Buyer,  Seller shall grant to Buyer a junior mortgage on the Facility.
Such junior  mortgage  shall be expressly  subordinate to the liens of ING or of
any other lender which is the supplier of a Qualified Letter of Credit and liens
securing the working capital line or any other financing obtained by Seller from
time to time, up to the total  outstanding of the stated amount of the Letter of
Credit at such time, plus $15 million. Such mortgage shall include a requirement
to name Buyer as a mortgagee  under any property or casualty policy insuring the
Facility  and  shall  also  include  an  express  assignment  of any  rights  to
reimbursement  for any damage or destruction to the Facility,  whether by way of
compensation for  governmental  taking, a recovery in tort, or any other form of
such  compensation;  provided that such assignment  shall be subordinated to the
same extent as the mortgage.

8. The  Agreement  is amended by adding the  following  paragraph to then end of
Article XVIII:

            Notwithstanding  any of  the  foregoing,  Seller  shall  obtain  and
      maintain with respect to the Facility  insurance  against perils presently
      covered  under  existing  policies  with  existing  coverage and deduction
      amounts  (including,  without  limitation,   machinery  breakdown,  flood,
      explosion,  fire,  lightning,  riot,  civil commotion,  smoke,  vandalism,
      malicious acts,  wind or hail) in amounts  necessary to repair any insured
      damage to the Facility (including complete reconstruction),  together with
      such other  insurance as may reasonably be necessary in view of the nature
      and business of the  Facility,  in each case,  to

                                      -10-

<PAGE>

      the extent available at commercially  reasonable rates. Insurance required
      or acceptable to the lender under the  reimbursement  agreement related to
      any Qualified Letter of Credit shall conclusively be deemed to satisfy the
      foregoing  requirement.  Seller shall provide Buyer with  certificates  of
      insurance  certifying the issuance of such insurance,  which  certificates
      shall provide for not less than ten (10) days' notice of  cancellation  to
      the  certificate  holder.  If  Seller  shall  fail to  maintain  insurance
      required  under this paragraph for more than ninety (90) days after notice
      from Buyer demanding the replacement of expired or canceled coverage, then
      Buyer may (bur shall not have the obligation to) acquire such insurance on
      its own,  and deduct the amount paid  therefor  from the amount  otherwise
      payable to Seller under this Agreement.

9. The  Agreement  is  amended  by  deleting  Article  XIX in its  entirety  and
replacing it with the following new Article XIX:


                           ARTICLE XIX: FORCE MAJEURE

            As used in this Agreement, "Force Majeure" means causes that are not
      preventable by reasonable  diligence and beyond the reasonable  control of
      the party claiming Force Majeure. It shall include, without limitation:

            (a)   failure  or  interruption of services due to  causes  beyond a
                  party's control;

            (b)   sabotage, acts of public enemy,  insurrections,  wars (whether
                  declared or otherwise), riots, vandalism;

            (c)   strikes,  lockouts,  boycotts,  sit-ins,  slowdowns,  or other
                  labor  disturbances,  disputes or unrest (it being agreed that
                  labor  disturbances,  disputes  or  unrest  resulting  from an
                  employer's  exercise  of rights  under or in  connection  with
                  labor  agreement  or state or  federal  labor law shall not be
                  deemed to be within the reasonable control of the employer);

            (d)   acts  of  God,  droughts,   floods,   hurricanes,   tornadoes,
                  cyclones, or other storms, earthquakes, epidemics;

            (e)   accidents  not  preventable  by reasonable  diligence,  fires,
                  explosions,  lightning strikes, breakdowns of or damage to the
                  plant,  equipment or Facility (other than breakdowns or damage
                  caused by failure to conduct  maintenance  procedures required
                  under this Agreement);

            (f)   damage to roadways, interruptions to transportation, embargoes
                  or blockades;

            (g)   orders or acts of civil or military authority,  including, but
                  not  limited  to  law,  regulation,   rule  or  order  of  any
                  governmental  authority,  or other  causes of similar  nature,
                  which wholly or partially  prevent the delivering,  processing
                  or  burning  of  garbage,   the   generating   or  selling  of
                  electricity  or capacity to any person by the  Facility or the
                  disposal of ash, residue or

