PROJECT ORANGE ASSOCIATES LP, S-4/A, 2000-04-27

PROJECT ORANGE ASSOCIATES LP
S-4/A, 2000-04-27
ELECTRIC SERVICES

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<PAGE>

As filed with the Securities and Exchange Commission on April 27, 2000
Registration Nos. 333-30266
and 333-30266-01

================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------

AMENDMENT No. 1 to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------
PROJECT ORANGE ASSOCIATES L.P.
PROJECT ORANGE CAPITAL CORP.
(Exact name of Registrant as specified in its charter)
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Delaware 4911 13 - 3472059
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Delaware 4911 16 - 1580601
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(State or other jurisdiction of (Primary Standard Industrial Classification (I.R.S. Employer Identification
incorporation) Code number) Number)
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c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200
(315) 471-8111

(Address, including zip code, and telephone number, including area code, of registrants' principal executive offices)

With a copy to:
Richard S. Scolaro, Esq. Nicolai J. Sarad, Esq.
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C. James T. Seery, Esq.
90 Presidential Plaza Piper Marbury Rudnick & Wolfe LLP
Syracuse, New York 13202-2200 1251 Avenue of the Americas
(315) 471-8111 New York, New York 10020-1104
(212) 835-6000

(Name, address, including zip code, and telephone
number, including area code, of agent for service for
registrant)

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Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.

If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: |_|

If this form is filed to register additional securities for an offering pursuant
to Rule 362(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: |_| __________________.

If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: |_| _______________.

CALCULATION OF REGISTRATION FEE

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====================================== =================== ==================== ==================== ==================
Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities To Be Offering Price Aggregate Offering Registration
To Be Registered Registered Per Security Price(1) Fee(1)
- -------------------------------------- ------------------- -------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
10.5% Senior Secured Notes due 2007 68,000 $1,000.00 $68,000,000.00 $17,952.00
====================================== =================== ==================== ==================== ==================
</TABLE>

(1) Determined solely for the purposes of calculating the registration fee in
accordance with Rule 475(f)(2) promulgated under the Securities Act of
1933, as amended. Registration fee previously paid.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(A) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to Section
8(A), may determine.
<PAGE>

The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to exchange these securities in any jurisdiction in which the offer or exchange
is not permitted.

PROSPECTUS

Subject to completion, dated April
27, 2000 Project Orange
Associates L.P.
Project Orange Capital Corp.

$68,000,000
EXCHANGE OFFER

WE ARE OFFERING TO ISSUE OUR
10.5% Senior Secured Notes Series B due 2007
IN EXCHANGE FOR OUR
10.5% Senior Secured Notes Series A due 2007
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME ON ________, 2000 UNLESS EXTENDED

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

The Exchange Offer:
o We will exchange all notes that noteholders properly tender and do not
withdraw before the expiration of the exchange offer.
o The terms of the new notes to be issued in the exchange are the same as the
old notes, except that the new notes will not be subject to transfer
restrictions.

o The exchange offer expires at 5:00 P.M., New York City time on
_____________, 2000, unless we extend the exchange offer.

The Notes:
o Mature on September 15, 2007.
o Pay interest on March 15 and September 15 of each year, commencing March
15, 2000.
o Subject to some exceptions, will be secured by
o A perfected, first priority lien on the funds deposited in the
accounts which we have established under the Deposit and Disbursement
Agreement;
o A perfected, first priority lien on substantially all of our assets,
including an assignment of all material contracts to which we are a
party; and
o A perfected, first priority pledge of our general and limited
partnership interests.

o The notes are not guaranteed.

o We can redeem some or all of the notes at our option on at least 30 days'
notice if we pay an early redemption premium.
o There will likely be no public market for the new notes.

This investment involves risk. See "Risk Factors" beginning on page 10.

- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has determined whether this prospectus is truthful or complete. Nor
have they made, nor will they make, any determination as to whether anyone
should buy these securities. Any representation to the contrary is a criminal
offense.
- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS

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Page
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Prospectus Summary..................................1
Risk Factors.......................................10
Forward-Looking Statements.........................17
Use of Proceeds....................................18
Capitalization.....................................19
Selected Historical and Pro Forma Financial
Data............................................20
Unaudited Pro Forma Condensed Financial
Data............................................23
Management's Discussion and Analysis of
Financial Condition and Results of Operations...25
Business...........................................32
Management.........................................45
Certain Relationships and Related Transactions.....46
Overview of the Independent Power Industry
in New York.....................................47

Page
Summary Descriptions of the Principal
Agreements Relating to the Project..............49
Regulation.........................................76
The Exchange Offer.................................82
Description of Notes...............................90
Federal Income Tax Consequences...................138
Plan of Distribution..............................142
Legal Matters.....................................142
Experts...........................................142
Where You Can Find More Information...............143

Index to Financial Statements.....................F-1
Exhibit A--Independent Engineer's Report
</TABLE>

In making an investment decision regarding the new notes, you must rely on
your own examination of our partnership and the terms of the offering, including
the merits and risks involved. The contents of this prospectus are not to be
considered as legal, business or tax advice. You should consult with your own
counsel, accountants and other advisors as to legal, tax, business, financial
and other related aspects of an investment in the notes.

You should not rely on any information not contained in this prospectus.
We have not authorized anyone to provide you with different information. We are
not making an offer of the notes in any state where the offer is not permitted.
You should not assume that the information contained in this prospectus is
accurate as of any date other than the date on the front cover of this
prospectus.

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<PAGE>

PROSPECTUS SUMMARY

This summary does not contain all of the information that may be important
to you. We encourage you to read this entire prospectus, including the risk
factors, financial data and the accompanying notes, before making an investment
decision. References in this prospectus to "Funding L.P." mean Project Orange
Funding, L.P., a Delaware limited partnership. References to "Orange L.P." mean
Project Orange Associates L.P., a Delaware limited partnership. References to
"Capital Co." mean Project Orange Capital Corp., a Delaware corporation. Funding
L.P. was merged with and into Orange L.P. immediately following the issuance of
the old notes on December 6, 1999. Except for historical financial information
and unless otherwise indicated, all information presented below relating to
Orange L.P. gives effect to the consummation of the merger.

THE EXCHANGE OFFER

On December 6, 1999, we completed an offering of $68.0 million principal
amount of our 10.5% Senior Secured Notes due 2007. We entered into a
registration rights agreement with the initial purchaser of these notes in which
we agreed to complete this exchange offer. You should read the discussion under
the headings "--The New Notes" on page 2 and "Description of Notes" on page 90
for more information about the new notes.

We believe that the new notes to be issued in the exchange offer may be
resold by you without compliance with the registration and prospectus delivery
provisions of the Securities Act of 1933, unless you are an affiliate of Orange
L.P. or Capital Co. or an underwriter or a broker dealer. You should read the
discussion under the heading "The Exchange Offer" on page 82 for further
information regarding the exchange offer and resale of the new notes.

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<S> <C>
The Exchange Offer............................ We are offering to exchange up to $68.0 million of new notes, which have
been registered under the federal securities laws, for up to $68.0
million of old notes. Old notes may only be exchanged in increments of
$1,000. The economic terms of the new notes are identical to the old
notes. See "The Exchange Offer" on page 82.

Tenders; Expiration Date; Withdrawal.......... The exchange offer will expire at 5:00 p.m. New York City time on
__________, 2000, unless we extend it. If extended, the term "expiration
date" will mean the latest date and time to which the exchange offer is
extended. If you decide to exchange your old notes for new notes, you
must acknowledge that you are not engaging in, and do not intend to
engage in, a distribution of the new notes. You may withdraw your tender
of old notes at any time before ________, 2000.

Conditions to the Exchange.................... We are not required to accept any old notes in exchange for new notes.
We may terminate or amend the exchange offer if we determine that the
exchange offer violates applicable law or any applicable interpretation
of the SEC.

Tender Procedures - Beneficial Owners......... If you wish to tender notes that are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee, you should
contact the registered holder promptly and instruct the registered
holder to tender on your behalf.

If you are a beneficial holder, you should follow the instructions
received from your broker or nominee with respect to tendering
procedures and should contact your broker or nominee directly.

Tender Procedures - Registered Holders
and DTC Participants.......................... If you are a registered holder of notes and you wish to participate in
</TABLE>

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<PAGE>

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the exchange offer, you must complete, sign and date the letter of
transmittal delivered with this prospectus, or a facsimile of the
letter. If you are a participant in The Depositary Trust Company and you
wish to participate in the exchange offer, you must instruct DTC to
transmit to the exchange agent a message indicating that you agree to be
bound by the terms of the letter of transmittal. You should mail or
otherwise transmit the letter of transmittal or facsimile (or DTC
message), together with your old notes and any other required
documentation to U.S. Bank Trust National Association, as exchange
agent.
Guaranteed Delivery Procedures................ If you are a registered holder of old notes and you wish to tender them,
but they are not immediately available or you cannot deliver them or the
letter of transmittal to the exchange agent prior to the expiration
date, you must tender your old note according to special guaranteed
delivery procedures. For more details, see "The Exchange Offer" --
"Procedures for Tendering--Registered Holders and DTC
Participants--Registered Holders" on page 85.

Federal Income Tax Consequences............... In the opinion of Piper Marbury Rudnick & Wolfe LLP the exchange of old
notes in the exchange offer will not result in any gain or loss to you
for federal income tax purposes. See "Federal Income Tax Consequences"
on page 138.

Exchange Agent................................ U.S. Bank Trust National Association is the exchange agent for the
exchange offer. Its address is 180 Fifth Street, St. Paul, Minnesota
55101, Attention: Corporate Trust Services, Specialized Finance. Its
telephone number is (651) 244-1215.

THE NEW NOTES

Offered Securities............................ Up to $68,000,000 aggregate principal amount of 10.5% Senior Secured
Notes Series B due 2007 which have been registered under the Securities
Act.

Maturity Date................................. September 15, 2007.

Average Life.................................. The average life of the notes is 4.6 years.

Interest Payment Dates........................ We will pay interest on the new notes on March 15 and September 15 of
each year.

Scheduled Principal Payments.................. We will pay the principal of the new notes in semi-annual installments,
which commenced March 15, 2000, as follows:
</TABLE>

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<PAGE>

Scheduled Percentage of
Payment Date Principal
Amount Payable
March 15, 2000......................... 3.25%
September 15, 2000..................... 6.75%
March 15, 2001......................... 4.25%
September 15, 2001..................... 4.50%
March 15, 2002......................... 4.50%
September 15, 2002..................... 5.25%
March 15, 2003......................... 5.25%
September 15, 2003..................... 6.00%
March 15, 2004......................... 6.00%
September 15, 2004..................... 6.50%
March 15, 2005......................... 7.00%
September 15, 2005..................... 7.00%
March 15, 2006......................... 8.00%
September 15, 2006..................... 8.00%
March 15, 2007......................... 8.75%
September 15, 2007..................... 9.00%

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Collateral.................................... To secure the new notes we will, subject to some permitted exceptions, provide:

o a perfected, first priority lien on the funds deposited in the accounts
which Orange L.P. established under the Deposit and Disbursement
Agreement between and Orange L.P. and U.S. Bank Trust National
Association;

o a perfected, first priority lien on substantially all of Orange L.P.'s
assets, including an assignment of all of the contracts to which Orange
L.P. is a party; and

o a perfected, first priority pledge of Orange L.P.'s general and limited
partnership interests.

For more details, see "Description of Notes--Collateral" on page 91.

Ranking....................................... The new notes will rank senior in right of payment to all of our subordinated
indebtedness issued in the future, if any. The new notes will rank equally in right
of payment with our future senior borrowings, if any. We do not have any debt equal
in rank to the notes. For more details, see "Description of Notes--Brief Description
of the Notes" on page 90.

Recourse...................................... Our owners are not directly obligated under the new notes, but our owner's
partnership interests pledged as security for the new notes may be foreclosed upon.
Our owners are not obligated to contribute additional funds if monies available to
us are insufficient for the payment of debt service in respect of the new notes.

</TABLE>

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<S> <C>
Optional Redemption........................... We may redeem the new notes at our option at any time and from time to time, in
whole or in part, upon not less than 30 nor more than 60 days' notice to each holder
of new notes. If we choose to redeem the new notes, the redemption price will be the
principal amount of the new notes being redeemed, plus accrued interest through the
date of redemption, plus an additional amount intended to give each holder of new
notes a yield comparable to U.S. Treasury securities, plus 50 basis points, or
one-half of one percent. For more details, see "Description of Notes--Optional
Redemption" on page 97.

Mandatory Redemption.......................... We will be required to redeem the new notes under specific circumstances, in whole
or in part, at a redemption price equal to the principal amount of the new notes
being redeemed plus accrued and unpaid interest to the redemption date. For more
details, see "Description of Notes--Mandatory Redemption" on page 97.

Change of Control............................. If a change of control occurs, we will be required to make an offer to repurchase
the new notes, in whole or in part, at a price equal to 101% of the principal amount
of those notes then outstanding, plus any accrued and unpaid interest. Our ability
to pay cash to the holders of the new notes is limited by our then existing
financial resources. For more details, see "Description of Notes--Repurchase at the
Option of Holders upon Change of Control" on page 98.

Principal Covenants........................... The indenture contains restrictive covenants that limit our ability to:

o incur additional indebtedness;

o release funds from reserve accounts established under the Deposit and
Disbursement Agreement;

o create liens;

o sell assets;

o pay dividends or make distributions;

o enter into sale and lease-back transactions;

o enter into some types of transactions with affiliates;

o take actions with respect to the material agreements to which we are a
party; and

o enter into any transaction of merger or consolidation or change our form
of organization or our business.

For a more detailed description of these covenants, see "Description of
Notes--Certain Covenants" on page 106.
</TABLE>

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<PAGE>

RISK FACTORS

Our ability to make payments on the notes depends entirely on our
successful operation of the project and the steam plant. We are dependent on
third parties, whom we do not control, to manage the project and the steam
plant, to provide fuel, to provide operation and maintenance services and to
purchase electricity. In addition, we must comply with many statutory and
regulatory standards in order to operate the project and the steam plant.

The "Risk Factors" section, which begins on page 10, contains a detailed
discussion of these and other factors that you should consider in evaluating an
investment in the new notes.

THE ISSUERS

Orange L.P. and Capital Co. will issue the new notes. On December 6, 1999,
Funding L.P. and Capital Co. issued the old notes. Funding L.P. and Capital Co.
were formed on November 12 and November 10, 1999, respectively, for the sole
purpose of issuing the old notes. Funding L.P. merged into Orange L.P., which
succeeded to Funding L.P.'s obligations under the old notes. Orange L.P. is a
Delaware limited partnership formed in 1988 for the purpose of constructing,
owning and operating the project. Since Funding L.P. and Capital Co. were both
nominally capitalized and have no operations, separate financial statements or
other financial data for these entities have not been presented in this
prospectus.

THE PROJECT

The project includes an 80 megawatt natural gas-fired simple cycle
cogeneration facility located adjacent to the campus of Syracuse University in
Syracuse, New York and a 9.5 mile natural gas pipeline connecting the facility
to its fuel supply. The project commenced commercial operation in July 1992.

We believe the key elements of the project are as follows:

o Stable Revenue Stream. Orange L.P. and Niagara Mohawk Power Corporation, a
utility serving areas of central, northern and western New York, have
entered into contracts that are structured to provide Orange L.P. with a
fixed annual indexed schedule of prices for electricity and, consequently,
a stable stream of revenues through June 30, 2008.

o Prepaid Fuel Supply. As of December 31, 1999, the project had a remaining
prepaid supply of approximately 69.1 million MMBtu of natural gas which
Orange L.P. purchased in 1991 from Noranda Inc., which assigned its
obligations to Canadian Hunter Exploration Ltd. in December 1999. We expect
that the remaining quantity of prepaid natural gas will be sufficient to
meet the project's fuel requirements beyond the term of the notes.

o Asset Management by Niagara Mohawk Energy Marketing. Orange L.P. has
recently hired Niagara Mohawk Energy Marketing, Inc. to manage Orange
L.P.'s business operations and finances. Niagara Mohawk Energy Marketing
has a thorough understanding of the upstate New York energy market and
experience in managing natural gas-fired cogeneration facilities such as
this project.

o Operation and Maintenance by GE International. General Electric
International, Inc. operates and performs all routine and major maintenance
on the project. Orange L.P. is a member in a lease engine support program
under which, if either of the project's gas turbine generators becomes
inoperable, General Electric will, within 72 hours of the outage, deliver
and install leased gas turbine equipment until the damaged gas turbine can
either be repaired or replaced.

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<PAGE>

o Long-Term Steam Contract with Syracuse University. The project supplies
steam to Syracuse University under a steam contract with a remaining stated
term of approximately 32 years. Orange L.P. operates the steam plant as an
alternative source of steam generation under a long-term operating
agreement with Syracuse University. The steam plant is a steam generating
boiler facility owned by Syracuse University and is located adjacent to the
project.

o Beneficial Tax Arrangement. The project occupies an approximately one-acre
parcel of land leased from Syracuse University under a lease agreement for
a remaining stated term of approximately 32 years. As part of a beneficial
tax arrangement with the City of Syracuse, Orange L.P. makes lease payments
instead of taxes to the City of Syracuse at rates substantially lower than
the local tax rates.

In the section entitled "Business" and the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" we
summarize in detail the terms of each of the project's contractual arrangements
and the background of the entities that are counterparties to these contracts,
as well as the financial impact of each of these arrangements on the project.

Our executive offices are located c/o Scolaro, Shulman, Cohen, Lawler &
Burstein, P.C., 90 Presidential Plaza, Syracuse, New York 13202-2200. Our
telephone number is (315) 471-8111.

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<PAGE>

SUMMARY SELECTED HISTORICAL FINANCIAL DATA

The following table shows Orange L.P.'s summary selected historical and
pro forma financial data for the periods indicated. The summary selected
historical financial data for the five years ended December 31, 1999 are derived
from the audited financial statements of Orange L.P. This summary selected
historical data is qualified in its entirety by the more detailed information
and financial statements, including the related notes, included in this
prospectus. You should read the summary selected historical financial data in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in this prospectus.
Our unaudited summary pro forma financial data presented below are based
on our historical financial statements as adjusted to give effect to the
offering of the old notes, GAS Orange's acquisition of partnership interests in
Orange L.P. and the merger of Funding L.P. with and into Orange L.P. The pro
forma income statement and other data for the year ended December 31, 1999 give
effect to the offering of the old notes, the acquisition, and the merger as if
they had occurred on January 1, 1999. The pro forma adjustments are based upon
available information and upon assumptions that management believes are
reasonable under the circumstances. The pro forma financial statements do not
purport to represent what our actual results of operations or actual financial
position would have been if the offering of the old notes, the acquisition and
the merger had occurred on those dates or to project our results of operations
or financial position for any future period or date. The following pro forma
financial data should be read in conjunction with the "Unaudited Pro Forma
Condensed Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and our financial statements and the
related notes included in this prospectus.

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Year Ended December 31
------------------------------------------------------------------------------
Pro Forma (c)
1995 1996 1997 1998(d) 1999 1999

Income Statement Data: (Dollars in thousands)
Revenues
<S> <C> <C> <C> <C> <C> <C>
Energy revenues....................... $36,690 $40,801 $37,304 $41,308 $39,919 $39,919
Gas revenues.......................... -- -- -- -- 469 469
Steam revenues........................ 2,986 3,322 3,194 2,693 2,929 2,929
Deferred amortization income.......... -- -- -- 7,666 15,333 15,333
-------- ------- ------- ------- ------ ----------
Total revenues...................... 39,676 44,123 40,498 51,667 58,650 58,650
-------- ------- ------ ------- ------ ---------
Operating Expenses
Operating and maintenance expenses.... 18,466 19,276 17,595 18,095 15,158 15,170
Other operating expenses.............. 2,837 3,302 4,218 5,419 5,544 5,544
Depreciation and Amortization......... 3,121 3,153 3,221 6,718 10,125 10,125
Amortization--swap contract........... -- -- -- 4,382 9,364 9,364
Amortization--prepaid gas supply...... 2,659 3,529 3,897 4,895 3,845 3,845
-------- ------- ------- ------- ------ ----------
Total cost of operations............ 27,583 29,260 28,931 39,509 44,036 44,048
-------- ------- ------ ------ ------ ---------
Operating income...................... 12,093 14,863 11,567 12,158 14,614 14,602
-------- ------- ------ ------ ------ ---------
Interest expense...................... 15,333 15,063 14,694 7,364 476 6,875
Amortization--debt issuance costs..... -- -- -- -- -- 959
Interest income....................... 294 (262) (438) (235) (272) (272)
Other (income)/expense................ -- -- -- -- -- --
-------- --------- ------ ----- --------- ---------
Net income (loss)..................... ($2,946) $ 62 ($2,689) $5,029 $14,410 7,040
======= ===== ======= ====== ======= ---------

Other Data:
EBITDA(a)............................. $17,873 $21,545 $18,685 $20,487 $ 22,615 $22,603
Capital expenditures.................. $ -- $ -- $ 40 $ 44 $ 440 $ 440
Ratio of earnings to fixed charged (b) 0.8x 1.0x 0.8x 1.7x 27.0x 1.9x

Cash Flow Data
Provided by (used in)
Operating Activities.................. $ 6,141 $ 7,341 $ 4,538 $ 7,489 $ 877
Investing Activities.................. 0 (6) (40) 178,932 (3,332)
Financing Activities.................. (9,499) (3,500) (4,032) (185,353) 835

<CAPTION>
As of December 31,
-----------------------------------------------------------

1995 1996 1997 1998(d) 1999
Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents............. $ 1,314 $ 5,149 $ 5,615 $ 6,683 $5,063
Restricted cash and cash equivalents.. 8,130 10,494 13,062 12,603 13,415
Property, plant & equipment, net...... 111,185 108,032 104,851 98,177 88,570
Total assets.......................... 202,322 202,498 199,582 257,940 244,577
Current liabilities................... 9,254 11,104 14,558 29,369 37,224
Long-term debt........................ 164,062 160,030 153,942 -- 60,054
Total liabilities..................... 180,452 180,566 180,339 241,434 272,318
Total partners' capital............... $21,870 $21,932 $19,243 $16,506 (27,741)
</TABLE>

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(a) EBITDA is defined as earnings before interest expense, depreciation, and
amortization expenses related to prepaid gas, the swap contract, and debt
issuance costs, and excluding deferred amortization income. EBITDA is
presented because we believe it is a widely accepted financial indicator of
an entity's ability to incur and service debt. You should not consider
EBITDA as an alternative to net income or operating income, as an indicator
of Orange L.P.'s operating performance or other operations or cash flow
data prepared in accordance with generally accepted accounting principles,
or as an alternative to cash flow as a measure of liquidity. Other entities
may calculate EBITDA differently and therefore EBITDA as determined by
other entities may not be comparable. You should also note that minimum
levels of EBITDA are not required by our financial covenants under the
indenture or the other financing documents. We use this measure in our
financial and business planning process to provide reasonable assurance
that our forecasts will provide adequate interest coverage to meet debt
service and working capital requirements.

(b) The ratio of earnings to fixed charges is computed by dividing earnings
(net income/loss plus interest charges) by fixed charges. Fixed charges
include interest expense and amortization of capitalized expenses related
to indebtedness. The deficiency in earnings for the years ended December
31, 1997 and 1995 was $2,689,000 and $2,946,000, respectively.

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<PAGE>

(d) During 1998, Orange L.P. entered into the master restructuring agreement
with Niagara Mohawk, whereby its power purchase agreement was amended. See
"Summary Descriptions of the Principal Agreements Relating to the Project--
Amended Power Purchase Agreement" on page 49.

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<PAGE>

RISK FACTORS

In addition to the other information in this prospectus, you should
carefully consider the risks described below before deciding to exchange your
old notes for the new notes. We believe that these risks are the material risks
facing us although they are not the only ones facing us.

The discussion in the "Risk Factors" refers to the indexed swap agreement,
the amended power purchase agreement, the steam contract, the steam plant
operating agreement, the gas purchase agreement, the firm gas transportation
contract, the operation and maintenance agreement and the asset management
agreement. These agreements are further identified in "Business -- Principal
Contracts and Contracting Parties" on page 34. In addition, we refer to the
ground lease and the lease and sublease agreement in "Risk Factors". The ground
lease is the lease agreement dated as of February 27, 1990 between Syracuse
University and Orange L.P. and the lease and sublease agreement is the lease and
sublease agreement dated as of April 5, 1991 between SIDA and Orange L.P.

DEPENDENCE UPON OPERATIONS OF THE PROJECT AND THE STEAM PLANT--WE MAY NOT BE
ABLE TO MAKE PAYMENTS TO YOU UNDER THE NOTES IF WE DO NOT OPERATE THE PROJECT
AND THE STEAM PLANT SUCCESSFULLY.

Our ability to make payments of principal, premium, if any, and interest
on the notes depends entirely on the successful operation of the project and the
steam plant. Operating the project and the steam plant involves, among other
things, general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. Changes in these factors could make
it more expensive for Orange L.P. to operate the project or the steam plant,
could require additional capital expenditures or could reduce some benefits
currently available to us. In addition to the other risks identified in "Risk
Factors," a variety of other risks affect the project and the steam plant, some
of which are beyond Orange L.P.'s control, including:

o The project or the steam plant could perform below expected levels of
output or efficiency;
o The natural gas supply could be interrupted or unavailable;
o Operating costs could increase;
o Delivery of electricity to Niagara Mohawk or the New York Independent
System Operator could be disrupted;
o Environmental problems could arise which could lead to fines or a shutdown
of the project or the steam plant;
o Project units and equipment have broken down or failed in the past and
could break down or fail in the future and replacement parts may be
difficult to obtain;
o The operator of the project and the steam plant could suffer labor
disputes;
o The government could change permit or governmental approval requirements;
o Third parties could fail to perform their contractual obligations to Orange
L.P.; and
o Catastrophic events, such as fires, earthquakes, explosions, floods, severe
storms or other occurrences, could affect the project, the steam plant,
Niagara Mohawk or other relevant third parties.

No one can assure you that none of these events will happen or that we
will operate the project successfully to enable us to make payments under the
notes or that Orange L.P.'s financial condition or results of operations in the
future will match those of the past. For example, one of the project's turbines
was out of service from April 15 through June 21, 1999 due to the inability of
GE Energy Plant Operations, Inc., GE International's

-10-
<PAGE>

predecessor, to obtain a replacement engine in a timely manner, even with the
dedicated spare engine. A turbine was also out of service from November 1
through November 6, 1999.

In addition, if the New York Independent System Operator market price of
electricity exceeds the fixed payment price under the indexed swap agreement
with Niagara Mohawk, and Orange L.P. is unable, by reason of equipment failure
or otherwise, to generate and sell sufficient electricity into the New York
Independent System Operator market to meet its floating payment obligation to
Niagara Mohawk under the indexed swap agreement (which causes Orange L.P. to
default on its payment obligation under the indexed swap agreement), then
Niagara Mohawk may terminate the indexed swap agreement. If Niagara Mohawk
terminated the indexed swap agreement, this would have a material adverse effect
on Orange L.P.'s revenues and could make us unable to make payments of
principal, premium, if any, and interest on the notes when due. See "Summary
Descriptions of the Principal Agreements to the Project--Amended Power Purchase
Agreement--Revenues Generated by Amended Power Purchase Agreement" on page 54.
For additional information regarding recent shutdowns of the project resulting
from equipment failure, see "Exhibit A--Independent Engineer's Report."

DEPENDENCE UPON PERFORMANCE BY THIRD PARTIES--WE MAY NOT BE ABLE TO REPAY THE
NOTES IF UNRELATED THIRD PARTIES DO NOT FULFILL THEIR COMMITMENTS TO US.

Our ability to make payments of principal, premium, if any, and interest
on the notes when due, may be materially and adversely affected by the
performance of third parties whom we do not control under commercial agreements
to which Orange L.P. is party. These third parties include, among others:

o Niagara Mohawk under the amended power purchase agreement;

o Syracuse University under the ground lease, the steam contract and the
steam plant operating agreement;

o Canadian Hunter or Union Pacific Resources, Inc., under the gas purchase
agreements;

o Tennessee Gas Pipeline Company under the firm gas transportation contract;

o GE International under the operation and maintenance agreement;

o Niagara Mohawk Energy Marketing under the asset management agreement; and

o Counterparties under agreements under which we may agree to sell natural
gas or electricity or purchase electricity.

We call these commercial agreements, together with the other documents and
agreements relating to the project, the project documents.

If any of these third parties:

o claim that there was a defect in proceedings with respect to the approval
of their project documents;

o claim that their project documents were not duly authorized by them;

o disavow their obligations under their project documents;

o fail to perform their contractual or other obligations; or

o are excused from performing their obligations because we failed to perform
our obligations or because of governmental actions or other actions outside
of our or their control,

-11-
<PAGE>

then, among other things, we may not be able to obtain alternate customers,
goods or services to cover any third party's non-performance of its obligations.
In particular, if Niagara Mohawk fails to fulfill its contractual obligations
under the amended power purchase agreement, or is excused from fulfilling its
contractual obligations because of governmental actions or other actions, our
revenues would significantly decrease and we would not be able to make payments
of principal, premium, if any, and interest on the notes when due.

In addition, failure to receive sufficient natural gas or any interruption
in the supply of natural gas would have a material adverse effect on the
project, including possibly giving Syracuse University a right to terminate the
steam contract, the steam plant operating agreement and the ground lease. No
assurance can be given that there will not be a disruption of supply or that
cost increases will not result.

RISKS ARISING FROM REGULATION AND DEREGULATION--IF ORANGE L.P. AND ITS CUSTOMERS
AND SUPPLIERS ARE NOT ABLE TO COMPLY WITH REGULATORY STANDARDS, THE OPERATIONS
OF THE PROJECT AND THE STEAM PLANT WOULD BE ADVERSELY AFFECTED.

Orange L.P., as well as its customers and suppliers, are required to
comply with many federal, state and local statutory and regulatory standards and
to maintain permits and governmental approvals required to operate the project
and the steam plant. Some of these permits and governmental approvals contain
specific conditions. We cannot assure you that:

o Orange L.P. and the operator will be able to operate the project and the
steam plant and perform under Orange L.P.'s contracts with third parties in
the future in accordance with applicable permits, governmental approvals,
conditions or regulations, or that the conditions contained in these
permits or governmental approvals will not change;

o Orange L.P.'s customers and suppliers will be able to perform under their
contracts with Orange L.P. in the future and in accordance with their
applicable permits, governmental approvals, conditions or regulations, or
that the conditions contained in these permits or governmental approvals
will not change; and

o changes in laws or regulations (including, but not limited to, taxes and
environmental laws) that may occur will not impose more stringent or
comprehensive requirements on the operation or maintenance of the project,
resulting in increased compliance costs, the need for additional capital
expenditures or the reduction of some benefits currently available to the
project or the steam plant, or expose Orange L.P. to liabilities for
previous actions taken in compliance with laws in effect at the time or for
actions taken by or conditions caused by third parties.

UNCERTAINTIES ASSOCIATED WITH INSURANCE--INSURANCE PROCEEDS MIGHT NOT BE ENOUGH
TO SATISFY OUR OBLIGATIONS UNDER THE NOTES IN THE EVENT OF A MATERIAL LOSS.

Orange L.P. currently maintains property, business interruption,
catastrophic and general liability insurance for the project and the steam
plant. If an insurable loss occurs with respect to the project, the proceeds of
property insurance will be paid to the collateral agent to be held by the
collateral agent and will be applied as required under the indenture and the
Deposit and Disbursement Agreement. The collateral agent will apply proceeds of
insurance relating to the steam plant required under the steam plant operating
agreement with Syracuse University as provided in the steam plant operating
agreement. We cannot assure you that this insurance coverage will be available
in the future at commercially reasonable costs or terms or that the amounts for
which the project or the steam plant is or will be insured will cover all
potential losses.

Orange L.P. has title insurance policies in the amount of $68.0 million in
favor of the collateral agent with respect to the first mortgage on, among other
things, the interest of the City of Syracuse Industrial Development Agency,
which we call SIDA, under the ground lease and easement agreements and Orange
L.P.'s interest under the lease and sublease agreement. Primarily because of the
nature of the rights obtained from Syracuse University and SIDA, the insurance
coverage afforded by such policies may be narrower, and the exceptions to
coverage

-12-
<PAGE>

may be broader, than those which are commonly provided in transactions of this
nature. The title insurance policy includes affirmative assurance that all New
York mortgage and recording tax required to be paid with respect to the first
mortgage has been paid. In fact, no mortgage recording tax will be paid, because
the first mortgage will include SIDA as a mortgagor and will be recorded under
New York Tax Commission and Controller opinions to the effect that mortgages
similar to the first mortgage given by SIDA and similar industrial development
agencies are entitled to exemption from the mortgage recording tax. If in fact
mortgage recording tax is due with respect to the first mortgage and is not
paid, the first mortgage and the notes will not be able to be enforced until the
mortgage recording tax is paid. No one can assure you that the title insurer or
its reinsurers will be able to satisfy any claims which may be made under the
title insurance policy, or that the coverage amounts would be sufficient to
satisfy amounts outstanding under the notes at any time.

RISKS RELATING TO EXERCISE OF REMEDIES--THE COLLATERAL AGENT'S ABILITY TO
FORECLOSE ON ORANGE L.P.'S ASSETS MAY BE LIMITED BY BANKRUPTCY LAW AND DEPENDS
ON ORANGE L.P.'S BEING ABLE TO OBTAIN THE CONSENTS OF THIRD PARTIES AND ON THE
COLLATERAL AGENT'S OR ANY ACQUIRER'S BEING ABLE TO OBTAIN NEW PERMITS AND
GOVERNMENTAL APPROVALS.

Some of the assets comprising the collateral securing the notes require
the consent of third parties as a condition to their transfer or utilization
upon or following a foreclosure. No one can assure you that these third parties
will give their consent or cooperation when asked to facilitate a transfer of
assets or operating rights to the collateral agent or any other person upon or
following a foreclosure. Accordingly, the collateral agent may not have the
ability to foreclose upon all of these pledges and liens without these consents
or, following a foreclosure, to operate or utilize such assets.

Some of the permits and governmental approvals that serve as collateral
for the notes are not transferable. Upon or following a foreclosure, the
acquiror of the project would have to apply for new permits and governmental
approvals in order to continue operation of the project and the steam plant. Any
delays or inability in obtaining such new permits or appeals could reduce the
proceeds available to the holders of notes in the event of a foreclosure.

The right of the collateral agent to repossess and dispose of the
collateral if an event of default occurs is likely to be significantly impaired
by applicable bankruptcy law if a bankruptcy case were to be commenced by or
against us prior to the collateral agent's having repossessed and disposed of
the collateral. Under the federal bankruptcy code, a secured creditor such as
the collateral agent may be prohibited from repossessing or disposing of its
security from a debtor in a bankruptcy case, and any action allowed to be taken
by the collateral agent to recover its security may be significantly delayed.
During any such delay the value of the collateral may diminish. It is also
possible that Orange L.P. could seek to oppose any exercise of repossession
rights.

If a bankruptcy case is commenced by or against any party to the project
documents other than Orange L.P., all or part of the project documents also
could possibly be rejected under section 365 or section 1123 of the federal
bankruptcy code by such other parties or trustees appointed in such bankruptcy
cases and, therefore, not be specifically enforceable. If the lease and sublease
agreement is rejected in a bankruptcy case with respect to SIDA, or the ground
lease is rejected in a bankruptcy case with respect to Syracuse University,
under section 365(h) of the federal bankruptcy code, Orange L.P. may be able to
retain its rights under such leases (including rights such as those relating to
the amount and timing of payment of rent and other amounts payable under the
ground lease and any right of use, possession, quiet enjoyment, subletting,
assignment or hypothecation) that are appurtenant to the real property covered
by the ground lease for the balance of the term and any renewal or extension
term enforceable under non-bankruptcy law. There can be no assurance that
section 365(h) will not be changed to Orange L.P.'s detriment, or that Orange
L.P. or the collateral agent as its assignee will be able to enforce (under
section 365(h)) all of Orange L.P.'s rights under the lease and sublease
agreement or the ground lease (including specifically Orange L.P.'s right to
purchase SIDA's interest in the project for one dollar).

Orange L.P.'s ability to continue to operate and maintain possession of
the project as collateral for the holders of the notes depends upon the master
lease and the ground lease remaining in effect. If Syracuse University properly
terminates the ground lease, it has the right to take possession of the Project
and the premises

-13-
<PAGE>

without any obligation to pay the notes. If SIDA terminates the lease and
sublease agreement, SIDA has the right and obligation to convey its interest in
the project to Orange L.P. for one dollar, in which event the PILOT Agreement
would terminate. For a discussion of events which could result in the
termination of the ground lease or the lease and sublease agreement, see
"Summary Descriptions of the Principal Agreements Relating to the
Project--Ground Lease Arrangement--Events of Default; Termination of Ground
Lease" on page 58 and "--Ground Lease Arrangement-- Termination of Master Lease,
Reconveyance of the Project" on page 59. See also "--University Consent and
Agreement," on page 59 "--SIDA Consent and Agreement" on page 61 and "--PILOT
Consent and Agreement" on page 64 for a discussion of provisions mitigating
these termination risks, including provisions requiring Syracuse University,
SIDA and the City of Syracuse to offer the collateral agent a new ground lease,
lease and sublease agreement and PILOT Agreement, respectively.

NEW MANAGEMENT OF THE PROJECT AND THE STEAM PLANT--THE NEW MANAGING PARTNER MAY
NOT BE ABLE TO MANAGE THE PROJECT AND THE STEAM PLANT EFFECTIVELY.

NCP Energy, Inc., a wholly owned subsidiary of GPU International, Inc.,
under a management agreement with NCP Syracuse, Orange L.P.'s former general
partner, served as attorney-in-fact for Orange L.P. In that role, NCP Energy
made most of the day-to-day business decisions relating to the management of the
project and the steam plant since 1995. Niagara Mohawk Energy Marketing now
serves as asset manager of the project and the steam plant under an asset
management agreement and a related limited agency agreement, and GE
International operates and maintains the project and the steam plant under the
operation and maintenance agreement. If the project or the steam plant is not
managed effectively, Orange L.P.'s business, financial condition and results of
operations could be materially and adversely affected. See "Business--Operation
and Maintenance" on page 39 and "--Asset Management" on page 39.

UNCERTAINTIES OF ESTIMATES, PROJECTIONS AND ASSUMPTIONS--IF OUR ESTIMATES,
PROJECTIONS AND ASSUMPTIONS PROVE TO BE INCORRECT WE MAY BE UNABLE TO FULFILL
SOME OF OUR CONTRACTUAL OBLIGATIONS OR MAKE PAYMENTS OF PRINCIPAL, PREMIUM OR
INTEREST ON THE NOTES.

In connection with the issuance of the old notes, we prepared estimates,
projections and assumptions to approximate the revenue generation capability of
the project and the steam plant and the associated costs, and provided them to
the independent engineer. The independent engineer evaluated the reasonableness
of these projections in light of the technical operating parameters of the
project and steam plant, the operations and maintenance budgets of the project
and steam plant, and the related assumptions and forecasts contained in the
independent engineer's report. The independent engineer based its evaluations on
its inspection and review of technical, environmental, economic and regulatory
aspects of the project and steam plant. The independent engineer's report
contains a discussion of the assumptions and forecasts used in preparing the
projections, which concern the operations and maintenance budgets of the project
and steam plant.

For purposes of preparing the projections, we made assumptions about
general business and economic conditions, such as real property and sales taxes
payable by Orange L.P. and other persons, and about numerous other material
contingencies and matters that are not within our control or the control of any
other person and the outcome of which we cannot predict with any expectation of
complete accuracy. We also made assumptions concerning operations and
maintenance costs under the operation and maintenance agreement. You should be
aware that assumptions are inherently subject to significant uncertainties, and
actual results will differ, perhaps materially, from those projected.
Accordingly, the projections are not necessarily indicative of future
performance, and we do not assume any responsibility for the accuracy of the
projections.

In particular, in preparing the projections, we have assumed that we will
not be required to incur any costs under provisions of the steam plant operating
agreement that make us responsible for rebuilding the steam boilers in the steam
plant and related apparatus and equipment when necessary. Under the terms of the
steam plant operating agreement, the replacement costs of the steam boilers are
assumed to be approximately $11.9 million. Although based on information
currently available to us we believe that the cost to rebuild or replace the
steam boilers is substantially less than this amount, we have not obtained any
formal bids or estimates from engineers. We deposited $3.5 million in the
capital expenditure reserve account. We have requested the Independent

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<PAGE>

Engineer to recalculate the projections to include the cost of the steam boiler
life extension program, which we expect to be substantially less than $3.5
million. Following the recalculation of the projections, any amount in excess of
the discounted value of the estimated required capital expenditures for the
steam boiler life extension program based on the revised projections may,
subject to the terms of the notes, be released from the capital expenditure
reserve account. We cannot assure you that the actual cost of the steam boiler
life extension program will equal the amount presented in the revised
projections or that the life extension program will be adequate to defer our
obligation, if any, to rebuild the steam boilers beyond the term of the notes.
As a result, after release of the excess amounts from the capital expenditure
reserve account, we cannot assure you that the project will generate sufficient
cash to rebuild or replace the steam boilers and meet our other obligations,
including our obligations with respect to the notes. If we defaulted on our
obligation to rebuild or replace the steam boilers, Syracuse University has the
benefit of a guaranty of those obligations given by General Electric Company. If
Syracuse University were forced to call on this guaranty and General Electric
Company were forced to perform under it, General Electric Company would have a
subrogation claim against us for the amounts it spends to discharge its
obligations under the guaranty. We cannot assure you that we will have the
resources to pay the subrogation claim.

We do not make any representation or warranty about the likely existence
of any particular future set of facts or circumstances, and you should not place
undue reliance on the projections or the independent engineer's report. If
actual results are less favorable than those shown or if the estimates and
assumptions used in formulating the projections prove to be incorrect, Orange
L.P.'s financial performance may be less favorable than that presented in the
projections. As a consequence, our ability to make payments of principal,
premium, if any, and interest on the notes when due could be adversely affected.

We prepared the projections contained in the independent engineer's report
based on our present knowledge and assumptions. Deloitte & Touche LLP, the
independent auditors of Orange, L.P., has not examined, compiled or performed
any procedures with respect to the projections. Accordingly, Deloitte & Touche
LLP does not express any opinion or other form of assurance with respect to the
projections. Deloitte & Touche LLP's report included in this prospectus relates
solely to Orange L.P.'s historical financial information. That report does not
extend to the projections contained in the independent engineer's report.
Neither we nor the independent engineer intend to provide to the holders of the
notes any projections or to evaluate any projections other than the projections
contained in the independent engineer's report.

RISKS THAT TRANSFERS OF THE PROCEEDS OF THE OFFERING COULD BE DEEMED FRAUDULENT
CONVEYANCES--A COURT COULD DECIDE IN CONNECTION WITH A BANKRUPTCY PROCEEDING TO
TAKE OR REQUIRE US TO TAKE ACTIONS THAT COULD BE DETRIMENTAL TO THE HOLDERS OF
THE NOTES.

Our payment to GAS Orange of a distribution of the proceeds from the sale
of the old notes may be subject to review under federal and state fraudulent
conveyance laws in a bankruptcy case involving, or a lawsuit commenced by or on
behalf of, our unpaid creditors. Under those laws, if a court were to find that
at the time the notes were issued, either (a) we had incurred the indebtedness
under the notes with the intent of delaying or defrauding creditors or (b) we
received less than reasonably equivalent value or fair consideration for the
notes and (i) were insolvent or rendered insolvent by reason of such
transaction; (ii) were engaged in a business or transaction for which the assets
remaining with us, constituted and unreasonably small capital; or (iii) intended
to incur, or believed that we would incur, debts that we would be unable to pay
when due, the court could subordinate the notes to our present or future
indebtedness, void the issuance of some or all of the debt under the notes,
direct the repayment of any amounts paid for the notes to us or to a fund for
the benefit of our creditors, or take other action which could be detrimental to
the holders of the notes.

We cannot assure you that a court would conclude that the indebtedness
represented by the notes is being incurred for proper purposes and in good faith
and that we were and are solvent under the standards described above and that we
had, have and will have sufficient capital for carrying on our business and
were, are and will be able to pay our debts as they mature.

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<PAGE>

FINANCING A CHANGE OF CONTROL OFFER--WE MAY NOT HAVE THE FUNDS NECESSARY TO
FINANCE A CHANGE OF CONTROL OFFER WHICH MAY BE REQUIRED UNDER THE INDENTURE.

If a change of control event occurs, we will be required under the
indenture to offer to repurchase all outstanding notes. No one can assure you
that we will have sufficient funds at the time of a change of control to be able
to make the required repurchases of the notes. See "Description of
Notes--Repurchase at the Option of Holders upon a Change of Control" on page 98.

Risk Factors Relating to the Exchange Offer.

If you do not exchange your old notes in the exchange offer, you may not ever be
able to sell them.

It may be difficult for you to sell old notes that are not exchanged in
the exchange offer. Those notes may not be offered or sold unless they are
registered or there are exemptions from the registration requirements under the
Securities Act and applicable state securities laws.

If you do not tender your old notes or if we do not accept some of your
old notes, those notes will continue to be subject to the transfer and exchange
restrictions in:

o the indenture,

o the legend on the old notes, and

o the offering memorandum relating to the old notes.

The restrictions on transfer of the old notes arise because we issued the old
notes under an exemption from the registration requirements of the Securities
Act and applicable state securities laws. In general, you may only offer or sell
the old notes if they are registered under the Securities Act and applicable
state securities laws, or offered and sold under an exemption from such
requirements. We do not intend to register the old notes under the Securities
Act. To the extent old notes are tendered and accepted in the exchange offer,
the trading market, if any, for the old notes would be adversely affected.

The market for the notes and the market prices for such notes are uncertain.

The new notes are being offered to the holders of the old notes only.
There is no public market for the new notes. The new notes could trade at prices
that may be higher or lower than the initial offering price of the old notes.
The liquidity of the trading market in the new notes, and the market price
quoted for the new notes, may be adversely affected by changes in the overall
market for similar securities, existing interest rates and by our operating
results.

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<PAGE>

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. All statements other
than statements of historical facts included in this prospectus regarding
industry prospects, our prospects and our financial position are forward-looking
statements. Although we believe that the expectations reflected in these
forward-looking statements are reasonable, we cannot give you any assurance that
our expectations will prove to be correct. We have based these statements on our
beliefs, assumptions and expectations and on information currently available to
us. These forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause actual results,
performance or achievements to differ materially from the results, performance
or achievements expressed or implied by these statements. Forward-looking
statements are not guarantees of performance.

We have identified some of these risks, uncertainties and other important
factors in "Risk Factors," in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in the assumptions made by our
independent engineer in its report, a copy of which is included in this
prospectus. You should also consider, among others, the following important
factors:

o general economic and business conditions in the United States;

o changes in governmental regulations affecting Orange L.P., the project and
the United States electric power industry;

o general industry trends;

o changes to the competitive environment;

o power costs and resource availability;

o changes in business strategy, development plans or vendor relationships, or
in Orange L.P.'s relationship with Niagara Mohawk;

o availability, terms and deployment of capital; and

o availability of qualified personnel.

These forward-looking statements speak only as of the date of this
prospectus. We do not intend to publicly update or revise these forward-looking
statements to reflect events or circumstances after the date of this prospectus,
and we do not assume any responsibility to do so.

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<PAGE>

USE OF PROCEEDS

We will not receive any proceeds from the exchange offer.

We used the proceeds we received from the sale of the old notes, together
with cash on hand,

o to make a distribution of $46.0 million to GAS Orange, which was used
in connection with GAS Orange's acquisition of partnership interests
in Orange L.P.;

o to fund the capital expenditure reserve account under the Deposit and
Disbursement Agreement in the amount of $3.5 million;

o to fund the debt service reserve account under the Deposit and
Disbursement Agreement in the amount of $6.2 million; and

o to fund transaction costs related to the offering of the old notes and
pay or provide for some obligations that arose or will arise as a
consequence of the transactions contemplated by this prospectus in an
aggregate amount of $11.1 million.

The following table sets forth the sources and uses of funds in connection
with the issuance of the old notes:

<TABLE>
<CAPTION>
Sources of Funds Uses of Funds
<S> <C> <C>
Offering of old notes............................ $66.8 Distribution to GAS Orange in
connection with acquisition...................... $46.0(a)
Capital expenditure reserve account.............. 3.5
Debt service reserve account..................... 6.2
Transaction costs and other payments ............ 11.1(b)
-----
Total Sources of Funds........................... $66.8 Total Uses of Funds.............................. $66.8
===== =====
</TABLE>

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

(a) Represented the sums of $46.0 million purchase price of partnership
interests acquired by GAS Orange, including $685,000 aggregate
distribution paid to NCP Syracuse and Syracuse Orange Partners of income
tax liability for period from July 1, 1999 to closing of GAS Orange's
acquisition of partnership interests in Orange L.P.

(b) Represented the sum of (i) $3.0 million to fund the stipulation reserve
account; (iii) $340,000 paid to GE International in respect of membership
fees for GE lease engine program; (iii) $450,000 insurance escrow
established under the partnership interest purchase agreement; and (iv)
$7.3 million of transaction fees and expenses.

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<PAGE>

CAPITALIZATION

Funding L.P. was formed on November 12, 1999 and did not engage in any
operations before it merged with and into Orange L.P. on December 6, 1999.
Capital Co. was formed on November 10, 1999 and has not engaged in any
operations since its formation. The following table sets forth the
capitalization of Orange L.P. as of December 31, 1999. The information presented
below should be read in conjunction with Orange L.P.'s unaudited Pro Forma
Condensed Financial Data, Orange L.P.'s historical financial statements and the
related notes, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in this prospectus.

PROJECT ORANGE ASSOCIATES, L.P.

As of
December 31, 1999

------------------------
(Dollars in thousands)

<S> <C>
Unrestricted cash.......................................................... $5,063
Restricted cash............................................................ 13,415
======

Senior secured notes....................................................... $66,854(a)

Partners' capital.......................................................... (27,741)
--------
Total capitalization.............................................. $39,113
=======
</TABLE>

- ----------
(a) The senior secured notes reflects the discount on debt issuance of
$1,146,000.

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<PAGE>

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table shows our selected historical and pro forma financial
data for the periods indicated. The selected financial data for the five years
ended December 31, 1999 are derived from our audited financial statements. This
selected data is qualified in its entirety by the more detailed information and
financial statements, including the related notes, included in this prospectus.
The selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this prospectus.

Our unaudited summary pro forma financial data presented below are based
on our historical financial statements as adjusted to give effect to the
offering of the old notes, GAS Orange's acquisition of partnership interests in
Orange L.P. and the merger of Funding L.P. with and into Orange L.P. The pro
forma income statement and other data for the year ended December 31, 1999 give
effect to the offering of the old notes, the acquisition, and the merger as if
they had occurred on January 1, 1999. The pro forma adjustments are based upon
available information and upon assumptions that management believes are
reasonable under the circumstances. The pro forma financial statements do not
purport to represent what our actual results of operations or actual financial
position would have been if the offering of the old notes, the acquisition and
the merger had occurred on those dates or to project our results of operations
or financial position for any future period or date. The following pro forma
financial data should be read in conjunction with the "Unaudited Pro Forma
Condensed Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and our financial statements and the
related notes included in this prospectus.

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<PAGE>

<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES, L.P.

Year Ended December 31
---------------------------------------------------------------------
Pro Forma(c)
1995 1996 1997 1998 1999 1999
Income Statement Data:
Revenues
<S> <C> <C> <C> <C> <C> <C>
Energy revenues................. $36,690 $40,801 $37,304 $41,308 $39,919 $39,919
Gas revenues.................... -- -- -- -- 469 469
Steam revenues.................. 2,986 3,322 3,194 2,693 2,929 2,929
Deferred amortization income.... -- -- -- 7,666 15,333 15,333
--------- --------- --------- -------- ------- ------
Total revenues................ 39,676 44,123 40,498 51,667 58,650 58,650
--------- --------- --------- -------- ------- ------
Operating Expenses
Operating and maintenance expenses 18,466 19,276 17,595 18,095 15,158 15,170
Other operating expenses........ 2,837 3,302 4,218 5,419 5,544 5,544
Depreciation and Amortization... 3,121 3,153 3,221 6,718 10,125 10,125
Amortization--swap contract..... -- -- -- 4,382 9,364 9,364
Amortization--prepaid gas supply 2,659 3,529 3,897 4,895 3,845 3,845
--------- --------- --------- -------- ------- ------
Total cost of operations...... 27,583 29,260 28,931 39,509 44,036 44,048
--------- --------- --------- -------- ------- ------
Operating income................ 12,093 14,863 11,567 12,158 14,614 14,602
--------- --------- --------- -------- ------- ------
Interest expense................ 15,333 15,063 14,694 7,364 476 6,875
Amortization--debt issuance costs -- -- -- -- -- 959
Interest income................. 294 (262) (438) (235) (272) (272)
Other (income)/expense.......... -- -- -- -- -- --
-------- --------- --------- -------- ------- ------
Net income (loss)............... ($2,946) $ 62 $ (2,689) $5,029 $14,410 $7,040
======= ========= ========= ======== ======= ======
Other Data:
EBITDA(a)....................... $17,873 $21,545 $18,685 $20,487 $22,615 $22,603
Capital expenditures............ $ -- $ -- $ 40 $ 44 $440 $440
Ratio of earnings to fixed charges(b) 0.8x 1.0x 0.8x 1.7x 27.0x 1.9x

Cash Flow Data
Provided by (used in)
Operating Activities.................. $ 6,141 $7,341 $ 4,538 $ 7,489 $ 877
Investing Activities.................. 0 (6) (40) 178,932 (3,332)
Financing Activities.................. (9,499) (3,500) (4,032) (185,353) 835

<CAPTION>
As of December 31,
------------------------------------------------------------
1995 1996 1997 1998(d) 1999
Balance Sheet Data:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents............. $ 1,314 $ 5,149 $ 5,615 $ 6,683 $5,063
Restricted cash and cash equivalents. 8,130 10,494 13,062 12,603 13,415
Property, plant & equipment, net...... 111,185 108,032 104,851 98,177 88,570
Total assets.......................... 202,322 202,498 199,582 257,940 244,577
Current liabilities................... 9,254 11,104 14,558 29,369 37,224
Long-term debt........................ 164,062 160,030 153,942 -- 60,054
Total liabilities..................... 180,452 180,566 180,339 241,434 272,318
Total partners' capital............... $21,870 $21,932 $19,243 $16,506 (27,741)
</TABLE>

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

(a) EBITDA is defined as earnings before interest expense, depreciation, and
amortization expenses related to prepaid gas, the swap contract, and debt
issuance costs, and excluding deferred amortization income. EBITDA is
presented because we believe it is a widely accepted financial indicator of
an entity's ability to incur and service debt. You should not consider
EBITDA as an alternative to net income or operating income, as an indicator
of our operating performance or other operations or cash flow data prepared
in accordance with generally accepted accounting principles, or as an
alternative to cash flow as measure of liquidity. Other entities may
calculate EBITDA differently and therefore EBITDA as determined by other
entities may not be comparable. You should also note that minimum levels of
EBITDA are not required by our financial covenants under the indenture or
the other financing documents. We use this measure in our financial and
business planning process to provide reasonable assurance that our
forecasts will provide adequate interest coverage to maintain debt service
and working capital requirements.
(b) The ratio of earnings (net income/loss plus interest charges) to fixed
charges is computed by dividing earnings by fixed charges. Fixed charges
include interest expense and amortization of capitalized expenses related
to indebtedness. The deficiency in earnings for the year ended December 31,
1997 and 1995 was $2,689,000 and $2,946,000, respectively.

-21-
<PAGE>

(c) The pro forma financial data for the year ended December 31, 1999 reflects
(i) interest expense calculated in accordance with the indenture as if the
debt were issued on January 1, 1999, (ii) amortization of debt
discount/issuance costs as if the debt were issued on January 1, 1999, and
(iii) the annual incremental cost of entering into the GE Lease Engine
agreement.
(d) During 1998, we completed the master restructuring agreement with Niagara
Mohawk, which amended our power purchase agreement. See "Summary
Descriptions of the Principal Agreements Relating to the Project--Amended
Power Purchase Agreement."

-22-
<PAGE>

UNAUDITED PRO FORMA CONDENSED FINANCIAL DATA

The following unaudited pro forma condensed statement of operations is
based on our historical financial statements, as adjusted to give effect to the
offering of the old notes; GAS Orange's acquisition of partnership interests in
Orange L.P., and the merger of Funding L.P. with and into Orange L.P., assuming
that these transactions occurred on January 1, 1999.

Funding L.P. and its wholly owned subsidiary Capital Co. were formed in
November 1999 for the purpose of issuing the old notes. GAS Orange was a 1%
general partner and a 98% limited partner of Funding L.P. from its formation
until its merger into Orange L.P. described below. On December 6, 1999, the
following events occurred:

o Funding L.P. and Capital Co. issued the old notes and Funding L.P.
distributed $46.0 million of the proceeds of the old notes to GAS
Orange as a partner distribution;

o Gas Orange used the $46.0 million distribution to acquire its 1%
general partnership interest and 89% limited partnership interest in
Orange L.P.; and

o Funding L.P. was then merged with and into Orange L.P., with Orange
L.P. as the surviving entity

The pro forma statement of operations and accompanying notes are derived
from and should be read in conjunction with our historical audited financial
statements and the related notes included in this prospectus. The pro forma
statement of operations is presented for informational purposes only and does
not purport to represent what Orange L.P.'s financial position or results of
operations would actually have been if the offering of the old notes, the
acquisition and the merger, had occurred on the date indicated, or to Orange
L.P.'s results of operations at any future date or for any future period.
However, the pro forma statement of operations contains, in our opinion, all
adjustments necessary for a fair presentation.

-23-
<PAGE>

PROJECT ORANGE ASSOCIATES, L.P.
Unaudited Pro Forma Statements of Operations

For Year Ended December 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>

Pro Forma
----------------------------------

As
Actual Adjustments Adjusted
<S> <C> <C> <C>
Income Statement Data:
Revenues
Energy revenues...................................................... $39,919 -- $39,919
Gas.................................................................. 469 -- 469
Steam revenues....................................................... 2,929 -- 2,929
Deferred amortization income......................................... 15,333 -- 15,333
------- ------ -------
Total revenues................................................... $58,650 -- $58,650
------- ------ -------

Operating Expenses
Operating and maintenance
Expenses.......................................................... 15,158 12 (a) 15,170
Other operating expenses............................................. 5,544 -- 5,544
Depreciation and Amortization........................................ 10,125 -- 10,125
Amortization - Swap contract......................................... 9,384 -- 9,364
Amortization - Prepaid gas
Supply............................................................ 3,845 -- 3,845
------ ------ ------
Total cost of operations.......................................... 44,036 12 (a) 44,048
------ -- ------
Operating income..................................................... 14,614 (12) 14,602
------ ------ ------
Interest expense..................................................... 476 6,399 (b) 6,875
Amortization -
debt issuance costs............................................... -- 959 (c) 959
Interest income...................................................... (272) -- (272)
Other (income)/expense............................................... -- -- --
------ ------ ------
Net income (loss).................................................... $14,410 $7,870 $ 7,040
======= ====== =======
</TABLE>

(a) Reflects the annual membership fee paid to GE International for membership
in the GE lease engine program. The total membership fee is $340,000. The
adjustment reflects the incremental increase in expense related to the
twelve months.

(b) Reflects the incremental interest expense for the first twelve months
associated with the notes calculated in accordance with the indenture.
Total interest expense for the first 12 months is $6.9 million.

(c) Reflects amortization of debt issuance costs, including discount at
issuance associated with the offering of the old notes during the first
twelve months.

-24-
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Results of Operations for the Year Ended December 31, 1998 and the Year Ended
December 31, 1999

The following discusses the results of operations of Orange L.P. comparing the
year ended December 31, 1998 with the year ended December 31, 1999.

Revenues
<TABLE>
<CAPTION>

Year Ended December 31,
1998 1999
----------------------------------------
Revenues: (Dollars in Thousands)
<S> <C> <C>
Electric generation $27,455 $11,716
Swap Contract 9,471 18,839
Deferred Swap Gain 4,382 9,364
------- -------
Sub total - Electricity 41,308 39,919
------- -------
Gas -- 469
Steam 2,693 2,929
Deferred amortization income 7,666 15,333
------- -------
Total Revenues $51,667 $58,650
======= =======
</TABLE>

Total revenues increased 14% to $58.7 million for the year ended December 31,
1999 from $51.7 million for the year ended December 31, 1998. The increase in
total revenues of $7.0 million was primarily due to the increase in deferred
amortization income based on the master restructuring agreement with Niagara
Mohawk amounting to $7.6 million; offset by a decrease in total electricity
revenues of $1.4 million for the twelve month period ended December 31, 1999.
For more details, see Principal Contracts - Indexed Swap Agreement"). The
deferred revenue represents a portion of the gain realized on proceeds received
from the restructuring of Orange L.P.'s power purchase agreement with Niagara
Mohawk.

Revenues from electricity generation decreased 57.3% to $11.7 million in 1999
from $27.5 million in 1998 and revenues from steam generation increased 9% to
$2.9 million in 1999 from $2.7 million in 1998. The significant reduction in
electricity generation revenues was primarily due to the fact that 1998 only
reflected six months of the lower pricing of electricity associated with the
implementation of the master restructuring agreement. In addition, Orange L.P.
began optimizing project revenues by reducing generation during off-peak
periods, or lower usage periods, in 1999. During "off-peak" times, or times when
demand for energy is relatively low such as in the spring, the market price of
power is low relative to the market price of natural gas during these periods.
Minimizing electrical generation during these periods increases Orange L.P.'s
gross margins. This is because Orange L.P.'s prepaid natural gas has greater
value than would the amount of electricity Orange L.P. could generate from that
quantity of natural gas. Finally, one of the project's turbines was out of
service and therefore unable to generate from April 15 through June 21, 1999.
The reduction in electric generation revenues was partially offset by an
increase in swap contract revenues and the deferred swap gain. In addition, the
extended turbine outage in the spring of 1999 did not have a material adverse
impact on the project's financial performance because the price of energy
payable under the power put agreement during that period, which was the Proxy
Market Price, remained relatively low. Therefore, as described above relating
to the project's optimization program, during the turbine outage the project was
able to sell natural gas at or near the energy equivalent price. This also
compensated in part for the loss in generation revenue.

-25-
<PAGE>

Operating Expenses

Year Ended December 31,
1998 1999
----------------------------------------
Operating Expenses: (Dollars in Thousands)
<S> <C> <C>
Operating and maintenance expenses $18,095 $15,158
Other operating expenses 5,419 5,544
Depreciation and amortization 6,718 10,125
Amortization of prepaid gas supply 4,895 3,845
Amortization of swap contract 4,382 9,364
_______ _______
Total Operating Expenses $39,509 $44,036
======= =======
</TABLE>

Total operating expenses increased 11.5% to $44.0 million for the year ended
December 31, 1999 from $39.5 million for the year ended December 31, 1998.
Operating and maintenance expenses declined 16.2% to $15.2 million in 1999 from
$18.1 million in 1998 due to a reduction in maintenance fees and expenses
resulting from the amendment of the operating and maintenance agreement in
November of 1998.

In June 1998, Orange L.P.'s power purchase agreement with Niagara Mohawk was
restructured, and the remaining depreciable life of the capitalized costs
described above was reduced to 10 years to match the term of the amended
agreement. Prior to the restructuring of the power purchase agreement,
capitalized costs were depreciated over the term of the original power purchase
agreement of 39.6 years. In July 1998, Orange L.P. changed the basis of its
amortization of prepaid gas supply to a fixed per unit rate based upon the gas
use in conjunction with the implementation of the master restructuring agreement
and the power put agreement. Prior to the master restructuring agreement,
prepaid gas supply was amortized on increasing per unit amounts of expense
inherent in the negotiation of the gas purchase agreement. Also, in June 1998
Orange L.P. entered into the indexed swap agreement. During 1999, Orange L.P.
recognized $9.4 million of swap contract amortization expense compared to $4.4
million in 1998.

Other Income and Expense

Year Ended December 31,
-----------------------
1998 1999
---- ----
(Dollars in Thousands)
<S> <C> <C>
Interest expense $7,364 $ 476
Interest income (235) (272)
------ -----

Total Interest Expense (Income) $7,129 $ 204
====== =====
</TABLE>

The total interest expense decreased 97.1% to .2 million in 1999 from $7.1
million in 1998. Interest expense decreased to $.5 million from $7.4 million in
1998 due to Orange L.P.'s repayment on June 29, 1998 of all its then outstanding
long-term debt with the cash proceeds received from Niagara Mohawk under the
terms of the master restructuring agreement.

Net Income

Year Ended December 31,
---------------------------------
1998 1999
---------------------------------
(Dollars in Thousands)
<S> <C> <C>
Net Income $5,029 $14,410
</TABLE>

Net income increased to $14.4 million in 1999 as compared to $5.0 million in
1998, primarily due to increases in revenues in connection with the master
restructuring agreement and decreases in interest expense and operating and
maintenance expense.

-26-
<PAGE>

Results of Operations for the Years Ended December 31, 1997 and 1998

The following discussion and analysis includes an explanation of the
significant changes in revenues and expenses when comparing 1997 to 1998.

Revenues

Year Ended December 31,
---------------------------------------
1997 1998
---------------------------------------
Revenues: (Dollars in Thousands)
<S> <C> <C>
Electric Generation $37,304 $27,455
Swap Contract ------- 9,471
Deferred Swap Gain ------- 4,382
------- -------

Sub total-Electricity 37,304 41,308
------- -------

Steam 3,194 2,693
Deferred amortization income ------- 7,666
______ ______
Total Revenues $40,498 $51,667
======= =======
</TABLE>

Total revenues increased 27.6% to $51.7 million in 1998 from $40.5 million in
1997. The increase was primarily due to the recognition of deferred revenue
based on the master restructuring agreement and the amortization of deferred
income from the indexed swap agreement. This deferred revenue represents the
gain realized on proceeds received from the restructuring of Orange L.P.'s power
purchase agreement with Niagara Mohawk.

Electric generation revenues decreased 26.4% to $27.5 million in 1998 from
$37.3 million in 1997. This decrease was due to the lower price for electric
generation resulting from the implementation of the master restructuring
agreement. This decrease was offset by swap revenues and deferred income
associated with the master restructuring agreement. Revenues from steam
delivery declined 15.7% to $2.7 million in 1998 from $3.2 million in 1997. The
decline in steam demand was principally due to unusually warm weather in New
York State associated with the so called El Nino weather pattern experienced
during the early months of 1998.

Operating Expenses

Year Ended December 31,
1997 1998
---------------------------------
Operating Expenses: (Dollars in Thousands)
<S> <C> <C>
Operating and maintenance expenses $17,595 $18,095
Other operating expense 4,218 5,419
Depreciation and amortization 3,221 6,718
Amortization of prepaid gas supply 3,897 4,895
Amortization of swap contract ----- 4,382
______ ______
Total Operating Expenses $28,931 $39,509
======= =======
</TABLE>

Total operating expenses increased 36.6% to $39.5 million in 1998 from $28.9
million in 1997. This increase was principally a result of the increase in
depreciation and amortization expenses due to changes in depreciable lives of
the project's assets implemented in conjunction with the master restructuring
agreement. Operating and maintenance expenses increased approximately 2.8% to
$18.1 million in 1998 from $17.6 million in 1997, largely as a result of higher
royalties and other variable expenses associated with the increase in MWh
produced by the project in 1998.

-27-
<PAGE>

Interest Expense

<TABLE>
<CAPTION>
---------------------------------
Year Ended December 31,
1997 1998
---------------------------------
(Dollars in Thousands)
<S> <C> <C>
Total Interest Expense $14,694 $7,364
</TABLE>

Interest expense declined by 49.9% to $7.4 million in 1998 from $14.7 million
in 1997. This decrease was principally due to the repayment by Orange L.P. on
June 30, 1998 of all of its then outstanding long-term debt with the cash
proceeds received from Niagara Mohawk under the master restructuring agreement.

Net Income

<TABLE>
<CAPTION>
---------------------------------
Year Ended December 31,
1997 1998
---------------------------------
(Dollars in Thousands)
<S> <C> <C>
Net Income (Loss) ($2,689) $5,029
</TABLE>

Net income increased to $5.0 million in 1998 from a loss of $2.7 million in
1997. This increase was principally attributable to an increase in total
revenues of $11.2 million and a decrease in interest expense of $7.3 million
offset by an increase in operating expenses of $10.6 million.

Liquidity and Capital Resources

Orange L.P. derived substantially all of its cash flow from the sale of
electricity to Niagara Mohawk under its power purchase agreement and from the
sale of steam to the University under the steam contract for the year 1997.
During 1998, under the master restructuring agreement, the power purchase
agreement with Niagara Mohawk was renegotiated and amended and restated as the
power put agreement and indexed swap agreement. Substantially all of Orange
L.P.'s cash flow in 1998 was derived from the proceeds received by Orange L.P.
from Niagara Mohawk under the master restructuring agreement. Orange L.P. has
used its cash primarily to repay its debt, to pay financing costs, and to make
distributions to its partners.

The following table sets forth a summary of Orange L.P.'s cash flows for the
years ended December 31, 1997, 1998 and 1999:

<TABLE>
<CAPTION>
Year Ended December 31,
1997 1998 1999
----------------------------------------------------------
(Dollars in Thousands)
Cash Flows:
<S> <C> <C> <C>
Net Cash Flows provided by Operating Activities $ 4,538 $ 7,489 $ 877
Net Cash Flows Provided by (Used in) Investing Activities (40) 178,932 (3,332)
Net Cash Flows Provided by (Used in) Financing Activities (4,032) (185,353) 835
------- --------- -------
Net Change in Cash $ 466 $ 1,068 $(1,620)
======= ========= =======
</TABLE>

In 1999, net cash from operating activities decreased 88% to $.9 million from
$7.5 million in 1998 primarily due to the increase in restricted cash resulting
from the issuance of the Notes (see related discussion below) and an increase in
accounts receivable. Orange L.P.'s net cash flows from operating activities
increased 65.0% to $7.5 million in 1998 from $4.5 million in 1997 principally
due to the reduction in Orange L.P.'s interest expense in 1998 following
repayment by Orange L.P. of its outstanding indebtedness on June 30, 1998.

-28-
<PAGE>

In 1999, cash flows from investing activities decreased to a use of $3.3
million from a source of $178.9 million primarily due to the receipt of cash
proceeds, in 1998, from Niagara Mohawk of approximately $180.3 million in
connection with the execution of the master restructuring agreement. Cash
flows from investing activities increased from a use of $40,000 in 1997 to a
source of $178.9 million in 1998. This increase was again due to the receipt of
cash proceeds from the master restructuring agreement. This increase in cash
flows was offset in part by remittance of approximately $1.3 million of the
escrowed construction funds to the party responsible for the completion of
certain elements of the project.

In 1999, cash flows used in financing activities decreased from a use of
$185.4 million to a source of $.8 million. This decrease was due to the receipt
of cash in 1999 due to the issuance of the notes, net of partner distributions
and payment of debt issuance costs, and the repayment in 1998 of Orange L.P.'s
outstanding long-term debt as described below. Cash flows used in financing
activities increased to $185.4 million in 1998 from $4.0 million in 1997, due
to the repayment of all of Orange L.P.'s outstanding long-term debt and payment
of related financing costs in 1998 using the proceeds received from Niagara
Mohawk under the master restructuring agreement. Included in the payment of
related financing costs was approximately $9.6 million of swap breakage costs
incurred upon the termination of the interest swap agreements in conjunction
with the long-term debt repayment prior to the scheduled termination dates. In
addition, Orange L.P. made a distribution in an aggregate amount of $7.8 million
to its partners during 1998. No such distribution was made in 1997.

Orange L.P. was entitled to defer payment of and hold a portion of the funds
owed to Canadian Hunter under the gas purchase agreement, for royalties,
operating costs and transportation costs. Pursuant to the terms of the gas
purchase agreement, these deferred amounts, totaling $470,000 per quarter to a
maximum of $11,280,000, were payable to Canadian Hunter, with interest earned on
the deferred amounts once the maximum deferred principal amount was reached.
Orange L.P. has provided for a restricted cash account in an amount equal to the
outstanding deferred principal amount, plus interest earned on the funds.
During 1998, the maximum deferred principal amount was reached, and Orange L.P.
made payments to Canadian Hunter totaling $3,130,024, which included $2,190,024
in accrued interest. The entire proceeds of the restricted cash account was
paid to Canadian Hunter in December 1999 concurrent with the issuance and
closing of the old notes.

In connection with the consummation of the offering of the old notes, GAS
Orange's acquisition of partnership interests in Orange L.P. and the merger of
Funding L.P. with and into Orange L.P., Orange L.P. assumed all of Funding
L.P.'s obligations with respect to $68 million aggregate principal amount of the
notes. Prior to the consummation of GAS Orange's acquisition of partnership
interests in Orange L.P. and the merger of Funding L.P. with and into Orange
L.P., GAS Orange, Funding L.P.'s general partner, received a distribution of
$46.9 million. GAS Orange immediately paid this amount to NCP Syracuse and
Syracuse Orange Partners to acquire their partnership interests in Orange L.P.
and to become a 1% general partner and a 89% limited partner in Orange L.P..
Orange L.P. has funded the capital expenditure reserve account established under
the Deposit and Disbursement Agreement with $3.5 million out of proceeds of the
offering of the old notes. Orange L.P. used $6.2 million of the proceeds of the
offering of the old notes to fund a debt service reserve account established
under the Deposit and Disbursement Agreement. The remaining net proceeds of the
offering of old notes were used to fund transaction costs relating to the
offering and to pay or provide for certain of our obligations that arise as a
consequence of the offering. See "Use of Proceeds."

Qualitative and Quantitative Disclosures About Market Risk

The risk inherent in Orange L.P.'s market risk sensitive instruments and
positions is the potential loss arising from adverse changes in electric market
prices and interest rates as discussed below. Orange L.P.'s policy is to use
financial instruments to manage risk consistent with its plans and prudent
business practices. Orange L.P. does not utilize these instruments for trading
or speculative purposes.

Orange L.P. is exposed to credit losses in case counterparties fail to perform
or make payments. Orange L.P. uses a credit management process to assess,
monitor and mitigate counterparty exposure. In case a major counterparty fails
to make payments or otherwise fails to perform, there may be a material adverse
impact on Orange L.P.'s financial condition, results of operations and net cash
flows.

-29-
<PAGE>

Foreign Currency Options

In 1998, Orange L.P. entered into foreign currency options, which were based
upon a contracted notional amount which totaled $5.9 million, to reduce exposure
to exchange rate fluctuations relative to the production and transportation of
fuel received from Canadian Hunter. These options gave Orange L.P. the right,
but not the obligation, to buy foreign currency at a specific price. Orange
L.P.'s exposure to loss from changes in the relative value of the currency was
limited to the amount paid for the options, which was $150,000. The fair values
of these options at December 31, 1998 approximated $150,000. At December 31,
1999 none of these options were outstanding. Orange L.P. recognized net gains
of $80,639 from these options in 1999.

Interest Rate Swaps

Orange L.P. used interest rate swap agreements as hedges to manage the
proportions of fixed versus floating rate debt. Differences between amounts
paid and received under interest rate swaps were recorded as adjustments to the
interest expense of the underlying debt. The interest rate swap agreements,
which were based upon a contracted notional amount which totaled $160.0 million
at December 31, 1997, were terminated on June 30, 1998 as part of the repayment
of all of Orange L.P.'s then outstanding indebtedness. A portion of the cash
proceeds received from the master restructuring agreement was utilized to pay
interest rate swap breakage costs. The interest rate swap breakage costs,
incurred by Orange L.P. totaled $9,612,299. The costs related to the
termination of the interest rate swaps and outstanding indebtedness were
reflected in the settlement Orange L.P. negotiated with Niagara Mohawk under the
master restructuring agreement. These costs were netted against the deferred
master restructuring agreement gain (See Note 4 to the consolidated financial
statements).

Indexed Swap Agreement

Orange L.P. also entered into the indexed swap agreement to manage the price
of electricity. Under the indexed swap agreement, Niagara Mohawk is required to
make fixed monthly payments to Orange L.P. equal to an agreed annual price per
MWh multiplied by an agreed notional quantity of electricity per month. Orange
L.P. is required to make floating monthly payments to Niagara Mohawk based on
the current market price per MWh multiplied by the contracted notional quantity
of electricity per month. At December 31, 1999 and 1998 the fair value of the
Indexed Swap Agreement amounted to $69.4 million and $78.8 million,
respectively, which approximated its carrying value. The potential change in
fair value resulting from a hypothetical 10% change in quoted market prices
would result only in an offsetting change in revenues from the indexed swap
agreement and electricity revenues from the power put agreement. Under the power
put agreement, Niagara Mohawk pays Orange L.P. a payment based upon the current
market price per MWh multiplied by Orange L.P.'s electricity output.

Year 2000 Issue

The "Year 2000 problem" arose because many existing computer programs use only
the last two digits to refer to a year. These computer programs do not properly
recognize a year that begins with "20" instead of the familiar "19." If not
corrected, many computer applications could have failed or created erroneous
results. At the turn of the century and to date, Orange L.P. has experienced no
disruption in service as a result of year 2000 issues. Orange L.P. management
is not currently aware of any year 2000 related problems associated with its
internal business systems or software or with the systems or software of its
venders.

In 1998, Orange L.P. initiated a program to address its Year 2000 issues.
Orange L.P. implemented a comprehensive program to address the potential impact
of the Year 2000 issue. This program involved several stages, including
inventory and impact assessment, remediation, testing and implementation. The
inventory and impact assessment of the information technology infrastructure,
computer applications and computerized processes embedded in certain operating
equipment was completed. Orange L.P. depends substantially for its operating
revenues on Niagara Mohawk's and Syracuse University's purchases of electricity
and steam, respectively, generated by the project and the steam plant. Orange
L.P. is also largely dependent on the New York Independent System Operator for
its operating revenues. Orange L.P. contacted Niagara Mohawk and Syracuse
University and both reported that their Year 2000 programs were completed in
1999. The New York Independent System Operator has reported no significant year
2000 issues.

-30-
<PAGE>

The total cost expended by Orange L.P. for its Year 2000 plan was
approximately $140,000.

New Accounting Standards

In June 1998, the Financial Accounting Standards Board, or FASB, issued its
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities", also referred to as SFAS 133, which was to
be effective for financial statements for all fiscal quarters of fiscal years
beginning after June 15, 1999 (see below). SFAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires an entity to recognize all derivatives, within the scope of this
statement, as assets or liabilities on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If a derivative is a hedge, changes in fair value of the derivative will either
be offset against the change in fair value of the hedged assets, liability or
firm commitment through earnings or be recognized in other comprehensive income
until the hedged item is recognized in earnings, depending on the nature of the
hedge. The ineffective portion of the derivative's change in fair value will be
immediately recognized in earnings. Orange L.P. is currently evaluating the
impact of SFAS 133.

In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities, Deferral of the Effective Date of FASB
Statement No. 133", an amendment of the SFAS 133, which defers the effective
date of SFAS 133 for one year. SFAS 133 will now be effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS 137 also defers
by one year the transition date regarding embedded derivatives in SFAS 133.

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<PAGE>

BUSINESS

Project Overview

Orange L.P. is a Delaware limited partnership formed in 1988 for the purpose
of constructing, owning and operating the project. The project consists of a
fully completed and operating 80 MW natural gas-fired simple cycle cogeneration
facility located adjacent to Syracuse University's campus in Syracuse, New York
and a 9.5 mile natural gas pipeline connecting the facility to its fuel supply.
The project commenced commercial operation in July 1992 and has maintained an
average availability factor since 1996 of 94.5%.

The key elements of the Project are the following:

o Stable Revenue Stream. Orange L.P. and Niagara Mohawk, a utility serving
areas of central, northern and western New York, which had $3.9 billion in
revenues in 1998, have entered into contracts that have been structured to
provide Orange L.P. with a fixed annual indexed schedule of prices for
electricity and, consequently, a stable stream of revenues, through June
30, 2008.

o Prepaid Fuel Supply. As of December 31, 1999, the project had a remaining
prepaid supply of approximately 69.1 million MMBtu of natural gas which
Orange L.P. purchased in 1991 under the gas purchase agreement with
Canadian Hunter, as successor by assignment from Noranda Inc. The remaining
quantity of prepaid natural gas is expected to be sufficient to meet the
project's fuel requirements beyond the term of the notes.

o Asset Management by Niagara Mohawk Energy Marketing. Orange L.P. has
recently contracted with Niagara Mohawk Energy Marketing to manage Orange
L.P.'s business operations and finances. Niagara Mohawk Energy Marketing
has a thorough understanding of the upstate New York energy market and has
experience in managing natural gas-fired cogeneration facilities such as
Orange L.P.'s.

o Operation and Maintenance by GE International. GE International, as
successor to GE Energy Plant Operations, operates and performs all routine
and major maintenance on the project. Orange L.P. has arranged to become a
member in a lease engine support program under which General Electric
Company will deliver and install leased gas-turbine equipment if either of
the project's gas turbine generators becomes inoperable. Under the program,
General Electric Company will install the equipment within 72 hours of the
relevant outage and will keep the equipment in service until such time as
the damaged gas turbine can either be repaired or replaced.

o Beneficial Tax Arrangement. The project occupies land leased from Syracuse
University, which we refer to as the premises, under the ground lease for a
remaining stated term of approximately 32 years. As part of a beneficial
tax arrangement with the City of Syracuse, Orange L.P. has assigned its
rights under the Ground Lease to SIDA, which, in turn, has subleased the
premises and leased the Project to Orange L.P. under the lease and sublease
agreement. As a result of this transfer, Orange L.P. makes payments in lieu
of taxes to the City of Syracuse at rates substantially lower than
prevailing local tax rates.

Systems and Equipment

The project includes two General Electric LM-5000 PC STIG gas turbine driven
generators and two Deltak heat recovery steam generators, which use natural gas
as the fuel source. Natural gas is supplied to the project through its 9.5 mile
natural gas pipeline, which pipeline connects to a delivery point located on
Tennessee Gas Pipeline Company's main gas line near Syracuse. As of December 31,
1999, the project had a remaining prepaid supply of approximately 69.1 million
MMBtu of natural gas which Orange L.P. purchased from Noranda Inc., Canadian
Hunter's predecessor, in 1991. We expect this amount of natural gas will be
sufficient to meet the natural gas requirements of the project

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<PAGE>

beyond the term of the notes, assuming heat rates and plant availability are
consistent with the project's historical experience.

Electrical power is generated by the project at 13,800 volts by two skid
mounted General Electric type LM-5000 PC STIG combustion gas turbine generators.
The project has two ABB step-up transformers, one per generator, which increase
the project's electrical power to 115Kv. Niagara Mohawk connects to the
substation through underground cabling routed from its Temple Substation,
located approximately two miles west of the project.

Exhaust gases exit the gas turbines and are ducted to the two heat recovery
steam generators. Each heat recovery steam generator is a three pressure level
boiler with individual pressure level steam drums and controls. The heat
recovery steam generators are natural circulation water-tube recovery units
designed to produce dry, saturated, low pressure steam; superheated, high
pressure steam; and superheated, intermediate pressure steam. Each heat recovery
steam generator contains a feedwater heater, or deaerator, to increase the steam
efficiency of the project. The project's steam system also includes all steam
piping and valves required throughout the project, including the piping which
connects to the steam plant. All steam piping is equipped with necessary
expansion loops and steam traps to provide high quality steam to all systems.

Each heat recovery steam generator includes an emissions reduction catalyst
for reduction of carbon monoxide and emissions monitoring ports. Gases exiting
the heat recovery steam generators are ducted to two stacks which are
approximately 200 feet high.

The project also includes a water treatment system, which consists of all
equipment required to provide demineralized water for boiler feedwater and
chemical treatment for the heat recovery steam generators.

For a more complete discussion of the design of the project equipment and
systems and an assessment of their condition and performance, please see
"Exhibit A--Independent Engineer's Report."

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<PAGE>

Principal Contracts and Contracting Parties

Orange L.P.'s principal contracts and the related contracting parties are
summarized below.

[GRAPHIC]

Niagara Mohawk Power Syracuse University
Corporation (Steam Purchaser and
(Power Purchaser and Ground Lessor)
Swap Counterparty)
Steam Contract, Steam
Amended Power Purchase Plant Operating
Agreement Agreement and Ground Lease

Niagara Mohawk Syracuse Industrial
Energy Marketing, Inc. PROJECT ORANGE Development Agency
(Asset Manager) ASSOCIATES, L.P. (Project Nominal
Owner)
Asset Management
Agreement Lease and
Sublease Agreement

General Electric Tennessee Gas
International, Inc. Pipeline Company
(Project Operator) (Fuel Transporter)

Operation and Natural Gas Transportation
Maintenance Contracts
Agreement

Canadian Hunter
Exploration Ltd.
(Fuel Supplier)

Gas Purchase
Agreement

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<PAGE>

Electricity Sales

Orange L.P. sells power under an amended power purchase agreement consisting
of a power put agreement and an indexed swap agreement, each with Niagara
Mohawk.

The Power Put Agreement

The power put agreement dated as of September 18, 1986 between Niagara Mohawk
and Orange L.P. provides Orange L.P. with the right, but not the obligation, to
sell up to 663,000 MWh plus 5% of energy and associated capacity to Niagara
Mohawk annually, subject to applicable monthly and hourly limits. Prior to the
establishment of a competitive market for electricity administered by the New
York Independent System Operator, the price per MWh for energy and associated
capacity sold to Niagara Mohawk under the power put agreement was determined by
reference to a formula based on Niagara Mohawk's short-term avoided energy and
associated capacity costs. For all periods after November 18, 1999, the date the
New York Independent System Operator was implemented, the power put agreement
provides that Orange L.P. may sell energy and associated capacity to Niagara
Mohawk at the then-applicable market price for energy or market price for
capacity, if applicable. Once the New York Independent System Operator achieves
specified volumetric tests, Orange L.P.'s right to sell power to Niagara Mohawk
will terminate. Orange L.P. has the right to sell energy and associated capacity
through the New York Independent System Operator, and to sell energy and
associated capacity outside the New York Independent System Operator system on a
bilateral contract basis, subject to Niagara Mohawk's right of first refusal for
a limited period of time. The New York Independent System Operator system began
operating on a trial basis during the second half of November 1999. See "Summary
Descriptions of the Principal Agreements Relating to the Project--Amended Power
Purchase Agreement--Power Put Agreement."

