Exhibit 10.16.1 NRG GENERATING (NEWARK) COGENERATION INC./ STEWART & STEVENSON OPERATIONS, INC. OPERATING AND MAINTENANCE AGREEMENT This System Operating and Maintenance Agreement ("Agreement") is made as of the 1st day of May 1996 between NRG...

Exhibit 10.16.1

NRG GENERATING (NEWARK) COGENERATION INC./
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ OPERATIONS, INC.
OPERATING AND MAINTENANCE AGREEMENT

This System Operating and Maintenance Agreement ("Agreement") is made as of
the 1st day of May 1996 between NRG Generating (Newark) Cogeneration Inc.,
a Delaware corporation ("Owner"), and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Operations, Inc.,
a Delaware corporation ("Operator"), having its principal place of business
at Houston, Texas, whose obligations hereunder shall be fully guaranteed by
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ SERVICES, INC. ("SSSI"), pursuant to a Guarantee in the
form of Appendix I.

Owner (formerly named "O'Brien (Newark) Cogeneration, Inc.") and Operator
entered into an Operation & Maintenance Contract dated as of April 1, 1994
with respect to the System (as defined below), a copy of which is attached
as Appendix II (the "Existing O&M Agreement").

In connection with the bankruptcy of Owner's parent, the existing
Electricity Purchase Agreement between Owner and Jersey Central Power Light
Company relating to the System has been amended with the Third Amendment to
the Power Purchase Agreement (as defined below).

Owner and Operator have renegotiated the terms and conditions of the
Existing O&M Agreement and desire to replace it with this Agreement
effective upon the Effective Date.

In consideration of the foregoing and the mutual covenants and benefits
contained herein, the parties hereby agree as follow:

I. DEFINITIONS

In this Agreement the following terms have the associated meaning:

1 . Affiliate - With reference to a specified person, any other person or
entity, directly or indirectly through one or more intermediaries,
which controls, is controlled by, or is under common control with,
such person. A person or entity is controlled by another person or
entity if the second person or entity holds a sufficient number of
securities in the first person or entity to elect a majority of the
directors of the first person or entity.

2. Agent - The agent for the lenders under the Financing Agreements.

3. Amended Power Purchase Agreement - The Amended Power Purchase
Agreement for Purchase and Sale of Electric Power, dated April 30,
1996, between Owner and Jersey Central Power & Light, a copy of which
Is attached as Appendix III hereto.

4. Annual Operating Plan and Budget - As set forth In Article VI, Section
6.

5. Bonus - As set forth in Exhibit A.

6. Change - Shall mean any of the following that are proposed by one
party to the other by a written notice to the other party: (i) a
change in the then current Annual Operating Plan and Budget: (ii) a
change in connection with the services to be provided by Operator
hereunder (iii) a change made necessary to avoid injury to persons or
property or to mitigate losses as a result of the occurrence of an
Emergency; and (iv) a change enabling Operator to accomplish or
contract for a Major System Repair.

7. Change Order - Shall mean the written approval of a proposed Change
and the related Change Order Budget Statement by Operator and Owner as
further provided for In Article VI, Section 7(b).

8. Change Order Budget Statement - Shall mean the statement prepared by
Operator pursuant to Article VI, Section 7(b) with respect to a
proposed Change setting forth In reasonable detail: (i) the direct
cost or savings to Owner of the proposed Change; (ii) the indirect
costs or savings of the proposed Change, including without limitation,
any loss of electricity revenues or steam host revenues and any
increased insurance, operating. maintenance or other costs during or
following the implementation of the proposed Change; (iii) changes in
the operating efficiency of the System; and (iv) any other material
effect on the operation, maintenance, efficiency or profitability of
the System or the provision of the services hereunder.

9. Contract Year - As set forth in the Amended and Restated Power
Purchase Agreement.

10. Effective Date - May 1, 1996.

11. Emergency - Any event or occurrence which in the judgment of Operator
or Owner, as the case may be, requires immediate action and which
constitutes a serious hazard to the safety of persons or property or
may materially Interfere with the safe, economical, lawful or
environmentally sound operation of the System.

12. Event of Default - As set forth in Article XII.

13. Existing O&M Agreement - As set forth in the Recitals.

14. Expenses - As set forth in Article VI, Section 2.

15. Financing Agreements - Any loan, lease financing, security, of related
agreements entered into at any time by and among owner and the lending
institutions providing financing for the System.

16. Force Majeure - Unforeseeable causes beyond the reasonable control of
and without the fault or negligence of the party claiming Force
Majeure, including but not limited to acts of God, strike, flood,
earthquake, storm, fire. lightning. epidemic, war, riot, civil
disturbance, sabotage, change in low or applicable regulation
subsequent to the date thereof and action or inaction by any federal,
state or local legislative, executive, administrative or judicial
agency or body which, in any of the foregoing cases, by exercise of
due foresight such party could not reasonably have been expected to
avoid, and which by the exercise of due diligence, it is unable to
overcome.

17. Legal and Contractual Requirements - All:

a. Laws, permits, approvals, regulations or orders of governmental
authorities applicable to the Amended and Restated Power Purchase
Agreement, the System. Owner's obligations under this Agreement
as owner of the System and Operator's scope of work hereunder;

b. Provisions of the System Contracts;

c. Agreements, warranties and specifications of Operator's or
Owner's suppliers or vendors; and

d. Operating and maintenance manuals and procedures furnished
by Owner applicable to the System or the components thereof (such
operating manuals to reflect Sound Independent Power Industry
Practice).

l8. Liquidated Damages -As set forth in Exhibit A.

19. Major System Repair

The inspection, overhaul, repair or replacement of any piece of
equipment needed to operate the System where such inspection,
overhaul, repair or replacement is the result of: (i) an unscheduled
breakdown, repair, or failure of such equipment or (ii) a scheduled
inspection, overhaul, repair or replacement of such equipment (union
the inspection, overhaul, repair or replacement has been incorporated
into the Annual Operating Plan and Budget) and further that such
inspection, overhaul, repair or replacement shall have a cost in
excess of $10,000, which includes labor and material costs, and shall
be adjusted each year by the increase or decrease in the Producer
Price Index. Equipment shall include the gas turbines, the
generators, boilers, heat steam recovery generators, chillers, load
gears, exhaust ducting, emissions equipment. water and waste water
treatment, fuel treatment facilities and interconnection facilities;
provided, however, that a Major System Repair shall not include the
replacement of accessories, equipment and consumables required in the
ordinary course of Routine Maintenance and preventative maintenance of
the System reflecting Sound Independent Power Industry Practice.

20. Operating Fee - As set forth in Article VI Section 1.

21. Owner's Plan of Operation - Owner's instructions to Operator as to the
desired electricity and/for thermal energy production schedule and
other operating and maintenance objectives.

22. Owner's Representative - As set forth in Article V. Section 1 (a).

23. Producer Price Index - The U.S. Producer Price Index for All Item, as
currently published in the United States Department of Labor Bureau of
Labor Statistic's monthly publication, PPI Detailed Report or any
successor publication of such information, or if such index is no
longer published or the method of computation thereof is substantially
modified, a mutually agreeable alternative index.

24. Proprietary Information - All financial, technical and operating
information which the parties, directly or indirectly, acquire from
each other, and any other information which a party expressly
designates in writing to be confidential. However, Proprietary
Information shall exclude information failing into any of the
following categories

a. Information that, at the time of disclosure thereof, is in the
public domain;

b. Information that, after disclosure thereof, enters the public
domain other than by breach of this Agreement;

c. Information that prior to disclosure thereof, was already in the
recipient's possession, either without limitation on disclosure
to others or subsequently becoming free of such limitation;

d. Information obtained by the recipient from a third party having
an independent right to disclose such information;

e. Information that is available by independent research without use
of or access to the Proprietary Information acquired from the
other party; and

f. Information that a party is required by low or governmental
action to disclose, provided the disclosing party notifies the
party from whom the information originated in advance and gives
it the opportunity to resist the order.

25. Routine Maintenance - Those activities including the replacement of
accessories, equipment, and consumables required in the ordinary
course of routine and preventative maintenance of the System and
System site in accordance with Sound Independent Power Industry
Practice.

26. Sound Independent Power Industry Practice - Those prudent practices
and methods in effect at the time of performance that am customarily
followed by operators of similarly situated plants and equipment.

27. System - Owner's properties, plant and equipment located in Newark,
New Jersey, including a single gas turbine combined cycle generating
station with a nominal capacity of 52 megawatts, more fully defined in
Exhibit B.

28. System Contracts - Contracts and agreements to which Owner is a party
(including, without limitation, insurance policies) relating to the
operation and maintenance of the System, set forth an Exhibit C, which
Exhibit shall be amended by Owner to provide a more comprehensive list
on or before June 15, 1996.

II. ENGAGEMENT OF OPERATOR

1. Effective on the Effective Date, Owner engages Operator to operate and
maintain the System and perform certain duties, all as hereinafter set
forth in this Agreement, and Operator accepts such engagement to
operate and maintain the System and perform the duties specified in
this Agreement in accordance with its terms and conditions.