                                      -11-

<PAGE>


                  other by-products from the Facility (provided,  however,  that
                  such orders or acts shall not  constitute  a Force  Majeure to
                  the extent that they merely  increase the cost of  performance
                  or  require a change in the  method of  performance  (E.G.,  a
                  change of fuel mix),  but do not delay or prevent  performance
                  hereunder);

            (h)   appropriation  or diversion of electricity by rule or order of
                  any governmental  authority having jurisdiction  thereof,  and
                  failure to deliver or accept  delivery of  electricity  during
                  such time as a party may be obliged to temporarily discontinue
                  delivering  or accepting  delivery of the  electricity  hereby
                  contracted  for on  account  of System  Emergencies  or System
                  Pre-Emergencies.

            If either party is rendered  wholly or partly  unable to perform its
      obligations  under  this  Agreement  because  of Force  Majeure as defined
      above,  that party shall be excused from whatever  performance is affected
      by the Force Majeure to the extent so affected provided that:

            (A)   the  non-performing  party shall promptly give the other party
                  written notice  describing the  particulars of the occurrence.
                  If such notice is given more than ten (10)  working days after
                  the occurrence of Force Majeure,  then the excuse  provided by
                  such Force Majeure  shall not apply to the period  between the
                  eleventh working day following the occurrence and the date the
                  notice is given;

            (B)   the suspension of performance be of no greater scope and of no
                  longer  duration  than is  reasonably  required  by the  Force
                  Majeure;

            (C)   no   obligations  of  either  party  which  arose  before  the
                  occurrence causing the suspension of performance be excused as
                  a result of the occurrence;

            (D)   the non-performing party uses reasonable efforts to remedy its
                  inability   to  perform.   If  Seller  fails  to  pursue  such
                  reasonable  efforts  within  thirty (30) days after  demand by
                  Buyer,  then the Force  Majeure shall be deemed to have ceased
                  until such time as reasonable efforts begin.

            Notwithstanding  anything  contained  in  this  section,  no  excuse
            arising  out of a Force  Majeure  event or series of  related  Force
            Majeure  events  shall  continue  for a period  of  greater  than 18
            months,  unless:  (i) prior to the end of such  18-month  period the
            party claiming Force Majeure shall inform the other party whether or
            not  such  Force  Majeure  is  permanent  (in  which  case  the next
            paragraph  shall  apply),  and (ii) if the Force Majeure is declared
            not permanent, the party claiming Force Majeure shall provide to the
            other party,  concurrent with the foregoing  notice,  detailed plans
            and schedules to cure the Force Majeure  event,  including,  without
            limitation:  (a) any  regulatory  or  permitting  requirements,  (b)
            detailed  plans and  schedules  for any  necessary  construction  or
            procurements and (c) cost,  expense and financial data sufficient to
            reasonably demonstrate that the cure of

                                      -12-

<PAGE>

            the Force  Majeure  will occur as  proposed.  If the party  claiming
            Force  Majeure  fails  substantially  to  conform  to such plans and
            schedules,  the other party may declare the Force Majeure  excuse to
            be ended and the other  party  shall be  obligated  to  perform  all
            obligations under this Agreement.

            In the event Seller  declares that it has been rendered  permanently
            incapable of performing  its  obligations  under this Agreement as a
            result of a Force Majeure pursuant to the foregoing paragraph,  then
            Buyer shall have the right  immediately to terminate this Agreement,
            neither party shall have any further  liabilities  or obligations to
            the other,  including any liability for liquidated  damages pursuant
            to Article XIII and Buyer shall  instruct the Escrow Agent to return
            any  Qualified  Letter of Credit or any  proceeds of any  Expiration
            Draw to the Issuer;  PROVIDED,  HOWEVER,  that if the Force  Majeure
            event in question  was or should have been  insured by Seller  under
            the terms of this  Agreement  or if the event in  question  entitles
            Seller to receive compensation,  then Seller shall have liability to
            Buyer  for  liquidated  damages  upon  termination  pursuant  to the
            provisions of Article XIII hereof to the extent of the lesser of the
            amount of such liquidated  damages and the proceeds of such required
            insurance or  compensation  remaining  after discharge of the senior
            obligations described in the last paragraph of Article XIII.