Indexed Swap Agreement

The indexed swap agreement between Niagara Mohawk and Orange L.P., which
expires on June 30, 2008, serves as a financial hedge against movements in the
price of electricity. Under the indexed swap agreement, Niagara Mohawk will be
required to make specified monthly fixed payments to Orange L.P. amounting to an
indexed annual price per MWh, which is $54.62/MWh for the current annual period
ending June 30, 2000 multiplied by the applicable notional quantity of
electricity for each hourly interval during that month, which aggregates, on an
annual basis, to 663,000 MWh, the notional quantity. On each payment date, the
monthly fixed payment will be netted against a monthly floating payment that
Orange L.P. is obligated to pay to Niagara Mohawk. The monthly floating payment
under the indexed swap agreement equaled the price for sales of energy and
associated capacity made to Niagara Mohawk under the power put agreement,
multiplied by the applicable notional quantity of energy and associated
capacity, for each hourly interval during that month, until Orange L.P.'s right
to sell energy and associated capacity to Niagara Mohawk terminates. For all
periods after that time, the floating payment will equal the New York
Independent System Operator market price for sales of energy and, if applicable,
the market price for capacity multiplied by the notional quantity of energy and
associated capacity, as applicable, for each hourly interval during that month.
See "Summary Descriptions of the Principal Agreements Relating to the Project--
Amended Power Purchase Agreement--Indexed Swap Agreement."

Amended Power Purchase Agreement Supports a Stable Revenue Stream

The power put agreement and indexed swap agreement have been structured to
provide Orange L.P. with a stable revenue stream through June 30, 2008 assuming
the project generates an annual quantity of electricity, consistent with
applicable monthly and hourly limits, at least equal to the notional quantity.
As illustrated in the table below, assuming Orange L.P. generates energy and
associated capacity in an amount at least equal to 663,000 MWh per year, the
notional quantity, revenues to Orange L.P. under the amended power purchase
agreement would be insensitive to the market price of electricity. If the
project generates less than this notional quantity of electricity in any year or
if the quantity of electricity generated in specified intervals falls short of
applicable hourly or monthly thresholds, revenues to Orange L.P. under the
amended power purchase agreement may be lower than those shown in the table
below.

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<PAGE>

Illustrative Revenue Streams at Different Market Prices for Electricity

Indexed Swap Agreement
------------------------------------
Assumed Market
Annual Energy Price of Floating Payment Fixed Payment
Production Energy Energy Sales from Orange from Niagara Annual Revenue
(MWh)(1) ($/MWh)(2) Revenue(3) L.P.(4) Mohawk(5) to Orange L.P.(6)
<S> <C> <C> <C> <C> <C>
663,000 $10.00 $ 6,630,000 ($6,630,000) $36,213,060 $36,213,060
663,000 15.00 9,945,000 (9,945,000) 36,213,060 36,213,060
663,000 20.00 13,260,000 (13,260,000) 36,213,060 36,213,060
663,000 25.00 16,575,000 (16,575,000) 36,213,060 36,213,060
663,000 30.00 19,890,000 (19,890,000) 36,213,060 36,213,060
663,000 35.00 23,205,000 (23,205,000) 36,213,060 36,213,060
663,000 40.00 26,520,000 (26,520,000) 36,213,060 36,213,060
663,000 45.00 29,835,000 (29,835,000) 36,213,060 36,213,060
663,000 50.00 33,150,000 (33,150,000) 36,213,060 36,213,060
663,000 55.00 36,465,000 (36,465,000) 36,213,060 36,213,060
663,000 60.00 39,780,000 (39,780,000) 36,213,060 36,213,060
663,000 65.00 43,095,000 (43,095,000) 36,213,060 36,213,060
663,000 70.00 46,410,000 (46,410,000) 36,213,060 36,213,060
663,000 75.00 49,725,000 (49,725,000) 36,213,060 36,213,060
663,000 80.00 53,040,000 (53,040,000) 36,213,060 36,213,060
</TABLE>
___________________________
(1) Assumes the project generates 663,000 MWh, but there can be no assurance
that the project will do so.

(2) "Market Price" is defined as either the applicable market price for energy
or market price for capacity payable by Niagara Mohawk under the power put
agreement or the New York Independent System Operator market price,
whichever is applicable.
(3) Energy Sales Revenue is the market price multiplied by assumed annual
energy production.
(4) The floating payment from Orange L.P. under the indexed swap agreement is
the annual notional quantity multiplied by the market price.
(5) The fixed payment from Niagara Mohawk under the indexed swap agreement is
the annual notional quantity multiplied by the indexed fixed rate for the
annual contract year ending June 30, 2000 (or $54.62 per MWh).
(6) Annual Revenue to Orange L.P. is the sum of the energy sales revenue less
the floating payments from Orange L.P. plus the fixed payments from Niagara
Mohawk.

For additional information, see "Exhibit A--Independent Engineer's Report."

Niagara Mohawk Power Corporation

Niagara Mohawk is engaged in the purchase, transmission, distribution and sale
of electricity and the purchase, distribution, sale and transportation of
natural gas in New York State. Niagara Mohawk provides electric service to its
customers in areas of central, northern and western New York having a total
population of approximately 3.5 million, including the cities of Buffalo,
Syracuse, Albany, Utica, Schenectady, Niagara Falls, Watertown and Troy. Niagara
Mohawk sells, distributes and transports natural gas in areas of central,
northern and eastern New York contained within its electric service territory
having a total population of approximately 1.7 million. In 1999, Niagara Mohawk
had approximately $3.83 billion in operating revenues and its senior unsecured
debt is currently rated "Baa3" by Moody's Investors Service and "BBB-" by
Standard & Poor's Ratings Services. Niagara Mohawk's filings with the Securities
and Exchange Commission, including its financial statements, are available from
the SEC's Internet site at http://www.sec.gov or at the SEC's public reference
rooms. See "Where You Can Find More Information" on page 143. Niagara Mohawk's
filings are also available to the public through the New York Stock Exchange, 20
Broad Street, New York, New York 10005.

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<PAGE>

Fuel Supply Arrangements

Gas Purchase Agreement

Under the gas purchase agreement dated as of March 18, 1991 between Canadian
Hunter Exploration Ltd., as successor by assignment from Noranda Inc., and
Orange L.P., Orange L.P. purchased and prepaid in full for 120 million MMBtu of
natural gas for the Project. Under the Gas Purchase Agreement, Orange L.P. may
request a maximum of 30,000 MMBtu of natural gas per day. The Project's average
daily consumption of natural gas from January 1, 1996 through December 31, 1999
was 17,105 MMBtu. As of December 31, 1999, approximately 69.1 million MMBtu of
natural gas remained available under the Gas Purchase Agreement, which Orange
L.P. expects to be sufficient to meet the fuel requirements of the Project
beyond the term of the notes, assuming heat rates and capacity factors are
consistent with the Project's historical experience. Under the Gas Purchase
Agreement, Canadian Hunter is responsible for delivering the natural gas to an
interconnection between the pipeline facilities of TransCanada Pipelines and
Tennessee Gas Pipeline Company, located near Niagara Falls, New York. Effective
January 1, 2000 Union Pacific Resources assumed 41.667% of Canadian Hunter's gas
supply obligations under the Gas Purchase Agreement. See "Summary Descriptions
of the Principal Agreements Relating to the Project--Gas Purchase Agreement."

Canadian Hunter Exploration Ltd.

Canadian Hunter is an Alberta, Canada based company. Prior to December 31,
1998, Canadian Hunter was a wholly owned subsidiary of Noranda Inc. and acted as
agent for Noranda in connection with its oil and gas exploration, development
and production businesses. On December 31, 1998, Noranda spun off Canadian
Hunter into a separate public company. At December 31, 1999, Canadian Hunter's
reserve base reached 111.8 billion cubic feet equivalent of natural gas and
liquids. In 1999, Canadian Hunter had approximately CDN $400.5 million in gross
revenues.

Union Pacific Resources Inc.

Union Pacific Resources is a Canadian corporation which is a wholly owned
subsidiary of Union Pacific Resources Group Inc., a Utah corporation engaged
primarily in the exploration for and the development and production of natural
gas, natural gas liquids and crude oil in several major producing basins in the
United States, Canada, Guatemala, Venezuela and other international areas. In
March 1998, Union Pacific Resources Group and Union Pacific Resources acquired
Norcen Energy Resources Limited, a major Canadian oil and gas exploration and
production company with primary operations in western Canada, the Gulf of
Mexico, Guatemala and Venezuela. For the year ended December 31, 1999, Union
Pacific Resources had operating revenues of approximately $332.1 million and at
December 31, 1999 had fixed assets of approximately $1.9 billion. Union Pacific
Resources Group's senior unsecured debt is currently rated "Baa3" by Moody's
Investors Service and "BBB-" by Standard & Poor's Ratings Services.

Sale of Natural Gas

Orange L.P. is entitled under the gas purchase agreement to attempt to
optimize the economic value of its annual entitlement of prepaid natural gas
from Canadian Hunter by electing either to consume the natural gas to generate
electricity and steam from the project or to sell its entitlement in that year
to third parties. Niagara Mohawk Energy Marketing, in its capacity as asset
manager for the project, continuously monitors electricity and natural gas
prices in order to determine when it would be economically advantageous for
Orange L.P. to either consume or sell its entitlement of prepaid natural gas in
any given period. Consistent with the terms of the notes, when Orange L.P.
elects to sell quantities of natural gas that it would have needed to consume by
generating electricity to meet its obligations to Niagara Mohawk under the
indexed swap agreement for such period, it uses the proceeds from such sale to
acquire an amount of electricity necessary to insure that it will be able to
meet such obligations. See "Description of Notes--Certain Covenants--
Prohibitions on Fundamental Changes."

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<PAGE>

Natural Gas Transportation Contracts

Under the Firm Gas Transportation Contract dated March 29, 1991 between Orange
L.P. and Tennessee Gas Pipeline Company, Tennessee Gas Pipeline Company delivers
the natural gas purchased from Canadian Hunter from Tennessee Gas Pipeline
Company's interconnection point with TransCanada Pipelines' pipeline at Niagara
Falls, New York to the project's natural gas pipeline at a delivery point
constructed and operated by Tennessee Gas Pipeline Company on Tennessee Gas
Pipeline Company's main natural gas line near Syracuse. The natural gas is then
delivered to the project via the project's natural gas pipeline. Orange L.P.
compensates Tennessee Gas Pipeline Company for these transportation services
based on standard rates established by the U.S. Federal Energy Regulatory
Commission, or FERC. Orange L.P. has also entered into an interruptible gas
transportation contract dated as of March 11, 1999 with Tennessee Gas Pipeline
Company, under which Tennessee Gas Pipeline Company provides interruptible
natural gas transportation services for up to an additional 5,000 dekatherms of
natural gas per day. See "Summary Descriptions of the Principal Agreements
Relating to the Project--Natural Gas Transportation Contracts."

Tennessee Gas Pipeline Company

Tennessee Gas Pipeline Company is a wholly owned subsidiary of El Paso Energy
Corporation. The principal business of Tennessee Gas Pipeline Company consists
of the interstate transportation of natural gas. Tennessee Gas Pipeline
Company's primary asset is an interstate natural gas pipeline system known as
the Tennessee Gas Pipeline Company system, which consists of approximately
14,700 miles of pipeline with a design capacity of 5,512 MMcf/d. The Tennessee
Gas Pipeline Company system serves the northeast section of the U.S., including
the New York City and Boston metropolitan areas. At December 31, 1999, Tennessee
Gas Pipeline Company had total assets of approximately $5.4 billion and
operating revenues for 1999 of $704 million. Tennessee Gas Pipeline Company's
senior unsecured debt is currently rated "Baa1" by Moody's Investors Service and
"BBB+" by Standard & Poor's Ratings Services.

Steam Sales

Steam Contract

Under the steam contract dated February 27 1990 between Syracuse University
and Orange L.P., Orange L.P. agreed to provide up to a specified maximum
quantity of steam to Syracuse University and several related parties to meet
their steam requirements for a term of 40 years. The steam contract requires
Syracuse University to accept delivery of and pay for minimum quantities of
steam. The steam contract has a remaining stated term of approximately 32 years.
Under the steam contract, the steam may be provided by either the project or the
steam plant, which is operated by Orange L.P. Syracuse University is the sole
and exclusive purchaser of steam from the Project. See "Summary Descriptions of
the Principal Agreements Relating to the Project--Steam Contract."

Steam Plant Operating Agreement

Under the steam plant operating agreement between Syracuse University and
Orange L.P., Orange L.P. operates and maintains the steam plant. The steam plant
operating agreement provides that, for the term of the steam contract, Orange
L.P. must maintain the steam plant in a state of readiness as an alternate or
supplemental source of steam should the supply of steam from the project be
interrupted. Orange L.P. pays an annual user charge to Syracuse University for
the right to use the steam plant. The annual user charge for the current year
and for each year during the term of the notes will be $1.25 million payable
annually. See "Summary Descriptions of the Principal Agreements Relating to the
Project--Steam Plant Operating Agreement."

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<PAGE>

Syracuse University

Syracuse University is a private, coeducational institution located in
Syracuse, New York. Syracuse University was officially chartered in 1870 and has
a student body of approximately 18,300 full-time and part-time students in its
undergraduate and graduate degree programs. Syracuse University's senior
unsecured debt is currently rated "A1" by Moody's Investors Service and "A+" by
Standard & Poor's Ratings Services.

Operations and Maintenance

Under the operation and maintenance agreement dated March 1998 between GE
International, as successor to GE Energy Plant Operations, and Orange L.P., GE
International will operate and perform all required routine and major
maintenance on the project, the steam plant, the project's natural gas pipeline,
the premises and specified rights of way related to the Project through April 1,
2008. In consideration for these services, Orange L.P. pays GE International
specified expenses and fees, including reimbursable expenses, a spare parts fee,
an operating fee and a fee based on the number of hours that the project
operates and burns fuel called a fired-hour fee. The operating fee is an annual
fee of $350,000. Each of the operating fee, fired-hour fee, handling fee and
spare parts fee, are subject to escalation based on increases in the consumer
price index.

Orange L.P. arranged to become a member beyond the term of the notes in a
lease engine support program with General Electric Company, acting through GE
Industrial Aeroderivative Engines Division, or GE Industrial, which provides
that, if either of the project's gas turbine generators becomes inoperable, GE
Industrial will, within 72 hours of notification, deliver and install leased
gas-turbine equipment for the Project to utilize until such time as the damaged
gas turbine can either be repaired or replaced. The lease engine support program
imposes significant monetary penalties on GE Industrial if it fails to timely
perform its obligations. See "Summary Descriptions of the Principal Agreements
Relating to the Project-- Operation and Maintenance Agreement."

GE International, Inc.

GE International is a Delaware corporation and a wholly owned subsidiary of
General Electric Company. GE International, as successor to GE Energy Plant
Operations, originally took over day-to-day operations and management of the
project in 1998, as assignee of Stewart & Stevenson Operations, Inc., the former
operator of the Project, following the acquisition by General Electric Company
of the gas turbine division of Stewart & Stevenson Services, Inc. Orange L.P.
entered into the current operation and maintenance agreement with GE Energy
Plant Operations in November 1998. At December 31, 1999, General Electric
Company had total assets of approximately $405.2 billion and total revenues for
1999 of approximately $111.6 billion. General Electric Company's senior
unsecured debt is currently rated "Aaa" by Moody's Investors Service and "AAA"
by Standard & Poor's Ratings Services.

Asset Management

Asset Management Agreement

Under the asset management agreement dated December 6, 1999 entered into by
Niagara Mohawk Energy Marketing and Orange L.P., Niagara Mohawk Energy Marketing
manages the business operations and finances of Orange L.P. Under the asset
management agreement, Niagara Mohawk Energy Marketing is paid a fixed monthly
fee of $22,750 per month, which amount will escalate under an annual inflation
adjustment beginning in January 2001. See "Summary Descriptions of the Principal
Agreements Relating to the Project--Asset Management Agreement."

Niagara Mohawk Energy Marketing, Inc.

Niagara Mohawk Energy Marketing is a wholly owned subsidiary of Niagara Mohawk
Energy, Inc. and constitutes substantially all of Niagara Mohawk Energy's
assets. Niagara Mohawk Energy Marketing's primary business is the sale of energy
commodities at both the retail and wholesale levels, and the provision of
energy-related services to end-users,

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<PAGE>

generation asset owners and retail aggregators. Niagara Mohawk Energy
Marketing's wide range of generation asset management experience includes
providing asset management services for several New York independent power
producers who, similar to Orange L.P., participated in the master restructuring
agreement. Niagara Mohawk Energy Marketing's duties have included optimizing
operating and other cost-reduction strategies, overseeing and directing plant
operations and maintenance staff, energy marketing and accounting services,
portfolio management and accounting services, and related services. Niagara
Mohawk Energy Marketing's primary market area is the Northeast region, which
includes New York, Pennsylvania, Ohio, New England and eastern Canada. For the
year ended December 31, 1999, Niagara Mohawk Energy had total assets of $81
million and revenues for 1998 of $258 million, of which $250 million were
generated by Niagara Mohawk Energy Marketing.

Competition

Orange L.P. currently sells power generated by the Project under its amended
power purchase agreement with Niagara Mohawk, which has a remaining stated term
of approximately 8.4 years. Because of the terms of the amended power purchase
agreement, Orange L.P.'s revenues are not significantly affected by competition
from other sources of generation. If the amended power purchase agreement were
terminated prior to its stated expiration date in 2008, however, we would likely
face intense competition from generation companies and electric power marketers
throughout the region.

Insurance

The project and the steam plant will maintain, among others, the following
types of insurance:

o all risk property coverage with a limit of $90 million (for replacement
costs);

o earthquake and flood coverage with an annual aggregate limit of $50 million;

o business interruption insurance of $30 million;

o comprehensive general liability insurance with a limit of $1 million per
occurrence and $2 million in the aggregate per year;

o automobile liability insurance with a limit of $1 million per accident;

o umbrella excess liability insurance with a limit of $50 million;

o extra expense insurance of $3 million; and

o workers compensation insurance in accordance with New York State statutes.
The all risk property coverage and the flood and earthquake coverage are
subject to deductibles of $300,000 and $100,000, respectively, per loss and
the business interruption coverage has a 30-day average daily value
deductible.

These policies were issued by domestic insurance carriers and syndicates rated
A or better with a financial size category of class XIII or greater. Financial
size categories are assigned by A.M. Best Company, an insurance rating agency,
based on the size of an insurance company, ranging from Class I (smallest) to
Class XV (largest). Insurance companies assigned to the financial size category
of Class XIII have adjusted policy holders' surpluses of between $1.25 billion
and $1.5 billion.

Employees

Orange L.P. does not have any employees. All of the employees who operate and
maintain the project for GE International are currently employed by either GE
International or Granite Services, Inc, a wholly owned subsidiary of General
Electric Company. GE International and Granite Services have retained
substantially the same employees previously employed by Stewart & Stevenson
Services, Inc., the prior operator of the project. As of December 31, 1999, (i)
GE International employed four employees at the project who perform
administrative and technical functions

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<PAGE>

and provide technical direction to workers at the project and (ii) Granite
Services employed 16 employees at the project who perform primarily operation,
maintenance and technical support functions. Approximately 15% of the employees
who currently work at the project have been employed there since 1991.

None of GE International's or Granite Services' employees are covered by any
collective bargaining agreement. We believe that GE International's and Granite
Services' employee relations are good.

Environmental Matters

Orange L.P. is subject to environmental laws and regulations at the federal,
state and local level in connection with its ownership and operation of the
project and its operation of the steam plant. These environmental laws and
regulations generally require that a wide variety of permits and governmental
approvals be obtained to operate an energy-producing facility. The project must
operate in compliance with the terms of these permits and approvals. If Orange
L.P. fails to operate the project in compliance with applicable laws, permits
and approvals, governmental agencies could levy fines or curtail operations.

Orange L.P. believes that the project is in substantial compliance in all
material respects with all environmental regulatory requirements applicable to
it, and Orange L.P. believes that maintaining substantial compliance with
current governmental requirements will not require a material increase in
capital expenditures or materially adversely affect Orange L.P.'s financial
condition or results of operations. It is possible, however, that future
developments, such as more stringent requirements of environmental laws and
enforcement policies, could affect capital and other costs at the project and
the manner in which Orange L.P. conducts its business. See "Regulation--
Environmental Regulation."

Litigation

There are presently two lawsuits pending to which Orange L.P. is a party. The
first case, David Soltau v. Project Orange Associates, L.P., relates to a slip
and fall accident that occurred on or about March 14, 1992 and was filed in the
Supreme Court of the State of New York, County of Onondaga, which we refer to as
the Soltau case. The original complaint in the Soltau case seeks $600,000 in
damages. Orange L.P. has denied liability in the Soltau case based on an
argument that it was under no duty to inspect the project site while the project
was under construction. An affidavit for motion to dismiss the Soltau case was
prepared on May 11, 1999 and filed with the court. The second case, Edward
Mosher v. Syracuse University; Syracuse University v. North Fork Enterprises and
Project Orange Associates, L.P., in which Orange L.P. is a third party
defendant, was filed in the Supreme Court of the State of New York, County of
Onondaga, which we refer to as the Mosher case. The Mosher case relates to a
slip and fall accident that occurred on or about November 20, 1992. North Fork
Enterprises, a co-third party defendant for whom Mr. Mosher worked when the
accident occurred, has agreed to assume the defense of the Mosher case and to
indemnify Orange L.P..

Principal Sponsor

Adam H. Victor indirectly controls 100% of GAS LP and is a beneficiary of the
Victor Family Irrevocable Trust which has an 84% interest in GAS Orange. Gas
Orange has delegated limited authority to Adam Victor as its agent for the
purpose of reaching technical decisions on behalf of GAS Orange respecting the
activities of Niagara Mohawk Energy Marketing under the asset management
agreement and GE International under the operation and maintenance agreement.
Since 1979, Mr. Victor has been involved as the developer of the project and in
the negotiations relating to many of the project documents. He has continued to
be involved in Orange L.P. through his interest in GAS LP. Mr. Victor received a
Master of Business Administration from the Wharton School of Finance and a B.S.
from Cornell University.

-41-
<PAGE>

Ownership of Orange L.P. Following the Acquisition and Merger

Adam H. Victor

100% 100%
- ------------------ ------------- ------------- ---------
A.V. Grantor Trust G.A.S. Orange Victor Family Others(1)
Development, Inc. Irrevocable Trus
- ------------------ ------------- ------------- ---------

99% Limited Partner 1% Limited Partner 84% 16%

- ---------------------------- --------------------------------
G.A.S. Orange Partners, L.P. G.A.S. Orange Associates, L.L.C.
("GAS LP") ("GAS Orange")
- ---------------------------- --------------------------------

1% General Partner 1% General Partner
9% Limited Partner 89% Limited Partner

----------------
Project Orange
Associates, L.P.
----------------

_________________
(1) The other membership interests in GAS Orange are held by:
Douglas Corbett 12.5%
Richard S. Scolaro 2.0%
James Ryan 1.0%
Jeffrey M. Fetter 0.5%

Funding L.P. is a limited partnership organized under Delaware law. Capital
Co. is a Delaware corporation. Capital Co.'s office is located at 90
Presidential Plaza, Syracuse, New York 13202-2200 and its telephone number is
(315) 471-8111. Prior to merging with and into Orange L.P., Funding L.P.'s
office and telephone number were the same.

Funding L.P. and Capital Co. were formed in November 1999 for the sole purpose
of issuing the original unregistered notes. After the original unregistered
notes were issued, Funding L.P. merged into Orange L.P. under the agreement and
plan of merger between Funding L.P. and Orange L.P. Orange L.P. succeeded to
Funding L.P.'s obligations with respect to the old notes.

GAS Orange, a Delaware limited liability company, acquired a 1% general
partnership interest in Orange L.P. from NCP Syracuse, and an 89% limited
partnership interest in Orange L.P. from Syracuse Orange Partners. Orange L.P.
now has two partners, GAS Orange and GAS LP.

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<PAGE>

Since the purchase in December 1999 by GAS Orange of NCP Syracuse's general
partnership interest in Orange L.P. and the merger of Funding L.P. with and into
Orange L.P., GAS Orange has acted as managing partner of Orange L.P., Niagara
Mohawk Energy Marketing has managed Orange L.P.'s business operations and
finances and GE International has continued to operate and maintain the project
and the steam plant under the operation and maintenance agreement. The GAS
Orange operating agreement provides that GAS Orange is managed by its members.
Generally, provided a quorum is present at any meeting of the members of GAS
Orange, the vote or written consent of members of GAS Orange holding not less
than a majority of the membership interests in GAS Orange will be the act of the
members. The sole other partner of Orange L.P. is GAS LP, which is both a
general partner and a limited partner.

On or about January 1995, GAS LP, some of its affiliates and Adam Victor
brought an action in New York against Syracuse Orange Partners, NCP Syracuse and
North Canadian Power Incorporated, a shareholder in NCP Syracuse, relating to a
disagreement as to (i) whether NCP Syracuse and Syracuse Orange Partners were
honoring the special rights of GAS LP, as developer general partner in Orange
L.P., to participate in partnership decision making and (ii) whether GAS LP was
receiving its fair share of partnership distributions derived from the revenues
received by Orange L.P. from various activities. In settlement documents,
including stipulations of discontinuance of actions in the appropriate courts,
dated on or about March 28, 1996, the parties agreed to release their claims
against each other. As part of the settlement, GAS LP agreed to relinquish its
special rights as the developer general partner in Orange L.P., and Orange L.P.
agreed to make a one-time payment to GAS LP in the amount of $250,000. Since
then, GAS LP has not participated in the day-to-day management of Orange L.P.

A third party, Kronish, Lieb, Weiner & Hellman, former counsel to Adam Victor
and GAS LP, had a permanent cash flow interest in 25% of the partnership
distributions to which GAS LP is entitled under the Orange L.P. partnership
agreement until March 16, 2000. Kronish Lieb, however, at no time had any
equity or voting rights respecting GAS LP or Orange L.P. Kronish Lieb obtained a
carried cash flow interest of 12.5% of the net revenues Mr. Victor received from
the project, together with additional sums as part of a structured contingency
fee arrangement as counsel to Mr. Victor and GAS LP in 1987. In 1994, Mr. Victor
and GAS LP, which was originally the developer general partner of Orange L.P.,
were involved in an arbitration proceeding respecting the interpretation of that
arrangement and Kronish Lieb's share of sums due to GAS LP as distributions on
equity from Orange L.P. That arbitration resulted in an award in favor of
Kronish Lieb. Mr. Victor and GAS LP immediately appealed the award and,
concurrently with their appeal, commenced a case under Chapter 11 of the federal
bankruptcy code in the U.S. Bankruptcy Court for the Southern District of New
York on July 12, 1994. Kronish Lieb contested the petitions. Subsequently,
Kronish Lieb, Mr. Victor and GAS LP settled all outstanding claims, and Mr.
Victor and GAS LP withdrew their respective bankruptcy cases as well as their
appeal of the arbitration, under a Stipulation dated November 14, 1994 and Order
of the Bankruptcy Court dated December 8, 1994, or the stipulation.

Under the stipulation, Mr. Victor agreed to pay Kronish Lieb a fixed sum, and
agreed to increase Kronish Lieb's permanent cash flow interest to 25% of the
partnership distributions GAS LP was entitled to receive going forward. Under
the other terms of the stipulation, GAS LP or Adam Victor or the entities
through which Adam Victor indirectly held an interest in GAS LP were not
permitted, without the consent of Kronish Lieb, to pledge or sell any or all of
their partnership interests in Orange L.P., amend the partnership agreement of
Orange L.P. or enter into any agreement or transaction with Orange L.P. or NCP
Syracuse, the effect of which would be to delay or diminish any benefit to be
received by Kronish Lieb under the Stipulation or otherwise adversely affect
Kronish Lieb. At the time of the offering of the old notes, Mr. Victor and GAS
LP had fulfilled their payment obligations in favor of Kronish Lieb under the
stipulation, except to the extent of Kronish Lieb's continuing 25% cash flow
interest in the partnership distributions GAS LP is entitled to receive going
forward. Under an Amendment, Release and Covenant Not to Sue, or the covenant,
dated April 5, 1991 among Kronish Lieb, GAS LP, Adam Victor, Orange L.P. and
others, Orange L.P. was authorized and directed to pay Kronish Lieb all amounts
which it is entitled to receive under the Stipulation.

In order to provide that Kronish Lieb would receive the amounts which it was
entitled to receive under the stipulation and the covenant, and to provide that
the other terms of the stipulation and the covenant would be complied with, upon
the closing of the offering of the old notes Orange L.P. deposited $3.0 million
into the stipulation reserve account created under the Deposit and Disbursement
Agreement. This amount represented Orange L.P.'s determination of the maximum
amount reasonably needed either to pay or otherwise settle the obligations of
GAS LP to Kronish Lieb under the stipulation and the covenant. The indenture
provides that at Orange L.P.'s request, the Collateral Agent will

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<PAGE>

transfer, free of the liens of the Collateral Documents, amounts in the
stipulation reserve account to an escrow account established and administered in
accordance with the covenant in the event of a dispute as to GAS LP's
obligations to pay Kronish Lieb under the stipulation.

On March 16, 2000 GAS LP and Kronish Lieb signed a settlement agreement and
mutual releases providing that GAS LP would pay Kronish Lieb $4,000,000 in
exchange for Kronish Lieb's releasing GAS LP, Orange L.P., Adam Victor, GAS
Orange, Orange L.P. and their affiliates from all further claims or rights to
receive any further payments from any of them. On March 15, 2000, at Orange
L.P.'s direction the Trustee distributed the balance of $2.7 million on deposit
in the stipulation reserve account to Orange L.P. for payment to Kronish Lieb on
behalf of GAS LP. This reduced the balance of the stipulation reserve account
to zero. As a result of this settlement and payment, no further funds will be
deposited to the stipulation account. Orange L.P. paid the remaining $1.3
million of the $4,000,000 settlement amount to Kronish Lieb, net of
distributions made to Kronish Lieb since the closing of the old notes on
December 6, 1999, from funds of Orange L.P. contained in a bank account of
Orange L.P. which is not subject to the lien of the Collateral Documents or the
security interest of the Trustee and Collateral Agent.

-44-
<PAGE>

MANAGEMENT

Directors and Executive Officers

The executive officers of GAS Orange, Orange L.P.'s general partner, are as
follows:

<TABLE>
<CAPTION>
Name Age Position
---- ---- --------
<S> <C>
Adam H. Victor 47 President, Treasurer
Douglas Corbett 50 Vice President, Secretary
Richard S. Scolaro 62 Vice President, Assistant Secretary
</TABLE>

The executive officers and directors of Capital Co. are as follows:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C>
Adam H. Victor 47 President, Treasurer, Director
Douglas Corbett 50 Vice President, Secretary, Director
Richard S. Scolaro 62 Vice President, Assistant Secretary, Director
</TABLE>

Adam H. Victor has served as a Director of Capital Co. and as President and
Treasurer of both GAS Orange and Capital Co. since their respective dates of
formation. Mr. Victor was involved with the development of the project and has
continued his involvement in Orange L.P. through his interest in GAS LP. GAS
Orange has delegated limited authority to Mr. Victor as its agent for the
purpose of reaching technical decisions on behalf of GAS Orange respecting the
activities of Niagara Mohawk Energy Marketing and GE International.

Douglas Corbett has served as a Director of Capital Co. and as Vice
President and Secretary of both GAS Orange and Capital Co. since their
respective dates of formation. Mr. Corbett, a business consultant and attorney,
has been a principal with Corbett & Schreck, P.C., a Houston, Texas-based law
firm since 1992.

Richard S. Scolaro has served as a Director of Capital Co. and as Vice
President and Assistant Secretary of both GAS Orange and Capital Co. since their
respective dates of formation. Since February 1979, Mr. Scolaro, an attorney,
has been a principal with Scolaro, Shulman, Cohen, Lawler & Burstein, P.C., a
Syracuse, New York-based law firm, which provides legal services to Orange L.P..
Mr. Scolaro is also a director of Charles W. Commack Associates, Inc., a member
of the NASD.

Director Compensation

Members of the Board of Directors of Capital Co. do not receive compensation
for services as a director.

Executive Compensation

For the year ended December 31, 1999, Adam H. Victor received a management fee
from Orange L.P. in the amount of $360,000. Other than Mr. Victor, no executive
officer of GAS Orange or Capital Co. received compensation of $100,000 or more
during the same period.

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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Until December 5, 1999, NCP Energy, Inc., a wholly owned subsidiary of GPU
International, Inc., under a management agreement with NCP Syracuse, Orange
L.P.'s former general partner, managed Orange L.P., for which it received
quarterly management fees and reimbursements. Management services included
accounting, financial reporting, and project management. For the years ended
December 31, 1999, 1998 and 1997, NCP Energy, Inc. received $947,099 $978,399
and $709,091, respectively, in management fees and reimbursed costs. At
December 31, 1999 and 1998, $15,059 and $90,763, respectively, were included in
accrued liabilities.

Adam H. Victor indirectly controls 100% of GAS LP and is a beneficiary of the
Victor Family Irrevocable Trust, which has an 84% interest in GAS Orange. Mr.
Victor has served as a Director of Capital Co. and as President and Treasurer of
both GAS Orange and Capital Co. since their respective dates of formation. Mr.
Victor, through GAS LP, receives a quarterly consulting fee of $75,000 subject
to annual escalation at the rate of inflation beginning in 1993. During the
years ended December 31, 1999, 1998 and 1997, consulting fees amounted to
$356,560, $351,340 and $345,032, respectively. As of December 31, 1999 and
1998, $89,140 and $87,836, respectively, are included in accrued liabilities.

Richard S. Scolaro owns a 2% interest in GAS Orange. Mr. Scolaro has served
as a Director of Capital Co. and as Vice President and Assistant Secretary of
both GAS Orange and Capital Co. since their respective dates of formation. Mr.
Scolaro, an attorney, is a principal with Scolaro, Shulman, Cohen, Lawler &
Burstein, P.C. Legal services provided to Orange L.P. by Scolaro, Shulman,
Cohen, Lawler & Burstein, P.C. in 1999 in connection with the issuance of the
notes aggregated $1,102,332 and is included in deferred financing costs.

Douglas Corbett owns a 12.5% interest in GAS Orange. Mr. Corbett has served
as a Director of Capital Co. and as Vice President and Assistant Secretary of
both GAS Orange and Capital Co. since their respective dates of formation. Mr.
Corbett, an attorney, is a principal with Corbett & Schreck, P.C. Consulting
services provided by Corbett & Schreck, P.C. in 1999 in connection with the
issuance of the notes aggregated $100,000 which was charged to deferred
financing costs.

On December 6, 1999, Orange L.P. made a distribution of $46.9 million to GAS
Orange to provide funding to acquire partnership interests of Orange L.P. See
"Use of Proceeds" on page 18 and "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
on page 28.

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<PAGE>

OVERVIEW OF THE INDEPENDENT POWER INDUSTRY IN NEW YORK

The United States electric industry has undergone significant change over the
last several years, leading to significant deregulation and increased
competition. As a result, numerous electric utilities nationwide are in the
process of divesting all or a portion of their generation assets. Many are
expected to commence this process in the next few years, as legislative and
regulatory developments drive the industry to disaggregate.

The restructuring of the vertically integrated utility industry in New York
began in May 1996 as a result of a New York Public Service Commission order
requiring each investor-owned utility to file a restructuring plan. The New York
Public Service Commission order called for retail competition starting in 1998
and suggested the creation of an independent system operator to assume
operational control of the investor owned utilities transmission assets.
Restructuring agreements for all of New York State's investor-owned utilities
have now been approved and are being implemented. Retail access was implemented
throughout New York State by year end 1999. Most New York investor-owned
utilities have divested their generating assets and become primarily
distribution companies. This has fragmented the ownership of New York State's
generation assets and increased competition for generation sales. It is possible
that divestiture could eventually lead to the concentration of divested
generation in the hands of a relatively small number of new owners and thus
reduce competition. However, actually in Orange L.P.'s opinion, regulatory
oversight will most likely prevent this concentration from occurring, and will
maintain or increase competitive pressures.

Historically, the New York Power Pool operated a centrally-dispatched pool to
minimize member production costs and to maintain statewide reliability. It also
coordinated the operation of the bulk power transmission facilities in the
state. The New York Power Pool system has become an independent system
operator, which now administers an open access transmission tariff and an
independent system operator services tariff which have been accepted by FERC,
subject to minor changes to comply with FERC requirements. The New York
Independent System Operator commenced trial operations on November 18, 1999. The
New York Independent System Operator is a non-profit New York corporation under
FERC's jurisdiction governed by a board of directors comprised of
representatives from all market participants, including buyers of power, sellers
of power, consumer groups and transmission owners. The New York Power Exchange,
an entity related to the New York Independent System Operator, was envisioned to
be the main power exchange to facilitate competition in the power markets, and
to operate the actual day-ahead and real-time markets for installed capacity,
energy and ancillary services. The New York Power Exchange has not been
implemented; its proposed functions are being handled instead by the New York
Independent System Operator. In a filing in December 1997 with the Federal
Energy Regulatory Commission, or FERC, the members of the New York Power Pool
withdrew their FERC application to form the Power Exchange, proposing instead
that the New York Independent System Operator perform those functions. It is
unclear whether a power exchange separate from the New York Independent System
Operator ever will be implemented. It is possible that other entities may form
competing power exchanges in the future.

The New York Power Pool member systems serve over 99% of New York State's
electric power requirements. Currently, its members are the investor owned
utilities in the state, the New York Power Authority, and the Long Island Power
Authority. In addition, over 5,000 MW of capacity is owned by independent power
producers, who sell the bulk of their output to investor-owned utilities under
long-term contracts. The New York Power Pool interconnects with the New England
Power Pool to the Northeast, Hydro Quebec and Ontario Hydro to the north, and
Pennsylvania-New Jersey-Maryland Power Pool, or PJM, to the south.

Transmission System Market. Transmission access will be available to all
market participants on an open access and non-discriminatory basis. The party
requesting transmission service will pay the independent system operator a
transmission service charge that has three components, a transmission service
charge, a transmission use charge, and a New York Power Authority transmission
access charge.

FERC has set a number of issues concerning the transmission service charge and
marginal losses for hearing. Although the hearing did not impact the start date
for independent system operator operations, its outcome may materially impact
the costs of transmission service offered by the independent system operator.

New York Power Pool Wholesale Market. Generators may transact in the
centralized wholesale power exchange implemented by the New York Independent
System Operator, and may compete in distinct markets for energy, installed
capacity and ancillary services. Pricing is based upon market clearing prices
which are the prices at which sufficient

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<PAGE>

electricity will be supplied to satisfy all demand for which bids have been
submitted. The generator is paid the market clearing price, not its bid price,
at the point it supplies energy to the system and the purchaser paying the
market clearing price at the point it receives energy from the system.

Bilateral Energy Markets. Any generator in the state, including Orange L.P.,
subject to Niagara Mohawk's right of first refusal for the term of the Power Put
Agreement, has the right to sell its output of energy to any wholesale customer
statewide including utilities, municipalities, and energy supply companies.
Generators can sell energy under bilateral contracts, with pricing and other
provisions determined by two-party negotiation. Customers that want to engage in
bilateral transactions must schedule either firm or non-firm transmission
service with the New York Independent System Operator.

Regions. New York State has regional transmission constraints which divide
the state's power market into two distinct regions - the western region and the
eastern region. The most significant regional differences in the power market
are between the western and eastern regions. The Project is located within the
western region. This region possesses primarily low cost baseload, nuclear and
coal, and hydro facilities which, together with must-run independent power
producer facilities, form 83% of its installed capacity. Even though the western
region has only 40% of New York Power Pool's generation capacity, power normally
flows from the West into the East because it is primarily baseload generation.
The flow of power from the lower priced western region to the higher priced
eastern region is limited to approximately 5,000 MW by transmission limits and
reliability considerations.

Demand. In 1997, the New York Power Pool summer peak was 28,700 MW and
energy demand totaled 148,882 GWh. The statewide peak grew by an average of 2.8%
per year from 1992 to 1997, while energy demand grew by an average of 0.8%
annually during that same period. Current New York Power Pool forecasts predict
a continued capacity surplus until 2003, at which point new capacity will be
required in order to maintain system reserve margin requirements. There have
been recent announcements of new independent power projects which, if completed,
will extend the forecasted capacity surplus until beyond 2008.

Interconnection. Western and central New York are relatively unattractive
markets for the transmission of imported power due to low generation costs and
low on-peak energy prices relative to the area's adjacent markets, New England
Power Pool, PJM and eastern New York. On the export side, the New England Power
Pool and PJM forecast higher demand growth for their markets. Also, the existing
transmission infrastructure permits us to access these neighboring markets,
subject to constraints imposed by capacity limitations and reliability
considerations.

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<PAGE>

SUMMARY DESCRIPTIONS OF THE PRINCIPAL AGREEMENTS
RELATING TO THE PROJECT

The following descriptions of the Amended Power Purchase Agreement, Steam
Contract, Steam Plant Operating Agreement, Ground Lease, Master Lease, PILOT
Agreement, Host Community Agreement, Gas Purchase Agreement, TransCanada
Pipelines Limited Firm Service Contract, Firm Gas Transportation Contract,
Interruptible Gas Transportation Contract, Tennessee Gas Pipeline Company Letter
of Credit, Operation and Maintenance Agreement, Asset Management Agreement,
Partnership Interest Purchase Agreement, and related consents and agreements,
which together we refer to as the Significant Project Contracts, do not describe
every detail of the agreements. They are subject to, and are qualified in their
entirety by reference to the Significant Project Contracts. For definitions of
terms used but not defined in the descriptions of the Significant Project
Contracts below, see "Description of Notes--Certain Definitions."

Amended Power Purchase Agreement

When it commenced commercial operations, the Project had contracted to sell
all its electricity to Niagara Mohawk under a long-term power purchase
agreement. In May 1996, the New York Public Service Commission called for a
competitive electricity market in the State of New York and required each
investor-owned utility, including Niagara Mohawk, to file a restructuring plan.
The New York Public Service Commission also suggested creating an independent
system operator to assume operational control of the transmission assets of each
investor-owned utility. Under the independent system operator system instituted
on November 18, 1999, the New York Independent System Operator facilitates
competition in the power markets and operates the actual day-ahead and real-time
markets for installed capacity, energy and ancillary services.

In connection with this New York Public Service Commission initiative, Niagara
Mohawk entered into the Master Restructuring Agreement with 27 independent power
producers, including Orange L.P. The Master Restructuring Agreement amended and
restated Orange L.P.'s then existing power purchase agreement with Niagara
Mohawk, dividing it into a Power Put Agreement and Indexed Swap Agreement
described below.

Power Put Agreement

The Power Put Agreement became effective on June 30, 1998 upon the completion
of the restructuring contemplated by the Master Restructuring Agreement and,
except for provisions relating to the power put option, remains in effect for
ten years.

Power Put Option; Pricing. Under the Power Put Agreement, until the New York
Independent System Operator has achieved specified volumetric tests (the period
ending on such date being what we refer to as the Proxy-Market Price Period),
but in no event later than June 30, 2008, Orange L.P. has the right but not the
obligation, to sell to Niagara Mohawk energy and capacity. It can sell energy
up to the amount in the table entitled "POWER PUT AGREEMENT--Contract Quantity"
below. This includes sales of up to 5% more energy than the contract quantity.
Capacity is subject to both seasonal variation and degradation associated with
the contract quantity of electricity for the immediately succeeding month, in
each case for each interval during the preceding calendar month. The interval is
one hour or other period of time as determined under the Power Put Agreement.
Niagara Mohawk is obligated to take and pay for energy and capacity from the
Project at the Proxy-Market Price or the Market Price and, if applicable, the
Market Capacity Price. Prior to the establishment of the New York Independent
System Operator, the Proxy-Market Price means Niagara Mohawk's short-term
avoided energy and capacity costs as filed with the New York Public Service
Commission under the SC-6 tariff. After the establishment of the New York
Independent System Operator the Proxy-Market Price means the Market Price and,
if applicable, the Market Capacity Price. The Market Price means the day ahead
market price paid to sellers for energy produced in that specific location as
specified and published by the New York Independent System Operator. The Market
Capacity Price means the regional market price paid to sellers for capacity.
This will be applicable only after the New York Independent System Operator has
been established and if there then exists a market for capacity.

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<PAGE>

The Power Put Agreement provides that Orange L.P. has the right to sell energy
and associated capacity to Niagara Mohawk for periods ranging from one hour up
to one month. Prior to the beginning of each month, Orange L.P. must provide
Niagara Mohawk a schedule indicating the projected deliveries of energy and
associated capacity for that month. Orange L.P. may update the schedule hourly
by providing notice no less than 30 minutes before the hour in which the change
is to be effective.

At the conclusion of the Proxy-Market Price Period, Orange L.P.'s right to
sell energy and associated capacity to Niagara Mohawk will terminate. Orange
L.P. will have the right to sell energy and associated capacity both through the
New York Independent System Operator and outside the New York Independent System
Operator under bilateral contracts, subject to Niagara Mohawk's right of first
refusal to purchase energy and associated capacity. Niagara Mohawk's right of
first refusal to purchase energy and associated capacity terminates at the
conclusion of the Proxy-Market Price Period. The New York Independent System
Operator system began operating on a trial basis during the second half of
November 1999.

POWER PUT AGREEMENT--Contract Quantity

<TABLE>
<CAPTION>
Monthly Contract Quantity (MWh/month)
Annual
Contract Contract
Year Quantity Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
2 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
3 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
4 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
5 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
6 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
7 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
8 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
9 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
10 663,000 57,884 52,160 57,884 55,976 50,774 54,928 56,072 55,988 49,590 57,884 55,976 57,884
</TABLE>
_________________________

The contract quantity of electricity for each Interval will not exceed 80 MWh
+ 5% (the "Interval Cap"); but the aggregate amount of electricity that Orange
L.P. will have the right to make Niagara Mohawk buy each year under the Power
Put Agreement will not exceed 663,000 MWh + 5%.

Right of First Refusal. Under the Power Put Agreement, until the New York
Independent System Operator is fully established and functioning and achieves
specified volumetric tests, Niagara Mohawk has a right of first refusal to
purchase the energy or capacity associated with the quantities covered under the
Power Put Agreement. Energy and associated capacity over these amounts are not
subject to the Power Put Agreement and Orange L.P. may sell them to third
parties without offering this excess energy and capacity to Niagara Mohawk.

Delivery of Electricity. The Power Put Agreement requires that Orange L.P.
deliver electricity to Niagara Mohawk's system at specified approximate voltage
levels. Niagara Mohawk may suspend accepting and paying for electricity from
Orange L.P. for periods when its transmission system is temporarily physically
unable to accept this electricity for reasons of necessary maintenance, repair,
system emergency, safety or similar actions. Orange L.P. may shut down the
Project or temporarily disconnect it from Niagara Mohawk's system for any
periods of time necessary for maintenance, safety or emergency reasons. Under
the Power Put Agreement, Orange L.P. must provide Niagara Mohawk schedules of
planned maintenance requirements, including the number and duration of any
planned outages. Orange L.P. may also reschedule deliveries of power which are
not made due to any suspension or shutdown, upon a mutually agreed schedule.

Force Majeure. If force majeure prevents either Niagara Mohawk or Orange
L.P. from carrying out any of its obligations other than making payments under
the Power Put Agreement, either party may suspend performance of its obligations
that are affected by the force majeure following giving notice. At Orange L.P.'s
option, it may reschedule deliveries of power not delivered due to any force
majeure event when mutually agreed.

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Required Payments for Changes in Costs. Orange L.P. and Niagara Mohawk are
required to pay each other adjustments for changes in costs as established under
contracts as of January 1, 1997, regarding the local distribution system, gas
transportation and the electrical interconnection. To the extent there is a net
increase in the cost of these items to Orange L.P., then Niagara Mohawk pays
Orange L.P. the net difference. To the extent there is a net decrease in the
cost of these items to Orange L.P., then Orange L.P. pays Niagara Mohawk for
this net decrease. In addition, Orange L.P. and Niagara Mohawk must make net
payments adjusting for changes in costs under contracts as of January 1, 1997
for changes in federal, state or local laws during the Proxy-Market Price Period
and any later periods during which like adjustments in costs are recovered by
any entity that owns any of Niagara Mohawk's non-nuclear generating assets.

The contract prices under the Power Put Agreement do not specifically address
the charges for reactive power, voltage support services or line-losses.
Reactive power and voltage support are so-called ancillary services provided by
electric generators. These services are required to ensure that the voltage over
the electric transmission system, or grid, is kept at a reliable level to
maintain the flow of electricity to users. Line losses are electricity that is
lost during transmission as a result of the heating of the wires that occurs
during the transmission process. The Power Put Agreement requires Orange L.P.
and Niagara Mohawk to reimburse or pay these charges in addition to the contract
prices under the Power Put Agreement. If Niagara Mohawk's tariffs require Orange
L.P. to pay Niagara Mohawk for reactive power or line-losses when Niagara
Mohawk's power plants are producing electricity, then Orange L.P. is entitled to
reimbursement by Niagara Mohawk for all reactive power charges and/or line-loss
charges or costs incurred by Orange L.P. during the associated payment period.
If Orange L.P. is required to provide voltage support services Niagara Mohawk
will pay to Orange L.P. any and all voltage support service payments made by the
independent system operator to Niagara Mohawk on account of voltage support
services provided by Orange L.P. Also, if the independent system operator
charges Orange L.P. for any line-losses, then Niagara Mohawk must reimburse
Orange L.P. for all line-loss charges incurred by Orange L.P.

Orange L.P. must notify Niagara Mohawk of any payment due before the fifth
business day of each month, after netting amounts owing. Niagara Mohawk must
then provide, a revised notice with actual electricity prices and quantities,
and the adjusted amounts may be paid on the next payment date without interest.
If either Orange L.P. or Niagara Mohawk disputes any part of any notice or
payment obligation, it must provide a written explanation of the basis for the
dispute and pay the undisputed amount. If any underpayment or overpayment is
established, either through mutual agreement or settlement under the terms of
the Power Put Agreement, the amount will be paid along with interest.

Qualifying Facility Status. Under the Power Put Agreement, Orange L.P. has
the right in its sole discretion to maintain the Project's status as a
qualifying facility under federal and state law. As a qualifying facility,
Orange L.P. is not considered to be a "public utility" and is exempt from most
state and federal regulations applicable to public utilities. The Power Put
Agreement states that Niagara Mohawk's rights and obligations, including without
limitation its obligation to pay for electricity produced by Orange L.P. as
described in the Power Put Agreement, continue as a contractual right regardless
of whether Orange L.P. maintains the Project's qualifying facility status.

Indexed Swap Agreement

In connection with the Power Put Agreement, Orange L.P. entered into the
Indexed Swap Agreement with Niagara Mohawk. It serves as a financial hedge
against movements in the price of electricity and is not a contract for the
delivery or purchase of electricity. Unless terminated early under its terms,
the Indexed Swap Agreement terminates June 30, 2008.

Under the Indexed Swap Agreement, Niagara Mohawk makes monthly fixed payments
to Orange L.P. and Orange L.P. makes monthly floating payments to Niagara
Mohawk. On the monthly payment date these payments will be netted against each
other. The party owing the greater amount makes a net payment to the other
party.

Fixed Payments. The fixed payments are $54.62/MWh for the annual period
ending June 30, 2000, multiplied by the notional quantity of electricity
specified to be delivered to Niagara Mohawk during the applicable interval.
After June 30, 2000, the fixed payments will be $53.84/MWh adjusted by an index
factor and increment, or the Indexed Contract Price, multiplied by the
applicable notional quantity. The notional quantities of electricity during the
Proxy Market Period and for the period after the Proxy Market Period are shown
in the tables below entitled "Contract

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Quantity Proxy Market Period (MWh/hr)" and "Contract Quantity for Contract Years
Following the Proxy Market Period (MWh/hr)," respectively.

Floating Payments. The floating payments are (i) the Proxy-Market Price or
the Market Price, if applicable, multiplied by the applicable notional quantity
for each hourly interval and (ii) if applicable, the Market Capacity Price
multiplied by the weighted average capacity associated with the applicable
notional quantity.

Indexed Contract Price. The Indexed Contract Price applies after June 30,
2000. The Indexed Contract Price is calculated under a formula with monthly
adjustments to account for monthly changes in the price of natural gas on the
spot market as well as fluctuations in the U.S. Consumer Price Index. These are
added to a contractually agreed amount that increases each contract year after
the initial year beginning July 1, 2000. This is done as follows.

o The base Contract Price for each year starts at $53.84 per megawatt hour.

o Fifteen percent of this Contract Price is adjusted upward or downward by the
percent change in the spot market price for natural gas at the Niagara Border
(New York State-Canada) during any month from the base price for Niagara
Border spot market gas, established in June 1998.

o Forty-one percent of the Contract Price is adjusted upward or downward by the
percent change in the consumer price index for the region (all urban consumers
for the New York, Northern New Jersey Long Island region) during the month
from the base consumer price index for the region, established on June 1,
1998.

o The remainder of the Indexed Contract Price is a third component which starts
at $23.56 for the contract year beginning July 1, 2000, and is adjusted upward
to a contractually agreed upon amount each contract year thereafter. In brief,
the component which starts at $23.56 increases gradually up to $27.70 by the
last contract year of the Indexed Swap Contract, which begins July 1,
2007.

The sum of these three items is the Indexed Contract Price for the month in
question during any contract year.

Hourly Contract Quantity Proxy-Market Period (MWh/hr)

<TABLE>
<CAPTION>
Annual Hourly Contract Quantity (MWh/hr)
Contract Contract
Contract Quantity Price
Year (MWh) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ($/MWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 53.84
2 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 54.62
3 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
4 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
5 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
6 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
7 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
8 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
9 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
10 663,000 77.80 77.60 77.80 77.74 68.20 76.30 75.40 75.30 68.90 77.80 77.70 77.80 I
</TABLE>
_________________________
For each Contract Year which is a leap year, the Contract Quantity for the
month of February will be adjusted by a factor of 28 divided by 29.
I = Indexed Contract Price

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<PAGE>

Hourly Contract Quantity for Contract Years Following the Proxy-Market Period
(MWh/hr)

<TABLE>
<CAPTION>
Hourly Contract Quantity (MWh/hr)
Annual
Contract Contract
Contract Quantity Price
Year (MWh) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ($/MWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 53.84
2 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 54.62
3 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
4 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
5 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
6 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
7 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
8 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
9 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
10 663,000 75.69 75.68 75.68 75.68 75.68 75.68 75.68 75.68 75.69 75.69 75.69 75.69 I
</TABLE>
_________________________

For each leap year, the Contract Quantity for February will be adjusted by a
factor of 28 divided by 29.
I = Indexed Contract Price

Tax Adjustments. Orange L.P. entered into the Indexed Swap Agreement
expecting that neither Orange L.P. nor Niagara Mohawk would have to deduct or
withhold for any tax from any payment (except for interest payments) to be made
by either Orange L.P. or Niagara Mohawk under the Indexed Swap Agreement. In
general, the Indexed Swap Agreement provides that if either Orange L.P. or
Niagara Mohawk makes a deduction or withholding for taxes, the party required to
make the payment must also pay the other party an amount necessary to ensure
that the net amount received will equal the amount the receiving party would
have received had no deduction or withholding been required. There are some
exceptions, such as when actions are commenced by the relevant taxing authority
or result from a change in tax law after the execution and delivery of the
Indexed Swap Agreement.

Events of Default and Other Termination Events. The Indexed Swap Agreement
specifies events of default and cure periods for breach, including:

o Orange L.P.'s or Niagara Mohawk's failure to make payments on time, which
becomes an event of default of 3 local business days after notice from the
other party;

o Orange L.P.'s or Niagara Mohawk's failure to perform its obligations in
accordance with the Indexed Swap Agreement, other than payment defaults
described above and failures to provide notice or documentation, which
becomes an event of default if not remedied within 30 days after notice is
given;

o any materially incorrect or misleading representation made by Orange L.P. or
Niagara Mohawk in the Indexed Swap Agreement;

o Orange L.P.'s or Niagara Mohawk's default under hedging or related
transactions involving the other;

o Orange L.P.'s or Niagara Mohawk's filing for voluntary bankruptcy, or
related bankruptcy or insolvency proceedings;

o a merger, amalgamation or consolidation of Orange L.P. or Niagara Mohawk
with another entity, if the resulting or surviving entity fails to assume
all the obligations the assignor;

o defaults by Orange L.P. under debt instruments which amount in the aggregate
to at least $30 million and which have resulted in the acceleration of debt
or payment defaults; and

o defaults by Niagara Mohawk under debt instruments which amount in the
aggregate to the lesser of (A) $50 million or (B) 10% of the shareholder
equity in Niagara Mohawk, and which have resulted in the acceleration of the
debt or payment defaults of $50 million.

The Indexed Swap Agreement provides for specified termination events, with
applicable cure periods, including:

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<PAGE>

o any change in law or interpretation by any court, tribunal or regulatory
authority which makes it unlawful for either Orange L.P. or Niagara Mohawk
to perform its obligations under the Indexed Swap Agreement;

o actions taken by a taxing authority, or brought in a court of competent
jurisdiction or some types of changes in tax law;

o merger events resulting in specified tax payments or other effects, and

o any merger, amalgamation or consideration of Orange L.P. or Niagara Mohawk
with another entity in which the surviving or transferee entity has a
significantly weaker creditworthiness.

Either Orange L.P. or Niagara Mohawk may, within twenty (20) days after the
occurrence of an event or events of default, give written notice of the
default(s) and designate an early termination date, except that termination will
occur automatically upon the occurrence of some insolvency events or the
institution of proceedings relating to those insolvency events.

If a termination event occurs, and no transfer of contractual obligations or
agreement can be reached concerning the termination event, the appropriate party
may give written notice of and designate an early termination date.

If an early termination event occurs, the Indexed Swap Agreement also provides
for payment by either Orange L.P. or Niagara Mohawk, or applicable. If
termination results from an event of default, the defaulting party must pay an
amount equal to the loss incurred by the non-defaulting party, or the Non-
Defaulting Party Termination Loss, to the non-defaulting party if the Non-
Defaulting Party Termination Loss is positive. The non-defaulting party must
pay the defaulting party if the Non-Defaulting Party Termination Loss is
negative. Upon termination resulting from a termination event, the losses or
benefits of the two parties are shared equally.

Revenues Generated by Amended Power Purchase Agreement

Based on assumptions and conditions described in the Amended Power Purchase
Agreement, Niagara Mohawk will owe Orange L.P. a minimum net payment obligation
during the period ending June 30, 2008. The amount will equal the Fixed Payment
under the Indexed Swap Agreement, multiplied by the applicable notional quantity
of electricity under the Indexed Swap Agreement.

Significant among the assumptions and conditions giving rise to this minimum
net payment obligation are the following:

o during the Proxy Market Price Period, Orange L.P. is able to generate and sell
to Niagara Mohawk under the Power Put Agreement electricity in an amount at
least equal to the notional quantity of electricity under the Indexed Swap
Agreement;

o after the Proxy Market Price Period, Orange L.P. is able to generate and sell
into the New York Independent System Operator electricity at least equal to
the notional quantity of electricity under the Indexed Swap Agreement and at a
price at least equal to the floating payments price applicable to payments
from Orange L.P. to Niagara Mohawk under the Indexed Swap Agreement;

o there are no cost adjustments permitted under the Power Put Agreement which
have the effect of reducing the price paid by Niagara Mohawk to Orange L.P.
for electricity generated and sold to Niagara Mohawk under the Power Put
Agreement;

o there are no cost or liability adjustments permitted under the Indexed Swap
Agreement which have the effect of increasing the floating payment paid by
Orange L.P. to Niagara Mohawk or decreasing the fixed payment paid by Niagara
Mohawk to Orange L.P. for the notional quantity of electricity under the
Indexed Swap Agreement; and

o the Indexed Swap Agreement is not terminated early because of an event of
default or other event giving rise to an early termination under the Indexed
Swap Agreement.

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<PAGE>

Orange L.P.'s ability to generate and sell a sufficient amount of electricity
to Niagara Mohawk or to the New York Independent System Operator could be
adversely affected by various circumstances, including equipment failure or
other operational difficulties, failure by third parties to perform their
contractual obligations to Orange L.P., regulatory changes or unforeseeable
circumstances beyond the control of Orange L.P. Orange L.P.'s ability to
generate and sell electricity also would be adversely affected by its failure to
perform its contractual obligations to third parties. For example, Orange L.P.'s
right to possess the Project under the Ground Lease could be terminated if
Orange L.P. fails to perform its obligations under the Steam Contract or the
Steam Plant Operating Agreement.

Niagara Mohawk Consent

Niagara Mohawk has consented to Orange L.P.'s assignment of its interests
under the Amended Power Purchase Agreement to the Collateral Agent under the
Security Agreement and the other Collateral Documents as security for our
obligations under the notes and the indenture. Niagara Mohawk has agreed to
accept the Collateral Agent's performance of Orange L.P.'s obligations under the
Amended Power Purchase Agreement. So long as the Amended Power Purchase
Agreement has been assigned to the Collateral Agent or has been assumed by the
Collateral Agent, its designee(s) or assignee(s), Niagara Mohawk will make all
payments due to Orange L.P. under the Amended Power Purchase Agreement directly
to the Collateral Agent, in accordance with the Collateral Agent's written
instructions. On a default or breach by Orange L.P. under the Amended Power
Purchase Agreement, Niagara Mohawk will not terminate the Amended Power Purchase
Agreement without giving the Collateral Agent written notice of the default or
breach and giving the Collateral Agent up to 30 days to cure a payment default
or a reasonable time necessary to cure a non-payment default so long as the
Collateral Agent has commenced to cure the default within 60 days after receipt
of the notice and then diligently completes the cure. If the Collateral Agent
commences foreclosure proceedings to obtain possession of the project, the
Collateral Agent will be allowed a reasonable period to complete the
proceedings.

Steam Contract

Orange L.P. has entered into a Steam Contract with Syracuse University dated
as of February 27, 1990, as amended, under which Syracuse University purchases
steam from Orange L.P. The remaining stated term of the Steam Contract is
approximately 32 years.

Steam Delivery Requirements. The Steam Contract requires that Orange L.P.
provide steam from the Project to Syracuse University in amounts necessary to
meet the steam requirements of Syracuse University and some of its ancillary
customers. However, Orange L.P. has no obligation to provide steam in excess of
450,000 pounds per hour or more than a maximum annual average of 230,000 pounds
of steam per hour, or a total of 2,014,800,000 pounds during any 12 months.
Syracuse University must accept delivery of or pay for a minimum quantity of
steam equal to the lesser of the minimum amount required to maintain the project
as a qualifying cogeneration facility under the Public Utility Regulatory
Policies Act of 1978, as amended, or PURPA, and 60,000 pounds of steam per hour,
or a total of 525,600,000 pounds in any 12 months. The minimum annual
requirement may be reduced if the supply of steam to Syracuse University is
interrupted or discontinued and this is not the fault of Syracuse University.

Steam Purchase; Pricing. Syracuse University is the exclusive purchaser of
steam from the Project. Although the Steam Contract generally prohibits Orange
L.P. from selling or furnishing steam, power or energy to third parties without
Syracuse University's prior written consent, the Steam Contract expressly
permits Orange L.P. to sell electricity to Niagara Mohawk or other public
utilities without Syracuse University's consent. As discussed above, FERC
regulates the New York Independent System Operator as a public utility subject
to FERC's jurisdiction. The Steam Contract sets a base steam price until July
2008 of $4.27 per thousand pounds of steam. The price is subject to adjustment
for increases or decreases in fuel and labor costs. The base steam price will be
further adjusted beginning in July 2008 on the sixteenth anniversary of
operation of the Project. The Steam Contract has a pricing formula for excess
steam delivered to Syracuse University as well as a future price adjustment if
an alternative fuel or technology would reduce the cost at which Syracuse
University could obtain its steam requirements.

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<PAGE>

Defaults; Failure to Deliver Steam. In the event of a default by Orange
L.P., which includes events of bankruptcy or insolvency or failure to deliver
steam, Syracuse University may require Orange L.P. to make other arrangements
for the delivery of steam or may make alternative arrangements for the delivery
of steam. In either case, Orange L.P. is to reimburse it for amounts paid to
purchase or produce steam over what it would pay under the Steam Contract. Under
some circumstances following a default, Syracuse University may immediately
assume operating control of the Project as provided in the Steam Contract.
However, under the Steam Contract Orange L.P. has no responsibility for any
failure to supply steam to Syracuse University that is caused, or materially
contributed to, by the fault of Syracuse University or by force majeure events,
including acts of God, strikes or interference through any governmental
authority.

Steam Plant Operating Agreement

In connection with the Steam Contract, Orange L.P. has entered into the 40-
year Steam Plant Operating Agreement with Syracuse University, dated as of
February 27, 1990, as amended, under which Orange L.P. is responsible for
operating and maintaining the Steam Plant. The Steam Plant Operating Agreement
requires Orange L.P. to operate and maintain the Steam Plant in a state of
readiness to make available an alternate or supplemental source of steam to
Syracuse University and its ancillary customers. It must do so with its own
work force and at its sole cost and expense. The steam must meet the pressure,
temperature and other requirements of the Steam Contract after the interruption
of the required supply of steam from the project. Unless sooner terminated in
accordance with its terms, the Steam Plant Operating Agreement continues for the
term of the Steam Contract.

User Charge. For its right to operate the Steam Plant, Orange L.P. must pay
an annual user charge to Syracuse University. The payment is due each July,
although Orange L.P. may elect to make twelve equal monthly payments. The
current annual user charge is $1.25 million per year which increases at
intervals as shown below.

<TABLE>
<CAPTION>
Year Annual User Charge
<S> <C> <C>
Present-2007 $1,250,000
2008-2012 $1,350,000
2013-2022 $1,450,000
2023-2031 $1,550,000
2032 (Final payment) $1,550,000
</TABLE>

Insurance; Indemnification. The Steam Plant Operating Agreement requires
Orange L.P. to maintain casualty and other insurance on the Steam Plant
throughout the term. In addition, the Steam Plant Operating Agreement imposes
indemnification obligations on Syracuse University and Orange L.P. in connection
with claims asserted against each other with respect to the Steam Plant,
including specific limitations on liabilities from the existence of specific
hazardous substances or other environmental conditions.

Damage to Steam Plant. In the event of damage or destruction by fire or
otherwise of the Steam Plant or any part of it, Orange L.P. must notify Syracuse
University and restore, replace or rebuild the Steam Plant at Orange L.P.'s sole
cost. However, that if the insurance proceeds are insufficient for such
restoration, Orange L.P.'s obligation to restore with funds other than insurance
proceeds shall be subject to Syracuse University's obligation to indemnify
Orange L.P.

Eminent Domain. If all or substantially all of the Steam Plant is taken by
eminent domain, the Steam Plant Operating Agreement will automatically
terminate. However, under some circumstances Syracuse University may replace
the Steam Plant or take other appropriate action to enable Orange L.P. to comply
with its obligations under the Steam Contract at no additional cost to Orange
L.P. Unless and until a replacement or other alternate or supplemental source of
steam is available to Orange L.P., Orange L.P.'s obligations under the Steam
Contract will be appropriately modified to reflect, among other things, the
actual steam generating capacities of the Project as it then exists and the
absence of a suitable or supplemental source of steam.

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<PAGE>

Obligation to Rebuild Boilers. The Steam Plant Operating Agreement obligates
Orange L.P. to rebuild the boilers in the Steam Plant when they wear out. The
need to rebuild will either be agreed to by Syracuse University and Orange L.P.
or determined by a professional consultant they select. Orange L.P. may replace
a boiler with a package boiler if this is more economic than rebuilding the
boiler. Orange L.P. and Syracuse University have agreed that the current boiler
replacement costs are $11.9 million, and that this amount is to be redetermined
every five years. Until redetermined, the boiler replacement cost increases 5%
annually.

Defaults; Termination of Steam Plant Operating Agreement. The Steam Plant
Operating Agreement specifies events of default, which include the following:
Orange L.P.'s failure to pay user charges or perform any of the provisions of
the Steam Plant Operating Agreement, bankruptcy, abandonment of the Steam Plant
or termination of the Steam Contract or the Ground Lease for any reason other
than a default of Syracuse University. Upon any events of default, Syracuse
University may give written termination notice to Orange L.P. stating the date
of termination. On termination of the Steam Plant Operating Agreement, Orange
L.P. must surrender use and possession of the Steam Plant to Syracuse University
and is liable to Syracuse University for damages for Orange L.P.'s default.

Ground Lease Arrangement

Ground Lease. Orange L.P. has entered into the Ground Lease with Syracuse
University dated February 27, 1990, as amended, under which Syracuse University
leased to Orange L.P. the parcel of land (but not any underground oil storage
tanks) where the project was constructed, which we refer to as the premises.
Under the Ground Lease Syracuse University also provides an easement for a
transmission line for natural gas and/or propane over land owned by Syracuse
University.

Assignment of Ground Lease. On April 5, 1991 SIDA issued its 1991 Taxable
Industrial Development Revenue Bonds (Project Orange Associates, L.P.). The
bond proceeds were used by Orange L.P. to finance, the development, acquisition
and construction of the Project and to obtain a prepaid supply of natural gas
for the Project. In connection with the bond issuance, Orange L.P. assigned to
SIDA all its rights in and under the Master Lease the premises under the Ground
Lease under an assignment of lease dated the same date.

Master Lease. On the same day Orange L.P. entered into the Master Lease with
SIDA. Orange L.P. sublets from SIDA the premises and easements it assigned to
SIDA and leases from SIDA the Project, easements granted to SIDA by the City of
Syracuse and all personal property acquired by SIDA for use for the Project. The
Master Lease incorporates all of the rights and obligations of SIDA, and terms
and provisions applicable under the Ground Lease, and applies them all to bind
Orange L.P. in SIDA's place.

Rent Payments. Under the Ground Lease, Orange L.P. pays Syracuse University
annual rent of one dollar for the premises. The Ground Lease is intended to be a
net lease so that all costs, expenses and obligations of every kind relating to
the Project or the premises will be paid by Orange L.P. The Master Lease
provides for a nominal annual rent payment of one dollar payable in arrears on
December 31 each year.

Term. The term of the Ground Lease expires when the Steam Contract expires,
unless terminated earlier in accordance with the Ground Lease. The Master Lease
continues until the earlier of the termination of the Ground Lease or the
termination or expiration of the PILOT Agreement.

Ownership. During the term of the Ground Lease and the Master Lease, the
project will be owned by SIDA. On the termination or expiration of the Master
Lease, Orange L.P. will purchase from SIDA, and SIDA will convey to Orange L.P.
for one dollar, SIDA's entire right, title and interest in the Project and any
improvements to the premises. On the expiration or termination of the Ground
Lease, the Project and any improvements to the premises will become the property
of Syracuse University without any further consideration by Syracuse University.

Maintenance and Repair. The Ground Lease and the Master Lease require Orange
L.P. to maintain and promptly repair the premises and the project at its own
expense.

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Insurance and Indemnification under the Ground Lease. The Ground Lease
contains indemnification provisions and insurance requirements virtually
identical to those in the Steam Plant Operating Agreement.

Insurance and Indemnification under the Master Lease. The Master Lease
incorporates the indemnification provisions and insurance requirements of the
Ground Lease into the Master Lease. In addition under the Master Lease, Orange
L.P. is required to indemnify and hold SIDA and its members, officers, agents
and employees harmless from all claims arising from SIDA's undertaking the
project. This includes property loss or damage, bodily injury liability or
expense from owning the Project, all taxes and any liability or expense relating
to violations of laws relating to hazardous substances. The indemnification
obligations survive the termination of the Master Lease and any conveyance of
SIDA's interest in the Project to Orange L.P.

Damage, Destruction and Restoration. If all or part of the project is damaged
by fire or other casualty, Orange L.P. must restore the Project to its original
condition, at its sole cost, whether or not the insurance covers the cost.
Insurance proceeds for damage or destruction will be paid to the holder of a
permitted mortgage (as defined below) to be applied as required in the permitted
mortgage and the applicable Consent and Agreement.

Condemnation. If all or substantially all of the premises is taken by
condemnation, the Ground Lease will be terminated and the net condemnation
proceeds will be distributed:

o first, to Syracuse University, to pay the value of the land taken;

o second, to the holder of any permitted mortgage, to pay the unpaid amounts
secured by the permitted mortgage;

o third, to Syracuse University, to pay any subordinated or deferred user
charges under the Steam Plant Operating Agreement; and

o fourth, to Syracuse University and Orange L.P. in proportion to the relevant
values of their interests in the Project and the Steam Plant.

If less than all or substantially all of the premises and the project and the
Steam Plant are taken, the Ground Lease will remain in effect and the net
condemnation proceeds after payment of the value of the land to Syracuse
University will be paid to Orange L.P. Orange L.P. will then restore the
project to the extent reasonably practicable to its condition prior to the
condemnation. If the net condemnation proceeds exceed the cost of restoration,
the excess will be distributed as provided above.

Right to Mortgage. The Ground Lease entitles Orange L.P. to mortgage its
leasehold interest in the premises to a lending institution so long as 100% of
the proceeds of the mortgage loan, or 95% of the proceeds of any refinancing of
the mortgage loan, are designated for use for the construction, development,
improvement, expansion, alteration, maintenance, repair, replacement or
operation of the project or the Steam Plant, or for costs to develop the Project
or the Steam Plant. This includes establishing appropriate reserves and
paying other financing costs, or to purchase or redeem any economic interest in
the Project. (Any mortgage meeting this definition is referred to as a permitted
mortgage.) A permitted mortgage must fully amortize before the Ground Lease
expires and must expressly recognize the rights of Syracuse University under the
Ground Lease and the Steam Contract. The Ground Lease permits the holder of a
permitted mortgage to cure any of Orange L.P.'s defaults before Syracuse
University may terminate.

Events of Default; Termination of Ground Lease. The Ground Lease specifies
events of default, including the following:

o Orange L.P.'s failure to pay rent when due for sixty days after written notice
from Syracuse University;

o Orange L.P.'s failure to perform any of the terms with regard to punctual
payment of taxes and utility charges on the project and the premises;
compliance with all applicable laws; maintaining insurance; and Orange L.P.'s
giving a mortgage not in the form of a permitted mortgage;

o Orange L.P.'s filing for voluntary bankruptcy or being adjudicated bankrupt or
insolvent;

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o commencement against Orange L.P. of an action seeking involuntary bankruptcy
or appointment of a trustee without Orange L.P.'s consent or acquiescence;

o Orange L.P.'s abandonment of the Project and the premises;

o a final money judgment against Orange L.P. exceeding $100,000 which is not
discharged within sixty days; and

o the termination of the Steam Contract for any reason other than default by
Syracuse University.

If an event of default occurs, Syracuse University may give a written
termination notice to Orange L.P. stating the date when the Ground Lease will
terminate. Under the University Consent and Agreement, the Collateral Agent
will receive notice of and have an opportunity to cure any default. On
termination of the Ground Lease, Orange L.P. must surrender use and possession
of the Project and the premises to Syracuse University and is liable to Syracuse
University for damages for Orange L.P.'s default.

Termination of Master Lease; Reconveyance of the Project. SIDA may
terminate the Master Lease and reconvey and assign to Orange L.P. SIDA's entire
right, title and interest in the Project following an event of default under the
Ground Lease or the PILOT Agreement. SIDA may also terminate the Master Lease
following events of default or violations of laws relating to hazardous
substances concerning the Project. Orange L.P. may exercise its option at any
time to terminate the Master Lease by giving notice to SIDA. If either party
terminates the Master Lease, Orange L.P. must make specified payments, including
all unpaid fees and expenses of SIDA incurred under the Master Lease, mortgages
related to the Project and all amounts due and payable under the PILOT
Agreement. On the termination or expiration of the Master Lease, Orange L.P.
must purchase from SIDA and SIDA will convey to Orange L.P., for one dollar,
SIDA's entire right, title and interest in the Project.

University Consent and Agreement

Consent to Assignment and Payment; Notices; Amendments. Syracuse University
has consented and agreed to Orange L.P.'s assigning its interests under the
Ground Lease, the Steam Contract, the Steam Plant Operating Agreement and some
other agreements with Syracuse University to the Collateral Agent under the
Security Agreement and other Collateral Documents, as security for our
obligations under the notes, the indenture and the other financing documents.
Syracuse University has also agreed that the Collateral Documents constitute a
permitted mortgage for purposes of these Syracuse University agreements.

Syracuse University has agreed to make all payments due to Orange L.P. under
the Syracuse University agreements directly to the Collateral Agent, in
accordance with the Collateral Agent's written instructions. Syracuse University
has also agreed to accept performance of Orange L.P.'s obligations under
Syracuse University agreements by the Collateral Agent, the holders of the notes
and the Trustee or their respective designee(s). We refer to these parties
collectively as the Secured Parties.

Syracuse University has further agreed that neither the Collateral Agent nor
the Secured Parties nor any designee will be liable for the performance or
observance of any of Orange L.P.'s obligations nor will any assignment of
Syracuse University agreements to the Secured Parties give rise to any duties or
obligations. However, if the Collateral Agent, the Secured Parties or a
designee exercise their rights with respect to Syracuse University agreements or
make any claims with respect to any payments, deliveries or any obligations
under Syracuse University agreements, the terms of the Syracuse University
agreements relating to exercising those rights or claims will apply.

Orange L.P. and Syracuse University have agreed not to amend, terminate,
waive or supplement any Syracuse University agreement without obtaining the
prior written consent of the Secured Parties .

Cure Rights. Syracuse University has agreed that its right under the Steam
Contract to assume operating control of the Project under specific circumstances
will not be construed to limit the exercise of any rights or remedies available
to the Collateral Agent or the Secured Parties in their capacities as secured
creditors under the financing documents and the Collateral Documents. This
includes their rights to take possession of or enter the Project, to assume
operating

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control of the Project, and to foreclose on and dispose of Orange
L.P.'s interest in the Project and the Syracuse University agreements. In
assuming operating control, the Secured Parties and the Collateral Agent will
prevent Syracuse University from assuming operating control of the Project.
Syracuse University will, however, be entitled to give written notice to the
Collateral Agent of its intent to exercise its right to terminate the Steam
Contract if it is not reimbursed as required within eight months after the
interruption of service. The Collateral Agent and the Secured Parties must give
written notice to Syracuse University of their intent to exercise their rights
and remedies under the Collateral Documents.

Syracuse University will exercise any rights it may have to take or to
operate the Project in accordance with Syracuse University agreements and the
Niagara Mohawk agreements and it will not knowingly operate the Project so that
its net electrical output exceeds 75 MW.

Syracuse University will not terminate any Syracuse University agreement
without providing the Collateral Agent at least 120 days prior written notice of
its intent to terminate the agreement and giving the Collateral Agent or the
Secured Parties 120 days to cure the condition giving rise to the right of
termination.

If taking or obtaining entry to the Project is necessary to cure a default or
if the default has not been cured by the Collateral Agent or the Secured
Parties, then Syracuse University can not terminate any Syracuse University
agreement for that default if and for so long as the Collateral Agent or the
Secured Parties diligently proceed to obtain possession of or entry to the
Project and to cure the default.

The Collateral Agent and the Secured Parties may assign their and Orange
L.P.'s rights and interests under the Syracuse University agreements to any
purchaser or transferee of the Project upon notice to Syracuse University.
However, it can do so only if the purchaser or transferee is reputable and
solvent and any assignment and assumption does not by its terms modify the
provisions of the Syracuse University agreements. Foreclosure of, or any sale
under any Collateral Document, or any conveyance from Orange L.P. in lieu of
foreclosure, does not require the consent of Syracuse University or constitute a
breach of any Syracuse University agreement.

Insurance, Condemnation and Other Proceeds. Syracuse University has agreed
that the application of insurance and condemnation proceeds, proceeds from
surety bonds and similar obligations and proceeds from contract claims relating
to the Project, and decisions to sue on or otherwise resolve any of them will be
made by the Collateral Agent under the Collateral Documents. Upon any damage to
or destruction of the Project, the Collateral Agent and the Secured Parties are
required to consider in good faith applying any insurance proceeds to rebuild
and reconstruct as long as:

o no default or event of default is continuing under the indenture and other
financing documents which permits the acceleration of the notes,

o the aggregate proceeds and all other funds available to reconstruct are
sufficient to complete reconstruction within a reasonable time and

o either (x) the conduct of the rebuilding or reconstruction or the operation
of the Project after completion of the reconstruction are not likely in the
reasonable judgment of the Collateral Agent to give rise to a similar
default or event of default or (y) the amount of insurance proceeds required
to cover rebuilding or reconstruction does not exceed the greater of (a) 35%
of the replacement value of the project or (b) the replacement cost of one
of the gas turbines in the project.

Insolvency. If any Syracuse University agreement is rejected by a trustee
or debtor-in-possession in any bankruptcy or insolvency proceeding or terminates
before it would otherwise expire, for any reason other than with the consent of
the Collateral Agent, then within 90 days after the rejection or termination,
the Collateral Agent, the Secured Parties or their designee(s) may request
Syracuse University to enter into a new Syracuse University agreement, on the
same terms and conditions as the Syracuse University agreement in effect on
termination.

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If the Collateral Agent or the Secured Parties elect to perform Orange L.P.'s
obligations under any Syracuse University agreement or to enter into a new
Syracuse University agreement, the sole recourse of Syracuse University will be
to the Secured Parties' interests in the project and the Collateral.

Right of First Refusal. If an event of default occurs and the Secured
Parties decide to sell or dispose of any Collateral, then the Collateral Agent
must give notice to Syracuse University. Within 45 days after notice from the
Collateral Agent, Syracuse University may offer to purchase and the Collateral
Agent may agree to sell on agreeable terms any or all of the Gas Purchase
Agreement and the other Collateral, instruments and money. If so, Syracuse
University will purchase the Gas Purchase Agreement or such other Collateral "as
is" and pay to the Collateral Agent for the benefit of the Secured Parties the
aggregate purchase price for the Gas Purchase Agreement or the other Collateral
in cash, and enter into any and all reasonable documentation required.

Syracuse University has agreed that any lien, charge or encumbrance that it
has on or with respect to the Gas Purchase Agreement under the Syracuse
University agreements will be limited to an amount equal to any then due but
unpaid user charges plus interest and any accrued user charges plus any excess
steam payments plus interest then due and unpaid under the Steam Contract.

SIDA Consent and Agreement

SIDA has agreed to Orange L.P.'s assignment of its interests under the Master
Lease and the Lease Documents under the Security Agreement, the Indenture and
the First Mortgage. SIDA has consented to the First Mortgage and the Collateral
Documents and has agreed that the First Mortgage and other Collateral Documents
constitute a permitted mortgage. SIDA has agreed to several amendments to the
Master Lease regarding the part of the Ground Lease incorporated in the Master
Lease, including subordinating the Master Lease to the Ground Lease.

Consent to Assignment and Payment; Amendments. SIDA has agreed to make all
payments due to Orange L.P. under the Lease Documents directly to the Collateral
Agent in accordance with the Collateral Agent's written instructions. SIDA has
agreed to accept performance of Orange L.P.'s obligations under the Lease
Documents by the Collateral Agent, the Secured Parties or their designee(s).

SIDA has agreed that neither the Collateral Agent nor the Secured Parties nor
a designee will be liable to perform any of Orange L.P.'s obligations under the
Lease Documents, nor will any assignment of the Lease Documents to the
Collateral Agent, the Secured Parties or a designee give rise to any duties or
obligations. However, if the Collateral Agent, the Secured Parties or designee
exercise their rights with respect to the Lease Documents under the First
Mortgage or other Collateral Documents or make any claims with respect to any
payments, deliveries or other obligations under the Lease Documents, the terms
and conditions of the Lease Documents relating to the exercise of those rights
or claims will apply.

Orange L.P. and SIDA may not amend, surrender, terminate, waive, supplement
or otherwise modify any Lease Document, or consent to an amendment, without
obtaining the prior written consent of the Collateral Agent.

Cure Rights. SIDA has agreed that it will not terminate any lease-related
document to which it is a party unless it gives the Collateral Agent at least
120 days prior written notice of its intent to terminate and 120 days to cure
the condition giving rise to the right of termination. If a default under any
of these lease documents requires taking possession of or entering the Project,
or if the default can not be cured by the Collateral Agent or the Secured
Parties , then SIDA can not terminate the lease document for the default if and
for so long as the Collateral Agent or the Secured Parties diligently proceed to
obtain possession of or enter the Project or upon obtaining possession
diligently proceed to cure the default, if the default can be cured. Neither the
Collateral Agent nor the Secured Parties must continue to seek possession or
entry, or to continue in possession of the Project, if the default is cured.

The Collateral Agent and the Secured Parties may assign their rights and
interests and, after foreclosure or assignment in lieu of foreclosure, Orange
L.P.'s rights and interests, under these lease documents to any purchaser or
transferee of the Project upon notice to SIDA. However, the purchaser or
transferee must be reputable and solvent and the assignment and assumption must
not modify the provisions of these lease documents. Foreclosure of the First

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Mortgage or any other Collateral Document, or any sale by the Collateral Agent
or any Secured Party, or any conveyance by Orange L.P. in lieu of foreclosure,
will not require the consent of SIDA or constitute a breach of any lease
document.

If the Collateral Agent or the Secured Parties perform for Orange L.P.' under
any lease document or enter into any new lease document, the sole recourse of
SIDA will be to the Secured Parties' interests in the Project and other
Collateral. In addition, SIDA will not exercise any remedy against Orange L.P.
as a secured creditor without giving the Collateral Agent at least 30 days prior
written notice of its intent to exercise the remedy. Nor will SIDA take any
similar action if Orange L.P. or the Collateral Agent gives SIDA additional
security.

Insolvency. If any lease document is rejected by a trustee or debtor-in-
possession in any bankruptcy or insolvency proceeding or terminates before it
would otherwise expire for any reason other than with the consent of the
Collateral Agent, then within 90 days of the rejection or termination the
Collateral Agent or the Secured Parties or their designee(s) may request SIDA to
execute and deliver a new lease document on the same terms as the original lease
document in effect at termination.

Reconveyance Option. SIDA has agreed that if SIDA or Orange L.P. has any
right or obligation to convey and assign SIDA's interests in the Project, or a
reconveyance option under the Master Lease, the PILOT Agreement or otherwise,
Orange L.P. and SIDA must obtain the prior written consent of the Collateral
Agent, and provide to the Collateral Agent any instruments, documents, opinions
of counsel and endorsements to the Collateral Agent's title insurance policy as
the Collateral Agent deems necessary. In addition, SIDA has agreed to grant
liens and security interests under the First Mortgage and other Collateral
Documents to the Collateral Agent before any reconveyance, if required by the
Collateral Agent. If there is an event of default or default under the
Indenture, or if the Collateral Agent has entered into or is entitled to a new
Master Lease or a new Ground Lease, then if the Collateral Agent elects, SIDA
will reconvey its interests in the Project under any reconveyance option
directly to the Collateral Agent or its designee(s). The City of Syracuse has
consented to the foregoing agreement by SIDA under the PILOT Consent and
Agreement. If Orange L.P. acquires any or all of SIDA's interests in the Project
under the Master Lease or the PILOT Agreement or otherwise, then the interests
transferred to Orange L.P. will be deemed to be mortgaged and granted to the
Collateral Agent as mortgagee under the First Mortgage just as if originally
described in the First Mortgage.