2. All operating and management personnel involved in the operation and
maintenance of the System shall be employees of Operator or its
Affiliates and shall not for any purposes be deemed employees of
Owner.

III. TERM

The term of this Agreement shall become effective upon the Effective Date
and expire on the sixth (6th) anniversary of the Effective Date, unless
terminated earlier in accordance with Article XII of this Agreement.

IV. OPERATING AND MAINTENANCE DUTIES OF OPERATOR

1. Subject to the terms of this Agreement Operator shall operate and
maintain the System and shall control the details and means of
performing its obligations hereunder.

2. For the period prior to and including the Effective Date, Operator
shall assist Owner in preparing the System for operation under the
Amended Power Purchase Agreement. These services will include but not
be limited to:

a. Preparing a plan and schedule to staff the System;

b. Recruiting and training the staff which will operate and maintain
the System;

c. Responding, in a timely manner, to Owners requests for
information;

d. Procuring, as agent for Owner, replacement of stock of
consumables, spare parts, tools, and supplies in accordance with
the Annual Operating Plan and Budget;

e. Appointing a plant manager (subject to Owner's approval) who
shall supervise the performance of Operators employees at the
System site;

f. Reviewing plans, specifications and drawings of machinery and
equipment layouts and commenting to Owner thereon with regard to
matters affecting operation and maintenance;

g. Observing and receiving training and instructions from Owner,
such training and instructions to be in accordance with Sound
Independent Power Industry Practice;

h. Performing for Owner such other services as may from time to time
be reasonably requested or are reasonably necessary or
appropriate in connection with the operation and maintenance of
the System; and

i. Reporting to and consulting with Owner about the operation of the
System on a scheduled basis, as reasonably requested by Owner.

Such services shall be provided in a manner consistent with all Legal and
Contractual Requirements, Sound Independent Power Industry Practice and the
Annual Operating Plan and Budget.

3. All full time personnel whom Operator will provide for the operation
and maintenance of the System shall be at the site and available full
time for training and to perform services to support System operation
and maintenance as required by the staffing plan to be developed by
Operator and approved by Owner.

4. A written management program shall be developed by operator for
approval by Owner to ensure optimal performance, responsiveness, and
cost-effectiveness in the operation and maintenance of the System.
The program shall include provisions regarding:

a. Budget tracking, analysis and adjustments;

b. Personnel policies, including policies regarding payroll,
compensation, pensions and other benefits;

c. Training;

d. Purchasing and inventory control;

e. A System safety and health program which will include procedures
and a manual;

f. An employee job-site handbook for Operator's employees operating
and maintaining the System;

g. A maintenance planning and scheduling system; and

h. A system for maintaining an inventory of consumables, spare
parts, tools and supplies.

5. Subsequent to the Effective Date, Operator shall provide all
operations and maintenance services necessary to efficiently operate
and maintain the System, including but not limited to performing the
following operating and maintenance services:

a. Operating and maintaining the System in compliance with all Legal
and Contractual Requirements, Sound Independent Power Industry
Practice and the Annual Operating Plan and Budget;

b. Obtaining and maintaining in effect all licenses and permits
required by law to be obtained and maintained in Operator's name
and assisting Owner in obtaining and renewing all licenses and
permits required by low to be obtained and maintained by Owner or
in Owners name;

c. Paying all employees of itself and its Affiliates, agents and
subcontractors promptly and filing all reports and remitting all
payments required under labor statutes to the appropriate
governmental authorities, as the obligations arise:

d. Conducting the operations and maintenance of the System
including, but not limited to. entering into contracts with third
parties as agent for Owner (subject to Owner's approval if not in
the ordinary course of business);

e. Employing, and ensuring adequate training of, Operator employees
and employees of its Affiliates (duly licensed where required by
statute or regulation) for the operation and maintenance of the
System consistent with Sound Independent Power Industry Practice,
and planning and administering all matters pertaining to employee
relations, salaries, wages, working conditions, hours of work,
termination of employment, employee benefits, employee staffing.
safety and related matters pertaining to such employees, and
maintaining records with respect to all such matters;

f. Monitoring, preparing and maintaining records of the operations
and maintenance aspects of the System (including records of
financial, business, and sales tax aspects of the System) in such
form and covering such matters as Owner may reasonably request,
consistent with Sound Independent Power Industry Practice,
generally accepted accounting principles, and applicable records
retention requirements; and making such records available for
inspection and/or audit by Owner and Owner's designees;

g. Implementing an inventory control system to identify, catalog,
and disburse spare parts for the maintenance of the System and
procuring, as agent for Owner, replacement spare parts and
refurbishing. where practical or economical, spare parts to allow
their reuse;

h. Operating and maintaining the System according to the operations
and maintenance programs prepared by Operator for Owner and, if
necessary, creating updates for such programs and creating new
programs as required for operation and maintenance of the System;

i. Operating and maintaining the System to maximize the continuous,
reliable, safe and efficient generation of electrical and/or
thermal energy by the System so as to conserve fuel and financial
resources and to minimize unscheduled outages, and providing
maintenance for the System in a cost-effective manner to prevent
deterioration beyond normal wear and tear provided, however, that
Owner acknowledges such efforts shall necessarily be limited by
the operating life, capacity and maintenance requirements of the
system and by Legal and Contractual Requirements;

j. Using all reasonable care necessary to keep the System and the
System site clean, orderly, and free from debris, rubbish or
waste to the extent consistent with the operation of the System;

k. Taking necessary precautions and corrective actions in the event
of an Emergency;

l. Keeping the System and the System site free and clear of all
liens and encumbrances arising out of the acts, omissions, or
debts of Operator or its employees, agents or subcontractors
claiming by, through or under Operator (this subsection shall not
apply to mechanics liens and liens of any nature arising by
operation of law, provided such liens are promptly removed by the
payment of the debts they secure when due; in the event of a
dispute between Operator or its subcontractors and a lienholder,
Operator's obligation to Owner pursuant to this provision may be
satisfied by the posting of an appropriate bond to the extent
acceptable to the Agent);

m. Within 30 days of its receipt of Owner's Plan of Operation
submitted in accordance with Article V, Section 1 (c), preparing
and submitting to Owner for Owner's approval a written proposed
Annual Operating Plan and Budget which shall include all
anticipated Expenses of the System to be paid by Owner for each
succeeding calendar year, all as more fully described in Article
VI, Section 6 or required by the Agent;

n. Reporting to and consulting with Owner about the operation of the
System on a scheduled basis, as reasonably requested by Owner;

o. Using reasonable commercial efforts to secure from vendors,
suppliers and subcontractors the best indemnities, warranties and
guarantees as may be commercially available regarding supplies.
equipment and services purchased for the System, all of which
shall be assigned to Owner (Operator shall render reasonable
assistance to Owner for the purpose of enforcing such
indemnities, warranties or guarantees of which Owner is a
beneficiary regarding the System);

p. Performing for Owner such other services as may from time to time
be reasonably requested or are necessary or appropriate in
connection with the operation and maintenance of the System;

q. Promptly notifying Owner of:

i. Any condition, event or act which is likely to result in a
material deficiency in budgeted revenues, or excess in
budgeted costs, of Owner;

ii. Any forced outages or significant malfunction of the System
as soon as practicable;

iii. Any material failure to comply with any Legal and
Contractual Requirements or any event which is reasonably
expected to cause such material failure;

r. Promptly providing Owner with such information relative to the
System as Owner may reasonably request;

S. Establishing an effective maintenance planning and scheduling
system to optimize the availability, reliability and heat rate
of the System;

t. Assisting Owner in the compliance by Owner with the terms of the
Financing Agreements, as they relate to the operation and
maintenance of the System, including the preparation of reports
concerning operations and making personnel available for
discussions with the Agent or other lender representatives;

u. Subject to Article XI, assisting Owner in selling or otherwise
disposing of used and/or unneeded parts and supplies; and

v. Providing and maintaining written procedures, in a form
reasonably acceptable to Owner, required to enable Operator's
employees to safety and efficiently startup, operate, and shut
down the System equipment and to perform preventive maintenance
on the System equipment.