10. The  Agreement  is amended by adding  after  ARTICLE XXV the  following  new
ARTICLE XXVI:


                            ARTICLE XXVI: ARBITRATION

      (a) Any  controversy or claim between or among the parties  arising out of
      or relating to this  Agreement or any  agreement or  instruments  relating
      hereto or delivered in connection herewith,  and including but not limited
      to a claim that a proposed draw under the letter of credit  referred to in
      Article  XIII is  improper  and/or  a claim  based on or  arising  from an
      alleged tort,  shall at the written  request of any party be determined by
      arbitration  in accordance  with the Commercial  Arbitration  Rules of the
      American  Arbitration  Association.  The arbitration  proceedings shall be
      conducted   in   Portland,   Maine.   The   arbitrators   shall  have  the
      qualifications  set forth in  subparagraph  (b)  hereto.  All  statutes of
      limitations  which would  otherwise  be  applicable  in a judicial  action
      brought by a party shall apply to any arbitration proceeding hereunder.

      (b) The arbitrators  shall be selected in accordance with the rules of the
      American   Arbitration   Association   from  panels   maintained   by  the
      Association. The panel shall consist of three arbitrators, one selected by
      each party and the third  selected by the two party  appointees.  At least
      one of the arbitrators must have at least 15 years experience in the power
      generation industry, including experience in power supply management. Each
      party shall bear its own costs arising from the  arbitration,  which costs
      shall include attorneys' fees, administrative fees, arbitrators' fees, and
      court  costs.  The  arbitrators  also may grant  provisional  or ancillary
      remedies  such as, for  example,  injunctive  relief,  attachment,  or the
      appointment of a receiver,  either during the pendency of the  arbitration
      or as part of the arbitration.

                                      -13-

<PAGE>

      (c)  Notwithstanding the applicability of other law to any other provision
      of this Agreement,  the Federal  Arbitration  Act, 9 U.S.C. ss. 1 ET Seq.,
      shall apply to the  construction  and  interpretation  of this arbitration
      paragraph.

      (d) In any demand or claim for  arbitration  relating to a matter in which
      an award in excess of  $100,000  is or may be  sought,  the party  seeking
      arbitration  shall set forth in detail the basis of its claim in a written
      demand for  arbitration.  The arbitrator shall establish a period prior to
      the  arbitration  date  when  each  party  shall  have the right to obtain
      discovery  from the other party that would  ordinarily be available  under
      the civil rules  applicable in the Maine Superior  Court.  Similarly,  any
      party  proposing to present  expert  testimony in the  arbitration  shall,
      within the reasonable time period established by the arbitrators,  provide
      the other party with a detailed written summary of the proposed  testimony
      of such expert.

      (e)  Buyer  and  Seller  each  recognize  the  benefits  of quick  dispute
      resolution.  It is  the  intent  of  the  parties  that  each  arbitration
      proceeding be concluded within three (3) months of the written request for
      arbitration.

      (f) Any award,  order or judgment  pursuant to such  arbitration  shall be
      deemed final and may be entered and enforced in any state or federal court
      of competent jurisdiction. Each party agrees to submit to the jurisdiction
      of any such court for purposes of the enforcement of any such award, order
      or judgment.

11. The Agreement is amended by adding a new Article XXVII, as follows:


                      ARTICLE XXVII: PREPAYMENT OF CAPACITY

            In the event that Buyer exercises its rights under section 3.2(h) of
      that certain  Capacity  Sales  Agreement  between buyer and CL Power Sales
      One,  L.L.C.  ("CL One") dated as of November 6, 1995 (the "Capacity Sales
      Agreement")  to prepay in full its  obligations  to make monthly  capacity
      payments, THEN:

            (a) Buyer shall  undertake to make payments to Maine Energy equal to
            the Quarterly Payments and LC Fee Reimbursement Payments at the time
            and in the manner required at the time of such undertaking  pursuant
            to the Capacity Purchase Agreement;

            (b) Seller shall deliver  Capacity for the Facility to Buyer through
            May 31, 2007,  under this  Agreement,  without further charge (other
            than  payment  of  the  aforesaid  Quarterly  Payments  and  LC  Fee
            Reimbursement Payments);

            (c) Seller  shall  negotiate  in good  faith  with  Buyer  regarding
            replacement of the Letter of Credit with a mortgage and  termination
            of the LC Fee Reimbursement Payments;

            (d) Seller shall consent to the termination of the Capacity Purchase
            Agreement by CL One;

                                      -14-

<PAGE>


            (e) Seller shall  cooperate  with buyer in making any changes to the
            Escrow  Agreement  necessary to reflect the  termination of CL One's
            interest.