Bankruptcy. SIDA has assigned to the Collateral Agent its claims and rights
to damages from any rejection of any lease document by any party to any lease
document under the Federal bankruptcy code. SIDA has agreed to obtain the
Collateral Agent's consent before electing to treat any lease document as
terminated under Section 365(h)(1) of the federal bankruptcy code. If SIDA seeks
to offset any damages from non-performance by any party against the rent or
other charges reserved in any lease document, then prior to setting off SIDA
will notify the Collateral Agent. The Collateral Agent will have 30 days after
receipt of the notice from SIDA to object to the offset and the Collateral Agent
will have the right to bring its objections to the attention of any court
supervising the bankruptcy.

If any action or matter is commenced or filed in respect of the mortgaged
property in connection with any federal bankruptcy case, the Collateral Agent
may participate in the litigation. If an event of default occurs, the Collateral
Agent may assume control of any litigation and SIDA will execute any and all
documents required by the Collateral Agent. Promptly after learning of the
default, SIDA will notify the Collateral Agent of all filings by or against any
party under any lease document of a petition under the federal bankruptcy code.
SIDA has given the Collateral Agent a non-exclusive right to apply to the
bankruptcy court under Section 365(d)(4) of the bankruptcy code for an order
extending the period during which any lease document may be rejected or assumed.

Insurance, Condemnation and Other Proceeds. SIDA has agreed that the
application of insurance and condemnation proceeds, proceeds from surety bonds
and similar obligations and proceeds from contract damage claims relating to the
Project, and decisions to sue on or resolve any of them, other than any
unassigned rights, will be made by the Collateral Agent under the Collateral
Documents.

Liens. SIDA will not assign or transfer, or mortgage, pledge, grant a
security interest in or otherwise encumber, its interest in or under any of the
lease documents without the prior written consent of the Collateral Agent,
except under a reconveyance option, or a merger, consolidation or transfer of
all or substantially all of its assets with or to another industrial development
agency or similar governmental entity.

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PILOT Agreement

Orange L.P. entered into a Payment in Lieu of Tax Agreement dated April 5,
1991, or the PILOT Agreement, with the City of Syracuse and SIDA, under which
Orange L.P. makes payments in lieu of real property taxes to the City of
Syracuse for approximately 20 years with respect to the portion of the Project
within the boundaries of the City of Syracuse.

Tax-Exempt Status of the Project. So long as SIDA retains its interest in
the Project, the portion of the Project within the City of Syracuse will be
assessed by the City of Syracuse as exempt on its tax rolls.

Payment In Lieu of Taxes. In consideration of the Master Lease, the PILOT
Agreement requires Orange L.P. to pay to the City of Syracuse an annual payment
in lieu of real property taxes, referred to as the PILOT Amount. The PILOT
Amount fluctuates annually as a function of the change in the tax rate
applicable to the premises each year. The PILOT Amount is further adjusted based
on electric rates and the revenue the Project generates from electricity sales.
The PILOT Amount is paid quarterly in equal installments. Each quarter any
excess of that portion of the PILOT Amount which is due in respect of that
calendar quarter is subordinate to the monthly debt service due under existing
mortgage(s).

Events of Default. Events of default under the PILOT Agreement include:

(1) Orange L.P.'s failure to pay amounts due to the City of Syracuse under the
PILOT Agreement;

(2) Orange L.P.'s failure to perform any other requirement under the PILOT
Agreement, which failure continues for 30 days after receipt of written
notice from the City of Syracuse;

(3) any material false representation by Orange L.P. or on Orange L.P.'s behalf
in the PILOT Agreement;
(4) Orange L.P.'s compulsion to transfer, assign or terminate its interests in
the Project as a consequence of any default or event of default on our part
under the instruments governing the notes; and

(5) Orange L.P.'s filing for voluntary bankruptcy, filing of a petition under
any current or future bankruptcy law or being adjudicated bankrupt and
insolvent.

Termination. The PILOT Agreement will terminate on the earlier of July 22,
2012, which is the twentieth anniversary of the date of substantial completion
of the Project, or upon termination of the Master Lease. If the maximum
electrical output of the Project exceeds 80 MW, Orange L.P. and SIDA both may
terminate the PILOT Agreement upon 30 days notice. The City of Syracuse and SIDA
may terminate the PILOT Agreement on the continuance of an event of default
under the PILOT Agreement beyond applicable notice and cure periods. However, a
mortgagee has a reasonable opportunity to cure Orange L.P.'s defaults, except
defaults relating to bankruptcy or insolvency. In addition, upon an event of
default the City of Syracuse or SIDA may compel the reconveyance of the Project
to us, causing a termination of the PILOT Agreement. Upon an event of default
relating to our bankruptcy or insolvency, the conveyance will be deemed to have
occurred automatically.

The exercise of the rights of the Collateral Agent to consent to the
reconveyance of the Project or to obtain a new PILOT Agreement following
termination as a result of an event of default would under most circumstances
require that the event of default be cured.

Priority of PILOT Payments. Orange L.P. and the Collateral Agent have
agreed in the SIDA Consent and Agreement that the payments due under the PILOT
Agreement will be treated as a lien on the Project superior to the liens under
the First Mortgage and other Collateral Documents.

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PILOT Consent and Agreement

Consent to Assignment. SIDA and the City of Syracuse have consented and
agreed to Orange L.P.'s assignment of its interests under the PILOT Agreement to
the Collateral Agent under the First Mortgage, the Security Agreement and other
Collateral Documents as security for our obligations under the notes, the
Indenture and the other financing documents.

The City of Syracuse and SIDA have agreed to amendments to the PILOT
Agreement to ensure its terms refer to the Indenture and the Collateral
Documents. They have also agreed that the Collateral Agent and the Secured
Parties may exercise all rights and cure any defaults under the PILOT Agreement.

Cure Rights. The City of Syracuse and SIDA have agreed that if an event of
default is curable by the Collateral Agent or the Secured Parties but cannot
reasonably be cured by them within the 30-day period (or 15-day period for some
monetary defaults), the Collateral Agent, the Secured Parties or their
designee(s) will have 120 days from the date of receipt of the notice to cure
the event of default. If possession of the Project is necessary to cure the
event of default, or if the event of default can not be cured by the Collateral
Agent or the Secured Parties, then the City of Syracuse and SIDA will not be
entitled to terminate the PILOT Agreement or exercise other remedies so long as
the Collateral Agent, the Secured Parties or their designee(s) proceed
diligently to obtain possession of or entry to the Project under their rights
under their mortgage(s) and other security documents, and after obtaining
possession proceed diligently to cure the event of default, if it can be cured.

Insolvency; Termination. If the PILOT Agreement is terminated by virtue of
Orange L.P.'s bankruptcy or insolvency or otherwise, other than by the
expiration of its term, without the Secured Parties' consent, the City of
Syracuse and SIDA must deliver a new PILOT agreement on the same terms as the
existing PILOT Agreement. Within 90 days after the Collateral Agent receives
notice of the rejection or termination, the Collateral Agent, the Secured
Parties, their designees, successors or assigns may request the City of Syracuse
and SIDA to enter into a new PILOT agreement.

Host Community Agreement

Orange L.P. has entered into a Host Community Agreement dated April 5, 1991
with the City of Syracuse and the Syracuse Housing Authority, a municipal
housing authority formed and operating under the Public Housing Law of the State
of New York. The Host Community Agreement required us, on the commencement of
construction of the Project, to pay the Syracuse Housing Authority $100,000. The
proceeds of that payment were to be used by Syracuse Housing Authority to help
fund the construction of a multi-purpose community center in Syracuse. The
center was never constructed. The Host Community Agreement also provides that
Orange L.P. must make annual payments to Syracuse Housing Authority for
operation and maintenance of the center for 40 years and to the City of Syracuse
for its general fund for 20 years. In each case, the initial annual amount is
$10,000. This increases by five percent per year and is compounded yearly.
Orange L.P. has not been billed for and, accordingly, has not paid the annual
payments to the Syracuse Housing Authority or the City of Syracuse.

Gas Purchase Agreement

Under the Gas Purchase Agreement dated as of March 18, 1991 entered into by
Noranda, Canadian Hunter as Noranda's agent, and Orange L.P., Orange
L.P.purchased 120 million MMBtu of natural gas for the Project. The Gas
Purchase Agreement was assigned by Noranda to, and assumed by, Canadian Hunter
as of December 3, 1999. Orange L.P. did not purchase specific identifiable
reserves. Rather, it acquired the right to obtain quantities of natural gas as
requested, subject to daily and annual limits. As of December 31, 1999,
approximately 69.1 million MMBtu of gas remained available under the Gas
Purchase Agreement. Orange L.P. expects this to be sufficient to meet the fuel
requirements of the Project beyond the term of the notes, assuming heat rates
and capacity factors are consistent with the Project's historical experience.

Purchase of Gas; Quantity. Under the Gas Purchase Agreement Canadian Hunter
as assignee, shall make up to 30,000 MMBtu of natural gas per day available for
sale and delivery to Orange L.P. at the point of delivery. The point

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of delivery is an interconnection between the pipeline facilities of TransCanada
Pipelines and Tennessee Gas Pipeline Company near Niagara Falls, New York. To
meet this obligation Canadian Hunter may purchase natural gas from third
parties. Except under specified circumstances, Orange L.P. may not use in the
Project natural gas purchased from any person other than Canadian Hunter. Those
circumstances include failure by Canadian Hunter to deliver the quantity of
natural gas nominated by Orange L.P., a force majeure event preventing delivery
of the natural gas from the point of delivery to the Project or where the
quantity of natural gas required by Orange L.P. for consumption in the Project
for any day exceeds specified amounts.

Payments; Pricing. Under the Gas Purchase Agreement Orange L.P. made a
lump-sum payment of $88 million to Noranda (Canadian Hunter's predecessor) on
April 30, 1991 to purchase the 120 million MMBtu of natural gas. In addition to
that payment, Orange L.P. is responsible for other payments, including
royalties, production costs and some transportation costs at the point of
delivery. Orange L.P. must also pay the cost of natural gas for compressor fuel
necessary to transport the natural gas purchased under the Gas Purchase
Agreement. The Gas Purchase Agreement provides that Orange L.P. and Canadian
Hunter will each pay half of any tax on the export of gas from Canada or the
import of gas into the United States. Canadian Hunter is responsible for all
sales and use taxes in Canada and Orange L.P. is responsible for all sales and
use taxes in the United States.

Sales to Third Parties. Under the Gas Purchase Agreement, subject to some
limitations, Orange L.P. may request Canadian Hunter to use all reasonable
efforts to sell to third parties quantities of natural gas purchased by Orange
L.P. Proceeds from sales to third parties by Canadian Hunter, net of 3% of the
gross price obtained from the sale plus the amount of taxes other than income
taxes and transportation costs paid by Canadian Hunter will be paid to Orange
L.P. Under some circumstances Orange L.P. may arrange for the delivery of
purchased natural gas to one or more third parties. Orange L.P. may also make
arrangements with Canadian Hunter to deliver quantities of purchased natural gas
to third parties.

Transportation; Risk of Loss; Indemnification. Canadian Hunter must
transport natural gas to the point of delivery described above. Under the Gas
Purchase Agreement title and risk of loss of all natural gas, other than
compressor fuel, pass from Canadian Hunter to Orange L.P. at the point of
delivery. Orange L.P. is responsible for transporting the natural gas from that
point, as described below. Canadian Hunter must indemnify Orange L.P. with
respect to all suits, debts, damages, liabilities and expenses arising out of
claims of any or all persons to natural gas sold under the Gas Purchase
Agreement or other charges on gas which attach before title passes to Orange
L.P. Orange L.P. provides identical indemnification to Canadian Hunter for
similar claims to natural gas which attach after title passes to Orange L.P.

Force Majeure; Failure to Deliver. The Gas Purchase Agreement provides that
the exercise of rights and performance of obligations, other than payment
obligations under the Gas Purchase Agreement, may be suspended due to an event
of force majeure. If Canadian Hunter can deliver required quantities of natural
gas to Orange L.P. from alternate sources, it may not suspend its delivery
obligations due to an event of force majeure. If, as a result of an event of
force majeure, Canadian Hunter fails to deliver natural gas that Orange L.P. has
requested in accordance with the Gas Purchase Agreement, Orange L.P. may obtain
natural gas from substitute suppliers and may be entitled to a refund of a
portion of the lump sum payment made to Canadian Hunter. If Orange L.P. cannot
take delivery of natural gas for 150 days as a result of some events of force
majeure (or 60 days for most other events of force majeure), Orange L.P. may
terminate the Gas Purchase Agreement by delivering a notice of termination to
Canadian Hunter in accordance with the Gas Purchase Agreement. Following
termination of the Gas Purchase Agreement by Orange L.P. for this reason,
Canadian Hunter must repay to Orange L.P. the portion of the lump-sum payment
described above corresponding to the unused portion of the Maximum Entitlement.

Termination. Orange L.P. and Canadian Hunter also have rights to terminate
the Gas Purchase Agreement if the other party defaults. If Canadian Hunter fails
to deliver requested quantities of natural gas, Orange L.P. may obtain
substitute supplies of natural gas and may discontinue some payments due or
chargeable until Canadian Hunter resumes performance. Following the default,
Canadian Hunter must promptly inform Orange L.P. of the reasons for the default
and the anticipated duration of the default and take all steps necessary to
resume full performance as soon as possible. Upon receipt of the notice, Orange
L.P. may notify Canadian Hunter of its intention to terminate the Gas Purchase
Agreement. However, the Gas Purchase Agreement enables Canadian Hunter to avoid
termination by remedying the default within designated cure periods and
indemnifying Orange L.P. for some of its costs. If the Gas Purchase

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Agreement is terminated, Canadian Hunter must repay the portion of the lump-sum
payment corresponding to the unused portion of the Maximum Entitlement of
natural gas, plus other amounts, including a lump-sum payment equal to the
present value of any excess costs to Orange L.P. to acquire replacement gas.

If Orange L.P. fails to make specified payments to Canadian Hunter more than
45 days past due, Canadian Hunter may reduce the unconsumed portion of Orange
L.P.'s entitlement of natural gas in accordance with the Gas Purchase Agreement.
Unless and until the unconsumed portion of its entitlement of natural gas is
reduced to zero, Canadian Hunter may not suspend or interrupt deliveries of
natural gas on account of Orange L.P.'s failure to make one of these payments.
If the unconsumed entitlement is reduced to zero because of the reductions,
Canadian Hunter may immediately suspend deliveries and may notify Orange L.P. of
its intention to terminate. If, within 90 days of receipt of the notice, Orange
L.P. has remedied its particular failure to make a payment and has reimbursed
Canadian Hunter for all other monies due under the Gas Purchase Agreement, the
reduction in the unconsumed entitlement in respect of the particular failure
will be reversed, the unconsumed entitlement will be reinstated to that extent
and the Gas Purchase Agreement will remain in full force and effect.

Term. Subject to earlier termination by its terms, the Gas Purchase
Agreement has a stated term of 20 years from June 1992, the date of the initial
delivery of natural gas. At the end of the 20-year period, whether or not
Orange L.P. has used its entire entitlement of natural gas, Orange L.P. will be
deemed irrevocably to have forfeited all right and entitlement to these amounts
of natural gas.

Assignment of Obligations to Union Pacific Resources. Orange L.P., Canadian
Hunter and Union Pacific Resources agreed to replace the Gas Purchase Agreement
with two agreements, one between Canadian Hunter and Orange L.P., which we refer
to as the Canadian Hunter Supply Agreement, and the other between Union Pacific
Resources and Orange L.P., which we refer to as the Union Pacific Resources
Supply Agreement, effective as of January 1, 2000, subject to the conditions
below. Canadian Hunter will not have any liability under the Union Pacific
Resources Supply Agreement and Union Pacific Resources will not have any
liability under the Canadian Hunter Supply Agreement. Except as required to
reflect the respective status of Canadian Hunter or Union Pacific Resources on
the contract party, the terms of the Canadian Hunter Supply Agreement will be
identical to the Gas Purchase Agreement, except that:

(1) the maximum daily quantity, unconsumed entitlement, maximum entitlement
and other quantities of natural gas to be supplied by Canadian Hunter
will be 58.333% of the quantities described in the same clauses of the
Gas Purchase Agreement;

(2) there will be no further deferral of payments as contemplated in Section
3.7 of the Gas Purchase Agreement; and

(3) the Canadian Hunter Supply Agreement will be governed by the laws of the
Province of Alberta, Canada.

The terms of the Union Pacific Resources Supply Agreement will be identical
to the Canadian Hunter Supply Agreement, except that:

(1) the maximum daily quantity, unconsumed entitlement, maximum entitlement
and other quantities of natural gas to be supplied by Union Pacific
Resources will be 41.667% of those quantities described in the same
clauses of the Gas Purchase Agreement; and

(2) Canadian Hunter, as Union Pacific Resources' agent, will administer
nominations and transportation services applicable to supplies of natural
gas purchased by Orange L.P. from Union Pacific Resources, and accounting
and payments due from Orange L.P. to Union Pacific Resources.

Orange L.P., Canadian Hunter and Union Pacific Resources have agreed that the
unconsumed entitlement under the Gas Purchase Agreement was 70,236,028 MMBtu as
at October 1, 1999 and that if the Canadian Hunter Supply Agreement and Union
Pacific Resources Supply Agreement had been in force on that date, the
unconsumed entitlements would have been 40,970,782 MMBtu and 29,265,246 MMBtu,
respectively.

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Orange L.P., Canadian Hunter and Union Pacific Resources have also agreed
that it is their mutual intent that upon the effectiveness of the Canadian
Hunter Supply Agreement and the Union Pacific Resources Supply Agreement in
replacement of the Gas Purchase Agreement, Orange L.P. will be in the same
position, economic and otherwise, as it was in under the Gas Purchase Agreement
as in effect on the date of the offering of the original unregistered notes,
except that Union Pacific Resources and Canadian Hunter will have separate, and
not joint and several, liability. In addition, Orange L.P., Canadian Hunter and
Union Pacific Resources have agreed to cooperate fully to incorporate any other
changes to the Gas Purchase Agreement that they mutually determine to be
necessary and appropriate to realize this intent. On the date of this
prospectus Orange L.P., Canadian Hunter and Union Pacific Resources are in the
process of finalizing the split and Orange L.P. anticipates that the Canadian
Hunter Supply Agreement and the Union Pacific Resources Supply Agreement will be
in effect by June 1, 2000.

To be sure that the two new gas supply agreements are enforceable and subject
to the security interests of the Collateral Agent, the following additional
actions will be taken as conditions precedent to the effectiveness of the
Canadian Hunter Supply Agreement and the Union Pacific Resources Supply
Agreement:

(1) Union Pacific Resources will give a consent and agreement in favor of the
Collateral Agent substantially in the form executed by Canadian Hunter at
the closing of the offering of the original unregistered notes, modified
as appropriate for Union Pacific Resources;

(2) Alberta counsel to Union Pacific Resources will give a legal opinion in
customary form as to the enforceability of the Union Pacific Resources
Supply Agreement against Union Pacific Resources and other customary
matters;

(3) Canadian Hunter will a give revised consent and agreement in favor of the
Collateral Agent, updating the consent and agreement it gave at the
closing of the offering of the original unregistered notes;

(4) Alberta counsel to Canadian Hunter will give a legal opinion similar to
the opinion given by Union Pacific Resources' counsel, but relating to
the Canadian Hunter agreements;

(5) Orange L.P. must receive evidence reasonably satisfactory to it that firm
gas transportation arrangements with TransCanada Pipelines Limited are in
place for all deliveries to be made under the Canadian Hunter Supply
Agreement and the Union Pacific Resources Supply Agreement at no
additional cost to Orange L.P. above Orange L.P.'s existing costs for
these arrangements under the Gas Purchase Agreement; and

(6) Orange L.P. will apply to the U.S. Department of Energy for an expedited
approval of an amendment to Orange L.P.'s authorization to import natural
gas, and must have received a binding authorization order from the
Department of Energy.

Canadian Hunter Consent and Agreement

Canadian Hunter has consented and agreed to Orange L.P.'s assignment of its
interest under the Gas Purchase Agreement to the Collateral Agent under the
Security Agreement and the other Collateral Documents as security for our
obligation under the notes, the Indenture and the other financing documents.
Union Pacific Resources will enter into a Consent Agreement substantially
similar to the Canadian Hunter Consent and Agreement.

Consent to Assignment and Payment; Notices; Amendments. Canadian Hunter has
agreed that the Collateral Agent will be entitled to exercise all rights and to
cure any of Orange L.P.'s defaults under the Gas Purchase Agreement and it will
accept the Collateral Agent's performance of Orange L.P.'s obligations under the
Gas Purchase Agreement upon receipt of written notice from the Collateral Agent.
Canadian Hunter has agreed to make any payments to be made by it under the Gas
Purchase Agreement directly to the Collateral Agent in accordance with the
Collateral Agent's written instructions.

Canadian Hunter has agreed it will not, without the prior written consent of
the Collateral Agent,

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(1) cancel or terminate the Gas Purchase Agreement except as provided in the
agreement or consent to or accept any cancellation or termination of the
agreement by Orange L.P.,

(2) sell, assign or otherwise dispose of any part of its interest in the Gas
Purchase Agreement, or

(3) amend or modify the Gas Purchase Agreement in any material respect.

Canadian Hunter has also agreed to notify the Collateral Agent of each single
reduction of the unconsumed entitlement if that reduction by itself exceeds 2
million MMBtu, and of any other single reduction if the particular reduction,
together with all previous reductions, aggregates more than 2 million MMBtu.
Canadian Hunter's rights to suspend deliveries of natural gas when it is
permitted to do so under the Gas Purchase Agreement or if the unconsumed
entitlement is reduced to zero have not been affected by Canadian Hunter's
Consent and Agreement.

Cure Rights. Canadian Hunter's rights to terminate the Gas Purchase
Agreement upon any default or breach by Orange L.P. will not be effective until
30 days from the date the default notice is delivered to the Collateral Agent,
if the default is the failure to pay money to Canadian Hunter under the
Contract, or if the breach or default cannot be cured by the payment of money to
Canadian Hunter, after a reasonable period of time as is necessary to cure the
default, so long as the Collateral Agent has commenced to cure the default
within 30 days from the date the default notice is delivered to the Collateral
Agent.

If possession of the Project is necessary to cure the breach or default, and
the Collateral Agent has commenced foreclosure proceedings, it will be allowed a
reasonable time to complete those proceedings. Canadian Hunter has consented to
the transfer of Orange L.P.'s interest under the Gas Purchase Agreement to the
Collateral Agent, or a purchaser or grantee at a foreclosure sale by judicial or
non-judicial foreclosure and sale or by a conveyance by Orange L.P. in lieu of
foreclosure, and has agreed that if any of those events occur it will recognize
the Collateral Agent, or any other purchaser or grantee, as the buyer under the
Gas Purchase Agreement. However, the Collateral Agent, or any purchaser or
grantee must have stockholders' equity of not less than U.S. $150 million, must
assume and agree to perform all of Orange L.P.'s obligations under the Gas
Purchase Agreement and must be the owner of the Project.

Insolvency. If the Gas Purchase Agreement is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding, or terminated
for any reason other than a default which could have been but was not cured by
the Collateral Agent, then within 45 days of the rejection or termination, the
Collateral Agent may request Canadian Hunter to execute and deliver a new
agreement on the same terms and conditions as the original Gas Purchase
Agreement as in effect on the date of termination. If the Collateral Agent or
its designee or assignee elects to perform Orange L.P.'s obligations under the
Gas Purchase Agreement or to enter into a new agreement the sole recourse of
Canadian Hunter in seeking to enforce the obligations will only extend to such
parties' interest in the Project.

Natural Gas Transportation Contracts

TransCanada Pipelines Firm Service Contract

Canadian Hunter and TransCanada Pipelines Limited, or TransCanada Pipelines,
entered into a Firm Service Contract dated as of October 11, 1990, which we
refer to as the TransCanada Pipelines Firm Service Contract. Under this
agreement, TransCanada Pipelines transports natural gas from Alberta to an
interconnection point on the pipeline facilities of TransCanada Pipelines and
Tennessee Gas Pipeline Company. Subject to the provisions of the TransCanada
Pipelines Firm Service Contract and TransCanada Pipelines' gas transportation
tariff, TransCanada Pipelines provides firm transportation service for Canadian
Hunter for a volume of natural gas which may not exceed 566.66 thousand cubic
meters during any day. The TransCanada Pipelines Firm Service Contract has a
stated term which continues until October 31, 2005.

Collateral Assignment of TransCanada Pipelines Firm Service Contract. Under
a Collateral Assignment of the Firm Service Agreement dated as of April 5, 1991,
or Collateral Assignment of Firm Service Contract, Canadian Hunter assigned its
rights under the TransCanada Pipelines Firm Service Contract to Orange L.P. The
assignment was not an absolute assignment, but was made as collateral security
for the payment and performance of some obligations

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under the Gas Purchase Agreement. Canadian Hunter and Orange L.P. agreed under
this Collateral Assignment that Orange L.P. may at its election and upon prior
written notice to TransCanada Pipelines and Canadian Hunter Exploration:

(1) at any time after the termination of the Gas Purchase Agreement by Orange
L.P. under the Gas Purchase Agreement, exercise any and all rights of
Canadian Hunter under the TransCanada Pipelines Firm Service Contract in
accordance with its terms, or assign any and all such rights to any
person or entity to the extent permitted, and

(2) at any time after a default under the Gas Purchase Agreement such that
Orange L.P. is obtaining substitute supplies, Orange L.P. may exercise
any and all rights of Canadian Hunter under the TransCanada Pipelines
Firm Service Contract in accordance with its terms just as if it were a
party in the place of Canadian Hunter, for so long as Orange L.P. is
obtaining substitute supplies in respect of the particular default.

TransCanada Pipelines Consent and Agreement

Consent to Assignments and Payment; Notices; Amendments. TransCanada
Pipelines and Canadian Hunter have consented and agreed to Orange L.P.'s
assignment of its interests under the TransCanada Pipelines Firm Service
Contract to the Collateral Agent under the Security Agreement and other
Collateral Documents as security for our obligations under the notes, the
Indenture and the other financing documents.

Canadian Hunter and TransCanada Pipelines Limited have agreed that, upon
receipt of a written notice, Orange L.P. or the Collateral Agent may at their
election:

(1) at any time after the termination of the Gas Purchase Agreement, exercise
any and all rights of Canadian Hunter under the TransCanada Pipelines
Firm Service Contract in accordance with its terms, or assign any and all
such rights to any person or entity to the extent permitted, and

(2) at any time after a default by Canadian Hunter under the Gas Purchase
Agreement such that Orange L.P. is obtaining substitute supplies of
natural gas, Orange L.P. or the Collateral Agent may exercise Canadian
Hunter's rights under the TransCanada Pipelines Firm Service Contract in
accordance with its terms just as if it were a party in the place of
Canadian Hunter, for so long as Orange L.P. is obtaining substitute
supplies in respect of the particular default.

In exercising Canadian Hunter's rights, Orange L.P. and the Collateral Agent
must satisfy specific financial assurance requirements and supply TransCanada
Pipelines with any reasonable information requested, including evidence that
Orange L.P. or the Collateral Agent have obtained necessary permits and
authorizations from governmental agencies. Any assignment or re-assignment of
the rights under the TransCanada Pipelines Firm Service Contract including to
Canadian Hunter under the Collateral Assignment to Firm Service Contract
requires the prior written consent of TransCanada Pipelines, and must satisfy
pre-conditions required by TransCanada Pipelines.

If Orange L.P., the Collateral Agent, or any assignee exercises Canadian
Hunter's rights, TransCanada Pipelines may act in accordance with such exercise
of Canadian Hunter's rights and will not be liable to Canadian Hunter in
connection therewith. Orange L.P.'s or the Collateral Agent's ability to
exercise such rights or make an assignment are subject to some restrictions
contained in the Collateral Assignment of the Firm Service Contract. Any notice
to TransCanada Pipelines from the Collateral Agent, or an assignee of the
Collateral Agent, will be given priority by TransCanada Pipelines over any
notice from Orange L.P., or an assignee of Orange L.P., and Orange L.P. may
exercise Canadian Hunter's rights only for so long as TransCanada Pipelines has
not received notice that the Collateral Agent intends to exercise Canadian
Hunter's rights.

TransCanada Pipelines has acknowledged that Canadian Hunter must obtain the
consent of Orange L.P. and the Collateral Agent to amend the TransCanada
Pipelines Firm Service Contract, provided that Canadian Hunter must ensure
compliance with its agreement with Orange L.P., that Orange L.P. must ensure
compliance with its agreement with the Collateral Agent, that neither agreement
shall prevent TransCanada Pipelines from proposing or making any modification or
amendment to TransCanada Pipelines' gas transportation tariff and that neither
agreement shall prevent

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TransCanada Pipelines from making any modification or amendment of the
TransCanada Pipelines Firm Service Contract necessary to conform with the
requirements of any governmental or regulatory authority.

Cure Rights. TransCanada Pipelines will deliver to Orange L.P. and the
Collateral Agent a notice of any default or breach by Canadian Hunter under the
TransCanada Pipelines Firm Service Contract concurrently with the delivery of
any such notice to Canadian Hunter. Orange L.P. and the Collateral Agent will be
given the same time period allowed to Canadian Hunter to cure such default or
breach.

Firm Gas Transportation Contract

Orange L.P. has entered into the Firm Gas Transportation Contract with
Tennessee Gas Pipeline Company dated March 29, 1991. Under this agreement,
Tennessee Gas Pipeline Company provides firm natural gas transportation service
for the natural gas purchased by Orange L.P. under the Gas Purchase Agreement.

Delivery and Receipt of Gas. Under the Firm Gas Transportation Contract
Orange L.P. must deliver natural gas to Tennessee Gas Pipeline Company at a
point of interconnection between Tennessee Gas Pipeline Company and the
facilities of TransCanada Pipelines at the Niagara River near Lewiston, New
York. This point of receipt is the same as the point of delivery under the Gas
Purchase Agreement. Tennessee Gas Pipeline Company must deliver natural gas to
Orange L.P. at a delivery point constructed and operated by Tennessee Gas
Pipeline Company on its main line near Syracuse, New York. The quality
specifications and standards for measuring gas received, transported and
delivered under the Firm Gas Transportation Contract are based on Tennessee Gas
Pipeline Company's FERC Gas Tariff.

Compensation; Ownership. Tennessee Gas Pipeline Company's compensation is
based on a rate schedule approved by FERC. Tennessee Gas Pipeline Company
reserves the right under the agreement to change the rate schedule, subject to
FERC review and adjustment. As presented in the Firm Gas Transportation
Contract, from the time gas is delivered to Tennessee Gas Pipeline Company at
the point of receipt and prior to delivery of the gas to Orange L.P. at the
point of delivery, Tennessee Gas Pipeline Company has the unqualified right to
commingle such gas with other gas in its pipeline system and shall have the
unqualified right to treat such gas as its own.

Term; Termination. The stated 20-year term of the Firm Gas Transportation
Contract has approximately 12 years remaining. Following the stated expiration
date, the Firm Gas Transportation Contract will continue from year to year;
however, either Orange L.P. or Tennessee Gas Pipeline Company may terminate the
Firm Gas Transportation Contract at the end of the stated term or any annual
extension by giving 12 months' prior written notice. Tennessee Gas Pipeline
Company's provision of transportation under the Firm Gas Transportation Contract
is subject to termination on 30 days' written notice at the option and sole
discretion of either Tennessee Gas Pipeline Company or Orange L.P.

Interruptible Gas Transportation Contract

Orange L.P. also has entered into an Interruptible Gas Transportation
Contract with Tennessee Gas Pipeline Company dated as of November 11, 1999. This
replaces a prior agreement dated as of June 26, 1992. Under this Interruptible
Gas Transportation Contract, Tennessee Gas Pipeline Company agrees to provide
transportation, on an interruptible basis, for up to 5,000 dekatherms of natural
gas daily which is received at the point of receipt, or interim points, and
delivered to the point of delivery, or interim points.

Transportation Rates. Under the Interruptible Gas Transportation Contract,
the compensation that Orange L.P. pays to Tennessee Gas Pipeline Company for
transportation services is in accordance with Tennessee Gas Pipeline Company's
Rate Schedule IT filed with FERC and the General Terms and Conditions of
Tennessee Gas Pipeline Company's FERC Gas Tariff.

Term. Tennessee Gas Pipeline Company's provision of transportation under
the Interruptible Gas Transportation Contract is subject to termination on 30
days' written notice at the option of either Tennessee Gas Pipeline Company or
Orange L.P. In addition, the Interruptible Gas Transportation Contract will
terminate automatically if Orange L.P. fails to pay in full any bill for service
rendered by Tennessee Gas Pipeline Company when due, provided that Tennessee Gas
Pipeline Company gave notice to FERC and Orange L.P. prior to termination.

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Tennessee Gas Pipeline Company Letter of Credit

Orange L.P. has entered into a Letter of Credit Drawing Agreement with
Tennessee Gas Pipeline Company dated as of March 29, 1991. Under this agreement,
Orange L.P. agreed to provide an irrevocable letter of credit in favor of
Tennessee Gas Pipeline Company, from which Tennessee Gas Pipeline Company could
draw if Orange L.P. failed to pay specified charges due and payable under the
Firm Gas Transportation Contract. Orange L.P. amended the Letter of Credit
Drawing Agreement on June 26, 1992 to permit drawings under the letter of credit
also to pay charges that are due and payable under the Interruptible Gas
Transportation Agreement.

Under a Pledge and Security Agreement made by Orange L.P. to Citibank, N.A.
dated August 6, 1998, Citibank has provided an irrevocable letter of credit for
the benefit of Tennessee Gas Pipeline Company in the stated amount of $700,000.
Orange L.P. deposited $700,000 in a special cash collateral account held by
Citibank. These funds are pledged and assigned to Citibank under the Pledge and
Security Agreement to provide collateral for Citibank's letter of credit.

Tennessee Gas Pipeline Company Consent and Agreement

Consent to Assignment and Payment; Notices; Amendments. Tennessee Gas
Pipeline Company has consented and agreed to Orange L.P.'s assignment of its
interests under the Tennessee Gas Pipeline Company natural gas transportation
contracts to the Collateral Agent under the Security Agreement and the other
Collateral Documents as security for our obligations under the notes, the
Indenture and the other financing documents.

Tennessee Gas Pipeline Company has agreed that the Collateral Agent may
exercise all of Orange L.P.'s rights and cure any of Orange L.P.'s defaults
under the natural gas transportation contracts and it will accept the Collateral
Agent's performing for Orange L.P. under the natural gas transportation
contracts upon receipt of written notice from the Collateral Agent. Tennessee
Gas Pipeline Company has agreed to make any payments it must make under the
natural gas transportation contracts directly to the Collateral Agent in
accordance with the Collateral Agent's written instructions.

Tennessee Gas Pipeline Company will not, without using reasonable efforts to
obtain the prior written consent of the Collateral Agent,

(1) cancel or terminate any of the natural gas transportation contracts
except as provided in the agreements, or consent to or accept any
cancellation or termination of the natural gas transportation contract by
Orange L.P.,

(2) sell, assign or otherwise dispose of any part of its interest in the
Tennessee Gas Pipeline Company agreements except as provided in those
agreements or

(3) amend or modify the natural gas transportation contracts in any material
respect. Tennessee Gas Pipeline Company may, however, modify or amend its
gas tariff or the rates or charges payable to it under its tariff, or
modify or amend the Tennessee Gas Pipeline Company agreements as
necessary to conform with the requirements of any governmental authority.

Cure Rights. Tennessee Gas Pipeline Company will not terminate any of the
natural gas transportation contracts for Orange L.P.'s default or breach without
providing to the Collateral Agent a period to cure as follows:

(1) if the default is the failure to pay money due and payable to Tennessee
Gas Pipeline Company, 30 days from the date written notice of default is
delivered to the Collateral Agent or

(2) if the breach or default cannot be cured by the payment of money to
Tennessee Gas Pipeline Company, a reasonable time of not less than 90
days necessary to cure such default, so long as the Collateral Agent or
its designee has commenced to cure the breach or default within 90 days
of receipt of the default notice.

If possession of the Project is necessary to cure a breach or default, and the
Collateral Agent has commenced foreclosure proceedings, the Collateral Agent
will be allowed a reasonable period to complete the proceedings.

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Tennessee Gas Pipeline Company has consented to the transfer of Orange L.P.'s
interest under the natural gas transportation contracts to the Collateral Agent,
or a purchaser or grantee at a foreclosure sale by judicial or nonjudicial
foreclosure and sale or by a conveyance by Orange L.P. in lieu of foreclosure
and has agreed that upon foreclosure, sale or conveyance, it will recognize the
Collateral Agent or other purchaser or grantee as the buyer under the natural
gas transportation contracts.

Insolvency. If any of the natural gas transportation contracts is terminated
by virtue of being rejected by a trustee or debtor-in-possession in any
bankruptcy or insolvency proceeding, within 45 days of such rejection or
termination the Collateral Agent or its successors or assigns may request
Tennessee Gas Pipeline Company to execute and deliver to the Collateral Agent
new agreements, which shall be on the same terms and conditions as the original
natural gas transportation contracts as in effect on the date of termination.

The Collateral Agent may assign all or part of its interest in the natural
gas transportation contracts to a person or entity to whom the Project is
transferred, if the transferee assumes Orange L.P.'s or the Collateral Agent's
obligations under the natural gas transportation contracts, including the
obligation to provide security as described in the Letter of Credit Drawing
Agreement, and the transferee has a financial capability at least equivalent to
Orange L.P.'s on the date of the offering of the old notes. If the Collateral
Agent or its designee or assignee elects to perform Orange L.P.'s obligations
under the natural gas transportation contracts or to enter into new contracts,
its sole recourse in seeking to enforce the obligations is limited to those
parties' interests in the Project. However, successors to Orange L.P.'s interest
under the natural gas transportation contracts or any new agreements entered
into will remain obligated to provide security under the Letter of Credit
Drawing Agreement.

Operation and Maintenance Agreement

Orange L.P. has entered into the Operation and Maintenance Agreement with GE
International (as successor to GE Energy Plant Operations) dated as of November
1, 1998, under which GE International operates, maintains and repairs the
Facility. As used in the Operation and Maintenance Agreement, the term
"Facility" includes in substantial part, the Project, the Steam Plant, the
Project's natural gas pipeline, the premises and rights of way on land across
and through which this pipeline passes. Prior to the Operation and Maintenance
Agreement, GE Energy Plant Operations operated, maintained and repaired the
Project as assignee of Stewart & Stevenson Operations, Inc. under a prior
operation and maintenance agreement after General Electric Company acquired the
gas turbine division of Stewart & Stevenson Services, Inc.

Operation and Routine Maintenance. Under the Operation and Maintenance
Agreement, GE International continuously operates the Facility and performs all
routine maintenance 24 hours/day, 7 days/week, 365 days/year in accordance with
instructions from Orange L.P.

Compensation. Under the Operation and Maintenance Agreement, Orange L.P.
pays GE International specified expenses and fees, including reimbursable
expenses, a spare parts fee, an operating fee and a fee based on the number of
hours that the Facility operates and burns fuel called a fired-hour fee. The
reimbursable expenses, include among other things, all wages and salaries GE
International pays its operating personnel, training expenses, expenses for
relocation of employees to Syracuse, New York, GE International's direct costs
and expenses for the services of subcontractors and consultants, all taxes
(other than GE International's franchise taxes or federal income taxes) incurred
by GE International under the Operation and Maintenance Agreement and a fixed
annual handling fee of $50,000 for labor and services incurred to purchase parts
and tools for the Facility.

Subject to some adjustments described in the Operation and Maintenance
Agreement, the fired-hour fee is an amount equal to the product of $88 and the
number of hours each gas turbine in the Project is operating. The spare parts
fee is an annual fee of $50,000 in consideration of GE International's
purchasing, delivering and maintaining the inventory of spare parts for the
Facility. The operating fee is an annual fee of $350,000 for operation and
maintenance of the Facility. As provided in the Operation and Maintenance
Agreement, each of the operation fee, fired-hour fee, handling fee, and spare
parts fee are subject to escalation based on increases in the consumer price
index.

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GE Lease Engine Program. Orange L.P has entered into a LM-5000 Engine Lease
Agreement with GE Industrial. Under the Engine Lease Agreement, for a stated
term that will extend beyond the maturity of the notes, GE Industrial will
deliver an operable leased LM-5000 gas generator to the Project and qualified
technical direction for its installation and removal within 72 hours of
notification of a need for such unit from Orange L.P. If GE Industrial fails to
deliver a leased generator within such time frame, GE Industrial will, as Orange
L.P.'s sole and exclusive remedy therefor, be liable for significant hourly and
daily late delivery penalties, subject to a specified maximum liability per
occurrence. The Engine Lease Agreement provides that Orange L.P. will pay GE
Industrial an annual fee plus weekly use rate fees which are incurred during any
period after a lease unit is delivered to the Project.

Either party may terminate the Engine Lease Agreement if the other party has
committed a material breach of the Engine Lease Agreement and the breach has not
been remedied within 10 days of written notice of such breach. For purposes of
the Lease Engine Agreement, failure of Orange L.P. to make timely annual payment
of the annual fee and/or payment for the usage of a leased generator shall
constitute a material breach. Orange L.P. may cancel the Engine Lease Agreement
at any time, but will be liable, in addition to any then outstanding and unpaid
amounts, for payment of a portion of the unpaid annual fee for all remaining
years in the stated term of the Engine Lease Agreement. Finally, the parties may
cancel the Engine Lease Agreement by mutual written agreement without penalty to
either party.

Term. The stated term of the Operation and Maintenance Agreement continues
until April 1, 2008, unless such date is either extended or the Operation and
Maintenance Agreement is terminated prior to such date. Orange L.P. may extend
the Operation and Maintenance Agreement for up to eight (8) additional years by
providing notice of such extension to GE International at any time prior to
January 1, 2008. At the end of the term of the Operation and Maintenance
Agreement, GE International is required to leave the Facility, or cause the
Facility to be left, in the same condition as on July 1, 1992, normal wear and
tear and any other degradation for which GE International is not responsible
excepted.

Events of Default; Termination. The Operation and Maintenance Agreement
provides that GE International may, by written notice to Orange L.P., terminate
the Operation and Maintenance Agreement immediately because of some events of
default by Orange L.P. These events of default include, among others,

(1) Orange L.P.'s failure to pay any amounts due to GE International or
perform any of its material obligations under the Operation and
Maintenance Agreement, which failure continues for 30 days after notice
from GE International of such failure, and

(2) bankruptcy or insolvency of Orange L.P.

The Operation and Maintenance Agreement permits Orange L.P. to terminate if
GE International defaults and fails to cure the default within the applicable
cure period. Events of default include:

o failure by GE International to pay any amount due to Orange L.P. for 30 days
after notice from Orange L.P. of the failure,

o bankruptcy or insolvency of GE International,

o GE International's failure to deliver steam under the Steam Agreement for 10
consecutive days or a total of 30 days in any operating year,

o GE International's taking any action or failing to take any reasonable action
which materially adversely affects the Facility's status as a qualifying
facility and

o GE International taking any action or failing to take any reasonable action
which results in the breach of any significant project contracts.

Orange L.P. may also terminate the Operation and Maintenance Agreement at any
time without cause, so long as Orange L.P. pays GE International a termination
fee.

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Force Majeure. If force majeure causes a total interruption of project
operation, the reduction of electric output by 20 MW or more, or an increase in
the project's heat rate by 25% or more, in any case for a period of 180 days or
more, then Orange L.P. may, with written notice to GE International, suspend
operation of the Facility and suspend performance by both parties for the
duration of such force majeure. During the suspension GE International has no
continuing obligations with respect to the Facility and Orange L.P. has no
obligation to pay or carry out any other obligation to GE International.

GE International Consent and Agreement

Consent to Assignment and Payment; Notices; Amendments. GE International
has consented and agreed to Orange L.P.'s assigning its interest under the
Operation and Maintenance Agreement to the Collateral Agent pursuant to the
Collateral Documents as security for our obligations under the notes, the
Indenture and the other financing documents.

GE International has agreed that the Collateral Agent will be entitled to
exercise all rights and to cure any defaults by Orange L.P. under the Operation
and Maintenance Agreement, and to accept the Collateral Agent's performance of
our obligations under the Operation and Maintenance Agreement upon receipt of a
written notice from the Collateral Agent. GE International has agreed to make
all payments to be made by it under the Operation and Maintenance Agreement
directly to the Collateral Agent upon receipt of the Collateral Agent's written
instructions.

GE International will not, without the prior written consent of the
Collateral Agent,

o cancel or terminate the Operation and Maintenance Agreement except under its
terms or consent to or accept any cancellation or termination of the
agreement by Orange L.P.,

o sell, assign or otherwise dispose of any part of its interest in the
Operation and Maintenance Agreement, or

o amend or modify the Operation and Maintenance Agreement in any material
respect.

GE International has waived its rights

o to terminate the Operation and Maintenance Agreement,

o to any equitable adjustment in any of its hourly fees under the Operation
and Maintenance Agreement, and

o to any rights to reduce, extend the time for, or suspend its performance
under the agreement, resulting from Orange L.P.'s failure to meet any of its
obligations under the Operation and Maintenance Agreement due as of the
closing date.

Cure Rights. GE International will not terminate the Operation and
Maintenance Agreement on account of any default or breach without providing the
Collateral Agent with the following cure periods:

(1) if the default is the failure to pay money to GE International, 45 days
from the date on which written notice of default or breach is received by
the Collateral Agent to cure such default or

(2) if the breach or default cannot be cured by paying money to GE
International, a reasonable time necessary to cure the default, provided
the Collateral Agent starts to cure the default within 90 days of receipt
of the default notice and then diligently completes the cure and
continues to perform any monetary obligations under the Operation and
Maintenance Agreement.

If possession of the Project is necessary to cure a breach or default, and the
Collateral Agent commences foreclosure proceedings, the Collateral Agent will
have a reasonable period to complete the proceedings. GE International has
consented to the transfer of Orange L.P.'s interest under the Operation and
Maintenance Agreement to the Collateral Agent or a purchaser or grantee at a
foreclosure sale by judicial or nonjudicial foreclosure and sale or by a
conveyance by Orange L.P. in lieu of foreclosure. Upon a foreclosure, sale or
conveyance, GE International will recognize the Collateral Agent or any other
purchaser or grantee as a party under the Operation and Maintenance Agreement.

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Insolvency. If the Operation and Maintenance Agreement is rejected by a
trustee or debtor-in-possession in any bankruptcy or insolvency proceeding, or
is terminated for any reason other than a default which could have been but was
not cured by the Collateral Agent, then within 45 days after the rejection or
termination the Collateral Agent or its successors or assigns may request GE
International to execute and deliver to the Collateral Agent a new agreement on
the same terms as the original Operation and Maintenance Agreement in effect at
termination.

The Collateral Agent may assign all or part of its interest in the Operation
and Maintenance Agreement or a new agreement to a person or entity to whom the
Project is transferred, if the transferee assumes the obligations of Orange L.P.
or the Collateral Agent, and has a financial capability at least equivalent to
Orange L.P.'s on the closing date. If the Collateral Agent elects to perform
Orange L.P.'s obligations under the Operation and Maintenance Agreement or to
enter into a new operations and maintenance agreement, the sole recourse of GE
International in enforcing the obligations will be limited to that party's
interest in the Project.

Asset Management Agreement

Under an Asset Management Agreement between Niagara Mohawk Energy Marketing
and Orange L.P. dated December 6, 1999, Niagara Mohawk Energy Marketing manages
the business operations and finances of Orange L.P.

Asset Management Services. Niagara Mohawk Energy Marketing performs all
routine accounting and related functions for Orange L.P. and for the Project and
related assets. This includes rendering invoices, manufacturing accounts
receivable and accounts payable, and providing budgets and reports. Niagara
Mohawk Energy Marketing administers and monitors Orange L.P.'s performance under
the project contracts, and negotiates any new energy supply, purchase or
transportation agreements and tariffs as required. It also makes
recommendations regarding and, with Orange L.P.'s consent, assists in the
implementation of cost reduction or revenue enhancement strategies.

We also entered into an energy services management agreement dated December
6, 1999 with Niagara Mohawk Energy Marketing. Under this agreement Niagara
Mohawk Energy Marketing provides energy management services to Orange L.P. and
the Project.

Compensation. Niagara Mohawk Energy Marketing's compensation under the
Asset Management Agreement is $22,750 per month. This will escalate under an
annual inflation adjustment beginning January 1, 2001. In addition, Niagara
Mohawk Energy Marketing is entitled to payment of its actual costs, including
employee expenses and time related to extraordinary, unforeseen events.

Exculpation; Indemnity; Limitation of Remedies. Under the Asset Management
Agreement Niagara Mohawk Energy Marketing is not liable for any damages
associated with the ownership and/or operation of the Project or related assets.
Any damage claims against Niagara Mohawk Energy Marketing for any breach of its
obligations under the Asset Management Agreement will be limited to the amount
it is paid under the Asset Management Agreement. Orange L.P. must indemnify and
hold harmless Niagara Mohawk Energy Marketing and its officers and employees for
any claims or liabilities arising from or related to Orange L.P.'s ownership or
operation of the Project or related assets.

Termination. Orange L.P. may terminate the Asset Management Agreement upon
60 days' prior notice to Niagara Mohawk Energy Marketing. Niagara Mohawk Energy
Marketing may terminate upon six months' prior notice to Orange L.P.

Asset Management Consent and Agreement

Consent to Assignment and Payment; Notices; Amendments. Niagara Mohawk Energy
Marketing has consented and agreed to Orange L.P.'s assigning its interest under
the Asset Management Agreement to the Collateral Agent under the Collateral
Documents as security for Orange L.P.'s obligations under the notes, the
Indenture and the other financing documents.

Niagara Mohawk Energy Marketing has agreed that the Collateral Agent may
exercise all rights and to cure any defaults of Orange L.P. and will accept the
Collateral Agent's performance of Orange L.P.'s obligations under the

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Asset Management Agreement upon receipt of a written notice from the Collateral
Agent. Niagara Mohawk Energy Marketing will make any payments it must make under
the Asset Management Agreement directly to the Collateral Agent in accordance
with the Collateral Agent's written instructions.

Without the prior written consent of the Collateral Agent Niagara Mohawk
Energy Marketing will not cancel or terminate the Asset Management Agreement
except under its terms. If it does terminate for default by Orange L.P., it
will honor the cure provisions described in "Cure Rights" below. Neither will
it consent to or accept any cancellation or termination by Orange L.P. In
addition, it has agreed not to sell, assign, or otherwise dispose of any part of
its interest in the Asset Management Agreement or amend or modify the Asset
Management Agreement in any material respect. However, Niagara Mohawk Energy
Marketing may assign its interest as authorized under the Asset Management
Agreement to one of its affiliates or to a third party agent for financing
collateral purposes.

Niagara Mohawk Energy Marketing has waived its rights under the Asset
Management Agreement to terminate, to any equitable adjustment in its
compensation and to reduce, extend the time for or suspend its performance on
account of Orange L.P.'s failure to meet any obligations under the Asset
Management Agreement due as of the closing date.

Cure Rights. Niagara Mohawk Energy Marketing will not generally terminate
the Asset Management Agreement for default by Orange L.P. without providing the
Collateral Agent with 45 days from the date it receives written notice of
default to cure the default if the default is the failure to pay amounts due and
payable to Niagara Mohawk Energy Marketing. If the breach, however, cannot be
cured by the payment of money to Niagara Mohawk Energy Marketing, then it will
not terminate for default without giving a reasonable time necessary to cure the
default so long as the Collateral Agent starts to cure the default within 90
days of receiving the default notice and either the Collateral Agent or Orange
L.P. diligently completes the cure and continues to perform any monetary
obligations under the Asset Management Agreement.

If possession of the Project is necessary to cure a breach or default, and the
Collateral Agent commences foreclosure proceedings, the Collateral Agent will
have a reasonable period to complete the proceedings. Niagara Mohawk Energy
Marketing has consented to the transfer of Orange L.P.'s interest under the
Asset Management Agreement to the Collateral Agent or a purchaser or grantee at
a foreclosure sale by judicial or nonjudicial foreclosure and sale or by a
conveyance by Orange L.P. in lieu of foreclosure. Upon foreclosure, sale or
conveyance, it will recognize the Collateral Agent or any other purchaser or
grantee as party under the Asset Management Agreement so long as there are no
uncured defaults.

Insolvency. If the Asset Management Agreement is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding, or is
terminated for any reason other than a default which could have been but was not
cured by the Collateral Agent, then within 45 days after the rejection or
termination, the Collateral Agent or its successors or assigns may request
Niagara Mohawk Energy Marketing to execute and deliver to the Collateral Agent a
new agreement on the same terms as the original Asset Management Agreement in
effect at termination.

The Collateral Agent may assign all or part of its interest in the Asset
Management Agreement or a new agreement to a person or entity to whom the
Project is transferred, if the transferee assumes the obligations of Orange L.P.
or the Collateral Agent under the Asset Management Agreement and has a financial
capability at least equivalent to Orange L.P.'s on the closing date. If the
Collateral Agent or its designee or assign elects to perform Orange L.P.'s
obligations under the Asset Management Agreement or to enter into a new
agreement, the sole recourse of Niagara Mohawk Energy Marketing in enforcing the
obligations will be limited to such party's interest in the Project.

REGULATION

Energy Regulation

The enactment of the Public Utility Regulatory Policies Act in 1978, or PURPA,
and FERC's adoption of regulations under PURPA, encouraged the development of
cogeneration and other types of generating facilities by independent power
producers in the United States. As a result of PURPA and other regulatory
initiatives and favorable market conditions, the domestic independent generation
business has experienced significant growth.

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In recent years, federal and state initiatives have further promoted the
development of competition in the sale of electricity and gas. On the federal
level, FERC has adopted a rule that facilitates access to the nationwide
electric transmission system, or "grid," by utility and non-utility purchasers
of electricity and allows utilities subject to FERC jurisdiction to recover
stranded costs. In addition, proposals have been introduced in Congress to
repeal PURPA and the Public Utility Holding Company Act of 1935, or PUHCA. If
the repeal of PURPA and PUHCA were to occur, competitive advantages that
independent power producers have over some regulated utilities may be reduced or
eliminated.

Federal Regulation

The Project is currently certified as a "qualifying facility" under PURPA
which also exempts the Project from regulation under PUHCA. Orange L.P. and the
Project also are exempt from rate regulation under the New York State Public
Service Law by the New York State Public Service Commission and from relevant
provisions of the Federal Power Act, or FPA, with respect to sales of
electricity to Niagara Mohawk for resale to its customers or sales through the
New York Independent System Operator. These sales together account for 100% of
Orange L.P.'s sales of electricity.

PURPA provides an electric generating project with rate and regulatory
incentives if the project qualifies as a qualifying facility. PURPA exempts
qualifying facilities, such as the Project, from the definition of "electric
utility company" under PUHCA, most provisions of the FPA and a number of state
laws relating to financial, organizational and rate regulation of electric
utilities. Under PURPA, a cogeneration facility qualifies as a qualifying
facility if the facility meets or exceed FERC's electricity and thermal energy
output requirements and operating efficiency requirements.

Under PURPA, qualifying facilities receive two primary benefits. First, PURPA
permits FERC to exempt cogeneration qualifying facilities, such as the Project,
from PUHCA, from most provisions of the FPA and from some state laws relating to
organization, rate and financial regulation of electric utilities. Second,
FERC's regulations under PURPA require electric utilities to do two primary
things. One is, they must purchase electricity generated by qualifying
facilities, that commenced construction on or after November 9, 1978, at a price
based on the purchasing utility's avoided costs; also must sell supplementary,
back-up, maintenance and interruptible power to qualifying facilities on a just,
reasonable and nondiscriminatory basis. FERC defines "avoided costs" as the
"incremental costs to an electric utility of electric energy or capacity or both
which, but for the purchase from the qualifying facility or qualifying
facilities, such utility would generate itself or purchase from another source."
Utilities may also purchase power from a qualifying facility at negotiated
prices other than avoided costs as provided by FERC regulations. Under the
Power Put Agreement, Niagara Mohawk purchases power from the Orange L.P. at
negotiated prices.

Throughout the Project's operating history, it has consistently met and
exceeded the FERC's qualifying facility operating requirements for electricity,
useful thermal energy output and operating efficiency. Nevertheless, if the
Project were to lose its qualifying facility status, whether due to a failure to
meet the FERC requirements or as a result of a repeal of PURPA by Congress, it
could be subject to regulation as an electric utility under PUHCA and rate
regulation under the FPA. While the Power Put Agreement does not require that
the Project retain its qualifying facility status, if the Project did lose its
status the Project, under current law, would be required by FERC to justify the
cost basis of the rates it charges under the Power Put Agreement. Project
Orange anticipates, however, that if the Project's loss of qualifying facility
status was imminent -- whether because of legislation (such as repeal of PURPA
without a grandfathering of existing qualifying facilities) or a failure by the
Project to comply with FERC qualifying facility requirements -- Orange L.P.
would seek to obtain from FERC and/or the SEC an alternative exemption from
designation as an electric utility under PUHCA as well as authority from FERC to
charge market-based rates under the FPA. This would avoid rate regulation of the
Project's sale of power under the Power Put Agreement and its designation as an
electric utility under PUHCA. Based on current law and FERC precedent, it is
Orange L.P.'s opinion that the Project would be able to obtain both the
alternative PUHCA exemption and the market-based rate authority.

State Energy Regulation

Power production facilities are also subject to regulation under the New York
State Public Service Law. However, if a power project cogenerates electricity
and thermal energy, or shaft horsepower, and does not produce power in

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excess of 80 MW, it may qualify as a "co-generation facility" under Section
2(2-a) of the Public Service Law. A "co-generation facility" under Section
2(2-a) of the Public Service Law is not an "electric corporation" under Section
2(13) of the Public Service Law, and therefore is not subject to state
regulation as a public utility.

The New York courts have held that there is a distinction between a federal
qualifying facility and a New York co-generation facility. To date, however, the
New York Public Service Commission has not established any standards for New
York co-generation facilities similar to FERC's operating and efficiency
standards for cogeneration and small power production qualifying facilities.
Therefore, a power project that cogenerates electricity and steam in New York
cannot be sure it is a co-generation facility under the New York Public Service
Law and not an electric corporation under that statute. However, the New York
Public Service Commission has not to date challenged the status of a federal
cogeneration qualifying facility that is under 80 MW. As a net 80 MW power
project that is a federal qualifying facility, the Project is, in Orange L.P.'s
opinion, a co-generation facility under the New York Public Service Law. So long
as the Project maintains this status, it also will be exempt from regulation as
a steam corporation under the New York Public Service Law. Additionally, under
FERC's regulations, so long as the Project maintains its qualifying facility
status, it would not be subject to state laws relating to regulation of rates or
financial and organizational structure of electric utilities.

If the Project were found not to be a co-generation facility under state law,
Orange L.P. or the operator of the Project, or both, would be an electric
corporation under the New York Public Service Law and subject to regulation by
the New York Public Service Commission as a utility. Orange L.P. does not
believe, however, that such a finding would pose significant risks because the
Power Put Agreement no longer requires that the Project maintain co-generation
status under state law.

In any case, in that event Orange L.P. could petition the New York Public
Service Commission for an order declaring the Project to be a co-generation
facility and to obtain a "Certificate of Public Convenience and Necessity" from
the New York Public Service Commission. In the case of cogeneration facilities
over 80 MW seeking this kind of certificate, the New York Public Service
Commission has imposed a regime of "lightened regulation." Lightened regulation
involves submitting annual reports concerning sales to retail customers and any
SEC filings, together with limited additional filing requirements and New York
Public Service Commission review. This state review has been described in
recent New York Public Service Commission orders. Nonetheless, failure to
maintain this status could subject the Project to regulation as a utility under
state law.

To the extent the Project is not operating to produce electricity, it meets
its thermal energy requirements under the Steam Contract either by operating
steam boilers at Syracuse University or by operating auxiliary boilers owned by
the Project.

Environmental Regulation

Orange L.P.'s operations are subject to numerous laws and regulations
governing the discharge of materials into the environment or otherwise relating
to environmental protection and restriction upon land use. These laws and
regulations primarily involve the generation, handling, storage, transport, and
disposal of hazardous substances, the emission or discharge of air and water
pollutants, noise emission from the facilities, and the implementation of safety
and health standards with respect to Orange L.P.'s facilities or the public or
environment in general. Many of these laws and regulations require Orange L.P.
to get permits and other regulatory approvals for the facilities. This often
means having to comply with lengthy and complex permitting or approval
procedures and imposes ongoing reporting and compliance obligations. Modified or
renewed permits and authorizations may be required for any physical or
operational changes to Orange L.P.'s facilities. Failure to comply with these
applicable laws and regulations, including any new permits or authorizations,
may result in the assessment of administrative, civil and criminal penalties,
imposition of cleanup costs and liens, and, to a lesser extent, issuance of
injunctions to limit or cease operations. As discussed below, while Orange L.P.
believes it is in substantial compliance with applicable laws and regulations,
Orange L.P. cannot assure you that it will be able to obtain all necessary
permits and approvals for proposed projects or that compliance with new or
changed environmental laws, regulations and policies would not have a material
adverse effect on its operations, financial condition, or competitive position.

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Federal Clean Air Act and Related Requirements

The Project and the Steam Plant are subject to the federal Clean Air Act,
federal regulations implementing that act and state laws and regulations dealing
with air quality. These laws, and permits issued under them, limit the emissions
of specific pollutants, including nitrogen oxides, sulfur dioxide, carbon
monoxide and particulate matter from the Project and the Steam Plant. In
addition, the Project and the Steam Plant must obtain federal and state permits
and operate according to the terms and conditions of the permits. Should the
Project or the Steam Plant make operational changes, it may be necessary to
amend the permits. If the Project or the Steam Plant were to exceed limits on
emissions or fail to fulfill permit conditions, it or they would be subject to
enforcement actions initiated by the state or federal government.

In June 1997, the Project and Syracuse University filed a joint application
for an operating permit under Title V of the Clean Air Act. The New York State
Department of Environmental Conservation, or NYDEC, has confirmed that such
Title V operating permit application was timely and complete, and it has
provided the Project and Syracuse University with a joint draft Title V permit.

NYDEC issued a certificate to operate to the Project which requires the
Project to monitor its emissions of carbon monoxide and nitrogen oxide, or NOx,
and to submit self-monitoring reports each quarter. In addition, the certificate
to operate requires the Project to submit on a quarterly basis the results of
tests assessing the performance of the emissions monitors. The Steam Plant is
not required to conduct similar monitoring because NYDEC has exempted the Steam
Plant from a regulatory requirement to monitor opacity. The Project's
certificate to operate also specifies that excess emissions may constitute
violations of the applicable emission limits if the excess emissions do not
occur during periods of startup, shutdown or malfunction. The permit also
limits the Project's noise emissions. In 1998, the Project paid a modest penalty
for failing to report two instances where NOx levels were exceeded in the second
quarter of 1997. In January 1999, the Project reported to NYDEC a NOx exceedance
caused by a control equipment malfunction. Also in 1999, the Project paid a
modest penalty to NYDEC for failing to submit a timely report.

Based upon current federal regulations, Orange L.P. believes that the Project
meets the requirements for exemption from the requirements of the Acid Rain
Program established under Title IV of the Clean Air Act, because the Project is
a qualifying facility certified by FERC. Orange L.P. believes that the Steam
Plant is exempt from Title IV because the Steam Plant does not generate
electricity.

New York is in the northeast Ozone Transport Region, where all areas are
subject to regulation as areas that are not in attainment with the National
Ambient Air Quality Standard for ozone. Because New York has promulgated
regulations under a 1994 multi-state agreement to reduce emissions of NOx, an
ozone precursor, the Project is subject to state requirements to limit NOx
emissions. This includes NOx controls based on reasonably available control
technology, or NOx RACT, and the NOx Budget Program regulations. The Project and
the Steam Plant timely submitted a joint plan for complying with the requirement
to implement NOx controls based on NOx RACT. According to the NOx RACT
compliance plan and the Project's Title V operating permit application, the
Project uses steam injection to limit NOx emissions to 25 ppm dry, corrected to
15 percent oxygen. Compliance test results submitted to NYDEC indicated that the
four operating boilers at the Steam Plant that are subject to NOx RACT emit NOx
at or below the applicable emission rate in the NOx RACT regulation. The Project
has fulfilled its obligations under the administrative sections in NOx Budget
regulations, which took effect on May 1, 1999. The Project's 1999 NOx emissions
were significantly below the Project's NOx allocation for the year. The Steam
Plant is not subject to the requirements of the NOx Budget Program regulations
because its boilers do not generate electricity and because all of its operating
boilers have heat input capacity lower than the applicability threshold
specified in the NOx Budget Program regulations.

The 1994 multi-state agreement to which New York is a party contemplates
consideration of a third phase of emission reductions to go into effect in 2003.
Therefore, additional measures to limit NOx emissions may be necessary at that
time. In addition, the U.S. Environmental Protection Agency has promulgated a
rule that requires states to revise their regulations setting out how they will
attain the National Ambient Air Quality Standard for ozone. Depending upon the
requirements in the state regulations responding to the Environmental Protection
Agency, the Project and the Steam Plant may be required to further reduce their
respective NOx emissions in order to comply with the new regulations.

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There is a substantial quantity of asbestos-containing material used for
insulation at the Steam Plant. The cost for total removal of the asbestos-
containing material was estimated at approximately $2 million in 1989. Because
most of the ACM is reportedly in an undamaged condition, Orange L.P. has
developed and implemented a procedure to inspect and repair or replace any
asbestos-containing material insulation that becomes damaged due to normal
operations or activities. Orange L.P. does not believe total replacement is
necessary or will be required by regulatory authorities.

Orange L.P. believes that the Project and the Steam Plant are in substantial
compliance with the applicable requirements under federal and state laws
relating to air quality.

Federal Clean Water Act and Related Requirements

Orange L.P.'s operations are subject to the federal Clean Water Act and
analogous state and local laws and regulations relating to the discharge of
pollutants to surface and groundwaters. The Clean Water Act and state laws also
establish requirements for municipally-owned sewage treatment plants, including
pretreatment requirements for industrial users of those plants. Local sewerage
authorities also have established regulations governing connections to and
discharges into their sewer systems and treatment plants. Under these laws and
regulations, Orange L.P. is required to obtain permits for the discharge of its
wastewater and to develop and implement a spill prevention, control and
countermeasure plan with respect to its handling and storage of oil.

In accordance with permits issued by the Onondaga County Department of
Drainage and Sanitation, Orange L.P. is authorized to discharge, within
specified limits, industrial wastewaters generated by the Project and the Steam
Plant to the Onondaga County's wastewater system. The Project's discharge permit
(#140) expires on November 2, 2001 and the Steam Plant's discharge permit (#125)
expires on July 1, 2001. Orange L.P. submits semi-annual self-monitoring reports
for both discharges. In recent years, Orange L.P. has paid several small
penalties to Onondaga County associated with discharges that were not in
compliance with permitted pH levels under Permit #125. Orange L.P. completed a
Project designed to correct these excursions in early 1999. Stormwater runoff
from the Steam Plant and the Project is discharged to an Onondaga County
combined sewer. Orange L.P. believes that the Project and the Steam Plant are in
substantial compliance with their respective wastewater discharge permits. As
required by federal regulations, Orange L.P. maintains a certified spill
prevention, control and countermeasure plan applicable to the Project and the
Steam Plant that was updated in November, 1997.

Federal Resource Conservation and Recovery Act and Related Requirements

Orange L.P. generates wastes, including occasionally hazardous wastes, that
are subject to the federal Resource Conservation and Recovery Act, or RCRA, and
New York's waste management laws and regulations. RCRA regulates the generation,
treatment, storage, handling, transportation, and disposal of hazardous and non-
hazardous wastes. Moreover, the Environmental Protection Agency and NYDEC have
limited the approved methods of disposal for specified hazardous and non-
hazardous wastes. In recent years, both the Project and the Steam Plant have
been RCRA small quantity generators. A recent assessment performed by Orange
L.P.'s environmental consultant noted several solid and hazardous waste
management compliance issues which Orange L.P. believes are easily corrected by
altering administrative practices and will not have a material adverse effect on
it.

Comprehensive Environmental Response, Compensation and Liability Act and Related
Requirements

The Comprehensive Environmental Response, Compensation and Liability Act,
which we refer to as CERCLA or Superfund, and similar state laws, including the
New York State Superfund Program, impose liability, without regard to fault or
the legality of the original conduct, on some classes of persons that are
considered to have contributed to the release of a "hazardous substance" into
the environment. These persons include the owner or operator of the disposal
site or sites where the release occurred and companies that transported,
disposed or arranged for the transport or disposal of hazardous substances found
at the site. Persons who are or were responsible for releases of hazardous
substances under CERCLA may be subject to joint and several liability for the
costs of cleanup of the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment. Orange L.P. does not believe that there are any pending or
imminent claims against it under CERCLA or similar state laws. A recent
inspection of the Project and

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Steam Plant sites by Orange L.P.'s environmental consultant found no evidence of
on-site contamination that could have an impact to soil or groundwater.

New York Petroleum and Hazardous Substances Bulk Storage Facilities Requirements

New York has established regulatory programs governing underground and
aboveground petroleum and hazardous substances bulk storage facilities. Some
underground petroleum and hazardous substance bulk storage facilities are also
regulated under the Environmental Protection Agency's RCRA tank program. In some
respects, the federal requirements are more comprehensive and stringent than
NYDEC's regulations. In general, the state and federal requirements address
registration and permitting, operating practices, closure and reporting
obligations for various types of tanks and associated piping. NYDEC and the
Environmental Protection Agency have broad civil, administrative and criminal
enforcement authority for violations of statutory, regulatory and permit
requirements.

The Steam Plant has four 30,000-gallon underground fuel oil tanks and one
275-gallon aboveground diesel oil tank. Syracuse University owns all of the
tanks and Orange L.P. operates them. Orange L.P. also owns and operates a 7,000-
gallon aboveground fuel oil tank and a 7,000-gallon aboveground caustic tank and
operates a 1,500-gallon aboveground acid tank. In 1999 Orange L.P. made capital
improvements to retrofit the two acid and one caustic tanks in order to comply
with new NYDEC chemical bulk storage requirements for secondary containment or
equivalent technology. As a result, Orange L.P. believes the Project is in
substantial compliance with these regulations. In all other respects, Orange
L.P. also believes it is in substantial compliance with all federal and state
requirements relating to the bulk storage of petroleum and hazardous substances.

Prior to the construction of the Project and Orange L.P.'s operation of the
Steam Plant, Syracuse University removed, replaced and/or closed several bulk
fuel oil underground storage tanks on the Steam Plant site. At the time a
15,000-gallon underground storage tank was closed in 1988, Syracuse University
removed and disposed of approximately 100 cubic yards of petroleum-contaminated
soil and installed a groundwater well to recover residual free product from the
groundwater surface adjacent to the closed tank. In 1992, an environmental
consultant retained by Syracuse University reviewed the soil and groundwater
conditions at the site and concluded that no further remedial action was
required. Based on the location and historic nature of this petroleum release,
as well as the completed remediation, Orange L.P. believes that any requirement
for further action associated with the previously-identified soil and
groundwater contamination is remote.

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THE EXCHANGE OFFER

Purpose and Effect of the Exchange Offer

Orange L.P. and Capital Co. (the "Issuers") are offering to issue their 10.5%
Senior Secured Notes Series B due 2007 (the "New Notes") in exchange for their
10.5% Senior Secured Notes Series A due 2007 (the "Old Notes") as described
below (the "Exchange Offer").

The Old Notes were sold by Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser") on December 6, 1999 to a limited number of
institutional investors (the "Purchasers"). In connection with the sale of the
Old Notes, the Issuers and the Initial Purchaser entered into a Registration
Rights Agreement, dated December 6, 1999 (the "Registration Rights Agreement"),
which requires, among other things, the Issuers

(1) to register the Old Notes under the Securities Act, or

(2) to file with the SEC a registration statement under the Securities Act
with respect to the New Notes identical in all material respects to
the Old Notes and use their reasonable effort to cause that
registration statement to be declared effective under the Securities
Act.

The Issuers are further obligated, upon the effectiveness of the registration
statement described in paragraph (2) above, to offer the holders of the Old
Notes the opportunity to exchange their Old Notes for a like principal amount of
New Notes which will be issued without a restrictive legend and may be reoffered
and resold by the holder without restrictions or limitations under the
Securities Act. A copy of the Registration Rights Agreement has been filed as
an exhibit to the Registration Statement of which this prospectus is a part.
The Exchange Offer is being made under the Registration Rights Agreement to
satisfy the Issuers' obligations under that agreement. The term "Holder" with
respect to the Exchange Offer means any person in whose name Old Notes are
registered on the Issuers' books or any other person who has obtained a properly
completed assignment from the registered holder. At the date of this
prospectus, the sole Holder of the Old Notes is The Depositary Trust
Corporation, or DTC.

In participating in the Exchange Offer, a Holder is deemed to represent to
the Issuer, among other things, that

(1) the New Notes acquired under the Exchange Offer are being obtained in
the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder,

(2) neither the Holder nor any such other person is engaging in or intends
to engage in a distribution of such New Notes,

(3) neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of
such New Notes, and

(4) neither the Holder nor any such other person is an "affiliate" of
the Issuers, as defined in Rule 405 under the Securities Act.

Based on a previous interpretation by the staff of the SEC described in no-
action letters issued to third-parties, including "Exxon Capital Holdings
Corporation" (available May 13, 1988), "Morgan Stanley & Co. Incorporated"
(available June 5, 1991), "Mary Kay Cosmetics, Inc." (available June 5, 1991),
"Warnaco, Inc." (available October 11, 1991), and "K-III Communications Corp."
(available May 14, 1993), the Issuer believes that the New Notes issued under
the Exchange Offer may be offered for resale, resold and otherwise transferred
by any Holder of such New Notes (other than any such Holder which is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such Holder's business and such Holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes. Any Holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes cannot rely on such
interpretation by the staff of the SEC and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Broker-dealers who acquired the Old Notes from
the

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Issuers may not rely on the staff's interpretations and must comply with the
registration and prospectus delivery requirements of the Securities Act,
including being named as a selling noteholder, in order to resell the Old Notes
or the New Notes. Under no circumstances may this prospectus be used for an
offer to resell, resale or other retransfer of the New Notes. In the event that
the Issuers' belief is inaccurate, Holders of the New Notes who transfer New
Notes in violation of the prospectus delivery provisions of the Securities Act
without an exemption from registration may incur liability. The Issuers do not
assume or indemnify Holders against such liability. The Exchange Offer is not
being made to, nor will the Issuer accept tenders for exchange from, Holders of
Old Notes in any jurisdiction in which the Exchange Offer or the acceptance of
the Exchange Offer would not be in compliance with the securities or blue sky
laws of such jurisdiction. Each broker-dealer that receives New Notes for its
own account in exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Issuers have not entered into any
arrangement or understanding with any person to distribute the New Notes to be
received in the Exchange Offer. See "Plan of Distribution," on page 142.

Terms of the Exchange Offer

Upon the terms and subject to the conditions described in this prospectus and
in the letters of transmittal, the Issuer will accept any and all Old Notes
properly tendered and not withdrawn prior to 5:00 p.m., New York time, on the
Expiration Date (defined below). The Issuer will issue $1,000 in principal
amount of the New Notes in exchange for each $1,000 in principal amount of
outstanding Old Notes surrendered in the Exchange Offer. However, Old Notes may
be tendered only in integral multiples of $1,000.

The form and terms of the New Notes will be the same as the form and terms of
the Old Notes except that the New Notes will be registered under the Securities
Act and as a result will not be subject to restrictions on transfer. The New
Notes will evidence the same debt as the Old Notes. The New Notes will be
issued under and entitled to the benefits of the Indenture, which also
authorized the issuance of the Old Notes.

As of the date of this prospectus, $68,000,000 in aggregate principal amount
of the Old Notes is outstanding. This prospectus, together with the letter of
transmittal, is being sent to all registered Holders of the Old Notes.

The Issuers will be deemed to have accepted validly tendered Old Notes when,
as and if the Issuers have given oral or written notice of tender to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
for the purposes of receiving the New Notes from the Issuers.

Old Notes that are not tendered for exchange in the Exchange Offer will
remain outstanding and will be entitled to the rights and benefits such Holders
have under the Indenture. If any tendered Old Notes are not accepted for
exchange because of an invalid tender, the occurrence of other events described
in this document or otherwise, certificates for any such unaccepted Old Notes
will be returned, without expense, to the tendering Holder as promptly as
practicable after the Expiration Date.

Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange under the Exchange
Offer. The Issuers will pay all charges and expenses, other than applicable
taxes described below, in connection with the Exchange Offer. See "--Fees and
Expenses," on page 88.

Expiration Date; Extensions; Amendments to the Exchange Offer

The term "Expiration Date" shall mean 5:00 p.m., New York City time on
_______, 2000, unless the Issuers, in their sole discretion, extend the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.

In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent (defined below) of any extension by oral or written notice and will mail
to the registered Holders an announcement, prior to 9:00 a.m., New York City
time, on the next business day after the then Expiration Date.

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The Issuers reserves the right, in their sole discretion,

(1) to delay accepting any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions presented below
under "--Conditions" shall not have been satisfied by giving oral or
written notice of such delay, extension or termination to the Exchange
Agent, or

(2) to amend the terms of the Exchange Offer in any manner.

Any such delay in acceptances, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice to the registered
Holders. If the Exchange Offer is amended in a manner determined by the Issuers
to constitute a material change, the Issuer will promptly disclose such
amendment by means of a post-effective amendment to the registration statement
of which this prospectus is a part. The amended prospectus will be distributed
to the registered Holders of the Old Notes, and the Issuers will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
Holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.

Without limiting the manner in which the Issuers may choose to make a public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Issuers will have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.

Upon satisfaction or waiver of all the conditions to the Exchange Offer, the
Issuers will accept, promptly after the Expiration Date, all Old Notes properly
tendered and will issue the New Notes promptly after acceptance of the Old
Notes. See "--Conditions to the Exchange Offer" below. For purposes of the
Exchange Offer, the Issuers will be deemed to have accepted properly tendered
Old Notes for exchange when, as and if the Issuers shall have given oral or
written notice to the Exchange Agent.

In all cases, issuance of the New Notes for Old Notes that are accepted for
exchange under the Exchange Offer will be made only after timely receipt by the
Exchange Agent of a properly completed and duly executed letter of transmittal
and all other required documents; provided, however, that the Issuers reserve
the absolute right to waive any defects or irregularities in the tender or
conditions of the Exchange Offer. If any tendered Old Notes are not accepted
for any reason described in the terms and conditions of the Exchange Offer or if
Old Notes are submitted for a greater principal amount than the Holder desires
to exchange, then such unaccepted or non-exchanged Old Notes evidencing the
unaccepted portion, as appropriate, will be returned without expense to the
tendering Holder as promptly as practicable after the expiration or termination
of the Exchange Offer.

Conditions to the Exchange Offer

Notwithstanding any other term of the Exchange Offer, the Issuers will not be
required to exchange any Old Notes for any New Notes and may terminate the
Exchange Offer before the acceptance of any Old Notes for exchange, if:

(1) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange
Offer which, in the Issuers' reasonable judgment, might materially
impair the ability of the Issuer to proceed with the Exchange Offer;
or

(2) any law, statute, rule or regulation is proposed, adopted or enacted,
or any existing law, statute, rule or regulation is to be interpreted
by the staff of the SEC, which, in the Issuers' reasonable judgment,
might materially impair the ability of the Issuer to proceed with the
Exchange Offer.

If the Issuers determine in their sole discretion that any of these
conditions are not satisfied, the Issuers may

(1) refuse to accept any Old Notes and return all tendered Old Notes to
the tendering Holders,

(2) extend the Exchange Offer and retain all Old Notes tendered prior to
the expiration of the Exchange Offer, subject, however, to the rights
of Holders who tendered such Old Notes to withdraw their tendered Old
Notes, or

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(3) waive such unsatisfied conditions with respect to the Exchange Offer
and accept all properly tendered Old Notes which have not been
withdrawn.

If a waiver or a determination by the Issuers that a condition has been
satisfied constitutes a material change to the Exchange Offer, the Issuers will
promptly disclose such waiver or determination by means of a prospectus
supplement that will be distributed to the registered Holders, and the Issuers
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver or the determination and the
manner of disclosure to the registered Holders, if the Exchange Offer would
otherwise expire during such five to ten business day period.

Procedures for Tendering -- Registered Holders and DTC Participants

Registered Holders of Old Notes, as well as beneficial owners who are direct
participants in DTC, who desire to participate in the Exchange Offer should
follow the directions described below and in the letter of transmittal.

All other beneficial owners should follow the instructions received from
their broker or nominee and should contact their broker or nominee directly.
The instructions described below and in the letter of transmittal DO NOT APPLY
to such beneficial owners.

Registered Holders

To tender in the Exchange Offer, a Holder must complete, sign and date the
letter of transmittal, or facsimile of the letter of transmittal, have the
signatures guaranteed if required by the letter of transmittal, and mail or
otherwise deliver such letter of transmittal or such facsimile to the Exchange
Agent prior to the Expiration Date. In addition, either

(1) certificates for such Old Notes must be received by the Exchange Agent
along with the letter of transmittal, or

(2) the Holder must comply with the guaranteed delivery procedures
described below.

To be tendered effectively, the letter of transmittal and other required
documents must be received by the Exchange Agent at the address below under "--
Exchange Agent" prior to the Expiration Date.

The tender by a Holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such Holder and the Issuer in accordance
with the terms and subject to the conditions in this document and in the letter
of transmittal.

The method of delivery of Old Notes and the letter of transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holder. Instead of delivery by mail, it is recommended that Holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date. No
letter of transmittal or Old Notes should be sent to the Issuers. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect the above transactions for such Holders.

Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered are tendered

(1) by a registered Holder who has not completed the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" on the letter
of transmittal, or

(2) for the account of an Eligible Institution (as defined below).

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In the event that signatures on a letter of transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantor
must be a member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an
"Eligible Institution").

If the letter of transmittal is signed by a person other than the registered
Holder of any Old Notes listed, such Old Notes must be endorsed or accompanied
by a properly completed bond power signed by such registered Holder as such
registered Holder's name appears on such Old Notes.

If the letter of transmittal or any Old Notes or bond or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Issuers, evidence satisfactory to the Issuer of their authority to so act must
be submitted with the letter of transmittal.

Holders who wish to tender their Old Notes and

(1) whose Old Notes are not immediately available, or

(2) who cannot deliver their Old Notes, the letter of transmittal or any
other required documents to the Exchange Agent prior to the Expiration
Date, may effect a tender if:

(A) The tender is made through an Eligible Institution;

(B) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the Holder,
the certificates number(s) of such Old Notes and the principal
amount of Old Notes tendered stating that the tender is being
made and guaranteeing that, within three New York Stock Exchange
trading days after the Expiration Date, the letter of transmittal
(or facsimile) together with the certificate(s) representing the
Old Notes and any other documents required by the letter of
transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and

(C) Such properly completed and executed letter of transmittal (or
facsimile), as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer and other
documents required by the letter of transmittal are received by
the Exchange Agent within three New York Stock Exchange trading
days after the Expiration Date.

Upon request to the Exchange Agent a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures described above.

DTC Participants

Any financial institution that is a participant in DTC's systems may make
book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into
the Exchange Agent's account at DTC in accordance with DTC's procedures for
transfer. Such delivery must be accompanied by either

(1) the letter of transmittal (or facsimile), with any required signature
guarantees, or

(2) an Agent's Message (as defined below),

and any other required documents, must, in any case, be transmitted to and
received by the Exchange Agent at the address below under "--Exchange Agent" on
or prior to the Expiration Date or the guaranteed delivery procedures described
below must be complied with. The Exchange Agent will make a request to
establish an account with respect to the Old Notes at DTC for purposes of the
Exchange Offer within two business days after the date of this prospectus.

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The term "Agent's Message" means a message, transmitted by DTC, received by
the Exchange Agent and forming part of a book-entry transfer where a tender is
initiated, which states that DTC has received an express acknowledgement from a
participant tendering Old Notes that such participant has received and agrees to
be bound by the terms of the letter of transmittal and that the Issuer may
enforce such agreement against the participant.

Miscellaneous

All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Issuers in their sole discretion, which determination
will be final and binding. The Issuers reserve the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Issuers' acceptance
of which would, in the opinion of counsel for the Issuers, be unlawful. The
Issuers also reserve the right to waive any defects, irregularities or
conditions of tender as to particular Old Notes. The Issuers' interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
the letter of transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Issuers shall determine. Although the
Issuers intend to notify Holders of defects or irregularities with respect to
tenders of Old Notes, none of the Issuers, the Exchange Agent, or any other
person shall incur any liability for failure to give such notification. Tenders
of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in the letter of
transmittal, as soon as practicable following the Expiration Date.

By tendering, each Holder or the person receiving the New Notes, as the case
may be, will be deemed to represent to the Issuers that, among other things, the
New Notes acquired under the Exchange Offer are being obtained in the ordinary
course of business of the Person receiving such New Notes, whether or not such
person is the Holder,

(1) neither the Holder nor any such other person is engaging in or intends
to engage in a distribution of such New Notes,

(2) neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of
such New Notes, and

(3) neither the Holder nor any such other Person is an "affiliate," as
defined in Rule 405 of the Securities Act, of the Issuer.

In all cases, issuance of New Notes that are accepted for exchange under the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
certificates for such Old Notes or a timely Book-Entry Confirmation of such Old
Notes into the Exchange Agent's account at DTC, a properly completed and duly
executed letter of transmittal and all other required documents. If any
tendered Old Notes are not accepted for any reasons described in the terms and
conditions of the Exchange Offer or if Old Notes are submitted for a greater
principal amount than the Holder desires to exchange, such unaccepted or non-
exchanged Old Notes will be returned without expense to the tendering Holder
(or, in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at DTC under the book-entry transfer procedures described below,
such non-exchanged Old Notes will be credited to an account maintained with such
DTC) as promptly as practicable after the expiration or termination of the
Exchange Offer.

The Issuers reserve the right in their sole discretion to purchase or make
offers for any Old Notes that remain outstanding subsequent to the Expiration
Date or, as described above under " - Conditions," to terminate the Exchange
Offer and, to the extent permitted by applicable law, purchase Old Notes in the
open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers could differ from the terms of the Exchange Offer.