c. V. RESPONSIBILITIES OF OWNER

1. Subject to the terms of this Agreement, Owner shall, at its cost and
expense, perform and provide the following at the times required to
support the start-up, operation and maintenance of the System:

a. Providing an Owner's Representative who shall represent and
bind Owner in all matters regarding this Agreement and the
performance of Owner hereunder;

b. Providing the System and System site free and clear of all
liens and encumbrances (except for any liens or encumbrances in
favor of Agent or the lenders under the Financing Agreements);

c. Preparing the Owner's Plan of Operation and delivering the same
to Operator on or before September 1 of each year;

d. With Operator's assistance, administering all System Contracts;

e. Providing all required utility services, including water,
sewer, gas, telephone, water/wastewater treatment, waste
disposal, special waste disposal and electricity;

f. With operators assistance, obtaining and reviewing all
necessary licenses and permits except those required by law to be
obtained and maintained in Operator's name;

g. Providing manufacturer's operating and maintenance manuals for
the System;

h. With Operator's assistance, preparing and submitting any
special accounting and reporting documents that may be required
by governmental authorities;

i. Providing at its own expense, an office at the site for use by
Operator

j. Within five days of its receipt thereof, providing Operator
complete copies of all technical, operational and other System
and System site related information, including the System
Contracts, as are in the possession, or under the control of
Owner;

k. Being responsible for the billing and collection of electricity
revenues under the Amended Power Purchase Agreement and thermal
revenues under the Steam Purchase Contract with Newark Boxboard;

l. Being solely responsible for obtaining, maintaining and
renewing all licenses and permits necessary for (i) Owner to do
business in the jurisdictions in which the System is located and
(ii) the ownership, operation and maintenance of the System and
System site;

m. Being responsible for arranging the disposal of hazardous
wastes generated by or at the System or System site: provided,
however, that Operator will coordinate removal of such waste from
the System site using subcontractors chosen by Owner;

n. Complying with, and diligently enforcing, all agreements
(including the System Contracts) to which Owner is a party and
which relate to or impact upon the System or Operator's ability
to perform its obligations hereunder; and

o. Timely paying all of Owner's vendors, suppliers and
contractors.

Such activities shall be provided in a manner consistent with all
Legal and Contractual Requirements, Sound Independent Power Industry
Practice and the Annual Operating Plan and Budget.

VI. EXPENSES, REIMSURUMENTS, BUDGET, CONSIDERATION, COMPENSATION

1. As compensation to Operator for its performance of the Services, Owner
shall Pay operator (a) the Expenses incurred by Operator and (b) an
annual fee ("Operator's Fee"). The Operator's Fee for the first
Contract Year shall be $150,000. The Operator's Fee shall be payable
in equal monthly installments in arrears. The Operator's Fee shall be
adjusted annually in accordance with the following sentence. For each
Contract Year after the first Contract Year, the Operator's Fee shall
be equal to the product of: (i) the ratio of the Producer Price Index
for the lag month of the then expiring Contract Year over the Producer
Price Index for the last month of the previous Contract Year and (ii)
the Operator's Fee for the then expiring Contract Year, provided,
however, that for any partial Contract Year, the Operator's Fee shall
be multiplied by a fraction, the numerator of which shall be the total
number of days in such Contract Year and the denominator of which
shall be 365 or 366, as the case may be. If Operator falls to pay
accrued, undisputed Liquidated Damages in any Contract Year in
accordance with the provisions herein, Owner may elect to reduce the
Operator's Fee in the subsequent Contract Year by the amount of
undisputed Liquidated Damages owed to Owner.

2. Owner shall directly pay, or promptly reimburse to Operator as the
case may be, the following expenses ("Expenses") relating to the
System:

a. Insurance and bond premiums for policies which are required by
Article VIII hereof;

b. Property, and other taxes (including, without limitation, sales
taxes, gross receipts taxes, value added taxes. energy taxes and
capital taxes) related to Owner or the System, but not including
those based an Operator's income or capital;

c. The base salaries, straight time hourly wages and overtime
hourly wages of all of Operator's on-site personnel plus (i)
thirty eight percent (38%) of (x) the base salaries and straight
time hourly wages and (y) the straight time hourly portion of the
actual overtime wages for all hourly employees, and (ii) five
percent (5%) of the base salaries, straight time hourly wages,
and overtime hourly wages.

d. Transportation, travel, lodging, and (for employees newly hired
or newly assigned to the System site) relocation expenses of
persons employed by Operator or its Affiliates performing the
duties of Operator under this Agreement subject to advance
approval by Owner in writing;

e. Reasonably incurred legal and accounting fees relating to the
System, subject to advance approval by Owner in writing;

f. Fuel expenses including fuel purchase, transportation, handling
and demurrage charges;

g. The expenses of purchased electric power, telephone and other
communication services, purchased potable water. waste disposal,
special waste disposal, lubricants and chemicals necessary for
the operation of the System;

h. Costs reasonably incurred or paid by Operator due to an
Emergency;

i. Training, including outside training services;

j. The costs of permits or licenses required for either Owner,
Operator or the System;

k. Costs associated with Routine Maintenance, Major System Repairs
(including scheduled and unscheduled) inspections, and overhauls,
outside contractor services and purchases of replacement
equipment, parts and components;

l. Spare parts, tools, supplies and consumables;

m. Capital costs approved by Owner for improvements, alterations
or additions to the System including those required by
governmental laws, regulations or orders including without
limitation, those arising from environmental concerns; and

n. The cost of transportation of spare parts, tools, supplies,
consumables and any item which is a reimbursable expense
hereunder.

For all Expenses (other then relating to labor, legal and accounting
fees) incurred and paid by operator for which Operator is entitled to
reimbursement hereunder, Owner additionally shall pay Operator a
general and administrative expense fee of five percent (5%) of such
Expenses.

3. a. For convenience and in order to save on expenses, Owner
will directly pay certain Expenses reimbursable to Operator as
set forth in the Annual Operating Plan and Budget described in
Article VI, Section 2 as practicable. To the extent reasonably
practical, the items covered by such Article VI, Section 2 shall
be procured through Operator's issuance of an Owner purchase
order and the cost of any such items shall be paid directly by
Owner to the vendor thereof. Operator shall perform such duty as
owner's agent.

b. Without Owners prior approval, Operator shall be empowered to
prepare and issue an Owner purchase order for any material or
service the cost of which would constitute an Expense, so long as
the total cost for such item is less than or equal to $10,000.
For any item or items whose total cost is greater than $10,000,
Operator shall submit a written requisition to Owner, and after
receipt of written approval from Owner, Operator shall be
authorized as agent for Owner to prepare and issue a purchase
order on behalf of Owner on Owner's purchase order form for such
item. Operator shall (i) verify the receipt at the System site

of all materials end services to be delivered to the System site
covered by Owner's purchase orders issued by Operator, (ii)
verify the accuracy of vendors' invoices in connection therewith.
and (iii) forward such invoices to Owner for approval, processing
and payment by Owner. Nothing in this Agreement shall prevent
Operator from procuring any material or service the cost of which
would constitute an Expense under Article VI(2).

C. Operator shall periodically, but not more often than once a week,
deliver to Owner invoices received by Operator from third parties
for all direct Expenses, accompanied by a summary of all such
invoices which itemizes all such invoices by operating cost
account number. Such invoices shall also be accompanied by a
statement from Operator confirming that all such invoices are
accurate, due and payable, together with all relevant
documentation reasonably necessary for Owner to verify the
accuracy thereof. Each invoice submitted to Owner shall be paid
by Owner directly to the payee of such invoice on or before the
date such invoice is due.

4. From time-to-time, Operator will prepare and send to Owner an invoice,
including expense statements, vouchers or such other supporting
information as Owner may reasonably require, for the amounts then due
for reimbursable Expenses and the monthly installment of the
Operator's Fee. Owner shall pay the amount due to Operator no later
than thirty (30) days after receipt of the invoice. All payments
shall be made by wire transfer of immediately available funds to Texas
Commerce Bank, Houston, Texas, Account No. 00101616119, ABAR 113000
609. Any payment not made within 30 days after receipt of the invoice
will bear interest from the date on which payment was due at the rate
of one and one-half percent (1.5%) per month or the maximum rate
permitted by law, whichever is the lesser.

5. Operator shall maintain complete, true, and correct records in
connection with all Expenses incurred by Operator. Operator shall
retain all such records for five (5) years after Expense reimbursement
by Owner has been fulfilled or for any longer period of time required
by law. All documents and records relating to this Agreement shall be
available for inspection by Owner anytime during normal business
hours. Owner may audit all records of Operator relating to Expenses
and services performed hereunder. In the event the audit shows that
the payment by Owner to Operator exceeds the amount due Operator,
Owner shall disclose such information to Operator and Operator shall
refund the excess amount to Owner within five (5) business days of the
disclosure to Operator. In the event the audit shows that the payment
by Owner to Operator is greater than the amount due Operator under
this Agreement and such error was caused by Operator, Owner shall be
reimbursed its reasonable costs of performing the audit. In the event
the audit shows that the payment by Owner to Operator is less than the
amount due Operator, Owner shall disclose such information to Operator
and pay the underpayment amount to Operator within five (5) business
days of the disclosure to Operator.