12. The Agreement is further  amended by replacing  Attachment II: Rate Schedule
with the Attachment II that is affixed to this Amendment.

13.  The rate per kWh  payable to Seller  is, on the date  hereof,  subject to a
scheduled  maintenance  rate  adjustment  under  Article X of the  Agreement  on
account of alleged  failure to perform  schedule  maintenance on the agreed upon
date. Seller dispute the validity of this adjustment. By execution of this Third
Amendment,  the parties agree that the one percent (1%)  adjustment  relating to
scheduled  maintenance  occurring  or  scheduled  to occur  prior to the date of
execution  hereof  shall  apply to  deliveries  occurring  from  January 1, 1995
through  November 5, 1995.  Seller waives any dispute as to the  correctness  of
such  adjustment  and Buyer waives any claim for any  additional  adjustment  on
account of  scheduled  maintenance  occurring or scheduled to occur prior to the
date of execution hereof.

14. In all other respects the Agreement shall remain in full force and effect.


                                      -15-

<PAGE>




            IN WITNESS HEREOF, the parties hereto have executed this instrument.

      WITNESS:                       CENTRAL MAINE POWER COMPANY

                                     By: /s/ Frederick Woodruff
                                        -----------------------------
                                         Frederick Woodruff
                                     Its: Managing Director, Power
                                     Supply

                                     Dated:____________________________


                                     MAINE ENERGY RECOVERY COMPANY
                                     LIMITED PARTNERSHIP
                                     A Maine Limited Partnership
                                     By: Kuhr Technologies, Inc.
                                     Its   General Partner


      /s/ Robert E. Wetzel           By:  /s/ Martin J. Sergi
      ----------------------------        ------------------------------
      Witness                             Its chief Operating Officer

                                     Dated:____________________________



                                      -16-

<PAGE>




                                  ATTACHMENT II

                                  RATE SCHEDULE


               Total            Energy           Capacity
               Rate             Rate              Rate

               (cent)kWh       (cent)kWh        (cent)kWh

1995**          15.71           7.18              8.53
1996            16.59           7.18              9.41
1997            17.76           7.36             10.40
1998            16.63           7.54              9.09
1999            16.63           7.73              8.90
2000            16.63           7.92              8.71
2001            16.63           8.12              8.51
2002            16.63           8.32              8.31
2003            16.88           8.53              8.35
2004            17.13           8.74              8.39
2005            17.39           8.96              8.43
2006            17.65           9.18              8.47
2007*           17.92           9.41              8.51


* Rates shown for the year 2007 are for the period  January 1, 2007  through May
31, 2007. Rates for the remainder of 2007 will be calculated as set forth below.

      For the period June 1, 2007 through December 31, 2007 during each Calendar
Year from 2008 through 2012, the rate paid for deliveries  shall be Market Rate,
as defined in Appendix A hereto.

      All rates either listed above or  calculated  using  methodologies  listed
above are deemed to include upward  adjustments for maintenance  scheduling (1%)
and savings resulting from variations in line losses (2.89258%), as described in
ss.  4(C)(7)(d) and (e) of the Maine Public Utilities  Commission's  Chapter 360
Rules.

**Rates shown for 1995 apply from November 7, 1995, to December 31, 1995.



                                      -17-

<PAGE>




                                  APPENDIX "A"