Withdrawal of Tenders of Old Notes

Except as otherwise provided, tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York time, on the Expiration Date.

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To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address below prior to 5:00 p.m., New York time, on the Expiration
Date. Any such notice of withdrawal must

(1) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"),

(2) identify the Old Notes to be withdrawn (including the certificate
number or),

(3) be signed by the Holder in the same manner as the original signature
on the letter of transmittal by which such Old Notes have been
tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee
with respect to the Old Notes register the transfer of such Old Notes
in the name of the person withdrawing the tender, and

(4) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. If Old Notes have been tendered
under book-entry transfer, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the
withdrawn Old Notes, in which case a notice of withdrawal will be
effective if delivered to the Exchange Agent by any method of delivery
described in this paragraph.

All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Issuers, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
will be returned to the Holder without cost to such Holder as soon as
practicable after withdrawal; and no New Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Properly
withdrawn Old Notes may be retendered by following one of the procedures above
under " - Procedures for Tendering" at any time prior to the Expiration Date.

Exchange Agent

U.S. Bank Trust National Association has been appointed as Exchange Agent of
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for Notice of Guaranteed Delivery with respect to the exchange of the
Old Notes should be directed to the Exchange Agent addressed as follows:

U.S. Bank Trust National Association
180 Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Services, Specialized Finance

By Telephone:
(651) 244-1215

By Facsimile:
(651) 244-1537

Fees and Expenses

The expenses of soliciting tenders will be paid by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopier, telephone or in person by officers and regular
employees of the Issuer and its affiliates.

The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers-dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay
the Exchange Agent reasonable and customary fees for their services and will
reimburse them for their reasonable out-of-pocket expenses in connection
therewith.

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The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers and are estimated in the aggregate to be approximately
[$100,000.] Such expenses include registration fees, fees and expenses of the
Exchange Agent, accounting and legal fees and printing costs, among others.

The Issuers will pay all transfer taxes, if any, applicable to the exchange
of the Old Notes under the Exchange Offer. If, however, certificates
representing New Notes for principal amounts or number of shares not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of Old Notes tendered, or if
tendered the Old Notes are registered in the name of, any person other than the
person signing the letter of transmittal, or if a transfer tax is imposed for
any reason other than the exchange of the Old Notes under the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other person) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of such transfer taxes will
be billed to such tendering Holder.

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DESCRIPTION OF NOTES

You can find the definitions of terms used in this description under the
subheading "Certain Definitions" or in the Indenture.

The Issuers will issue the New Notes under an Indenture dated as of December
6, 1999 between the Issuers and U.S. Bank Trust National Association, as Trustee
and Collateral Agent. The terms of the New Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939. The agreements referred to under the caption "--
Collateral" define the terms of the security interests that will secure the
notes.

On December 6, 1999, concurrently with the issuance and sale of the Old
Notes, Funding L.P. merged with and into Orange L.P., with Orange L.P. as the
surviving partnership, under the Merger Agreement. As a condition to the
issuance of the Old Notes, Orange L.P. expressly assumed, and agreed to perform
and discharge, all of the obligations of Funding L.P. with respect to the Notes
and the Indenture. Capital Co. was incorporated solely for the purpose of
acting as co-Issuer of the notes.

The following description is a summary of the material provisions of the
Indenture, the Deposit and Disbursement Agreement, the Security Agreement, the
SIDA Security Agreement, the First Mortgage and the Pledge Agreements. It does
not restate those agreements in their entirety. We urge you to read the
Indenture, the Deposit and Disbursement Agreement, the Security Agreement, the
SIDA Security Agreement, the First Mortgage and the Pledge Agreements because
they, and not this description, define your rights as holders of the New Notes.
Copies of the Indenture and the other Financing Documents are available as
described below under "Additional Information."

Brief Description of the Notes

The notes:

o are general obligations of the Issuers;

o are secured by a lien on substantially all the assets of Orange L.P.;

o are without preference in right of payment to all unsecured senior borrowings
of the Issuers.

The notes are payable solely from revenues generated by Orange L.P. and from
other funds that may be available from time to time in the Accounts held by the
Collateral Agent. The direct and indirect current or former owners of the
Issuers are not obligated under the notes except for recourse to those partners'
ownership interests in Orange L.P. or GAS LP to the extent those interests have
been pledged to the Collateral Agent as security for the notes. None of GAS
Orange and GAS LP, which are collectively referred to as the Partners, nor any
of the direct or indirect current or former owners of the Partners or of the
Issuers, will be obligated to contribute additional funds if monies in the
Accounts are insufficient for the payment of debt service in respect of the
notes. So long as the notes are outstanding, distributions to the Partners from
the Distribution Account will constitute Restricted Payments under the
Indenture.

Principal, Maturity and Interest

The Indenture provides for the issuance by the Issuers of up to $68.0 million
aggregate principal amount of notes. The Issuers will issue all notes in
denominations of $100,000 and integral multiples of $1,000 in excess of
$100,000. The notes will mature on September 15, 2007.

Interest on the notes will accrue at the rate of 10.5% per annum and will be
payable semi-annually in arrears on March 15 and September 15 of each year,
commencing March 15, 2000. The Issuers will make each interest payment to the
Holders of record of the notes on the immediately preceding March 1 and
September 1, as the case may be. Interest on the notes will accrue from the date
of original issuance or, if interest has already been paid, from the date it was
most recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.

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The Issuers will pay the principal of the notes in semi-annual installments,
commencing March 15, 2000, as follows:

Percentage of Principal
Schedule Payment Date Amount Payable

March 15, 2000 ............................................... 3.25%
September 15, 2000 6.75%
March 15, 2001 ............................................... 4.25%
September 15, 2001 4.50%
March 15, 2002 ............................................... 4.50%
September 15, 2002 5.25%
March 15, 2003 ............................................... 5.25%
September 15, 2003 6.00%
March 15, 2004 ............................................... 6.00%
September 15, 2004 6.50%
March 15, 2005 ............................................... 7.00%
September 15, 2005 7.00%
March 15, 2006 ............................................... 8.00%
September 15, 2006 8.00%
March 15, 2007 ............................................... 8.75%
September 15, 2007 9.00%

Methods of Receiving Payments on the Notes

If a Holder has given wire transfer instructions to the Issuers, the Issuers
will pay all principal, premium, if any, and interest on that Holder's notes in
accordance with those instructions. Otherwise, the Issuers will make all
payments of principal, premium, if any, and interest on the notes at the office
of the Paying Agent and Registrar within the City and State of New York unless
the Issuers decide to make interest payments by check mailed to the Holders at
their addresses in the register of Holders.

Paying Agent and Registrar for the Notes

The Trustee will initially act as Paying Agent and Registrar. The Issuers may
change the Paying Agent or Registrar without prior notice to the Holders, and
either Issuer may act as Paying Agent or Registrar.

Transfer and Exchange

A Holder may transfer or exchange New Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder to furnish appropriate
endorsements and transfer documents and the Issuers may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Issuers
are not required to transfer or exchange any note selected for redemption. Also,
the Issuers are not required to transfer or exchange any note for a period of 15
days before a selection of notes to be redeemed.

The Issuers and the Trustee will treat the registered Holder of a note as the
owner of the note for all purposes.

Collateral

The notes will, subject to specific permitted exceptions, be secured by:

(1) a perfected, first priority lien on the funds in the Accounts
established under the Deposit and Disbursement Agreement;

(2) a perfected, first priority lien on and security interest in
substantially all of the assets of Orange L.P.,

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including a mortgage on the leasehold and subleasehold interest of
Orange L.P. under the Master Lease and an assignment of all of the
contracts and personal property of Orange L.P.; and

(3) a perfected, first priority pledge of the Equity Interests in Orange
L.P. held by GAS Orange and the Equity Interests of GAS LP in Orange
L.P. and of the partners of GAS LP in GAS LP.

The collateral does not include the Steam Plant (or insurance in respect of
the Steam Plant) or any turbine and associated equipment leased from GEAID under
the lease engine support program.

Deposit and Disbursement Agreement

Orange L.P. entered into a deposit and disbursement agreement (as more
particularly defined in "Certain Definitions " below, the "Deposit and
Disbursement Agreement"). The Deposit and Disbursement Agreement grants to U.S.
Bank Trust National Association, in its capacity as collateral agent (in such
capacity, the "Collateral Agent") for the benefit of the Trustee, the Holders of
the notes and the other Secured Parties , a perfected, first priority lien on
the funds in the Accounts.

First Mortgage

SIDA and Orange L.P. entered into a mortgage and assignment of rents (as more
particularly defined in "Certain Definitions" below, the "First Mortgage"),
granting to the Collateral Agent for the benefit of the Holders of the notes and
other Secured Parties a first mortgage lien on, and security interest in, Orange
L.P.'s interest in the Mortgaged Property described in the First Mortgage,
including SIDA's

(1) leasehold estate under the Ground Lease and Easement Lease in the
Leased premises and the Outside Easements,

(2) easement interest under the City Easement Agreements in the City
Easements,

(3) title to the improvements (including the Project) and equipment
located on the Leased Premises and the Easements, subject to Permitted
Liens, including some Permitted Title Encumbrances; and including,
SIDA's and Orange L.P.'s

(4) subleasehold estate under the Master Lease in the Leased Premises and
the Outside Easements,

(5) leasehold estate under the Master Lease in the City Easements,

(6) leasehold estate under the Master Lease in the improvements (including
the Project) and the equipment located on the Leased Premises and the
Easements and

(7) all Orange L.P.'s right, title and interest under the Master Lease,
subject to Permitted Liens, including some Permitted Title
Encumbrances.

Lease Documents and Rents. The First Mortgage includes a lien upon,
security interest in, and present assignment of, the Lease Documents and the
rents, issues, profits, and proceeds by Orange L.P. and SIDA to the Collateral
Agent, subject to the right of Orange L.P. to collect the rents, issues, profits
and proceeds, until the occurrence and during the continuance of an Event of
Default.

Secured Obligations; Maximum Principal Amount of Secured Obligations. The
First Mortgage secures the payment and performance when due of all of Orange
L.P.'s obligations under the notes, the Indenture and the Collateral Documents.
However, the maximum principal amount of the Secured Obligations under the First
Mortgage will be limited to $68.0 million (the "Maximum Principal Amount"), plus
interest payable under the notes on the Maximum Principal Amount, premium
payable upon prepayment of notes in the Maximum Principal Amount and repayment
after default of amounts advanced for the payment of real estate taxes, payments
in lieu of taxes, charges and assessments, insurance premiums, costs of
collection, costs of enforcement and other amounts paid by the Collateral Agent,
provided

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that the Secured Obligations will not include interest on any unpaid
interest if that would require the payment of additional mortgage recording tax,
unless the mortgage recording tax is paid. Orange L.P. agrees to pay any
mortgage recording tax that may be or become due with respect to the First
Mortgage. The First Mortgage expressly provided that the limitation on the
Maximum Principal Amount of the Secured Obligations secured under the Mortgage
does not limit the amount of the Secured Obligations secured under the Security
Agreement or any other Collateral Document.

Reconveyance Option. In the event Orange L.P. has any right or obligation
to acquire SIDA's interests under the Master Lease or the PILOT Agreement (each
a "Reconveyance Option"), Orange L.P. must obtain the prior written consent of
the Collateral Agent and provide to the Collateral Agent all instruments,
documents, opinions of counsel and endorsements to the Collateral Agent's title
insurance policy as the Collateral Agent requests before exercising that right
or fulfilling that obligation. If an Event of Default is continuing, then at the
option of the Collateral Agent, SIDA's interests being reconveyed under any
Reconveyance Option will be conveyed directly to the Collateral Agent.

Bankruptcy. Orange L.P. has assigned, transferred and set over to the
Collateral Agent Orange L.P.'s claims and rights to the payment of damages
arising from the rejection of any of the Master Lease, the Ground Lease or the
Easement Agreements under the Federal Bankruptcy Code.

Orange L.P. has agreed to obtain the Collateral Agent's prior written consent
before electing to treat any of the Master Lease, the Ground Lease or the
Easement Agreements as terminated under Section 365(h)(1) of the Federal
Bankruptcy Code. If Orange L.P. seeks to offset the amount of any damages caused
by the non-performance by any party against the rent or other charges reserved
in any of the Master Lease, the Ground Lease or the Easement Agreements, Orange
L.P. will, prior to effecting such offset, notify the Collateral Agent of its
intention to do so, and the Collateral Agent will have 30 days after receipt of
such notice from Orange L.P. to object to all or any part of that offset and
bring its objection to the attention of any court supervising the bankruptcy of
that party.

If any action shall be commenced in respect of the Mortgaged Property in
connection with any case under the Federal Bankruptcy Code, the Collateral Agent
may participate in that litigation. If an Event of Default shall be continuing,
the Collateral Agent will have the option of assuming the control of any such
litigation and Orange L.P. has agreed to execute any and all powers,
authorizations, consents and other documents required by the Collateral Agent in
connection therewith and pay all costs and expenses incurred by the Collateral
Agent in connection therewith. Orange L.P. has agreed to promptly notify the
Collateral Agent of any and all filings by or against any party under any of the
Master Lease, the Ground Lease and or the Easement Agreements of a petition
under the Federal Bankruptcy Code.

Orange L.P. has assigned and transferred to the Collateral Agent a right to
apply to the bankruptcy court under Section 365(d)(4) of the Federal Bankruptcy
Code for an order extending the period during which any of the Master Lease, the
Ground Lease and/or the Easement Agreements may be rejected or assumed.

Remedies. Upon the occurrence and during the continuance of an Event of
Default:

(1) the Collateral Agent may (A) have a receiver appointed to collect the
rents, issues, profits, income and proceeds from and operate the
Mortgaged Property; (B) may enter upon the Mortgaged Property itself
or by its agents for such purposes; and (C) may collect the rents,
issues, profits, income and proceeds without such entry;

(2) the Collateral Agent may commence actions to foreclose the First
Mortgage or enforce the provisions of the First Mortgage;

(3) the Collateral Agent may foreclose the First Mortgage by non-judicial
power of sale (and Orange L.P. and SIDA have agreed to waive any right
granted under Section 1421 of the New York Real Property Actions and
Proceedings Law to challenge the Collateral Agent's enforcement of the
First Mortgage by non-judicial power of sale);

(4) the Collateral Agent may exercise all of the rights of a "secured
party" under the New York Uniform Commercial Code;

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(5) the Collateral Agent may cure defaults and pay and perform obligations
of Orange L.P. under the First Mortgage; and

(6) the Collateral Agent, the Trustee, the Holders and the other Secured
Parties may exercise any other rights and remedies available under the
Financing Document, at law and in equity.

Security Agreements

The Issuers and SIDA have each entered into a security agreement (the
"Security Agreement" and the "SIDA Security Agreement" respectively and,
collectively, the "Security Agreements") granting an assignment and a perfected,
first priority security interest to the Collateral Agent for the benefit of the
Trustee, the Holders of the notes and the other Secured Parties, of all of their
respective interests

(1) under each of the Project Documents to which it is a party and any
other agreement relating to the Project to which it is party and all
amendments, supplements and renewals thereto;

(2) to the insurance policies required to be maintained under the
Financing Documents;

(3) all Governmental Approvals;

(4) to all revenues derived from their ownership and operation of the
Project;

(5) to their assets, including their respective personal property and
fixtures (in the case of SIDA, to the extent relating to the Project);

(6) to the Accounts;

(7) to the Permitted Investments; and

(8) to the proceeds, if any, derived from any of (1) through (7).

So long as no Event of Default has occurred and is continuing, and subject to
the terms and conditions in the Indenture and the Collateral Documents, all
revenues received by Orange L.P. will be allocated to the appropriate Accounts
in the manner described under the caption "Flow of Funds."

Upon the occurrence and during the continuance of an Event of Default, the
Collateral Agent may:

(1) declare all amounts immediately due and payable under the Indenture
and the notes;

(2) proceed to protect and enforce the rights vested in it under the
respective Security Agreements;

(3) cause any action at law or suit in equity or other proceeding to be
instituted and prosecuted to collect or enforce any obligations or
rights under the Collateral;

(4) sell or otherwise dispose of the Collateral;

(5) perform any obligation of either the Issuers or SIDA under any
Financing Document;

(6) take possession of the Collateral;

(7) secure the appointment of a receiver; and

(8) exercise its rights as a "secured party" under the New York Uniform
Commercial Code.

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Pledge Agreements

The Partners and the partners of GAS LP have entered into pledge agreements
(each, a "Partner Pledge Agreement" and, collectively, the "Pledge Agreements")
providing for the perfected, first priority pledge to the Collateral Agent for
the benefit of the Trustee, the Holders and the other Secured Parties of all of
the respective partnership interests of each of GAS Orange in Orange L.P., and
the partnership interests of GAS LP in Orange L.P. and of the partners of GAS LP
in GAS LP.

These pledges will secure the payment and performance of all of Orange L.P.'s
Obligations under the notes and the other Financing Documents. Cash payments
made by Orange L.P. to a pledgor in respect of such collateral which are
permitted by the Indenture and proceeds received by a pledgor from a sale of
such collateral which is permitted by the Indenture shall upon receipt by such
pledgor be released from the Lien created by the relevant Pledge Agreement.

So long as no Event of Default has occurred and is continuing, and subject to
the terms and conditions in the Indenture and the Collateral Documents, all
revenues actually received by Orange L.P. will be allocated to the appropriate
Accounts in the manner described under the caption "Flow of Funds."

Upon the occurrence and during the continuance of an Event of Default
(subject, in the case of direct or indirect interests in Orange L.P. held
through GAS LP, to the requirements of the Stipulation):

(1) all rights of Orange L.P. and any pledgors to exercise any voting or
other consensual rights in respect of the pledged Collateral will
cease. All of these rights will become vested in the Collateral Agent
acting at the direction of the Trustee, which, to the extent permitted
by law, will have the sole right to exercise these voting and other
consensual rights;

(2) the Trustee may sell or cause the Collateral Agent to sell the
Collateral for the benefit of the Secured Parties in accordance with
the terms of the Collateral Documents;

(3) the Trustee may exercise or cause the Collateral Agent to exercise all
or any other rights and remedies that the Trustee, the Collateral
Agent or the other Secured Parties have under any of the Financing
Documents, at law or in equity; and

(4) the Trustee shall have all rights of a "secured party" under the New
York Uniform Commercial Code.

University Subordination Agreement

In 1991, as security for Orange L.P.'s performance under the Steam Contract,
the Steam Plant Operating Agreement and the Ground Lease, Orange L.P. entered
into

(1) a Mortgage and Security Agreement dated as of April 5, 1991 with SIDA
and Syracuse University under which Orange L.P. and SIDA granted to
Syracuse University a mortgage lien on, and a security interest in,
the Project in the maximum principal amount of twenty million dollars
($20,000,000) (the "University Facility Mortgage");

(2) a Mortgage and Security Agreement dated as of April 5, 1991 with SIDA
and Syracuse University under which Orange L.P. and SIDA granted to
Syracuse University a mortgage lien on, and a security interest in,
the Pipeline in the principal amount of ten million dollars
($10,000,000) to secure Orange L.P.'s obligations relating to access
to the Pipeline after the termination or expiration of the Ground
Lease (the "University Pipeline Mortgage"); and

(3) two Security Agreements dated as of April 5, 1991 with SIDA and
Syracuse University under which we and SIDA granted a security
interest in our contracts and other assets relating to the Project
(the "University Security Agreements", together with the University
Facility Mortgage and the University Pipeline Mortgage are referred to
as either the "University Collateral Documents" or the "Subordinate
Collateral Documents") in favor of the Collateral Agent. Syracuse
University does not have a security

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interest in the Equity Interests in Orange L.P.

The Subordinate Collateral Documents are, by their terms, subordinate to any
Permitted Mortgage and particular unassigned rights of SIDA. In order to confirm
and effectuate the subordination of the Subordinate Collateral Documents to the
First Mortgage, the Security Agreement and the SIDA Security Agreement (the
"Senior Collateral Documents") securing Orange L.P.'s obligations under the
notes and other Financing Documents, Syracuse University, the Collateral Agent
and Orange L.P. will enter into a Subordination Agreement (the "University
Subordination Agreement") under which Syracuse University will acknowledge and
agree that

(1) the Senior Collateral Documents are and will remain a Permitted
Mortgage under the Steam Contract, the Steam Plant Operating Agreement
and the Ground Lease,

(2) the Subordinate Collateral Documents are and will remain subject and
subordinate in all respects to the Senior Collateral Documents
regardless of the times or order of the granting of these documents,
the times or order of recording of these documents, the property,
rights or interests covered by these documents or any other fact or
circumstance, and

(3) notwithstanding the union of the fee simple title and the leasehold
estate created under the Ground Lease or the merger of any other
University Document in Syracuse University either by purchase,
foreclosure or otherwise, the separation of the fee simple estate and
the leasehold estate in the Ground Lease and the separation of the
parties' interests in the other University Documents will be
maintained and a merger will not take place without the prior written
consent of the Secured Parties; provided, however, that this will not
limit or restrict in any manner the right of Syracuse University to
terminate the Ground Lease or the other University Documents in
accordance with their terms and the terms of the University Consent
and Agreement. While Syracuse University is not barred from
foreclosing upon its interests secured by the Subordinate Collateral
Documents, any such foreclosure would constitute an Event of Default
under the Senior Collateral Documents.

Insurance and Condemnation Proceeds

The First Mortgage and the other Collateral Documents include a lien upon,
and security interest in, Orange L.P.'s and SIDA's interests in all insurance,
condemnation and other proceeds with respect to the Project. Under the SIDA
Consent and Agreement, SIDA has agreed that all insurance and condemnation
proceeds with respect to the Project will be applied as provided in the First
Mortgage and other Collateral Documents. See "Summary Descriptions of the
Principal Agreements Relating to the Project--SIDA Consent and Agreement." Under
the University Consent and Agreement, Syracuse University has also agreed that
all insurance and condemnation proceeds with respect to the Project will be
applied as provided in the First Mortgage and other Collateral Documents.
However, the Collateral Agent has agreed with Syracuse University that, if the
Project is damaged or destroyed, the Collateral Agent and the Secured Parties
are required to consider in good faith the application of any insurance proceeds
and permit the application of such insurance proceeds for the rebuilding and
reconstruction of the Project as long as

(1) no Default or Event of Default is continuing under the Indenture and
other Financing Documents which permits the acceleration of the
maturity of the notes,

(2) the aggregate of such proceeds and all other funds available for such
rebuilding or reconstruction are sufficient to complete the same
within a reasonable time, and

(3) either (x) the conduct of such rebuilding or reconstruction or the
operation of the Project after its completion are not likely in the
reasonable judgment of the Collateral Agent to give rise to such a
Default or Event of Default or (y) the amount of such insurance
proceeds required to effect such rebuilding or reconstruction does not
exceed the greater of

(A) 35% of the replacement value of the Project or

(B) the replacement cost of one of the gas turbines in the Project.

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See "Summary Descriptions of the Principal Agreements Relating to the Project-
- -Ground Lease Arrangement--Insurance and Indemnification under the Ground
Lease," "--Insurance and Indemnification under the Master Lease," "--
Condemnation" and "University Consent and Agreement."

Proceeds of Collateral

All proceeds from any foreclosure or other remedies with respect to the
Collateral remaining after payment of the costs of such foreclosure or other
remedies received by the Collateral Agent or the Trustee will be deposited in
the Redemption Account or otherwise as provided in the Deposit and Disbursement
Agreement and the Indenture, to be distributed as provided in the Deposit and
Disbursement Agreement and the Indenture.

Exercise of Remedies

The Trustee will determine the circumstances and manner in which it or the
Collateral Agent will dispose of the Collateral, including whether to release
all or any portion of the Collateral from the Liens created by the Collateral
Documents and whether to foreclose on the Collateral following an Event of
Default. The Trustee will determine the circumstances and manner in which it,
the Collateral Agent and the other Secured Parties will exercise their other
rights and remedies under and with respect to the Financing Documents, at law or
in equity. Upon the full and final payment and performance of all Obligations in
respect of the notes and the Indenture, the notes will be canceled and the
Collateral Documents will terminate, or be assigned to any subsequent lender,
and the Collateral will be released.

Optional Redemption

The notes will be redeemable at the option of the Issuers at any time and
from time to time, in whole or in part, upon not less than 30 nor more than 60
days notice to each Holder, at a redemption price equal to the Make-Whole Price.
"Make-Whole Price" means an amount equal to the greater of

(1) 100% of the principal amount of such notes and

(2) as determined by a Reference Treasury Dealer, the sum of the present
values of the remaining scheduled payments of principal and interest
thereon discounted to the date of redemption on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate plus 50 basis points,

plus, in each case, accrued and unpaid interest to the Redemption Date. Unless
the Issuers default in payment of the redemption price, on and after the
Redemption Date, interest will cease to accrue on the notes or portions of the
notes called for redemption.

Mandatory Redemption

The notes are subject to mandatory redemption, in whole or in part, at a
redemption price equal to the principal amount of the notes being redeemed plus
accrued and unpaid interest to the redemption date, upon:

(1) the receipt of Loss Proceeds or Eminent Domain Proceeds by Orange L.P.
if Orange L.P. determines that:

(A) the Project cannot be rebuilt, repaired or restored to permit
operations on a commercially reasonable basis, or Orange L.P.
determines not to rebuild, repair or restore the Project, in
which case the amount of such Loss Proceeds or Eminent Domain
Proceeds will be available for a redemption, or

(B) only a portion of the Project is capable of being rebuilt,
repaired or restored, in which case, if excess proceeds exist
after such rebuild, repair or restoration, only the amount of the
excess Loss Proceeds or Eminent Domain Proceeds shall be made
available for such redemption;

(2) the receipt by Orange L.P. of proceeds in connection with a Title
Event, in which case the amount of the

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Title Event Proceeds shall be made available for a redemption, subject
to reduction by the costs expended in connection with collecting
proceeds upon the occurrence of such Title Event, and any additional
reasonable costs or expenses that Orange L.P. will be subject to as a
result of the Title Event; and

(3) the receipt by Orange L.P. of payments arising from the occurrence of
a Contract Termination Event in which case the amount of all such
payments shall be made available for such redemption, subject to
reduction, in the case of a Contract Termination Event relating to the
Gas Purchase Agreement, by the costs expended in connection with
obtaining a replacement or substitute gas supply and funding the Gas
Reserve Account.

Selection and Notice

If less than all of the notes are to be redeemed at any time, the Trustee
will select notes for redemption on a pro rata basis, provided that no notes of
$1,000 or less shall be redeemed in part. The Issuers will mail notices of
redemption by first class mail at least 30 but not more than 60 days before the
redemption date to each Holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any note is to be
redeemed in part only, the notice of redemption that relates to that note shall
state the portion of the principal amount of the note to be redeemed. A new note
in principal amount equal to the unredeemed portion of the partially redeemed
note will be issued in the name of the Holder of the partially redeemed note
upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. Unless the Issuers default in payment of the
redemption price on and after the redemption date, interest ceases to accrue on
the notes or portions of the notes called for redemption.

Repurchase at the Option of Holders upon Change of Control

Upon the occurrence of a Change of Control, each Holder of notes will have
the right to require the Issuers to repurchase all or any part, equal to $1,000
or an integral multiple of $1,000, of such Holder's notes under the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount of the notes plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase (the "Change of
Control Payment"). Within ten days following any Change of Control, the Issuers
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), under the procedures required by the Indenture and
described in such notice. The Issuers will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations to
the extent such laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Change of Control. The Issuers do not
have outstanding securities or liabilities that rank equal to the notes and also
contain change of control payment provisions.

On the Change of Control Payment Date, the Issuers will, to the extent
lawful,

(1) accept for payment all notes or portions of the notes properly
tendered under the Change of Control Offer,

(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all notes or portions of the notes so tendered
and

(3) deliver or cause to be delivered to the Trustee the notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of notes or portions of the notes being purchased by the
Issuers.

The Paying Agent will promptly mail to each Holder of notes so tendered the
Change of Control Payment for such notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a New Note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such New Note will be in a principal
amount of $1,000 or an integral multiple of $1,000. The Issuers will publicly

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announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.

The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the notes to require that the Issuers
repurchase or redeem the notes in the event of a takeover, recapitalization or
similar transaction. Finally, the Issuers' ability to pay cash to the Holders of
notes upon a repurchase may be limited by the Issuers' then existing financial
resources. In the event the Issuers are unable to consummate a Change of
Control Offer, such failure will constitute an Event of Default under the
Indenture. See "Risk Factors--Financing a Change of Control Offer."

The Issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements described
in the Indenture applicable to a Change of Control Offer made by the Issuers and
purchases all notes validly tendered and not withdrawn under such Change of
Control Offer. The requirement to make a Change of Control Offer may not be
waived by the Issuers or the Trustee, however, it can be waived with the consent
of Holders of a majority in principal amount of the then outstanding notes,
voting as a single class.

The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Issuers. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of notes to require the Issuers to repurchase such notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of the Issuers to another Person or group may be uncertain.

Flow of Funds

Deposit and Disbursement Agreement

Under the Deposit and Disbursement Agreement, the Trustee, on behalf of the
Secured Parties, will appoint the Collateral Agent as security agent for the
Secured Parties with respect to funds of Orange L.P. in which the Collateral
Agent has been granted a security interest. The Collateral Agent will hold,
invest and disburse funds in which the Collateral Agent, on behalf of the
Secured Parties, has been granted a security interest.

The Deposit and Disbursement Agreement Accounts

Orange L.P. has established the following accounts (collectively, the
"Accounts") with the Collateral Agent and has pledged these Accounts as security
for the benefit of the Collateral Agent acting on behalf of all the Secured
Parties:

(1) Revenue Account;

(2) Principal Account;

(3) Interest Account;

(4) Debt Service Reserve Account;

(5) Gas Reserve Account;

(6) Capital Expenditure Reserve Account;

(7) Subordinated Asset Management Fee Account;

(8) Distribution Account;

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(9) Distribution Suspense Account;
(10) Loss Proceeds Account;
(11) Stipulation Reserve Account; and
(12) Redemption Account.

At the written request and direction of Orange L.P., the Collateral Agent
will invest all amounts deposited with the Collateral Agent in Permitted
Investments.

Revenue Account; Priority of Payments

All revenues or other proceeds received by Orange L.P. or otherwise derived
from the ownership or operation of the Project will be paid into the Revenue
Account. Orange L.P. will arrange for the direct payment of the revenues into
the Revenue Account, and neither Orange L.P. nor any Partner will have any right
of withdrawal from the Revenue Account except under the priority of payments
described below.

The Revenue Account shall be funded from the following:

(1) all revenues and other proceeds received by Orange L.P. (including
payments under the Niagara Mohawk Agreements);

(2) to the extent amounts in any reserve accounts equal the required
balance, the income, if any, from the investment of funds in such
account; and

(3) other amounts as required to be transferred to the Revenue Account
from any other Account under the Deposit and Disbursement Agreement.

Upon receipt of a certificate from Orange L.P. (or its duly authorized agent
for such purposes) detailing the amounts to be paid, funds in the Revenue
Account shall be transferred via wire transfer by the Collateral Agent:

First, as and when required, to pay Operating and Maintenance Costs of Orange
L.P., provided that, if such cumulative Operating and Maintenance Costs in any
fiscal year either exceeds or falls short of the projected Operating and
Maintenance Costs in the applicable annual Operating Budget by more than 10%,
then no amounts may be withdrawn on behalf of Orange L.P. to pay non-budgeted
operating costs unless Orange L.P. certifies that (i) the additional non-
budgeted, or reduced under-budgeted, costs are reasonably designed to permit, or
shall not adversely affect the ability of, the Issuers to satisfy their
obligations in respect of the notes and maximize Orange L.P.'s revenue and net
income and (ii) the Independent Engineer certifies that the additional (or
reduced) cost is prudent and reasonable;

Second, on a monthly basis, to the Trustee and the Collateral Agent any
amounts then due and payable to each of them as fees, costs and expenses;
provided, however, that if funds in the Revenue Account are insufficient on any
date to make the payments specified in this paragraph, distribution of funds
shall be made ratably to the specified recipients based on the respective
amounts owed such recipients;

Third, on a monthly basis

(1) to the Interest Account an amount which, together with the amount then
in such account, equals all of the interest due or becoming due on the
notes on the next succeeding Interest Payment Date;

(2) to the Principal Account an amount which, together with the amount
then in such account, equals all of the principal and premium, if any,
due or becoming due on the notes on the next succeeding Principal
Payment Date;

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(3) to a sub-account within the Principal Account an amount which,
together with the amounts then in such sub-account, equals all of the
principal due or becoming due on any Permitted Indebtedness other than
the notes within the succeeding six-month period; and

(4) to a sub-account within the Interest Account an amount which, together
with the amounts then in such sub-account, equals all of the interest
due or becoming due on any Permitted Indebtedness other than the notes
within the succeeding six-month period; provided, however, that if
monies in the Revenue Account are insufficient on any date to make the
transfers specified in this paragraph, distribution of monies shall be
made, first, ratably to the Accounts referred to in clauses (1) and
(2) of this paragraph based on the respective amounts owed such
Accounts and second, ratably to the Accounts referred to in clauses
(3) and (4) of this paragraph based on the respective amounts owed
such Accounts;

Fourth, on a monthly basis, to the Debt Service Reserve Account an amount as
necessary to fund the Debt Service Reserve Account so that the sum of the amount
available to be drawn under any Debt Service Reserve Letter of Credit plus the
balance in the Debt Service Reserve Account equals the Debt Service Reserve
Required Balance;

Fifth, on a monthly basis, to the Gas Reserve Account, an amount necessary to
cause the balance to be equal to the Gas Reserve Required Balance;

Sixth, on a monthly basis, to the Capital Expenditure Reserve Account, an
amount necessary to cause the balance to be equal to the Capital Expenditure
Reserve Required Balance;

Seventh, on a monthly basis, to the Subordinated Asset Management Fee
Account, an amount necessary for the payment of Subordinated Asset Management
Fees then due and owing;

Eighth, on a monthly basis, any remaining amounts to the Distribution
Account; and

Ninth, any amounts in the Distribution Account which cannot be distributed
because of the failure to satisfy particular conditions to distributions, to the
Distribution Suspense Account.

Interest Account and Principal Account

Funds in the Interest Account and the Principal Account will be utilized to
make payments of interest, principal and premium, if any, on the notes and any
outstanding Permitted Indebtedness.

Debt Service Reserve Account

The Debt Service Reserve Account was funded with proceeds from the sale of
the original unregistered notes in an amount equal to the Debt Service Reserve
Required Balance. Orange L.P. may replace amounts in the Debt Service Reserve
Account with a Debt Service Reserve Letter of Credit having a stated amount
equal to the amount being withdrawn from the Debt Service Reserve Account. These
deposits, in conjunction with the Debt Service Reserve Letter of Credit, if any,
will be available in the event the Revenue Account, the Principal Account and
the Interest Account lack sufficient funds on a Payment Date to meet payments of
principal, premium, if any, and interest on the notes.

At any time that the sum of the amount available to be drawn under the Debt
Service Reserve Letter of Credit plus the amount then on deposit in the Debt
Service Reserve Account is less than the Debt Service Reserve Required Balance,
the Debt Service Reserve Account shall then accumulate cash deposits from, and
in the following order of priority:

(1) the Revenue Account, as provided above under "Revenue Account; Priority of
Payments;" and

(2) net interest, if any, earned on amounts deposited in the Debt Service
Reserve Account; and

(3) amounts then on deposit in the Subordinated Asset Management Fee Account;

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until the sum of the amount available to be drawn under the Debt Service Reserve
Letter of Credit plus the amount then on deposit in the Debt Service Reserve
Account equals the Debt Service Reserve Required Balance. Once the Debt Service
Reserve Required Balance is reached, interest income, if any, in excess of such
amount shall be transferred to the Revenue Account.

Gas Reserve Account

The Gas Reserve Account will be funded in accordance with the provisions
above under the caption "Flow of Funds--Revenue Account; Priority of Payments"
until the amount then on deposit in the Gas Reserve Account equals the Gas
Reserve Required Balance. Once the Gas Reserve Required Balance is reached,
interest income, if any, in excess of such amount will be transferred to the
Revenue Account.

The Gas Reserve Required Balance at any time will equal the Gas Reserve
Deficit at such time multiplied by the highest average "Niagara Border Spot
Price" for natural gas (delivered to pipe as stated in U.S. dollars) reported at
any time during the previous 12 months in the weekly Canadian Price Report
published by Natural Gas Week (on an MMBtu basis).

The Gas Reserve Deficit at any time will equal:

(1) the amount of gas necessary, in the judgment of the Independent Engineer,
to operate the Project through the latest stated maturity date of the
notes, or September 15, 2007, so that electric output of the Project for
such period will average at least 663,000 MWh per year and Orange L.P.
can meet its obligations to deliver steam under the Steam Contract less;

(2) the sum of:

(A) the "Unconsumed Entitlement" (as such term is used in the Gas Purchase
Agreement) at such time plus

(B) the unconsumed quantity, at such time, of any natural gas (in addition
to the Unconsumed Entitlement), purchased and paid for by Orange L.P.
and as to which transportation under arrangements approved by the
Independent Engineer as being consistent with prudent industry practice
are in place plus

(C) the Btu equivalent of energy and associated capacity that Orange L.P.
has purchased the right to acquire in connection with permitted sales
of natural gas as described under the caption "Prohibition on
Fundamental Changes."

The Independent Engineer shall determine the Gas Reserve Deficit at least
annually in connection with the preparation and approval of the Operating Budget
prior to the end of each calendar year and in connection with each withdrawal of
funds from the Gas Reserve Account.

Capital Expenditure Reserve Account

The Capital Expenditure Reserve Account will be funded to the Capital
Expenditure Reserve Required Balance in accordance with the provisions above
under the caption "Flow of Funds--Revenue Account; Priority of Payments" and in
accordance with the Operating Budget and schedules thereto approved by the
Independent Engineer prior to the end of each calendar year (and, in good faith,
so as to implement even monthly contributions) or with such variations from such
Operating Budget and schedules as Orange L.P. certifies to the Trustee and the
Collateral Agent are reasonable and necessary and in accordance with prudent
industry practice. Amounts on deposit in the Capital Expenditure Reserve Account
will be used for Capital Expenditures to be made in accordance with prudent
industry practice and as may be required by the Indenture and the Deposit and
Disbursement Agreement. Funds on deposit in the Capital Expenditure Reserve
Account in excess of the Capital Expenditure Reserve Required Balance may be
distributed to the partners of Orange L.P. or as Orange L.P. will direct.

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Subordinated Asset Management Fee Account

Funds in the Subordinated Asset Management Fee Account will be used for the
payment of Subordinated Asset Management Fees due and owing under Niagara Mohawk
Energy Marketing Agreement (subject to the subordination provisions applicable
to the payment of such amounts).

In addition, interest earned on funds in the Subordinated Asset Management
Fee Account will be transferred to the Debt Service Reserve Account under the
circumstances described in the second paragraph under the caption "--Debt
Service Reserve Account."

Distribution Account

The Distribution Account will receive funds transferred from the Revenue
Account after all other then required amounts have been paid as provided above
under "Revenue Account; Priority of Payments." Restricted Payments may be made
only from and to the extent funds are on deposit in the Distribution Account.
Such distributions will be made no more frequently than once every six months
and are subject to the prior satisfaction of the following conditions:

(1) the amount then on deposit in the Principal Account will be equal to or
greater than the aggregate payments of principal and premium, if any, due
on the notes on the next succeeding Principal Payment Date and on other
Permitted Indebtedness within the succeeding six-month period, and the
amount then on deposit in the Interest Account shall be equal to or
greater than the aggregate payments of interest due on the notes on the
next succeeding Interest Payment Date and on other Permitted Indebtedness
within the succeeding six-month period;

(2) the amount available to be drawn under the Debt Service Reserve Letter of
Credit plus the amount on deposit in the Debt Service Reserve Account
equals or exceeds the Debt Service Reserve Required Balance, the amount on
deposit in the Gas Reserve Account equals or exceeds the Gas Reserve
Required Balance and the amount on deposit in the Capital Expenditure
Reserve Account equals or exceeds the Capital Expenditure Reserve Required
Balance;

(3) no Default or Event of Default has occurred and is continuing;

(4) the Debt Service Coverage Ratio for the most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such distribution is to be made
(or in the case of any proposed distribution date prior to the date on
which internal financial statements are available for a period of four
full fiscal quarters after the Original Closing Date, the Debt Service
Coverage Ratio for the period commencing on the Original Closing Date, and
ending on the last date of the most recently ended quarter for which
internal financial statements are available immediately preceding the date
on which such distribution is to be made) is equal to or greater than 1.35
to 1, in the opinion of the Independent Engineer and as certified by an
authorized officer of Orange L.P. or Niagara Mohawk Energy Marketing;

(5) the projected Debt Service Coverage Ratio for the next succeeding four
full fiscal quarters is equal to or greater than 1.35 to 1, in the opinion
of the Independent Engineer and as certified by an authorized officer of
Orange L.P. or Niagara Mohawk Energy Marketing;

(6) the amount then on deposit in the Revenue Account, after giving effect to
the payment of such distributions, is at least $1 million;

(7) either (i) the average of the "Market Price" (as defined in the Indexed
Swap Agreement) for the preceding six months is less than 80% of the then
applicable "Indexed Contract Price" (as so defined) or (ii) if the average
Market Price for such period equals or exceeds 80% of the then applicable
Indexed Contract Price, then the average operating availability for the
immediately preceding four fiscal quarters for which such information is
available and the projected operating availability for the next succeeding
four fiscal quarters are, in each case,

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at least 94.61% in the opinion of the Independent Engineer and as certified
by an authorized officer of Orange L.P. or Niagara Mohawk Energy Marketing;
and

(8) there are no pending or threatened actions or proceedings of any kind,
including actions or proceedings of or before any Governmental Authority,
that could, if determined adversely, have a Material Adverse Effect.

If the payment by Orange L.P. of, or the right of any partner of Orange L.P. to
receive any permitted distribution or other payment by Orange L.P. to any of its
Partners, is disputed under any pending or threatened legal proceeding, the
Collateral Agent shall have the right to deposit the disputed amount of such
distribution or payment in an interest bearing escrow account pending the final
resolution of such dispute.

Distribution Suspense Account

Funds in the Distribution Account which may not be distributed because of a
failure to satisfy any conditions to distributions will be transferred to the
Distribution Suspense Account. Funds in the Distribution Suspense Account may be
transferred back to the Distribution Account and distributed when

(1) all conditions to distribution are satisfied and

(2) no Default or Event of Default has occurred and is continuing.

If funds in the Revenue Account are not sufficient to pay any amounts which are
due and payable and required to be paid with proceeds of the Revenue Account,
then funds in the Distribution Suspense Account shall be transferred to the
Revenue Account for distribution as required.

Loss Proceeds Account

All Loss Proceeds and Eminent Domain Proceeds received by Orange L.P. shall
be deposited in the Loss Proceeds Account subject to disbursement for repair or
replacement of the assets affected, or otherwise, as follows:

The Collateral Agent will apply the amounts in the Loss Proceeds Account to
the payment, or reimbursement to the extent the same have been paid or satisfied
by Orange L.P., of

(1) the costs incurred by the Collateral Agent or the Trustee in connection
with any negotiation, action or proceeding to collect the Loss Proceeds or
Eminent Domain Proceeds in question; and

(2) the costs of repair or replacement of the Project or any part of the
Project that has been affected due to an Event of Loss or Event of Eminent
Domain upon the Collateral Agent's receipt of a complete and properly
executed requisition from an authorized officer of Orange L.P. and
approved by the Independent Engineer;

provided, however, that no approval of the Independent Engineer shall be
required if the repair or replacement in question is reasonably estimated by
Orange L.P. to cost less than $1.0 million.

If Orange L.P. determines that the Project is not capable of being rebuilt or
replaced to permit operation on a commercially reasonable basis, or determines
not to rebuild, repair or restore the Project (or if the Loss Proceeds and
Eminent Domain Proceeds, together with any other amounts available to Orange
L.P. for such rebuilding or replacement, are not sufficient to permit such
rebuilding or replacement), the Collateral Agent shall transfer the Loss
Proceeds and Eminent Domain Proceeds to the Redemption Account for application
in accordance with the Indenture and the Deposit and Disbursement Agreement. The
Collateral Agent shall transfer the Loss Proceeds and Eminent Domain Proceeds in
excess of the cost of repairing or replacing the Project to the Redemption
Account for application in accordance with the Indenture and the Deposit and
Disbursement Agreement. If Orange L.P. does not rebuild or replace the Project,
the Collateral Agent shall transfer the Loss Proceeds and Eminent Domain
Proceeds to the Redemption Account for application in accordance with the
Indenture and the Deposit and Disbursement Agreement. See "--Mandatory
Redemption."

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All Title Event Proceeds received by Orange L.P. or the Collateral Agent, as
applicable, shall be deposited in the Loss Proceeds Account to the payment, or
reimbursement to Orange L.P. to the extent the same have been paid or satisfied
by Orange L.P., of

(1) the costs incurred by the Collateral Agent or the Trustee in connection
with any negotiation, action or proceeding to collect the Title Event
Proceeds in question; and

(2) to the cost of remedying such Title Event.

Any Title Event Proceeds related to the New York mortgage recording tax and
any penalties and interest thereon shall be used to pay such tax before being
used for any other purpose. Any Title Event Proceeds not so expended shall be
transferred to the Redemption Account for application in accordance with the
Indenture and the Deposit and Disbursement Agreement.

Stipulation Reserve Account

The Stipulation Reserve Account was funded on the Original Closing Date with
proceeds from the sale of the original unregistered notes in the amount of $3.0
million. This amount was deposited to the Stipulation Reserve Account for
Orange L.P. to apply to pay Kronish Lieb amounts it was entitled to receive from
time to time under the Stipulation or to make provision for other payments to
Kronish Lieb on account of these amounts, such as a settlement or resolution of
claims with Kronish Lieb. As described above under "Ownership of Orange L.P.
Following the Acquisition and Merger," on March 15, 2000 GAS LP settled with
Kronish Lieb, the amount remaining on deposit in the Stipulation Reserve Account
was paid at Orange L.P.'s direction to Kronish Lieb, and Kronish Lieb executed a
release in favor of Orange L.P., GAS Orange, GAS LP and their affiliates.

In addition, income earned on funds on deposit to the Stipulation Reserve
Account will be credited to the Stipulation Reserve Account.

Redemption Account

The Redemption Account will be funded from:

(1) specific proceeds received in connection with an Event of Loss, an
Event of Eminent Domain or a Title Event;

(2) specific proceeds realized in connection with a Contract Termination
Event; and

(3) proceeds received as a result of the foreclosure of the Collateral
following an Event of Default under the Indenture.

All proceeds received in connection with an Event of Loss, Event of Eminent
Domain or a Title Event will be deposited in the Loss Proceeds Account and
proceeds will be transferred to the Redemption Account if not used to repair or
replace the Project or remediate the title deficiency, as permitted under the
Indenture, and will be distributed to the Collateral Agent for distribution
after giving effect to the provisions of the Indenture, and the Deposit and
Disbursement Agreement with respect to such proceeds. See "--Mandatory
Redemption."

Investment of Monies

Amounts deposited in the Accounts under the Deposit and Disbursement
Agreement, at the written request and direction of Orange L.P., will be invested
by the Collateral Agent in Permitted Investments. The investments will generally
mature in such amounts and not later than such times as may be necessary to
provide monies when needed to make payments from such monies as provided in the
Deposit and Disbursement Agreement. Net interest or gain received, if any, from
such investments will be applied as provided in the Deposit and Disbursement
Agreement. Absent written instructions from Orange L.P., the Collateral Agent
will invest the amounts held in the accounts and funds under the Deposit and
Disbursement Agreement in Permitted Investments described in clause (1) of such
definition. So long as

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an outstanding balance remains in any of the Accounts under the Deposit and
Disbursement Agreement, the Collateral Agent will provide Orange L.P. with
monthly statements showing the amount of all receipts, the net investment income
or gain received and collected, all disbursements and the amount then available
in each of the Accounts.

Excluded Accounts

In addition to the Accounts, Orange L.P. may establish, fund and maintain
other accounts ("Excluded Accounts") with any bank, securities brokerage firm,
or financial institution, provided that the accounts are funded exclusively with
one or more of the following:

(1) funds contributed to Orange L.P. by any Partner,

(2) funds loaned to Orange L.P. that constitute Permitted Indebtedness,

(3) funds which have been properly released or otherwise properly paid to
Orange L.P. under the terms of the Deposit and Disbursement Agreement,

(4) pending release, cash collateral subject to a lien permitted by the
Indenture, and/or

(5) any interest or other income earned on any of the Excluded Accounts.

All Excluded Accounts shall be free of any Liens and security interests in favor
of Orange L.P., the Collateral Agent and/or the Secured Parties and shall be
free of any and all operating restrictions and investment restrictions imposed
under the Indenture.

Certain Covenants

Limitations on Indebtedness

The Issuers will not create, incur or suffer to exist any Indebtedness except
Permitted Indebtedness.

Limitations on Guarantees

The Issuers will not contingently or otherwise be or become liable in
connection with any guarantee, except for endorsements and similar obligations
in the ordinary course of business.

Liens

The Issuers will not directly or indirectly, create, incur, assume or suffer
to exist any Lien of any kind on any of their respective assets now owned or
hereafter acquired, except Permitted Liens or to the extent they may be
considered Liens, Permitted Title Encumbrances.

Restricted Payments

The Issuers shall not make any Restricted Payments except for payments
permitted under the Deposit and Disbursement Agreement as described under the
caption "Flow of Funds."

Investments

The Issuers shall not make any Investments, except

(1) Permitted Investments;
(2) Orange L.P.'s investment in Capital Co. existing on the Original
Closing Date;

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(3) to the extent they constitute Investments:

(A) contracts to purchase natural gas described in clause (2)(B) of the
definition of "Gas Reserve Deficit"; and

(B) contracts to purchase energy and associated capacity required to be
entered into in connection with permitted sales of natural gas; and

(4) under the Project Documents and the exercise of rights permitted by
the Indenture to the extent they constitute Investments.

Sale and Lease-Back Transactions

The Issuers shall not enter into any Sale and Lease-Back Transactions.

Transactions with Affiliates

The Issuers will not make any payment to, or sell, lease, transfer or
otherwise dispose of any of their respective properties or assets to, or
purchase any property or assets from, or enter into or make any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless

(1) such Affiliate Transaction is on terms that are no less favorable to the
applicable Issuer than those that would have been obtained in a
comparable transaction by such Issuer with an unrelated Person and

(2) such Issuer delivers to the Trustee

(A) with respect to any Affiliate Transaction or any series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (1) above; and

(B) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$2.5 million, an opinion as to the fairness to such Issuer of such
Affiliate Transaction from a financial point of view issued by a
nationally recognized expert in evaluating such transactions;

provided that transactions expressly permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments," shall not
be deemed Affiliate Transactions.

Project Documents

Orange L.P. will

(1) pay all amounts payable under each of the Project Documents as and
when such amounts become due and payable,

(2) perform and observe in all material respects the covenants and
agreements contained in each of the Project Documents,

(3) enforce, defend and protect all of its material rights contained in
any of the Project Documents and

(4) take all reasonable and necessary actions to prevent the termination
or cancellation of any of the Project Documents (other than by
performance) unless

(A) Orange L.P. determines in good faith that such failure to perform,
observe, enforce, defend, protect or act under clause (2), (3) or
(4) is in the best interest of Orange L.P.,

(B) such failure would not have a Material Adverse Effect and

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(C) Orange L.P. promptly gives the Trustee and the Collateral Agent
notice of the failure to so perform, observe, defend, protect or act
and the basis for such determination, if possible, not later than
five days prior to such failure, but in any event not later than
five days thereafter.

In addition, Orange L.P. will not

(1) breach any obligation under any Project Document to which it is a party and
fail to cure such breach within the applicable cure period provided for in
such Project Document (or, if no cure period is specified in such Project
Document, within 30 days of such breach),

(A) amend, vary or waive, or consent to any amendment, variation or
waiver of, any terms of any of the Project Documents,

(B) release, surrender, cancel or terminate any rights or obligations,
or discharge any obligations (other than by performance), consent to
any release, surrender, cancellation, termination or discharge
(other than by performance), under any of the Project Documents or

(C) affirmatively consent to the assignment by any party to any Project
Document of such party's right or obligations under such Project
Document in each case without the consent of the Required Holders,
or
(2) assign, transfer or otherwise dispose of any of its rights in any of the
Project Documents unless, in each case

(A) Orange L.P. determines in good faith that such action is in the best
interests of Orange L.P.,

(B) such action would not have a Material Adverse Effect and

(C) Orange L.P. promptly gives the Trustee and the Collateral Agent
notice of such action and the basis for such determination, if
possible, not later than five days prior to such action, but in any
event not later than five days thereafter.

Prohibitions on Other Obligations or Assignments

The Issuers may not assign any of their rights or obligations under any
Financing Document or Material Project Document, and may not enter into
additional contracts if it would be reasonably expected to cause a Material
Adverse Effect and except otherwise only as contemplated under the Indenture,
including entering into contracts in connection with Permitted Investments.

Continued Operation of the Project

Orange L.P. will operate the Project at all times, except to the extent
prevented by scheduled or unscheduled maintenance in a manner consistent with
prudent industry practice for similar operations and, in any event, in a manner
so as to guarantee that Orange L.P.'s obligations to provide steam to Syracuse
University under the Steam Contract and to make payments to Niagara Mohawk under
the Indexed Swap Agreement will be met and, as consistent with prudent industry
practice and in compliance with the terms of the Project Documents so as to
assure, to the extent reasonably possible, the maximum generation of net revenue
for the Project consistent with the Project Documents. See "Summary
Descriptions of the Principal Agreements Relating to the Project."

Orange L.P. will renew, extend or replace the Operation and Maintenance
Agreement so that it remains in full force and effect at all times and shall
replace or consent to the replacement of the Operator if the Operator is not
operating the Project and the Steam Plant in accordance, in all material
respects, with the provisions of any of the Financing Documents, the Operation
and Maintenance Agreement, and the other Material Project Documents, upon
receipt of notice from Trustee to the effect that, in the opinion of the
Required Holders or the Independent Engineer, the Operator has failed to perform
any material obligations which are or may be performed on Orange L.P.'s behalf
by the Operator or has failed to perform its obligations under the Operation and
Maintenance Agreement; provided however, that the Operator may have 30 days from
Orange L.P.'s receipt of notice to cure said failure (or to establish to the
satisfaction of the Required Holders that a failure does not exist); provided,
further, that if such failure cannot be corrected within such 30 days, the
Required Holders will not unreasonably withhold their consent to an extension of

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such time if corrective action is promptly instituted by the Operator within the
30-day period and thereafter diligently pursued until the failure is corrected
and such extension shall not in the judgment of the Required Holders have a
material adverse effect on the Holders' interests in the Project and the
Collateral. Notwithstanding the above, Orange L.P. will have no obligation to
terminate the Operation and Maintenance Agreement if such termination would
constitute a breach under the Operation and Maintenance Agreement. Orange L.P.
will not exercise its right under the Operation and Maintenance Agreement to
terminate the obligation of the Operator to perform major maintenance on the gas
turbine packages in return for the payment of the fired-hour fee without the
consent of the Required Holders. Orange L.P. shall also continue its membership
in the lease engine support program under which General Electric Company will
deliver and install substitute leased turbine equipment if either of the
Project's gas turbines become inoperative and need to be repaired or replaced.

Orange L.P. will renew, extend or replace the Asset Management Agreement so
that it remains in full force and effect at all times. Orange L.P. shall replace
or consent to the replacement of Niagara Mohawk Energy Marketing. Upon receipt
of notice from Trustee to the effect that, in the opinion of the Required
Holders or the Independent Engineer, Niagara Mohawk Energy Marketing has failed
to perform any material obligations which are or may be performed on Orange
L.P.'s behalf by Niagara Mohawk Energy Marketing or has failed to perform its
obligations under the Asset Management Agreement. Niagara Mohawk Energy
Marketing may have 30 days from Orange L.P.'s receipt of notice to cure said
failure (or to establish to the satisfaction of the Required Holders that a
failure does not exist). If the failure cannot be corrected within that 30 day
period, the Required Holders will not unreasonably withhold their consent to an
extension of time if corrective action is promptly instituted by Niagara Mohawk
Energy Marketing within the 30-day period and thereafter diligently pursued
until the failure is corrected and the extension will not in the judgment of the
Required Holders have a material adverse effect on the Holders' interests in the
Project and the Collateral. Notwithstanding the above, Orange L.P. will have no
obligation to terminate the Asset Management Agreement if such termination would
constitute a breach under the Asset Management Agreement.

Prohibitions on Fundamental Changes

Except for the merger of Funding L.P. with and into Orange L.P. which occurred
on the Original Closing Date, Orange L.P. may not enter into any transaction of
merger or consolidation, change its form of organization or its business,
liquidate, wind-up or dissolve itself or discontinue its business. Orange L.P.
is also restricted from engaging in any business other than owning and operating
the Project and activities incidental thereto, issuing the notes, incurring
Permitted Indebtedness and performing its obligations under the Operative
Documents.

Orange L.P. may not lease (as lessor) or sell, transfer, assign, hypothecate,
pledge or otherwise dispose of any of its property or assets, except for

(1) sales of obsolete, worn out or replaced property not used or useful in
its business, in each case for not less than fair market value,

(2) in the ordinary course of its business as contemplated by the Project
Documents,

(3) the sale of Permitted Investments, and

(4) sales of natural gas that are permitted.

In order for a sale of natural gas to be permitted, it must satisfy the
following conditions:

(1) after giving effect to such sale of natural gas, the aggregate quantity of
gas sold or consumed by the Project and the Steam Plant during any twelve
month period will not exceed the maximum displacement amount permitted to
be drawn under the Gas Purchase Agreement during the period plus such
additional amounts as would not cause the Gas Reserve Deficit to be
greater than zero;

(2) the sale of natural gas must satisfy the requirements of the Gas Purchase
Agreement and the other Project Documents and, after giving effect to such
sale, Orange L.P. will continue to be entitled to draw and/or have

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secured supply and transportation rights to, natural gas sufficient for it
to meet its obligations under the Steam Contract;

(3) the purchase price for such natural gas must be payable in U.S. dollars
and the purchaser must, in writing, agree to remit such purchase price
directly to the Revenue Account and consent to the assignment by Orange
L.P. of its rights under the natural gas purchase agreement with such
purchaser to the Collateral Agent;

(4) the purchaser of such natural gas must either itself have, or arrange for
its obligations to Orange L.P. to be secured by a letter of credit or
guaranty issued by an entity that has outstanding unsubordinated unsecured
long term debt that is rated Investment Grade, defined as "Baa3" and "BBB-
" by Moody's Investors Service and Standard & Poor's Ratings Services,
respectively, or other specific rating agencies, or in the alternative,
secure its payment obligations to Orange L.P. by depositing cash or cash
equivalents as collateral with the Collateral Agent in a manner
sufficient, as established by an opinion of counsel to create a perfected
security interest in the deposit in favor of Orange L.P. and the
Collateral Agent as Orange L.P.'s assignee; and

(5) Orange L.P. will not sell any natural gas which it is entitled to draw
during any period when the notes remain outstanding unless all of the
following conditions are satisfied:

(A) Orange L.P. will not sell any entitlement that it has to draw natural
gas during on-peak hours (as defined in the Indexed Swap Agreement)
between June 15 and September 15 of any year;

(B) For any period for which Orange L.P. sells its entitlement to draw
natural gas, it will purchase the right (whether in a financial
transaction or transaction for physical delivery of energy and
associated capacity) to acquire an equivalent amount of energy and
associated capacity, on a Btu equivalent basis assuming an unadjusted
heat rate value equal to 10,000 Btu/kWh at the higher heating value in
2000, and as adjusted for 0.5% annual degradation on a going forward
basis, for a purchase price that is less than or equal to the net
proceeds payable to Orange L.P. from the sale of such natural gas;

(C) The energy and associated capacity that Orange L.P. has the right to
purchase must be deliverable during the same period during which the
natural gas sold was to be drawn so that Orange L.P. could acquire and
resell such energy and associated capacity through the New York
Independent System Operator or settle the financial transaction in such
a way as to generate revenues sufficient to pay Niagara Mohawk the
floating rate payment payable by Orange L.P. under the Indexed Swap
Agreement that corresponds to such period;

(D) The payment terms with regard to the energy and associated capacity
that Orange L.P. has the right to purchase for any period must be such
that the proceeds of sale from the natural gas sold that corresponds to
such period will be available to pay when due the purchase price of, or
settle amounts for, such energy and associated capacity;

(E) In the case of a contract for the delivery of energy or associated
capacity, the seller of such energy and associated capacity to Orange
L.P. must agree to pay liquidated damages to Orange L.P. in the event
that the seller fails to deliver any energy and associated capacity
acquired by Orange L.P. in an amount at least equal to the amount that
Orange L.P. would have received if such energy and associated capacity
was delivered and sold by Orange L.P. through the New York Independent
System Operator net of net revenues (after costs of cover) Orange L.P.
receives from any cover transaction in replacement of such failed
deliveries of energy and associated capacity;

(F) The seller of such energy and associated capacity must agree in writing
to remit any such liquidated damages or other payments required to be
made by it to Orange L.P. directly to the Revenue Account and consent
to the assignment by Orange L.P. of its rights under the energy and
associated capacity purchase agreement to the Collateral Agent; and

(G) The seller of such energy and associated capacity must either itself
have, or arrange for its obligations to Orange L.P. to be secured by a
letter of credit or guaranty issued by an entity that has, outstanding

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unsubordinated unsecured long term debt that is rated investment grade
by either Moody's Investors Service or Standard & Poor's Ratings
Services or, in the alternative, secure its payment obligations to
Orange L.P. by depositing cash or cash equivalents as collateral with
the Collateral Agent in a manner sufficient, as established by an
opinion of counsel, to create a perfected security interest in favor of
Orange L.P. and the Collateral Agent as Orange L.P.'s assignee, such
security to be in an amount adequate, in accordance with then
applicable industry standards, to protect Orange L.P. from risk of
counterparty default.

Additional Covenants

In addition to the covenants described above, the Indenture will also contain
covenants of the Issuers regarding:

(1) maintenance of existence;

(2) payment of taxes;

(3) maintenance of books and records;

(4) insurance;

(5) compliance with laws;

(6) maintenance of separate existence;

(7) delivery to the Trustee and the Rating Agencies of compliance certificates
and of notices of Events of Default;

(8) delivery to the Trustee and the Rating Agencies of unaudited quarterly
reports of the Issuers for the first three quarters of each fiscal year
containing condensed combined financial information and audited annual
reports of the Issuers,
(9) delivery to the Independent Engineer of a draft annual Operating Budget,

(10) maintenance of "qualifying facility" status under PURPA, so long as PURPA
shall remain in effect, or otherwise remain exempt from regulation under
the Federal Power Act and PUHCA (except as an "exempt wholesale generator"
of electricity as defined in PUHCA), so long as such laws shall remain in
effect, such that none of the Holders shall be deemed subject to, or not be
exempt from, regulation under the Federal Power Act or PUHCA solely as a
result of holding the notes,

(11) compliance with their obligations under the Covenant, and

(12) delivery to the Trustee of all other information required to be delivered
under Rule 144A(d)(4) under the Securities Act in order to permit
compliance by a Holder with Rule 144A in connection with the resale of the
notes.

Events of Default

Certain Events

The following events will constitute Events of Default under the Indenture:

(1) Failure to pay any principal, premium, if any, and interest or other
amounts owed on any note when the same becomes due and payable, whether by
scheduled maturity or required prepayment or redemption or by

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acceleration or otherwise, and such failure continues for five days or
more following the due date for payment; or

(2) Any representation or warranty made by either Issuer or any other Credit
Party in the Indenture or in any other Financing Document or any
representation, warranty or statement in any certificate, financial
statement or other document furnished to the Trustee or any other Person
by or on behalf of either Issuer or any other Credit Party proves to have
been untrue or misleading in any material respect as of the time made,
confirmed or furnished and the fact, event or circumstance that gave rise
to such inaccuracy has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect and that fact, event or circumstance
continues uncured for 30 or more days from the date Orange L.P. receives
notice from the Trustee; provided that, if such Issuer or other Credit
Party commences and diligently pursues efforts to cure such fact, event or
circumstance within such 30-day period and delivers written notice to the
Trustee, such Issuer may continue to effect such cure, and such
misrepresentation shall not be deemed an Event of Default for an
additional 60 days so long as such Issuer or other Credit Party is
diligently pursuing such cure; or

(3) (A) The Issuers fail to pay any Imposition as and when due and payable,
and such failure continues for fifteen days or more following the date
such payment becomes delinquent; or

(B) either Issuer fails to perform or observe in any material respect any
covenant, agreement or provision binding upon it contained in the
Indenture or any of the other Financing Documents regarding maintenance
of existence or restrictions on Indebtedness, Liens, Restricted
Payments, guarantees, Investments, Sale Lease-Back Transactions,
Affiliate Transactions, Project Documents, disposition of assets,
operation of the Project, fundamental changes, or nature of business
and such failure continues uncured for 30 or more days from the date
such Issuer receives notice from the Trustee; or if such Issuer fails
to perform or observe any covenant, agreement or provision binding upon
it contained in any of the Project Documents and such failure continues
uncured for 30 or more days from the date such Issuer receives notice
from the Trustee, provided that the same does not constitute an event
of default under the relevant Project Document, or

(C) an event that then gives any Person the right to terminate or
materially adversely affect any of Orange L.P.'s rights under the
relevant Project Document; or

(D) if any event of default by Orange L.P. under any of the Project
Documents, or any event arises that in either case then gives any Person,
other than Orange L.P., the right to terminate or materially adversely
affects any of Orange L.P.'s rights under any of the Project Documents,
shall occur and be continuing; or

(E) any event that then gives Syracuse University the right to foreclose
under any University Collateral Document; or

(F) the commencement and continuance of any action, suit or proceeding for
the foreclosure, including foreclosure by power of sale, of any lien on a
security interest in any Collateral, including any such foreclosure under
any University Collateral Document; or

(4) Either Issuer or any other Credit Party fails to perform or observe any
covenant, agreement or provision binding upon it contained in the
Indenture or any of the other Financing Documents, other than those
referred to in clauses (1) through (3) inclusive above and (5) through (7)
inclusive below, and such failure continues uncured for 30 or more days
from the date Orange L.P. receives notice from the Trustee of such
failure; provided that if such Issuer or other Credit Party commences and
diligently pursues efforts to cure such default within such 30-day period,
such Issuer or other Credit Party may continue to effect such cure of the
default and such default will not be deemed an Event of Default for an
additional 90 days so long as such Issuer or other Credit Party is
diligently pursuing such cure; or

(5) Some events involving the bankruptcy, insolvency, receivership or
reorganization of either Issuer; or

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(6) Any Collateral Document or any material provision of a Collateral Document
ceases to be in full force and effect or there is a Material Adverse
Effect on the Lien purported to be granted in any Collateral Document such
that it ceases to be a valid and perfected Lien in favor of the Collateral
Agent for the benefit of the Secured Parties on the Collateral described
with the priority purported to be created; provided, however, that Orange
L.P. shall have 10 days after Orange L.P. obtains actual knowledge to cure
any such cessation, if curable, or to furnish to the Collateral Agent all
documents or instruments required to cure any such cessation, if curable;
or

(7) Any event of default under any Permitted Indebtedness of either Issuer
which results in Permitted Indebtedness in excess of $2.5 million becoming
due and payable prior to its stated maturity.

Control by Holders

The Holders of at least a majority in aggregate principal amount of the
outstanding notes (the "Required Holders") will have the right to direct the
time, place and method of conducting any proceeding for any right or remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee in the Indenture or the other Financing Documents. The Required Holders,
acting through the Trustee, will have the right to direct the time, place and
method for exercising any right or remedy available to the Collateral Agent
under the Collateral Documents.

Subject to the above paragraph, if an Event of Default has occurred and is
continuing and as a result payments on the notes are not made when due, the
Trustee is required to enforce the Collateral Documents and the rights of the
Holder under the Collateral Documents.

Enforcement of Remedies

If one or more Events of Default have occurred and are continuing, then:

(1) in the case of an Event of Default described in clause (5) above under
"Certain Events," the entire principal amount of the notes, all interest
accrued and unpaid thereon, and all premium and other amounts payable
under the notes, the Indenture and the other Financing Documents, if any,
will automatically become due and payable without presentment, demand,
protest or notice of any kind; or

(2) in the case of an Event of Default described in:

(A) clause (1) above under "Certain Events," upon the direction of the
Holders of no less than 25% in aggregate principal amount of the
outstanding notes, the Trustee will, by notice to the Issuers, declare
the entire principal amount of the notes, all interest accrued and
unpaid thereon, and all premium and other amounts payable under the
notes, the Indenture and the other Financing Documents, if any, to be
due and payable, or

(B) clauses (2), (3), (4), (6) or (7) above under "Certain Events," upon
the direction of the Required Holders, the Trustee will, by notice to
the Issuers, declare the entire principal amount of the notes, all
interest accrued and unpaid thereon and all premium and other amounts
payable under the notes, the Indenture and the other Financing
Documents, if any, to be due and payable.

If an Event of Default occurs and is continuing and is known to the Trustee,
the Trustee will mail to each Holder notice of the Event of Default within 30
days after the occurrence. Except in the case of an Event of Default in payment
of principal of or interest on any note, the Trustee may withhold the notice to
the Holders if the Trustee in good faith determines that withholding the notice
is in the interest of the Holders.

If an Event of Default relating to failure to pay amounts owed on the notes
has occurred and is continuing, the Trustee may declare the principal amount of
the notes, all accrued and unpaid interest, and all premium and other amounts
payable under the notes, the Indenture and the other Financing Documents, if
any, to be immediately due and

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payable notwithstanding the absence of direction from Holders of at least 25% in
aggregate principal amount of the outstanding notes directing the Trustee to
accelerate the maturity of the notes, unless Holders of more than 75% in
aggregate principal amount of the outstanding notes direct the Trustee not to
accelerate the maturity of such notes, if, in the good faith exercise of its
discretion, the Trustee determines that such action is necessary to protect the
interests of the Holders.

In addition, if one or more of the Events of Default referred to in clause
(2)(B) immediately above has occurred and is continuing, the Trustee may declare
the entire principal amount of the notes, all accrued and unpaid interest, and
all premium and other amounts payable under the notes, the Indenture and the
other Financing Documents, if any, to be due and payable notwithstanding the
absence of direction from the Required Holders directing the Trustee to
accelerate the maturity of the notes unless the Required Holders direct the
Trustee not to accelerate the maturity of the notes, if in the good faith
exercise of its discretion the Trustee determines that such action is necessary
to protect the interests of the Holders.

If any Event of Default occurring by reason of any willful action or inaction
taken or not taken by or on behalf of the Issuers with the intention of avoiding
payment of the premium that the Issuers would have had to pay if the Issuers
then had elected to redeem the notes under the optional redemption provisions of
the Indenture, a premium equal to the then applicable Treasury Rate shall also
become and be immediately due and payable to the extent permitted by law upon
the acceleration of the notes.

At any time after the principal of the notes has become due and payable upon a
declared acceleration, and before any judgment or decree for the payment of the
money so due, or any portion of any judgment or decree, has been entered, the
Holders of not less than a majority in aggregate principal amount of the
outstanding notes, by written notice to the Issuers and the Trustee, shall
rescind and annul such declaration and its consequences if:

(1) there has been paid to or deposited with the Trustee a sum sufficient to
pay:

(A) all overdue interest on the notes,

(B) the principal of and premium, if any, on any notes that have become due
(including overdue principal) other than by such declaration of
acceleration and interest at the respective rates provided in the notes
for overdue principal,

(C) to the extent that payment of such interest is lawful, interest upon
overdue interest at the respective rates provided in the notes for
overdue interest, and

(D) all sums paid or advanced by the Trustee and the Collateral Agent and
the reasonable compensation, expenses, disbursements, and advances of
the Trustee and the Collateral Agent, and their agents and counsel, and

(E) all Events of Default, other than the nonpayment of the principal of
the notes that has become due solely by such acceleration, have been
cured or waived in accordance with the Indenture.

(2) If an Event of Default relating to failure to pay amounts owed on the
notes has occurred and is continuing and an acceleration has occurred, the
Trustee may (as the Holders of 25% in aggregate principal amount of the
outstanding notes may request) direct the Collateral Agent to foreclose
upon and take possession of all Collateral.

(3) If an Event of Default other than that referred to in clauses (2) above
has occurred and is continuing and an acceleration has occurred, the
Trustee may (as the Required Holders request), direct the Collateral Agent
to foreclose upon and take possession of all Collateral.

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Application of Monies Collected by Trustee

Any monies collected or to be applied by the Trustee after an Event of Default
in respect of the notes will be applied in the following order from time to
time, on the date or dates fixed by the Trustee:

(1) first, to the payment of all amounts due to the Trustee or any predecessor
Trustee under the Indenture;

(2) second,

(A) in case the unpaid principal amount of the Outstanding notes has not
become due, to the payment of any overdue interest,

(B) in case a portion of the unpaid principal amount of the Outstanding
notes has become due, first, to the payment of accrued interest on all
Outstanding notes for overdue principal, premium, if any, and overdue
interest, and next to the payment of the overdue principal on all notes
or

(C) in case all the unpaid principal amount of all the Outstanding notes
has become due, first to the payment of the whole amount then due and
unpaid upon the Outstanding notes for principal, premium, if any, and
interest, together with interest for overdue principal, premium, if
any, and overdue interest; and

(3) third, in case the unpaid prncipal amount of all the Outstanding notes has
become due, and all of the outstanding principal, premium, if any,
interest and other amounts owed in connection with the notes have been
fully paid, any surplus then remaining will be paid to the Issuers, or to
whomsoever may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct;

provided that proceeds from the disposition of Collateral upon foreclosure shall
be applied first to amounts due and unpaid to SIDA under the PILOT Agreement.

Amendments and Supplements

The Issuers, the Trustee and the Collateral Agent may amend or supplement the
Indenture or execute a waiver without the consent of the Holders

(1) to add additional covenants of the Issuers, to surrender rights conferred
upon the Issuers, or to confer additional benefits upon the Holders,

(2) to increase the assets securing the Issuers' obligations under the
Indenture,

(3) to cure any ambiguity, defect or inconsistency,

(4) to comply with requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the Trust Indenture Act of 1939 or

(5) to reflect any amendments required by a Rating Agency in circumstances
where confirmation of the Ratings is required or permitted under the
Indenture.

The Indenture may be otherwise amended or supplemented by the Issuers, the
Trustee and the Collateral Agent with the consent of the Required Holders;
provided that no such amendment or supplement may, without the consent of all
Holders of notes, modify:

(1) the principal, premium and interest payable upon the notes,

(2) the dates on which interest or principal on any notes is paid,

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(3) the dates of maturity of any notes, and

(4) the procedures for amendment by a supplemental Indenture.

Notwithstanding the foregoing, the provisions in the Indenture relating to a
Change of Control and the related definitions as used in the Indenture may be
amended by the Required Holders.

Satisfaction and Discharge of the Indenture; Defeasance

The Issuers may terminate the Indenture by delivering all outstanding notes to
the Trustee for cancellation and by paying all other sums payable under the
Indenture.

Legal and covenant defeasance shall be permitted upon terms and conditions
customary for transactions of this nature.

Trustee

There will at all times be a Trustee under the Indenture, which shall be a
corporation having either (a) a combined capital and surplus of at least $500.0
million, or (b) having a combined capital and surplus of at least $100.0 million
and being a wholly owned subsidiary of a corporation having a combined capital
and surplus of at least $500.0 million in each case subject to supervision or
examination by a Federal or State or District of Columbia authority and having a
corporate trust office in New York, New York, to the extent there is such an
institution eligible and willing to serve. The Issuers jointly agree to
indemnify and hold harmless the Trustee in connection with the performance of
its duties under the Indenture, except for liability which results from the
negligence, bad faith or willful misconduct of the Trustee.

The Trustee may resign at any time by giving written notice to the Issuers.
The Trustee may be removed at any time by act of the Required Holders, delivered
to the Trustee and to the Issuers. The Issuers shall give notice of each
resignation and removal of the Trustee and each appointment of a successor
Trustee to all Holders.

Book-Entry, Delivery and Form

The New Notes will initially be issued in the form of one or more registered
notes in global form without interest coupons registered in the name of DTC or
its nominee.

The global notes will be deposited upon issuance with the Trustee as custodian
for DTC in New York, New York, and registered in the name of DTC or its nominee,
in each case for credit to an account of a direct or indirect participant in DTC
as described below.

Except as described below, the global notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for notes
in certificated form except in the limited circumstances described below. See "-
- -Exchange of Book-Entry Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the global
notes will not be entitled to receive physical delivery of Certificated Notes
(as defined below).

Transfers of beneficial interests in the global notes are subject to the
applicable rules and procedures of DTC and its direct or indirect participants
(including, if applicable, those of Euroclear and Cedelbank), which may change
from time to time.

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Initially, the Trustee will act as Paying Agent and Registrar. The New Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.

Depositary Procedures

The following descriptions of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them from time to time. The Issuers take no responsibility for
these operations and procedures and urge investors to contact the system or
their participants directly to discuss these matters.

DTC has advised the Issuers that DTC is a limited purpose trust company
created to hold securities for its participating organizations, or Participants,
and to facilitate the clearance and settlement of transactions in those
securities between Participants through electronic book-entry changes in
accounts of its Participants. The Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly, or Indirect
Participants. Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.

DTC has also advised the Issuers that, under procedures established by it,
ownership of interests in the global notes will be shown on, and the transfer of
ownership will be effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interest in the global notes).

Investors in the New Notes may hold their interests directly through DTC, if
they are Participants in such system, or indirectly through organizations which
are Participants in such system. All interests in a global note may be subject
to the procedures and requirements of DTC. The laws of some states require that
specified persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer beneficial interests in a global
note to such persons will be limited to that extent. Because DTC can act only on
behalf of Participants, which in turn act on behalf of Indirect Participants and
some banks, the ability of a person having beneficial interests in a global note
to pledge such interests to persons or entities that do not participate in the
DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.

Except as described below, owners of interests in the global notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
"Holders" under the Indenture for any purpose.

Payments in respect of the principal of, and premium, if any, and interest on
a global note registered in the name of DTC or its nominee will be payable to
DTC in its capacity as the registered Holder under the Indenture. Under the
terms of the Indenture, the Issuers and the Trustee will treat the persons in
whose names the notes, including the global notes, are registered as the owners
for the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, none of the Issuers, the Trustee nor any agent of the
Issuers or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership interest
in the global notes, or for maintaining, supervising or reviewing any of DTC's
records or any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the global notes or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants or
Indirect Participants. DTC has advised the Issuers that its current practice,
upon receipt of any payment in respect of securities such as the notes
(including principal and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in the principal amount of beneficial interest in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the

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Issuers. None of the Issuers or the Trustee will be liable for any delay by DTC
or any of its Participants in identifying the beneficial owners of the notes,
and the Issuers and the Trustee may conclusively rely on and will be protected
in relying on instructions from DTC or its nominee for all purposes.

Interests in the global notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its Participants. See "--Same Day
Settlement and Payment."

Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same day funds.

DTC has advised the Issuers that it will take any action permitted to be taken
by a Holder of notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global notes and only in respect
of such portion of the aggregate principal amount of the notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the notes, DTC reserves the right to exchange the
global notes for legended notes in certificated form, and to distribute such
notes to its Participants.

Although DTC has agreed to the foregoing procedures to facilitate transfers of
interests in the global notes among Participants in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Issuers or the Trustee
or any of their respective agents will have any responsibility for the
performance by DTC, or its obligations under the rules and procedures governing
their operations.

Exchange of Book-Entry Notes for Certificated Notes

A global note is exchangeable for definitive notes in registered certificated
form ("Certificated Notes") if:

(1) DTC (x) notifies the Issuers that it is unwilling or unable to
continue as depositary for the global notes and the Issuers thereupon
fail to appoint a successor depositary or (y) has ceased to be a
clearing agency registered under the Exchange Act,

(2) the Issuers, at their option, notify the Trustee in writing that they
elect to cause the issuance of the Certificated Notes; or

(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the notes. In addition, beneficial interests
in a global note may be exchanged for Certificated Notes upon request
but only upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases,
Certificated Notes delivered in exchange for any global note or
beneficial interests will be registered in the names, and issued in
any approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures).

Exchange of Certificated Notes for Book-Entry Notes

Notes issued in certificated form may not be exchanged for beneficial
interests in any global note unless the transferor first delivers to the Trustee
a written certificate (in the form provided in the Indenture) to the effect that
such transfer will comply with the appropriate transfer restrictions, if any,
applicable to such notes.

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Same Day Settlement and Payment

The Indenture will require that payments in respect of the notes represented
by the global notes (including principal, premium, if any, and interest) be made
by wire transfer of immediately available funds to the accounts specified by the
global note Holder. With respect to notes in certificated form, the Issuers will
make all payments of principal, premium, if any, and interest by wire transfer
of immediately available funds to the accounts specified by the Holders or, if
no such account is specified, by mailing a check to each such Holder's
registered address. The notes represented by the global notes are expected to be
eligible to trade in the Depositary Agent's Same-Day Funds Settlement System,
and any permitted secondary market trading activity in such notes will,
therefore, be required by the Depositary Agent to be settled in immediately
available funds. The Issuers expect that secondary trading in any certificated
notes will also be settled in immediately available funds.

Certain Definitions

Terms defined below are summaries of terms defined in, and are defined more
specifically in, the Project Documents and the Financing Documents. Such
summaries do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Project Documents
and the Financing Documents.

"Accounts" means the accounts established under and defined in the Deposit
and Disbursement Agreement.

"Additional Project Documents" means any contracts or agreements related to
the construction, testing, maintenance, management, repair, operation or use of
the Project or the Steam Plant entered into by Orange L.P. and any other Person
subsequent to the date of the Indenture.

"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.

"Agency Agreement" means the Agency Agreement and Power of Attorney dated as
of April 5, 1991 between SIDA and Orange L.P.

"Asset Manager" means Niagara Mohawk Energy Marketing, Inc.

"Asset Manager Agreement" means the Asset Management Letter Agreement dated as
of December 6, 1999, between Orange L.P. and Niagara Mohawk Energy Marketing
under which Niagara Mohawk Energy Marketing agrees to manage the business
operations and finances of Orange L.P., including the administration of the
Project Documents and to seek to maximize the Project's revenues from the
Original Closing Date as the same may be supplemented or amended from time to
time and any energy services management agreement entered into in connection
therewith.

"Asset Manager Consent and Agreement" means the Consent and Agreement dated as
of December 6, 1999 among Niagara Mohawk Energy Marketing, the Collateral Agent
and Orange L.P. relating to Niagara Mohawk Energy Marketing Agreement.

"Assumption Agreement" means the assumption agreement executed and delivered
by Orange L.P. to the Trustee on the Original Closing Date concurrently with the
consummation of the Merger.

"Boiler Guaranty" means the Guaranty Agreement of Century Contractors West,
Inc. in its capacity as construction contractor to the Project, and S&S Services
dated as of April 5, 1991 to Syracuse University guaranteeing specific
obligations of Orange L.P. under the Steam Plant Operating Agreement and assumed
by General Electric Company on February 2, 1998.

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"Canadian Hunter" means Canadian Hunter Exploration Ltd., an Alberta, Canada
corporation.

"Canadian Hunter Agreements" means the Gas Purchase Agreement, the TransCanada
Agreement and the Collateral Assignment of the Firm Service Agreement.

"Canadian Hunter Consent and Agreement" means the Consent and Agreement dated
as of December 6, 1999 among Canadian Hunter, the Collateral Agent and Orange
L.P. relating to the Gas Purchase Agreement.

"Capital Expenditure Reserve Account" means the account of such name created
under and defined in the Deposit and Disbursement Agreement.

"Capital Expenditure Reserve Required Balance" means an amount equal to:

(1) the aggregate Capital Expenditures budgeted for the next succeeding
twelve-month period (A) as approved by the Independent Engineer and
delivered to the Trustee and the Collateral Agent at least annually and
(B) as adjusted by management and described in an Officers' Certificate
delivered to the Trustee and the Collateral Agent six months following
each budget approved by the Independent Engineer plus

(2) $3.5 million until such time as a life extension program for the Steam
Plant is approved by Orange L.P. and the Independent Engineer, at which
time the portion of the Capital Expenditures Reserve Required Balance
required by this clause (2) shall be reduced to an amount equal to the
discounted present value of the Capital Expenditures contemplated by the
approved life extension program for the Steam Plant (or, in the event of a
dispute between the two, the Required Capital Expenditure Reserve Balance
shall be reduced to the discounted present value of the Capital
Expenditures contemplated by the life extension program approved by the
Independent Engineer and then, if the net present value of the Capital
Expenditures contemplated by the life extension program approved by a
third party under expedited dispute resolution procedures described in the
Deposit and Disbursement Agreement, is lower, the Required Capital
Expenditure Reserve Balance shall be further reduced to such lower
amount).

"Capital Expenditures" means:

(1) labor, materials and other direct expenses for any major overhaul of or
major maintenance procedure for the Project or the Steam Plant (including
major maintenance such as turbine overhauls or the refurbishment or
replacement of the steam boilers) which requires significant disassembly
or shutdown of the Project or the Steam Plant under manufacturers'
guidelines or recommendations, engineering or operating considerations or
the requirements of any applicable legal requirement or any Project
Contracts; and

(2) any other expenses that are capitalized on the balance sheet and qualify
as capital expenditures of Orange L.P. in accordance with GAAP;

provided that:

(A) the "Fired-Hour Fee" payable under Section 5.10 of the Operation and
Maintenance Agreement shall not constitute a "Capital Expenditure" even
if any portion would be treated as a capital expenditure of Orange L.P.
in accordance with GAAP, and

(B) amounts expended by Orange L.P. under Section 7.01 of the Steam Plant
Operating Agreement to repair, overhaul, refurbish or replace the Steam
Plant shall be deemed to constitute "Capital Expenditures" to the
extent that they would be treated as capital expenditures of Orange
L.P. in accordance with GAAP if Orange L.P. owned the Steam Plant.

"Capital Stock" means:

(1) in the case of a corporation, corporate stock;

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(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;

(3) in the case of a partnership or limited liability company, partnership or
membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets
of, the issuing Person.

"Cedelbank" means Cedelbank, societe anonyme.