6. On or before October 1 of each year, the Operator shall prepare and
submit to Owner a written Annual Operating Plan and Budget which shall
include all expenses of the System anticipated to be paid by Owner as
either a direct or reimbursable Expense during the upcoming calendar
year pursuant to Section 1 of this Article VI, together with a written
operations and maintenance plan for the same period of time. Such
Annual Operating Plan and Budget shall set forth the anticipated
operations and maintenance plan including projected electrical
production from the System on a monthly basis, and a complete schedule
(to the extent technically feasible) of Operator responsible Routine
Maintenance and all Owner-directed major maintenance tasks (including
Major System Repairs) to be accomplished during said year. Owner and
Operator shall agree upon the budget operations and maintenance plan,
and persons to perform maintenance under

the plan prior to the start of the calendar year, and shall meet and
exchange information as is necessary and convenient to such end.

It the parties cannot reach agreement on the Annual Operating Plan and
Budget by the start of any calendar year, then, until such time as
agreement is reached or the dispute is resolved, the Annual Operating
Plan and Budget for such calendar year shall be based on the Annual
Operating Plan and Budget for the preceding calendar year, as adjusted
to reflect the net change, if any, between the most recently published
Producer Price Index available on the first day of the calendar year
in question and the corresponding Producer Price index in effect at
the start of the immediately preceding calendar year.

Operator has submitted, and Owner has accepted, the Annual Operating
Budget for the calendar year ending December 31, 1996. a copy of which
is attached as Exhibit F. All Annual Operating Budgets shall be in
substantially the form attached as Exhibit F. The amounts set forth
on Exhibit F shall be reduced pro rata based on the number of days
remaining in the calendar year from and after the Effective Date.
Likewise, the amounts set forth in the Annual Operating Plan and
Budget in effect during the calendar year in which this Agreement
expires or is terminated shall be reduced on a pro rata basis based on
actual number of days elapsed during such calendar year prior to the
date of the expiration or termination of this Agreement

7. a. The parties recognize that Changes may be required during
the term of this Agreement. Either Owner or Operator may by a
written notice to the other party propose a Change. The written
notice shall describe the proposed Change in reasonable detail
and the reasons therefor.

b. The written notice of a Change proposed by Operator shall be
accompanied by a Change Order Budget Statement. Upon receipt by
Operator of any proposed Change from Owner, Operator shall use
its best efforts to prepare and submit to Owner a Change Order
Budget Statement with respect to such proposed Change within
fifteen (15) days of the receipt of Owner's proposed Change. No
proposed Change the cost of which is in excess of $10,000 shall
be implemented until a Change Order has been executed by both
parties approving the Change and the related Change Order Budget
Statement; provided, however, that Operator shall be entitled to
implement a proposed Change without the prior approval of Owner
if such Change is required due to an Emergency. If Operator
implements a Change without the prior approval of Owner due to an
Emergency, Operator shall promptly notify Owner of such Change
and pursue Owner's approval thereof in accordance with subsection
c below. Operator acknowledges that Owner's approval of any
proposed Change and/or the related Change Order Budget Statement
may require the approval of the Agent.

c. Owner and Operator shall diligently and in good faith endeavor
to reach agreement upon any proposed Change and the related
Change Order Budget Statement within thirty (30) days after the
date of the receipt of a proposed Change and related Change Order
Budget Statement. If a Change is required as a result of an
Emergency. then Operator shall provide to Owner, as soon as
practicable, notice of such Change, together with a statement
describing the Emergency and a Change Order Budget Statement. If
a Change due to an Emergency causes the Annual Operating Plan and
Budget to be exceeded and Owner believes that an Emergency did
not exist, then Owner shall have the right to dispute the Change.
If Owner and Operator do not agree as to the resolution of such
dispute, then either party may submit the dispute to arbitration
in accordance with the provisions of Article XVIII, Section 2 and
3.

8. Operator shall report to Owner in writing monthly on electrical and
thermal output and expenditures incurred to date; projected electrical
and thermal output and expenditures for the balance of the calendar
year, performance to date under the operations and maintenance plan
and such other matters as Owner may reasonably request as to the
operation and maintenance of the System. In such report, Operator
shall recommend such changes to the then current budget and operations
and maintenance plan as Operator considers necessary or appropriate.

9. Operator shall use its best efforts to operate and maintain the
System each year within the budget approved by Owner (as amended by
Change Orders). For purposes of determining the approved budget for
the initial calendar year, the budget provided as Exhibit F in the
aggregate amount of $1,871,860, for operating and maintenance duties
set forth in Article IV, shall be adjusted by the ratio of the
remaining number of days from the Effective Date to year-end divided
by 366. If for any calendar year the Expenses (other than those
Expenses set forth In Article VI, Section 2 (b) and Expenses incurred
in response to Emergencies) whether direct or reimbursable, paid by
Owner exceed the approved Annual Operating Plan and Budget, as amended
by Change Orders mutually agreed by Owner and Operator, then Operator
shall be solely responsible for any such excess.

10. Operator's consideration for services performed and expenses paid
pursuant to this Agreement shall be the reimbursement of expenses
described In Article VI, Section 2, the Operator's Fee, and, if
applicable, the Bonus.

VII. INDEMNIFICATION

1. Operator will protect, indemnify and hold harmless Owner, Owner's
Affiliates and Agent, and their respective directors, officers,
employees, agents and representatives against and from any and all
demands, losses, claims, actions or suits, including costs, judgments,
penalties, fines and attorney's fees, for or on account of injury to
or death of third persons, or for damage to or destruction of property
belonging to third persons or for violation of law, in each case
resulting from or arising out of Operator's negligent maintenance or
operation of the System or Operator's willful act or omission, except
to the extent caused by System design or construction defect, by
Owner's act or omission, or the act or omission of third parties.

2. Owner will protect, indemnify and hold harmless Operator, Operator's
Affiliates. and their respective directors, officers, employees,
agents and representatives against and from any and all demands,
losses, claims, actions or suits, including costs, judgments,
penalties, fines and attorneys' fees, for or on account of injury to
or death of third persons, or for damage to or destruction of property
belonging to third persons, or for violation of law, in each case
resulting from or arising out of a System design or construction
defect, or the negligence or willful act or omission of Owner.

3. The duty to indemnify under this Article will continue in full force
and effect, notwithstanding the expiration or termination of this
Agreement, with respect to any claim or action based on facts or
conditions which occurred prior to such termination.

4. If any indemnified party intends to seek indemnification under this
Article from any indemnifying party with respect to any action or
claim, the indemnified party shall give the indemnifying party notice
of such claim or action within thirty (30) days of the commencement
of, or actual knowledge by the indemnified party of, such claim or
action. The indemnifying party shall have no liability under this
Article for any claim or actions for which such notice is not
conveyed; provided, however, that so long as the indemnifying party is
not materially harmed by the indemnified party's failure to give
timely notice of a claim or action, then the indemnifying party's
indemnify obligation shall

be unaffected. The indemnifying party shall, at its sole cost and
expense, defend any such claim or action; provided. however, that the
indemnified party shall, at its own cost and expense, have the right
to participate in the defense or settlement of any such claim or
action. The indemnified party shall not compromise or settle any such
claim or action without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld.

▇▇▇▇.▇▇▇▇▇▇▇▇▇ COVERAGE

1. Operator, on its behalf and on the behalf of all subcontractors of
Operator performing any on-site services in connection with the
operation and maintenance of the System or any of its appurtenant
equipment, shall procure and maintain in effect during the term for
which they perform services pursuant to this Agreement the following
minimum insurance coverages, in the given amounts:

a. Vehicle liability insurance covering all owned, non-owned and
hired automobiles, trucks, trailers and other vehicles. Such
insurance shall provide coverage not less than that of the
standard comprehensive automobile liability policy in limits not
less than $1,000,000 combined single limit each occurrence for
bodily injury and property damage. The Owner and NRG Generating
(U.S.) Inc. shall be named as additional insureds.

b. Workers' Compensation insurance that satisfies statutory
requirements and Employers' Liability Insurance with limits of
$1,000,000. This insurance shall include All States Coverage and
Longshoremen & Harbor Workers Compensation Act coverage (if
exposure exists.) The Employer's Liability Coverage shall not
contain an occupational disease exclusion.

c. Liability insurance, on an "Occurrence" basis and in a form
providing coverage not less than that of the standard Commercial
General Liability policy, covering operations of the System
including independent contractors, products and completed
operations, broad form property damage, blanket contractual
liability coverage (for any written or oral contracts related to
the System) and personal injury liability coverage for claims
arising out of the operations of the System for bodily injury,
property damage and personal injury with policy limits not low
than $1,000,000 combined single limit each occurrence and
$2,000,000 aggregate limit. The aggregate policy limits shall
apply solely to this project or site. Coverage shall include a
standard severability of interests clause and cross liability
coverage. The Owner and NRG Generating (U.S.) Inc. shall be
named as additional insureds.

d. Excess or umbrella liability insurance, on an "Occurrence"
basis and with coverage at least as broad as the vehicle
liability, employers' liability and general liability policies,
to provide limits of insurance in excess of Owner's vehicle
liability, employers liability and general liability policies for
not less than $10,000,000 combined single limit each occurrence
and in the aggregate for bodily injury. property damage and
personal injury. The aggregate policy limits shall apply solely
to this project or site. Coverage shall include a standard
severability of interests clause and cross liability coverage.
The Owner and NRG Generating (U.S.) Inc. shell be named as
additional insureds.