"MARKET RATE" is the average  monthly market price for capacity and energy ($/kw
or (cent)/kWh) delivered in wholesale transactions in New England for a block of
energy  and  capacity  similar  in size and  nature to a 20,000 KW  resource  or
purchase  capable of  producing  150,000,000  kWh  annually  (i.e.,  a base load
resource).  The average  monthly  market price will be determined in (cent)/kWh,
using a  methodology  that  incorporates  reference(s)  to  generally  accepted,
publicly  available   indicators  of  the  components  of  market  price.  These
components  shall  include at a minimum  both fixed and variable  operation  and
maintenance  costs  (including  all ash disposal or spent fuel  disposal  costs,
environmental  compliance costs, start up and regulatory compliance costs), fuel
costs,  capital costs, and general and administrative  costs. As necessary,  the
methodology will convert the components to (cent)/kWh.  Further, the methodology
and reference(s)  utilized in the monthly determination will be agreed on by and
be reasonably  acceptable to Buyer and Seller. The Market Rate for a month shall
to the extent  possible be the average  monthly  market price for the particular
month in which the  deliveries to be paid for occur,  but if data for that month
is not available in time for the monthly  billing  statement  preparation  under
Article IV but is expected to be available later, payment will be made using the
Market  Rate for the  previous  month,  until the  Market  Rate for the month in
question is calculated. A "true up" to adjust for any differences in the interim
Market Rate paid and the Market Rate finally calculated will be made in the next
monthly  billing  period  after the  Market  Rate for the month in  question  is
finally  calculated.  It is the intent of the parties that Seller will be timely
paid each month  even  though  some  component  of the Market  Rate has not been
determined.

If generally  accepted,  publicly  available  indicators of components of market
price become unavailable for more than three consecutive months and are expected
to continue to be  unavailable  for the  foreseeable  future,  or if the parties
cannot agree on market price information  sources,  then the attached Proxy Unit
Calculation  Methodology  will be utilized  until such time as agreeable  market
reference(s) for future months become available.

Should  any part of the  Market  Rate not be agreed to by Buyer and Seller or if
the Buyer and  Seller  cannot  agree on the Proxy  Unit  Calculation,  then such
disagreement  shall be submitted to arbitration under the provisions hereof, for
resolution in accordance  with the  standards  for  determining  Market Rate set
forth herein. It is the express intent of the parties that should they be unable
to  agree  on all or any  part of the  Market  Rate,  they  intend  that  Seller
nevertheless  be  paid a  reasonable  price  for  its  energy  and  capacity  in
accordance  with  the  concepts  set  forth  in Maine  Uniform  Commercial  Code
ss.2-305(1). The parties intend to be bound by the terms hereof even if they are
unable to reach agreement on any applicable Market Rate for any month during the
term hereof,  and desire that the Market Rate be set in the absence of agreement
by arbitration in accordance with the arbitration provisions hereof.

                                      -18-

<PAGE>




                     PROXY UNIT COST CALCULATION METHODOLOGY

            Total Proxy Unit costs will be the sum of the following 3 costs:
                  (1)   Capital Costs
                  (2)   Operation & Maintenance ("O&M") Costs
                  (3)   Energy Costs

      (1)   Capital Costs will be calculated in $/mwh by  multiplying  the total
            installed  costs  of a Gas  Fired  Combined  Cycle  unit  times  the
            Economic  Carrying  Charge Rate of a facility  with a 20 year Book &
            Tax life and a cost of capital  equal to the U.S.  Prime Rate plus 3
            percentage points, as follows:


  CAPITAL COSTS           Total Unit                    Economic
        in         =    Installed Cost   *          Carrying Charge
      $/kWyr                in $/kW                       Rate
                                               (Redetermined Annually for
                                                each year when the
                                                computation is made)

      (2)(a) Fixed O&M in $/kWyr will be added to the above capital costs in
             $/kWyr

             For total fixed costs           Capital Costs in $/kWyr
                                           +Fixed O&M cost in $/kWyr
                                          ----------------------------
                                          Total fixed costs in $/kWyr


      (2)(b) Variable O&M costs in $/Mwyr  will be added to fuel costs in $/Mwyr
             accordingly.


      (3)    Energy Price  will be  computed  by using  the  delivered  price of
             Natural Gas to Maine in $/mCF  divided  by the  Heating  Content of
             NaturalGas in mBTU/MCF, as follows:

              Energy Price = ($/MCF) = $/mBTU
              ----------------------
                     mBTU
                     ----
                     MCF

      The Energy Costs will be  calculated  by  multiplying  the Energy Price in
      $/mBTU by an efficiency  factor of heat rate  associated with the combined
      cycle technology  appropriate at that time. As way of example, a heat rate
      of 8,500 BUT/kWh is used for purpose of the example below.

                                                                  6
      Energy Costs = ($/mBTU)(8500 BTU/kWh)(1000 kWh/mwh)(1mBTU/10 BTU)=$/mwh

                                      -19-