"Change of Control" means the occurrence of any of the following:

(1) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the properties or
assets of Orange L.P. taken as a whole to any "person" (as that term is
used in Section 13(d)(3) of the Exchange Act);

(2) the adoption of a plan relating to the liquidation or dissolution of
Orange L.P.; or

(3) the first day following the Original Closing Date (and after giving effect
to the issuance of the notes and application of the proceeds) on which
Permitted Holders cease to own, directly or indirectly, in the aggregate
(a) 50% or more of the total voting power of the Voting Stock of Orange
L.P. or (b) 85% or more of the total economic ownership interests in
Orange L.P.

"Change of Control Offer" shall have the meaning described under the caption
"Repurchase at the Option of Holders Upon Change of Control."

"Change of Control Payment" shall have the meaning described under the caption
"Repurchase at the Option of Holders Upon Change of Control."

"Change of Control Payment Date" shall have the meaning described under the
caption "Repurchase at the Option of Holders Upon Change of Control."

"City Easement Agreements" means the easements, licenses, rights of way,
passages and similar agreements described in Exhibit A-3 to the First Mortgage
and the City Easement Assignment and the improvements, appurtenances, fixtures
and additions now or hereafter thereon and relating thereto.

"City Easement Assignment" means the Assignment of Easements dated as of April
5, 1991 by Orange L.P., as assignor, to SIDA, as assignee, recorded in the
Clerk's Office on May 3, 1991.

"City Easements" means specific easements located within the City of Syracuse,
New York described in Exhibit A-2 to the First Mortgage granted by the City
Easement Agreements and assigned by the City Easement Assignment.

"Clerk's Office" means the Office of the County Clerk of Onondaga County, New
York.

"Collateral" means all real and personal property interests which are subject
or are to become subject to the security interests or Liens granted by any of
the Collateral Documents. The definition of "Collateral" expressly excludes (a)
the Excluded Accounts, (b) the Steam Plant and any improvements, accessions and
additions thereto and (c) insurance proceeds relating to the Steam Plant.

"Collateral Agent" or "Agent" means U.S. Bank Trust National Association in
its capacity as collateral agent under the Collateral Documents and any
successor in such capacity.

"Collateral Assignment of the Firm Service Agreement" means the Collateral
Assignment of the Firm Service Agreement dated as of April 5, 1991 between
Canadian Hunter and Orange L.P.

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"Collateral Documents" means, collectively, the Deposit and Disbursement
Agreement, the First Mortgage, the Security Agreement, the Pledge Agreements,
the SIDA Security Agreement, the Consents and any other document providing for
any lien, pledge, encumbrance, mortgage or security interest to secure the
payment and performance by SIDA and the Credit Parties of their respective
obligations under the Indenture, the notes and the Collateral Documents on (i)
any or all of the assets of Orange L.P., the ownership interests of the assets
or (ii) the assets and contracts constituting or related to the Project.

"Comparable Treasury Issue" means the United States Treasury security selected
by a Reference Treasury Dealer as having a maturity comparable to the Remaining
Average Life of the notes to be redeemed that would be utilized, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining
Average Life of such notes.

"Comparable Treasury Price" means, with respect to any date of redemption,

(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the
third business day preceding such date of redemption, as described in the
daily statistical release (or any successor release) published by the
Federal Reserve Bank of New York and designated "Composite 1:10 p.m.
Quotations for U.S. Government Securities," or

(ii) if such release (or any successor release) is not published or does not
contain such prices on such business day, (A) the average of the
Reference Treasury Dealer Quotations, or (B) if the Trustee obtains fewer
than three such Reference Treasury Dealer Quotations, the average of all
such Reference Treasury Dealer Quotations.

"Consent" means each of the Niagara Mohawk Energy Marketing Consent and
Agreement, the University Consent and Agreement, the University Subordination
Agreement, the SIDA Consent and Agreement, the PILOT Consent and Agreement, the
Niagara Mohawk Consent and Agreement, the Tennessee Gas Pipeline Company Consent
and Agreement, Canadian Hunter Consent and Agreement, TransCanada Consent and
Agreement, and the Operator Consent and Agreement.

"Contract Termination Event" means:

(i) the occurrence of an early termination event (whether by default or
otherwise) under the Indexed Swap Agreement with respect to which Niagara
Mohawk is required to make a termination payment under the Indexed Swap
Agreement to Orange L.P.; or

(ii) any event of force majeure under, or the termination of, the Gas
Purchase Agreement with respect to which Canadian Hunter is required to refund
or repay any portion of the lump-sum payment corresponding to the unused
portion of the Maximum Entitlement (as defined in the Gas Purchase Agreement).

"Credit Parties" means the Issuers, Orange L.P., each of the Partners and each
Affiliate of the Issuers, Orange L.P. or the Partners that is a party to any
Collateral Document.

"Custodian" means, initially, the Trustee, and its successors and assigns or
any other custodian performing similar functions.

"Debt Service Coverage Ratio" means for any period, without duplication, the
ratio of:

(i) (A) the sum of all revenues (including interest and fee income, but
excluding any insurance proceeds and all other similar non-recurring receipts)
of Orange L.P. for such period, minus (B) the aggregate amount of Operating
and Maintenance Costs of Orange L.P. for such period, minus (C) all Capital
Expenditures during such period, to

(ii) the sum of (A) all principal, premium (if any) and interest payable
with respect to Permitted Indebtedness outstanding for such period, plus (B)
the aggregate amount of overdue principal, premium (if any) and interest

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payments owed with respect to Permitted Indebtedness outstanding from previous
periods; all as determined on a cash basis in accordance with GAAP.

"Debt Service Reserve Account" means the account of such name created under
and defined in the Deposit and Disbursement Agreement.

"Debt Service Reserve Letter of Credit" one or more irrevocable, direct pay
letters of credit issued by a Debt Service Reserve LOC Provider in favor of the
Collateral Agent where the account party is not Orange L.P.

"Debt Service Reserve LOC Provider" means any commercial bank or financial
institution issuing the Debt Service Reserve Letter of Credit, which institution
shall be rated not less than A by S&P and A2 by Moody's.

"Debt Service Reserve Required Balance" means on the Original Closing Date,
$6.2 million and thereafter an amount equal to the aggregate amount of the
principal and interest due on the notes on the next succeeding semi-annual
scheduled Payment Date.

"Default" means an event or condition that, with the giving of notice, lapse
of time of failure to satisfy specified conditions, or any combination, would
become an Event of Default.

"Default Rate" means 12.5% per annum.

"Deposit and Disbursement Agreement" means the Deposit and Disbursement
Agreement, dated as of December 6, 1999, between Orange L.P., the Trustee and
the Collateral Agent.

"Depositary Agent" means initially the Depository Trust Company as the
Depositary Agent with respect to the notes, and any and all successors thereto
appointed as depositary under the Indenture and the Deposit and Disbursement
Agreement and having become such under the applicable provisions of the
Indenture and the Deposit and Disbursement Agreement.

"Distribution Account" means the account of such name created under and
defined in the Deposit and Disbursement Agreement.

"Distribution Suspense Account" means the account of such name created under
and defined in the Deposit and Disbursement Agreement.

"Drawing Agreement" means the Letter of Credit Drawing Agreement dated as of
March 29, 1991, as amended, between Tennessee Gas Pipeline Company and Orange
L.P.

"DTC" means the Depository Trust Company.

"Easement Agreements" means the City Easement Agreements and the Outside
Easement Agreements.

"Easements" means the City Easements and the Outside Easements.

"Eminent Domain Proceeds" means all amounts and proceeds (including
instruments) received by Orange L.P. in respect of any Event of Eminent Domain,
after deducting all reasonable expenses incurred in litigating, arbitrating,
compromising, settling or consenting to the settlement of any claims against the
appropriate Governmental Authority.

"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office,
as operator of the Euroclear system, or its successors.

"Event of Default" means the occurrence of an Event of Default under and as
defined in the Indenture.

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"Event of Eminent Domain" means any compulsory transfer or taking or any
transfer under threat of compulsory transfer or taking of any material part of
the Collateral or the Project by any Governmental Authority.

"Event of Loss" means an event which causes all or a portion of the Project to
be damaged, destroyed or rendered unfit for normal use for any reason
whatsoever, other than an Event of Eminent Domain or a Title Event.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exchange Offer" has the meaning described in the Registration Rights
Agreement.

"Exchange Offer Registration Statement" has the meaning described in the
Registration Rights Agreement.

"Excluded Accounts" has the meaning described above under "Excluded Accounts."

"Fair Value" when applied to any property means its fair value to Orange L.P.,
which may be determined without physical inspection by use of accounting and
other data maintained by, or available to, Orange L.P.; provided, that Orange
L.P. delivers an Officers' Certificate specifying the Fair Value of the relevant
assets and, in the event of a transaction in excess of $2.5 million, Orange L.P.
also delivers an opinion of a nationally recognized expert in the valuation of
such assets as to their Fair Value and that the transaction is fair to Orange
L.P.

"Final Maturity Date" means the latest stated maturity date of the notes or
September 15, 2007.

"Financing Documents" means, collectively, the Indenture, the Assumption
Agreement, the Purchase Agreement, Registration Rights Agreement, the Collateral
Documents and the notes.

"First Mortgage" means the Mortgage and Assignment of Rents (First Mortgage)
dated as of December 6, 1999 by SIDA and Orange L.P., as mortgagors, to the
Collateral Agent, as mortgagee, to be recorded in the Clerk's Office.

"Fuel Supply Agreements" means the Canadian Hunter Agreements, the Natural Gas
Transportation Agreements and any other agreements necessary for or entered into
in connection with the supply of fuel to the Project.

"GAAP" means generally accepted accounting principles described in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.

"GAS LP" means G.A.S. Orange Partners, L.P., a Delaware limited partnership.

"GAS Orange" means G.A.S. Orange Associates, LLC, a Delaware limited liability
company.

"Gas Purchase Agreement" means (i) the Restated Gas Sale and Purchase
Agreement dated as of March 18, 1991, between Orange L.P. and Noranda, which was
assigned by Noranda to, and assumed by, Canadian Hunter under an Assignment,
Amendment and Release Agreement dated as of December 1, 1999 among Noranda,
Canadian Hunter and Orange, L.P. and (ii) the agreements between Orange L.P. and
Canadian Hunter and Union Pacific Resources, respectively, to be entered into in
replacement of the Restated Gas Sale and Purchase Agreement in accordance with
the terms of a letter agreement dated December 1, 1999 among Orange L.P.,
Canadian Hunter and Union Pacific Resources as in effect on the Original Closing
Date.

"Gas Reserve Account" means the account of such name created under and defined
in the Deposit and Disbursement Agreement.

"Gas Reserve Required Balance" has the meaning described under the caption
"Gas Reserve Account."

"Gas Reserve Deficit" has the meaning described under the caption "Gas Reserve
Account."

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"General Partner" means G.A.S. Orange Associates, LLC, in its capacity as
general partner of Orange L.P.

"Governmental Approvals" means all governmental approvals, authorizations,
consents, decrees, permits, waivers, privileges and filings with all
Governmental Authorities required to be obtained for the construction, operation
and maintenance of the Project.

"Governmental Authority" means the government of any federal, state,
municipal or other political subdivision in which the Project is located, and
any other government or political subdivision exercising jurisdiction over the
Project or any party to any of the Project Documents, including all agencies and
instrumentalities of such governments and political subdivisions.

"Government Securities" means direct obligations of, or obligations,
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.

"Ground Lease" means the Lease Agreement covering the Premises dated as of
February 27, 1990, between Syracuse University, as lessor, and Orange L.P., as
lessee a memorandum of which dated April 24, 1991 was recorded in the Clerk's
Office on May 23, 1991 in Book 3693 at Page 87, as amended by those three
amendatory letters dated May 1, 1990, June 22, 1990 and August 29, 1990, as
further amended by that Amendment to Lease dated as of December 31, 1990, as
further amended by that Amendment to Lease dated as of December 16, 1992, as the
lessee's interest was assigned by the Ground Lease Assignment, and as amended
and otherwise affected by the University Consent and Agreement.

"Ground Lease Assignment" means Assignment of the Ground Lease dated as of
April 5, 1991 between Orange L.P., assignor, and SIDA, as assignee, recorded in
the Clerk's Office on May 3, 1991 in Book 3693 at Page 139.

"Holder" means as of any particular time, the Person in whose name a note is
registered.

"Hot Tap Reimbursement Agreement" means the agreement relating to Installation
of a Hot Tap, Measurement and DAC, dated May 25, 1988, between Tennessee Gas
Pipeline Company and GAS Inc. as amended by that letter agreement, dated August
11, 1988, and assigned to Orange L.P. by that Assignment and Assumption
Agreement dated November 30, 1990 between GAS Inc. and Orange L.P.

"Impositions" means all payments in lieu of taxes (including all payments due
under the PILOT Agreement), taxes (including real estate taxes and transfer,
sales and use taxes), assessments (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof but excluding any water or other utilities to the extent the same
are governed by a contract between Orange L.P. and the applicable service
provider), rates and charges, excises, levies, license fees, permit fees,
inspection fees and other authorization fees and other charges of any
governmental authority, in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen, of every character (including all
interest and penalties thereon), which at any time may be assessed, levied,
confirmed or imposed on or in respect of, or be a Lien upon the Project, any
occupancy, use or possession of the Project, the rents, income, issues and
profits therefrom, the Obligations under the notes or the Financing Documents,
but excluding income, excess profits, franchise, capital stock, estate,
inheritance, succession, gift or similar taxes of any Secured Party, except to
the extent that such taxes of any Secured Party are imposed in whole or in part
in lieu of, or as a substitute for, any taxes which are or would otherwise be
Impositions; all rent and other amounts payable under the Ground Lease, the
Master Lease, the Outside Easement Lease and the Easement Agreements, and all
other amounts payable under any of the other Project Documents.

"Indebtedness" of any Person means, at any date, without duplication:

(1) all obligations of such Person for borrowed money;

(2) all obligations of such Person evidenced by notes, debentures, notes or
other similar instruments (excluding "deposit only" endorsements on checks
payable to the order of such Person);

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(3) all obligations of such Person to pay the deferred purchase price of
property or services (except accounts payable and similar obligations
arising in the ordinary course of business shall not be included);

(4) all obligations of such Person as lessee under capital leases to the
extent required to be capitalized on the books of such Person in
accordance with GAAP; and

(5) all obligations of others of the type referred to in clause (1) through
(4) above guaranteed by such Person, whether or not secured by a lien or
other security interest on any asset of such Person.

"Indenture" means the Indenture dated as of December 6, 1999 between the
Issuers and U.S. Bank Trust National Association, as Trustee, under which the
Issuers are issuing the notes.

"Independent Engineer" means Stone & Webster or another nationally recognized
independent engineering firm with at least the same standing as Stone & Webster
in terms of size, experience and technical expertise with respect to assignments
of such nature and which has been retained as independent engineer by Orange
L.P.

"Independent Engineer's Base Case Projections" means the base case projections
prepared by the Independent Engineer and included in the Independent Engineer's
Report.

"Independent Engineer's Report" means the Independent Engineer's Report
prepared by Stone & Webster and attached to this Offering memorandum as Exhibit
A.

"Indexed Swap Agreement" means the ISDA Master Agreement and the related
Confirmation each dated June 30, 1998 between Niagara Mohawk and Orange L.P.

"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities Corporation.

"Insurance Consultant" means J&H Marsh & McLennan, Limited, or another
nationally recognized independent insurance consulting firm which is retained by
Orange L.P. to act as Insurance Consultant for the benefit of the Secured
Parties under the Indenture.

"Interest Account" means the account of such name created under and defined in
the Deposit and Disbursement Agreement.

"Interest Payment Date" means each March 15 and September 15, commencing March
15, 2000, and concluding on the Final Maturity Date.

"Investment" means, with respect to any Person, any investment by such Person
in other Persons (including Affiliates) in the form of direct or indirect loans
(including guarantees of Indebtedness or other obligations), advances (excluding
commission, travel and similar advances to employees made in the ordinary course
of business), or capital contributions, purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.

"Issuers" means Project Orange Associates, L.P., a Delaware limited
partnership, as the survivor of the merger of Project Orange Funding, L.P. with
and into Project Orange Associates, L.P., and Project Orange Capital Corp., a
Delaware corporation.

"Lease Documents" means the Ground Lease, the Master Lease and any other lease
of property necessary or entered into in connection with the Project.

"Leased Premises" means the real property described in Exhibit A-1 to the
First Mortgage and the improvements, appurtenances, fixtures and additions now
or hereafter thereon or relating thereto.

"Lien" means any mortgage, pledge, hypothecation, assignment, mandatory
deposit arrangement with any Person owning Indebtedness of such Person,
encumbrance, lien (statutory or other), preference, priority or other security

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agreement of any kind or nature whatsoever which has the substantial effect of
constituting a security interest, including, without limitation, any conditional
sale or other title retention agreement, any financing statement or similar
instrument under the Uniform Commercial Code or comparable law of any
jurisdiction, domestic or foreign.

"Loss Proceeds" means all net proceeds from an Event of Loss received by
Orange L.P., including insurance proceeds or other amounts actually received,
except proceeds or business interruption insurance, on account of an event which
causes all or any portion of the Project to be damaged, destroyed or rendered
unfit for normal use.

"Loss Proceeds Account" means the account of such name created under and
defined in the Deposit and Disbursement Agreement.

"Master Lease" means the Lease and Sublease Agreement dated as of April 5,
1991 between SIDA , as lessor, and Orange L.P., as lessee, a memorandum of which
dated as of April 5, 1991 was recorded in the Clerk's Office on May 3, 1991 in
Book 3693 at Page 149, as amended and otherwise affected by the SIDA Consent and
Agreement.

"Material Adverse Effect" means a material adverse effect on:

(1) the financial position or results of operations of the Issuers;

(2) the Collateral or the validity or priority of any of the Liens on the
Collateral under any of the Collateral Documents;

(3) the ability of the Issuers to pay any of their payment obligations or to
perform any of their other material obligations under the Indenture, the
notes or any of the other Financing Documents or under any of the Project
Documents to which they are a party;

(4) the ability of the Trustee or the Collateral Agent to enforce any of the
payment obligations of the Issuers, any of the other material obligations
of the Issuers or any of the material rights of the Trustee or the
Collateral Agent under the Indenture, the notes or any of the other
Financing Documents; or

(5) the ability of Orange L.P. to enforce any of its material rights under any
of the Project Documents.

"Material Project Documents" means the Niagara Mohawk Agreements, the
Partnership Agreement, the Drawing Agreement, the Natural Gas Transportation
Agreements, the Canadian Hunter Agreements, the Boiler Guaranty, the PILOT
Agreement, the Master Lease, Syracuse University Agreements, the Easement
Agreements, Niagara Mohawk Energy Marketing Agreement, the Consents and the
Operation and Maintenance Agreement.

"Moody's" means Moody's Investors Service, Inc., a corporation organized and
existing under the laws of the State of Delaware, its successors and assigns.

"Mortgaged Property" is defined in the First Mortgage.

"Natural Gas Transportation Agreements" means the Tennessee Gas Pipeline
Company Interruptible Gas Transportation Agreement, the Tennessee Gas Pipeline
Company Firm Gas Transportation Agreement, the Drawing Agreement and the Hot Tap
Reimbursement Agreement.

"New Notes" shall have the same meaning described under the caption
"Registration Rights; Liquidated Damages."

"Niagara Mohawk" means the Niagara Mohawk Power Corporation, a New York
corporation.

"Niagara Mohawk Agreements" means the Power Put Agreement and the Indexed Swap
Agreement.

"Niagara Mohawk Consent and Agreement" means the Consent and Agreement dated
as of a date on or prior to the Original Closing Date, between Niagara Mohawk,
Orange L.P. and the Collateral Agent relating to the Niagara Mohawk Agreements.

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"Noranda" means Noranda Inc., a corporation incorporated under the laws of the
Province of Ontario, Canada.

"Obligations" means all principal, interest, penalties, fees,
indemnifications, reimbursements, damages, premiums, liabilities and other
liabilities payable under the documentation governing any Indebtedness.

"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Managing Member, the Managing
Partner, the Chief Operating Officer, the Chief Financial Officer, the
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-
President of such Person.

"Officers' Certificate" means a certificate signed on behalf of either Issuer
by Officers of such Issuer or the General Partner, one of whom must be the
principal executive officer or managing member, managing partner, principle
financial officer, the treasurer or principal accounting officer of such Issuer
or the General Partner.

"Operating and Maintenance Costs" means, for any periods, all amounts
disbursed by or on behalf of Orange L.P. for operation, maintenance (excluding
Capital Expenditures), administration, repair, or improvement of the Project,
including, without limitation, premiums on insurance policies, property and
other taxes, payments under the relevant Lease Documents and under agreements,
or options, to purchase energy and associated capacity in connection with
permitted sales of natural gas, operating and maintenance agreements, royalty
and other land use agreements and fees, expenses and any other payments required
under the Project Documents (excluding Subordinated Asset Management Fees).

"Operating Budget" means a budget of Operating and Maintenance Costs and
Capital Expenditures with respect to Orange L.P. and the Project for any given
fiscal year, or part of a fiscal year, prepared in good faith on the basis of
estimated requirements, showing such costs by category for such fiscal year and
as approved by the Independent Engineer.

"Operation and Maintenance Agreement" means the Cogeneration Facility
Operation and Maintenance Agreement dated as of November 1, 1998 between Orange
L.P. and Operator and any subsequent operation and maintenance agreement entered
into by Orange L.P. with the Operator having terms and conditions that are, in
the opinion of the Independent Engineer, reasonable and customary for agreements
of its type and which are consistent with prudent industry practice.

"Operative Documents" means the Financing Documents, the Project Documents and
any Additional Project Documents.

"Operator" means General Electric International, Inc., a Delaware corporation,
or such other Person with technical expertise and experience and industry
standing of at least that of General Electric International, Inc. as shall
replace General Electric International, Inc. as the operator of the Project
under the Operation and Maintenance Agreement.

"Operator Consent and Agreement" means the Consent and Agreement dated as of a
date on or prior to the Original Closing Date among the Operator, the Collateral
Agent and Orange L.P. relating to the Operation and Maintenance Agreement.

"Orange L.P." means Project Orange Associates, L.P.

"Original Closing Date" means December 6, 1999.

"Outside Easement Agreements" means the easements, licenses, rights of way,
passages and similar agreements described in Exhibit A-5 to the First Mortgage,
the Outside Easement Assignments and the Outside Easement Lease.

"Outside Easement Assignments" means the Assignment and Assumption of
Easements dated as of April 5, 1991 by O'Brien and Geer, as assignor, to OBG
Technical Services, Inc., as assignee, recorded in the Clerk's Office on May 3,
1991 in Book 3693 at Page 9 and the Assignment and Assumption of Easements dated
as of April 5, 1991 by OBG

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Technical Services, Inc., as assignor, to Orange L.P., as assignee, recorded in
the Clerk's Office on May 3, 1991 in Book 3693 at Page 15.

"Outside Easement Lease" means the Lease Agreement dated as of April 5, 1991
between Orange L.P., as lessor, and SIDA, as lessee, a memorandum of which dated
as of April 5, 1991 was recorded in the Clerk's Office on May 3, 1991 in Book
3693 at Page 143.

"Outside Easements" means specific easements located outside of the City of
Syracuse, New York described in Exhibit A-4 to the First Mortgage granted under
the Outside Easement Agreements, assigned to Orange L.P. by the Outside Easement
Assignments and leased by Orange L.P. to SIDA by the Outside Easement Lease and
the improvements, appurtenances, fixtures and additions now or hereafter thereon
and relating thereto.

"Outstanding Notes" means, as of the time in question, all notes authenticated
and delivered under the Indenture, except (i) notes theretofore canceled or
required to be canceled under the Indenture; (ii) notes for which provision for
payment shall have been made in accordance with the Indenture; and (iii) notes
in substitution for which other notes have been authenticated and delivered
under the Indenture.

"Partners" means, collectively, GAS Orange and GAS LP.

"Partnership Agreement " means the Second Amended and Restated Agreement of
Limited Partnership of Project Orange Associates, L.P., a Delaware limited
partnership, dated as of December 16, 1992 between the General Partner and the
Limited Partner.

"Partnership Interest Purchase Agreement" means the Partnership Interest
Purchase and Sale Agreement dated as of July 29, 1999, as amended, among GAS
Orange, as purchaser, and NCP Syracuse and Syracuse Orange Partners, as sellers.

"Payment Date" means any Interest Payment Date or Principal Payment Date.

"Permitted Holders" means Adam H. Victor, the Victor Family Irrevocable Trust
and their respective Permitted Transferees.

"Permitted Indebtedness" means:

(1) the notes;

(2) Indebtedness incurred to finance the making of capital improvements to the
Project required to maintain compliance with applicable law or anticipated
changes to applicable law; that no such Indebtedness may be incurred
unless at the time of such incurrence

(A) no Default or Event of Default, has occurred and is continuing,

(B) the Independent Engineer confirms as reasonable a certification by
Orange L.P. (containing customary qualifications) that the proposed
capital improvements are reasonably expected to enable the Project to
comply with applicable or anticipated legal requirements,

(C) the calculations of Orange L.P. demonstrate that, after giving effect
to the incurrence of such Indebtedness, the projected Debt Service
Coverage Ratio of Orange L.P.

(i) for the next four consecutive fiscal quarters, commencing with the
quarter in which such Indebtedness is incurred, taken as one annual
period, and

(ii) for each subsequent fiscal year through the Final Maturity Date
(treated as a single accounting period), will be an average of not
less than 1.4 to 1 for the entire period and not less than 1.35 to 1
for any such fiscal year and

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(D) each of the Rating Agencies confirms that the incurrence of such
Indebtedness will not result in a Rating Downgrade;

(3) Indebtedness in respect of any letter of credit under the Drawing
Agreement in an aggregate principal amount outstanding at no time in
excess of $700,000;

(4) Indebtedness incurred to finance the purchase price of tangible movable
assets which are not essential to the operation of the Project or the
Steam Plant and with an aggregate principal amount not in excess of
$500,000 at any time outstanding;

(5) promissory notes issued to NCP Syracuse and Syracuse Orange Partners under
Section 6.10(e) of the Partnership Interest Purchase Agreement, i.e. the
tax notes; and

(6) the Project Documents or any rights or obligations that may be construed
to be Indebtedness.

"Permitted Investments" means an Investment in any of the following:

(1) direct obligations of the Department of the Treasury of the United States
of America;

(2) obligations representing the full faith and credit of the United States of
America or of any of the following federal agencies: Export-Import Bank,
Farmers Home Administration, General Services Administration, U.S.
Maritime Administration, Small Business Administration, Government
National Mortgage Association (GNMA), U.S. Department of Housing & Urban
Development (PHA's) and Federal Housing Administration;

(3) obligations issued or fully guaranteed by any state of the United States
of America or any political subdivision of any such state or any public
instrumentality of the United States of America and, at the time of the
acquisition, having one of the two highest ratings obtainable from either
S&P or Moody's;

(4) certificates of deposit and Eurodollar time deposits, bankers' acceptances
and overnight bank deposits, in each case with any domestic or foreign
commercial bank having capital and surplus in excess of $250.0 million;

(5) notes, bonds, collateralized mortgage obligations or other evidences of
indebtedness rated "AAA" by S&P and "Aaa" by Moody's issued by the Federal
Home Loan Bank, the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation;

(6) commercial paper rated in any one of the two highest rating categories by
Moody's or S&P;

(7) investment agreements with banks (foreign and domestic), broker/dealers,
and other financial institutions rated at the time of bid in any one of
the three highest rating categories by Moody's and S&P;

(8) repurchase agreements with banks (foreign and domestic), broker/dealers,
and other financial institutions rated at the time of bid in anyone of the
three highest rating categories by Moody's and S&P, provided,

(A) collateral is limited to the securities specified in clauses (1)
through (5) above,

(B) the margin levels for collateral must be maintained at a minimum of
102% including principal and interest,

(D) the collateral will be delivered to a third party custodian, designated
by Orange L.P., acting for the benefit of the Collateral Agent and all
fees and expenses related to collateral custody will be the
responsibility of Orange L.P.,

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(E) the collateral must have been or will be acquired at the market price
and marked to market weekly and collateral level shortfalls cured
within 24 hours,

(F) unlimited right of substitution of collateral is allowed provided that
substitution collateral must be permitted collateral substituted at a
current market price and substitution fees of the custodian shall be
paid by Orange L.P.;

(9) asset-backed securities having the highest rating obtainable from either
S&P or Moody's;

(10) forward purchase agreements delivering securities specified in clauses
(1) and (6) above with banks (foreign and domestic), broker/dealers, and
other financial institutions maintaining a long-term rating on the day of
bid no lower than investment grade by both S&P and Moody's (such rating
may be at either the parent or subsidiary level); and

(11) money market funds rated "AAAm" or "AAAm-G" or better by S&P and other
financial funds investing exclusively in investments of the types
described in clauses (1) through this clause (11) of this definition.

"Permitted Liens" means, collectively:

(1) Liens to secure Indebtedness described in clause (2) or (4) of the
definition of Permitted Indebtedness on the assets financed with the
proceeds of such Indebtedness;

(2) Liens under Syracuse University Collateral Documents, provided the same
are subordinate to the Liens under the Collateral Documents;

(3) mechanic's, workmen's, materialmen's, supplier's, construction or other
like Liens arising in the ordinary course of business that, in each case,
have not become the subject of foreclosure or any other action or
proceeding and for which adequate reserves have been established under
generally accepted accounting principles;

(4) servitudes, easements, rights-of-way, restrictions, minor defects or
irregularities in title and such other encumbrances or charges against
real property or interests in real property, which do not secure any
monetary obligation, and which are of a nature generally existing with
respect to property of a character similar in character and use to the
property that is subject thereto and which do not in individually or in
the aggregate with other Permitted Liens under this clause (4) or clauses
(5) and (6) below materially interfere with the use of the property in the
business of Orange L.P. or materially adversely affect the property value;

(5) other Liens incidental to the conduct of Orange L.P.'s business or the
ownership of properties and assets, which do not secure any monetary
obligation (other than vendor's liens for accounts payable with respect to
the acquisition of the property in question in the ordinary course of
business and liens for taxes, assessments or governmental charges which
are either not yet due or which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves are
established in accordance with GAAP), and which do not individually or in
the aggregate with other Permitted Liens under this clause (5) or clause
(4) above or clause (6) below materially interfere with the use of the
properties or assets in the business of Orange L.P. or materially
adversely affect the properties or assets value;

(6) the Permitted Title Encumbrances;

(7) Liens to secure the notes; and

(8) Liens on cash and Permitted Investments and securities entitlements with
respect thereto to secure Indebtedness described in clause (3) of the
definition of Permitted Indebtedness.

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"Permitted Title Encumbrances" means

(1) the matters described as items 1-128, inclusive, in Schedule B, Section 2
of the Commitment for Title Insurance issued by the Title Insurance
Company dated August 25, 1999, and

(2) Syracuse University Mortgages and University Security Agreements,

provided that the same are subordinate to the First Mortgage under Syracuse
University Subordination Agreement.

"Permitted Transferees" shall mean with respect to any Person:

(1) in the case of any Person who is a natural person, such individual's
spouse or children (natural or adopted), any trust for such individual's
benefit or the benefit of such individual's spouse or children (natural or
adopted), or any corporation or partnership in which the direct and
beneficial owner of all of the equity interest in such Person or such
individual's spouse or children (natural or adopted) or any trust for the
benefit of such persons;

(2) in the case of any Person who is a natural person, the heirs, executors,
administrators or personal representatives upon the death of such Person
or upon the incompetency or disability of such Person for purposes of the
protection and management of such individual's assets;

(3) in the case of any Person who is not a natural person (other than a
trust), any Affiliate of such Person and

(4) in the case of the Victor Family Irrevocable Trust, its beneficiaries on
the Original Closing Date.

"Person" means any individual, sole proprietorship, corporation, partnership,
joint venture, limited liability partnership, limited liability corporation,
trust, unincorporated association, institution, Governmental Authority or any
other entity.

"PILOT Agreement" means the Payment in Lieu of Tax Agreement dated as of April
5, 1991, among the City of Syracuse, Orange L.P. and SIDA, as amended and
otherwise affected by the PILOT Consent and Agreement.

"PILOT Consent and Agreement" means the Consent and Agreement dated as of a
date or prior to the Original Closing Date among Orange L.P., the City of
Syracuse, SIDA and the Collateral Agent for and on behalf of the Secured Parties
, relating to the PILOT Agreement, to be recorded in the Clerk's Office

"Pledge Agreements" means the Pledge and Security Agreements, each dated as of
December 6, 1999 from GAS Orange, GAS LP and the partners of GAS LP in favor of
the Collateral Agent and the Trustee.

"Power Put Agreement" means the Power Put Agreement dated as of September 19,
1986 between Niagara Mohawk and Orange L.P., as amended.

"Premises" means the Leased Premises and the Easements.

"Principal Account" means the Account of such name created under and defined
in the Deposit and Disbursement Agreement.

"Principal Payment Date" when used with respect to any note means the date on
which all or a portion of the principal of such note becomes due and payable as
provided or in the Indenture, whether on a scheduled date for payment of
principal at a Redemption Date, the Final Maturity Date, a date of declaration
of acceleration, or otherwise.

"Project" means an 80 MW (net) gas fired cogeneration power plant (including
the electric transmission line and the Project's natural gas pipeline) (but
excluding the Steam Plant and related facilities and improvements), together
with all buildings, structures or other improvements erected on the Leased
Premises and the Easements, all alterations to the Leased Premises or
replacements of the Leased Premises, all fixtures, attachments, appliances,
equipment, machinery and other articles attached to the Leased Premises or used
in connection with the Leased Premises and all parts which may from time to time
be incorporated or installed in or attached to, all contracts and agreements for
the purchase or

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sale of commodities or other personal property related to the Leased Premises,
all Lease Documents of real or personal property related to the Leased Premises,
and all other real and tangible and intangible personal property owned by Orange
L.P. or SIDA and placed upon or used in connection with the electric and steam
generation plant, electric transmission line and Pipeline built upon the
Premises and the Easements.

"Project Documents" means the Material Project Documents, the Fuel Supply
Agreements, other Lease Documents and any other material agreement or document
relating to the development, construction or operation of the Project or the
Steam Plant.

"Project Pipeline" means the gas pipeline and related facilities connecting
the Project to the Tennessee Gas Pipeline Company pipeline referred to in the
Natural Gas Transportation Agreements.

"Project Revenues" means all income and receipts of Orange L.P. derived from
the ownership or operation of the Project, including payments due Orange L.P.
under the Niagara Mohawk Agreements, the Canadian Hunter Agreements or the
Operation and Maintenance Agreement, proceeds of any business interruption or
other insurance, income derived from the sale or use of electric energy or steam
transmitted or distributed by the Project, together with any receipts derived
from the sale of natural gas and any other property pertaining to the Project or
incidental to the operation of the Project, all as determined in conformity with
cash accounting principles, the investment income on amounts in the Accounts
established under the Deposit and Disbursement Agreement, the proceeds of any
insurance or condemnation awards relating to the Project and proceeds from the
Collateral Documents, and any payments to Orange L.P. (to the extent not
included within other items listed in this definition) under the Master Lease,
but not including sums paid to Orange L.P. in satisfaction of a contractual
obligation to indemnify Orange L.P. for third party liability to the extent such
sums do not exceed the actual damage, loss or cost suffered by Orange L.P. in
connection therewith.

"Purchase Agreement" means the Purchase Agreement dated as of December 2, 1999
between the Issuers and the Initial Purchaser.

"Rating" means the rating of the notes by the Rating Agencies.

"Rating Agency" means any of Moody's and S&P.

"Rating Downgrade" means a lowering by either of the Rating Agencies of then
current credit ratings of the notes.

"Redemption Account" means the account of such name created under and defined
in the Deposit and Disbursement Agreement.

"Redemption Date" means the date on which the Issuers redeems or shall redeem
any notes in accordance with the Indenture.

"Reference Treasury Dealer" means any nationally recognized primary U.S.
government securities dealer in New York City selected by Orange L.P.

"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any date of redemption, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third business day preceding such date of redemption.

"Registration Rights Agreement" means that Registration Rights Agreement,
dated as of December 6, 1999, by and between the Issuers and the Initial
Purchaser.

"Remaining Average Life" means, with respect to any notes, the principal of
which is to be redeemed (the "Called Principal"), the number of years
(calculated to the nearest one-twelfth year) obtained by dividing:

(1) such Called Principal into

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(2) the sum of the products obtained by multiplying:

(a) the principal component of each Remaining Scheduled Payment (as defined
below) with respect to such Called Principal by

(b) the number of years (calculated to the nearest one-twelfth year) that
will elapse between the date on which such Called Principal is to be
redeemed (the "Settlement Date") and the scheduled due date of such
Remaining Scheduled Payment.

For purposes of this definition, the term "Remaining Scheduled Payments" means,
with respect to the Called Principal of any note, all payments of such Called
Principal and interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal were
made prior to its scheduled due date.

"Required Holders" means, at any time, Persons that at such time hold at least
a majority in aggregate principal amount of the outstanding notes.

"Responsible Officer" means, with respect to knowledge of any default under
the Indenture, the chief executive officer, president, managing member, managing
partner, chief financial officer, general counsel, principal accounting officer,
treasurer, or any vice president of either Issuer or the General Partner, as
applicable, or other officer who in the normal performance of his or her
operational duties would have knowledge of the subject matter relating to such
default.

"Restricted Payment" means, with respect to any Person:

(1) the declaration and payment of distributions or dividends, the issuance of
Equity Interests in such Person or any other payment in respect of any
Equity Interests made in cash, property, obligations or other notes; and

(2) the making of any Investment in, including any loans or advances to, any
Affiliate;

provided, however, that "Restricted Payment" shall not include

(A) payments under any of the Project Documents for services rendered or

(B) the payment of a distribution by Funding L.P. to GAS Orange on the
Original Closing Date with a portion of the net proceeds of the
issuance of the notes in an aggregate amount not to exceed $48.1
million or

"Revenue Account" means the account of such name created under and defined in
the Deposit and Disbursement Agreement.

"Rule 144" means Rule 144 promulgated under the Securities Act.

"S&P" means Standard & Poor's Ratings Services, a division of the McGraw-Hill
Companies, Inc., a corporation organized and existing under the laws of the
State of New York, its successors and assigns.

"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by either Issuer of any real or tangible personal
property, which property has been or is to be sold or transferred by such Issuer
to such Person in contemplation of such leasing.

"SEC" means the United States Securities and Exchange Commission.

"Secured Parties " means the Holders, the Trustee and the Collateral Agent.

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"Security Agreement" means the Security Agreement, dated as of December 6,
1999 between Orange L.P. and the Collateral Agent as Agent for the Secured
Parties.

"Senior Collateral Documents" means the First Mortgage, the Security
Agreement, and the SIDA Security Agreement.

"SIDA" means the City of Syracuse Industrial Development Authority, a public
benefit corporation of the State of New York.

"SIDA Consent and Agreement" means the Consent and Agreement dated as of a
date on or prior to the Original Closing Date among Orange L.P., SIDA and the
Collateral Agent for and on behalf of the Secured Parties, to be recorded in the
Clerk's Office.

"SIDA Security Agreement" means the Security Agreement dated as of December 6,
1999 between SIDA and the Collateral Agent.

"Steam Contract" means the Steam Contract dated as of February, 27, 1990
between Orange L.P. and Syracuse University, as amended by those letter
agreements dated May 1, 1990, June 22, 1990, August 29, 1990, and an amendment
dated December 31, 1990.

"Steam Plant" means Syracuse University's existing steam generation facility
as more particularly defined in the Steam Contract.

"Steam Plant Operating Agreement" means the Steam Plant Operating Agreement
dated as of February 27, 1990, between Orange L.P. and Syracuse University, as
amended by the letter agreement dated May 1, 1990.

"Stipulation Reserve Account" means the account of such name created under and
defined in the Deposit and Disbursement Agreement.

"Subordinated Asset Management Fees" means fees and other amounts payable to
Niagara Mohawk Energy Marketing under the Asset Management Agreement and Niagara
Mohawk Energy Marketing Consent and Agreement.

"Subordinated Asset Management Fee Account" means the Account of such name
created under and defined in the Deposit and Disbursement Agreement.

"Subordinated Collateral Documents" means Syracuse University Collateral
Documents.

"Tennessee Gas Pipeline Company" means Tennessee Gas Pipeline Company, a
Delaware corporation.

"Tennessee Gas Pipeline Company Consent and Agreement" means the Consent and
Agreement dated as of a date on or prior to the Original Closing Date among
Tennessee Gas Pipeline Company, Orange L.P. and the Collateral Agent relating to
the Natural Gas Transportation Agreements.

"Tennessee Gas Pipeline Company Firm Gas Transportation Agreement" means that
Firm Natural Gas Transportation Agreement dated March 29, 1991 between Orange
L.P. and Tennessee Gas Pipeline Company.

"Tennessee Gas Pipeline Company Interruptible Gas Transportation Agreement"
means the Gas Transportation Agreement dated as of November 19, 1987 between
Tennessee Gas Pipeline Company and Gas Alternative Systems, Inc., as amended by
that letter agreement dated as of October 4, 1988, and as assigned by Gas
Alternative Systems, Inc. to Orange L.P.

"Title Company" means Ticor Title Insurance Company.

"Title Event" means the existence of any defect of title or lien or
encumbrance on the Project (other than Permitted Liens) that entitles the
Collateral Agent to make a claim under the policy or policies of title insurance
issued to it under

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the Financing Documents or that entitles Orange L.P. to make a claim under any
policy or policies of title insurance held by it.

"Title Event Proceeds" means all amounts and proceeds (including instruments)
received by the Collateral Agent or Orange L.P. in respect of any Title Event.

"TransCanada" means TransCanada Pipelines Limited, a Canadian corporation.

"TransCanada Agreement " means the Firm Service Contract, dated as of October
11, 1990, between TransCanada and Canadian Hunter.

"TransCanada Consent and Agreement" means the Consent and Agreement dated as
of a date on or prior to the Original Closing Date among TransCanada, Canadian
Hunter, Orange L.P. and the Collateral Agent relating to the TransCanada
Agreement.

"Treasury Rate" means, with respect to any date of redemption, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such date of redemption.

"Trustee" means the party named as such above until a successor replaces it in
accordance with the applicable provisions of the Indenture and thereafter means
the successor serving hereunder.

"UCC" means the New York Uniform Commercial Code.

"University Agreements" means the Ground Lease, the Steam Contract, the Steam
Plant Operating Agreement, the University Easement Agreements, the University
Consent and Agreement and the University Security Agreements.

"University Collateral Documents" means the University Facility Mortgage, the
University Pipeline Mortgage and the University Security Agreements. The
University Collateral Documents will be subordinated to the First Mortgage, the
Security Agreement, the SIDA Security Agreement and the Pledge Agreements under
the University Subordination Agreement.

"University Consent and Agreement" means the Consent and Agreement dated as of
a date on or prior to the Original Closing Date, among Orange L.P., Syracuse
University and the Collateral Agent for and on behalf of the Secured Parties ,
relating to, among other things, the Ground Lease Agreement and the Steam
Contract, to be recorded in the Clerk's Office.

"University Easement Agreements" means the City Easement Agreement granted by
Syracuse University described in item 2 of Exhibit A-3 to the First Mortgage and
the Outside Easements granted by Syracuse University described in items 15 and
16 of Exhibit A-5 to the First Mortgage.

"University Facility Mortgage" means the Mortgage and Security Agreement (A),
dated as of April 5, 1991, recorded in the Clerk's Office on May 3, 1991 in Book
5857 at Page 221, as amended by the First Amendment of Mortgage and Security
Agreement (A), dated as of December 24, 1992, recorded in the Clerk's Office on
January 7, 1993 in Book 6731 at Page 254, given by SIDA and Orange L.P. to
Syracuse University relating to the Project and securing Orange L.P.'s
obligation to Syracuse University under the Steam Contract, the Steam Plant
Operating Agreement and the Ground Lease up to a maximum of $20,000,000
principal amount of such obligations.

"University Pipeline Mortgage" means the Mortgage and Security Agreement (B),
dated as of April 5, 1991, recorded in the Clerk's Office on May 3, 1991 in Book
5857 at Page 249, as amended by the First Amendment of Mortgage and Security
Agreement (B), dated as of December 24, 1992, recorded in the Clerk's Office on
January 7, 1993 in Book 6731 at Page 274, given by SIDA to Syracuse University
relating to the Pipeline and securing Orange L.P.'s obligations to Syracuse
University relating to access to the Pipeline upon termination of the Steam
Contract and the Steam Plant Operating Agreement up to a maximum of $10,000,000
principal amount of such obligations.

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"University Security Agreements" means two Security Agreements dated as of
April 5, 1991 among Orange L.P., SIDA and Syracuse University and Orange L.P.
relating to the Orange L.P.'s supply contracts for natural gas and other fuel
and sale contracts for energy and associated capacity, steam and other power and
energy, Orange L.P.'s obligations to Syracuse University under the Steam
Contract, the Steam Plant Operating Agreement and the Ground Lease. There is no
limit on the principal amount of the obligations secured.

"University Subordination Agreement" means the Subordination Agreement dated
as of December 6, 1999 among Syracuse University, Orange L.P. and the Collateral
Agent.

"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors or otherwise entitled to vote in the determination of the management
of such Person.

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FEDERAL INCOME TAX CONSEQUENCES

The following discussion of the material United States federal income tax
consequences of the purchase, ownership and disposition of the notes is based
upon the advice of Piper Marbury Rudnick & Wolfe LLP. The discussion does not
cover all of the tax considerations that may be relevant to a decision to
purchase, own or dispose of the notes. Moreover, the discussion applies to you
only:

(1) if you purchased the old notes in their original offering at their
"issue price" as defined below, and

(2) if you hold your notes as capital assets, and

(3) if you are not are a dealer, financial institution, insurance
company, tax-exempt entity or other investor with special
circumstances or subject to special rules or treatment under
federal income tax laws.

This discussion is based solely on United States federal tax laws and on
administrative and judicial interpretations of these laws, as of the date of
this prospectus, all of which are subject to change, possibly on a retroactive
basis.

This discussion does not address all of the federal income tax consequences
that may be relevant to a particular holder, nor does it address any aspect of
state, local or foreign taxation. Accordingly, you are urged to consult your
own tax advisor as to the United States federal income tax consequences to you
of the purchase, ownership and disposition of the notes as well as about the
effect of any state, local or foreign tax laws.

Holders

This section applies to you if you are a U.S. Holder, i.e., you are, for
United States federal income tax purposes:

(1) a citizen or resident of the United States, or

(2) a corporation or other entity created or organized in or under the
laws of the United States or any political subdivision of the
United States, or

(3) an estate whose income is subject to United States federal income
taxation regardless of its source, or

(4) a trust over which a U.S. court is able to exercise primary
jurisdiction and as to which at least one United States person has
authority to control its substantial decisions.

Exchange of Old Notes for New Notes. U.S. Holders who exchange their Old
Notes for New Notes will not recognize any income, gain or loss for federal
income tax purposes with respect to such exchange, and a U.S. Holder will have
the same tax basis and holding period in the New Notes as such U.S. Holder had
in the old notes.

Interest Income and Original Issue Discount. You will generally be subject
to United States federal income tax on any interest paid on the notes:

(1) when you receive it, if you are a cash method taxpayer (including
most individuals), or

(2) when it accrues, if you are an accrual method taxpayer.

Your interest income will be taxed at ordinary income rates.

In addition, U.S. Holders will be subject to special tax accounting rules
since the notes will have original issue discount for federal income tax
purposes. The amount of original issue discount on a note is the excess of its
"stated redemption price at maturity" (the sum of all principal payments to be
made on the note) over its "issue price." The "issue price" of each note will be
equal to the first price at which a substantial amount of the old notes was sold
for money (excluding sales to bond houses, brokers or similar persons acting as
underwriters, placement agents or

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wholesalers). Each Holder (whether a cash or accrual method taxpayer) will be
required to include in income such original issue discount as its accrues, in
advance of the receipt of cash attributable to that income.

The amount of original issue discount includable in income by the initial
Holder of a note is the sum of the "daily portions" of original issue discount
with respect to the note for each day during the taxable year or portion of the
taxable year on which such Holder held such note ("accrued original issue
discount"). The daily portion is determined by allocating to each day in any
"accrual period" a ratable portion of the original issue discount allocable to
that accrual period. The accrual periods for a note will be periods that are
each selected by the Holder that are no longer than one year, provided that each
scheduled payment occurs either on the final day of an accrual period or on the
first day of an accrual period. The amount of original issue discount allocable
to any accrual period other than the initial short accrual period (if any) and
the final accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and properly adjusted for the
length of the accrual period) reduced by the amount of interest allocable to
that period. The amount of original issue discount allocable to the final
accrual period is the difference between the amount payable at maturity and the
adjusted issue price of the note at the beginning of the final accrual period.
The amount of original issue discount allocable to any initial short accrual
period may be computed under any reasonable method. The adjusted issue price of
the note at the start of any accrual period is equal to its issue price
increased by the original issue discount for all prior accrual periods and
reduced by any prior payments of principal amortized with respect to such note.
The Issuers are required to report the amount of original issue discount accrued
on notes held of record by persons other than corporations and other exempt
Holders, which may be based on accrual periods other than those chosen by the
Holder of the notes. The tax basis of a note in the hands of the Holder will be
increased by the amount of original issue discount on the note that is included
in the Holder's income under these rules, and will be decreased by the amount of
any payments of principal amortized with respect to the note.

Gain or Loss on Sale or Disposition. You will generally be subject to
federal income tax on any gain derived from the sale or other disposition of
your notes, including their redemption by us. The amount of your gain or loss
will be equal to the difference between the amount realized from the disposition
of the notes and your adjusted tax basis in the notes. Your gain or loss will be
a long-term capital gain or loss if you held your notes for more than one year
and a short-term capital gain or loss otherwise. If you sell your notes between
interest payment dates, a portion of the proceeds from the sale will reflect
accrued but unpaid interest and will be taxed at ordinary income rates if you
are a cash basis taxpayer.

Backup Withholding and Information Reporting. If you are an individual or a
noncorporate entity, you may be subject to backup withholding at a rate of 31%
on payments in respect of, and the proceeds of disposition of, the notes. Backup
withholding will apply only if you:

(1) fail to furnish your taxpayer identification number which, for an
individual, would be your Social Security number,

(2) furnish an incorrect taxpayer identification number,,

(3) are notified by the Internal Revenue Service that you have failed
to properly report payments of interest and dividends, or

(4) fail to certify, under penalty of perjury, that you have furnished
a correct taxpayer identification number, on Form W-9 or a
substantially similar form and have not been notified by the
Internal Revenue Service that you are subject to backup withholding
for failure to report interest and dividend payments.

The amount of any backup withholding from a payment to you will be allowed as
a credit against your United States federal income tax liability and may entitle
you to a refund.

-139-
<PAGE>

Taxation of non-U.S. Holders

This section applies to you if you are a non-U.S. Holder, i.e., you are, for
United States federal income tax purposes:

(1) a nonresident alien individual, or

(2) a foreign corporation, or

(3) an estate whose income is not subject to United States federal
income taxation regardless of its source, or

(4) a trust over which a U.S. court is unable to exercise primary
jurisdiction or as to which no United States person has authority
to control its substantial decisions.

Interest Income. You will generally not be subject to United States
withholding tax on any payment of principal, original issue discount or interest
on the notes provided that:

(1) you do not own, actually or constructively, 10% or more of either
our capital or profits, and

(2) you are not a "controlled foreign corporation" related to us,
and

(3) you are not a bank extending credit under the loan to us in the
ordinary course of your business, and

(4) you (or your agent) certify, under penalties of perjury, that you
are a beneficial owner of the notes and not a U.S. Holder and you
(or your agent) provide us or our paying agent with Form W-8 or
Form W-8BEN containing your name and address.

In addition, you will not be subject to the United States withholding tax on
any original issue discount or interest paid on the notes:

(1) if you hold the notes in connection with your U.S. trade or
business and you (or your agent) submit Form 4224 or Form W-8ECI,
or

(2) you are exempt under an applicable tax treaty and you (or your
agent) submit Form 1001, Form W-8 or Form W-8BEN (if you are
partially exempt, you will be subject to a U.S. withholding tax at
such reduced treaty rate).

Consult your tax advisor about the specific procedures for satisfying these
requirements and about the new procedures which may or could come into effect on
January 1, 2001. You will be subject to withholding if the paying agent knows
that a form you submitted to obtain exemption contains false information.

U.S. Trade or Business. If you hold the notes in connection with your trade
or business in the United States:

(1) you will be taxed on any interest income and original issue
discount and any gain from sale or disposition of the notes as if
you were a U.S. Holder, and

(2) if you are a corporation, you also may be subject to a "branch
profits tax" in the amount of 30% (subject to reduction by a tax
treaty) of your income from the notes.

Gain or Loss on Sale or Disposition. Generally, you will not be subject to
federal income tax on any gain derived from the sale or other disposition of
your notes, including their redemption by us unless:

(1) part of the gain represents accrued but unpaid interest, in which
case the rules for taxation of the interest apply;

-140-
<PAGE>

(2) the gain is connected with your trade or business in the United
States, or

(3) you are otherwise a non-resident alien individual for federal
income tax purposes and you are present in the United States for
183 or more days during the year in which you dispose of the notes
(which results in your becoming a resident alien for federal income
tax purposes), or

(4) you are subject to tax under the law related to the taxation of
United States expatriates.

Estate Taxes. If you are an individual, the notes will not be subject to the
United States federal estate tax when you die, unless, at the time of your
death:

(1) payments on the notes were connected to a trade or business
conducted by you in the United States, or

(2) you owned 10% or more of the capital or profits interest in
us.

Backup Withholding and Information Reporting. General information reporting
and backup withholding rules applicable to the U.S. Holders will not apply to
your receipt of payments of principal or interest on the notes if you provide
proper certifications which exempt you from paying a withholding tax on these
payments, as described above. However, the paying agent will report its payments
to you of interest on the notes to the IRS. You will be subject to backup
withholding if the paying agent knows that a form you submitted to obtain
exemption from withholding tax contains false information.

If you sell or dispose of your notes through a U.S. office of a broker, the
proceeds may be subject to backup withholding and information reporting if you
do not qualify for an exemption. Under current law, however, if you sell or
dispose of your notes through a foreign office of a broker, the proceeds will
not be subject to backup withholding but may be subject to information reporting
if the broker has specific connections to the United States. Consult your tax
advisor about a specific application of these rules to your particular
circumstances.

-141-
<PAGE>

PLAN OF DISTRIBUTION

Each broker-dealer that receives new notes for its own account under the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for old notes where such old
notes were acquired as a result of market-making activities or other trading
activities.

We will not receive any proceeds from any sale of new notes by broker-dealers.
New notes received by broker-dealers for their own account under the exchange
offer may be sold from time to time:

(1) in one or more transactions in the over-the-counter market,

(2) in negotiated transactions,

(3) through the writing of options on the exchange bonds, or

(4) a combination of such methods of resale.

(5) Such bonds may be sold:

(6) at market prices prevailing at the time of resale,

(7) at prices related to such prevailing market prices, or

(8) at negotiated prices.

Any such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such New Notes.

Any broker-dealer that resells New Notes that were received by it for its own
account under the exchange offer and any broker or dealer that participates in a
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act. Any profit on any such resale of exchange bonds
and any commissions or concessions received by any of them may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.

We have agreed to pay all expenses incident to the exchange offer other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the notes, including any broker-dealers, against some liabilities,
including liabilities under the Securities Act.

LEGAL MATTERS

Piper Marbury Rudnick & Wolfe LLP, New York, New York, will provide us with an
opinion as to legal matters in connection with the notes offered by this
prospectus.

EXPERTS

The financial statements of Project Orange Associates, L.P. as of December 31,
1999 and 1998 and for each of the three years in the period ended December 31,
1999 included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing in this prospectus,
and have been so included in reliance

-142-
<PAGE>

upon the report of such firm giving upon their authority as experts in
accounting and auditing.

Stone & Webster Management Consultants, Inc. has prepared the Independent
Engineer's Report dated December 2, 1999, included in this prospectus as Exhibit
A. The Independent Engineer's report was prepared in connection with the
offering of the Old Notes and has not been updated since then. The Independent
Engineer's Report should be read in its entirety for additional information
about the Project and the other matters addressed. In reaching its conclusions,
Stone & Webster Management Consultants, Inc. has utilized the sources of
information described in the Independent Engineer's Report and believes that the
use of such information is reasonable for the purposes of its Independent
Engineer's Report. We included the Independent Engineer's Report in this
prospectus in reliance upon the conclusions of the Independent Engineer and upon
such firm's experience in preparing independent engineer's reports for similar
projects.

WHERE YOU CAN FIND MORE INFORMATION

We will file annual, quarterly and special reports, and other information with
the SEC under the Exchange Act. You may read and copy any documents we file at
the following SEC public reference rooms:

<TABLE>
<CAPTION>
<S> <C> <C>
Judiciary Plaza 500 West Madison Street 7 World Trade Center
450 Fifth Street, N.W. 14th Floor Suite 1300
Rm. 1024 Chicago, Illinois 60661 New York, New York
Washington, D.C. 20549 10048
</TABLE>

You may obtain information on the operation of the public reference room in
Washington, D.C. by calling the SEC at 1-800-SEC-0330. We will file information
electronically with the SEC. Our SEC filings are available from the SEC's
Internet Site at http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding issuers that file
electronically. You may read and copy our SEC filings and other information at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006

We have filed with the SEC a registration statement on Form S-4 under the
Securities Act. This prospectus does not contain all of the information in the
registration statement. We have omitted parts of the registration statement as
permitted by the rules and regulations of the SEC. You may inspect and copy the
registration statement, including exhibits, at the SEC's public reference
facilities or Internet site. Our statements in this prospectus about the
contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.

-143-
<PAGE>

INDEX TO FINANCIAL STATEMENTS

PROJECT ORANGE ASSOCIATES, L.P.

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
. Independent Auditors' Report........................................................ F-2
. Balance Sheets as of December 31, 1999 and 1998..................................... F-3
. Statements of Operations for the years ended December 31, 1999, 1998 and 1997....... F-4
. Statements of Partners' Capital for the years ended December 31, 1999, 1998 and 1997 F-5
. Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997....... F-6
. Notes to Financial Statements....................................................... F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Partners of Project Orange Associates, L.P.

We have audited the accompanying balance sheets of Project Orange Associates,
L.P. as of December 31, 1999 and 1998, and the related statements of operations,
partners' capital and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Project Orange Associates, L.P. as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles.

/s/ Deloitte & Touche LLP

March 30, 2000
Parsippany, New Jersey

F-2
<PAGE>

PROJECT ORANGE ASSOCIATES, L.P.
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(Dollars in Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1999 1998
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents - unrestricted $ 5,063 $ 6,683
Restricted cash (Note 10) 9,200 --
Accounts receivable (allowance for doutful 6,713 3,389
accounts, $0 - 1999 and 1998)
Prepaid expenses 321 392
Other current assets 14 289
--------- ---------

Total current assets 21,311 10,753
--------- ---------

NONCURRENT ASSETS:
Restricted cash and cash equivalents (Note 10) 4,215 12,603
Swap contract (Note 4) 69,409 78,773
Property, plant and equipment - net (Note 8) 88,570 98,177
Prepaid gas supply - net (Note 9) 53,789 57,634
Deferred financing costs 7,283 --
-- --

Total noncurrent assets 223,266 247,187
--------- ---------

TOTAL ASSETS $ 244,577 $ 257,940
========= =========

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
Accounts payable, trade $ 4,253 $ 3,466
Accrued liabilities 1,474 2,254
Current portion of long-term debt (Note 10) 6,800 --
Deferred revenue - Master Restructuring Agreement (Note 4) 24,697 23,649
--------- ---------

Total current liabilities 37,224 29,369
--------- ---------

LONG-TERM LIABILITIES:
Long-term debt (Note 10) 60,054 --
Deferred gas payments (Note 9) -- 11,280
Deferred revenue - Master Restructuring Agreement (Note 4) 175,040 200,785
--------- ---------

Total long-term liabilities 235,094 212,065
--------- ---------

COMMITMENTS AND CONTINGENCIES

PARTNERS' CAPITAL (Note 11)
General Partners (622) 95
Limited Partners (27,119) 16,411
--------- ---------

Total Partners Capital (27,741) 16,506
--------- ---------

TOTAL LIABILITIES AND PARTNERS'

CAPITAL $ 244,577 $ 257,940
========= =========
</TABLE>

See notes to financial statements.

F-3
<PAGE>

PROJECT ORANGE ASSOCIATES, L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in Thousands)
- ------------------------------------------------------------------------------------------------------------------------

1999 1998 1997

<S> <C> <C> <C>
REVENUES (Note 4):
Electricity $ 39,919 $ 41,308 $ 37,304
Gas 469 - -
Steam 2,929 2,693 3,194
Deferred amortization income 15,333 7,666 -
------- ------ -------

Total revenues 58,650 51,667 40,498
------- ------- ------

OPERATING EXPENSES:
Operating and maintenance expenses 15,158 18,095 17,595
Other operating expenses 5,544 5,419 4,218
Depreciation and amortization 10,125 6,718 3,221
Amortization of swap contract (Note 4) 9,364 4,382 -
Amortization of prepaid gas supply 3,845 4,895 3,897
------ ------ ------
Total operating expenses 44,036 39,509 28,931
------ ------ ------

OPERATING INCOME 14,614 12,158 11,567
------- ------- ------

OTHER INCOME AND EXPENSE:
Interest expense 476 7,364 14,694
Interest income (272) (235) (438)
------ ------ -----

Total other income and expense 204 7,129 14,256
------ ------ ------

NET INCOME (LOSS) $ 14,410 $ 5,029 $ (2,689)
========= ======== =========

See notes to financial statements.
</TABLE>
F-4
<PAGE>

PROJECT ORANGE ASSOCIATES, L.P.
STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in Thousands)
- ---------------------------------------------------------------------------------------------------------------------------------

NCP
Syracuse GAS LP SOP GAS Orange Total
-------- -------------------------- --- ------------------------ -----
General General Limited Limited General Limited

BALANCE, JANUARY 1, 1997
<S> <C> <C> <C> <C> <C> <C> <C>
$ 221 $ 111 $ 999 $ 20,601 - - $ 21,932

Net loss (27) (27) (242) (2,393) - - (2,689)
----- ----- ------ -------- -- -- -------

BALANCE, DECEMBER 31, 1997 194 84 757 18,208 - - 19,243

Net income 51 50 452 4,476 - - 5,029

Distribution of capital (78) (206) (1,853) (5,629) - - (7,766)
----- ------ -------- -------- -- -- -------

BALANCE, DECEMBER 31, 1998 167 (72) (644) 17,055 - - 16,506
(Note 11)
Net income 72 72 645 6,387 - - 7,176

Distribution of earnings (41) (198) (1,782) (2,092) - - (4,113)

Distribution of capital (32) (32) (289) (2,855) - - (3,208)
----- ----- ------ -------- -- -- -------

BALANCE, JUNE 30, 1999 166 (230) (2,070) (18,495) - - 16,361

Net income - 72 651 - $ 72 $ 6,439 7,234

Distribution of earnings (53) (194) (1,747) (3,301) - - (5,295)

Distribution of capital - - - - (512) (45,529) (46,041)

Acquisition of partnership interests (113) - - (15,194) 170 15,137 -
------ -- -- --------- ---- ------- --------

BALANCE, DECEMBER 31, 1999 $ - $ (352) $ (3,166) $ - $ (270) $ (23,953) $(27,741)
==== ======== ========== ==== ======== =========== ==========

</TABLE>

See notes to financial statements.

F-5
<PAGE>

PROJECT ORANGE ASSOCIATES, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(Dollars in Thousands)
- -----------------------------------------------------------------------------------------------------------------------

1999 1998 1997

<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 14,410 $ 5,029 $ (2,689)
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation and amortization 10,126 6,718 3,221
Amortization of prepaid gas supply 3,845 4,895 3,897
Amortization of deferred gain (15,333) (7,666) -
Changes in assets and liabilities:
Decrease (increase) in escrowed
construction funds - 1,217 (161)
Increase in restricted cash and cash equivalents (9,200) - -
(Increase) decrease in accounts receivable (3,324) 262 (1,108)
Decrease (increase) in prepaid expenses 71 (24) -
Increase (Decrease) in accounts
payable and accrued liabilities 7 (2,750) 1,398
Other current assets 275 (192) (20)
------ -------- -------

Net cash provided by operating
activities 877 7,489 4,538
------ -------- -------

INVESTING ACTIVITIES:
Payment for equipment (440) (44) (40)
Payment of deposits (2,892) (1,317) -
Receipt of restructuring proceeds - 180,293 -
------ -------- -------

Net cash (used in) provided by
investing activities (3,332) 178,932 (40)
-------- -------- -------

FINANCING ACTIVITIES:
Repayment of long-term debt - (160,030) (4,032)
Proceeds from bond issuance 66,843 - -
Payment of debt issuance costs (7,351) (17,557) -
Distribution to partners (58,657) (7,766) -
--------- -------- -------

Net cash provided by (used in) financing activities 835 (185,353) (4,032)
--------- ---------- -------

NET CHANGE IN UNRESTRICTED CASH
AND CASH EQUIVALENTS (1,620) 1,068 466

UNRESTRICTED CASH AND CASH
EQUIVALENTS, BEGINNING OF YEAR 6,683 5,615 5,149
------- ------ -----

UNRESTRICTED CASH AND
CASH EQUIVALENTS, END OF YEAR $ 5,063 $ 6,683 $ 5,615
======== ======== =======

SUPPLEMENTAL DISCLOSURE:
Interest paid $ 534 $ 8,741 $ 14,176
====== ======== ========

See notes to financial statements.
</TABLE>
F-6
<PAGE>

PROJECT ORANGE ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------

1. THE PARTNERSHIP

Project Orange Associates, L.P. is a Delaware limited partnership (the
"Partnership") between G.A.S. Orange Partners, L.P. ("GAS LP") and GAS
Orange Associates, L.L.C. ("GAS Orange"). GAS LP is a 1% general partner and
a 9% limited partner. GAS Orange is a 1% general partner and a 89% limited
partner. Project Orange Capital Co. ("Capital"), a Delaware corporation, is
a wholly owned by the Partnership.

In November 1999, Project Orange Funding, L.P. ("Funding L.P."), a Delaware
limited partnership, and Capital were formed in connection with the
securities regulations of various states, for the sole purpose of issuing
$68,000,000, aggregate principal amount of 10.5% Senior Secured Notes due
2007. Funding L.P. and Capital were nominally capitalized, have no operating
activities and no assets. Upon consummation of the issuance of the Senior
Secured Notes on December 6, 1999, and pursuant to an Agreement of Merger
between the Partnership and Funding L.P., Funding L.P. was merged with and
into the Partnership.

On July 29, 1999, NCP Syracuse, Inc. ("NCP Syracuse") and Syracuse Orange
Partners, L.P. ("SOP") entered into a Partnership Interests Purchase and
Sale Agreement to sell all of their respective interests in the Partnership,
together with all of the rights and obligations under the Partnership
Agreement, to GAS Orange. On December 6, 1999, the Partnership made a
distribution to GAS Orange to acquire an aggregate 89% limited partnership
interest and a 1% general partnership interest in the Partnership from SOP
and NCP Syracuse, respectively, pursuant to the Partnership Interests
Purchase and Sale Agreement, as amended.

Prior to the change in ownership, NCP Syracuse acted as the managing general
partner. SOP was a 89% limited partner and GAS LP was a 1% general partner
and a 9% limited partner. NCP Energy, Inc. ("NCP Energy"), a wholly-owned
subsidiary of GPU International, Inc. ("GPUI"), which owned a limited
partnership interest in SOP, managed the Partnership under an agreement with
NCP Syracuse. Prior to the Partnership Interest and Purchase Sale Agreement
the distribution of available cash was dependent upon the internal rate of
return (IRR) generated by the Partnership's Project assets and the level of
available cash (tranche) in a given year. The following table summarizes the
sharing formulas:

<TABLE>
<CAPTION>
NCP SOP GAS LP
<S> <C> <C> <C>
Prior to achieving 19% IRR:
Within 20 years of term conversion date:
- up to tranche 1 1% 89% 10%
- up to 1 to tranche 2 1 19 80
- above tranche 1 49 50
Above 20 years of term conversion date 1 89 10

After achieving 19% IRR:
Within 20 years of term coversion date 1 49 50
20 year after tern coversion date 1 24 75

After achieving 20% IRR 1 24 75
</TABLE>

F-7
<PAGE>

The principal asset of the Partnership is an 80 megawatt natural gas-fired
cogeneration plant located in Syracuse, New York (the "Facility") with a 9.5-
mile interconnecting natural gas pipeline from the Tennessee Gas Pipeline
Company ("TGPL"), which together constitute the Project (the "Project"). The
Facility generates electricity for sale to the New York Independent System
Operator (the "Power Exchange") and Niagara Mohawk Power Corporation ("NIMO")
pursuant to a Power Put Agreement, which expires no later than 2008. The
Facility also sells steam to Syracuse University (the "University") for its
steam distribution systems pursuant to a Steam Sale Agreement, which expires
in July 2032. The Steam Sale Agreement requires the University to accept
delivery of and pay for minimum quantities of steam.

The Partnership and the University have also entered into an Steam Plant
Operating Agreement, which expires in July 2032, under which the Partnership
operates, as a back-up to the Facility, certain existing steam facilities
owned by the University. Pursuant to this agreement, the Partnership is
required to pay a specified annual user charge to the University of
$1,250,000 beginning in July 1998 and escalating to $1,550,000 during the
last 10 years of the agreement. In accordance with the terms of the
agreement, the Partnership paid annual user charges of $1,250,000 to the
University in 1999 and 1998. Such payments are included in other operating
expense on the Statement of Operations. At December 31, 1999 and 1998,
$625,000 was included in accrued liabilities.

Gas required to operate the Facility is provided by Noranda Inc. (Noranda) as
the seller and Canadian Hunter Exploration, Ltd. (Canadian Hunter), as the
agent for the seller, pursuant to a Gas Sale and Purchase Agreement which
expires in July 2012 (see Note 9). The natural gas is transported by Nova
Corporation and TransCanada Pipeline Ltd. to an interconnect with the TGPL
system where the Partnership takes possession and transports the natural gas
through the 9.5-mile interconnecting pipeline. The Partnership holds
transportation space on the TGPL system pursuant to a Firm Natural Gas
Transportation Agreement (Firm Transportation Agreement) which expires in
July 2012.

The Partnership entered into the Ground Lease with the University dated
February 27, 1990, as amended, pursuant to which the University leased to the
Partnership the parcel of land on which the Project was constructed. In
connection with the issuance by the Syracuse Industrial Development Agency
(SIDA) of its 1991 Taxable Industrial Development Revenue Bonds (Project
Orange Associates, L.P.), the proceeds were used by the Partnership to
finance, among other things, the development, acquisition and construction of
the Project and to obtain a prepaid supply of natural gas for the Project,
the Partnership assigned to SIDA the rights, title and interest in and to the
premises under the Ground Lease pursuant to an assignment of lease dated as
of April 5, 1991.

At the same time the Partnership entered into the Master Lease with SIDA,
dated as of April 5, 1991 under which the Partnership (a) sublets from SIDA
the premises and easements which had been assigned to SIDA by the Partnership
and (b) leases from SIDA the Project, easements granted to SIDA by the City
of Syracuse and all personal property acquired by SIDA for use in connection
with the Project.

Under the terms of the Ground Lease, the Partnership is required to pay the
University a nominal annual rent of one dollar for the premises. The Ground
Lease is a net lease whereby all costs, expenses and obligations relating to
the Project or the premises are paid by the Partnership. The Master Lease
provides for a nominal annual rent payment of one dollar. The term of the
Ground Lease shall expire on the date the Steam Contract expires, unless
terminated earlier in accordance with the Ground Lease. The term of the
Master Lease will continue until the earlier of (i) the termination of the
Ground Lease, as it may be extended, or (ii) the termination or expiration of
the term of the PILOT Agreement. During the term of the Ground Lease and the
Master Lease, the Project will be owned by SIDA. On the termination or
expiration of the Master Lease, the Partnership will purchase from SIDA for a
nominal fee of one dollar,

F-8
<PAGE>

SIDA's entire right, title and interest in the Project and any improvements
to the premises. On the expiration or earlier termination of the Ground
Lease, the Project and any improvements to the premises will become the
property of the University without any further consideration by the
University.

The Partnership entered into a Payment in Lieu of Tax Agreement dated April
5, 1991 (PILOT Agreement) with the City of Syracuse and SIDA, under which the
Partnership makes payments in lieu of real property taxes to the City of
Syracuse for approximately 20 years with respect to the portion of the
Project lying within the boundaries of the City of Syracuse. In
consideration of the Master Lease, the PILOT Agreement requires the
Partnership to pay the City of Syracuse an annual payment in lieu of real
property taxes. The amount fluctuates annually as a function of the change
in the tax rate applicable to the premises each year and is further adjusted
based on the electric rates and revenue that the Project generates from
electricity sales. The PILOT Agreement will terminate on the earlier of July
22, 2012, which is the twentieth anniversary of the date of substantial
completion of the Project, or upon termination of the Master Lease.

During the formation and development of the Project and in the normal course
of its operations, the Partnership had various material transactions with
affiliates (see Note 12).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements, and revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Cash Equivalents - The Partnership classifies all short-term investments with
original maturities of three months or less as cash equivalents. Cash
equivalents consist of short-term investments in commercial paper.

Financial Instruments - In 1998, the Partnership entered into foreign
currency options to reduce exposure to exchange rate fluctuations relative to
the production and transportation of fuel received from Canadian Hunter.
These options give the Partnership the right, but not the obligation, to buy
foreign currency at a specific price. The Partnership's exposure to loss
from changes in the relative value of the currency is limited to the amount
paid for the options. No options were entered into as of December 31,
1999.

The Partnership entered into an Indexed Swap Agreement to manage the price of
electricity (see Note 4).

In 1998, the Partnership used interest rate swaps as hedges to manage the
proportions of fixed versus floating rate debt. Differences between amounts
paid and received under interest rate swaps were recorded as adjustments to
the interest expense of the underlying debt.

The Partnership does not hold or issue financial instruments for trading
purposes.

Property, Plant and Equipment - All costs of developing and constructing the
Facility and the related pipeline were capitalized, including direct
construction costs, interest on funds advanced for construction, fees paid to
various parties for development of the Project, costs associated with
obtaining the nonrecourse financing for the Project and costs of negotiating
contracts.

F-9
<PAGE>

Prior to the MRA, capitalized costs were depreciated on a straight-line basis
over the estimated useful life which was determined to be the life of the
Power Purchase and Steam Sale Agreements remaining at December 24, 1992 (39.6
years). In connection with consummation of the MRA on June 30, 1998 and the
amendment of the Power Purchase Agreement with NIMO, management determined
that the remaining costs should be depreciated on a straight-line basis over
10 years in conjunction with the Power Put Agreement and the Index Swap
Agreement, each of which expires in June 2008 (see Note 4). The affect was
to increase deprecation expense by approximately $3,391,000 and $6,815,000 in
1998 and 1999, respectively. Furniture and fixtures within the Facility are
depreciated on a straight-line basis over their estimated useful life of five
years.

Deferred Revenue - Master Restructuring Agreement (MRA) - Deferred revenue on
the MRA represents the Indexed Swap Agreement and the gain on amounts
received from the restructuring of the Partnership's power purchase agreement
with NIMO. This deferred revenue is being recognized in income over the
earlier of a 10-year period or when certain rights under the Power Put
Agreement between the Partnership and NIMO expire, at which time the
unamortized deferred revenue will be recognized in income (see Note 4).

Revenue Recognition - The Partnership recognizes revenues when electricity
and steam are delivered under the terms of the related contracts.
Additionally, the Partnership periodically sells a portion of its prepaid gas
supply when the gas is not used to operate the plant.

Impairment of Long-lived Assets - Statement of Financial Accounting Standards
No. 121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of requires the review for possible impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. In performing the reviews for recoverability,
the Partnership estimates the future cash flows expected to result from the
use of the asset and its eventual disposition. If the sum of the expected
future cash flows (undiscounted and without interest charges) is less than
the carrying amount of the asset, an impairment loss is recognized.
Otherwise, an impairment loss is not recognized. Measurement of an
impairment loss for long-lived assets that an entity expects to hold and use
should be based on the fair value of the asset.

Management continually monitors the effects of the energy industry
deregulation and the market prices of electricity to determine if an
impairment loss should be recognized. Based upon the estimated future cash
flow of the Project, there was no impairment to recognize as of December 31,
1999.

Amortization of Prepaid Gas Supply - In connection with the consummation of
the MRA and the amendment of the Power Purchase Agreement with NIMO, the
remaining balance of the prepaid gas supply is being amortized using a fixed
per unit rate based upon the gas used. Prior to the MRA, the Partnership
amortized the prepaid gas supply on increasing per unit amounts of expense
inherent in the negotiations of the gas supply contract, offset by decreasing
amounts of financing costs associated with the prepayment of the gas (see
Note 9).

Deferred Financing and Bond Issuance Costs - Deferred financing and bond
issuance costs are amortized over the life of the Senior Secured Notes.

Income Taxes - The Partnership is not considered a taxable entity for Federal
and state income tax purposes. Any taxable income or losses, credits and
certain other items, therefore, are reported by the partners on their own tax
returns in accordance with the Partnership Agreement.

Reclassifications - Certain amounts from the prior year financial statements
have been reclassified to conform with the current year presentation.

F-10
<PAGE>

3. NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (SFAS 133), as amended by SFAS
No. 137 Deferral of the Effective Date of FASB Statement No. 133. This
Statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts. The Partnership is currently evaluating the requirements of this
accounting standard, which is required to be adopted in the first quarter of
2001.

4. POWER PUT AND INDEXED SWAP AGREEMENTS

On June 30, 1998, NIMO consummated the MRA whereby substantially all of its
independent power producer (IPP) agreements were renegotiated resulting in
lump sum payments to the IPPs and/or new contracts with NIMO. As a result of
this transaction, NIMO and the Partnership amended the then existing power
purchase agreement, which would have expired in July 2032, with a Power Put
Agreement and an Indexed Swap Agreement, each of which expire in June 2008.
In addition, the Partnership received cash proceeds from NIMO as part of the
MRA resulting in a gain of $153,327,045 (net of the interest rate swap
breakage fees and other transaction fees), which is included in deferred
revenue - MRA. For the years ended, 1999 and 1998, the Partnership recorded
amortization of deferred revenue in the amount of $15,332,705 and 7,666,352,
respectively, relating to this deferred gain.

The Power Put Agreement gives the Partnership the right, but not the
obligation, to sell up to 663,000 MWh plus 5% of energy and associated
capacity to NIMO annually at a proxy-market price and at the prevailing
market price after establishment of the Power Exchange. In the event that
the Partnership chooses to sell energy and capacity to third parties, NIMO
has the right of first refusal to purchase such energy and capacity. At the
time the Power Exchange achieves a competitive market for electricity,
certain rights between the Partnership and NIMO expire under the Power Put
Agreement. The Power Put Agreement provides that the Power Exchange must
achieve certain volumetric tests for a six-month period, subsequent to the
initial establishment of the Power Exchange, in order to establish a
competitive market price. Thereafter, the Partnership is expected to sell
electricity into the Power Exchange at the prevailing market price. These
volumetric tests are expected to be achieved during the second half of 2000.
The unamortized balance of the deferred gain will be recognized in income
upon the expiration of the aforementioned rights under the Power Put
Agreement.

The Indexed Swap Agreement is a financial instrument, which acts as a
financial hedge against movements in the price of electricity and is not a
contract for the actual physical delivery or purchase of electricity. The
Partnership pays NIMO floating market price and NIMO pays the Partnership a
contract price which is fixed for the first two years and subsequently
adjusted monthly according to an indexing formula for the remaining term.
The notional amount of the swap (663,000 MWh annually) is based on the
contracted quantity of energy and capacity. The market price that the
Partnership pays NIMO under the Indexed Swap Agreement is equivalent to the
market price that the Partnership receives from either NIMO under the Power
Put Agreement or a third party for sales to the Power Exchange. The index
swap agreement will terminate on June 30, 2008, unless terminated early as
provided for in the agreement.

If the Power Exchange market price of electricity exceeds the fixed payment
price under the indexed swap agreement with NIMO, and the Partnership is
unable, by reason of equipment failure or otherwise, to generate and sell
sufficient electricity into the Power Exchange market to meet its floating
payment obligation to NIMO under the indexed swap agreement (which causes the
Partnership to default on its payment obligation under the indexed swap
agreement), then NIMO may terminate the indexed swap agreement. If NIMO
terminates the indexed swap agreement, this would have a material adverse
effect

F-11
<PAGE>

on the Partnership's revenues and could make the Partnership unable to make
payments of principal and interest on the Senior Secured Notes when due.

The fair value of the Indexed Swap Agreement on December 31, 1999 and 1998
amounted to $69,408,940 and $78,772,744, respectively, and is included in
Swap contract in the balance sheet. The initial valuation was derived using
the discounted estimated cash flows related to payments expected to be
received by the Partnership. A corresponding amount was recorded in deferred
revenue-MRA and is being recognized to income based upon the swap payments
received from NIMO. The deferred revenue will be recognized over the earlier
of a ten-year period or when the rights referred to above between the
Partnership and NIMO expire under the Power Put Agreement. For the years
ended December 31, 1999, and 1998, the Partnership recognized $9,363,804 and
$4,382,190, respectively, of deferred swap revenue (included in electricity
revenue in the Statement of Operations) and similar amounts of swap contract
amortization expense. The unamoritized balance of the deferred swap revenue
will be recognized in income upon the expiration of the Power Put
Agreement.

At December 31, 1999 and 1998, the components of deferred revenue-Master
Restructuring Agreement on the balance sheet are as follows:

December 31
1999 1998

Current:
Power Purchase Contract Amendment $ 15,333 $ 15,333
Index Swap 9,364 8,316
-------- --------
Total $ 24,697 $ 23,649
======== ========

Long Term:
Power Purchase Contract Amendment $ 114,996 $131,376
Index Swap 60,044 69,409
--------- --------
Total $ 175,040 $200,785
========= ========

5. OPERATIONS, MAINTENANCE AND ASSET MANAGEMENT AGREEMENTS

In November 1998, the Partnership entered into an amended Operations and
Maintenance Agreement (O&M Agreement) with General Electric International,
Inc. (GEI, formerly General Electric Energy Plant Operations) which expires
in April 2008. As a result of its acquisition of the gas turbine division of
Stewart & Stevenson Services, Inc. (SSSI), GEI assumed the contractual
obligations of Stewart & Stevenson Operations, Inc. (SSOI), which operated
the Facility for the Partnership pursuant to an O&M Agreement that would have
expired in July 2008. GEI and SSOI were related parties through their
affiliation with General Electric Business Asset Funding and SSSI, which, in
turn held limited partnership interests in SOP.

Under the terms of the O&M Agreement, GEI receives payment for all expenses
incurred related to the operation, maintenance, spare parts and repair of the
Facility in addition to reimbursable expenses and certain fixed fees. The
Partnership has the option for an extension of the O&M Agreement up to eight
additional years from the April 2008 expiration date. For the years ended
December 31, 1999, 1998 and 1997, the Partnership recorded such expenses of
$4,352,203, $4,602,341 and $5,895,532, respectively.

F-12
<PAGE>

As part of a separate agreement, the Partnership is a member in a lease
engine support program under which, if either of the Project's gas turbine
generators becomes inoperable, GEI will, within 72 hours of the outage,
deliver and install leased gas turbine equipment until the damaged gas
turbine can either be repaired or replaced. If GEI fails to deliver a leased
generator within such time frame, GEI will be liable for significant hourly
and daily late delivery penalties, subject to a specified maximum liability
per occurrence. The Engine Lease Agreement provides that the Partnership
will pay GEI an annual fee of $340,000 for dual coverage plus certain weekly
use rates fees which are incurred during any period after a lease unit is
delivered to the Project. Either party may terminate the Engine Lease
Agreement if the other party has committed a material breach thereof and the
beach has not been remedied within 10 days of written notice of such breach.
The Partnership may cancel the Engine Lease Agreement prior to December 2000
without penalty or at any time there after, but will be liable, for any
outstanding and unpaid amounts and for payment of a portion of the unpaid
annual fee for all remaining years in the stated term of the Engine Lease
Agreement. The parties may also cancel the Engine Lease Agreement by mutual
written agreement without penalty to either party.

The Partnership owed GEI $2,889,022 in payments related to amounts due SSOI
under the prior O&M Agreement, primarily for accumulated operational bonuses.
In order to settle this obligation, the Partnership made a one time cash
payment of $1,625,000 to GEI at the consummation of the new O&M Agreement.
The remaining $1,264,022 was recorded as a reduction in Other operating
expenses in the statement of operations for the year ended December 31, 1998.

Pursuant to an Asset Management Agreement dated December 6, 1999 entered into
with Niagara Mohawk Energy Marketing (NME), NME manages the business
operations and finances of the Partnership and is paid a fixed monthly fee
which will escalate pursuant to an annual inflation adjustment beginning in
January 2001. NME is a wholly owned subsidiary of Niagara Mohwak Energy.
The management fee expense for 1999 was $18,347 which was included in accrued
liabilities.

6. FOREIGN CURRENCY OPTIONS

On November 30, 1998, the Partnership purchased twelve monthly Canadian
dollar options to reduce its exposure to exchange rate fluctuations between
the Canadian dollar and the U.S. dollar based upon 75% of the Partnership's
estimated 1999 monthly fuel expense. The Partnership's exposure to losses
from changes in the relative value of the currency is limited to the cost of
the options, which was $150,000. The premium paid was recorded in other
current assets on the balance sheet and was expensed, net of any gains, at a
specified amount each month during 1999. All of the options were exercised
as of December 31, 1999. The partnership recognized a net gain of $80,639
from such options, which was recorded as a reduction to fuel expense.

7. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Partnership's financial instruments, and the
methods and assumptions used to estimate the fair value of each class of
financial instruments, include:

Cash, Cash Equivalents and Escrowed Construction Funds - The carrying amount
approximates fair value because of the short maturity of those instruments.

Swap Contract - The fair value of the swap contract approximates the carrying
amount. The fair value represents estimated cash flows discounted at 13%
based on historical equity returns.

F-13
<PAGE>

Long-Term Debt - The fair value of the Partnership's long-term debt as of
December 31, 1999 is approximately $68,000,000 and is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Partnership for debt of the same remaining maturities.

Foreign Currency Options - The fair value of the options are derived by
obtaining estimated market prices for each transaction from a broker. As of
December 31, 1998, the fair value of such options approximates the carrying
amount. At December 31, 1999, there were no options outstanding (see Note
6).