2. Owner shall procure and maintain in effect during the term of this
Agreement at its expense the following minimum insurance coverage:

a. Vehicle liability insurance covering all owned, non-owned and
hired automobiles, trucks, trailers. and other vehicles. Such
insurance shall provide coverage not less then that of the
standard comprehensive automobile liability policy in limits not
less than $1,000,000 combined single limit each occurrence for
bodily injury and property damage. The Operator and NRG
Generating (U.S.) Inc. shall be named as additional insureds.

b. Workers' Compensation insurance (if required) that satisfies
statutory requirements and Employees' Liability Insurance with
limits of $1,000,000. This insurance shall include All States
Coverage and Longshoreman & Harbor Workers Compensation Act
coverage Of exposure exists.) The Employer's Liability Coverage
shall not contain an occupational disease exclusion.

c. Liability insurance, on an "Occurrence" basis and in a form
providing coverage not less than that of the standard Commercial
General Liability policy, covering operations of the System
including independent contractors, products and completed
operations, broad form property damage, blanket contractual
liability coverage (for any written or oral contracts related to
the System) and personal injury liability coverage for claims
arising out of the operations of the System for bodily injury,
property damage and personal injury with policy limits not less
than $1,000,000 combined single limit each occurrence and
$2,000,000 aggregate limit. The aggregate policy limits shall
apply solely to this project or site. Coverage shall include a
standard severability of interests clause and cross liability
coverage. The Operator and NRG Generating (L.I.S.) Inc, shall be
named as additional insureds.

d. "All Risk" Property Insurance, including Boiler and Machinery
Insurance and difference in conditions coverage (including flood
perils), with an extension for Business Interruption Coverage,
and naming Operator and NRG Generating (U.S.) Inc, as additional
insureds for all such insurance coverage as their interests
appear.

3. Within thirty (30) days after the date of execution of this
Agreement, each party shall provide to the other party, pursuant to
the notice provisions of Article XIV, properly executed certificates
of insurance, signed by an authorized representative of the insurance
carrier. These certificates shall provide the following information:

a. Name of insurance company, policy number and expiration date;

b. The coverage required hereunder and the limits on each covered
item, including the amount of deductibles and self-insured
retentions;

c. A statement indicating that sixty (60) days notice of
cancellation, non-renewal, or material change in coverage of any
of the policies shall be given to each named insured and any
additional insured; and

d. Named and additional insured.

4. Each party shall have the right to inspect and photocopy the
policies of insurance at the other party's place of business during
regular business hours. on reasonable prior written notice.

5. All insurance policies, including Workers' Compensation insurance,
provided by Owner and Operator shall waive all rights of subrogation
against one another and NRG .

6. The provision of insurance shall not be construed to limit the
liability of any party to the other party.

7. All commercial insurance carriers providing insurance hereunder must
be rated A- or better, with a minimum size rating of VIII by Bests
Insurance Guide and Key Ratings or an equivalent rating by another
nationally recognized insurance rating agency of a standing similar to
Best.

8. All deductibles or self insured retentions associated with policies
required hereunder shall be the responsibility of the named insured.

IX. ENGAGEMENT OF THIRD PARTIES

Operator may engage or subcontract in the ordinary course of business and
at Owner's expense such persons, corporations or other entities as Operator
deems advisable for the purpose of performing or carrying out any of the
obligations of Operator under this Agreement. Except in the case of an
Emergency, before incurring an Expense under this Article IX In excess of
$10,000, Operator shall obtain the prior written approval from Owner.

X. OPERATOR REPORTING OBLIGATIONS

Operator shall provide Owner with copies of all reports generated by
Operator's or Operator's Affiliates' employees, agents, or subcontractors
with respect to the operation of the System that are filed with any
federal, state, or local agency or governmental entity. In addition,
Operator shall provide Owner with monthly compliance reports, summarizing
Operator's compliance with all System permits and licenses. The content of
the monthly compliance reports shall be agreed to by Owner and Operator on
or before June 15, 1996. All monthly compliance reports shall be delivered
to owner within ten (10) days after the last day of the relevant month.

XI. SPECIFIC LIMITATIONS

In the conduct of its duties hereunder, Operator shall not, without first
obtaining the written consent of Owner:

1. Limit on Expenditures. Under-take an expenditure outside Operator's
scope of responsibilities except that, in case of an Emergency,
Operator may make such immediate expenditures as may be necessary, but
notice of any such Emergency and expenditures shall be given to Owner
as promptly as possible, but in no case more than 12 hours after the
event.

2. Settlement of Claims. For any claim for which Owner is or may be
responsible, pay in excess of $10,000 in the settlement of any claim
for injury to or death of persons, or loss of or damage to property,
or in settlement of any contract or other dispute.

3. Disposition of Equipment. On Owner's behalf, sell or otherwise
dispose of any item of equipment which is part of or used in the
operating or maintaining the System if the current price of new
equipment similar thereto is in excess of $5,000.

4. Contracts with Affiliates. On Owner's behalf, enter into any
contract with an Affiliate of Operator with a value in excess of
$5,000.

XII. TERMINATION/DEFAULT

1. This Agreement may be terminated:

a. By the non-defaulting party at any time following the occurrence
of any Event of Default, as described In this Article XII, if
such Event of Default is not cured within the period, if any,
provided therefor,

b. By Operator, if, after Operator has taken all reasonable efforts
to avoid regulation as a public utility, Operator's performance
under this Agreement renders Operator subject to regulation as a
public utility by any federal, state or local agency of any
governmental entity, by delivery of thirty (30) days' prior
written notice to Owner;

c. By Operator, if Owner's action or inactions under this Agreement
renders Operator subject to regulation as a public utility by any
federal, state or local agency of any governmental entity, by
delivery of thirty (30) days' prior written notice to Owner

d. By Owner for its convenience, upon ninety (90) days' written
notice to Operator provided that Owner pays Operator the
applicable termination charge in accordance with the provisions
of Exhibit D (no termination of this Agreement under this
provision may be effective until the third anniversary of the
Effective Date);

e. By Owner, if, at, on, or in connection with the operation and
maintenance of any part or all of either or both of (x) the
System or (y) the properties, plant or equipment operated by
Operator for NRG Generating (Newark) Cogeneration, Inc., Operator
falls to achieve and maintain compliance with all applicable
laws, permits, licenses, regulations, or orders of any
Governmental Authority; provided. however, that no failure of
Operator to perform its obligations under this Article XII,
Section 1 (e) shall be grounds for termination if such failure is
the result of the negligence of a third party other than
subcontractors of or procured by Operator or Operator's
affiliates or an act of Force Majeure, so long as Operator is
diligently pursuing a cure as required by this Agreement. Owner
may exercise its right of termination under this Article XII
action 1 (e), if and when Owner believes that Operator has failed
to achieve and maintain compliance with an applicable law,
permit, license, regulation or order, whether or not (s) a court
or administrative agency with competent jurisdiction has
determined that there has been such a failure or (t) a dispute
resolution process has determined that the failure was not the
result of either negligence of a third party other than
subcontractors or an act of Force Majeure which Operator is
diligently attempting to cure; provided, however, that following
any termination by Owner under this Article XII Section 1 (e), if
(u) a court or administrative agency, with competent jurisdiction
to assess a fine, penalty or other action for failures in
circumstances of the sort which were the basis of Owner's
termination, issues a final nonapealable order (or issues an
order for which all appeals periods have expired) determining as
a matter of both fact and law that the circumstances which were
the basis of Owner's termination did not constitute a violation
of any law, permit, license, regulation or order. or (v) a
dispute resolution process under Article XVIII determines that
the failure was the result of negligence of a third party other
then subcontractors or an act of Force Majeure which Operator is
diligently attempting to cure, then Owner shall pay Operator the
amount determined in accordance with Exhibit E.;

f. By the mutual agreement of the parties; and

g. By Owner, if the Amended Power Purchase Agreement is terminated
for any reason other then a default by Owner or an Owner
Affiliate.

2. Owner shall be in default under this Agreement upon the happening or
occurrence of any of the following events or conditions, each of which
shall be deemed to be an Event of Default for purposes of this
Agreement:

a. Owner materially breaches any of Owner's obligations.
covenants, conditions, services or other responsibilities under
this Agreement unless within thirty (30) days after notice from
Operator specifying the nature of such breach, Owner either cures
such breach or, if such breach (other than the failure to make
payment obligations) cannot be cured within thirty (30) days,
Owner commences and diligently pursues such cure and thereafter
continues to diligently pursue such cure. If the breach is not
cured within 120 days of the date of Operator's written notice to
Owner, then Operator may terminate this Agreement;

b. There is an assignment for the benefit of Owner's creditors, or
Owner or its Parent company, NRG Generating (U.S.) Inc.. is adjudged
bankrupt, or a petition is flied by or against Owner or its parent
company under the provisions of any insolvency or bankruptcy laws
(and such petition is not dismissed within six months), or the
business or principal assets of Owner or its parent company are
placed in the hands of a receiver, assignee or trustee, or Owner is
dissolved, or Owner's existence is terminated or its business is
discontinued; or

c. Any material representation or warranty furnished by Owner in
connection with this Agreement was knowingly false or misleading
in any material respect at the time it was made.

3. Operator shall be in default under this Agreement upon the happening
or occurrence of any of the following events or conditions, each of
which shall be deemed to be an Event of Default for purposes of this
Agreement:

a. Operator materially breaches or falls to observe or timely
perform any of Operator's obligations, covenants, conditions,
services or responsibilities under this Agreement, unless within
thirty (30) days after notice from Owner specifying the nature of
such breach or failure, Operator either cures such breach or
failure or, if such breach cannot be cured within thirty (30)
days, Operator commences and diligently pursues such cure and
thereafter continues to diligently pursue such cure. If the
breach is not cured within 120 days of the date of Owner's
written notice to Operator, then Owner may terminate this
Agreement;

b. There is an assignment for the benefit of Operator's creditors,
or Operator is adjudged bankrupt, or a petition is filed by or
against Operator under the provisions of any insolvency or
bankruptcy laws (and such petition is not dismissed within six
months), or the business or principal assets of Operator are
placed in the hands of a receiver, assignee or trustee, or
Operator is dissolved, or Operators existence is terminated or
its business is discontinued; or

c. Any material representation or warranty furnished by Operator
in connection with this Agreement was knowingly false or
misleading in any material respect at the time when made.

Notwithstanding subsection (a) above, Operator (i) shall not be afforded
any cure period, (ii) will not be permitted to invoke or utilize the
Article XVIII Dispute Resolution provisions, and (iii) will be subject to
immediate termination if the termination of this Agreement is affected
under the language of Article XII, Section 1(e).

4. Upon the occurrence of an Event of Default, the non-defaulting party
may:

a. Without recourse to legal process, terminate this Agreement by
delivery of a written notice of termination to the defaulting
party or its assigns; and/or

b. Pursue, concurrently or separately, other remedies existing in
law, any provision of this Agreement, or otherwise.

5. Upon termination or expiration of this Agreement, Operator
shall:

a. Deliver to Owner all books, records, operator logs, accounts and
manuals developed or maintained by Operator pursuant to this
Agreement, provided however, that Operator may retain copies of
such documents. Furthermore, Owner shall have the right to take
possession of all of the equipment, spare parts and supplies
purchased for the System and paid for by Owner,

b. At Owner's request and expense, cooperate with Owner to effect an
orderly transition of the operations and maintenance of the
System, including, without limitation, perform the following:

i. Continue to operate the System in accordance with this
Agreement for a period not to exceed 180 days while Owner
appoints and mobilizes a successor operator;

ii. Assist Owner in preparing an inventory of all material,
equipment, spare parts and supplies purchased for the
System; and

iii. Assign to Owner all Operator's contractual agreements with
third parties relating to the operations or maintenance of
the System, to the extent such agreements are so assignable.

XIII.ACCESS TO SYSTEM

Operator and Owner and their agents, representatives, and employees shall
have full and free access at all times to the System.

XIV. NOTICES

1. Any notice required or permitted under this Agreement shall be in
writing and shall be valid and sufficient if delivered personally,
mailed by registered or certified mail, or sent by a recognized
private overnight express delivery service. In each case postage
prepaid, return receipt requested, addressed to the other party as
follows:

If to Operator:

▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ OPERATIONS, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice-President of North American Operations
Telephone: ▇▇▇-▇▇▇-▇▇▇▇

If to Owner:

NRG Generating (U.S.) Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
Telephone: ▇▇▇-▇▇▇-▇▇▇▇

2. Any party may change its address, or add additional addresses, by
notice given to the other parties in the manner se forth above

XV. FURTHER ASSURANCES

1. Owner and Operator agree to execute, acknowledge and deliver any and
all such further documents and instruments and to take such action as
may reasonably be required in order to allow the financing of the
System to proceed, to effectuate the purpose of this Agreement, and to
obtain any government permits, licenses, or approvals necessary or
convenient to accomplish the foregoing.

2. Title to all materials, equipment, supplies, consumables, spare
parts and other items purchased or obtained by Operator for the System
shall pass to and vest in Owner upon the passage of title from the
vendor or supplier thereof and the payment or reimbursement of
Operator's costs by Owner.

XVI. REPRESENTATIONS AND WARRANTIES

1. Owner represents and warrants to Operator as follows:

a. Owner is a corporation duly formed, validly existing, and in
good standing under the laws of Delaware, and it is properly
qualified to do business in New Jersey;

b. The execution of this Agreement has been duly authorized and
approved by Owner, and no other authorizations, approvals, or
consents are required in order for this agreement to constitute a
binding and enforceable legal obligation of Owner;

c. The execution of this Agreement by Owner, and the performance
of Owner's obligations under this Agreement will not conflict
with, or result in a breach or default under, any agreement,
contract, or covenant to which Owner is a party; provided,
however. that this provision is modified to be consistent with
Section 7 of the Agreement which is being executed
contemporaneously herewith as an inducement to the execution of
this agreement; and

d. This Agreement, as executed, constitutes a binding legal
obligation of Owner that is enforceable in accordance with its
terms and conditions.

2. Operator represents and warrants to Owner as follows:

a. Operator is a corporation duly incorporated, validly existing,
and in good standing under the laws of Delaware, and it is
properly qualified to do business in New Jersey;

b. The execution of this Agreement by Operator has been duly
authorized and approved by Operator and no other authorization,
approvals, or consents are required in order for this Agreement
to constitute a binding and enforceable legal obligation of
Operator;

c. The execution of this Agreement by Operator, and the
performance of its obligations under this Agreement will not
conflict with, or result in a breach or default under, any
agreement, contract, or covenant to which Operator is a party;
and

d. This Agreement as executed, constitutes a binding legal
obligation of Operator that is enforceable in accordance with its
terms and conditions.

XVII.FORCE MAJEURE

1. Except for the obligation of either party to make any required
payments hereunder, the parties shall be excused from performing their
respective obligations under this Agreement and shall not be liable in
damages or otherwise if and to the extent that they are unable to so
perform or are prevented from performing by a Force Majeure, provided
that;

a. The non-performing party, as promptly as practicable after the
occurrence of the Force Majeure, but in no event later than 14
days thereafter, gives the other party written notice describing
the particulars of the occurrence;

b. The suspension of performance is of no greater scope and of no
longer duration than is reasonably required by the Force Majeure;

c. The non-performing party uses its best efforts to remedy its
inability to perform; and

d. As soon as the non-performing party is able to resume
performance of its obligations excused as a result of the
occurrence, it shall give prompt written notification thereof to
the other party.

2. Neither party shall be required to settle any strike, walkout,
lockout or other labor dispute on terms which, in the sole
judgment of the party involved in the dispute, are contrary to
its interest, it being understood and agreed that the settlement
of strikes, walkouts, lockouts or other labor disputes shaft be
entirely within the discretion of the party having such dispute.

XVIII. DISPUTE RESOLUTION

1. Resolution by Parties.

a. First Attempt. In the event that a dispute arises hereunder
between the parties, the parties shall attempt in good faith to
settle such dispute by mutual discussions within 30 days after
the date that a party gives written notice of the dispute to the
other party; provided, however, that if the dispute involves any
amount claimed under an invoice and after 10 days of mutual
discussion either party believes in good faith that further
discussion will not resolve the dispute to its satisfaction, such
party may immediately refer the matter to arbitration in
accordance with Section 2 of this Article XVIII.

b. Chief Executive Officers. In the event that the dispute is not
resolved in accordance with subsection 1 (a) above, either party
may refer the dispute to the chief executive officers or chief
operating officers of the respective parties for further
consideration. In the event that such individuals are unable to
reach agreement within 15 days, or such longer period as they may
agree, then either party may refer the matter to arbitration in
accordance with Section 2 of this Article XVIII.

2. Arbitration. In the event a dispute arises between Owner and
Operator which is not resolved pursuant to Section 1 of this Article
XVIII, shall be resolved by arbitration pursuant to the terms hereof.
As a condition to initiating arbitration proceedings, a party must
first have attempted to resolve the dispute under Section 1 of this
Article XVIII. All claims, disputes, and other matters in question
arising out of or relating to this Agreement or the breach thereof
shall be decided by arbitrators selected as hereinafter provided and
shall be conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then obtaining, unless the
parties mutually agree otherwise. The resolution of such disputes
shall not delay Operator's or Owner's performance of their undisputed
obligations under the terms of this Agreement. The

arbitration shall be held in Newark, New Jersey and any arbitration
demand must be filed with the American Arbitration Association office
located closest to Newark, New Jersey. If the claim or defense of
either party is determined to be frivolous, the arbitrators may
require that the party at fault pay or reimburse the other party for
(i) fees and expenses, including. attorneys and expert fees and
expenses, and (ii) reasonable out of pocket expenses incurred by the
other party in connection with the arbitration proceedings.
Notwithstanding the foregoing, a termination of the Agreement under
the language of Article XII, Section 1 (e) shall not, under any
circumstances (except for disputes relating to the settlement of
payment obligations), be subject to arbitration under this Article
VXIII.