8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment was comprised of the following:

December 31,
1999 1998

Development costs $21,674 $ 21,674
Facility construction costs 91,128 90,689
Pipeline construction costs 8,333 8,333
------- --------
121,135 120,696

Less accumulated depreciation 32,565 22,519
------- --------
Total property, plant and equipment - net $88,570 $ 98,177
======= ========

9. PREPAID GAS SUPPLY

In accordance with the terms of the Gas Sale and Purchase Agreement effective
in 1991, the Partnership made a lump sum payment of $88 million to Noranda to
purchase and prepay in full for 120 million MMBtu of natural gas for the
Project which will be required to operate the Facility over the first 16 to
20 years. Under the gas purchase agreement, the Partnership may request a
maximum of 30,000 MMBtu of natural gas per day.

In connection with the negotiations and settlement of the MRA, the balance of
the prepaid gas supply was reduced by $9,408,430, and the deferred MRA gain
was reduced by a similar amount (see Note 4).

In addition to the prepayment of funds to Canadian Hunter, the Partnership is
obligated for the payment of royalties, operating costs (as defined) and
transportation costs. During the years ended December 31, 1999, 1998 and
1997, these costs totaled $9,242,463, $10,233,683 and $9,919,700,
respectively, of which approximately $953,836 and $942,785 are included in
accrued liabilities as of December 31, 1999 and 1998, respectively.

A portion of the funds owed to Canadian Hunter for royalties, operating costs
and transportation costs were deferred and held by the Partnership. These
deferred amounts total $470,000 per quarter to a maximum of $11,280,000 and
were payable to Canadian Hunter, with interest earned on the deferred
amounts. In 1998, the Partnership reached the $11,280,000 maximum deferred
principal amount. Subject to the terms of the Gas Sales and Purchase
Agreement, the Partnership deposited funds in a deferral account that
approximates the total deferred amount to be paid to Noranda. In December
1999, the Partnership paid the principal and interest due to Canadian
Hunter.

F-14
<PAGE>

The Partnership is entitled under the gas purchase agreement to attempt to
optimize the economic value of its annual entitlement of prepaid natural gas
form Canadian Hunter by electing either to consume the natural gas to
generate electricity and steam from the Project or to sell its entitlement in
that year to third parties. Consistent with the terms of the Senior Secured
Notes, when the Partnership elects to sell quantities of natural gas that it
would have needed to consume by generating electricity to meet its
obligations to NIMO under the indexed swap agreement for such period, it uses
the proceeds from such sale to acquire an amount of electricity necessary to
insure that it will be able to meet such obligations.

10. LONG-TERM DEBT

The 10.5% Senior Secured Notes, due 2007, were issued on December 6, 1999.
The Partnership may redeem the Senior Secured Notes at any time, in whole or
in part. If the notes are redeemed, the redemption price will be the
principal amount of the notes being redeemed, plus accrued interest through
the date of redemption, plus a premium calculated to "make whole" each holder
of the notes to comparable U.S. Treasury securities plus 50 basis points.
The notes are secured by a first mortgage on the Project, subject to certain
permitted exceptions, including all material Project contracts. The Partners'
partnership interests are also pledged as security for the Senior Secured
Notes. However, the Partners are not obligated to contribute additional
amounts if funds available are insufficient for the payment of principal and
interest.

In accordance with the terms of the Indenture for the Senior Secured Notes
and a Deposit and Disbursement Agreement, various reserve accounts have been
established. Restricted cash included in these accounts aggregated
$13,415,000 at December 31, 1999.

The annual maurities for the notes over the next five years are as follows;
2000 - $6,800,000, 2001 - $5,950,000, 2002 - $6,630,000, 2003 - $7,650,000
and 2004 $8,500,000.

In 1992, the Partnership entered into a Financing Agreement with the Algemene
Bank Nederland N.V., acting as agent for a group of lenders, to provide for
the construction financing for the Project with a 16-year term facility
totaling $175 million (the Term Loan). The Partnership also entered into
three interest rate swap agreements to manage the portions of fixed versus
variable interest rate debt. All obligations under the Financing Agreement
were secured solely by the assets of the Partnership. On June 30, 1998, the
Partnership used the cash proceeds from the MRA to repay all outstanding
borrowings and accrued interest against the Term Loan. Additionally a
portion of the cash proceeds received from the MRA were utilized to pay
interest rate swap breakage costs, since the Partnership terminated its
interest rate swaps used to manage the fluctuations in interest rates of the
Term Loan. The interest rate swap breakage costs, incurred by the
Partnership, totaled $9,612,299. The costs related to the termination of the
Term Loan and interest rate swaps were reflected in the negotiated MRA
settlement and were netted against the deferred MRA gain (see Note 4).

11. PARTNERS' CAPITAL AND DISTRIBTUIONS

On December 6, 1999, a portion of the proceeds ($46,040,896) from the sale of
the 10.5% Senior Secured Notes were distributed on December 6, 1999 to GAS
Orange to acquire the partnership interests of NCP Syracuse and SOP. NCP
Syracuse received $24,835,505 and SOP received $21,204,391. In accordance
with the terms of the Partnership Interest Purchase and Sales Agreement, as
amended, the purchase price was adjusted as if the acquisition of the
partnership interests was effective as of June 30, 1999.

F-15
<PAGE>

12. RELATED PARTY TRANSACTIONS

The following summarizes the more significant related party transactions not
described elsewhere in the financial statements.

As of December 31, 1997, the excess funds in the escrow account, after
estimated future construction expenditures, totaled $1,059,000. In 1998, the
final outstanding items related to the Facility's construction were
completed, leaving excess funds in the construction escrow account totaling
$1,088,071, which were remitted to GPUI.

Until December 5, 1999, NCP Energy managed the Partnership, for which they
received quarterly management fees and reimbursements. Management services
included accounting, financial reporting, and Project management. For the
years ended December 31, 1999, 1998 and 1997, NCP Energy received $947,099
$978,399 and $709,091, respectively, in management fees and reimbursed costs.
At December 31, 1999 and 1998, $15,059 and $90,763, respectively, were
included in accrued liabilities.

In June 1998, the Partnership paid NCP Energy $1,250,000 in connection with
the negotiations of the MRA. The Partnership also approved the payment of
$625,000 for additional services provided by NCP Energy, of which $312,500
was included in accrued liabilities as of December 31, 1998. For the year
ended December 31, 1999, the Partnership paid NCP Energy $625,000 for
services. Such amounts are included in other operating expenses in the
Statement of Operations.

Adam H. Victor indirectly controls 100% of GAS L.P. and is a beneficiary of
the Victor Family Irrevocable Trust, which has an 84% interest in GAS Orange.
Mr. Victor has served as a Director of Capital Co. and as President and
Treasurer of both GAS Orange and Capital Co. since their respective dates of
formation.

Mr. Victor, through GAS LP, receives a quarterly consulting fee of $75,000
subject to annual escalation at the rate of inflation beginning in 1993.
During the years ended December 31, 1999, 1998 and 1997, consulting fees
amounted to $356,560, $351,340 and $345,032, respectively. As of December
31, 1999 and 1998, $89,140 and $87,836, respectively, are included in accrued
liabilities.

Richard S. Scolaro owns a 2% interest in GAS Orange. Mr. Scolaro has served
as a Director of Capital Co. and as Vice President and Assistant Secretary of
both GAS Orange and Capital Co. since their respective dates of formation.
Mr. Scolaro, an attorney, is a principal with Scolaro, Shulman, Cohen, Lawler
& Burnstein, P.C. Legal services provided to the Partnership by Scolaro,
Shulman, Cohen, Lawler & Burnstein, P.C. in 1999 in connection with the
issuance of the Senior Secured Notes aggregated $1,102,332 and is included in
deferred financing costs.

Douglas Corbett owns a 12.5% interest in GAS Orange. Mr. Corbitt has served
as a Director of Capital Co. and as Vice President and Assistant Secretary of
both GAS Orange and Capital Co. since their respective dates of formation.
Mr. Corbitt, an attorney, is a principal with Corbitt & Schreck, P.C.
Consulting services provided by Corbitt & Schreck, P.C. in 1999 in connection
with the issuance of the Senior Secured Notes aggregated $100,000 which was
charged to deferred financing costs.

13.COMMITMENTS AND CONTINGENCIES

Commitments and contingencies exist under agreements and operations in the
normal course of business, the total amount of which, in the opinion of the
Partners, is significant to the financial position of the Partnership. These
agreements are all inherent in the cogeneration business.

F-16
<PAGE>

Letter of Credit

In August 1998, the Partnership issued a $700,000 letter of credit to TGPL,
which can be drawn upon under the Firm Transportation Agreement. The letter
of credit, which must be renewed annually, has been collateralized with a
compensating cash account and is included in Restricted cash and cash
equivalents on the balance sheet. The balance in the account at December 31,
1999 and 1998, including interest, was $715,054 and $702,000,
respectively.

Litigation

There are presently two lawsuits pending to which the Partnership is a party.
The first case relates to a slip and fall accident that occurred in 1992 and
was filed in the Supreme Court of the State on New York, County of Onondaga.
The original complaint seeks $600,000 in damages. The Partnership had denied
liability based on an argument that it was under no duty to inspect the
Project site while the Project was under construction. An affidavit for
motion to dismiss the case was prepared on May 11, 1999 and filed with the
court. The second case, in which the Partnership is a third party defendant,
was filed in the Supreme Court of the State of New York, County of Onondaga.
The case relates to a slip and fall accident that occurred in 1992. A co-
third party defendant, for whom the plaintiff worked when the accident
occurred, has agreed to assume the defense of the case and to indemnify the
Partnership. While the outcome of these cases is not presently determinable,
Management does not believe that either of these cases will have a material
adverse effect on the results of operations, cash flows, or financial
position of the Partnership.

14. SUBSEQUENT EVENT

Through March 10, 2000, the Partnership made cash distribution to its
Partners in the amount of $3,592,000.

************

F-17
<PAGE>

EXHIBIT A

INDEPENDENT TECHNICAL CONSULTANT'S REPORT
on the

PROJECT ORANGE
COGENERATION POWER PROJECT

December 2, 1999

[LOGO] Stone & Webster Management Consultants, Inc.
<PAGE>

[LETTERHEAD OF STONE & WEBSTER]

December 2, 1999

Donaldson, Lufkin & Jenrette G.A.S. Orange Partners LP
277 Park Avenue c/o MCM Securities Inc.
New York, New York 10172 One Rockefeller Plaza, Suite 2330
New York, New York 10020
G.A.S. Orange Associates LLC
630 1/st/ Avenue, Suite 30C
New York, New York 10016

INDEPENDENT TECHNICAL CONSULTANT'S REPORT
PROJECT ORANGE

We submitted our Independent Technical Consultants Report for the Project Orange
Associates, L.P. cogeneration facility, ("Project Orange") dated December 2,
1999 (the "Report") in connection with the joint issuance by Project Orange
Funding, L.P. and Project Orange Capital Corp. (collectively, the "Issuers") of
approximately U.S. $68,000,000 of Senior Secured Notes due 2007 (the "Notes") to
be purchased by Donaldson, Lufkin & Jenrette Securities Corporation (the
"Initial Purchaser") and resold pursuant to Rule 144A and Regulation S under the
Securities Act of 1933, as amended ("the Securities Act"). We understand that
the Report will be used by the Initial Purchaser, Project Orange Associates,
L.P. and G.A.S. Orange Associates, L.L.C. in evaluating certain engineering, and
economic aspects of Project Orange in connection with the purchase and resale of
the Notes by the Initial Purchaser. In addition, we understand that the Report
will be included as an appendix to the prospectus to be included as part of a
registration statement to be filed with the U.S. Securities and Exchange
Commission (the "SEC") in connection with the registration of the Notes under
the Securities Act in accordance with the terms of a registration rights
agreement to be entered into between the Issuers and the Initial Purchaser. We
consent to the Report being so used as so included as an appendix (i) to the
Offering Memorandum, and (ii) to the prospectus incorporated in the registration
statement to be filed with the SEC. It is understood that, regarding the use of
this report, the addressees of this letter are subject to the Stone & Webster
Management Consultants, Inc. terms and conditions of this assignment.

Sincerely,

STONE & WEBSTER MANAGEMENT CONSULTANTS, INC.

/s/ K.H. Applewhite, Jr.
K.H. Applewhite, Jr.
Vice President

<PAGE>

[LOGO STONE & WEBSTER]

Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

LEGAL NOTICE

This report was prepared by Stone & Webster Management Consultants, Inc. and its
affiliated company, Stone & Webster Engineering Corporation, both hereafter
referred to as Stone & Webster, expressly for G.A.S. Orange Associates, L.L.C
and G.A.S. Orange Partners, L.P. (collectively, the "Sponsors"). Neither Stone &
Webster, nor the Sponsors nor any person acting in their behalf, (a) makes any
warranty, express or implied, with respect to the use of any information of
methods disclosed in this report; or (b) assumes any liability with respect to
the use of any information or methods disclosed in this report. Stone &
Webster's review of the Financial Projections relating to Project Orange
Associates', L.P. cogeneration facility, Project Orange, in no way serves to
transfer to Stone & Webster responsibility for the correctness and/or accuracy
of such information or modeling results.

ELECTRONIC MAIL NOTICE

Electronic mail copies of this report are not official unless authenticated and
signed by Stone & Webster and are not to be modified in any manner without Stone
& Webster's expressed written consent.

i
<PAGE>

TABLE OF CONTENTS

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

<TABLE>
<S> <C>
SECTION 1. EXECUTIVE SUMMARY............................................... 1-1
1.1. Introduction....................................................... 1-1
1.2. Scope of Services.................................................. 1-2
1.3. Conclusions........................................................ 1-2
1.4. Condition Assessment............................................... 1-4
1.5. Performance........................................................ 1-5
1.6. Environmental...................................................... 1-5
1.7. Remaining Useful Life.............................................. 1-6
1.8. Operations and Maintenance......................................... 1-6
1.9. Financial Projections.............................................. 1-7

SECTION 2. PROJECT DESIGN DESCRIPTION...................................... 2-1

2.1. Site Description................................................... 2-1
2.2. Design Basis....................................................... 2-2
2.2.1. Electric Power Supply......................................... 2-2
2.2.2. Process Steam Supply.......................................... 2-2
2.2.3. Gas Fuel Supply............................................... 2-3
2.2.4. Steam Generation.............................................. 2-3
2.2.5. Recommendation................................................ 2-4
2.3. Performance........................................................ 2-4
2.4. Gas Turbine Generators............................................. 2-4
2.5. Heat Recovery Steam Generator...................................... 2-5
2.6. Balance of Plant Mechanical Systems................................ 2-5
2.6.1. Boiler Feedwater System....................................... 2-5
2.6.2. Steam System.................................................. 2-6
2.6.3. HRSG Blowdown Tank............................................ 2-6
2.6.4. Water Treatment System........................................ 2-6
2.6.5. Instrument and Plant Air System............................... 2-7
2.6.6. Raw Water System.............................................. 2-7
2.6.7. Plant Fuel System............................................. 2-7
2.6.8. Fire Water System............................................. 2-8
2.6.9. Waste Water System............................................ 2-8
2.6.10. Water/Glycol System......................................... 2-8
2.7. Electrical Systems............................................... 2-8
2.7.1. 115 kV Substation at the Project.............................. 2-8
2.7.2. Main Step-Up Transformers..................................... 2-9
2.7.3. Auxiliary Transformers........................................ 2-9
2.7.4. 13.8 kV Switchgear............................................ 2-10
2.7.5. 480 V Switchgear.............................................. 2-10
2.7.6. 480 V Motor Control Center.................................... 2-10
2.7.7. 4160 V Motor Control Center................................... 2-10
2.7.8. DC Battery Powered Battery System............................. 2-10
2.7.9. UPS System.................................................... 2-10
2.7.10. Grounding System............................................ 2-11
2.7.11. Communication System........................................ 2-11
2.7.12. Life Safety System.......................................... 2-11
2.7.13. Lighting System............................................. 2-11
</TABLE>

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TABLE OF CONTENTS

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2.8. Controls and Instrumentation.................................. 2-11
2.9. Civil Design.................................................. 2-12
2.9.1. Drains..................................................... 2-13
2.9.2. Site Preparation........................................... 2-13
2.9.3. Paving..................................................... 2-13
2.9.4. Foundations................................................ 2-13
2.10. Heating, Ventilation and Air Conditioning..................... 2-13
2.11. Existing University Facilities................................ 2-14

SECTION 3. PROJECT CONDITION ASSESSMENT.................................. 3-1

3.1 The Project Overview.......................................... 3-1
3.1.1. Equipment Arrangement...................................... 3-1
3.1.2. Maintenance................................................ 3-1
3.1.3. Infrared Thermographic Assessment.......................... 3-1
3.1.4. Cyclic Operation........................................... 3-2
3.2 Condition Assessment.......................................... 3-2
3.2.1. Gas Turbine Generators..................................... 3-2
3.2.2. Heat Recovery Steam Generator.............................. 3-3
3.2.3. Boiler Feedwater System.................................... 3-3
3.2.4. Raw Water System........................................... 3-4
3.2.5. Water Treatment System..................................... 3-4
3.2.6. Instrument and Plant Air System............................ 3-4
3.2.7. Electrical Systems......................................... 3-4
3.2.8. Controls and Instrumentation............................... 3-5
3.2.9. Heating, Ventilating and Air Conditioning System........... 3-5
3.2.10. Existing Facilities...................................... 3-5
3.3 Life Extension Issues......................................... 3-5

SECTION 4. PROJECT PERFORMANCE........................................... 4-1

4.1. Basis Of Power Plant Heat Rates................................... 4-1
4.2. Heat Rate......................................................... 4-2
4.3. Power Output...................................................... 4-2
4.4. Availability...................................................... 4-2

SECTION 5. ENVIRONMENTAL REVIEW AND PERMITTING........................... 5-1

5.1. Permit Status .................................................... 5-1
5.2. Air Emissions .................................................... 5-2
5.3. Wastewater Discharge.............................................. 5-4
5.4. Site Contamination Issues......................................... 5-5
5.5. Other Environmental Issues........................................ 5-6

SECTION 6. OPERATION AND MAINTENANCE..................................... 6-1

6.1. Site Visit........................................................ 6-1
6.2. Asset Management Capabilities..................................... 6-2
6.3. O&M Capabilities.................................................. 6-2
6.4. Organizational Structure.......................................... 6-3
6.5. O&M Procedures.................................................... 6-3
6.6. Maintenance Management............................................ 6-3
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6.7. Conclusions................................................... 6-4

SECTION 7. PROJECT AGREEMENTS AND CONTRACTS.............................. 7-1

7.1. Power Put Agreement........................................... 7-1
7.2. The International Swap Dealer Association, Incorporated,
Master Agreement............................................ 7-3
7.3. Gas Sale and Purchase Agreement............................... 7-5
7.4. Steam Sales Agreement......................................... 7-5
7.5. Operations and Maintenance Agreement.......................... 7-6

SECTION 8. PROJECT ECONOMIC ANALYSIS..................................... 8-1

8.1. Overview...................................................... 8-1
8.2. Revenues...................................................... 8-2
8.3. Expenses...................................................... 8-4
8.3.1. Fuel...................................................... 8-5
8.3.2. Fuel Operating Cost and Royalty Cost...................... 8-6
8.3.3. Fuel Transportation Costs................................. 8-7
8.3.4. Operations, Maintenance, and Other Costs.................. 8-11
8.4. Sensitivity Cases............................................. 8-12
8.5. Coverage Ratios............................................... 8-13
</TABLE>

APPENDIX A - List of Documents Reviewed

EXHIBIT 1 - Base Case Financial Projections

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[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

SECTION 1. EXECUTIVE SUMMARY

1.1. Introduction

Stone & Webster Management Consultants, Inc. and Stone & Webster Engineering
Corporation (collectively, "Stone & Webster") were retained by Project Orange
Associates, L.P. ("Orange LP") and G.A.S. Orange Associates, L.L.C. ("GAS
Orange"), collectively the "Sponsors," to provide an independent technical
assessment of the Orange LP gas fired cogeneration facility and its related
assets (the "Project") on behalf of Donaldson, Lufkin & Jenrette Securities
Corporation. Orange LP sells electrical power and capacity to Niagara Mohawk
Power Corporation ("Niagara Mohawk") and steam to Syracuse University (the
"University"). The Sponsors have indicated their intention to contract the
management of the business and operations of Orange LP to Niagara Mohawk Energy
Marketing, Inc. ("NMEM") and to continue contracting the operation and
maintenance of the Project to GE Contractual Services (formerly, GE Energy Plant
Operations, Inc. and herein "GECS"). Donaldson, Lufkin & Jenrette Securities
Corporation is the initial purchaser of the Senior Secured Notes due 2007 (the
"Notes"), the sale of which is anticipated to finance the purchase of the
majority partnership interests in Orange LP by GAS Orange (the "Sale
Transaction"). Stone & Webster recommends that the reviewer of this report read
this report in its entirety for a full understanding of the Project and the pro
forma financial projections contained herein ("Financial Projections").

This report includes Stone & Webster's independent technical assessment of the
Project based on a review of available technical data, and presents our findings
and conclusions regarding the following:

. projected revenues, operating and maintenance expenses, capital costs, and
environmental issues relating to the future operation and maintenance of
the Project,

. projected availability, capacities, and heat rates of the units, and

. the expected useful lives of the units.

We also reviewed the Financial Projections, which incorporate the projected
electricity prices, dispatch rates, and fuel prices provided by the Sponsors
along with the projected operating costs of the units. The Financial
Projections calculate the debt service coverage ratios ("DSCR").

The power production facilities consist of two General Electric ("GE") LM5000 PC
steam injected gas turbines ("STIG") that have a combined rated capacity of 80
MW at International Standards Organization ("ISO") conditions of 59 degrees F
and 14.5 psia. Upon consummation of the Sale Transaction GAS Orange will have
complete operational control of these units. The Project is in good condition
overall as GECS appears to have performed all of the maintenance expected of an
operating company which abides by prudent industry practices.

The scope of this independent technical review included a design and equipment
assessment, operating history, projected performance, technical, logistical,
operations and maintenance ("O&M"), and environmental considerations. Stone &
Webster reviewed information provided by Orange LP and GECS, had meetings with
various parties, and visited the Project site. Stone & Webster reviewed the
technical and commercial assumptions and the calculation methodology of the
Financial Projections developed by the Sponsors as well as the projected
performance, revenues, and expenses. Using this model, Stone &

1-1

<PAGE>

Webster recommended sensitivity analyses to assess the impact of changes of
certain variables on the DSCR for the life of the Notes. Model outputs for the
base case and certain sensitivity analyses are provided in Exhibit I. Stone &
Webster has made no determination as to the completeness, reasonableness, and
accuracy of (i) certain financing assumptions provided by the Sponsors or (ii)
certain other assumptions described in detail in Section 8 of this report.

1.2. Scope of Services

This report provides a summary of our review and opinions for the Project
regarding the following:

. Condition of the Project Equipment

. Major Maintenance Programs

. Proposed Operating and Maintenance Plan and Budget

. Environmental Permits and Site Assessment Documents

. Financial Projections

Stone & Webster conducted this analysis and prepared the report using reasonable
care and skill and applied methods consistent with normal industry practice. In
the preparation of this report and in formulating the expressed opinions, Stone
& Webster has made certain assumptions with respect to conditions which may
exist or events which may occur in the future. If events or circumstances are
different than forecasted then the Financial Projections may be impacted. The
equipment inspection reports and site environmental reports were performed by
others and only reviewed by Stone & Webster. We have no reason to believe that
these reports are anything but true and accurate. Our walk-through site visit
confirmed the reasonableness of the reports generated by others and addressed
issues with additional information that could be provided, but did not involve
any physical, metallurgical, or other laboratory type inspection and analysis of
equipment and materials at the Project. We have noted herein where such
inspection and analysis would be prudent in order to have a reasonable
probability of improving upon the reliability and availability targets assumed
in the Financial Projections. Assessment of legal issues, such as assignment of
contractual rights, property rights, easements, and procedural issues related to
permits and permit waivers is outside of Stone & Webster's scope of work as
Independent Technical Consultant.

1.3. Conclusions

Set forth below are the principal opinions which we have reached regarding the
review of the Project. For a complete understanding of the assumptions upon
which these opinions are based, the Report should be read in its entirety. On
the basis of our review and the assumptions set forth in the Report, Stone &
Webster is of the opinion that:

1. The Project has operated at availabilities of 97-98 percent between 1996
and 1998. The Project has an average station availability between January
1996 and September 1999 of 94.47 percent including a prolonged outage which
occurred in the spring of 1999. Based on continued maintenance, planned
overhauls and participation in programs to maximize the availability of
spare lease gas turbine engines, it is reasonable to expect that the
Project will continue to operate at such availability levels. These
availability levels support the availability projections in the Financial
Projections.

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<PAGE>

2. The historically demonstrated capacity factors of the Project are
reasonable estimates of the capability of the facilities. In recent years,
the capacity factor has been artificially lowered due to the facility not
being operated at full load during all periods it was available to run. If
the Project was operated at full load and did not encounter a spare engine
shortage, we believe it would have demonstrated a capacity factor of 93-
94%. With continued proper maintenance, planned overhauls and participation
in programs to guarantee within 72 hours access to spare gas turbine
engines on a lease basis, it is reasonable to expect that that 92.5 percent
capacity factor can be maintained over the period shown in the Financial
Projections.

3. The heat rates in the Financial Projections for the Project have been
developed based on historical information. With continued proper
maintenance and overhauls as reflected in the Financial Projections, it is
reasonable to expect that these heat rates can be maintained over the
period shown in the Financial Projections.

4. The Project's maintenance budget, which includes a fired hour fee to cover
overhauls, appears reasonable and adequate to support the conclusions
expressed above and to meet the Project's maintenance and performance
objectives, excluding any unforeseeable catastrophic failures near the end
of a unit's design life. These maintenance expenditure estimates are used
in the Financial Projections and compare favorably to similar power
projects.

5. Based on Stone & Webster's review, it appears there are no existing
conditions that would preclude the operation of the Project over the
periods contemplated in the Financial Projections. This assumes the
continuation of condition assessments, normal maintenance and addressing
the minor issues noted below under Condition Assessment.

6. The Project has all necessary permits in place. We have no reason to
believe that the Project will not be able to renew its permits as needed.
We believe the environmental reports commissioned by Orange LP were
prepared in accordance with good industry practice.

7. The ability to obtain replacement parts in a timely manner for the GE
LM5000 gas turbine may be a concern during the period covered by the
Financial Projections and should be carefully evaluated, but has been
addressed by the Sponsors using the best practice we are aware of for this
situation. GECS has represented that, in addition to the Project
participating in the LM5000 Lease Engine Program, they have currently
dedicated a spare engine between the Project and one additional project
that it operates in California.

8. The main control system for the Project, which has recently been upgraded
to current control interface technology for this type of plant,
additionally, represents to be Y2K compliant.

9. Stone & Webster believes NMEM is an experienced and qualified asset manager
with very relevant knowledge of the evolving upstate New York energy
market.

10. Stone & Webster believes GECS is well qualified to operate this plant.
Having parent company connections to GE and operating other similar
projects provides for an effective pooling of technology information and
other resources that provides a strong support base for responding to and
resolving issues related to this type of facility. In addition, GECS has
demonstrated the ability to improve the operations of its plants through
the involvement of all the plant personnel. This enables it to keep costs
under control and find innovative solutions, which lower operating costs
and capital expenditures.

11. Under base case assumptions, the average DSCR is forecast to be 1.40 from
1999 through 2008. The

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<PAGE>

minimum DSCR is 1.35 and occurs in 2001.

1.4. Condition Assessment

Stone & Webster conducted a walk-through site inspection of the Project on
September 16 & 17, 1999. In general, the Project has the appearance of a well-
maintained facility, equipment and materials appear properly maintained and
operated. During the visit, both of the gas turbines ("GT") were operating at
normal conditions at or near base load. The Project was producing high-pressure
("HP") steam for sale to the University and was producing approximately 80 MW of
power for sale to Niagara Mohawk. The maintenance and preventative maintenance
programs being carried out at the Project on a routine basis are typical for an
operator using prudent utility maintenance practices. Stone & Webster's review
has not discovered any major technical issues that seriously impair the
probability of the Project achieving the performance levels contemplated in the
Financial Projections. We have identified a few minor issues which we feel
should be addressed to improve the probability of maintaining availability
levels contemplated in the Financial Projections. The principal minor issues
are as follows:

1. Review and confirm the availability of spare parts and lease pool turbines
for the GE LM5000 gas turbine

2. Investigate the cause of the tube leaks in sections of the heat recovery
steam generator ("HRSG") that have resulted in minor heat transfer surface
sections of the HRSGs being by-passed, make an evaluation to understand the
failure mechanism, make a economic study of possible actions to fix or
leave as is and implement / document the recommendations

3. Review the boiler feed water pump selection and feedwater regulator valve
selection for proper application and sizing for the current and planned
system operation

4. Review the raw water supply system and consider the feasibility of
installing an auxiliary cooling water system

5. Review the ventilation system design for the main equipment building with
the intent of lowering indoor temperatures during the summer months

6. Review the adequacy of maintenance access platforms and make additions as
required to reduce the risk of injury to operations and maintenance
personnel

7. Plan, implement and / or document the life extension measures taken for the
existing University steam boilers

While Stone & Webster believes that Orange LP's preventative maintenance
practices are both prudent and proactive (including use of a spare engine which
is shared with another GECS managed project that uses one engine and
participating in the LM5000 Lease Pool Program), this does not fully mitigate
the possibility that both preventative measures may be inadequate to maintain
the projected availabilities as demonstrated by the forced outage of an engine
which occurred earlier in 1999.

Studies which should be considered to improve the operation and maintainability
of the Project, but which do not quantifiably influence either the plant
availability or the Financial Projections are items 2 through 7. Items 2
through 7 are not budgeted based on the current information Stone & Webster has
available, but each could likely be studied and firm recommendations made for
approximately $25,000 per item. Implementing a recommendation would naturally be
more costly and is difficult to estimate at this time.

1-4
<PAGE>

Preliminary and rough estimates for items 2, 3 and 4 could have each one costing
approximately $200,000 and items 5 & 6 could be approximately $100,000 each.
Item 7 could be approximately $50,000 and any estimate for implementation of
item 7 would require knowledge from the life extension study results.

1.5. Performance

Stone & Webster reviewed the heat rate and capacity factor projections used in
the Financial Projections. In general, we believe the heat rate projections are
reasonable and consistent with historical experience. Capacity factor is a
function of plant availability and dispatch. For the past ten months, the
Project has been dispatched at 80 MW during peak hours, 73 MW during off peak
hours Monday thorough Friday and zero MW on weekends when it was available to
run. The availability for the Project for 1996 through 1998 was 97-98 percent.
In 1999, the availability has declined due to an extended outage in the spring
of 1999 with the availability through September 1999 averaging 83 percent.
Based on the information reviewed, the average availability from January 1996 to
September 1999 is 94.5 percent. During the period from January 1996 to
September 1999, the Project has achieved capacity factors within 1 to 2
percentage points lower than the station availability when the plant is fully
dispatched. We have assumed that the projected capacity factor can be equal to
the availability, but not greater than the availability. In the Financial
Projections, the availability and capacity factor for the Project is projected
to be 92.5 percent, which approximates the net capacity factor for January 1996
through September 1999 and crediting the Project for the time when it was
available but not dispatched. We believe this projection is reasonable and
achievable given the historic availability levels achieved by the Project and
given that going forward the Project is to be a member of the LM5000 Lease
Engine Program. GECS is a capable operator and should achieve acceptable
results for the Project and NMEM, the new asset manager, should provide sound
oversight. We have conducted several sensitivities to the assumptions
underlying the base case Financial Projections, the results of which did not
materially impair the DSCR related to the new debt through the life of the
Notes. See Section 8 for detail.

1.6. Environmental

Stone & Webster reviewed the environmental permit conditions, compliance status,
site contamination issues and other pertinent environmental aspects of the
Project and the University steam generating boiler facility (the "Steam Plant").
This review was based upon a number of environmental documents that were
provided to Stone & Webster for this purpose. Stone & Webster also conducted
telephone interviews of plant personnel. However, Stone & Webster did not
receive copies of anticipated capital improvement or operating and maintenance
budgets for either of these facilities. In addition, Stone & Webster did not
conduct an environmental site reconnaissance or interview environmental
regulatory agency personnel. At this time, Stone & Webster does not believe
that additional site visits or agency personnel interviews are warranted.

The environmental permits reviewed by Stone & Webster are current and up to
date. The associated renewal applications have been submitted to the
appropriate authorities on a timely basis. Stone & Webster did not identify any
permit conditions that are unusual or unexpectedly onerous.

Stone & Webster reviewed emissions monitoring reports for 1997, 1998 and 1999
through August and determined that both the Project and the Steam Plant are
operating substantially in compliance with their air permit conditions; and that
there are no gross violations or pending compliance actions. Accordingly, Stone
& Webster believes that these facilities should be capable of operating in
compliance with their air permit conditions without constraint upon their normal
operating conditions through the year 2001. However, the Project may need to
reduce and/or offset its current NO\\x\\ emissions in 2002 based on existing

1-5
<PAGE>

statutory requirements. At this time, Orange LP believes that it would be more
cost effective to purchase NO\\x\\ emission credits than to retrofit the Project
with a selective catalytic reduction ("SCR") system. Stone & Webster has run a
sensitivity of the Financial Projections assuming Orange LP begins to purchase
NO\\x\\ emissions credits in 2002, the result of which did not materially impair
the DSCR related to the new debt through the life of the Notes. See Section 8
for greater detail.

Wastewater is discharged separately from each of these sites to a local publicly
owned treatment works ("POTW") that is operated by the Onondaga County
Department of Drainage and Sanitation ("OCDDS"). Stone & Webster reviewed
copies of the self-monitoring reports for each of these facilities. With the
exception of pH excursions at the Steam Plant, the self-monitoring reports
indicate that each of these facilities is operating in compliance with its
wastewater discharge permit limitations without constraint on normal operating
conditions. A new pH neutralization system was installed at the Steam Plant
during the first quarter of 1999. However, plant staff reports that this new
system is limited by flow rate. Accordingly, a revision of the new system was
designed and was submitted to management for funding approval. Stone & Webster
reviewed a synopsis and budgetary cost estimate (~$40,000) for the revised
design and found them to be reasonable.

The only major spill incidents reported for the Project and the Steam Plant were
associated with the underground storage tanks ("USTs") formerly used to store
fuel oil. However, this was appropriately addressed in 1992 when new USTs with
secondary containment and leak detection were installed, and all contaminated
soil associated with the former USTs was reported to be excavated and removed
from the site for disposal at an approved offsite facility.

Plant personnel report that all oil-filled equipment containing polychlorinated
biphenyls ("PCBs") have been removed from the site, and all station transformers
are labeled as PCB-free.

Both asbestos containing material ("ACM") and lead-based paint are known to be
present, particularly at the Steam Plant. A quarterly survey is conducted at
each facility to test for airborne levels of each of these substances and
workers are trained in the recognition and handling of these and other wastes.

Stone & Webster noted that noise propagation by the Project is limited by its
permit to 45 dBA at a distance of 600 feet. Orange LP provided Stone & Webster
with a noise measurement and survey report (c. 1994) that indicated that Orange
LP is able to comply with this requirement.

1.7. Remaining Useful Life

The newer cogeneration portions of the Project which were placed in service in
1992 have a projected remaining useful life beyond the life of the Notes and
Stone & Webster has no reason to believe that the Project will not be able to
renew its permits as required. Based on Stone & Webster's review, it appears
that there are no conditions that would preclude the continued operation of the
newer cogeneration portions of the Project over the periods shown in the
Financial Projections, assuming Orange LP aggressively continues proactive and
effective asset condition assessment and maintenance. The University boilers
that are being operated in a backup mode should under go a formal life extension
program to improve the probability of maintaining the availability levels
contemplated in the Financial Projections.

1.8. Operations and Maintenance

Stone & Webster reviewed the operating and maintenance ("O&M") costs and the
technical assumptions in the Financial Projections. We believe the O&M costs
for the Project are reasonable. The capital costs are

1-6
<PAGE>

primarily addressed by the fixed and variable fee components provided for in the
O&M agreement. We believe the overall magnitude of the O&M costs allocated in
these fees are reasonable and include sufficient funds to perform O&M activities
during the term of the Financial Projections. They will also support the
projected performance levels of the facilities. The Sponsors have indicated
their intention to contract with NMEM for asset management of the Project. NMEM
is an experienced manager of generation assets with a unique understanding of
the upstate New York energy market. We believe Orange LP, with the advice of
NMEM and GECS, will demonstrate prudent judgement in deciding when to conduct
major inspections and maintenance and how to operate the Project. GECS has
extensive experience in the operation of power plants worldwide and currently
operates other plants that use the LM5000 gas turbine. This effective pooling of
technology information and resources related to this type of facility provides a
very strong support base for responding to and resolving problems for this type
of plant equipment. The staffing at this facility is good compared to like
facilities and the personnel we interviewed were knowledgeable in the operation
of the Project. GECS uses a combination of predictive and preventive maintenance
programs to monitor the condition of equipment such as: vibration reading for
major rotating equipment are monitored and trended to predict and plan
maintenance, thermography is used on electrical and mechanical equipment to spot
problems before equipment breaks or is damaged, and oil analysis is used to spot
bearing problems early. In summary, the Project has few maintenance problems and
appears to be a well managed facility.

1.9. Financial Projections

Orange LP has made revenue projections that include Indexed Swap payments from
Niagara Mohawk through June 2008. An availability and capacity factor of 92.5
percent are assumed for the Project. Accordingly, we believe a 92.5 percent
availability and capacity factor should be achievable based on our review of the
historical availability levels and the maintenance work accomplished by Orange
LP. The historical monthly availability factor from January 1996 to September
1999 averaged approximately 94.5 percent. The operating costs for the Project
are reasonable based on historical experience of the Project as well as other
projects with which we are familiar. It is our understanding that the gas
transportation costs are specific to the Project and based on historical
experience. The average DSCR for the base case is 1.40 with a minimum of 1.35.
For the sensitivities we considered, a reduction of the capacity factor to 85
percent had the most impact on the DSCR. The average DSCR for this scenario is
1.35 with a minimum of 1.29.

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[LOGO of Stone & Webster]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

SECTION 2. PROJECT DESIGN DESCRIPTION

Stone & Webster reviewed the documentation noted in Appendix A defining the
Project. This information was reviewed to assess the adequacy of the technical
design and ability of the Project to achieve the proposed performance
requirements. Specifically, our design review sought to confirm:

. fitness for purpose;

. conformance with industry standards; and

. level of redundancies in the design to support availability targets.

In general, with a few exceptions noted below, Stone & Webster found the design
of the Project to be conforming with industry standards based on GT technology
presently in use in the industry and with adequate redundancies to support the
availability assumptions used in the Financial Projections.

This section describes the principal components of the Project and the following
Project Condition Assessment section provides the findings of our review.

2.1. SITE DESCRIPTION

The Project was constructed, tested and accepted on property owned by the
University in Syracuse, New York. The Project is adjacent to the existing
University boilers bound by McBride, Taylor, Almond and Bort Streets. The
Project supplies power to the Niagara Mohawk grid and process steam to the
University steam distribution system. The Project began commercial operation on
July 21, 1992.

The Project is a simple cycle design with two GE LM5000 PC STIG generators and
two HRSGs with supplemental duct burner firing, all fueled by natural gas. The
ancillary equipment includes a distributed control system ("DCS"), feedwater
system, natural gas compressor, water treatment system, city and treated water
storage tanks and all required auxiliaries.

A major portion of the cogeneration facility is housed in the power island
building. This includes the GTs, the HRSGs, the boiler feedwater system
including boiler feed pumps, the compressed air system including air
compressors, water/steam analyzer and HRSG blowdown tank. A separate room
contains the fuel gas compressor, gas fuel filter/separator and the boiler fuel-
piping skid. This fuel gas compressor room is classified as Class I, Group D,
Division 2 per the National Electric Code while the remainder of the power
island building is unclassified. The control room which contains the DCS, GT
generator control panels, the fire alarm programmable logic controller ("PLC")
and other auxiliary control equipment is located on the second floor at the
south end of the power island building. This area also houses the Project
operation and maintenance personnel offices. The electrical room which contains
the switchgear, motor control centers and various other electrical apparatus is
located on the ground floor beneath the control room area. A separate battery
room is located in the southeast corner of the power island building.

The water treatment equipment is housed in a separate building on the southeast
corner of the Project and includes laboratory, demineralizer control system and
facilities for cleaning analyzing equipment.

These buildings are prefabricated metal construction. The control and electrical
rooms have one-hour

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<PAGE>

minimum rated firewalls. The buildings have been provided with roll up doors for
maintenance and man doors are provided for fire ingress and egress. Emergency
showers have been provided where chemicals are used or stored.

Electrical power is generated at 13.8 kV and delivered to the Niagara Mohawk
grid at 115 kV through step-up transformers located in the substation on the
northeast end of the Project. The Project is interconnected with Niagara Mohawk
via the Project switchyard and through underground cabling routed from the
Temple Substation, approximately two miles west of the Project.

Access is provided into the Project from two entrances off Taylor Street, one
adjacent to the existing Riley Boiler Plant and the second is between the
electrical substation and the power island building. A third access is provided
off Bort Street next to the water treatment building for chemical deliveries.

2.2. DESIGN BASIS

2.2.1. Electric Power Supply

The original Power Purchase Agreement was based on the supply of 80 MW maximum
net output to Niagara Mohawk and was for a base loaded plant. The Power
Purchase Agreement has undergone revision and restatement through the
restructured Niagara Mohawk power purchase agreements discussed in Section 7 of
this report. Under this agreement, Orange LP has the option to put electrical
energy to Niagara Mohawk up to 630,000 MWh +5 percent per year. The operation
plan for January 1999 to September 1999 has been to deliver 80 MW +5 percent
during on peak hours, 73 MW during off peak hours Monday through Friday and then
shutdown both GT generators on the weekends. The existing University boilers
are operated on weekends to meet process steam demands. The original design
basis for the Project was to operate at a base load of 80 MW 24 hours a day,
year-round and supply HP steam in the summer and low-pressure ("LP") steam in
the winter and Stone & Webster understands from the Sponsors that this mode of
operation is planned to be resumed upon consummation of the Sale Transaction.

In general, the Project operating philosophy requires all power generated less
parasitic loads, to be sold to Niagara Mohawk. However, if both GTs are shut
down the commercial grid will back feed through the 115 kV substation providing
the necessary 4160 V and 480 V to maintain the Project. The existing University
boilers have black start capability via a diesel power generator and a 1000 kW
steam turbine generator, which will allow the supply of steam in emergencies.

2.2.2. Process Steam Supply

The Steam Supply Agreement allows for 60,000 to 450,000 lb/h of process steam to
the University. The process steam is supplied at 275 psig and 550(degrees)F
during the summer and is reduced to 100 psig and 550(degrees)F during the
winter. For periods where the GTs and HRSGs are not in operation, process steam
is supplied from the existing University boilers. Based on the Project operating
records, the actual winter process steam requirement averages 100,000 to 120,000
lb/h with maximum process steam requirement of 200,000 lb/h. The actual summer
process steam requirement averages 40,000 to 60,000 lb/h with maximum process
steam of 60,000 lb/h. Below are listed recent summer and winter week process
steam requirements.

2-2
<PAGE>

Process Steam Exported to the University

(Average Hourly lb/h)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Saturday Sunday Monday Tuesday Wednesday Thursday Friday
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Date 8/28/99 8/29/99 8/30/99 8/31/99 9/1/99 9/2/99 9/3/99
----------------------------------------------------------------------------------------
275 psig 43,906 49,984 46,659 45,026 42,946 43,774 43,644
----------------------------------------------------------------------------------------
100 psig 81,362 80,766 80,904 80,893 81,462 80,784 79,872
----------------------------------------------------------------------------------------
Total 125,268 130,750 127,563 125,919 124,408 124,558 123,513
----------------------------------------------------------------------------------------
Saturday Sunday Monday Tuesday Wednesday Thursday Friday
----------------------------------------------------------------------------------------
Date 1/31/99 2/1/99 1/25/99 1/26/99 1/27/99 1/28/99 1/29/99
----------------------------------------------------------------------------------------
100 psig min 127,750 107,500 93,125 104,000 96,250 124,625 101,000
----------------------------------------------------------------------------------------
100 psig max 169,750 184,500 151,000 143,500 145,250 176,250 147,000
----------------------------------------------------------------------------------------
100 psig avg 148,148 134,932 119,662 119,832 122,297 147,099 128,141
----------------------------------------------------------------------------------------
</TABLE>

2.2.3. Gas Fuel Supply

The daily take on the pre-purchased supply of gas is limited to up to 20,000
MMBtu (HHV) and the maximum yearly take is limited to 9 million MMBtu (HHV) as
discussed under the Fuel Supply Agreement in Section 7. The most currently
available unconsumed entitlement estimate is provided in Section 8 herein. The
Project daily take generally does not exceed 18,000 MMBtu (HHV) and the average
yearly draw is 7 million MMBtu (HHV) based on plant records. The yearly take
for 1998 was 6,332,000 MMBtu (HHV). The gas take for the first seven months of
1999 is approximately 36 percent less than for comparable months of 1998. The
reduction in consumption can be attributed to the GT #1 being out of service
from April 15, 1999 through June 21, 1999 and the shutting down of both GTs for
weekends. The operation of the backup gas compressor, due to low supply header
pressure, typically does not exceed 5 percent of the operating time. We would
expect gas consumption to increase in subsequent years as a result of GT #1
returning to service and reflecting the shift in operation strategy back to base
load. Stone & Webster understands from our review of the documentation provided
that Orange LP has prepaid for the supply of 120 million MMBtu through 2008.
The estimated amount of gas remaining in the entitlement is noted herein in
Section 8.

2.2.4. Steam Generation

Each of the HRSGs has the following performance characteristics. HP steam 675
PSIG at 575(degrees)F is used for NOx control, power augmentation in the gas
turbine and to augment process steam through pressure reduction. Intermediate
pressure ("IP") steam 275 psig @ 550(degrees)F is used for process steam and for
the deaerator. Heater pegging steam requirements and LP steam is supplied
directly to the deaerator.

2-3
<PAGE>

2.2.5. Recommendation

The HRSG economizers have experienced numerous leaks and the feedwater system
has had failures of three of the seven boiler feed pumps along with erosion of
feedwater control valves. Although plant performance does not appear to be
materially impaired by these issues, Stone & Webster recommends that (i) the
cause of the leaks in HRSG economizer be determined; (ii) that the feedwater
system equipment selection be confirmed; and (iii) an economic decision be made
and documented concerning the resolution of these issues. A study concerning
each of the above issues could cost approximately $25,000 each and a preliminary
and rough estimate of the cost associated with the implementation of the results
of the studies could cost approximately $400,000 depending on the findings and
recommendations from the studies. Some minor improved heat rate performance
would be expected related to using all of the economizer heat transfer surface
in the HRSG.

2.3. Performance

In reviewing the Project's monthly reports for years 1996, 1997, 1998 and 1999
(through July) it is noted that yearly plant capacity and unit availability have
been slowly decreasing and experienced a sharp decrease in the first seven
months of 1999. The primary reason for GT #1 loss of availability appears to be
the inability to find a replacement engine in a timely manner. GT #1 was out of
service from April 16, 1999 through June 21, 1999, awaiting a replacement.
Engine and engine 474-157, the original engine for GT #1, is presently being
overhauled following this failure event on April 16, 1999 after having
accumulated approximately 43,000 hours.

GT #2 had its overhauled engine 474-158 installed on February 12, 1999 replacing
LM5000 Lease Engine Program spare engine 474-200. Engine 474-158 had been
removed for a 50,000 hour overhaul on June 17, 1998. Even with the overhauled
engine, GT #2 availability was less than 90 percent for the first seven months
of operation in 1999 due to varying problems.

GE is no longer manufacturing new LM5000 gas turbines for sale and the
availability of LM5000 gas turbine engines and spare parts for the next 5 to 10
years should be documented, since GT availability will be greatly affected by
spare parts availability.

2.4. Gas Turbine Generators

There are two GE LM5000 PC STIG generators, packaged by Stewart & Stevenson,
included in the Project.

Each GT is a packaged, unitized system that is directly coupled to a 60 cycle,
3600 rpm, 13.8 kV generator. The unit is rated at 50 MW at unity power factor
and with 59 degrees F cooling air temperature. Each generator includes a
brushless excitation system suitable for Class I, Group D, Division 2 areas per
the National Electric Code. Neutral and line side cubicles with CT's, surge
protectors and lightning arrestors are provided.

The GTs and generators are provided with acoustic enclosures with internal
lighting and redundant ventilation systems. Multi-stage air inlet filtration
systems are provided as well as an inlet deicing coil. The package includes a
gas fuel inlet system, an electrohydraulic start system, separate lube oil
systems for the GT and generator, each with duplex lube oil filters, unit
mounted redundant shell and tube lube oil coolers, fire and gas detection and
Halon extinguishing system serving both turbine and generator compartment, and
an on-line Rochem cleaning system plus soak wash system.

2-4
<PAGE>

Unit control panels are provided by Stewart & Stevenson and include a Woodward
fuel management system, programmable microprocessor for sequencing, generator
metering, Bentley Nevada 7200 vibration monitoring, monitor annunciation of
alarms and shutdowns and RS-232 link for data logging through the DCS. This is
the standard Stewart & Stevenson package.

Auxiliary equipment includes a 24 V DC battery and charger assembly, steam
injection metering system and heaters for the lube oil systems.

2.5. Heat Recovery Steam Generator

The Project contains two supplementary natural gas fired Deltak HRSGs. Each HRSG
is a three pressure level, natural circulation water-tube steam generator. The
HP boiler is sized to generate 68,500 lb/h of superheated steam at 625 psig and
575 degrees F unfired at 46.9 degrees F ambient temperature and a maximum of
215,317 lb/h in a fired condition. The IP boiler will provide 28,500 lb/h of
superheated steam at 285 psig and 560 degrees F unfired at 46.9 degrees F
ambient temperature. In the fired condition, it will produce a maximum of 52,645
lb/h. The LP boiler will generate sufficient steam for deaeration of the
feedwater. The final flue gas outlet temperature should not exceed 315 degrees F
per the design requirements. Deltak is a proven supplier of HRSGs.

The HP steam is used for NO\\x\\ control, power augmentation and augments
process steam through pressure reduction. IP steam is used for process steam and
augments the deaerating heater pegging steam that is supplied from the LP boiler
directly to the deaerating heater.

Each HRSG includes all inlet ducting, HP and IP superheaters, HP and IP de-
superheaters, CO catalyst for 80 percent CO reduction, economizers, outlet
transition, and walkways and ladders required for operation and maintenance.

Each duct burner consists of eleven gas burner elements with a maximum total
design heat release of 194.0 million Btu/h (LHV). Included are flame scanners, a
free-standing piping rack for pilot piping and main gas piping, a flame safety
system and one scanner and observation port scanner cooling air blower. The
burner piping system is electrically classified for a Class I, Group D, Division
II area per the National Electric Code. When initially installed there were some
issues related to HRSG performance, which resulted in some additional heat
transfer surface being installed in the HRSGs. As built and/or as modified
design heat transfer data was not available in the design information for the
HRSGs for review, but plant operations personnel indicate acceptable performance
was obtained following the addition of the heat transfer surface.

2.6. Balance of Plant Mechanical Systems

2.6.1. Boiler Feedwater System

Deaerating Heater
- -----------------

There is a spray type deaerating heater, which is common for both HRSGs and is
mounted on top of the HRSGs. The deaerator is designed to reduce dissolved
oxygen to 0.005 ml per liter at all operating loads. This deaerator, being
common to both units, does not have a backup, which is not as reliable of a
configuration as having a deaerator for each HRSG, but is an acceptable practice
for non-rotating equipment with very few moving parts.

2-5
<PAGE>

Boiler Feed Pumps
- -----------------

The boiler feed system consists of four 1/3 capacity HP boiler feedwater pumps
and three 1/2 capacity IP/LP pumps. The HP boiler feedwater pumps are sized to
provide the flows required throughout the broad operating range of the HP boiler
which are from 68,500 lb/h in the unfired condition through 432,000 lb/h in the
fired condition. The fourth high-pressure pump is a common spare. The IP/LP
pumps supply boiler feedwater to both the IP and LP boilers. The third pump is a
common spare. This sparing philosophy is acceptable and should provide for
reliable operation and help the Project achieve expected performance. Stone &
Webster noted a minor issue related to equipment sizing in the Condition
Assessment section of this report, which should be addressed to improve
reliability of the Project. An estimated cost for this issue is noted above in
Section 2.2.5.

2.6.2. Steam System

The steam system includes all steam piping and valves required including the
piping tie-ins into the existing boiler plant. The process steam lines are
equipped with sales meters. The IP system is designed to take 275 psig steam
directly to process and with necessary headers and pressure reduction valves for
the alternate winter process supply of 100 psig.

2.6.3. HRSG Blowdown Tank

One common HRSG blowdown tank is provided for both HRSGs. The continuous
blowdown is cascaded. The high-pressure boiler blowdown is routed to the IP
boiler and the IP boiler blowdown is routed to the blowdown tank. The
intermittent blowdown for each boiler is also routed to the blowdown tank. Low
point drains for maintenance are routed around the blowdown tank to insure
complete draining during downtimes. The drain from the blowdown tank is routed
to the chemical waste sump for cooling and then pumped to the neutralization
tank and them discharged to the process drain. This would be slightly more
reliable with a blowdown tank for each HRSG, but is an acceptable practice for
non-rotating equipment with no moving parts, on a small foot print site.

2.6.4. Water Treatment System

The water treatment system includes all equipment required to provide
demineralized water for boiler feedwater and chemical treatment for the HRSGs.
Two 550 gpm demineralized trains each representing 50 percent of the station
needs/1/ have been provided with the following equipment: strong acid cation
units, forced draft decarbonator, strong base anion units, acid regeneration
system, caustic regeneration system, 7,000 gallon acid storage tank, 7,000
gallon caustic storage tank, neutralizer waste transfer pumps, neutralizer tank
mixer, PLC control system, instrumentation, interconnecting piping, and a RS-232
communications module to interface with the Project DCS system. If the
originally forecast steam demand was realized and there was a low percent of the
condensate returned, then this system would not have any reserve capacity, which
would not be a reliable operating situation. Considering the historical and
expected requirement for steam export and condensate return, this system
represents 200 percent reserve capacity, which makes this system reliable.

The chemical treatment system for the HRSGs consists of a phosphate feed system,
an oxygen scavenger

__________________

/1/ Based on the "Winter-Highest Steam Export" heat balance diagram- historical
steam export has only approached one third of this design capacity

2-6
<PAGE>

feed system, a neutralizer feed system and a sodium sulfite feed system. A
95,000 gallon neutralization tank is provided to neutralize the pH of
regeneration wastes and plant chemical wastes.

Three 50 percent capacity (one common spare) deaerator make-up pumps are
provided that take suction from the 360,000 gallon treated water tank where the
demineralized water is stored. The sizing of this tank would not be adequate if
the originally predicted water requirement was realized, considering the
historically demonstrated requirement the tank will provide approximately 21
hours of run time which is acceptable. These pumps provide make-up water to the
deaerator. The philosophy of a shared common spare pump is not unusual in this
industry.

2.6.5. Instrument and Plant Air System

Two 100 percent capacity rotary-screw instrument/plant air compressors have been
provided to supply pressurized air required for the instrumentation and plant
services. If pressure drops in the air piping header, the spare unit will
automatically start. The system includes two air receivers, two prefilters, one
dual-tower desiccant type, heatless air dryer, one afterfilter, controls for
automatic operation, acoustic enclosure, regulating system, oil system with
filters and coolers, and all required instrumentation.

2.6.6. Raw Water System

Raw water is supplied to the Project from the city water supply. This water is
utilized for raw water supply to the demineralizer system, to cooling water, and
for utility water. The water to be utilized for boiler feedwater is piped to the
50,000 gallon city water tank and then pumped by three 50 percent capacity (one
common spare) city water pumps to the demineralizer trains. There are no backup
systems for supply of water to the Project other than the city water system and
this city water tank will only supply about 50 minutes of run time at the
original design requirement or about 3 hours of run time at the present
historical demonstrated demand. The more important issue is that the supply of
cooling water is provided directly off of the city supply lines and if this
supply is lost the plant will loose cooling to the boiler feed pumps and to the
lubrication systems for the GT and the generators which will bring the plant
down fairly quickly on high temperature limits for these pieces of equipment.

2.6.7. Plant Fuel System

The Project's fuel is natural gas, supplied at a normal fuel supply pressure of
700 psig by a pipeline designed and installed by The O'Brien & Gere Companies.
An emergency back-up fuel gas compressor is provided to boost the fuel gas
supply pressure if it drops below 625 psig. The fuel gas compressor is a
packaged skid-mounted reciprocating compressor with a lubricating system,
suction scrubber, discharge filter, aftercooler, discharge coalescer, two
pulsation bottles, a control system, safety shutdowns, instrumentation and
interconnecting piping.

A 100 percent capacity filter/separator is provided to insure that the fuel to
the equipment is dry and clean. Regulators, fire safety shut-off valves, and
relief valves are supplied to insure that a safe system is provided.

Fuel gas pressure for the GTs is 675 psig +/- 25 psi. The HRSG burner system for
auxiliary fire uses 35 psig fuel. Take-offs are provided to supply 35 psig fuel
to the existing Riley boiler plant as an emergency back-up and for utility
requirements such as hot water heaters.

The Project fuel system is typical of other LM5000 PC STIG facilities with which
we are familiar.

2-7
<PAGE>

2.6.8. Fire Water System

Fire protection water is taken from the two city water main supply lines.
Hydrants, sprinklers and standpipes for fire hoses are provided throughout the
Project as required by local and national codes. A deluge system is provided for
the lube oil system on the GT generators and for the main step-up transformers.
Wet pipe systems (automatic with fusible sprinkler heads) have been provided for
the maintenance area, the battery room and the office area. The system is
designed to meet the maximum sprinkler water flow demand plus a hose stream
allowance. The firewater system is provided with a pressure switch to provide a
low-pressure signal and alarm in the control room through the Project DCS.

2.6.9. Waste Water System

Oily water drains are routed to the oily water sump, pumped to an oily water
separator via two 100 percent diaphragm pumps, and then discharged to the city
sewer. Wastes from the oily water separator are removed from the Project site
via storage drums.

Chemical drains are piped to the chemical waste sump, pumped to the
neutralization tank via two 100 percent sump pumps, and then discharged to the
city sewer.

2.6.10. Water/Glycol System

The anti-icing coil in the GT inlet air filter requires heated water/glycol for
heating the inlet air to the GTs during freezing conditions. Three 50 percent
each water/glycol pumps are utilized to pump the water/glycol mixture through a
heat exchanger utilizing steam as the heating medium. A water/glycol standpipe
is provided for mixing, and make-up for the closed loop system.

2.7. Electrical Systems

The electrical systems design, layout, and equipment are typical for a facility
of this type and size. The Project ties into the electrical system of Niagara
Mohawk at a substation known as Temple Street. This is a 115 kV substation which
ties into two other 115 kV substations in the Niagara Mohawk system (i.e., Ash
Street and Peat) via single-circuit 115 kV transmission lines. The Temple Street
substation is configured using a ring scheme, which should provide for a high
reliability of service and a great deal of flexibility of operation.

The following sections provide brief descriptions of the electrical systems
associated with the Project.

2.7.1. 115 kV Substation at the Project

The 115 kV substation at the Project is configured as a single-bus, single-
breaker scheme rated for 115 kV. One of the principal advantages of this
arrangement is its low cost. However, the scheme generally provides a relatively
low degree of service reliability, since a total and complete station outage can
occur in the event of a single breaker or bus failure (i.e., a single
contingency can cause a complete station shutdown). In addition, under the
existing bus arrangement, maintenance of essential substation equipment
generally cannot be performed without disturbing the operation of the station.
For instance, the substation must be de-energized in order to carry out bus
maintenance. Also, maintenance of the breakers that protect the interconnecting
circuits can only be performed after de-energizing their corresponding circuit.
In Stone & Webster's experience, however, these single-bus, single-breaker
arrangements are fairly typical of facilities such as this one. The Project has
experienced one event where a lightning arrestor failed on this bus resulting in
a 20 hour forced outage.

2-8
<PAGE>

The Project connects to the Temple Street substation via a 115 kV, 750 kcmil,
aluminum, underground cable. The interconnection point between the Project and
the Niagara Mohawk system is at the cable potheads in the substation at the
Project (the "Receiving Point"). Meters are provided to measure incoming power
for start-up and outgoing power for sales.

The current rating (or ampacity) of the 115 kV substation bus is 1200A
(amperes), which is adequate. The substation appears to be properly fitted with
standard lightning arresting equipment, measurement transformers, switchgear,
protective relaying and disconnection equipment, including four disconnect
switches, two SF\\6\\, 115 kV, 1200A circuit breakers for outdoor use. In
addition, there are nine 1200/5 multi-ratio CTs, three bushing-type current
transformers with transducers, and three lightning arrestors.

A relay building (prefabricated metal) is provided to house protective relays,
control switches, meters and indicating lights. Two digital electronic multi-
function meters for current, voltage, watts, VARs, power factors and frequency
have been included in the building and equipped with RS-232 and KYZ pulse
outputs. The building is insulated, heated, lighted and air conditioned, with
smoke and fire detection connected to the cogeneration plant fire detection
system. Additional space with a locking door is provided for Niagara Mohawk
equipment.

The substation area is provided with high pressure sodium type lights and a
chain link fence to protect the entire perimeter.

2.7.2. Main Step-Up Transformers

Two main step-up transformers are provided and installed in the substation at
the Project. Each transformer is separately connected via underground cables to
each GT driven generator. The cables from the generators to the transformers are
routed underground. The transformers take the 13.8 kV power produced by the
generators and provide 115 kV power to the utility. The transformer are oil
insulated units and are sized to carry the continuous maximum unit output, and
are rated at 30.2/40.3/50.4 MVA, OA/FA/FA 65 degrees C rise, 3 phase, 60 Hz. The
high voltage side is 450 kV BIL, WYE connected, with no-load tap changing
capability. The low voltage side is 110 kV BIL, delta connected. The impedance
based on OA rated capacity is 7.5 percent. The units include bushings, bushing
transformers, station class lightning arrestors, sudden pressure relays and
winding temperature indicators. The transformers appear to be appropriately
dimensioned for an installation of this size.

Transformer oil spill containment is provided for each transformer including
underground tanks and containment dikes. This is furnished in complete
compliance with all applicable New York State DEC and federal EPA regulations.

A deluge system for fire protection is provided with freeze protection and alarm
contacts for remote indication.

2.7.3. Auxiliary Transformers

Two 1500/2000 kVA, AA/FA, 13.8 kV-480 V, dry type cast coil transformers are
supplied to provide power to the 480 V plant auxiliary motors and other services
requiring 480 V. Primary fuses are included. Each unit is sized for 100 percent
capacity to insure reliability throughout the Project. The auxiliary
transformers are located adjacent to the power island building on the south
side. The cable from the auxiliary transformers runs via cable trays throughout
the Project.

In addition, one 1500/2000 kVA, AA/FA, 13.8 kV-4160 V, dry type cast coil
transformer is included to

2-9
<PAGE>

supply power for the 4160 V emergency fuel gas compressor motor. One neutral
grounding resistor will be mounted on the unit and is rated at 600A, 2400 V line
to neutral, 10 second, with 300:5 CT. The unit is mounted in an outdoor
enclosure with one entrance bushing.

2.7.4. 13.8 kV Switchgear

The 13.8 kV switchgear consists of four sections of 15 kV metal clad switchgear
and three sections of 15 kV metal enclosure switches in one continuous indoor
lineup. All of the switchgear is located in the power island building in the
electrical room.

The switchgear includes two 3000A generator breaker assemblies, two 1200A feeder
breaker assemblies, and four sets of drawout PT equipment. Three 1200A
transformer feeder assemblies are included for the switches. The switchgear is
rated for 1000 MVA, with a maximum symmetrical interrupt capability of 48 kA
RMS. Relays, CT's, PT's, status lights and switches are included.

2.7.5. 480 V Switchgear

The 480 V switchgear consists of eight sections, with four 1600A power breakers,
three 3200A power breakers, twelve 1600:5 CT's, six 3000:5 CT's, six 4:1 PT's,
switches, indicating lights, bracing, and four bussed transition sections for
the 480 V MCCs. The transition buses are rated for 1600A.

2.7.6. 480 V Motor Control Center

The 480 V motor control centers (MCC) are connected by bus to the 480 V
switchgear. The four MCCs contain feed breakers, bus starter units, and relays,
as required to support the 480 V motors in the Project and spare capacity. All
of the motor control centers are located in the power island building in the
electrical room.

2.7.7. 4160 V Motor Control Center

The 4160 V MCC supports the emergency fuel gas compressor motor only. It is
rated at 250 MVA with a 1200A bus. The controller includes solid state
protective relaying.

2.7.8. DC Battery Powered Battery System

The 125 V DC battery system supports 125 V requirements for switchgear control,
substation control, emergency lighting, etc. The system has an energy storage
capacity of four hours and includes a lead calcium, solid state rectifier,
battery charger and redundant charger, and main DC distribution panels. Twenty-
four V DC battery systems are provided with the GTs to support 24 V DC loads
required for equipment in the gas turbine package.

2.7.9. UPS System

The uninterruptible power supply (UPS) system provides back-up power for the
distributed control system. The system includes a 150A, 208 V AC battery
charger, a 15 kVA inverter, a 30 minute battery system, a 225A battery
disconnect breaker (DC rated, 2 power, in NEMA 1 enclosure), a 225A AC
distribution panel with 225A main input breaker and bus, and a 15 kVA bypass
regulating transformer.

2-10
<PAGE>

2.7.10. Grounding System

The main exterior plant-wide ground grid utilizes bare copper cable. Copper clad
steel ground rods are buried a minimum of 30 inches below finished grade. The
system is designed to limit step and touch potential under maximum line-to-
ground fault conditions and to limit overall ground grid potential rise to less
than as defined in IEEE-80. The grounding system is tied to the station fence
ground, the substation ground grid, and the building grounding system. The
building steel columns, stack, tanks, and other metallic structures are
connected directly to the main grid. Equipment is grounded per manufacturers'
instructions.

2.7.11. Communication System

The Project communication system consists of telephone service with outlets in
the control room, office areas, electrical switchgear room and water treatment
laboratory.

A facility paging and two-party communication system is supplied with amplifying
equipment, headset stations, line balancing equipment, speakers and master
control station. Individual stations are integrated with the telephone
equipment.

2.7.12. Life Safety System

Zone panels are provided for interface to the main control room. Each panel has
a minimum of three spare zones and is tied together using a multiplexing cable
system in rigid galvanized steel conduit. The system is Class A, fully
supervised.

Ionized smoke detectors are provided in break rooms, electrical signal closets,
electrical equipment rooms, control room, office area, locker area, maintenance
area, gas compressor area and laboratory area.

Spot type heat detectors are supplied at the main transformers, the auxiliary
transformers, and the lube oil/control oil tanks and pumps. Smoke detectors for
HVAC mechanical equipment are ionization type.

Manual pull stations and horns are located at all exit and egress locations.
Audio-visual stations are located adjacent to the exit doors and in personnel
areas to meet applicable code requirements. All remote stations are tied into
the life safety system.

2.7.13. Lighting System

Plant lighting consists of normal lighting and self-contained DC battery pack
emergency lights. Outside lighting is 400/1000 watt HP sodium fixtures mounted
on building structures and controlled from photocells.

Emergency lighting systems are provided for purposes of personnel egress and
continuation of critical activities during emergency conditions.

2.8. Controls and Instrumentation

Control for the Project is accomplished by a DCS implemented with microprocessor
controllers for the control and monitoring of the Project processors. The DCS
has been recently upgraded to an ABB/Bailey Symphony Conductor NT DCS operating
system, which among other enhancements is Y2K compliant. The DCS is located in
the environmentally controlled control room in the power island building. With
the

2-11

<PAGE>

recent upgrade, Stone & Webster believes the DCS is representative of current
technology typically available for this type of facility.

The GTs, the generators, the duct burners, the fire monitoring system and the
demineralizer system have individual free standing control panels. Data logging
and some controls for this equipment are also handled through the DCS system.

Distributed Control System
- --------------------------

The system supports the following operator displays:

. Facility overview displays

. Graphic displays

. Alarming

. Digital input displays

. Analog indication

. Group displays

The system has the following printing and reporting capabilities:

. Alarm summaries

. Event summaries

. Operating summary reports on a periodic, demand, or event basis

. Any monitor graphics display printout

The system continuously monitors itself for failures and provides a diagnostic
display. Loop timing is available on-line with configuration data storage. The
system supports all control algorithms as required. The system is totally
redundant whereby any single failure of the following will alert the operator
while continuing to keep the process under uninterrupted automatic control from
the monitor:

. Power supply failure

. Controller/processor failure

. Highway or communications link failure including communications controllers
or data multiplexers

Interface hardware includes two operator consoles with monitor and keyboard, one
engineer's console with monitor and keyboard, two printers and one control panel
for mounting auxiliaries.

2.9. Civil Design

In general, the civil design appears typical and unremarkable for a facility of
this type.

2-12
<PAGE>

2.9.1. Drains

A system of underground gravity drains is installed to remove all effluent and
spills from the site. Oily water waste and chemical wastes are treated before
discharge. The drains run separately to the combined city sanitary/storm sewer;
i.e. process, sanitary, and storm run-off drains will be run separately. A
wastewater discharge flume monitors process wastewater discharge flows.

2.9.2. Site Preparation

All undesirable soils and materials are represented to be removed from the site.
Grading and storm run-off provisions have been included. Fill soil is provided
and compacted in accordance with applicable codes and standards.

2.9.3. Paving

Access roads, ramps, unloading areas, driveways, and heavy equipment parking
stands have been paved with concrete conforming to HS-20 truck loading.

Automobile parking lots and light vehicle parking areas have been paved with
asphaltic concrete.

Areas of ground between transformers and switchgear, under piping support
arbors, in the substation and around pumps and tanks have been finished with
crushed stone and compacted to a six-inch depth.

2.9.4. Foundations

The GT generators, HRSGs, fuel gas compressor, stacks, and boiler feedwater pump
foundations are supported by concrete filled steel piles.

The power island building is supported by spread footings on timber piles.

The outdoor pumps, treated water tank, neutralization tanks, water treatment
building, step-up transformers, and dead end structure foundations supported by
mats. The city water tank is mounted on a ring wall foundation.

2.10. Heating, Ventilation and Air Conditioning

Stone & Webster believes the design requirements identified for the various
areas of the Project to be typical and reasonable for this type of facility and
for this location.

The following areas have filtration, heating, pressure ventilation, self-
contained packaged units with air-cooled condensers, thermostats for controlling
the area temperature between 60 degrees F and 85 degrees F, and humidification
and dehumidification systems:

. The second floor area of the power island building, which includes the
Project control room, offices, secretary's area, and restroom

. The first floor area of the power island building, which includes the
switchgear, relay panels, restrooms, and battery charger room

. The laboratory in the water treatment room

2-13
<PAGE>

The following areas have filtration, pressure ventilation, redundant blowers,
and a pressure fail alarm system:

. Gas compressor room

The remaining areas of the power island building and water treatment building
have a specific number of air changes and space heaters to maintain a
temperature of 60 degrees F at the minimum design temperature.

The following are criteria utilized:

-------------------------------------------------------------------------
Area Design Condition
-------------------------------------------------------------------------
Control Room (Summer) 74degrees F + 2degrees F db
-
-------------------------------------------------------------------------
Laboratory (Winter) 72degrees F + 2degrees F db
-
-------------------------------------------------------------------------
Switchgear Room 60degrees F min. or Ambient
-------------------------------------------------------------------------
Water Treatment Building 68degrees F min. or Ambient
-------------------------------------------------------------------------
Offices 74degrees F + 4degrees F db
-
-------------------------------------------------------------------------
Main Equipment Building 15degrees F temperature rise (at
operating levels)
-------------------------------------------------------------------------
Restrooms In accordance with local codes
-------------------------------------------------------------------------
Battery Charger Room Not less than 15 air changes per hour
-------------------------------------------------------------------------
All Other Areas 3 to 5 air changes per hour
-------------------------------------------------------------------------

2.11. Existing University Facilities

As part of the operation and maintenance of the Project, certain existing
University facilities are operated and maintained to provide a backup steam
supply to supplement the GT/HRSG trains when they are out of service for
maintenance or shutdown per electric power sale requirements. These are
essentially the:

1) Riley boiler house, which consists of two Riley boilers each with a
capacity of 150,000 lb/h at 200 psig and 550 degrees F and are used in
winter to supply 100 psig process steam. These boilers were installed in
1951 and currently operate on either gas or oil.

2) Alco boiler house, which consists of two B&W boilers each with a capacity
of 100,000 lb/h at 300 psig and 550 degrees F and are used in summer to
supply 275 psig process steam. These boilers were installed in 1954 and
currently operate on either gas or oil.

Each of the above boilers are supplied with heating coils in the bottom drum to
maintain warm standby. The boiler houses are each equipped with boiler feed
pumps and deaerating heaters, which are interconnected so that either deaerating
heater can supply either boiler house. The boiler houses have a common softened
water system to provide makeup. Each boiler house has interconnection with the
power company at 13.8 kV. Four 30,000 gallon fuel oil storage tanks are
provided. The Alco boiler house contains a black start diesel generator that is
run weekly and a black start is performed yearly. The Riley boiler house has a
1000 kW 5 psig back pressure steam turbine generator for black start
capabilities.

2-14
<PAGE>

[LOGO OF STONE & WEBSTER]
Project Orange Associates. L.P.
- ------------------------------------------------------------------------

SECTION 3. PROJECT CONDITION ASSESSMENT

3.1. The Project Overview

Stone & Webster conducted a site visit, which consisted of a walk through
inspection lead by the Project operations manager. This allowed an opportunity
for Stone & Webster to get a general impression of the condition of the Project.
During the visit, Stone & Webster's intent was to do a visual type inspection of
all of the Project's major equipment. The inspection did not involve any
physical examination, nondestructive testing, or laboratory testing of any of
the equipment or materials on site. During our visit, both units were operating
under approximately full load conditions, no supplementary firing of the exhaust
gases in the HRSGs was being done during this time. The general condition of
the Project was excellent and no remarkable observations concerning general
house keeping, painting, and corrosion control were noted.

3.1.1. Equipment Arrangement

The site is relatively compact and some equipment is located in close proximity
to other equipment, allowing limited room for maintenance access. The GTs are
packaged on skids and were fully tested before their installation at this site.
The GT packages are opposite hand type layouts, which allowed both GT access
doors to face the outside walls of the turbine building to facilitate GT engine
exchange and maintenance.

3.1.2. Maintenance

The Project appears to be a well maintained facility where maintenance is
performed with careful attention to detail. No rusting equipment or missing
insulation material was observed during our visit. The overall site was
extremely clean and no debris of any sort was observed around the Project site,
inclusive of the inside of trenches. The Project maintenance personnel advised
that all scheduled maintenance is performed for all plant equipment and that the
Project monthly reports list all scheduled and unscheduled maintenance along
with plant operating performance data, export electric sales and process steam
sales. Preventive maintenance is represented to be conducted on all major
equipment according to predetermined and set schedules, which are based on
experience and manufacturers recommendations.

3.1.3. Infrared Thermographic Assessment

The Project has infrared thermographic electrical, mechanical, and heat
conservation inspections performed on a yearly basis for major plant systems,
equipment and piping to highlight and identify abnormal operating situations.
This is a highly desirable inspection in that the infrared inspection can point
out problem areas before failure. This type of inspection is noninvasive and
generally discovers problems that could go on for days, weeks, or months before
the item actually fails. The most recent infrared inspection was performed on
August 19 & 20, 1999 and the report addressed 10 items, which the testing firm
noted as requiring attention of a more immediate nature and others which could
be addressed in a more casual approach. A maintenance outage was scheduled for
September 24, 1999 for the repair of these items. This type of proactive
inspection of equipment is an excellent way to avoid serious damage to permanent
plant equipment and materials and improve overall plant availability, as
infrared imaging can detect problems not normally detectable by ordinary visual
observation techniques. The last two years reports were briefly reviewed. Some
similar type problems with similar equipment were noted, but it appeared that
all

3-1
<PAGE>

problems noted last year were not noted again this year implying that they were
addressed following this report last year. These types of issues are typical of
any facility and have no specific relationship to the type of GT or HRSG or any
other unique equipment at this facility.

3.1.4. Cyclic Operation

The Project was originally designed and operated as a base load plant and the
Sponsors have indicated that the current operating plan is to continue the
Project's original base loaded type of operation. The operating plan from
January 1999 until September 1999 had the GT and HRSG units reducing load
slightly every night and shutting down on weekends. The load reduction at night
was not particularly troubling, given that it did not involve more than the 10-
15 percent load reduction being done from January to September this year. The
shut down on weekends was a significant change in the operating mode and if this
were extended into a daily shut down situation, this change would be more
significant. The continued operation at base load, as is now anticipated,
should be acceptable and should result in availabilities generally in agreement
with those used in the Financial Projections and historically demonstrated at
the Project.

3.2. Condition Assessment

3.2.1. Gas Turbine Generators

As we understand the situation, GECS, as part of the support for their O&M
contract for the Project, has purchased a spare GE LM5000 gas turbine engine
(serial 474-117) which is presently dedicated to the support of the Project and
one other facility in Carson California which uses a single GE LM5000 gas
turbine and is water injected for NOx control.

Both of the original GTs engines have operated satisfactorily and have supported
a plant availability of at least 97 percent for years 1996, 1997 and 1998 though
the station availability has been slowly decreasing as would be expected as the
Project ages (see Figure 3.3-1). There was a sharp decrease in plant
availability for the first seven months of 1999 primarily since GT #1 was out of
service form April 16, 1999 through June 21, 1999 due to the unavailability of a
spare engine. When GT #1 came down the dedicated spare was in Carson California
and a replacement engine from the LM5000 Lease Engine Program was not available.

GT #1 (serial 474-157) operated for approximately 43,000 hours until April 16,
1999 when it was taken out of service due to a failure of a 5/th/ stage HP
compressor blade. The spare engine 474-117, which finished being overhauled in
January 1999, was not available back from Carson California until June 16, 1999
and then required minor hot section rework to reconfigure it for steam
injection. Following the reconfiguration the spare engine was installed in GT
#1 on June 21, 1999. Through November 8, 1999, this spare engine, 474-117, has
accumulated approximately 5,600 hours since it came back from overhaul in
January 1999 of which approximately 1,600 hours have been at the Project.
Engine 474-157, the original engine for GT #1 is presently scheduled to be back
to the Project on December 23, 1999. The spare engine, 474-117 had been
recently exhibiting higher than normal vibration levels, which on November 1,
1999 increased to the point where it was necessary to bring in a vibration
specialist and perform a trim balance on the this engine. This trim balance was
completed on November 7, 1999 and the unit has operated and restarted
satisfactorily with low vibration levels since that point in time.

GT #2 (serial 474-158) was shut down on June 17, 1998 for a 50,000 hour overhaul
(having accumulated approximately 48,000 hours) and lease engine 474-200 was
installed. Engine 474-158 was reinstalled February 12, 1999 and has accumulated
approximately 3,600 hours through November 8, 1999.

3-2
<PAGE>

Since GE is no longer manufacturing new LM5000 gas turbine engines for sale,
Stone & Webster recommends that it be documented through GE or others what the
availability of LM5000 gas turbine lease engines and spare parts is likely to
be, since plant and GT availability are greatly affected by lease engine and
spare parts availability. Stone & Webster recommends that the export steam uses
and surges be evaluated to determine if any system modifications or operations
modifications (including changing the amount of power augmentation steam into
the GT) may be possible to avoid venting steam during the spring and fall when
there is greater volatility in the steam load demand. With the exception of the
availability of spare engines and related engine spare parts noted above, Stone
& Webster did not observe or note a condition during its review which it
believes would significantly compromise the Project's ability to achieve its
performance projections identified in the Financial Projections. These items
noted, if appropriately addressed should not compromise the Project's ability to
achieve its performance projections identified in the Financial Projections.

3.2.2. Heat Recovery Steam Generator

The HRSGs have experienced a number of tube leaks, which have resulted in
portions of the heat transfer surface being operationally bypassed. Tube leaks
can typically be attributable to poor water chemistry control. The water
treatment system/program for HRSG and steam systems is well established and
maintained with daily reports provided by plant personnel and weekly summary
reports provided by Calgon Corporation. Calgon also performs yearly inspections
of the HRSGs, the most recent being May 18, 1999 for HRSG #1 and June 3, 1999
for HRSG #2. Both of those reports advise that the boiler waterside surfaces
were in excellent condition. The drum surfaces are reported to be well
passivated and in a deposit-free condition. In the reports, there were no
mechanical problems observed and the steam separators were noted clean and free
of any solids build-up indicating no apparent carry over problems. The
conditions reported observed are representative of a well-maintained water
treatment program by the Project operating personnel. As the water treatment
seems to be in order, Stone & Webster recommends that the cause of the tube
leaks be investigated and corrected in order to maintain and improve efficiency
and availability. Other than the above, Stone & Webster did not observe or note
a condition during its review which it believes would significantly compromise
the Project's ability to achieve its performance projections identified in the
Financial Projections. Without additional investigation and analysis, it is
difficult to quantify the impact of these leaks, but at first review, the choice
to isolate these heat transfer surfaces appears to make a relatively small
negative impact on the efficiency of the Project and will likely improve the
availability slightly, considering the present operating history.

3.2.3. Boiler Feedwater System

The feedwater system has exhibited failures of three of the seven boiler feed
pumps along with the erosion of the feedwater control valves. The feedwater
control valves have been replaced with smaller valves (4 inch replaced with 2
inch and the body material was upgraded to stainless steel). The present HP
boiler feed pumps are designed to deliver 1500 psig pressure with a minimum
operating pressure of 1000 psig. This pressure seems excessive for a boiler
delivering 625 psig steam. Stone & Webster recommends that the feedwater
systems and HRSGs be evaluated and proper selection of pump capacity and head be
confirmed to be suitable for the intended service conditions and the expected
variations. It is expected that two HP boiler feed pumps would meet normal
operating conditions (reduced head and increased flow) with the same or similar
footprint, but additional investigation and analysis would be required. With
the exception of the above, Stone & Webster did not observe or note a condition
during its review which it believes would significantly compromise the Project's
ability to achieve its performance projections identified in the Financial
Projections. Continued operation in the present condition, will likely result
in acceptable performance from the standpoint of the Financial Projections.
Modifications that are feasible and economically justified might result in a
minor improvement in plant efficiency and a reduced

3-3
<PAGE>

probability of feedwater pump and regulator control valve failures, which would
improve overall availability.

3.2.4. Raw Water System

The city water that is utilized for the water treatment system is first used as
cooling water prior to entering the city water tank. The city water is provided
normally from the south through 8" city water header UW-4300 and UW-4302. A
second, or emergency, alternate supply is provided from the north through line
6" UW-4319 tying into 8" line UW-4320. The loss of 8" line UW 4320 results in
no cooling water available for boiler feed pumps, gas compressor, turbine lube
oil coolers and other equipment, which will necessitate the shutdown of both
GT/HRSG trains. During the summer months (period of lower process steam flow)
this extra cooling water, which is not required by the water treatment system,
is diverted to the neutralizing tank for final discharge to the sewer. There
was a city water main break in February 1997 which resulted in sand and silt
deposits in the city water tank. The system has no means of pre-filtering the
normally clean raw city water. Stone & Webster recommends that the cooling
water and raw system supply be studied and evaluated to eliminate the
possibility of single failure events from shutting down the plant and to
eliminate the dumping of city water to the sewer which is both wasteful and
expensive.

Otherwise, Stone & Webster did not observe or note a condition related to the
raw water system during its review which it believes would significantly
compromise the Project's ability to achieve its performance projections
identified in the Financial Projections.

3.2.5. Water Treatment System

Provided that the historical demand for demineralized water does not increase,
Stone & Webster did not note any condition related to the water treatment system
during its review, which it believes would significantly compromise the
Project's ability to achieve its performance projections identified in the
Financial Projections.

3.2.6. Instrument and Plant Air System

With respect to the instrument and plant air system, Stone & Webster did not
observe any remarkable condition during its review.

3.2.7. Electrical Systems

Annually, the Project has an electrical preventative maintenance and testing
program on the high voltage electrical equipment that is conducted with the
assistance of H.M.T., Inc. (High Voltage Maintenance and Testing Services). The
latest testing was performed in June 1999 and their report dated August 17, 1999
listed six items that required attention/maintenance by the Project personnel
and will be accomplished during maintenance outages as required. This
inspection also included the electrical equipment in both the Riley and Alco
Boiler Houses that is maintained by GECS.

The DC batteries for the UPS system were replaced in 1998 with exide D batteries
and the DC batteries for electrical breaker controls are scheduled for
replacement in November 1999.

In general with respect to the electrical systems, Stone & Webster did not note
a remarkable condition during its review that it believes would significantly
compromise the Project's ability to achieve its performance projections
identified in the Financial Projections.

3-4
<PAGE>

3.2.8. Controls and Instrumentation

The existing Bailey distributed control system has recently been replaced and
upgraded to ABB/Bailey Symphony Conductor NT DCS operating system including
upgraded graphics and appears to be functioning satisfactorily. Stone & Webster
believes the controls and instrumentation will support the Project in achieving
its performance projections identified in the Financial Projections.

3.2.9. Heating, Ventilating and Air Conditioning System

All systems in the office/control room area were operating satisfactorily.
However, for the main equipment building housing, the GT/HRSG/boiler feed pump
systems, the wall louvers were blocked off and the building had ambient
temperatures in excess of 108F on the day of our visit. Stone & Webster
recommends that the ventilation system for the main equipment building be
evaluated/modified to provide proper ventilation during both summer and winter
conditions. This would improve working conditions in this area from a health
and safety standpoint as well as provide a more tolerant environment for
electrical and instrumentation equipment located in this area.

Other than the ventilation of the main equipment building, Stone & Webster did
not note any condition with respect to the heating, ventilating and air
conditioning system during its review which it believes would significantly
compromise the Project's ability to achieve its performance projections
identified in the Financial Projections. This ventilation issue will not likely
require much capital to resolve and will not likely have any significant impact
on the Financial Projections.

3.2.10. Existing Facilities

The equipment and portions of the Riley and Alco Boiler Houses, which are
operated and maintained by GECS, appear to be well-maintained. Both of the
these complexes were constructed in the 1950s and were designed and laid out to
burn coal and there are still a number of pieces of equipment from that period
abandoned in place. Because of the original use of these buildings and the
additional amount of equipment required for burning coal there is more than
ample maintenance access for the equipment which is now required to burn natural
gas and oil. The boiler exterior furnace walls do not exhibit signs of
overheating or other differential expansion problems, which can sometimes be
found on these types of units. In general with respect to the existing Riley
and Alco Boiler House facilities, Stone & Webster did not observe or note any
condition during its review which it believes would significantly compromise the
Project's ability to achieve its performance projections identified in the
Financial Projections.