3. Selection of Arbitrators. Each dispute shall be submitted to three
arbitrators, one arbitrator being selected by Owner, one arbitrator
being selected by Operator, and the third arbitrator being selected by
the two so selected. The party initiating the arbitration shall
include in its notification under Section 4 below the designation of
its selected arbitrator and the party receiving such notification
shall designate its arbitrator within fifteen (15) days thereafter by
notify the initiating party and its arbitrator of the selection. If
the arbitrators selected by Owner and Operator cannot agree on a third
arbitrator within fifteen (15) days after the second arbitrator is
selected, the third arbitrator shall be selected by the American
Arbitration Association. In the event the party receiving
notification of a demand for arbitration shall not have selected its
arbitrator and given notice thereof to the other party and its
arbitrator within fifteen (15) days after receiving such notification,
such arbitrator shall be selected by the American Arbitration
Association.

4. Notice. Notice of demand for arbitration shall be filed in writing
with the other party to this Agreement and with the American
Arbitration Association. The demand shall be made within a reasonable
time after the claim, dispute or other matter in question has arisen.
In no event shall the demand for arbitration be made after the date
when the applicable statute of limitations would bar institution of a
legal or equitable proceeding based on such claim, dispute, or other
matter in question.

5. Award. This agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. The award rendered
by the arbitrators shall be final and judgment may be entered upon it
in accordance with applicable law in any court having jurisdiction
thereof.

6. Survival. This Article shall survive termination of this Agreement.

XIX. GENERAL PROVISIONS

1. Governing Law. This Agreement shall be governed by and construed
under the laws of New Jersey.

2. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

3. Headings. Title and headings of the articles and sections of this
Agreement are for convenience of reference only and do not form a part
of and shall not in any way affect the interpretation of this
Agreement.

4. Amendment. No modification or amendment of this Agreement shall be
valid unless in writing and executed by both parties to this
Agreement.

5. Assignment. This Agreement may not be assigned by Operator without
the written consent of Owner and written agreement of assignee whereby
it expressly assumes and agrees to perform each and every obligation
of Operator hereunder. Any assignment by Operator in violation hereof
shall be null and void. Owner may, without the consent of Operator,
assign its rights (but not its obligations) under this Agreement to or
by a lender (including finance lessor) providing funds to refinance
the System.

6. Successors and Assigns. This Agreement shall be binding and inure
to the benefit of the parties hereto and their respective successors
and assigns, to the extent that assignment is permitted under this
Agreement.

7. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, supersedes all prior representations, documents
or statements transmitted between the parties.

8. Consequential Damages. In no event will Owner or Operator have the
right, with or without legal process. to recover punitive or special
damages, or indirect or consequential damages, such as loss of use,
lost profits, costs incurred because of delays, cost of replacement
energy, "idle plant" costs, interest on borrowed money, letters of
credit, security deposits or bonds. In no event will Owner or
Operator be liable for representations, oral or otherwise, as to the
results intended to be achieved through its undertakings pursuant to
this Agreement, except as specifically provided in this Agreement.

9. Other Provisions. Nothing in this Agreement shall be construed to
prevent or prohibit Operator from providing operating services to any
other person, organization, or entity.

10. Waiver. The waiver of any breach of any term or condition hereof
shall not be deemed a waiver of any other or subsequent breach,
whether of like or different nature.

11. Not for Benefit of Third Parties. This Agreement and each and every
provision thereof is for the exclusive benefit of the parties to this
Agreement and not for the benefit of any third party.

12. Survival of Representations, Warranties and Indemnities. All
representations, warranties and indemnities of the parties set forth
in this Agreement shall survive the termination or expiration of this
Agreement.

13. Approval by Proposed Lender. If any provision of this Agreement must
be approved by a lender, lessor or equity investor in connection with
the financing of the System or any other action contemplated hereby,
and such lender requires any modification of the provisions of this
Agreement, neither owner nor Operator shall unreasonably withhold its
approval and execution of any such modifications.

14. Survival of Obligations. Termination of this Agreement for any reason
shall not relieve Owner or Operator of any obligation accruing or
arising prior to such termination.

15. Confidentiality. The parties shall hold in confidence, and shall use
only for the purposes of this Agreement, any and all Proprietary
information disclosed to each other.

16. Severability. Should any section or subsection hereof be declared
invalid or unenforceable for any reason, the remaining sections and
subsections of this Agreement shall remain in full force an affect,
and the parties hereto agree to immediately renegotiate in good faith
such section or subsection as was declared invalid or unenforceable.

17. Duty to Mitigate. Each party must use its best efforts to mitigate
the injury or damage caused by the other party's failure to perform.
When a party seeking damages fails to make these efforts, the other
party shall be entitled to have the damages accordingly reduced.

18. Consent. Except in the case of an Emergency, when either party's
consent or approval is required, such consent or approval must be in
writing and given prior to the act for which such consent or approval
is sought.

19. Reasonableness. Except as expressly stated to be within the sole
discretion of any party, all consents or approvals required of either
party shall not be unreasonably withheld or delayed, nor shall any
acts or requests of a party be unreasonable in light of the
surrounding facts and circumstances.

20. Disclaimer, THE WARRANTIES EXPRESSLY PROVIDED BY OPERATOR HEREUNDER
ARE THE SOLE, INTENDED WARRANTIES AND OPERATOR HEREBY DISCLAIMS ALL
OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, ORAL, WRITTEN,
EXPRESS OR IMPLIED, INCLUDING ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ALL
WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.

21. Limits on Liability. Notwithstanding any provision contained in this
Agreement to the contrary, for any Contract Year, Operator shall not
be liable to Owner (whether by contract, warranty, tort, statute or
otherwise, including Liquidated Damages or penalties owed by Operator
under this Agreement) for any amounts that in the aggregate exceed the
amount of the Operating Fee and Bonuses paid for the Contract Year in
which the claim is made. If a claim(s) is made after the end of the
term, then the claim(s) shall be deemed to have been made in the last
Contract Year of the term. The limits of liability set forth herein
shall not apply to any damages incurred by a party as a result of its
gross negligence or willful misconduct.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first set forth above.

OWNER:

NRG Generating (Newark) Cogeneration Inc.

By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Its: President

OPERATOR:

▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Operations, Inc.

By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Its: VP North American OPS

EXHIBIT A

BONUS/LIQUIDATED DAMAGES

For the purpose of determining the liquidated damages ("Liquidated
Damages") payable by Operator to Owner, or the bonus ("Bonus") payable by
Owner to Operator, the effectiveness of Operator under this Agreement shall
be measured in terms of both availability and heat rate. These
measurements shall be applied at the completion of each Contract Year to
determine the Liquidated Damages or Bonus for that Contract Year.

Availability. Operator shall undertake to operate the System to maximize
availability. Availability will be measured for the Base Capacity level,
as defined as 52 MWe (net). In each case the following formula will be
used:

Contract Availability =

[Total Hours - (Equivalent Contract Unavailable Hours)]
Total Hours

where:

Total Hours = total hours in the Contract Year; and

Equivalent Contract Unavailable Hours = total of all hours during the
Contract Year during which there occurred a full or partial Planned,
Forced, or Maintenance Outage, as those terms are defined by Edison
Electric Institute as Equivalent Availability (including outages resulting
from Force Majeure events, but excluding outages resulting from (x) JCP&L's
failure to supply natural gas to the Facility during periods when PSE&G has
not interrupted transportation that it supplies under the PSE&G Gas Supply
Agreement and (y) JCP&L's failure to accept available Output from the
Facility). Partial outages are measured on an equivalency basis, e.g., a
50% outage for one hour would be equivalent to a full outage for one-half
hour, and so forth.

Availability. For purposes of Bonus/Liquidated Damages availability
calculation, the target Base availability will be 95%, for the term of this
Contract. Each one tenth of one percent (0.1%) of availability will have a
value of $20,000 as a Bonus or Liquidated Damages for availability
measurement.

Heat Rate. For purposes of Bonus/Liquidated Damages heat rate
calculations, the heat rate incentive will be based on 9750 Btu per kwh
HHV, as calculated in accordance with Article A.9 of the Amended Power
Purchase Agreement, for the term of this Contract.

LIQUIDATED DAMAGES AND BONUS

The Liquidated Damages payable by Operator to Owner and the Bonus payable
by Owner to operator shall be based on the Availability and Heat Rate
guarantees set forth in this Exhibit. For any Contract Year, the maximum
Liquidated Damages (in the aggregate for each category as adjusted by the
amounts of any Bonus payable to Operator) payable by Operator shall be no
more than one hundred percent(100%) of the Operator's Fee for such Contract
Year. For any Contract Year, once the aggregate Bonuses payable to
Operator (adjusted for the Liquidated Damages, if any, owed by Operator
equal $250,000, then any amounts in excess of $250,000 shall be payable to
Operator at a rate of 4O% of such excess. The availability and heat rate
Bonus/Liquidated Damages calculations will be determined monthly and will
be payable after the end of the Contract Year as set forth in the Amended
Power Purchase Agreement.

EXHIBIT B
DESCRIPTION OF THE SYSTEM

(i) NEWARK SYSTEM

The facility is a combustion gas turbine-steam turbine combined-cycle,
topping cycle cogeneration facility.

The nominal rating is 52 MW electrical with average thermal output of
45,000 lbs/hr steam. The prime movers of the plant is one General Electric
Frame 6 dual fuel combustion turbine, driving a 54,000 kVA synchronous
generator with electrical output PH, 60 Hz and 13.8 kV.

The exhaust from the Frame 6 turbine is directed into a three drum (tri-
pressure) heat recovery steam generator ("HRSG"). The HRSG at full turbine
load and 59F ambient temperature produces when fired with 94.0 million
BtuHHV an hour of auxiliary filing, 227,000 lbs/hr of 600 psig, 700 F
steam; 23,000 lbs/hr of 285 psig/500 F steam; and 12,300 lbs/hr of 30 psig
D&S steam.

The 600 psig steam is directed to the condensing extraction steam turbine
which drives a 22,000 kVa synchronous generator with an electrical output
of 3PH, 60 Hz and 13.8 kV.

The 165 psig steam extracted from the steam turbine is directed into a
header from which 45,000 lbs/hr is directed to process to dry paperboard.

Thermal loads of the system vary seasonally +/- 5,000 lbs from an average
of 45,000 lbs/hr over the course of an 8760 hour year.

The plant will operate on natural gas under normal circumstances other then
interruptions due to curtailment of supply on extremely cold days.
Kerosene fuel is used as the alternate, approximately 480 hr/yr. Output of
the combustion turbine is controlled by sensing and maintaining a constant
optimum turbine exhaust temperature.

NOX emission from the plant are controlled by a combination of steam
injection into the combustion turbine and Selective Catalytic Reduction
using anhydrous ammonia injection with a semi-precious metal catalyst in
the HRSG. The plant is equipped with Continuous Emission Monitoring
equipment.

The interconnection points for the System are shown an identified an the
following diagram associated with this Exhibit.

EXHIBIT C

SYSTEM CONTRACTS

NEWARK

Power Purchase Agreement dated 04/30/96
Transmission Service and Interconnection Agreement dated 11/17/87
Gas Service Agreement dated 04/30/96
Steam Purchase Agreement dated 10/03/86
Amended 03/08 & 07/20/88

Permits

Air Permit/Certification (Rental Boiler Stack) issued 03/11/93
Sewer Connection Permit issued 09/17/95
NJPDES General Permit issued N/A
Air Permit/Certification (▇▇▇▇▇▇ Boiler Stack) issued 03/28/94
Air Permit/Certification (Fuel Oil Storage Tank) issued 08/13/90
Air Permit/Certification (Stack #1) issued 12/10/87
Stormwater Discharge Permit issued 10/15/93

EXHIBIT D

TERMINATION FOR CONVENIENCE

Commencing on the third anniversary of the Effective Date, the Owner may
terminate this agreement for convenience as set forth In Article XII
Section 1 (d). The termination fee shall be $430,000 reduced pro-rata
based on the number of calendar days remaining in the Agreement term as the
numerator and 1096 calendar days as the denominator. The termination fee
will be adjusted accordingly for any pro-rated undisputed Bonus/Liquidated
Damage payments due on the Termination Date. This right of payment shall
be Operator's sole and exclusive remedy for any termination of the
Agreement by Owner under Article XII Section I (d) or the circumstances
that were the basis thereof or were related thereto.

EXHIBIT E

TERMINATION UNDER ARTICLE XII SECTION 1(e)

Commencing on the Effective Date, the Owner has the right to terminate the
Agreement immediately as set forth in Article XII Section 1 (e). If Owner
exercises such termination right and Operator thereafter becomes entitled
to receive a payment from Owner under the language of the second of the
provisos of Article XII Section 1 (e), then the amount of the payment shall
be determined as follows: (i) if the termination occurs on the Effective
Date, then the amount of the payment shall be $860,000 for Newark or (ii)
if the termination occurs after the Effective Date, then the amount of the
payment shall be the product of the amount specified in clause (i) times a
fraction, the numerator of which is the number of calendar days remaining
in the term of the Agreement, measured from the date that Operator
surrendered control of the Project to Owner, and the denominator of which
is 2,191 calendar days. The amount of this payment shall be adjusted for
any prorated undisputed Bonus/Liquidated Damage payments due under the
terms of the Agreement on the date of termination. This right of payment
shall be Operator's sole and exclusive remedy for any termination of the
Agreement by Owner under Article XII Section 1 (a) or the circumstances
that were the basis thereof or were related thereto.

EXHIBIT F

1996 Budget

SEE ATTACHED

APPENDIX I

NEWARK
GUARANTEE OF OPERATOR'S OBLIGATIONS
BY ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ SERVICES, INC.

In consideration of, and as an inducement for NRG Generating (Newark)
Cogeneration, Inc. ("Owner") to enter into certain agreements with ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇ Operations, Inc. ("Subsidiary"), ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Services,
Inc. hereby, irrevocably guarantees to Owner the Prompt performance and
payment when due, whether by acceleration or otherwise, of all obligations,
indebtedness, liabilities or undertakings according to the terms of the NRG
Generating (Newark) Cogeneration Inc./▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Operations, Inc.
Operating and Maintenance Agreement dated , 1996 and the Agreement
between ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Operations, Inc., NRG Generating (Newark)
Cogeneration Inc., NRG Generating (▇▇▇▇▇▇) Cogeneration Inc., NRG
Generating (U, S.) Inc., and ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Services, Inc. (the
"Agreements").

Subject to the terms and provisions herein set forth, the Guaranty is
continuing, absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Agreements, (b) any amendment to, waiver
of or consent to, departure from, or failure to exercise any right or
remedy under the Agreements, (c) any acceptance of partial payment or
performance of any of the guaranteed obligations, (d) any release,
application or amendment of or consent to departure from any security or
guaranty therefor, (e) any assignment of this Guaranty, (f) the insolvency,
bankruptcy, dissolution or liquidation of Subsidiary or any change in
ownership of Subsidiary, or (g) any other circumstance of a similar or
different nature which might otherwise constitute a defense available to
Subsidiary or the undersigned except as to the legal rights and defenses of
Subsidiary watch arc provided for under the Agreements. Notice of
acceptance of the Guaranty is hereby waived, and this Guaranty shall remain
in full force and effect up to and including the expiration of the
Agreements.

The Guarantor waives promptness, diligence, any and all demands for
payment, any notice of credits extended and shipments of merchandise made
hereunder, and all other notices whatsoever. The Guarantor consents to any
extensions of time for the payment of said account, to any changes in the
terms of any settlement or adjustment thereof and to any changes in the
terms of the Agreements. No delays on the part of Owner in the exercise by
Owner of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. No actions of
Subsidiary shall in any way impair or affect this Guaranty.

If Subsidiary defaults in the payment of any amounts due or in the
performance of any other obligation under the Agreements, the Guarantor
shall (a) pay upon demand (i) any sum due and to become due, (ii) any
damages, costs and expenses entitled to be recovered from Subsidiary by
reason of such default, and (iii) reasonable attorneys' fees and all costs
and other expenses incurred as a result of any such default or in enforcing
this Guaranty and (b) upon demand, perform or cause such obligation to be
performed. This

Guaranty is a guarantee of payment and not of collection and no action need
be brought against Subsidiary as a precondition to the enforcement of this
Guaranty.

This Guaranty shall be binding upon the Guarantor and its successors
and assigns and shall be for the benefit of the person named above, its
successors and assigns. Should any one or more of the provisions of the
Guaranty be determined by a court of competent jurisdiction to be illegal
or unenforceable, all other provisions shall remain effective.

This Guaranty shall be governed by and construed under the laws of the
State of New Jersey.

IN WITNESS WHEREOF, this Guaranty has been duly executed this _ day
of , 1996.

▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ SERVICES, INC.

By: /s/
Title:

APPENDIX II

[attach Existing O&M Agreement)

APPENDIX III

[attach the Amended and Restated Agreement for Purchase and Sale of
Electric Power]

Exhibit 10.16.1 NRG GENERATING (NEWARK) COGENERATION INC./ STEWART & STEVENSON OPERATIONS, INC. OPERATING AND MAINTENANCE AGREEMENT This System Operating and Maintenance Agreement ("Agreement") is made as of the 1st day of May 1996 between NRG...

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