3.3. Life Extension Issues

There was no specific Life Extension Program report available for review by
Stone & Webster, but the Project appears to be well-maintained and has had some
upgrades of equipment/facilities in the new cogeneration portion as well as the
existing University facilities. Additionally, the boilers for both the Project
and the existing University facilities are inspected annually and have received
renewed operating permits on an ongoing basis. The cogeneration portion of the
Project which was constructed in the early 1990s, appears to be typical of
equipment being furnished at this time and, if properly maintained and operated
in accordance with its design requirements, can typically be expected to have a
design life of 20 years before one expects to start implementing formal life
extension programs. Funds for a formal life extension program for the existing
University facilities should be budgeted and planned for by this time, but the
results from such a program were not available. Stone & Webster recommends that
a life extension program be instituted for the existing University facilities to
improve the probability of achieving the availability levels in the Financial
Projections.

3-5
<PAGE>

Station Availability

[GRAPH APPEARS HERE]
[PLOT POINTS TO COME]

Figure 3.3-1

<PAGE>

[LETTER HEAD OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

SECTION 4. PROJECT PERFORMANCE

The project's performance is a measure of the facility's ability to convert fuel
into useful thermal energy and electricity for sale. The efficiency of this
conversion process is dictated by the choices of the plant designer, the
thermodynamic principals involved in the cycle and to some degree by the
operation and maintenance practices employed at the Project. The hardware and
performance degrade with use. The rate and severity of degradation can be
influenced by operation and maintenance practices, type and cleanliness of fuel,
cleanliness of combustion air provided, cleanliness of NOx injection water or
steam, and many different, inherent, characteristics of the equipment. For a
new facility, we would review the mass and energy balance and equipment
specifications to see if we agreed with the predicted performance represented by
the designer. For an existing facility, we review historical data related to
performance and temper our opinion of a forecast of future performance to use in
the Financial Projections by observed plant physical conditions. Future
performance will depend upon proper operation and maintenance of the Project and
upon many variables beyond the control of Stone & Webster and, therefore may
vary from these projections. Based on the information reviewed and the above
assumptions, Stone & Webster believes the technical performance forecasts are
reasonable.

4.1. Basis of Power Plant Heat Rates

The thermal performance of a fossil power plant is typically represented by the
ratio of the heat input (based on the higher or lower heating value of the fuel)
to the net electrical output (on the low voltage side of the main transformers),
measured in British thermal units per kilowatt-hour ("Btu/kWh"). This ratio of
fuel heat input to electric power output is known as the "heat rate" and is
inversely proportional to the efficiency of the plant. The statement of a heat
rate for a plant must always include a reference noting whether it is based on
the lower or higher heating value of the fuel. The lower heating value ("LHV"),
or net heating value of the fuel is usually referenced by manufacturers of
equipment because this fuel heating value does not include the heat which cannot
be partially recovered by the equipment, and is lost in the form of water vapor.
The higher heating value ("HHV"), or gross heating value, on the other hand is
generally used by suppliers of fuel. This HHV of the fuel includes the heat,
which is lost in the form of water vapor. Typically power plants are most
efficient (a lower heat rate) the closer they are operated to their design basis
conditions, or near 100 percent of electrical output rating. When a power plant
is dispatched at lower loads the heat rate will increase because the efficiency
decreases. Therefore, for optimal thermal performance, power plants generally
need to operate at or near full load conditions. Gas turbine power plants'
efficiency varies with the air temperature entering their compressors, generally
becoming more efficient at cooler inlet air temperatures.

Cogeneration power plants expand the above definition somewhat because a portion
of the useful energy is exported as thermal energy, generally in the form of
steam. This exported thermal energy may be used for space conditioning. In the
discussion which follows two heat rate terms will be addressed. One will be the
overall plant heat rate without any credit for steam (thermal energy) leaving
the facility and the other will be adjusted to account for the thermal energy
that leaves the power plant. The adjusted heat rate value provides for some
comparison of plant performance with similar plants that do not cogenerate. The
unadjusted heat rate is used to predict the ongoing fuel requirement used in the
Financial Projections for the Project.

4-1
<PAGE>

4.2. Heat Rate

Stone & Webster reviewed the Project monthly operating reports from January 1996
to July 1999 and a summary table provided for the August & September 1999 report
which was in preparation at the time of our site visit and extracted the data
presented on the following tables on Figure 4-1. Stone & Webster believes that
the data used is the most accurate available from the Sponsors for the Project.
From August 1998 to August 1999, the power sales data is represented to be based
on Niagara Mohawk's power purchase records and for the earlier period, the power
sales data was based on the Project's power meters. Data from Niagara Mohawk's
power purchase records was not provided for the earlier period. There is some
variation between the two sets of data that should be explained. For eleven out
of these thirteen months where both sets of data are available, the variation is
less than one percent, but for two of these months, the variation reported is
11.2 percent for April 1999 and 17.5 percent for May 1999. Stone & Webster
generally considers the actual purchase records of the utility to be the most
accurate and would prefer to see these records for this entire period. We have
used the Project meter records where the Niagara Mohawk data has not been
provided to build the following tables that contain the historical Project heat
rates. Based on the data available, we believe these most recent 13 months of
data probably represent the best average heat rate to use in the pro forma.
This unadjusted average heat rate value is 9,351 Btu/kWh (LHV) or 10,370 Btu/kWh
(HHV). The heat rate also varies from summer to winter for this project with
the heat rate being higher during the winter months. This is due to
supplementary duct firing of the HRSG and / or firing of the auxiliary boilers
as required to satisfy the winter heating steam load.

The average adjusted heat rate value for this most recent 13 month period is
7,647 Btu/kWh (LHV), which implies an overall thermal efficiency of about 44
percent. This adjusted heat rate value provides some indication of how
efficiently the fuel is being used to generate electricity from the Project
while the Project is producing useful thermal energy for other purposes. While
this adjusted heat rate is not as good as the current GT combined cycle
technology allows, it is more efficient than any conventional re-heat /
regenerative Rankine thermal cycle power plant.

These heat rates are comparable with other GE LM5000 gas turbine facilities with
which we are familiar.

4.3. Power Output

The power output of each GT is approximately 40 MW and the monthly reports
indicate that the GTs can and do achieve rated capacity on a regular basis when
ambient air temperatures are not restricting the plants output. The power
output during the original performance test was approximately 40 MW for each GT,
but the heat rate was better at that time by approximately 7 percent. Recently,
the units have been restricted by the Sponsor's current asset manager to
operating at a reduced capacity during the off peak periods at night and have
been being shut down completely on the weekends. This change in operation was
represented to be made as a result of the economics involved in the present
utility restructuring process, which is underway in New York state. The
resulting historical capacity factors for the Project are as noted in Figure 4-1
for the periods for which data was provided. Going forward the new asset manger
plans to run the units at base load.

4.4. Availability

The availability of this project was in the high to mid 90 percent range over
the last few years (see Figure 4-1). From our review of the data available for
these types of units and the experience with other similar units which Stone &
Webster is familiar, these values are reasonable if not above average. The
availability does show some trend downward over the last few years and it is
likely this trend will or could increase as

4-2
<PAGE>

the Project ages and the availability of spare parts for the GE LM5000 gas
turbine engine becomes more competitive. The events noted in the Operations and
Maintenance section of this report are some indication of this already. Earlier
this year, the Project experienced an extended outage due to the non-
availability of a lease pool engine and the GECS shared spare engine. As we
understand this situation, GECS has dedicated a spare engine that it owns for
the Project and one additional facility they operate in California. Additionally
we understand that the Project is currently a participant in and will be a
member of the engine lease pool program as well, going forward, which Stone &
Webster considers to be a prudent practice for the Project. This current
dedicated spare engine for two GTs at the Project and for the additional GE
LM5000 facility operated by GECS is the best practice we are aware of for
dealing with this situation when it is coupled with being a member of the LM5000
Lease Engine Program.

4-3
<PAGE>

Project Orange Monthly
Steam and Power Sales
Fuel Input, Heat Rates, Net Capacity Factor, Station Availability

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Jan-96 Feb-96 Mar-96 Apr-96
Period Hours 744 696 744 720
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 102,052 93,396 84,852 57,998
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 57,168 48,600 58,392 54,360
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel input, Btu (LHV) 556,379,200,000 480,107,000,000 531,029,000,000 474,856,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 556,379 480,107 531,029 474,856
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 616,969 532,391 588,858 526,568
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 9,732 9,879 9,094 8,735
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 10,792 10,955 10,085 9,687
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) incomplete data incomplete data incomplete data incomplete data
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 96.05% 87.26% 98.10% 94.38%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 97.55% 88.08% 99.40% 95.99%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 96.05% 87.28% 98.10% 94.38%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 96.05% 87.28% 98.10% 94.38%
- ---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year May-96 Jun-96 Jul-96 Aug-96
Period Hours 744 720 744 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 40,586 30,272 29,867 31,252
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 58,752 55,800 56,520 57,312
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel input, Btu (LHV) 495,005,000,000 471,421,000,000 476,428,000,000 482,964,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 495,005 471,421 476,428 482,964
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 548,911 522,759 528,311 535,559
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,425 8,448 8,429 8,427
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,343 9,368 9,347 9,345
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) incomplete data incomplete data incomplete data incomplete data
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 98.71% 96.88% 94.96% 96.29%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 100.00% 98.48% 96.98% 96.74%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 98.71% 96.88% 94.96% 96.29%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 98.71% 96.88% 94.96% 96.29%
- ---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Sep-96 Oct-96 Nov-96 Dec-96
Period Hours 720 744 720 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 33,196 46,093 70,864 74,608
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 53,784 34,992 55,368 58,320
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel input, Btu (LHV) 455,239,000,000 333,590,000,000 498,307,000,000 522,653,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 455,239 333,590 498,307 522,653
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 504,815 369,918 552,573 579,570
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,464 9,533 9,000 8,962
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,386 10,572 9,980 9,938
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,719 7,925 7,455 7,402
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 93.38% 58.79% 96.13% 97.98%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 99.21% 95.16% 98.38% 99.21%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 97.40% 83.15% 96.68% 97.98%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 97.40% 83.15% 96.68% 97.98%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C>
------------------------------ -------------------------------
1996 Avg. 1996 Total Steam
Monthly Net Cap. 92.41% Sold, k-lbs 695,036
Factor=
------------------------------ -------------------------------
1996 Avg. 1996 Total Fuel
Monthly Station 97.27% Input MMBtu 5,777,978
Availability= (LHV)
- -------------------------------------------------- ------------------------------ -------------------------------
The above data is derived from the station 1996 Avg. 1996 Total Fuel
monthly reports and the attached supporting Monthly Net Cap. Input MMBtu 6,407,200
detail sheets & Sale Invoices when available. Factor w/ credit 94.82% (HHV) Approx.
for Reserve
Hours as if
The HHV numbers are derived by adjusting all of operated=
the fuel gas LHV values by multiplying by 1.1089 ------------------------------ -------------------------------
and the fuel oil numbers are derived by adjusting 1996 Total Power 649,368
all of the fuel oil LHV values by multiplying by Sales, MW-h
1.06 to get an estimate of the HHV value for the -------------------------------
fuel and the above estimated Heat Rates based 1996 Average
on HHV of the fuel. Heat Rate 8,927
(unadjusted),
Btu/kWh (LHV)
-------------------------------
-------------------------------
Net Capacity Factor is actual generation divided 1996 Average
by period hours times 80 MW and Station Heat Rate 9,900
Availability is fired hours plus reserve hours (unadjusted),
divided by period hours Btu/kWh (HHV)
- -------------------------------------------------- -------------------------------
</TABLE>

Figure 4-1
Sheet 1 of 4
<PAGE>

Project Orange Monthly
Steam and Power Sales
Fuel Input, Heat Rates, Net Capacity Factor, Station Availability

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Jan-97 Feb-97 Mar-97 Apr-97
Period Hours 744 672 744 720
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 97,922 74,824 76,138 55,163
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 58,032 51,264 58,752 52,920
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel input, Btu (LHV) 548,907,000,000 474,066,000,000 530,870,256,000 465,573,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 548,907 474,066 530,870 465,573
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 608,683 525,692 588,682 516,274
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 9,459 9,248 9,036 8,798
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 10,489 10,255 10,020 9,756
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,447 7,567 7,481 7,544
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 97.50% 95.36% 98.71% 91.88%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 98.78% 99.06% 100.00% 93.25%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 97.50% 97.55% 98.71% 91.88%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 97.50% 97.55% 98.71% 91.88%
- ---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year May-97 Jun-97 Jul-97 Aug-97
Period Hours 744 720 744 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 39,686 28,299 31,659 30,675
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 50,976 55,262 53,886 50,031
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel input, Btu (LHV) 440,798,000,000 470,452,000,000 461,028,000,000 429,591,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 440,798 470,452 461,028 429,591
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 488,801 521,684 511,234 476,373
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,647 8,513 8,556 6,586
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,589 9,440 9,487 9,522
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,693 7,873 7,820 7,826
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 85.65% 95.94% 90.53% 84.06%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 92.28% 98.60% 99.40% 98.23%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 91.09% 95.94% 95.67% 95.05%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 91.09% 95.94% 95.67% 95.05%
- ---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Sep-97 Oct-97 Nov-97 Dec-97
Period Hours 720 744 720 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Total Steam Sold (100# & 275#), k-lbs 33,726 50,424 68,101 81,075
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 34,905 31,105 37,227 58,653
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel input, Btu (LHV) 309,045,277,000 296,388,000,000 364,535,000,000 532,160,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 309,045 296,388 364,535 532,160
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 342,700 328,665 404,233 590,112
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,854 9,529 9,792 9,073
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,818 10,556 10,859 10,061
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,669 7,586 7,589 7,419
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 60.60% 52.26% 64.63% 98.54%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 99.72% 97.37% 100.00% 99.69%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 96.71% 94.61% 99.02% 98.54%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 96.71% 94.61% 99.02% 98.54%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C>
------------------------------ -------------------------------
1997 Avg. 1997 Total Steam
Monthly Net Cap. 84.64% Sold, k-lbs 667,690
Factor=
------------------------------ -------------------------------
1997 Avg. 1997 Total Fuel
Monthly Station 98.03% Input MMBtu 5,323,414
Availability= (LHV)
- -------------------------------------------------- ------------------------------ -------------------------------
The above data is derived from the station 1997 Avg. 1997 Total Fuel
monthly reports and the attached supporting Monthly Net Cap. Input MMBtu 5,903,133
detail sheets & Sale Invoices when available. Factor w/ credit 96.02% (HHV) Approx.
for Reserve
Hours as if
The HHV numbers are derived by adjusting all of operated=
the fuel gas LHV values by multiplying by 1.1089 ------------------------------ -------------------------------
and the fuel oil numbers are derived by adjusting 1997 Total Power 593,013
all of the fuel oil LHV values by multiplying by Sales, MW-h
1.06 to get an estimate of the HHV value for the -------------------------------
fuel and the above estimated Heat Rates based 1997 Average
on HHV of the fuel. Heat Rate 9,007
(unadjusted),
Btu/kWh (LHV)
-------------------------------
Net Capacity Factor is actual generation divided 1997 Average
by period hours times 80 MW and Station Heat Rate 9,988
Availability is fired hours plus reserve hours (unadjusted),
divided by period hours Btu/kWh (HHV)
- -------------------------------------------------- -------------------------------
</TABLE>

Figure 4-1
Sheet 2 of 4

<PAGE>

Project Orange Monthly
Steam and Power Sales
Fuel Input, Heat Rates, Net Capacity Factor, Station Availability

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Jan-98 Feb-98 Mar-98 Apr-98
Period Hours 744 672 744 720
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: Per Stm Invoice Per Stm Invoice Per Stm Invoice Per Stm Invoice
Total Steam Sold (100# & 275#), k-lbs 85,175 74,621 71,440 46,646
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr
Net Power Sales, MW-h 58,103 52,059 57,994 56,371
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, Btu (LHV) 534,884,000,000 476,880,115,400 524,369,196,000 487,092,771,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 534,884 476,880 524,369 487,093
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 593,133 528,812 581,473 540,137
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 9,206 9,160 9,042 8,641
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 10,208 10,157 10,026 9,582
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,370 7,363 7,494 7,603
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 97.62% 96.84% 97.44% 97.87%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 98.77% 98.09% 99.58% 99.15%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 97.62% 97.02% 97.44% 97.87%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 97.62% 97.02% 97.44% 97.87%
- ---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year May-98 Jun-98 Jul-98 Aug-98
Period Hours 744 720 744 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: Per Stm Invoice Per Stm Invoice Per Stm Invoice Per Stm Invoice
Total Steam Sold (100# & 275#), k-lbs 31,899 28,800 29,787 30,050
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: ProJ. Org. Mtr ProJ. Org. Mtr ProJ. Org. Mtr Per NIMO
Net Power Sales, MW-h 48,042 43,198 57,178 57,651
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, Btu (LHV) 415,933,000,000 374,430,000,000 487,960,000,000 494,766,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 415,933 374,430 487,960 494,766
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 461,228 415,205 541,099 548,646
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,658 8,668 8,534 8,582
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,601 9,612 9,463 9,517
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,836 7,840 7,878 7,929
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 80.72% 75.00% 96.07% 96.86%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 92.24% 94.35% 99.50% 100.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 89.91% 91.25% 96.07% 96.86%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 89.91% 91.25% 96.07% 96.86%
- ---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Month - Year Sep-98 Oct-98 Nov-98 Dec-98
Period Hours 720 744 720 744
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Data Source: Per Stm Invoice Per Stm Invoice Per Stm Invoice Per Stm Invoice
Total Steam Sold (100# & 275#), k-lbs 30,375 42,841 57,314 71,772
- ---------------------------------------------------------------------------------------------------------------------------------
Data Source: Per NIMO Per NIMO Per NIMO Per NIMO
Net Power Sales, MW-h 50,882 57,959 55,630 54,626
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, Btu (LHV) 434,920,000,000 496,441,000,000 483,770,000,000 499,202,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 434,920 496,441 483,770 499,202
- ---------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 482,283 550,503 536,453 553,565
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 8,548 8,565 8,696 9,139
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 9,479 9,498 9,643 10,134
- ---------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,799 7,658 7,487 7,543
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 88.34% 97.38% 96.58% 91.78%
- ---------------------------------------------------------------------------------------------------------------------------------
Station Availability 93.68% 98.44% 97.91% 91.94%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load) 93.03% 97.38% 96.58% 91.78%
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve Hours
as Operated at full load & GT#1 Apr-Jun 99
event as if it did not occur) 93.03% 97.38% 96.58% 91.78%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C> <C>
--------------------------- -------------------------------
1998 Avg. 1998 Total Steam
Monthly Net Cap. 92.71% Sold, k-lbs 600,720
Factor=
--------------------------- -------------------------------
1998 Avg. 1998 Total Fuel
Monthly Station 96.97% Input MMBtu 5,710,648
Availability= (LHV)
- ------------------------------------------------- --------------------------- -------------------------------
The above data is derived from the station 1998 Avg. 1998 Total Fuel
monthly reports and the attached supporting Monthly Net Cap. Input MMBtu 6,332,538
detail sheets & Sale Invoices when available. Factor w/ credit 95.23% (HHV) Approx.
for Reserve
Hours as if
The HHV numbers are derived by adjusting all of operated=
the fuel gas LHV values by multiplying by 1.1089 --------------------------- -------------------------------
and the fuel oil numbers are derived by adjusting 1998 Total Power 649,694
all of the fuel oil LHV values by multiplying by Sales, MW-h
1.06 to get an estimate of the HHV value for the -------------------------------
fuel and the above estimated Heat Rates based
on HHV of the fuel.
Average Minimum Maximum
------------------------------------------------ --------------------------------
1996 thru 1998 1998 Average
Avg. Monthly 97.42% 88.08% 100.00% Heat Rate 8,787
Station (unadjusted),
Availability= Btu/kWh (LHV)
------------------------------------------------ --------------------------------
------------------------- -------------------------------
Net Capacity Factor is actual generation divided 1996 thru 1998 1998 Average
by period hours times 80 MW and Station Avg. Station 89.92% Heat Rate 9,743
Availability is fired hours plus reserve hours Monthly Net (unadjusted),
divided by period hours Capacity Factor= Btu/kWh (HHV)
- ------------------------------------------------ ------------------------- -------------------------------

</TABLE>

<PAGE>

Project Orange Monthly
Steam and Power Sales
Fuel Input, Heat Rates, Net Capacity Factor, Station Availability

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Month-Year Jan-99 Feb-99 Mar-99 Apr-99 May-99
Period Hours 744 672 744 720 744
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Data Source: Per Stm Invoice Per Stm Invoice Per Stm Invoice Per Stm Invoice Per Stm Invoice
Total Steam Sold (100# & 275#).k-lbs 100,956 77,869 83,143 50,190 36,173
- ----------------------------------------------------------------------------------------------------------------------------------
Data Source: Per NIMO Per NIMO Per NIMO Per NIMO Per NIMO
Net Power Sales, MW-h 48,958 34,609 36,536 27,513 13,526
- ----------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, Btu (LHV) 494,681,064,600 356,879,557,600 380,459,197,400 275,694,000,000 136,103,000,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 494,681 356,880 380,459 275,694 136,103
- ----------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 548,552 395,744 421,891 305,717 150,925
- ----------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 10,104 10,312 10,413 10,021 10,063
- ----------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (HHV) 11,204 11,434 11,547 11,112 11,158
- ----------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,587 7,527 7,581 7,754 7,046
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 82.25% 64.38% 61.38% 47.76% 22.72%
- ----------------------------------------------------------------------------------------------------------------------------------
Station Availability 95.07% 94.89% 93.67% 67.68% 34.10%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve
Hours as Operated at full load) 90.84% 93.52% 92.31% 67.15% 37.97%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve
Hours as Operated at full load & GT#1
Apr-Jun 99 event as if it did not occur) 90.84% 93.52% 92.31% 90.34% 87.97%
- ----------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Month-Year Jun-99 Jul-99 Aug-99 Sep-99 Oct-99 Nov-99 Dec-99
Period Hours 720 744 744 720 744 720 744
- ----------------------------------------------------------------------------------------------------------------------------------
Data Source: Per Stm Invoice Per Stm Invoice Per Stm Invoice Proj. Org. Mtr
Total Steam Sold (100# & 275#).k-lbs 28,941 31,017 30,355 37,302
- ----------------------------------------------------------------------------------------------------------------------------------
Data Source: Per NIMO Per NIMO Per NIMO Proj. Org. Mtr
Net Power Sales, MW-h 24,660 35,330 36,654 32,488
- ----------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, Btu (LHV) 228,321,000,000 315,737,000,000 327,269,000,000
- ----------------------------------------------------------------------------------------------------------------------------------
Total Fuel Input, MMBtu (LHV) 228,321 315,737 327,269
- ----------------------------------------------------------------------------------------------------------------------------------
Approx. Total Fuel Input, MMBtu (HHV) 253,185 350,121 362,909
- ----------------------------------------------------------------------------------------------------------------------------------
Heat Rate (unadjusted), Btu/kWh (LHV) 9,259 8,937 8,929
- ----------------------------------------------------------------------------------------------------------------------------------
Data is incomplete for September
Heat Rate (unadjusted), Btu/kWh (HHV) 10,267 9,910 9,901 1999 forward
- ----------------------------------------------------------------------------------------------------------------------------------
Heat Rate (adjusted), Btu/kWh (LHV) 7,767 7,833 7,901
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (NCF per IEEE 762) 42.81% 59.36% 61.58% 56.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Station Availability 64.03% 100.00% 100.00% 94.45%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve
Hours as Operated at full load) 62.22% 92.70% 95.67% 87.44%
- ----------------------------------------------------------------------------------------------------------------------------------
Net Capacity Factor (crediting Reserve
Hours as Operated at full load & GT#1
Apr-Jun 99 event as if it did not occur) 94.00% 92.70% 95.67% 87.44%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
LHV HHV
----------------------------------------------------------------------
<S> <C> <C> <C>
Average Heat Rate (unadjusted), 9,351 10,370
Btu/kWh for Jul 1998 thru Aug 1999
- ----------------------------------------------------- ----------------------------------------------------------------------
The above data is derived from the station monthly
reports and the attached supporting detail sheets Average Heat Rate (adjusted),
& Sale Invoices when available. Btu/Wh (LHV) for Jul 1998 thru 7,647
Aug 1999
-----------------------------------------------------
The HHV numbers are derived by adjusting all of the
fuel gas LHV values by multiplying by 1.1089 and
the fuel oil numbers are derived by adjusting all
of the fuel oil LHV values by multiplying by 1.06
to get an estimate of the HHV value for the fuel
and the above estimated Heat Rates based on HHV of
the fuel.
-----------------------------------------------------

Jan 96-Sep 99 Avg. Monthly Net
Cap. Factor w/ credit for Reserve 92.28%
Hours as if operated=
-----------------------------------------------------
Net Capacity Factor is actual generation divided by -----------------------------------------------------
period hours times 80 MW and Station Availability Jan 96-Sep 99 Avg. Monthly Net
is fired hours plus reserved hours divided by period Cap. Factor w/credit for Reserve
hours. Hours as if operated and as if GT#1 94.62%
event April-June 99 did not occur=
- ----------------------------------------------------- -----------------------------------------------------
</TABLE>

<TABLE>
Totals Thru Sept.
- -------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C>
1999 Avg. 55.28% 1999 Total Steam 475,946
Monthly Net Cap. Sold, K-lbs
Factor=
- -------------------------------------------------- --------------------------------------------------

1999 Avg. 1999 Total Fuel
Monthly Station 81.18% input, MMBtu 2,515,144
Availability= (LHV)
- -------------------------------------------------- --------------------------------------------------
1999 Avg. Net
Monthly Cap. 1999 Total Fuel
Factor w/ credit 79.98% input, MMBtu 2,789.043
for Reserve (HHV) Approx.
Hours as if
operated=
- -------------------------------------------------- --------------------------------------------------
1999 Total Power
Sales, MW-h 290,273

--------------------------------------------------
- -------------------------------------------------- --------------------------------------------------
1996 thru Sep. 1999 Average
1999 Avg. 94.47% Heat Rate
Monthly Station (unadjusted), 9,755
Availability= Btu/kWh (LHV)
- -------------------------------------------------- --------------------------------------------------
- -------------------------------------------------- --------------------------------------------------
1996 thru Sep. 1999 Average
1999 Avg. Heat Rate 10,817
Monthly Station 83.02% (unadjusted)
Net Capacity Btu/kWh (HHV)
Factor=
- -------------------------------------------------- --------------------------------------------------
</TABLE>

Figure 4-1
Sheet 4 of 4
<PAGE>

[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

SECTION 5. ENVIRONMENTAL REVIEW AND PERMITTING

Stone & Webster reviewed the environmental permit conditions, compliance status,
site contamination issues and other pertinent environmental aspects of the
Project and the Steam Plant. This review was based upon a number of
environmental documents, which were provided to Stone & Webster for this
purpose. Stone & Webster also conducted telephone interviews of Project
personnel. However, Stone & Webster did not conduct an environmental site
reconnaissance or interview environmental regulatory agency personnel. At this
time, Stone & Webster does not believe additional site visits or agency
personnel interviews are warranted.

5.1. Permit Status

The Project and the Steam Plant facilities hold the following environmental
permits, applications and certificates:

. (Draft) Title V Application for the Project Orange Cogeneration Facility
and the Syracuse University Steam Station, submitted to the New York State
Department of Environmental Conservation ("NYSDEC") and the United States
Environmental Protection Agency ("USEPA") on March 28, 1997, issue pending,
expiration date pending.

. Certificate to Operate No. 7-3115-00204 for the SUSS, issued by the NYSDEC
on October 3, 1989, expiration date September 30, 1994.

. Certificate to Operate/PSD Permit No. 7-3115-00229/00003 for the Project,
issued by the NYSDEC on December 1, 1993, modified on July 12, 1994,
expiration date December 1, 1998.

. Industrial Wastewater Discharge Permit No. 125 for the Steam Plant, issued
by the Onondaga County Department of Drainage and Sanitation ("OCDDS") on
July 1, 1998, revised on January 20, 1999, expiration date July 1, 2001.

. Industrial Wastewater Discharge Permit No. 140 for the Project, issued by
the OCDDS on November 8, 1998, expiration date November 8, 2001.

. NYSDEC/USEPA Resource Conservation and Recovery Act ("RCRA") Hazardous
Waste Registration No. NY987016136. [Note: A copy of this registration was
not provided to Stone & Webster for our review and comment, although a copy
of the EPA's acknowledgement of said registration was.]

. Hazardous Substance Bulk Storage Registration Certificate No. 7-000152 for
Tank No. 001 at the Steam Plant, issued by the NYSDEC on April 29, 1999,
expiration date July 18, 2001. This permit covers the 1,500 gallon sulfuric
acid tank at the Steam Plant.

. Hazardous Substance Bulk Storage Registration Certificate No. 7-000230 for
Aboveground Storage Tank ("AST") Nos. T-100 and T-200 at the Project,
issued by the NYSDEC on February 27, 1998, expiration date April 29, 2000.
This permit covers the 7,000 gallon acid tank and the 7,000 gallon caustic
tank at the Project.

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. Petroleum Bulk Storage Registration Certificate No. 7-180602 for
Underground Storage Tank ("UST") Nos. 005 through 006 and AST No. 009 at
the Steam Plant, issued by the NYSDEC on July 8, 1997, expiration date June
18, 2002. This permit covers the 30,000 gallon USTs used to store No. 2
Fuel Oil at the Steam Plant, which is used as back-up fuel for the Steam
Plant, and the 275 gallon AST at the Steam Plant which was used to store
oil recovered from the subsurface oil recovery system.

. Permit No. 33127 for a gas transmission pipeline located at Route 173 in
Onondaga County, issued by the New York State Department of Transportation
("NYSDOT"), issued on November 1, 1993 and renewable annually, thereafter.

. Permit No. 33128 for a gas transmission pipeline located at Route 481 in
Onondaga County, issued by the NYSDOT on August 1, 1994 and renewable
annually, thereafter.

. Permit No. 33129 for a gas transmission pipeline located on the East Side
of Almond Street in Onondaga County, issued by the NYSDOT on August 1, 1994
and renewable annually, thereafter.

. Permit No. 33130 for a gas transmission pipeline located on the East Side
of Almond Street, the south side of Taylor Street, and Burt Street to
Jefferson Street in Onondaga County, issued by the NYSDOT on August 1, 1994
and renewable annually, thereafter.

. Permit No. 1276 for gas pipeline occupancy located at Sentinel Heights
Road, LaFayette Road and Rock Cut Road in Sentinel Heights in Onondaga
County, issued by the Onondaga County Department of Transportation
("OCDOT") on December 12, 1990 and renewable annually, thereafter

Comments specific to these permits are provided in the following sections.

5.2. Air Emissions

The Title V Permit was issued in draft form and has already undergone the 30-day
review period. As of August 3, 1999, the draft permit is undergoing review by
USEPA. Pending USEPA review, the permit will be approved and returned to the
NYSDEC for issuance. The Title V Permit will be a total site emission permit,
incorporating both the Project and the Steam Plant. This arrangement was
provided at the request of Syracuse University, with Orange LP managing the
permit. The Title V Permit, once issued, will render the two separate operating
permits previously issued for the Project and the Steam Plant null and void.

The operating permit for the Project expired on December 1, 1998. However, due
to the pending Title V Permit and the submittal of the Title V Permit
application, the Project is shielded and continues to operate under this permit.

The operating permit for the Steam Plant expired on September 30, 1994. However,
per agreement between the Project and the New York State Department of
Environmental Protection ("NYSDEP"), the permit was extended until May 15, 2001
or until the Title V Permit is issued, whichever occurs first, as represented to
be documented in a letter dated April 21, 1996 from George Danskin, Chief Permit
Administrator, NYSDEC.

Stone & Webster reviewed a copy of the draft Title V Permit Application and
noted that the heat input and emission limits specified therein were the same as
the inputs and limits specified in the NYSDEC operating permits for the GTs,
duct burners and boilers. In addition, Stone & Webster noted that the GTs, duct
burners and boilers are all permitted for operation 24 hours per day, 365 days
per year, although the boilers are technically identified as "back-up" units to
be used only when the GTs are out of service or during

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<PAGE>

periods of high steam demand.

Although the issue of the Title V Permit Application submitted to Stone &
Webster is supposedly a "final" draft, Stone & Webster noted several minor
errors, which we assume will be corrected in the final permit. For instance, the
application states that both water injection and SCR are used on the GTs for the
control of NO\\x\\, whereas it is our understanding that steam injection is the
only control technology used for the control of NO\\x\\ on these units. The
addition of a SCR would add to any capital expenditure outlined in the Financial
Projections. In addition, none of the fuel oil storage tanks are listed.

Stone & Webster noted that the permits for these units limit the emission of
SO\\2\\ by limiting the concentration of sulfur in fuel oil to 2 percent by
weight. Stone & Webster reviewed an analysis of fuel oil for the Steam Plant and
noted that the sulfur content was 0.067 percent sulfur, which is well under the
limit.

Stone & Webster reviewed emissions monitoring reports for 1997, 1998 and 1999 to
date and determined that both the Project and the Steam Plant are operating
substantially in compliance with their air permit conditions and there are no
gross violations or pending compliance actions noted. Accordingly, Stone &
Webster believes that these facilities should be capable of continuing to
operate in compliance with their air permit conditions without constraint upon
their normal operating conditions through the year 2001. After the year 2001,
elements of the NO\\x\\ Budget Rule and the Acid Rain Program may affect current
operations as discussed below.

The Steam Plant is not subject to either the NO\\x\\ Budget Rule or Acid Rain
Program, because (i) its heat input rate is less than 250 MMBtu/h and (ii) it
does not generate electricity.

The Project is not currently subject to the Acid Rain Program, because (i) its
Power Purchase Agreement was signed prior to November 15, 1990 and (ii) it is a
"Qualifying Facility" ("QF") as defined by the Federal Power Act. A QF is a
facility that recovers a certain percentage of its heat input in the form of
"other services" (such as steam) and/or additional electrical generation
capacity (i.e., a combined cycle combustion turbine facility could be a QF,
whereas a simple cycle combustion turbine facility could not). If, for some
reason, the Project were to stop producing steam for sale to the University,
then the Project would lose its QF status. In that case, however, the Project
would still be exempt from the Acid Rain Regulatory Program, since its only fuel
is natural gas with a sulfur content less than 0.05 percent by weight.

However, the Project is subject to the NO\\x\\ Budget Rule program, which
addresses the production of NO\\x\\ (a precursor to the formation of atmospheric
ozone), during the ozone season, which runs from May 1 through September 30 of
each year. According to Orange LP environmental personnel, the Project's current
allocation of NO\\x\\ (600 tons per year) is equivalent to its permitted
potential to emit; i.e., the Project could run at 100 percent of its capacity
throughout the entire ozone season without exceeding its NO\\x\\ allocation.
This NO\\x\\ allocation is valid through December 31, 2001.

During 2001, the NYSDEC will decide how much NO\\x\\ the airshed can handle. If
this amount is less than the total amount allocated, then the NYSDEC will have
to reduce individual facility allocations in order to reduce the total amount of
NO\\x\\ to an amount which the NYSDEC believes the airshed can handle.
Theoretically, this reallocation will be based on how much NO\\x\\ each facility
emitted during 2001.

Information provided to Stone & Webster for 1996-1998 indicates that the Project
emitted approximately 300 tons per year or approximately one-half its
permitted/allocated limit for each of those years, while operating at greater
than 90 percent of its operating capacity. Accordingly, the NYSDEC could reduce
the

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<PAGE>

Project's NO\\x\\ allocation for the year 2002 by as much as 50 percent without
significantly affecting the continued operation of the Project.

Stone & Webster does not anticipate that the NYSDEC would reduce the Project's
NO\\x\\ allocation significantly below 300 tons of NO\\x\\ per year. However,
Stone & Webster did consider a "worst case" scenario wherein the NYSDEC reduced
the Project's NO\\x\\ allocation to an amount equivalent to what a similar
facility equipped with selective catalytic reduction (SCR) emissions control
equipment would emit (i.e., approximately 100 tons of NO\\x\\ per year, or 200
tons of NO\\x\\ per year less than what the Project is currently emitting).

In the event of this "worst case" scenario, the Project would have to install
additional emissions control equipment (SCR) to reduce its NO\\x\\ generation
rate or purchase approximately 200 tons per year of NO\\x\\ emission reduction
credits ("ERCs") on the open market in order to sustain its current generation
rate.

The Project has estimated the installed cost of SCR at $4 million, plus annual
operating costs. Alternatively, the Project has estimated the cost of NO\\x\\
ERCs at $1,000 per ton per year), which would amount to an additional operating
cost of $200,000 (with no capital expenditures). Based on Stone & Webster's
experience on projects in this and other airsheds, this NO\\x\\ ERC cost appears
representative of current NO\\x\\ ERC costs. However, Stone & Webster notes that
the NO\\x\\ ERC market is very volatile at this time, and the cost of NO\\x\\
ERCs in the year 2002 is subject to considerable speculation.

At this time, the Project does not plan to install SCR or other additional
emission controls, because (i) it is not likely that significant NO\\x\\
reductions will be required and (ii) it would be more cost effective to purchase
NO\\x\\ emission reduction credits on an "as needed" basis than to retrofit the
facility with SCR.

5.3. Wastewater Discharge

Industrial Wastewater Discharge Permit No. 125 is the industrial wastewater
pretreatment permit for the Steam Plant. Wastewater is discharged from the site
to a local publicly owned treatment works ("POTW") that is operated by the
OCDDS. This permit is issued to the University and managed by Orange LP.
Industrial Wastewater Discharge Permit No. 140 is the industrial wastewater
pretreatment permit for the Project. Wastewater is discharge from the site to a
local POTW operated by the OCDDS. Stone & Webster reviewed copies of these
permits and found the discharge limitations and other permit conditions to be
reasonable and appropriate for the situation.

Stone & Webster reviewed copies of the self-monitoring reports for the Project.
These reports indicate that the Project is operating in compliance with its
wastewater discharge permit limitations without constraint on normal operating
conditions. However, there have been some permit exceedances (low pH) reported
for the Steam Plant. A compliance order was issued to the Steam Plant by the
OCDDS on May 30, 1997 concerning a low pH excursion caused by inadvertent
draining of a vessel to the sewer by a contractor. In response to this
violation, a "Slug Discharge Control Plan" was prepared and implemented for the
Steam Plant. Since that time, there have been other low pH excursions, although
none of these excursions resulted in violation notices. In response to these
excursions, a new pH neutralization system was installed during the first
quarter of 1999. However, the Project staff report that this new system is
limited by flow rate. Accordingly, a revision of the new system was designed and
was submitted to management for funding approval. The cost estimate for this
revision is approximately $40,000. Stone & Webster has reviewed a synopsis of
the revised design and finds it to be reasonable.

Stone & Webster also noted that a common Spill Prevention Control and
Countermeasure ("SPCC") Plan was compiled for both the Project and the Steam
Plant. A brief review of this plan indicates that it should

5-4
<PAGE>

be adequate for its intended purpose, although this plan is due for an update.

With the exception of pH, the self-monitoring reports indicate that the Steam
Plant is operating in compliance with its wastewater discharge permit
limitations without constraint on normal operating conditions.

5.4. Site Contamination Issues

Stone & Webster reviewed a number of environmental site assessments and
management audits for both the Project and the Steam Plant, most notably the
following:

. Environmental Liability Assessment of the Syracuse University Steam
Station, prepared for the Orange LP Project by The O'Brien & Gere
Companies, December 1989.

. Contaminated Soil Investigation and Remediation, Syracuse University Steam
Station, prepared for Syracuse University by Engineering-Science, June
1992.

The purpose of the O'Brien & Gere report was to document the potential presence
of any site contamination on the property proposed for the construction of the
Project. The purpose of the Engineering-Science report was to document the
remediation of soil contamination associated with a leaking underground storage
tank ("UST") at the Steam Plant.

According to the O'Brien & Gere report, the Alco Plant of the Steam Plant was
initially constructed in 1926. An addition to the Alco Plant was constructed in
the early 1960s, at approximately the same time that the Riley Plant of the
Steam Plant was constructed. Boilers at both the Alco and Riley Plants were
originally fired on coal with oil as back-up fuel, but were converted to gas
with oil as back-up fuel in the early 1970s. Records indicate that this area was
primarily residential for this entire period, with a few commercial operations
but no manufacturing or other heavy industry.

USTs were installed at the Steam Plant for the storage of fuel oil in the early
1950s, 1963 and 1970. All of these tanks were of carbon steel, single-wall
construction. These tanks were removed from service in 1986, 1987 and 1989. Four
new double-walled steel USTs were installed in 1989 to replace these tanks. The
new USTs are equipped with level and interstitial liquid detection systems that
alarm to the control room.

A passive subsurface oil recovery system was installed and put into operation in
1988. The site geology consists primarily of highly variable fill material
consisting of clay, silt, sand and medium gravel. Locally, groundwater typically
occurs under water table conditions at a depth of three to eight feet below land
surface, generally reflecting the topographic surface. Permeability of the soil
in the vicinity of the groundwater recovery system is considered low due to the
presence of clays and fine silts in the soil matrix. In addition, there are no
known groundwater wells used for drinking water purposes in the vicinity.

Several chemical substances are used during the normal course of operations at
both the Project and the Steam Plant. These chemicals are stored in ASTs or
drums. Designated locations have been established for the storage of full and
empty chemical containers. Management audit reports indicate that maintenance of
these areas is generally acceptable, with minor exceptions.

The only major spill incidents reported for the Project and the Steam Plant are
associated with the former USTs. As documented by the Engineering-Science
report, all contaminated soils associated with the former USTs were excavated
and removed from the site for disposal at an approved offsite facility.

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<PAGE>

5.5. Other Environmental Issues

The Project personnel report that all oil-filled equipment containing PCBs have
been removed from the site. The O'Brien & Gere report notes that all station
transformers are labeled as PCB-free. The Project personnel and several of the
past environmental reports confirm that much of the insulating materials at the
Steam Plant are asbestos containing material ("ACM"), although a comprehensive
inventory of ACM has not been compiled. At this time, there are no plans for the
wholesale removal and replacement of ACM. Instead, a quarterly survey is
conducted to test for airborne asbestos and document the condition of all
insulating materials. Worker training in the recognition and handling of ACM is
also conducted. ACM is periodically removed on an "as exposed" basis, only.
Stone & Webster notes that this is a common, acceptable practice.

Lead-based paint is also known to be present, although a comprehensive inventory
for it has not been compiled, either. As with asbestos, a quarterly survey is
conducted to test for airborne lead, and workers are trained in the recognition
and handling of lead-based paint and other wastes. Lead-based paint is
periodically removed on an "as exposed" basis, only. Stone & Webster notes that
this is a common, acceptable practice.

Stone & Webster noted that noise propagation by the Project is limited by its
permit to 45 dBA at a distance of 600 feet. Orange LP provided Stone & Webster
with a noise measurement and survey report (c. 1994), which indicated that
Orange LP is able to comply with this requirement.

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<PAGE>

[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

SECTION 6. OPERATION AND MAINTENANCE

6.1. Site Visit

Stone & Webster visited the Project plant on September 16 & 17, 1999. The
purpose of the brief visit was to observe the station in a normal operating mode
and to interview key station personnel. The Project equipment was operating
during both days and two of the existing plant 150 psig boilers were in hot
standby for immediate operation if required. The number 2 unit was operating
with the original GT and the number 1 unit was operating with the GE dedicated
spare engine while the original engine was out for a scheduled 50,000 hour
overhaul following a failure event which occurred on April 16, 1999 after having
accumulating approximately 43,000 hours. The Project and the University boilers
were visually inspected during a tour conducted by the Project plant manager.
The Project is very clean and has the appearance of a well-maintained facility.
The University boilers, despite the age of the plants, have few leaks and
minimal corrosion problems. In general, plant preservation is excellent. The
University boilers appeared to be in good condition despite over forty years of
operation. They did not appear to have been over stressed during previous coal
operation or recent alternate fuel operation. The Alco boilers control system is
upgraded to state of the art electronic controls. This system replaced a high
maintenance and less reliable pneumatic control system. The University boilers's
1000 kW steam turbine was not in use but was reported to be operable for a
station black start of the University boiler and steam systems. One of the Alco
350 psig boiler, steam turbine driven feed pumps was not operable, but the two
motor driven feed pumps which are operable are adequate for reliable operation.
The HRSGs did not appear to have any signs of thermal or mechanical distress or
visible hot spots. Thermography recently conducted identified two manhole access
covers that have hot gas leakage. This problem is minor and correction is
planned for the next outage. The HRSG associated vibration was low as compared
to similar plants. The HRSGs have had problems with failure of intermediate and
HP economizer tubes in the past. During this visit, the IP economizer tubes were
bypassed to prevent failure of high-pressure economizer tubes and as of our
visit, no final resolution was made on this problem. Piping and support systems
are, in general, designed to allow easy maintenance of most equipment. A new
neutralization system is installed in the existing facility to eliminate past
problems with pH exceedences. The new design has proved to be not adequate for
the volume of water that needs to be processed under all conditions. As a
result, an additional neutralization tank is planned to be added to resolve this
issue.

The HRSG feed pumps and feed water regulating valves have been susceptible to
erosion problems in the past years. The feed water regulating valves have been
replaced with stainless steel valves. This change is expected to eliminate the
valve erosion problem. The feed pumps, however, are likely to continue to be
high maintenance pumps. The pumps are apparently operating much nearer to their
minimum flow point was than was originally anticipated and as a result their
availability has been adversely affected.

Some areas of the Project in the HRSG building do not have adequate platforms
for safe operation and maintenance. For example, on the upper level, maintenance
of one HP boiler sight glass and the duct burner instrumentation is difficult
without exposing employees to the risk of falling. Operation and maintenance of
various valves in the middle and upper levels requires walking on piping
insulation with full body harness and lanyards and with a high fall risk.
Operation of valves on both GT steam injection skids is also a high fall risk
area. These concerns could add to the cost of insurance by the Project
underwriters.

The GT and generator compartments were clean as viewed through viewing windows.
The modules had a

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<PAGE>

minimum of oil deposition, less than observed at several other facilities. The
GT vibration levels were well within normal vibration limits. The Project was
stable and alarm free during our visit. The lease engine was being operated at a
slightly reduced load due to it exhibiting a slightly elevated oil temperature
in one sump and the operators did not want to approach an alarm point on the
lease engine oil temperature. The engine performance of both machines appeared
to be good.

The various pumps and instrumentation in outside areas appeared to be in good
condition. The equipment appeared to have adequate insulation to minimize
potential freezing problems during severe weather.

The electrical equipment areas were very clean and dry. Key electrical relays
had been tested within the past year. The station transformers did not have any
visible oil leakage and the high voltage bushings were clean. The station
batteries were clean and well maintained. The DCS battery is new this year and
the station service batteries are scheduled for replacement in November 1999.
Appropriate maintenance appears to have been provided for this equipment
including replacement of older components. Stone & Webster believes that the
electrical equipment will provide service meeting the availability projections
in the Financial Projections.

The control room has a good overall layout that affords the operator a view of
all the necessary plant information. The Project has installed a new Y2K
compliant DCS. This is an excellent user-friendly system. A new continuous
emissions monitoring system has recently been installed to monitor both HRSG
stacks independently. This replaced a less reliable system that monitored both
stacks on an alternating basis.

6.2. Asset Management Capabilities

The Sponsors plan to engage NMEM for the overall asset management for the
Project. NMEM is a wholly owned subsidiary of Niagara Mohawk Energy, Inc. and
its primary businesses are the sale of energy commodities at both the retail and
wholesale levels, and the provision of energy related services to end-users,
generation asset owners and retail aggregators. NMEM and its employees possess a
wide range of generation asset management talent and experience that can be
effectively used to manage the Project successfully. The Sponsors and NMEM
should provide effective direction for GECS.

6.3. O&M Capabilities

GECS and the former Stewart & Stevenson Operations Inc., which was merged into
GECS have vast experience in the operation of many gas turbine power plants
worldwide. GECS currently operates three facilities which use the GE LM5000 gas
turbine engine and at these three facilities there are a total of four GE LM5000
gas turbine engines. The Project personnel have the advantage of this experience
for operational guidance and problem resolution. The Project also has immediate
access to a substantial inventory of spare parts located around the U.S, but as
stated previously the availability of parts specifically for the GE LM5000 gas
turbine should be investigated and reviewed more closely, due to this engine no
longer being in production at GE and the delay experienced earlier this year in
locating a spare engine. Currently, a dedicated spare engine for the Project and
one other facility in addition to participation in the LM5000 Lease Engine
Program is the best mitigation measure which Stone & Webster is aware of to
address this situation going forward. GECS through its parent company
affiliation has substantial resources to provide prompt specialized technical
support to resolve problems with the Project operation and maintenance should
special needs arise and should GECS reasonably believe these resources would
benefit the Project or should the Sponsors reasonably request such services.

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<PAGE>

6.4. Organizational Structure

The staffing level of the Project is good compared to like facilities. In
addition to the eight plant operators, the Project normally has two Instrument &
Controls technicians and four plant mechanics. The Project is short one mechanic
as of the date of our site visit. One mechanic is trained on similar engines. No
pending reorganization of the staffing for the Project related to this
acquisition was identified to Stone & Webster or apparent from the review of the
documentation provided.

Two of the Project supervisors were interviewed during the visit and they were
both knowledgeable of the Project operation.

6.5. O&M Procedures

The Project operators are provided a combination of procedures, guidelines and
check lists for operation of the Project systems and overall plant operation.
The guidelines are short, user-friendly and adequate for operators familiar with
the operation of the various plant systems. The Project uses procedures from
vendor manuals for maintenance.

6.6. Maintenance Management

The Project has a full time maintenance manager responsible for maintenance
planning and scheduling, inventory control and spare parts procurement. The
Project uses a software program "GP Mate" for the scheduling of all preventative
and corrective maintenance. The program generates work orders for scheduled
corrective and preventative maintenance and provides a historical record of past
maintenance. The program is easy to use and well liked by the Project
maintenance manager. The system appears to be adequate and typical of current
computer based maintenance scheduling and tracking software tools. Provided this
tool or one similar to it is properly used to schedule and track the maintenance
of the Project, the maintenance management should be adequate for the Project to
support the availability targets anticipated in the Financial Projections.

The Project is using a combination of predictive and preventative maintenance.
The GT maintenance is based on engine time while other maintenance, such as
boiler inspections and protective relay testing is conducted annually.
Predictive maintenance is in place to monitor equipment vibration. This is
accomplished using an IRD 890 analyzer and associated software. The software is
valuable to define the cause of vibration and severity. The Project also has an
extensive oil analysis program. The Project is using thermography for early
identification of potential problems with electrical equipment and the HRSG
insulation. These types of activities are indicative of a well-maintained
facility and should enhance the probability of achieving the availability
targets forecasted in the Financial Projections.

The Project has conducted nondestructive testing of the HRSG, deaerator vessels,
feed piping and LP drum piping. This testing was started in 1995 to track wear
of key components most susceptible to corrosion and is considered by Stone &
Webster to be a proactive approach to maintenance which should support the
overall availability targets in the Financial Projections.

A formal life extension program has not been reported on the existing University
boiler vessels and piping but should be considered to improve the probability of
maintaining the availability targets in the Financial Projections.

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<PAGE>

6.7. Conclusions

The Project's history on GT forced outages is good from October 1995 to April
1999. This is a key indication that attention to detail on the LM5000 PC STIG
has been a focus over the years. The forced outage hours are calculated by unit
and the HRSG tube leaks have contributed to the forced outage hours. The bypass
operation of the IP economizer tubes should provide reliable operation and
reduce the forced outage hours. This bypass operation does result in a small
increase in heat rate (the exact amount has not been determined in the data
provided). However, it was stated the economizer only has seven tubes. This
small number of tubes would make a change in heat rate difficult to determine.

The failure of the compressor blade on GT #1, engine 474-157, combined with the
inability of GECS to provide a lease engine has made 1999 a high forced outage
year. This compressor blade failure event is not uncommon to the fleet of LM5000
gas turbine engines. The root cause may never be determined. In the past, GE
engineering has stated that the most common causes are a fixed blade off
schedule (wrong angle) or foreign object damage. Considering the past success of
maintenance, attention to detail, and expertise on staff at the time makes both
general common causes unlikely. The best policy to mitigate the repair issues
related to the LM5000 gas turbine engines is the continued participation in the
LM5000 Lease Engine Program and continuing the shared access to the spare engine
owned by GECS for the Project and the other LM5000 gas turbine facility operated
by GECS. The fees for the continued participation in the LM5000 Lease Engine
Program are reflected in the Financial Projections.

It is recommended that the adequacy of platforms be reviewed and additions be
made to minimize the risk of operations and maintenance personnel to injury.

The Project plant manager has developed an excellent Y2K contingency plan for
the loss of all utility services. The plan will ensure the reliable continuation
of steam, vital to many facilities in the area.

In summary and excepting the minor items noted, the Project has few maintenance
problems and is a well managed facility that should support achieving the
availability targets used in the Financial Projections. The addition of NMEM as
the asset manager for the Project should provide experienced, high-level
oversight management to the overall operation of the Project.

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<PAGE>

SECTION 7. PROJECT AGREEMENTS AND CONTRACTS

Stone & Webster reviewed the principal contracts and agreements associated with
this Project. These documents were reviewed from a technical standpoint to
assess the adequacy and reasonableness of their terms and conditions. To the
extent possible, they were compared to contracts and agreements for similar
projects. Adherence to industry standards and/or good engineering practices were
also assessed where appropriate. The technical review included a commercial and
economic prospective but did not address other non-technical matters such as
legal issues.

7.1. Power Put Agreement

The Power Put Agreement ("Put Agreement") reviewed by Stone & Webster is dated
April 30, 1998 and we understand was executed as of June 30, 1998. The Put
Agreement is effectively backdated to September 19, 1986, and replaces in its
entirety the previous agreements between Orange LP and Niagara Mohawk
(collectively, the "Parties").

The Put Agreement is a result of the Parties and several other independent power
producers ("IPPs") entering into a Master Restructuring Agreement dated July 9,
1997 ("MRA"), in which the IPPs agreed to amend, restate or terminate each of
their existing Power Purchase Agreements ("PPA") with Niagara Mohawk pursuant to
the MRA and the introduction of competition in the wholesale and retail
electricity markets in New York. The Parties agreed to amend and restate their
PPA so that it will consist only of the Put Agreement and the International Swap
Dealers Associates Inc. Master Agreement dated June 30, 1998 (the "Swap
Agreement") which the Parties entered into pursuant to the MRA. The Parties
further acknowledge that they desire to amend the Interconnection Agreement
between Niagra Mohawk and Orange LP dated January 13, 1999 (the "Interconnection
Agreement") in which Niagara Mohawk owns certain interconnection facilities that
are connected to Orange LP's plant, and that are owned and operated in
accordance with the Interconnection Agreement.

As of June 30, 1998, the existing PPA was amended and restated in its entirety
to consist of the Put Agreement and the Swap Agreement. The effective term of
the Put Agreement expires at the end of the Proxy Market Price/2/ period, or at
the end of ten contract years, whichever comes first. The effective term of the
Swap Agreement is through June 30, 2008 or nine months after the scheduled date
of maturity of the Notes.

Under the Put Agreement, Orange LP has the option to put electrical energy to
Niagara Mohawk up to a specified quantity, nominally 663,000 MWh +5 percent (the
"Notional Quantity"), and capacity annually, both subject to seasonal variations
and degradations as well as applicable monthly and hourly thresholds. Niagara
Mohawk is obligated to take-and-pay for all energy and capacity provided by
Orange LP at the Proxy Market Price or the Market Price, and, if applicable, the
Market Capacity Price. The energy and associated capacity in excess of the
Notional Quantity is not subject to the Put Agreement and Orange LP may sell
this excess energy to third parties without an obligation to offer such energy
and capacity to Niagara Mohawk. Orange LP can put energy and capacity to Niagara
Mohawk for periods ranging from a

______________

/2/ Capitalized terms used herein, but not defined herein are intended to have
the defined meaning ascribed to them by the documents to which they relate.

7-1
<PAGE>

minimum of one hour to a maximum period of one month. The Put Agreement outlines
the provision for notice by both Orange LP and Niagara Mohawk with respect to
approving all energy puts under this Put Agreement.

If Orange LP chooses not to exercise its right to put energy and capacity to
Niagara Mohawk, then Orange LP may sell energy and capacity associated with the
interval quantity or the contract quantity of electricity as set forth in
Attachment A of the Put Agreement to third parties, provided specifically with
respect to the contract quantity, the Project first offers to sell the energy
and capacity to Niagara Mohawk at the Proxy Market Price or the Market Price,
whichever is applicable, and the Market Capacity Price, if also applicable, and
Niagara Mohawk declines the opportunity to purchase both the energy and the
capacity. Applicable notice periods are again provided for Orange LP to notify
Niagara Mohawk such that Niagara Mohawk can re-notify Orange LP if they choose
not to exercise Niagara Mohawk's first right of refusal.

The Put Agreement hedges Orange LP against any increases or decreases in pricing
associated with the Notional Quantity. Changes in federal, state and local laws
are only effective during the Proxy Market Price Period, and any period
afterwards during which adjustments in costs are recovered by Niagara Mohawk for
its non-nuclear generating assets.

When exercising its option under the Put Agreement, Orange LP is obligated to
deliver electricity at approximately 115,000 volts, 60 hertz and 3 phase. The
electrical interconnection between Niagara Mohawk and Orange LP's plant must
meet the requirements of Niagara Mohawk Electric System Bulletin Number 756
dated December 1997, including the exceptions and clarifications, if applicable,
or the standards of the New York Independent System Operator and Power Exchange
("ISO/PE"). Orange LP must deliver the electricity to the delivery point which
is defined as the receiving point as set forth in the Interconnection Agreement.

Niagara Mohawk is obligated to accept and pay for the electricity put to it by
Orange LP, but may from time to time suspend, for reasons necessary to maintain
and repair its system and subject to certain limits, the delivery of that
electricity. If Niagara Mohawk asks Orange LP to disconnect from the system,
then Niagara Mohawk is obligated to pay any cost incurred with respect to that
disconnection and the reconnection. Also, all of the power deliveries which were
subject to this suspension may be rescheduled at the option of Orange LP. Orange
LP has the right to shut down the operation of its plant for any reason and for
any period whatsoever upon reasonable notice to Niagara Mohawk. Such
disconnection will be at the cost of Orange LP for the disconnection and
reconnection.

Electricity delivered by Orange LP will be measured by meters of a design
approved by the New York State Public Service Commission (the "Commission").
Those meters are located in the Project but will be installed, owned and
maintained by Niagara Mohawk. The cost of the meter and the installation are
paid for by Orange LP. In addition, Orange LP shall install, own and maintain
the portion of its interconnection to Niagara Mohawk's transmission system that
includes as a minimum the generator output leads, the generator step-up
transformer, and the 115 kV tap, together with the associated facilities. The
Interconnection Agreement shall remain in full force through the term of this
Put Agreement, unless the Parties terminate this Put Agreement.

Stone & Webster reviewed the technical portions of Force Majeure and believes
the obligations and responsibilities under those provisions are technically
reasonable and consistent with industry practice. Further we reviewed the
technical assumptions of the base case model and believe them to be technically
reasonable and similar to other projects with which we are familiar.

With regard to the evacuation of the electrical power from the Project, if
Niagara Mohawk determines it is

7-2
<PAGE>

necessary to retire or abandon its transmission system, which connects the
Project to the system, Niagara Mohawk will so notify Orange LP at least one year
in advance. Orange LP shall have the option of paying Niagara Mohawk for the
annual cost of maintenance of the transmission facilities, which are dedicated
explicitly to the output of the Project, or of providing an alternate
interconnection to Niagara Mohawk's transmission system. This alternative
interconnection facility may be satisfied by Orange LP purchasing Niagara
Mohawk's existing 115 kV facilities at the depreciated book cost or salvaged
value.

With respect to QF status, Niagara Mohawk has no right to question Orange LP's
status as a QF under state or federal law. Similarly, Orange LP has the right to
obtain and/or maintain its QF status under federal law. Niagara Mohawk's right
and obligation, including without limitation, its obligation to pay for
electricity shall continue as a matter of contractual right regardless of
whether or not Orange LP maintains its QF status. Any failure of Orange LP to
comply with applicable laws for QF status shall have no adverse impact on Orange
LP under this Put Agreement. If Orange LP chooses to qualify or perform as a
Exempt Wholesale Generator ("EWG") then Niagara Mohawk will cooperate and will
not take any action to oppose Orange LP's effort to obtain such appropriate
exemptions and approval, including Market Based Rate approval. Further, Orange
LP shall waive any statutory rights it may have under Section 66-c of NYPSL to
which Orange LP may demand a $.06 per kWh minimum power purchase rate from
Niagara Mohawk and any statutory right it may have under PURPA or NYPSL to
require Niagara Mohawk to enter into a PPA or otherwise to take the output of
Orange LP's plant. Niagara Mohawk agrees to act as the agent for Orange LP until
the end of the Proxy Market Price Period for the sale on up to a monthly basis
of Orange LP's plant capacity and energy to the New York Power Pool or any other
third party at no cost to Orange LP.

Orange LP also has the right to have Niagara Mohawk wheel some or all of the
output of the Project at Niagara Mohawk's duly filed transmission and
distribution tariffs and schedule.

Proxy Market Price means (i) prior to the establishment of the ISO/PE, Niagara
Mohawk's short term avoided and capacity cost at the transmission voltage level
of Orange LP's plant plus busbar and the location of the delivery point as
stated in its tariff approved by the Commission for the purchase of power from
PURPA qualifying facilities which tariff is currently designated as S.C.-6, as
the same may be in effect from time to time, or any successor tariff thereof or
such other price as may be agreed upon by Orange LP and Niagara Mohawk, and (ii)
on the first day of the month following the calendar month in which the ISO/PE
is established, the Market Price and, if applicable, the Market Capacity Price.
Further, the Proxy Market Price shall never be reduced or offset by any cost
that Niagara Mohawk may incur, including cost for ancillary services,
transmission services, or transition costs (or stranded costs).

7.2. The International Swap Dealer Association, Incorporated, Master Agreement

In the Swap Agreement reviewed by Stone & Webster, the Parties have entered
into, and/or committed to enter, several related and ancillary agreements that
are, or will be, governed by this Swap Agreement. The Swap Agreement includes
the letter agreements with the schedules and other documentation (formally
called "Confirmation") that are exchanged between the parties to confirm the
various transactions / agreements. The schedules include mechanisms for indexing
the Contract Price paid on an annual basis and other schedules that include the
contract quantity prior to the Proxy Market Period and contract quantities
provided for years following the Proxy Market Period.

The letter agreement between the Parties, Confirmation dated June 30, 1998,
confirms the term and the condition of the transaction between the respective
Parties. This Confirmation dated June 30, 1998 also presents the payment
obligation of the two Parties and further explains the Swap Agreement. Niagara

7-3
<PAGE>

Mohawk is obligated to pay Orange LP the sum of the accrued and unpaid Fixed
Payments from and including the Interval commencing at midnight immediately
preceding June 30, 1998, and Orange LP is obligated to pay Niagara Mohawk the
sum of the accrued and unpaid Floating Payments. Such payment obligations shall
be paid on a netting basis as governed by Section 2(c) of the Swap Agreement.

The Fixed Payment Obligation to be satisfied by Niagara Mohawk is defined as the
amount for each Interval equal to Niagara Mohawk's payment obligation for the
current Interval. The Niagara Mohawk payment obligation is further defined to
mean the amount equal to the product of the Notional Quantity of electricity
provided during the applicable Interval multiplied by the Contract Price or the
Indexed Contract Price applicable to such Interval. This Notional Quantity of
electricity is the sum of the contract quantity of electricity expressed in
megawatt hours for each hour or fraction of an hour for which Orange LP and
Niagara Mohawk are contractually committed. The Floating Payment to be paid by
Orange LP to Niagara Mohawk is equal to the sum of (i) the IPP Payment
Obligation for the current Interval and (ii) if applicable, the Market Capacity
Price in dollar per MW multiplied by the weighted average capacity associated
with the Notional Quantity of electricity for each Interval. The IPP Payment
Obligation is further defined as the amount equal to the product of the Notional
Quantity of electricity provided during the applicable Interval multiplied by
the Proxy Market Price, or the Market Price as the case may be applicable to
such Interval. The Market Price means for any Interval beginning on the first
day of the month following the calendar month in which the ISO/PE is enacted,
the day-ahead Locational Based Market Price ("LBMP") paid to Orange LP of energy
in the region located where the Project exists and is specified and published by
the ISO/PE. However, the Parties shall conduct good faith negotiations and
diligently endeavor to mutually determine whether to continue the pricing
referred to in Clause 1 of the definition of Proxy Market Price or mutually
agree upon additional period of time. The Proxy Market Price shall mean for any
interval (i) prior to and until the ISO/PE establishment, is Niagara Mohawk's
short-term avoided energy and capacity cost at the voltage level of the
Project's busbar as stated in Niagara Mohawk's tariff approved by the New York
Public Service Commission ("PSC") providing for the purchased power from PURPA
qualifying facilities which tariff is currently designated as S.C.-6, as the
same may be in effect from time-to-time or any successive tariff agreed upon
between Niagara Mohawk and Orange LP regardless of whether or not QF status is
maintained, (ii) after the ISO/PE establishment date, the Market Price, and if
applicable the Market Capacity Price upon which the parties have negotiated in
good faith. The Proxy Market Price shall not be reduced or offset by any cost
that Niagara Mohawk may incur including the cost for ancillary services,
transmission services or transition cost.

The Swap Agreement functions as a financial hedge against movements in the price
of electricity. Under the Swap Agreement, Niagara Mohawk will be required to
make certain monthly fixed payments to Orange LP amounting to an indexed annual
price per MWh ($54.62/MWh for the current annual period ending June 30, 2000)
multiplied by the applicable notional quantity of electricity for each hourly
interval during such month (which aggregates, on an annual basis, to the
Notional Quantity). On each payment date, such monthly fixed payment will be
netted against a monthly floating payment that Orange LP is obligated to pay to
Niagara Mohawk. The monthly floating payment under the Swap Agreement will equal
the price for sales of energy and capacity made to Niagara Mohawk under the Put
Agreement, multiplied by the applicable notional quantity of energy and the
capacity associated with such notional quantity, as applicable, for each hourly
interval during such month, until Orange LP's right to sell energy and capacity
to Niagara Mohawk terminates. After that time, the floating payment will equal
the ISO/PE market price for sales of energy and, if applicable, the market
capacity price multiplied by the applicable notional quantity of energy and the
capacity associated with such notional quantity, as applicable, for each hourly
interval during such month.

The Confirmation also reiterates that Niagara Mohawk has no contractual rights
to demand information from Orange LP with respect to Orange LP's status as a QF
under state and/or federal law. Niagara

7-4
<PAGE>

Mohawk further acknowledges that Orange LP is not required to maintain a
generating facility pursuant to the terms hereof for the performance of its
obligations hereunder with respect to QF statusing. Orange LP has the right but
not the obligation to maintain its QF status. As part of this agreement, Orange
LP waives any rights it may have under Section 66-c of NYPSL pursuant to which
Orange LP may demand a $.06 per kWh minimum power purchase rate from Niagara
Mohawk. The Project further waives its statutory rights to require Niagara
Mohawk to enter into a Power Purchase Contract to take the output of the Project
provided however, that until the end of the Proxy Market Price Period, Niagara
Mohawk agrees to act as agent for Orange LP to purchase and resell Orange LP's
capacity and energy to the New York Power Pool or any other third party. These
particular points are also consistent with those terms in the Power Put
Agreement outlined in Section 7.1 above.

In summary, the effect of the Swap Agreement is a nominally fixed price purchase
obligation on the part of Niagara Mohawk for the Notional Quantity of
electricity regardless of whether the Project operates at all. The combined
effect of the Put Agreement and the Swap Agreement is a nominally fixed price
obligation on the part of Niagara Mohawk for the Notional Quantity of
electricity that requires the Project to produce up to the Notional Quantity of
electricity to receive the full net revenues available at the nominally fixed
price.

7.3. Gas Sale and Purchase Agreement

Stone & Webster reviewed the Gas Sale and Purchase Agreement between Orange LP
and Noranda Inc. ("Noranda") with Canadian Hunter Exploration as Agent dated
March 18, 1991 (the "Gas Agreement"). The Gas Agreement provides for the
purchase of up to 120 million MMBtu of natural gas during the term of the Gas
Agreement, which is for 20 years from the initial delivery date. This quantity
is called the maximum entitlement. The Project can draw up to 9 million MMBtu
annually and is projected to average drawing about 7 million MMBtu per year
during the remaining term of the Gas Agreement. The remaining unconsumed
entitlement balance was approximately 71 million MMBtu as of July 1999.

The gas was paid for in a lump sum payment of $88 million dollars as part of the
original financing of the Project. In addition to the lump sum payment, Orange
LP pays an operating fee of $0.3226 per MMBtu delivered and measured into the
NOVA pipeline system through December 31, 1990 after this date for the first 15
years of the Gas Agreement, the operating fee is escalated with inflation in the
United States. In the 16/th/ year, the operating fee will be the higher of the
previously escalated operating fee or the actual costs incurred by Noranda in
producing, gathering and processing natural gas as determined by Noranda's
independent chartered accountant utilized by Noranda for its annual audit of its
financial statements in accordance with generally accepted accounting
principals. In addition to the operating fee, Orange LP also pays the Canadian
royalty on the gas. The royalty payment is discussed later in this report.
Orange LP is also responsible for the transportation costs of delivering the gas
to the Project. We believe the terms of the agreement are reasonable and are
advantageous to Orange LP.

7.4. Steam Sales Agreement

Stone & Webster reviewed the Steam Contract between the University and Orange
LP. The contract is dated February 21, 1990 and is fully executed as of May 3,
1990. The contract is for 40 years and provides for Orange LP to sell to the
University all of its steam requirements up to 450,000 pounds per hour of steam.

The Project pays the University a fee for the use of the University's existing
steam generation facilities. The fee is as follows:

7-5
<PAGE>

Anniversary Dates Annual Payment
----------------- --------------
First through fifth $1
Sixth through fifteenth $1,250,000
Sixteenth through twentieth $1,350,000
Twenty-first through thirtieth $1,450,000
Thirty-first through thirty-ninth $1,550,000

and a final payment of $1,550,000 on the first day of the last month preceding
the expiration of the term. If the commercial operation date did not occur by
the Commencement Date or July 1, 1992 (as revised in December 31, 1990), the
payment on the 20/th/ anniversary is to be increased by $104,167 for each month
the Project was late in achieving commercial operations. The existing plant is
to be used only as an alternate or supplemental source of steam.

The University pays Orange LP a base price for steam of $4.27 per thousand
pounds of steam which is adjusted annually for the cost of natural gas (70
percent of the adjustment) and labor (30 percent of the adjustment). This price
is for the first fifteen years of operation. Starting in year 2008, the
University pays Orange LP a base price of steam of $2.13 per thousand pounds of
steam, which has also been adjusted since the first year for changes in the
price of natural gas and labor. The contract is technically reasonable, but the
commercial terms could prove to be burdensome once the Swap Agreement has
reached the end of its term, which is past the term of the Notes.

7.5. Operations and Maintenance Agreement

Stone & Webster reviewed the Operation and Maintenance Agreement between Orange
LP and GECS dated November 1, 1998. The term of the agreement is through April
1, 2008 unless the agreement is extended or terminated as provided in the
agreement. The agreement is a continuation of the original agreement that Orange
LP had with GE who had assigned the O&M responsibilities to Stewart & Stevenson
Operations Inc. ("SSOI"). When GE bought the turbine division of Stewart &
Stevenson, SSOI was part of that sale. This agreement continues the previous
agreement because of the absorption of SSOI into GE. The agreement calls for
GECS to operate and maintain the Project and leave the Project in the same
condition as on July 1, 1992 except for normal wear and tear and other normal
degradation.

The agreement is typical of O&M agreements we have reviewed. The O&M agreement
provides that GECS shall submit an Annual Operating Plan and Annual Budget 180
days before the end of the current operating year for review and approval by
Orange LP each year and Monthly Reports within 15 days of the end of the each
month. GECS is reimbursed for these costs. Major maintenance of the LM5000 PC
STIG engines is charged at $88 per fired hour, which is paid to GECS. GECS is
then responsible for performing the scheduled overhaul maintenance of the
engines. GECS is paid an annual spare parts fee of $50,000 and an annual
operating fee of $350,000. These fees increase with inflation on an annual
basis. The Project participates in the LM5000 Lease Engine Program, which
guarantees delivery of a spare engine to the Project site within 72 hours of the
request. Failure to meet this requirement can result in credits up to the full
annual fee amount for participation in the LM5000 Lease Engine Program as shown
by the events in the spring of 1999. The O&M agreement is not incentive or
penalty based. We believe the agreement is reasonable and typical of these
agreements. GECS is a capable operator and has demonstrated experience with the
Project.

7-6
<PAGE>

[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

SECTION 8. PROJECT ECONOMIC ANALYSIS

8.1. Overview

The Financial Projections consist of a financial pro forma model prepared by the
Sponsors. Stone & Webster has reviewed the assumptions, data, and the
calculations that support the projections of the cash flow from operations.
Financing assumptions, including the interest rates, and debt amortization
schedule, have been provided by the Sponsors. The Sponsors also provided market
projections for electricity and natural gas. The Project has very little
exposure to market prices for electricity and natural gas, but the price of
natural gas is a minor part of the escalator in the Swap Agreement. In addition,
there is a very minor difference between the megawatt-hours sold under the Put
Agreement and the megawatt-hours swapped in Swap Agreement which in turn use the
market prices for electricity to calculate the dollar amounts involved in the
swap. This produces an almost negligible exposure to market electricity prices.
In the spreadsheet model used to create the Financial Projections, the prices
for electrical energy are input as nominal dollar projections. The O&M expenses
which are based historical information and the recently executed O&M agreement
are input as constant dollars and escalated with inflation, which is projected
at 3 percent. The results of the Financial Projections for the base case and the
sensitivity cases are included in Exhibit I of this Report. The projections are
for the last four months of year 1999 through the first six months 2008 which is
nine months past the term of the Notes and at which time the Project is assumed
to become a merchant plant. As noted above, the effective term of the Put
Agreement expires at the end of the Proxy Market Price period, or at the end of
ten contract years, whichever comes first. The effective term of the Swap
Agreement is through June 30, 2008 or nine months after the scheduled date of
maturity of the Notes.

In our review of the Financial Projections, Stone & Webster has made certain
assumptions with respect to conditions which may exist or events which may occur
in the future. While Stone & Webster believes these assumptions to be reasonable
for the purpose of this Report, they are dependent upon future events, and
actual conditions may differ materially from those assumed. In addition, the
Financial Projections use and rely upon information provided by sources that we
believe are reliable. Stone & Webster believes that the use of this information
and assumptions are reasonable for the purposes of our report. However, some
assumptions may vary significantly due to unanticipated events and
circumstances. To the extent that actual future conditions may differ from those
assumed herein or provided to us by others, the actual results will vary from
those forecast. This report summarizes our work up to the date of the report.
Thus, changes in conditions occurring or becoming known after such date could
affect the material presented to the extent of such changes.

The principal considerations and assumptions used by Stone & Webster in
reviewing the Financial Projections and the principal information provided by
others include the following:

1. Stone & Webster has made no determination as to the validity and
enforceability of any contract, agreement, rule or regulation applicable to
the Project. For purposes of this report, however, Stone & Webster has
assumed that all such contracts, agreements, rules and regulations will be
fully enforceable in accordance with their terms and that all parties will
comply with the provisions of their respective agreements.

2. The Sponsors provided the projections of market energy and natural gas
prices. Stone & Webster

8-1
<PAGE>

has not independently verified the methodology used by the Sponsors to
develop the price forecasts nor has it verified the accuracy of the
forecasts.

3. Stone & Webster has reviewed the O&M and capital budgets for the
electricity generating assets. We assume that the Sponsors will operate and
maintain the assets in accordance with the O&M and capital budgets and that
the assets will be operated in accordance with accepted industry practice.
We believe that the Sponsors' budget for O&M expenditures represent a
reasonable projection for the cost of operating and maintaining these units
through the term of the Financial Projections. The exchange rate assumed in
the pro forma is C$=US$0.67. We have not opined on the reasonableness of
this exchange rate forecast.

4. Stone & Webster has assumed that all licenses, permits and approvals which
have not yet been obtained or which need to be renewed during the period
covered by the Financial Projections are obtained and/or renewed on a
timely basis.

5. Stone & Webster has not evaluated the non-operating expenses projected by
the Sponsor. These expenses include property and other taxes, insurance,
and general and administrative expenses.

6. Stone & Webster has assumed the operator will employ qualified and
competent personnel who will operate and maintain the equipment in
accordance with the manufacturer's recommendations and good industry
practice.

7. The restructuring of the electric industry will not significantly impact
the projected revenues of the Project during the term of the Indexed Swap
Agreement.

8. The Project will operate as a base load facility as represented by the
Sponsors.

9. The Prices and operating costs used in the pro forma remain consistent with
historical experience and adjust for inflation at a rate of 3 percent per
year.

8.2. Revenues

The revenues in the Financial Projections consist primarily of sale of energy
under the Put Agreement and the Swap Agreement supplemented by the sale of steam
to the University. The revenues from steam are a function of the steam sales
price and the projected quantity of steam sold. We were provided the
documentation for calculating the current steam price and found it to be
consistent with the projections for the steam price. Similarly, the quantity of
steam sold is consistent with historical experience. The megawatt hours sold
under the Put Agreement are a function of the Project's availability and
capacity factor. The capacity factor used in the projections is 92.5 percent,
which is consistent with historical experience. Therefore, we believe the
revenue projections are reasonable. The revenues under each of the contracts are
provided below. In the tables which follow and unless noted otherwise, the
values in the 1999 column are for four months of the year and the values for
2008 column are for the first six months of that year.

8-2
<PAGE>

Table 8.2-1

Put Sales Projections

(Prices are $/MWh, revenues are nominal $000s)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
On-Peak, 89,005 260,878 260,878 260,878 261,901 263,947 261,901 260,878 260,878 131,974
MWh
- ------------------------------------------------------------------------------------------------------------------
On-Peak
Price $ 30.43 $ 32.41 $ 34.85 $ 33.94 $ 36.56 $ 36.79 $ 36.81 $ 36.81 $ 36.81 $ 36.81
- ------------------------------------------------------------------------------------------------------------------
Off-Peak,
MWh 124,958 381,013 379,259 379,259 378,236 377,944 378,236 379,259 379,259 187,218
- ------------------------------------------------------------------------------------------------------------------
Off-Peak
Price $ 22.38 $ 22.36 $ 23.70 $ 25.30 $ 25.30 $ 25.22 $ 26.23 $ 26.23 $ 26.23 $ 26.23
- ------------------------------------------------------------------------------------------------------------------
Total Put,
MWh 213,964 641,891 640,137 640,137 640,137 641,891 640,137 640,137 640,137 319,192
- ------------------------------------------------------------------------------------------------------------------
Put
Revenues $ 5,505 $ 16,975 $ 18,080 $ 18,449 $ 19,145 $ 18,864 $ 19,562 $ 19,551 $ 19,551 $ 9,769
- ------------------------------------------------------------------------------------------------------------------
Average Put
Price $ 25.73 $ 26.44 $ 28.24 $ 28.82 $ 29.91 $ 29.39 $ 30.56 $ 30.54 $ 30.54 $ 30.60
- ------------------------------------------------------------------------------------------------------------------
Floating
Swap Price $ 25.73 $ 26.44 $ 28.24 $ 28.82 $ 29.91 $ 29.39 $ 30.56 $ 30.54 $ 30.54 $ 30.60
- ------------------------------------------------------------------------------------------------------------------
Swap, MWh 221,000 663,000 663,000 663,000 663,000 663,000 663,000 663,000 663,000 663,000
- ------------------------------------------------------------------------------------------------------------------
Floating
Swap
Payment $ 5,686 $ 17,533 $ 18,726 $ 19,108 $ 19,828 $ 19,485 $ 20,260 $ 20,249 $ 20,249 $ 10,145
- ------------------------------------------------------------------------------------------------------------------
Indexed
Swap Price $ 54.23 $ 54.80 $ 56.51 $ 58.04 $ 59.70 $ 61.37 $ 63.19 $ 65.04 $ 66.64 $ 67.88
- ------------------------------------------------------------------------------------------------------------------
Indexed
Swap
Payment $ 11,985 $ 36,333 $ 37,464 $ 38,483 $ 39,582 $ 40,690 $ 41,895 $ 43,122 $ 44,185 $ 22,504
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

8-3
<PAGE>

Table 8.2-2

Steam Sales

(Steam Price in $/thousand pounds of steam,

Steam sold in thousands of pounds per year, steam revenue in nominal $000s)

Table 8.2.1-3

The Project Revenues

(Nominal $000s)

8.3. Expenses

The Financial Projections include the following expenses:

. Costs of purchasing and transporting fuel for the thermal power stations

. Fixed O&M costs

. Variable O&M costs including expenses associated with major maintenance

. Property and other taxes, insurance, and administrative expenses

8-4
<PAGE>

8.3.1. Fuel

The annual cost of the fuel consists of the operations fee and royalty payment
contained in the Gas Agreement as well as the transportation cost of delivering
the gas to the Project from western Canada. The cost of the fuel itself was paid
in the lump sum payment of $88 million that was part of the initial project
financing as described in our review of that agreement. It should be noted that
the percentage of fuel used in transportation is large, but we have been able to
confirm it is consistent with tariffs on TransCanada Pipeline ("TCPL") for
transporting fuel across Canada from Alberta to New York.

Table 8.3.1-1

Unconsumed Fuel Entitlement

(Thousand MMBtu (HHV))

Table 8.3.1-2

Gas Consumed in Transportation

(Thousand MMBtu (HHV))

Gas consumed at the burner tip is a function of the heat rate of the GTs, gas
consumed in firing the duct burners and gas consumed in firing the existing
boilers. The heat rate projected in the pro forma includes the fuel consumed in
the duct burners of the HRSG as well as fuel consumed in firing the University
boilers when needed for base case steam production. We have reviewed the
historical experience of the Project and believe the heat rate projection is
reasonable. Base case heat rate is projected to increase 0.50 percent each year.
We believe this is conservative as the Project has been in operation for several
years and has already experienced the normal degradation that a new plant
experiences. These figures are consistent with

8-5
<PAGE>

historical experience and are expressed based on the higher heating value of the
fuel.

Table 8.3.1-3

Gas Consumed at the Burner Tip

(Million MMBtu (HHV) per year)

8.3.2. Fuel Operating Cost and Royalty Cost

The gas supply agreement with Canadian Hunter calls for the Project to pay
Canadian Hunter an operating cost payment for supplying the gas in addition to
the lump sum payment paid at the original financial closing. It also calls for
the Project to reimburse Canadian Hunter for the Canadian Royalty payments. We
were provided with invoices from Canadian Hunter showing the rate for the
operating cost as well the royalty charge. The rates shown on the invoices are
consistent with the projections used in the pro forma. The basis for calculating
the operating cost and the royalty cost are provided below:

8-6

<PAGE>

<TABLE>
<CAPTION>
Table 8.3.2-4

Fuel Operating Cost Charge and Fuel Royalty Charge

(Nominal $000s)
- ----------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receipt
Volume,- 2,383 7,184 7,200 7,236 7,272 7,328 7,345 7,382 7418 3,718
MMBtu
(HHV)
- ----------------------------------------------------------------------------------------------------------------
Operating
Cost Rate, $0.4053 $0.4175 $0.4300 $0.4429 $0.4562 $0.4699 $0.4840 $0.4985 $0.5134 $0.5288
$/MMBtu
- ----------------------------------------------------------------------------------------------------------------
Operating
Cost $966 $2,999 $3,096 $3,205 $3,317 $3,443 $3,555 $3,680 $3,809 $1,966
- ----------------------------------------------------------------------------------------------------------------
Royalty
Rate 0.2052 0.2052 0.2052 0.2052 0.2052 0.2052 0.2052 0.2052 0.2052 0.2052
- ----------------------------------------------------------------------------------------------------------------
Reference
Price, $71.52 $71.63 $73.78 $75.99 $78.27 $80.62 $83.04 $85.53 $88.10 $90.74
C$/10/3/m/3/
- ----------------------------------------------------------------------------------------------------------------
Receipt
Volume of 66,042 199,116 199,564 200,562 201,565 203,128 203,586 204,604 205,627 103,044
Gas, 10/3/m/3/
- ----------------------------------------------------------------------------------------------------------------
Royalty Fee,
C$000s C$969 C$2,927 C$3,022 C$3,128 C$3,238 C$3,361 C$3,469 C$3,591 C$3,718 C$1,919
- ----------------------------------------------------------------------------------------------------------------
Exchange
Rate, 0.670 0.670 0.670 0.670 0.670 0.670 0.670 0.670 0.670 0.670
US$/C$
- ----------------------------------------------------------------------------------------------------------------
Royalty Fee,
US$000s $649 $1,961 $2,025 $2,096 $2,169 $2,252 $2,325 $2,406 $2,491 $1,286
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

8.3.3. Fuel Transportation Costs

Fuel transportation represents over half of the operating expenses of the
Project. The vast majority of this cost is fixed and does not vary with the
volume of fuel actually transported to the Project. We were provided with the
invoices for the transportation of the fuel and reviewed the invoices from 1997,
1998, and 1999 through June 1999. The calculations in the pro forma are
consistent with the calculations in the invoices and the charge rates for
demand, pressure, and variable charges used in the pro forma are consistent with
historical experience.

NOVA pipeline uses an unusual method of applying the demand charge in that it
adds the firm delivery and receipt volumes of gas together to apply the demand
charge. The delivery volume is the volume of gas actually delivered to the end
of the pipeline while the receipt volume is what is delivered into the pipeline.
Since there is considerable fuel used in the transportation, the Delivery demand
volume is highest with Nova, slightly less with TransCanada Pipeline ("TCPL"),
and the lowest with Tennessee Gas Pipeline ("TGPL"). Both TCPL and TGPL use
conventional methods of calculating the demand charge by only using the delivery
demand volume. TCPL also charges for maintaining pressure level.

8-7
<PAGE>

LOGO OF STONE & WEBSTER
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Table 8.3.3-1

NOVA Demand Charges

(C$=US$ 0.67)
- --------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Firm Service
Delivery &
and Receipt 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6 1,234.6
Volume,
10/3/m/3//day
- --------------------------------------------------------------------------------------------------------------------
Monthly
Demand
Charge x 12, $568 $1,758 $1,811 $1,864 $1,921 $1,979 $2,038 $2,099 $2,162 $2,227
C$
- --------------------------------------------------------------------------------------------------------------------
Demand Cost,
C$ $702 $2,170 $2,235 $2,302 $2,371 $2,442 $2,515 $2,591 $2,668 $1,367
- --------------------------------------------------------------------------------------------------------------------
Demand Cost,
US$ $471 $1,454 $1,498 $1,543 $1,589 $1,637 $1,686 $1,736 $1,788 $916
- --------------------------------------------------------------------------------------------------------------------

<CAPTION>
Table 8.3.3-2

Annual Nova Variable Transportation Charges

(Nominal $000s)
- --------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receipt
Volume, 66,042 199,116 199,564 200,562 201,565 203,128 203,586 204,604 205,627 103,044
10/3/m/3/
- --------------------------------------------------------------------------------------------------------------------
Variable
Rate, $0.2300 $0.2369 $0.2440 $0.2513 $0.2589 $0.2666 $0.2746 $0.2829 $0.2914 $0.3001
C$/10/3/m/3/
- --------------------------------------------------------------------------------------------------------------------
Variable
Charge, C$ $15 $47 $49 $50 $52 $54 $56 $58 $60 $31
- --------------------------------------------------------------------------------------------------------------------
Variable
Charge, $10 $32 $33 $34 $35 $36 $38 $39 $40 $21
US$
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

8-8
<PAGE>

[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Table 8.3.3-3

TransCanada Pipeline Demand Costs

(Nominal $000s)
- --------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Delivery
Demand, 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6
10/3/m/3//day
- --------------------------------------------------------------------------------------------------------------
Monthly
Demand
Charge x $4,175 $12,900 $13,288 $13,686 $14,096 $14,519 $14,954 $15,403 $15,865 $8,171
12, C$
- --------------------------------------------------------------------------------------------------------------
Demand
Cost, C$ $2,365 $7,309 $7,528 $7,754 $7,987 $8,227 $8,473 $8,728 $8,989 $4,604
- --------------------------------------------------------------------------------------------------------------
Demand
Cost, US$ $1,585 $4,897 $5,044 $5,195 $5,351 $5,512 $5,677 $5,848 $6,023 $3,085
- --------------------------------------------------------------------------------------------------------------
Fixed
Pressure
Demand, 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6 566.6
10/3/m/3//day
- --------------------------------------------------------------------------------------------------------------
Fixed
Pressure
Charge x12, $17.92 $55.44 $57.00 $58.80 $60.48 $62.40 $64.2 $66.12 $68.16 $35.10
C$/10/3/m/3/
- --------------------------------------------------------------------------------------------------------------
Fixed
Pressure $10 $31 $32 $33 $34 $35 $36 $38 $38 $20
Cost, C$
- --------------------------------------------------------------------------------------------------------------
Fixed
Pressure $7 $21 $22 $22 $23 $24 $24 $25 $26 $13
Cost, US$
- --------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Table 8.3.3-4

TCPL Variable Transportation Charges
- ---------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receipt
Volume, 60,273 181,723 182,133 183,044 183,959 185,385 185,803 186,732 187,666 94,044
10/3/m/3/
- ---------------------------------------------------------------------------------------------------------------
Variable
Rate, $1.73 $1.79 $1.84 $1.89 $1.95 $2.01 $2.07 $2.13 $2.20 $2.26
C$/10/3/m/3/
- ---------------------------------------------------------------------------------------------------------------
Variable
Charge, $ 105 $ 325 $ 335 $ 347 $ 359 $ 373 $ 385 $ 398 $ 412 $ 213
C$
- ---------------------------------------------------------------------------------------------------------------
Variable
Charge, $ 70 $ 217 $ 224 $ 232 $ 241 $ 250 $ 258 $ 267 $ 276 $ 143
US$
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

8-9
<PAGE>

<TABLE>
<CAPTION>
Table 8.3.3-5

TGPL Demand Costs

(Nominal $000s)

- ---------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Delivery
Demand,
MMBtu 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
(HHV) /
Day
- ---------------------------------------------------------------------------------------------------------------
Monthly
Demand
Charge x $40.72 $125.88 $129.60 $133.56 $137.52 $141.60 $145.92 $150.24 $154.80 $79.68
12, US$
- ---------------------------------------------------------------------------------------------------------------
Demand
Cost, US$ $ 815 $ 2,517 $ 2,592 $ 2,670 $ 2,750 $ 2,833 $ 2,918 $ 3,005 $ 3,096 $ 1,585
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

8-10
<PAGE>

8.3.4. Operations, Maintenance, and Other Costs

The operations, maintenance, and other costs are based on the experience with
1999 year to date through August 31 actual expenditures. The O&M contract with
the Project was changed in November 1998 from a lump sum contract to a fee plus
reimbursable budget contract. This change in the contract has resulted in a
projected decrease in Plant Operations costs of nearly $2 million per year. Only
about half of this decrease is reflected in the projected budget so we believe
the costs are reasonable and may be somewhat conservative. We have no reason to
believe these costs will be substantially higher in the future from current
experience in 1999. The GE Fees, Overhaul, and directed starts accrual amount
includes the fired hour charges and lease engine charges as well as the annual
fees paid to GE for performing the plant O&M. The other items are self-
explanatory.

<TABLE>
<CAPTION>
Table 8.3.4-1

Projected Consolidated Costs

(Nominal $000s)
- ---------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GECS Fees,
Overhaul and $ 734 $2,297 $2,276 $2,304 $2,330 $2,361 $ 2,385 $ 2,414 $ 2,444 $1,323
Directed Starts
Accrual
- ----------------------------------------------------------------------------------------------------------------
Plant Salaries $ 578 $1,786 $1,840 $1,895 $1,952 $2,011 $ 2,071 $ 2,133 $ 2,197 $1,125
- ----------------------------------------------------------------------------------------------------------------
Operating
Expense 80 246 253 261 269 277 285 294 302 155
- ----------------------------------------------------------------------------------------------------------------
Plant Admin
Expense 14 42 44 45 46 48 49 51 52 27
- ----------------------------------------------------------------------------------------------------------------
Employee
Services 2 5 6 6 6 6 6 6 7 3
- ----------------------------------------------------------------------------------------------------------------
Maintenance
Materials 23 70 72 75 77 79 82 84 87 44
- ----------------------------------------------------------------------------------------------------------------
Other Plant
Repair 81 251 259 266 274 283 291 300 309 158
- ----------------------------------------------------------------------------------------------------------------
Utility and
Environmental 134 414 426 439 452 466 480 494 509 261
Expenses
- ----------------------------------------------------------------------------------------------------------------
Administrative
and Insurance 318 982 1,012 1,042 1,073 1,105 1,138 1,173 1,208 619
Expenses
- ----------------------------------------------------------------------------------------------------------------
Taxes 267 810 1,434 1,476 1,522 1,578 1,638 1,701 1,763 1,278
- ----------------------------------------------------------------------------------------------------------------
Syracuse Fee 417 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 622
- ----------------------------------------------------------------------------------------------------------------
Partnership
Expenses 128 395 407 419 432 445 458 472 486 249
- ----------------------------------------------------------------------------------------------------------------
Total $2,775 $8,510 $9,281 $9,479 $9,683 $9,908 $ 10,134 $10,371 $10,613 $5,772
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

8-11
<PAGE>

We have reviewed the above figures and believe they are reasonable. There is a
possibility the Project will have to start buying NO\\x\\ emission credits
starting in the year 2002. This potential expense is handled as a sensitivity to
the operating costs.

8.4. Sensitivity Cases

Stone & Webster has performed several sensitivities using the Financial
Projections. The purpose of the sensitivities is to demonstrate how each
sensitivity affects the projected coverage ratio. The sensitivities performed
are as follows:

. Sensitivity 1 - Reduce capacity factor to 85 percent

. Sensitivity 2 - O&M costs increased by 15 percent

. Sensitivity 3 - Heat rates increased by 3 percent (300 Btu/kWh)

. Sensitivity 4 - The Project has to purchase $200,000 of NO\\x\\ credits
starting in 2002

Projecting O&M costs has inherent uncertainty, but the Project has been
operating for several years and there is little risk in incurring a substantial
increase in O&M costs. Sensitivity 1 demonstrates the impact of a significant
increase in O&M costs. We believe the heat rate projected for each unit is
reasonable and that additional degradation of any heat rate from its current
level is unlikely. Sensitivity 2 illustrates the impact of increasing the heat
rate beyond what we would consider reasonable for any further degradation in
heat rate for each unit. Sensitivity 3 illustrates the impact on the Project if
it has to purchase NO\\x\\ credits starting in 2002 as part of the reduction in
emissions the EPA has planned for the region. Each sensitivity represents an
individual case and should not be combined, since we believe it is unlikely for
each of these cases to occur together.

8.5. Coverage Ratios

The DSCR's for the base case and each of the sensitivities are presented in
Table 8.5-1. The coverage ratios are calculated on a pre-tax basis. In all cases
the minimum and average fixed charge coverage ratio is equal to or above 1.0 for
each year. Stone & Webster believes that these sensitivities reasonably
demonstrate the impact on cash flows and coverage ratios that would occur if the
sensitivity cases occurred.

8-12
<PAGE>

<TABLE>
<CAPTION>
Table 8.5-1
Debt Service Coverage Ratios
-----------------------------------------------------------------
Minimum Average
Coverage Ratio Coverage Ratio
-----------------------------------------------------------------
<S> <C> <C>
Base Case 1.35 1.40
-----------------------------------------------------------------
Sensitivity 1:
Reduced Capacity Factor 1.29 1.35
-----------------------------------------------------------------
Sensitivity 2:
Increased O&M 1.31 1.36
-----------------------------------------------------------------
Sensitivity 3:
Increased Heat Rate 1.35 1.39
-----------------------------------------------------------------
Sensitivity 4:
Purchase NO\\x\\ Credits 1.35 1.39
-----------------------------------------------------------------
</TABLE>

8-13
<PAGE>

[LOGO OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

APPENDIX A

LIST OF DOCUMENTS REVIEWED
<PAGE>

[LOGO OF STONE & WEBSTER]
Project Orange Association, L.P.
- --------------------------------------------------------------------------

APPENDIX A - LIST OF DOCUMENTS REVIEWED

- --------------------------------------------------------------------------------
Date Document
- --------------------------------------------------------------------------------
08/27/1999 Data Room List, Relevant Contract List & Working Group List
- --------------------------------------------------------------------------------
09/01/99 POA monthly operation reports 1999
- --------------------------------------------------------------------------------
09/01/99 Site Assessment
- --------------------------------------------------------------------------------
09/01/99 GPU International Biennial Safety and Environmental Assessments
- --------------------------------------------------------------------------------
09/01/99 SRA's Biennial Safety Assessment Report for the POA/SUSS facility
- --------------------------------------------------------------------------------
09/01/99 EI Environmental Audit
- --------------------------------------------------------------------------------
09/01/99 Overhead and Gantry Crane Inspections
- --------------------------------------------------------------------------------
09/01/99 Memo confirming Energy Initiatives Environmental and Safety
Regulatory Audit
- --------------------------------------------------------------------------------
09/01/99 Environmental and Safety Audit
- --------------------------------------------------------------------------------
09/01/99 Letter from NYSPSC regarding project audit
- --------------------------------------------------------------------------------
09/01/99 End of year closure to project associates cogeneration facility
record audit
- --------------------------------------------------------------------------------
09/01/99 Pipeline Audit Response
- --------------------------------------------------------------------------------
09/01/99 NY Public Service Commissions 1997 Audit of project High Pressure
Gas Pipeline
- --------------------------------------------------------------------------------
09/01/99 Tables 1 thru 8 summarizing results of a cylinder gas audit
- --------------------------------------------------------------------------------
09/01/99 Biennial Safety and Environmental assessment performed by S&RA at
the POA/SUSS facility from May 12 - 16, 1997
- --------------------------------------------------------------------------------
09/01/99 Final Environmental Impact Statement
- --------------------------------------------------------------------------------
09/01/99 Environmental Liability Assessment - Syracuse University Steam
Station
- --------------------------------------------------------------------------------
09/01/99 Contaminated soil investigation and remediation report
- --------------------------------------------------------------------------------
09/01/99 Outstanding Issues
- --------------------------------------------------------------------------------
09/01/99 Effectiveness questionnaire
- --------------------------------------------------------------------------------
09/01/99 FY 1999 Pipeline Safety Users Fee Assessment
- --------------------------------------------------------------------------------
09/01/99 Gas Transportation Line Permit #33127
- --------------------------------------------------------------------------------
09/01/99 Regulatory Assessment - Permitting Issues Galson Project No.
GQ-129
- --------------------------------------------------------------------------------

A-1
<PAGE>

Appendix A - List of Documents Reviewed
- --------------------------------------------------------------------------------
09/01/99 Hazardous Substance Report
- --------------------------------------------------------------------------------
09/01/99 Letter from lawyers transmitting documents
- --------------------------------------------------------------------------------
09/01/99 Operation and Maintenance Agreement dated 11/01/98
- --------------------------------------------------------------------------------
09/01/99 Environmental, Health and Safety Program Assessment
- --------------------------------------------------------------------------------
09/01/99 Plant Heat Rate & Capacity 1992 - 1993 contract year
- --------------------------------------------------------------------------------
09/01/99 MRA and related documents
- --------------------------------------------------------------------------------
09/01/99 Steam Contract Syracuse University 2-27-90
- --------------------------------------------------------------------------------
09/01/99 Letter 5-1-90 RE: Steam Contract, Op Agr and Lease Agr 2-27-
90
- --------------------------------------------------------------------------------
09/01/99 Letter 6-22-90 RE: Steam Contract and Lease Agr 2-27-90
- --------------------------------------------------------------------------------
09/01/99 Letter 8-29-90 RE: Ditto
- --------------------------------------------------------------------------------
09/01/99 Amendment to Steam Contract 12-31-90
- --------------------------------------------------------------------------------
09/01/99 Operating Agreement Syracuse University 2-27-90
- --------------------------------------------------------------------------------
09/01/99 Amendment to Operating Agreement 12-31-90
- --------------------------------------------------------------------------------
09/01/99 Assignmt Agrmt (Operating Agrmt) City of Syracuse Ind Dev
Agency 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Project Orange Associates exhibits and partnership meeting
notes
- --------------------------------------------------------------------------------
09/01/99 Taxable Income and Loss Revised vs Filed 3-13-98
- --------------------------------------------------------------------------------
09/01/99 Letter 3-12-99 RE: Tax Returns
- --------------------------------------------------------------------------------
09/01/99 Transmittal 3-12-98 RE: Taxable Income and Loss
- --------------------------------------------------------------------------------
09/01/99 Fax 2-11-98 RE: SOP Exhibits for Syracuse Orange Partners
Agrmt
- --------------------------------------------------------------------------------
09/01/99 Subcontract Agreemt 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Interconnection Agreemt 1-13-92
- --------------------------------------------------------------------------------
09/01/99 Agreement of Indemnity 2-10-93
- --------------------------------------------------------------------------------
09/01/99 Agreement of Indemnity 11-10-92
- --------------------------------------------------------------------------------
09/01/99 Letter 10-19-92 RE: Lease Agrmt 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------

A-2
<PAGE>

Appendix A - List of Documents Reviewed
- --------------------------------------------------------------------------------
09/01/99 Supplemental Agreement 7-24-92 Syracuse University
- --------------------------------------------------------------------------------
09/01/99 Letter 10-19-92 RE: Lease Agrmt 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
09/01/99 Amendment to Lease Agreement 12-16-92 Syracuse University
- --------------------------------------------------------------------------------
09/01/99 Amendment to Operating Agreement 12-16-92
- --------------------------------------------------------------------------------
09/01/99 First Amendment of Mortgage and Security Agrmt 12-24-92 City of
Syracuse, Syracuse University
- --------------------------------------------------------------------------------
09/01/99 Security Agreement 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
09/01/99 Mortgage and Security Agreement 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
09/01/99 Security Agreement 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
09/01/99 Agreement 4-5-91 City of Syracuse and Housing Authority
- --------------------------------------------------------------------------------
09/01/99 Payment in Lieu of Tax Agreement 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Lease and Sublease Agreement 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Memorandum of Lease 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Real Property Transfer Gains Tax Affidavit Tax Return CR Line
Mortgage Certificate 4-4-91
- --------------------------------------------------------------------------------
09/01/99 Subordination Agreement 4-5-91
- --------------------------------------------------------------------------------
09/01/99 Steam Contract Syracuse University 2-27-90
- --------------------------------------------------------------------------------
09/01/99 Lease Agreement Syracuse University Feb. 1990
- --------------------------------------------------------------------------------
09/01/99 Indemnification Agreement 6-30-98
- --------------------------------------------------------------------------------
09/01/99 Mortgage and Security Agreement 4-5-91 City of Syracuse
- --------------------------------------------------------------------------------
09/01/99 Fax 7-15-97, Letter 7-15-97 RE: Master Restructuring Agreement
7-9-97 Niagara Mohawk Power Corp.
- --------------------------------------------------------------------------------
09/01/99 POA Proforma Analysis 5-28-98
- --------------------------------------------------------------------------------
09/01/99 Miscellaneous Cost Information for Electric Equipment
- --------------------------------------------------------------------------------
09/11/99 POA Steam Station 1997 Fuel Use/Industrial Process Emission
Statement #DECID #7311500229.
- --------------------------------------------------------------------------------

A-3
<PAGE>

Appendix A - list of Documents Reviewed
- --------------------------------------------------------------------------------
09/11/99 POA Steam Station 1997 Fuel Use/Industrial Process Emission
Statement #DECID #7311500204.
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 1st Quarter 1998
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 2nd Quarter 1998
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 3rd Quarter 1998
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 4th Quarter 1998
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 1st Quarter 1999
- --------------------------------------------------------------------------------
09/11/99 Excess Emissions Report, 2nd Quarter 1999
- --------------------------------------------------------------------------------
09/11/99 Revision to Industrial Wastewater Discharge Permit #125
- --------------------------------------------------------------------------------
09/11/99 POA, LP SMR 125 Dec. 1, 1997 - May 31, 1998
- --------------------------------------------------------------------------------
09/11/99 Notice of Accidental Discharge
- --------------------------------------------------------------------------------
09/11/99 Calibration Sheet/Inspection - Riley Sewer
- --------------------------------------------------------------------------------
09/11/99 POA, Permit No. 125, Semi-annual Self Monitoring Report (June 1,
1998 - Nov. 30, 1998)
- --------------------------------------------------------------------------------
09/11/99 POA, Permit No. 125, Semi-annual Self Monitoring Report (Dec. 1,
1998 - June 30, 1999)
- --------------------------------------------------------------------------------
09/11/99 1st Quarter 1998- SMR Permit #140 Semi-annual Self Monitoring
Report (Dec. 1, 1997 - Feb. 28, 1998).
- --------------------------------------------------------------------------------
09/11/99 3rd Quarter 1998- SMR Permit #140 Semi-annual Self Monitoring
Report (June 1, 1998 - Aug. 31, 1998).
- --------------------------------------------------------------------------------
09/11/99 4th Quarter 1998- SMR Permit #140 Semi-annual Self Monitoring
Report (Sept. 1, 1997 - Dec. 31, 1998).
- --------------------------------------------------------------------------------
09/11/99 Semi-Annual Self-Monitoring Report Permit #140 for the period of
Jan. 1, 1999 - June 30, 1999
- --------------------------------------------------------------------------------
09/11/99 Draft - Title V Application for the Project Orange Cogen.
Facility and the Syracuse Univ. Sys. (March 28, 1997).
- --------------------------------------------------------------------------------
09/11/99 Notice of Violation of "Onondaga County Rules and Regulations
Relating to the use of the Public Sewer System" and Industrial
Wastewater Discharge Permit #125
- --------------------------------------------------------------------------------
09/11/99 Permit No. 125, Notice of Accidental Discharge (June 16, 1999)
- --------------------------------------------------------------------------------
09/11/99 Response to the Compliance Order issued on June 4, 1997, Permit
No. 125.
- --------------------------------------------------------------------------------

A-4
<PAGE>

Appendix A - List of Documents Reviewed
- --------------------------------------------------------------------------------
09/11/99 Letter notifying of renewal of Permit #140 Industrial Wastewater
Permit
- --------------------------------------------------------------------------------
09/11/99 Hazardous Substance Bulk Storage Registration Certificates
- -------------------------------------------------------------------------------
09/11/99 Petroleum Bulk Storage Registration Certificate
- -------------------------------------------------------------------------------
09/11/99 Emergency and Hazardous Chemical Inventory
- -------------------------------------------------------------------------------
09/11/99 NYSDEC Certificate to Operate PSD Permit -Special Conditions-
Emission Point #00001, 00002
- -------------------------------------------------------------------------------
09/11/99 Oil Spill Prevention Control and Countermeasure (SPCC) Plan (Emergency
Response Plan)
- -------------------------------------------------------------------------------
09/11/99 Letter from C&S Tech. Solutions - modifications to be made to pH
Neutralization System to facilitate a flow rate of 60 gpm.
- -------------------------------------------------------------------------------
09/11/99 Invoice for Rental Permit
- -------------------------------------------------------------------------------
09/11/99 POA, LP SMR 140 March 1, 1998 - May 31, 1998
- -------------------------------------------------------------------------------
09/11/99 Lab Analysis Report - Hazardous Waste Manifest
- -------------------------------------------------------------------------------
09/11/99 Calibration Sheet/Inspection - Cogen Sewer
- -------------------------------------------------------------------------------
09/11/99 Instructions 1998 Emission Statement
- -------------------------------------------------------------------------------
09/11/99 Letter from NY State Dept. of Environmental Conservation rgdg. 1998
Emission Statement.
- -------------------------------------------------------------------------------
09/14/99 Process Flow Diagram Steam Balance Annual Average
- -------------------------------------------------------------------------------
09/22/09 CPS Gas Call Option Term Sheet
- -------------------------------------------------------------------------------
09/30/99 Project Orange Quarterly Financial Documents from DLJ - Indexed Swap
Payment, Power Put Monthly Statements, Invoices,
- -------------------------------------------------------------------------------
10/05/99 Project Orange Plant Performance Snapshots - 10/1/99
- -------------------------------------------------------------------------------
10/05/99 Endfield Failure Low Pressure Compressor Incident
- -------------------------------------------------------------------------------
10/07/99 Independent Technical Consultants Draft Report, dated 09/30/99
- -------------------------------------------------------------------------------
10/15/99 Asset Management Qualifications for Niagara Mohawk Energy Marketing,
Inc.
- -------------------------------------------------------------------------------
10/15/99 Noise measurement / sound evaluation issues
- -------------------------------------------------------------------------------
10/18/99 Application for Permit - for Water Mains, Gas Mains, Sewer Lines, etc.
- -------------------------------------------------------------------------------

A-5

<PAGE>

Appendix A - List of Documents Reviewed
- --------------------------------------------------------------------------------
10/18/99 Permits for use of County-Owned property
- --------------------------------------------------------------------------------
10/18/99 Permits for use of State-Owned property.
- --------------------------------------------------------------------------------
10/18/99 Fax from GPU - Environmental Issues Closure
- --------------------------------------------------------------------------------
10/18/99 Documentation from Orange on GE Plant Operations/Electrical Test
Report
- --------------------------------------------------------------------------------
10/20/99 Report Comments
- --------------------------------------------------------------------------------
10/22/99 Report Comments
- --------------------------------------------------------------------------------
10/22/99 Client List Asset Management and Related Services
- --------------------------------------------------------------------------------
11/05/99 Report Comments
- --------------------------------------------------------------------------------
11/08/99 Report Comments
- --------------------------------------------------------------------------------
11/08/99 Report Comments
- --------------------------------------------------------------------------------
11/08/99 POA Operating Summaries
- --------------------------------------------------------------------------------
11/09/99 POA - GE-EPO name change
- --------------------------------------------------------------------------------
11/09/99 Fax - Project Orange Weekly operation, maintenance and events
Report (Nov. 1-7)
- --------------------------------------------------------------------------------
11/09/99 Fax - Definitions
- --------------------------------------------------------------------------------
11/12/99 Report Comments
- --------------------------------------------------------------------------------
11/12/99 Report Comments
- --------------------------------------------------------------------------------
11/12/99 Report Comments
- --------------------------------------------------------------------------------
11/12/99 Report Comments for offering circular
- --------------------------------------------------------------------------------
11/13/99 Final report comments
- --------------------------------------------------------------------------------
11/15/99 POA Monthly Report - August 1999
- --------------------------------------------------------------------------------
11/15/99 POA Monthly Report - September 1999
- --------------------------------------------------------------------------------
11/15/99 Draft Offering Memorandum for review and comment
- --------------------------------------------------------------------------------

A-6
<PAGE>

[LETTERHEAD OF STONE & WEBSTER]
Project Orange Associates, L.P.
- --------------------------------------------------------------------------------

EXHIBIT 1

BASE CASE FINANCIAL PROJECTIONS

<PAGE>

<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE: Base
($ in thousands, expect price per MWH)
4 months ended Projected Fiscal Years Ending December 31,
----------------------------------------------------------------------------
12/31/99 2000 2001 2002 2003
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW)(2)................... 79.0 79.0 79.0 79.0 79.0
Availability (3)............................... 95.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4)................................... 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5).................. 10,000.0 10,050.0 10,100.3 10,150.8 10,201.5
Electricity Produced (MWh) (6)................. 213,963.6 641,890.8 640,137.0 640,137.0 640,137.0
Steam Throughput (1,000 lbs) (7)............... 202,302.0 639,385.1 638,385.1 639,385.1 639,385.1
Fuel Consumed (MMBtu) (8)...................... 2,139,636.0 6,451,002.5 6,465,543.7 6,497,871.5 6,530,360.8
Entitlement Used (MMBtu) (9)................... 2,382,594.0 7,183,520.9 7,199,713.3 7,235,711.8 7,271,890.4

Debt Offering Annual Interest Rate............. 10.50% 10.50% 10.50% 10.50% 10.50%

General Inflation.............................. 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CON$)....................... $0.67 $0.67 $0.67 $0.67 $0.67
On-Peak Electricity Pricing ($MWh) (10)........ $30.43 $32.41 $34.85 $33.94 $36.58
Off-Peak Electricity Pricing ($MWh)............ $22.38 $22.36 $23.70 $25.30 $25.30
Indexed Swap Price ($MWh) (11)................. $54.23 $54.80 $56.51 $58.04 $59.70
Steam Price ($/1,000 lbs) (12)................. $4.36 $4.39 $4.43 $4.47 $4.51

Power Put Contract
Energy Sales - On-Peak...................... $ 2,706.4 $ 8,455.0 $ 9.091.6 $ 8,854.2 $ 9,575.1
Energy Sales - Off-Peak..................... 2,796.6 8,519.5 8,988.4 9,595.3 9,569.4
Capacity Sales - On Peak.................... 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak................... 0.0 0.0 0.0 0.0 0.0
-----------------------------------------------------------------------
Total Power Put Payments (13).................. 5,505.0 16,974.5 18,080.0 18,449.4 19,144.5

Indexed Swap Contract
Floating (Payment).......................... (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2)
Floating (Payment): Capacity................ 0.0 0.0 0.0 0.0 0.0
-----------------------------------------------------------------------
Total Floating (Payments) (14)................. (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2)
Fixed Payment............................... 11,984.8 36,332.5 37,464.4 38,483.4 39,581.6
-----------------------------------------------------------------------
Total Indexed Swap Payment (15)................ 6,298.8 18,799.8 18,738.6 19,375.0 19,753.3
Steam Sales.................................... 881.5 2,809.3 2,834.2 2,859.2 2,884.5
Fuel Commodity Sales........................... 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales.................... 0.0 0.0 0.0 0.0 0.0
-----------------------------------------------------------------------
Total Revenues............................ $ 12,685.3 $ 38,583.6 $ 39,652.8 $ 40,683.7 $ 41,782.3

Commodity Expense (16)......................... ($1,592.8) ($4,892.9) ($5,053.1) ($5,232.7) ($5,418.7)
Firm Service Transportation Expense (17)....... (2,876.7) (6,889.1) (9,155.8) (9,430.5) (9,713.4)
Variable Fuel Expense (18)..................... (102.3) (317.8) (328.1) (339.6) (351.5)
-----------------------------------------------------------------------
Total Fuel Expenses....................... ($4,571.9) ($14,099.8) ($14,536.9) ($15,002.8) ($15,483.6)

GE Overhaul Accrual & Directed Starts (19)..... ($476.7) ($1,430.0) ($1,426.1) ($1,426.1) ($1,426.1)
GE Contractual Services Fees (20).............. (257.5) (827.4) (852.2) (877.8) (904.1)
Plant Operations (21).......................... (777.2) (2,401.4) (2,473.5) (2,547.7) (2,624.1)
Other O&M and Plant Utilities (22)............. (134.0) (413.9) (426.4) (439.1) (452.3)
Administrative (23)............................ (317.8) (982.1) (1,011.6) (1,041.9) (1,073.2)
Taxes (24)..................................... (266.9) (810.1) (1,434.4) (1,477.5) (1,521.8)
Syracuse University User Charge (25)........... (416.7) (1,250.0) (1,250.0) (1,250.0) (1,250.0)
-----------------------------------------------------------------------
Total O&M and Administrative Expenses...... ($2,646.7) ($8,115.0) ($8,874.2) ($9,060.1) ($9,251.6)

Partnership Fees (26).......................... (127.8) (394.9) (406.8) (419.0) (431.6)
-----------------------------------------------------------------------
Total Expenses.......................... ($7,346.4) ($22,60?.8) ($23,817.9) ($24,481.9) ($25,166.8)

Net Operating Cash Flow........................ $5,338.8 $15,873.8) $15,834.9 $16,201.8 $16,615.6

<CAPTION>
2004 2005 2006 2007 2008(1)
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW)(2)............... 79.0 79.0 79.0 79.0 79.0
Availability (3)........................... 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4)............................... 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5).............. 10,252.5 10,303.8 10,355.3 10,407.1 10,459.1
Electricity Produced (MWh) (6)............. 641,890.8 640,137.0 640,137.0 640.137.0 319,191.6
Steam Thoughput (1,000 lbs) (7)............ 639,385.1 839,385.1 639,385.1 639,385.1 319,692.6
Fuel Consumed (MMBtu) (8).................. 6,580,993.5 6,595,827.1 6,828,806.8 6,661,950.8 3,338,458.7
Entitlement Used (MMBtu)(9)................ 7,328,272.5 7,344,791.1 7,381,515.1 7,418,422.6 3,717,544.3

Debt Offering Annual Interest Rate......... 10.50% 10.50% 10.50% 10.50% 10.50%

General Inflation.......................... 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CON$)................... $0.67 $0.67 $0.67 $0.67 $0.67
On-Peak Electricity Pricing ($MWh) (10).... $36.79 $36.81 $36.81 $36.81 $36.81
Off-Peak Electricity Pricing ($MWh)........ $24.22 $26.23 $26.23 $26.23 $26.23
Indexed Swap Price ($MWh) (11)............. $61.37 $63.19 $65.04 $66.84 $67.88
Steam Price ($/1,000 lbs) (12)............. $4.55 $4.59 $4.63 $4.67 $2.31

Power Put Contract
Energy Sales - On-Peak................... $ 9,710.6 $9,640.6 $9,602.9 $9,602.9 $4,857.9
Energy Sales - Off-Peak.................. 9,153.8 9,921.1 9,948.0 9,948.0 4,910.7
Capacity Sales - On Peak................. 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak................ 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------
Total Power Put Payments (13).............. 18,864.4 19,561.7 19,550.9 19,550.9 9,768.7

Indexed Swap Contract
Floating (Payment)....................... (19,484.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Floating (Payment): Capacity............. 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------
Total Floating (Payments) (14)............. (19,484.8) (20,280.4) (20,249.2) (20,249.2) (10,145.4)
Fixed Payment............................ 40,690.0 41,895.3 43,122.0 44,185.0 22,503.5
--------------------------------------------------------------------------
Total Indexed Swap Payment (15)............ 21,205.2 21,634.9 22,872.8 23,935.9 12,358.1
Steam Sales................................ 2,910.0 2,935.7 2,961.7 2,987.9 738.7
Fuel Commodity Sales....................... 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales................ 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------
Total Revenues......................... $ 42,979.6 $44,132.4 $45,385.4 $46,474.6 $22,865.5

Commodity Expense (16)..................... ($5,626.6) ($5,810.5) ($6,016.8) ($6,230.4) ($3,216.9)
Firm Service Transportation Expense (17)... (10,004.8) (10,304.9) (10,614.1) (10,932.5) (5,599.0)
Variable Fuel Expense (18)................. (384.9) (376.7) (389.9) (403.6) (208.3)
Total Fuel Expenses.................... ($15,996.2) ($16,492.1) ($17,020.8) ($17,566.5) ($9,024.2)

GE Overhaul Accrual & Directed Starts (19). ($1,430.0) ($1,426.1) ($1,426.1) (1,426.1) ($711.1)
GE Contractual Services Fees (20).......... (931.3) (959.2) (988.0) (1,017.6) (521.2)
Plant Operations (21)...................... (2,702.8) (2,783.9) (2,867.4) (2,953.5) (1,512.6)
Other O&M and Plant Utilities (22)......... (465.9) (479.9) (494.3) (509.1) (260.7)

Administrative (23)........................ (1,105.4) (1,138.5) (1,172.7) (1,207.9) (618.6)
Taxes (24)................................. (1,577.7) (1,638.4) (1,700.7) (1,762.6) (1,277.6)
Syracuse University User Charge (25)....... (1,250.0) (1,250.0) (1,250.0) (1,250.0) (621.5)
----------------------------------------------------------------------------
Total O&M and Administrative Expenses... ($9,463.1) ($9,676.0) ($9,899.2) ($10,126.8) ($5,523.3)

Partnership Fees (26)...................... (444.5) (457.8) (471.6) (485.7) (248.8)
---------------------------------------------------------------------------
Total Expenses......................... ($25,903.8) ($26,625.9) ($27,391.5) ($28,178.?) ($14,7??.2)

Net Operating Cash Flow..................., $17,075.8 $17,506.5) $17,993.8) $18.295.7 $8,0??.3)
</TABLE>

E-1
<PAGE>

PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- --------------------------------------------------------------------------------
Cash Flow Waterfall & Distributable Cash CASE: Base

($ in thousands)

<TABLE>
<CAPTION>
4 months ended Projected Fiscal Years Ending December 31,
--------------------------------------------------------------------------
12/31/99 2000 2001 2002 2003 2004
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Operating Cash Flow............................... $5,338.8 $15,973.8 $15,834.9 $16,201.8 $16,615.6 $17,075.8
Interest Income (Security Accounts)................... 25.8 402.5 249.3 252.3 255.1 256.1
---------------------------------------------------------------------------
Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax (27).... 0.0 0.0 0.0 0.0 0.0 10.3
Fees & Other Partnership Expenses..................... 127.8 394.9 406.8 419.0 431.6 444.5
---------------------------------------------------------------------------
Cash Available for Debt Service....................... $5,492.4 $16,771.2 $16,491.8 $16,873.1 $17,302.2 $17,786.7

Withdrawals from Debt Service Reserve Account......... 0.0 46.2 0.0 0.0 0.0 0.0
Withdrawals from Working Capital Reserve Account...... 0.0 0.0 0.0 0.0 0.0 0.0
Withdrawals from Restricted Cash Deposit Account...... 0.0 4,364.6 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account. 0.0 0.0 0.0 0.0 0.0 0.0
Withdrawals from Escrow Reserve Account............... 0.0 450.0 0.0 0.0 0.0 0.0

Interest Payments..................................... 0.0 (5,516.6) (6,274.3) (5,640.6) (4,917.7) (4,087.7)
Principal Payments.................................... 0.0 (6,800.0) (5,950.0) (6,630.0) (7,650.0) (8,500.0)
----------------------------------------------------------------------------
Total Debt Service.................................... 0.0 (12,316.6) (12,224.3) (12,270.6) (12,567.7) (12,587.7)

Cash Available after Debt Service..................... 5,492.4 9,315.4 4,266.7 4,602.5 4,734.5 5,199.0

Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax......... 0.0 0.0 0.0 0.0 0.0 (10.3)
Fees & Other Partnership Expenses..................... (127.6) (349.9) (406.8) (419.0) (431.6) (444.5)

Deposits to Debt Service Reserve Account(DSRA)........ $0.0 $0.0 ($23.2) ($148.5) ($10.0) ($45.9)
Deposits to Working Capital Reserve Account(WCRA)..... (1,000.0) 0.0 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)..... (4,364.6) 0.0 0.0 0.0 0.0 0.0
------------------------------------------------------------------
Total Deposits to Security Accounts................... $5,364.6) 0.0 ($23.2) ($148.5) ($10.0) ($45.9)

Distributable Cash.................................... $0.0 $ 8,920.5 $ 3,836.8 $ 4.835.0 $ 4,293.8 $4,698.3

Cash Available for Debt Service....................... 5,492.4 16,771.2 16,491.0 16,873.1 17,302.2 17,786.7
Total Debt Service.................................... 0.0 12,316.6 12,224.3 12,270.6 12,567.7 12,587.7

Debt Service Coverage Ratio........................... NA 1.36x 1.35x 1.38x 1.38x 1.41x
-----------
Minimum Coverage Ratio..................... 1.35x
-----------
Average Coverage Ratio..................... 1.40x
-----------

Cash Available for Debt Service + RCDA................ 5,492.4 21,135.9 16,491.0 16,873.1 17,302.2 17,786.7
Total Debt Service.................................... 0.0 12,316.6 12,224.3 12,270.6 12,567.7 12,587.7

Debt Service Coverage Ratio........................... NA 1.72x 1.35x 1.38x 1.38x 1.41x
-----------
Minimum Coverage Ratio..................... 1.35x
-----------
Average Coverage Ratio..................... 1.45x
-----------

Cash Available for Debt Service + RCDA + DSRA......... 1,650.7 $27,294.2 $22,603.2 $23,008.4 $23,586.1 $24,080.5
Total Debt Service.................................... 0.0 12,316.6 12,224.3 12,270.8 12,567.7 12,587.7

Debt Service Coverage Ratio........................... NA 2.22x 1.85x 1.88x 1.88x 1.91x
-----------
Minimum Coverage Ratio..................... 1.85x
-----------
Average Coverage Ratio..................... 1.95x
-----------

-----------
Adjusted EBITDA/Interest Expense(28)....... 2.63x NA 3.04x 2.63x 2.99x 3.52x 4.35x
-----------
Total Debt/Adjusted EBITDA................. 4.06x NA 4.05x 3.71x 3.27x 2.81x 2.30x
-----------

<CAPTION>
---------------------------------------------------
2005 2006 2007 2008
---------------------------------------------------
<S> <C> <C> <C> <C>
Net Operating Cash Flow............................... $17,506.5 $17,993.9 $18.295.7 $8,069.3
Interest Income (Security Accounts)................... 259.7 262.8 149.0 17.5
---------------------------------------------------
Syracuse University User Charge....................... 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax (27).... 23.9 37.8 49.8 59.1
Fees & Other Partnership Expenses..................... 457.8 471.6 485.7 248.8
---------------------------------------------------
Cash Available for Debt Service....................... $18,248.0 $18,766.0 $18,980.2 $8,394.6

Withdrawals from Debt Service Reserve Account......... 0.0 0.0 6,512.5 0.0
Withdrawals from Working Capital Reserve Account...... 0.0 0.0 0.0 1,000.0
Withdrawals from Restricted Cash Deposit Account...... 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account. 0.0 0.0 3,500.0 0.0
Withdrawals from Escrow Reserve Account............... 0.0 0.0 3,000.0 0.0

Interest Payments..................................... (3,159.5) (2,124.2) (955.0) 0.0
Principal Payments.................................... (9,520.0) (10,880.0) (12,070.0) 0.0
---------------------------------------------------
Total Debt Service.................................... (12,679.5) (13,004.2) (13,025.0) 0.0

Cash Available after Debt Service..................... 5,568.5 5,761.9 18,967.7 9,394.6

Syracuse University User Charge....................... 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax......... (23.9) (37.8) (49.8) (59.0)
Fees & Other Partnership Expenses..................... (457.8) (471.6) (485.7) (248.8)

Deposit to Debt Service Reserve Account(DSRA)......... (162.3) ($10.4) $0.0 $0.0
Deposit to Working Capital Reserve Account(WCRA)...... 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)..... 0.0 0.0 0.0 0.0
---------------------------------------------------
Total Deposits to Security Accounts................... ($162.3) ($10.4) $0.0 $0.0

Distributable Cash.................................... $4,924.4 $5,242.1 $18.432.2 $9,068.8

Cash Available for Debt Service....................... 18,248.0 18,766.0 18,980.2 8,394.6
Total Debt Service.................................... 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio........................... 1.44x 1.44x 1.46x NA
-----------
Minimum Coverage Ratio..................... 1.35x
-----------
Average Coverage Ratio..................... 1.40x
-----------

Cash Available for Debt Service + RCDA................ 18,248.0 18,766.0 18,980.2 8,394.6
Total Debt Service.................................... 12,679.5 13,004.2 13,025.0 0.0

Cash Available for Debt Service + RCDA + DSRA......... $24,587.7 $25,268.1 $25,492.7 $8,394.5
Total Debt Service.................................... 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio........................... 1.94x 1.94x 1.96x NA
-----------
Minimum Coverage Ratio..................... 1.85x
-----------
Average Coverage Ratio..................... 1.95x
-----------

-----------
Adjusted EBITDA/Interest Expense(28)....... 2.63x 5.78x 8.83x 19.88x NA
-----------
Total Debt/Adjusted EBITDA................. 4.06x 1.78x 1.22x 0.64x NA
-----------
</TABLE>

E-2
<PAGE>

BASE CASE FOOTNOTES

1) The Projected Operating Results and Financials are for the period from
September 1, 1999 through June 30, 2008, the date at which the Indexed Swap
Agreement and Power Put Agreement are terminated.

2) Net average capacity is based on historical operating information and
differs from nameplate capacity due to seasonal variations in operating
conditions.

3) Historical availability for the plant from January 1996 through September
1999 has been 94.5%. The 92.5% availability factor was determined to be a fair
and conservative estimate to be used on a going forward basis.

4) Plant capacity has averaged 92.3% from January 1996 through August 1999 as
adjusted for reserve hours in which the plant was either dispatched off
according to the cyclic operating plant instituted as of January 1999 or due to
Niagara Mohawk exercising the pre-Master Restructuring Agreement, Power Purchase
Agreement option of having the plant dispatched off. Niagara Mohawk no longer
has the option under the current Power Put and Indexed Swap contractual
arrangements.

5) The heat rate is based on historical operating data and degraded at a rate
of 0.5% per year. It is an all-in heat rate which includes fuel used in the duct
burners and the Syracuse boilers.

6) Projected electricity generation figures are based on net average capacity,
plant capacity, and a base load operating plan in which the plant runs whenever
it is available.

7) Steam throughput is directly correlated to Syracuse University steam demand
which has remained relatively constant. Throughput projections are based on
historical demand averages from January 1997 through August 1999. All steam
output is sold to Syracuse University and its ancillary users.

8) Fuel Consumed at the burner tip is a function of the heat rate and the
annual megawatt-hours

9) Entitlement consumption is a function of the fuel consumed at the burner tip
and the fuel consumed during transportation from Alberta to the site.

10) On-peak electricity pricing is based on estimates provided by the Sponsors.
The Sponsors represent that these figures were extracted from current Project
Orange Associates, L.P. estimates. A market study was not undertaken due to the
structure of the Power Put Agreement and Indexed Swap Agreement which hedge the
Project against changes in the market price of electricity provided that the
Project produces electricity.

11) The calculation of Indexed Swap Price is described in the review of that
agreement. The Indexed Swap price used in the pro forma for calendar years is a
weighted average of the contractual years.

12) Steam Price is described in the steam sales agreement. It is reduced in 2008
as described in the agreement.

13) Power Put Payments are based on the assumption that all of the electricity
produced is put to Niagara Mohawk according to the terms of the Power Put
Agreement prior to the establishment of the ISO/PE and purchased by market
buyers after the Power Put Agreement is terminated. Establishment of the ISO/PE,
under the terms of the Power Put Agreement requires that certain volumetric
trading levels be achieved. The Sponsor has assumed that establishment of the
ISO/PE and termination of the Power Put Agreement will occur on January 1, 2001.
This has no financial effect on the plant under the current operating
assumptions.

E-3
<PAGE>

BASE CASE FOOTNOTES

14) Indexed Swap Floating Payments are based on the on-peak market price times
the annual notion quantity times the percentage of total on-peak hours plus the
off-peak market price times the annual notion quantity times the percentage of
total off-peak hours. Annual on-peak and off-peak percentages are adjusted for
holidays and leap years.

15) Indexed Swap Fixed Payments are based on the calculated Indexed Swap times
the annual notional quantity stated in the Indexed Swap Agreement.

16) Commodity expense includes operating costs charged at the historical price
of US$ 0.4053/MMBtu times the total annual receipt volume into NOVA, and royalty
costs based on a historical Canadian Reference price times the applicable
Royalty Rate of 0.2052/1000 cubic meters times the total annual receipt volume
into NOVA converted into US$ at the assumed exchange rate. Commodity costs are
offset by Royalty Recovery Costs based on the total annual receipt volume into
NOVA times the historical recovery rate in US$.

17) Firm service transportation is provided by NOVA, TransCanada, and Tennessee
Gas Pipeline as described in this section. The rate charged is determined by the
relevant regulatory agencies in Canada and the United States.

18) Variable transportation expenses are described in this section of the
report.

19) GE overhaul accrual and directed starts fees are based on the fired hour fee
of $88 per hour. Directed start fees begin accumulating with the 56/th/ directed
start and are charged according to the provisions listed in the Operation and
Maintenance Agreement. According to the Sponsors' proposed operating plan, the
Project will be dispatched as a base load facility and will not incur any
directed start fees.

20) GE Contractual Services fees include a $350,000 operating fee, a $50,000
spare parts carrying fee, and a $50,000 handling fee as stated in the Operations
and Maintenance Agreement dated November 1, 1998. A $350,000 allotment for the
GE Industrial Aeroderivatives Lease Engine Program is also included starting in
2000 and is based on contract estimates provided by the Sponsors. Note that the
1999 figure is based on the current Operations and Maintenance Agreement fee of
$300,000 as escalated under contract terms. For the purposes of the projections
and according to the contractual arrangement, each of the figures is escalated
at inflation going forward.

21) Plant Operation figures are based on historical data from January 1996
through August 1999. Figures are projected forward at the assumed inflation
rate.

22) Other O&M and Plant Maintenance figures are based on historical data from
January 1996 through August 1999. Figures are projected forward at the assumed
inflation rate.

23) Administrative expenses include insurance expense, accounting, consulting,
engineering, legal fees, industry group dues, and additional fees. Insurance
expenses have been provided by the Sponsors according to contractual estimates
and preliminary arrangements with the Insurers. Legal fees differ from
historical averages due to Project Orange Associates' involvement in the MRA and
the revision of the original Power Purchase Agreement with Niagara Mohawk. All
other figures are based on historical data from January 1996 through August
1999. Figures are projected forward at the assumed inflation rate.

24) Taxes charged to the Project include payments in-lieu of taxes (PILOT),
property taxes, New York State Gross Receipt taxes, and New York State Gas
Import taxes, PILOT payments are calculated according to provisions listed in
the Payment in Lieu of Tax Agreement between The City of Syracuse, City of
Syracuse Industrial Development Agency, and Project Orange

E-4

<PAGE>

BASE CASE FOOTNOTES

Associates, L.P. dated April 5, 1991. Property taxes and New York State Gross
Receipts taxes are based on historical data from January 1996 through August
1999. New York State Gas Import taxes are currently passed through to Niagara
Mohawk according to the S.C.-6 pricing calculations. It is uncertain whether
these taxes will continue to be absorbed into market pricing after the
establishment of the ISO/PE. The New York State Gas Import tax projections are
based on estimates provided by the Sponsors. Note: Stone & Webster makes no
statement or representation regarding any and all tax calculations. All tax
projections and calculations are provided by the Sponsors.

25) The Syracuse University User Charge is related to the use of the Steam Plant
and facilities as listed in the Steam Contract between Project Orange
Associates, L.P. and Syracuse University dated February 27, 1990. The annual fee
charged for use of the facilities will be $1,250,000 through the term of the
projections.

26) Partnership fees include annual fees paid to Niagara Mohawk Energy
Marketing, Inc. as the asset manager for the Project. Additional fees include
bank service fees which are calculated based on historical data from January
1996 through August 1999. Figures are projected forward at the assumed inflation
rate.

27) The Incremental Tariff Rate of the PILOT agreement includes all incremental
amounts greater than the annual guaranteed amount as calculated by the Sponsors
and according to the PILOT agreement. This incremental amount is subordinated to
the Notes.

28) EBITDA is defined as Cash Available for Debit Service

E-5
<PAGE>

<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE: Availibility Reduced to 85% 12/2/99 1:51 PM
($ in thousands, except price per MWH)
4 Months ended Projected Fiscal Years Ending December 31,
12/31/99 2000 2001 2002 2003
================================================== ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)..................... 79.0 79.0 79.0 79.0 79.0
Availability (3).................................. 85.0% 85.0% 85.0% 85.0% 85.0%
Capacity (4)...................................... 85.0% 85.0% 85.0% 85.0% 85.0%
Heat Rate HHV (MMBtu/kWh) (5)..................... 10,000.0 10,050.0 10,100.3 10,150.3 10,201.5
Electricity Produced (MWH) (6).................... 196,615.2 589,845.6 588,234.0 588,234.0 588,234.0
Steam Throughout (1,000 lbs) (7).................. 202,302.0 639,385.1 639,385.1 639,385.1 639,385.1
Fuel Consumed (MMBtu) (8)......................... 1,966,152.0 5,927,948.3 5,941,310.5 5.971,017.0 6,000,872.1
Entitlement Used (MMBtu) (9)...................... 2,189,410.7 6,601,073.3 6,615,952.7 6,649,032.5 6,682,277.7
==================================================
Debt Offering Annual Interest Rate................ 10.50% 10.50% 10.50% 10.50% 10.50%

General Inflation................................. 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$).......................... $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh)(10)............ $ 30.43 $ 32.41 $ 34.85 $ 33.94 $ 36.56
Off-Peak Electricity Pricing ($MWh)............... $ 22.38 $ 22.36 $ 23.70 $ 25.30 $ 25.30
Indexed Swap Price ($MWh)(11)..................... $ 54.23 $ 54.80 $ 56.51 $ 58.04 $ 59.70
Steam Price ($/1,000lbs)(12)...................... $ 4.36 $ 4.39 $ 4.43 $ 4.47 $ 4.51

==================================================
Power Put Contract
Energy Sales - On Peak......................... $ 2,488.8 $ 7,769.5 $ 8,354.4 $ 8,136.3 $ 8,798.7
Energy Sales - Off-Peak........................ 2,569.8 7,828.7 8,259.7 8,817.3 8,793.5
Capacity Sales - On Peak....................... 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak...................... 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------
Total Power Put Payments (13)..................... 5,058.6 15,598.2 16,614.1 16,953.5 17,592.2

Indexed Swap Contract
Floating (payment)............................ (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2)
Floating (payment): Capacity.................. 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------
Total Floating (Payments) (14).................... (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2)

Fixed Payment................................. 11,984.8 36,332.5 37,464.4 38,483.4 39.581.6
----------------------------------------------------------------------------
Total Indexed Swap Payment (15)................... 6,298.8 18,799.8 18,738.6 19,375.0 19,753.3

Steam Sales....................................... 881.5 2,809.3 2,834.2 2,859.2 2,884.5
Fuel Commodity Sales.............................. 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release sales....................... 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------
Total Revenues............................... $ 12,238.9 $ 37,207.3 $ 38,196.5 $ 38,187.7 $ 40,230.1

==================================================
Commodity Expense (16)........................... ($1,463.7) $ 4,496.2) ($4,643.3) ($4,808.4) ($4,979.3)
Firm Service Transportation Expense (17).......... (2,876.7) (8,889.1) (9,155.8) (9,430.5) (9,713.4)
Variable Fuel Expense (18)........................ (94.0) (292.0) (301.5) (312.1) (323.0)
----------------------------------------------------------------------------
Total Fuel Expenses.......................... ($4,434.5) ($13,677.3) ($14,100.6) ($14,550.9) ($15,015.7)

==================================================
GE Overhaul Accrual & Directed starts (19)........ ($438.0) ($1,314.1) ($1,310.5) ($1,310.5) ($1,310.5)
GE Contractual Services Fees (20)................. (257.5) (827.4) (852.2) (877.8) (904.1)
Plant Operations (21)............................. (777.2) (2,401.4) (2,473.5) (2,547.7) (2,624.1)
Other O&M and Plant Utilities (22)................ (134.0) (413.9) (426.4) (439.1) (452.3)
Administrative (23)............................... (317.8) (982.1) (1,011.6) (1,041.9) (1,073.2)
Taxes (24)........................................ (266.9) (810.1) (1,434.4) (1,477.5) (1,521.8)
Syracuse University User Charge (25).............. (416.7) (1,250.0) (1,250.0) (1,250.0) (1,250.0)
----------------------------------------------------------------------------
Total O&M and Administrative Expenses........ ($2,608.1) ($7,999.1) ($8,758.5) ($8,944.5) ($9,136.0)

==================================================
Partnership Fees (26)............................. (127.8) (394.9) (406.8) (419.0) (431.6)
----------------------------------------------------------------------------
Total Expenses............................... ($7,170.3) ($22,071.3) ($23,265.9) ($23,914.4) ($24,583.3)
Net Operating Cash Flow........................... $ 5,068.6 $ 15,135.9 $ 14,926.9 $ 15,273.3 $ 15,848.8

<CAPTION>
2004 2005 2006 2007 2008(1)
================================================== -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)..................... 79.0 79.0 79.0 79.0 79.0
Availability (3).................................. 85.0% 85.0% 85.0% 85.0% 85.0%
Capacity (4)...................................... 85.0% 85.0% 85.0% 85.0% 85.0%
Heat Rate HHV (MMBtu/kWh) (5)..................... 10,252.5 10,303.8 10,355.3 10,407.1 10,459.1
Electricity Produced (MWH) (6).................... 589,845.6 588,234.0 588,234.0 588,234.0 293,311.2
Steam Throughout (1,000 lbs) (7).................. 639,385.1 639,385.1 639,385.1 639.385.1 319,692.6
Fuel Consumed (MMBtu) (8)......................... 6,047,399.4 6,061,030.8 6,091,336.0 6,121,792.7 3,067,772.9
Entitlement Used (MMBtu) (9)...................... 6,734,088.2 6,749,267.5 6,783,013.8 6,818,928.9 3,416,121.8
==================================================
Debt Offering Annunal Interest Rate............... 10.50% 10.50% 10.50% 10.50% 10.50%

General Inflation................................. 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$).......................... $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh)(10)............ $ 36.79 $ 36.81 $ 36.81 $ 36.81 $ 36.81
Off-Peak Electricity Pricing ($MWh)............... $ 24.22 $ 26.23 $ 26.23 $ 26.23 $ 26.23
Indexed Swap Price (SWWh) (11).................... $ 61.37 $ 63.19 $ 65.04 $ 66.64 $ 67.88
Steam Price ($/1,000 lbs) (12).................... $ 4.55 $ 4.59 $ 4.83 $ 4.67 $ 2.31

==================================================
Power Put Contract
Energy Sales - On Peak......................... $ 8,923.3 $ 8,858.9 $ 8,824.3 $ 8,824.3 $ 4,484.1
Energy Sales - Off Peak........................ 8,411.6 9,116.7 9,141.4 9,141.4 4,512.6
Capacity Sales - On Peak....................... 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak...................... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Power Put Payments (13)..................... 17,334.9 17,975.6 17,965.7 17,965.7 8,976.6

Indexed Swap Contract
Floating (payment)............................ (19,484.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Floating (payment): Capacity.................. 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Floating (Payments) (14).................... (19,484.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)

Fixed Payment................................. 40,690.0 41,895.3 43,122.0 44,185.0 22,503.5
---------------------------------------------------------------------------
Total Indexed Swap Payment (15)................... 21,205.2 21,634.9 22,872.8 23,935.9 12,358.1

Steam Sales....................................... 2,910.0 2,935.7 2,961.7 2,987.9 738.7
Fuel Commodity Sales.............................. 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release sales....................... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Revenues............................... $ 41,450.0 $ 42,546.3 $ 43,808.2 $ 44,889.4 $ 22,073.4

==================================================
Commodity Expense (16)............................ ($5,170.3) ($5,339.4) ($5,528.9 ($5,725,2) ($2,956.1)
Firm Service Transportation Expense (17).......... (10,004.8) (10,304.9) (10,614.1) (10,932.5) (5,599.0)
Variable Fuel Expense (18)........................ (335.3) (345.1) (358.3) (370.9) (191.4)
---------------------------------------------------------------------------
Total Fuel Expenses.......................... ($15,510.4) ($15,990.4) ($16,501.3) ($17,028.8) ($8,746.4)

==================================================
GE Overhaul Accrual & Directed starts (19)........ ($1,314.1) ($1,310.5) ($ 1,310.5) ($1,310.5) ($853.5)
GE Contractual Services Fees (20)................. (931.3) (959.2) (988.0) (1,017.6) (521.2)
Plant Operations (21)............................. (2,702.8) (2,783.9) (2,867.4) (2,953.5) (1,512.6)
Other O&M and Plant Utilities (22)................ (465.9) (479.9) (494.3) (509.1) (260.7)
Administrative (23)............................... (1,105.4) (1,138.5) (1,172.7) (1,207.9) (618.6)
Taxes (24)........................................ (1,577.7) (1,638.4) (1,700.7) (1,762.6) (1,277.6)
Syracuse University User Charge (25).............. (1,250.0) (1,250.0) (1,250.0) (1,250.0) (621.5)
---------------------------------------------------------------------------
Total O&M and Administrative Expenses........ ($9,347.2) ($9,560.4) ($9,783.5) ($10,011.1) ($5,465.6)

==================================================
Partnership Fees (26)............................. (444.5) (457.8) (471.6) (485.7) (248.8)
---------------------------------------------------------------------------
Total Expenses............................... ($25,302.1) ($26,098.6) ($26,756.4) ($27,525.4) ($14,460.8)
Net Operating Cash Flow........................... $ 16,148.0 $ 16,537.7 $ 17,043.8 $ 17,384.0 $ 7,612.6
</TABLE>

<PAGE>

(in thousands)

<TABLE>
<CAPTION>
4 months ended Projected Fiscal Years Ending December 31,
12/31/99 2000 2001 2002 2003
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow............................... $5,068.6 $15,135.9 $14,920.9 $15,273.3 $15,64?.8
Interest Income (Security Accounts)................... 25.4 393.0 506.7 621.0 745.4

Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax (27).... 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses..................... 127.8 394.9 406.8 419.0 431.?

Cash Available for Debt Service....................... $5,221.8 $15,?23.? $15,834.3 $16,313.3 $1?,?23.7

Withdrawals from Debt Service Reserve Account......... 0.0 46.2 0.0 0.0 0.0
Withdrawals from Working Capital Reserve Account...... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Restricted Cash Deposit Account...... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account. 0.0 0.0 0.0 0.0 0.0
Withdrawals from Escrow Reserve Account............... 0.0 450.0 0.0 0.0 0.0

Interest Payments..................................... 0.0 (5,516.6) (6,274.3) (5,640.6) (4,917.7)
Principal Payments.................................... 0.0 (6,800.0) (5,950.0) (6,630.0) (7,650.0)
Total Debt Service.................................... 0.0 (12,316.6) (12,224.3) (12,270.6) (12,567.7)

Cash Available after Debt Service..................... 5,221.8 4,103.4 3,?10.1 4,042.7 4,258.0

Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax......... 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses..................... (127.8) (394.9) (406.8) (419.0) (431.6)

Deposit to Debt Service Reserve Account(DSRA)......... $0.0 $0.0 ($23.2) ($148.5) ($10.0)
Deposit to Working Capital Reserve Account(WCRA)...... (1,000.0) 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)..... (4,094.0) (3,258.5) (3,180.1) (3,475.2) (3,?14.5)
Total Deposits to Security Accounts................... ($5,094.0) ($3,258.5) ($3,203.3) ($3,623.7) ($3,824.5)

Distributable Cash.................................... $0.0 $450.0 $0.0 $0.0 $0.0

Cash Available for Debt Service....................... 5,221.8 15,923.9 15,834.3 16,313.3 16,823.7
Total Debt Service.................................... 0.0 12,316.6 12,224.3 12,270.6 12,567.7

Debt Service Coverage Ratio........................... NA 1.29x 1.30x 1.33x 1.34x
-----------
Minimum Coverage Ratio..................... 1.29x
-----------
Average Coverage Ratio..................... 1.35x
-----------

Cash Available for Debt Service + RCDA................ 5,221.8 20,017.9 23,186.8 26,845.9 30,831.5
Total Debt Service.................................... 0.0 12,31?.? 12,224.3 12,270.? 12,567.7

Debt Service Coverage Ratio........................... NA 1.63x 1.90x 2.19x 2.45x
-----------
Minimum Coverage Ratio..................... 1.36x
-----------
Average Coverage Ratio..................... 1.89x
-----------

Cash Available for Debt Service + RCDA + DSRA......... $11,380.1 $26,176.2 $29,299.0 $32,981.2 $37,115.3
Total Debt Service.................................... 0.0 12,316.6 12,224.3 12,270.5 12,567.7

Debt Service Coverage Ratio........................... NA 2.13x 2.40x 2.69x 2.95x
-----------
Minimum Coverage Ratio..................... 1.86x
-----------
Average Coverage Ratio..................... 2.39x
-----------

-----------
Adjusted EBITDA/Interest Expense(28)....... 2.52x NA 2.89x 2.52x 2.89x 3.42x
-----------
Total Debt/Adjusted EBITDA................. 4.27x NA 4.27x 3.87x 3.39x 2.89x
-----------

<CAPTION>
2004 2005 2006 2007 2008
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow............................... $16,148.0 $16,537.7 $17,043.8 $17,364.0 $7,612.6
Interest Income (Security Accounts)................... 879.9 259.7 262.8 149.0 17.5

Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax (27).... 10.3 23.9 37.8 49.8 59.1
Fees & Other Partnership Expenses..................... 444.5 457.8 471.6 485.7 248.8

Cash Available for Debt Service....................... $17,482.6 $17,279.2 $17,815.9 $18,048.5 $7,838.8

Withdrawals from Debt Service Reserve Account......... 0.0 0.0 0.0 6,512.5 0.0
Withdrawals from Working Capital Reserve Account...... 0.0 0.0 0.0 0.0 1,000.0
Withdrawals from Restricted Cash Deposit Account...... 17,822.3 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account. 0.0 0.0 0.0 3,500.0 0.0
Withdrawals from Escrow Reserve Account............... 0.0 0.0 0.0 3,000.0 0.0

Interest Payments..................................... (4,087.7) (3,159.5) (2,124.2) (955.0) 0.0
Principal Payments.................................... (8,500.0) (9,520.0) (10,880.0) (12,070.0) 0.0
Total Debt Service.................................... (12,587.7) (12,679.5) (13,004.2) (13,025.0) 0.0

Cash Available after Debt Service..................... 22,717.2 4,599.7 4,811.8 18,036.0 8,938.0

Syracuse University User Charge....................... 0.0 0.0 0.0 0.0 0.0
PILOT -- Incremental Electric Tariff Rate Tax......... (10.3) (23.9) (37.8) (49.8) (59.1)
Fees & Other Partnership Expenses..................... (444.5) (457.8) (471.6) (485.7) (248.8)

Deposit to Debt Service Reserve Account(DSRA)......... ($45.9) ($162.3) ($10.4) $0.0 $0.0
Deposit to Working Capital Reserve Account(WCRA)...... 0.0 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)..... 0.0) 0.0 0.0 0.0 0.0
Total Deposits to Security Accounts................... ($45.9) ($162.3) ($10.4) $0.0 $0.0

Distributable Cash.................................... $22,216.5 $3,955.6 $4,292.0 $17,500.5 $8,630.1

Cash Available for Debt Service....................... 17,482.6 17,279.2 17,815.9 18,048.5 7,938.0
Total Debt Service.................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio........................... 1.39x 1.36x 1.37x 1.39x NA
-----------
Minimum Coverage Ratio..................... 1.29x
-----------
Average Coverage Ratio..................... 1.35x
-----------

Cash Available for Debt Service + RCDA................ 35,304.9 17,279.2 17,815.9 18,048.5 7,938.0
Total Debt Service.................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio........................... 2.80x 1.36x 1.37x 1.39x NA
-----------
Minimum Coverage Ratio..................... 1.36x
-----------
Average Coverage Ratio..................... 1.89x
-----------

Cash Available for Debt Service + RCDA + DSRA......... $41,598.7 $23,618.9 $24,318.0 $24,5?1.0 $7,938.0
Total Debt Service.................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio........................... 3.30x 1.86x 1.87x 1.89x NA
-----------
Minimum Coverage Ratio..................... 1.86x
-----------
Average Coverage Ratio..................... 2.39x
-----------

-----------
Adjusted EBITDA/Interest Expense(28)....... 2.52x 4.28x 5.47x 8.39x 18.90x NA
-----------
Total Debt/Adjusted EBITDA................. 4.27x 2.34x 1.88x 1.29x 0.67x NA
-----------
</TABLE>

E-7

<PAGE>

AVAILABILITY AND CAPACITY FACTOR REDUCTION FOOTNOTES TO MODEL

All footnotes are the same as the Base Case Footnotes except the following:

3) Historical availability for the plant from January 1996 through
September 1999 has been 94.5%. The 92.5% availability factor was determined
to be a fair and conservative estimate to be used on a going forward basis.
In this sensitivity, the availability and capacity factors are reduced to
85.0%

4) Capacity Factor is reduced to 85.0% for this sensitivity. This reduces
the megawatt-hours sold under the Power Put Agreement as well as reducing
the commodity cost of the fuel and the variable transportation expense.

E-8

<PAGE>

4 months ended| Projected Fiscal Years Ending December 31,
----------------------------------------------------------------------------------------
12/31/99| 2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Average Capacity (MW)(2).................. 79.0 79.0 79.0 79.0 79.0 79.0
Availability (3).............................. 92.5% 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4).................................. 92.5% 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)................. 10,000.0 10,050.0 10,100.3 10,150.8 10,201.5 10,252.5
Electricity Produced (MWh) (6)................ 213,953.6 641,890.8 640,137.0 640,137.0 640,137.0 641,890.8
Steam Throughput (1,000 lbs) (7).............. 202,302.0 639,385.1 639,385.1 639,385.1 639,385.1 639,385.1
Fuel Consumed (MMBtu) (8)..................... 2,139,636.0 6,451,002.5 6,465,543.7 6,497,871.5 6,530,360.8 6,580,993.5
Entitlement Used (MMBtu) (9).................. 2,382,594.0 7,183,520.9 7,199,713.3 7,235,711.8 7,271,890.4 7,328,272.5

Debt Offering Annual Interest Rate............ 10.50% 10.50% 10.50% 10.50% 10.50% 10.50%

General Inflation............................. 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$)...................... $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($/MWh) (10)...... $ 30.43 $ 32.41 $ 34.85 $ 33.94 $ 36.56 $ 36.79
Off-Peak Electricity Pricing ($/MWh).......... $ 22.38 $ 22.36 $ 23.70 $ 25.30 $ 25.30 $ 24.22
Indexed Swap Price ($/MWh) (11)............... $ 54.23 $ 54.80 $ 56.51 $ 58.04 $ 59.70 $ 61.37
Steam Price ($/1,000 lbs) (12)................ $ 4.36 $4.39 $ 4.43 $ 4.47 $ 4.51 $ 4.55

Power Put Contract
Energy Sales - On-Peak................... $ 2,708.4 $ 8,455.0 $ 9,091.6 $ 8,854.2 $ 9,575.1 $ 9,710.6
Energy Sales - Off-Peak.................. 2,796.6 8,519.5 8,988.4 9,595.3 9,569.4 9,153.8
Capacity Sales - On Peak................. 0.0 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak................ 0.0 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------------
Total Power Put Payments (13)................. 5,505.0 16,974.5 18,080.0 18,449.4 19,144.5 18,864.4

Indexed Swap Contract
Floating (Payment)....................... (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2) (19,484.8)
Floating (Payment): Capacity............. 0.0 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------------
Total Floating (Payments) (14)................ (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,828.2) (19,484.8)

Fixed Payment............................ 11,984.8 36,332.5 37,464.4 38,483.4 39,581.6 40,690.0
-------------------------------------------------------------------------------------
Total Indexed Swap Payment (15)............... 8,298.8 18,799.8 18,738.6 19,375.0 19,753.3 21,205.2

Steam Sales................................... 881.5 2,809.3 2,834.2 2,859.2 2,884.5 2,910.0
Fuel Commodity Sales.......................... 0.0 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales................... 0.0 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------------
Total Revenues........................ $12,685.3 $38,583.6 $ 39,652.8 $40,683.7 $41,782.3 $42,979.6

Commodity Expense (16)........................ ($1,592.8) ($4,892.9) ($5,053.1) ($5,232.7) ($5,418.7) ($5,626.6)
Firm Service Transportation Expense (17)...... (2,876.7) (8.889.1) (9,155.8) (9,430.6) (9,713.4) (10,004.8)
Variable Fuel Expense (18).................... (102.3) (317.8) (328.1) (339.6) (351.5) (364.9)
-------------------------------------------------------------------------------------
Total Fuel Expenses................... ($4,571.9) ($14,099.8) ($14,536.9) ($15,002.8) ($15,483.6) ($15,996.2)

GE Overhaul Accrual & Directed Starts (19).... ($476.7) ($1,430.0) ($1,426.1) ($1,426.1) ($1,426.1) ($1,430.0)
GE Contractual Services Fees (20)............. (257.5) (827.4) (852.2) (877.8) (904.1) (931.3)
Plant Operations (21)......................... (777.2) (2,761.6) (2,844.5) (2,929.8) (3,017.7) (3,108.2)
Other O&N and Plant Utilities (22)............ (134.0) (476.0) (490.3) (505.0) (520.2) (535.8)
Administrative (23)........................... (317.8) (1,129.4) (1,163.3) (1,198.2) (1,234.1) (1,271.2)
Taxes (24).................................... (268.9) (833.7) (1,458.7) (1,502.5) (1,547.6) (1,604.3)
Syracuse University User Charge (25).......... (416.7) (1,250.0) (1,250.0) (1,250.0) (1,250.0) (1,250.0)
-------------------------------------------------------------------------------------
Total O&M and Administrative
Expenses............................. ($2,646.7) ($8,708.2) ($9,485.2) ($9,689.5) ($9,899.9) ($10,130.8)

Partnership Fees (26)......................... (127.8) (454.2) (467.8) (481.8) (496.3) (511.2)
-------------------------------------------------------------------------------------
Total Expenses........................ ($7,346.4) ($23,282.2) ($24,489.9) ($25,174.1) ($25,879.7) ($26,638.2)
Net Operating Cash Flow....................... $5,338.8 $15,321.4 $15,162.9 $15,509.6 $15,902.6 $16,341.4

<CAPTION>
Project Fiscal Years Ending December 31,
----------------------------------------------------------
2005 2006 2007 2008(1)
----------------------------------------------------------
<S> <C> <C> <C> <C>
Net Average Capacity (MW)(2).................. 79.0 79.0 79.0 79.0
Availability (3).............................. 92.5% 92.5% 92.5% 92.5%
Capacity (4).................................. 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)................. 10,303.8 10,355.3 10,407.1 10,459.1
Electricity Produced (MWh) (6)................ 640,137.0 640,137.0 640,137.0 319,191.6
Steam Throughput (1,000 lbs) (7).............. 639,385.1 639,385.1 639,385.1 319,692.6
Fuel Consumed (MMBtu) (8)..................... 6,595,827.7 6,628,806.8 6,661,950.8 3,338,458.7
Entitlement Used (MMBtu) (9).................. 7,344,791.1 7,381,515.1 7,418,422.6 3,717,544.3

Debt Offering Annual Interest Rate............ 10.50% 10.50% 10.50% 10.50%

General Inflation............................. 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$)...................... $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($/MWh) (10)...... $ 36.81 $ 36.81 $ 36.81 $ 36.81
Off-Peak Electricity Pricing ($/MWh).......... $ 26.23 $ 26.23 $ 26.23 $ 26.23
Indexed Swap Price ($/MWh) (11)............... $ 63.19 $ 65.04 $ 66.64 $ 67.88
Steam Price ($/1,000 lbs) (12)................ $ 4.59 $ 4.63 $ 4.67 $ 2.31

Power Put Contract
Energy Sales - On-Peak................... $ 9,640.6 $ 9,602.9 $ 9,602.9 $ 4,857.9
Energy Sales - Off-Peak.................. 9,921.1 9,948.0 9,948.0 4,910.7
Capacity Sales - On Peak................. 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak................ 0.0 0.0 0.0 0.0
-------------------------------------------------------
Total Power Put Payments (13)................. 19,561.7 19,550.9 19,550.9 9,768.7

Indexed Swap Contract
Floating (Payment)....................... (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Floating (Payment): Capacity............. 0.0 0.0 0.0 0.0
-------------------------------------------------------
Total Floating (Payments) (14)................ (20,260.4) (20,249.2) (20,249.2) (10,145.4)

Fixed Payment............................ 41,895.3 43,122.0 44,185.0 22,503.5
-------------------------------------------------------
Total Indexed Swap Payment (15)............... 21,634.9 22,872.8 23,935.9 12,358.1

Steam Sales................................... 2,935.7 2,961.7 2,987.9 738.7
Fuel Commodity Sales.......................... 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales................... 0.0 0.0 0.0 0.0
-------------------------------------------------------
Total Revenues........................ $44,132.4 $45,385.4 $46,474.6 $22,865.5

Commodity Expense (16)........................ ($5,810.5) ($6,016.8) ($8,230.4) ($3,216.9)
Firm Service Transportation Expense (17)...... ($10,304.9) (10,614.1) (10,932.5) (5,599.0)
Variable Fuel Expense (18).................... (376.7) (389.9) (403.6) (208.3)
-------------------------------------------------------
Total Fuel Expenses................... ($16,492.1) ($17,020.8) ($17,566.5) ($9,024.2)

GE Overhaul Accrual & Directed Starts (19).... ($1,426.1) ($1,426.1) ($1,426.1) ($711.1)
GE Contractual Services Fees (20)............. (959.2) (988.0) (1,017.6) (521.2)
Plant Operations (21)......................... (3,201.5) (3,297.5) (3,396.5) (1,739.5)
Other O&N and Plant Utilities (22)............ (551.8) (568.4) (585.4) (299.8)
Administrative (23)........................... (1,309.3) (1,348.6) (1,389.0) (711.4)
Taxes (24).................................... (1,685.8) (728.9) (1,791.6) (1,292.5)
Syracuse University User Charge (25).......... (1,250.0) (1,250.0) (1,250.0) (621.5)
-------------------------------------------------------
Total O&M and Administrative
Expenses............................. ($10,363.7) ($10,607.5) ($10,856.3) ($5,896.9)

Partnership Fees (26)......................... (526.5) (542.3) (558.6) (286.1)
-------------------------------------------------------
Total Expenses........................ ($27,382.3) ($28,170.6) ($28,981.4) ($15,207.2)
Net Operating Cash Flow....................... $16,750.1 $17,214.8 $17,403.3 $7,658.3
</TABLE>

E-9
<PAGE>

($ in thousands)

<TABLE>
<CAPTION>
4 months ended Projected Fiscal Years Ending December 31,
------------------------------------------------------------------------
12/31/99 2000 2001 2002 2003
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow.................................... $5,338.8 $15,321.4 $15,162.9 $15,509.6 $15,902.6
Interest Income (Security Accounts)........................ 25.8 402.5 523.0 646.3 779.9
------------------------------------------------------------------------

Syracuse University User Charge............................ 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax (27).......... 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses.......................... 127.8 454.2 467.8 481.8 496.3
------------------------------------------------------------------------

Cash Available for Debt Service............................ $5,492.4 $16,178.0 $16,158.6 $16,637.7 $17,175.?

Withdrawals from Debt Service Reserve Account.............. 0.0 46.2 0.0 0.0 0.0
Withdrawals from Working Capital Reserve Account........... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Restricted Cash Deposit Account........... 0.0 0.0 0.0 0.0 14,993.2
Withdrawals from Capital Expenditures Reserve Account...... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Escrow Reserve Account.................... 0.0 450.0 0.0 0.0 0.0

Interest Payments.......................................... 0.0 (5,516.6) (6,274.3) (5,640.6) (4,917.7)
Principal Payments......................................... 0.0 (6,800.0) (5,950.0) (6,630.0) (7,650.0)
------------------------------------------------------------------------
Total Debt Service......................................... 0.0 (12,316.6) (12,224.3) (12,270.6) (12,567.7)

Cash Available after Debt Service.......................... 5,492.4 4,357.6 3,929.4 4,367.1 19,604.3

Syracuse University User Charge............................ 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax .............. 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses.......................... (127.8) (454.2) (467.8) (481.8) (496.3)

Deposits to Debt Service Reserve Account (DSRA)............ $0.0 $0.0 ($23.2) ($148.5) ($10.0)
Deposits to Working Capital Reserve Account (WCRA)......... (1,000.0) 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA).......... (4,364.6) (3,453.4) (3,438.4) (3,736.8) 0.0
------------------------------------------------------------------------
Total Deposits to Security Accounts........................ ($5,364.6) ($3,453.4) ($3,461.6) ($3,885.3) ($10.0)

Distributable Cash......................................... $ 0.0 $450.0 0.0 $ 0.0 $19,098.0

Cash Available for Debt Service............................ 5,492.4 16,178.0 16,153.6 16,637.7 17,178.8
Total Debt Service......................................... $0.0 12,316.6 12,224.3 12,270.6 12,567.7

Debt Service Coverage Ratio................................ NA 1.31x 1.32x 1.36x 1.37x
--------
Minimum Coverage Ratio............................. 1.31x
--------
Average Coverage Ratio............................. 1.36x
--------
Cash Available for Debt Service + RCDA..................... 5,492.4 20,542.6 23,971.7 27,894.2 32,171.9
Total Debt Service......................................... 0.0 12,316.6 12,224.3 12,270.6 12,567.7

Debt Service Coverage Ratio................................ NA 1.67x 1.96x 2.27x 2.56x
--------
Minimum Coverage Ratio............................. 1.36x
--------
Average Coverage Ratio............................. 1.75x
--------

Cash Available for Debt Service + RCDA + DSRA.............. $11,650.7 $26,701.0 $30,083.8 $34,029.5 $38,455.8
Total Debt Service......................................... 0.0 12,316.6 12,224.3 12,270.6 12,567.7

Debt Service Coverage Ratio................................ NA 2.17x 2.46x 2.77x 3.06x
--------
Minimum Coverage Ratio............................. 1.66x
--------
Average Coverage Ratio............................. 2.25x
--------
--------
Adjusted EBITDA/Interest Expense (28)............. 2.57x NA 2.93x 2.57x 2.95x 3.49x
--------
Total Debt/Adjusted EBITDA........................ 4.20x NA 4.20x 3.79x 3.32x 2.83x
--------

<CAPTION>
-------------------------------------------------------------------------------
2004 2005 2006 2007 2008
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow........................... $16,341.4 $16,750.1 $17,214.8 $17,493.3 $7,658.3
Interest Income (Security Accounts)............... 256.1 259.7 262.8 149.0 17.5
-------------------------------------------------------------------------------

Syracuse University User Charge................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax...... 10.3 23.9 37.8 49.8 59.1
Fees & Other Partnership Expenses................. 511.2 526.5 542.3 558.6 286.1
-------------------------------------------------------------------------------

Cash Available for Debt Service................... $17,119.8 $17,560.3 $18,057.7 $18,254.6 $8,821.8

Withdrawals from debt Service Reserve Account..... 0.0 0.0 0.0 6,512.5 0.0
Withdrawals from Working Capital Reserve Account.. 0.0 0.0 0.0 0.0 1000.0
Withdrawals from Restricted Cash Deposit Account.. 0.0 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account 0.0 0.0 0.0 3,500.0 0.0
Withdrawals from Escrow Reserve Account........... 0.0 0.0 0.0 3000.0 0.0
Interest Payments................................. (4,087.7) (3,159.5) (2,124.2) (955.0) 0.0
Principal Payments................................ (8,500.0) (9,520.0) (10,880.0) (12,070.0) 0.0
-------------------------------------------------------------------------------

Total Debt Service................................ (12,587.7) (12,679.5) (13,004.2) (13,025.0) 0.0

Cash Available after Debt Service................. 4,531.3 4,880.8 5,053.6 18,236.1 9,021.0

Syracuse University User Charge................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax...... (10.3) (23.9) (37.8) (49.8) (59.1)
Fees & Other Partnership Expenses................. (511.2) (526.5) (542.3) (558.6) (286.1)
Deposits to Debt Service Reserve Account (DSRA)... ($45.9) ($162.3) ($10.4) $0.0 $0.0
Deposits to Working Capital Reserve Account (WCRA) 0.0 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA). 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------------------
Total Deposits to Security Accounts............... ($45.9) ($162.3) ($10.4) $0.0 $0.0
Distributable Cash................................ $3,964.0 $4,166.0 $4,463.0 $17,629.7 $8,875.8

Cash available for Debt Service................... 17,119.0 17,560.3 18,057.7 18,250.6 8,021.0
Total Debt Service................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio....................... 1.36x 1.38x 1.39x 1.40x NA
--------
Minimum Coverage Ratio............................ 1.31x
--------
Average Coverage Ratio............................ 1.36x
--------

Cash Available for Debt Service + RCDA............ 17,119.0 17,560.3 18,057.7 18,250.6 8,021.0
Total Debt Service................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio....................... 1.36x 1.38x 1.39x 1.40x NA
--------
Minimum Coverage Ratio............................ 1.36x
--------
Average Coverage Ratio............................ 1.75x
--------

Cash Available for Debt Service + RCDA + DSRA..... $23,412.8 $23,900.0 $24,559.8 $24,763.1 $8,021.0
Total Debt Service................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio.......................
--------
Minimum Coverage Ratio............................ 1.66x
--------
Average Coverage Ratio............................ 2.25x 1.86x 1.88x 1.89x 1.90x NA
--------
--------
Adjusted EBITDA/Interest Expense (28)............. 2.57x 4.19x 5.56x 8.50x 19.11x NA
--------
Total Debt/Adjusted EBITDA........................ 4.20x 2.39x 1.85x 1.27x 0.56x NA
--------
</TABLE>

<PAGE>

PROJECT ORANGE ASSOCIATES L.P 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- --------------------------------------------------------------------------------

OPERATIONS AND MAINTENANCE INCREASED 15% FOOTNOTES TO MODEL

All footnotes are the same as the Base Case Footnotes except the following:

21, 22, 23, and 24) Variable Plant Operation figures are increased 15% over the
base case. Figures are projected forward at the assumed inflation rate.

E-11
<PAGE>

4 months ended Projected Fiscal Years Ending December 31,
12/31/99 2000 2001 2002 2003
========================================== -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)............. 79.0 79.0 79.0 79.0 79.0
Availability (3).......................... 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4).............................. 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)............. 10,300.0 10,351.5 10,403.3 10,455.3 10,507.6
Electricity Produced (MWh) (6)............ 213,963.6 641,890.8 640,137.0 640,137.0 640,137.0
Steam Throughput (1,000lbs) (7)........... 202,302.0 639,385.1 639,385.1 639,385.1 639,385.1
Fuel Consumed (MMBtu) (8)................. 2,203,825.1 6,644,532.6 6,659,510.0 6,692,807.8 6,726,271.6
Entitlement Used (MMBtu) (9).............. 2,454,071.8 7,399,026.5 7,415,704.7 7,452,783.2 7,490,047.1

==========================================
Debt Offering Annual Interest Rate........ 10.50% 10.50% 10.50% 10.50% 10.50%

General inflation......................... 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$).................. $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh) (10)... $ 30.43 $ 32.41 $ 34.85 $ 33.94 $ 36.56
Off-Peak Electricity Pricing ($MWh)....... $ 22.38 $ 22.36 $ 23.70 $ 25.30 $ 25.30
Indexed Swap Price ($MWh) (11)............ $ 54.23 $ 54.80 $ 56.51 $ 58.04 $ 59.70
Steam Price ($/1,000 lbs) (12)............ $ 4.36 $ 4.39 $ 4.43 $ 4.47 $ 4.51

==========================================
Power Put Contract
Energy Sales - On-Peak............... $ 2,708.4 $ 8,455.0 $ 9,091.6 $ 8,854.2 $ 9,575.1
Energy Sales - Off-Peak.............. 2,796.6 8,519.5 8,988.4 9,595.3 9,569.4
Capacity Sales - On Peak............. 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak............ 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------------
Total Power Put Payments (13)............. 5,505.0 16,974.5 18,080.0 18,449.4 19,144.5

Indexed Swap Contract
Floating (Payment)................... (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,528.2)
Floating (Payment): Capacity......... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------------
Total Floating (Payments) (14)............ (5,686.0) (17,532.7) (18,725.8) (19,108.4) (19,528.2)

Fixed Payment........................ 11,984.8 36,332.5 37,464.4 38,483.4 39,581.6
---------------------------------------------------------------------------------
Total Indexed Swap Payment (15)........... 6,298.8 18,799.8 18,738.6 19,375.0 19,753.3

Steam Sales............................... 881.5 2,809.3 2,834.2 2,859.2 2,884.5
Fuel Commodity Sales...................... 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales............... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------------
Total Revenues....................... $ 12,685.3 $ 38,583.6 $ 39,652.8 $ 48,683.7 $ 41,782.3

==========================================
Commodity Expense (15).................... ($ 1,640.6) ($ 5,039.7) ($ 5,204.6) ($ 5,389.7) ($ 5,581.2)
Firm Service Transportation Expense (17).. (2,876.7) (8,889.1) 9,155.8) 9,430.5) (9,713.4)
Variable Fuel Expense (18)................ (105.4) (327.3) (337.9) (349.8) (362.1)
---------------------------------------------------------------------------------
Total Fuel Expenses.................. ($ 4,622.8) ($ 14,256.1) ($ 14,698.3) ($ 15,169.9) ($ 15,656.7)

==========================================
GE Overhead Accrual & Directed Starts (19) ($ 478.7) ($ 1,430.0) ($ 1,426.1) ($ 1,426.1) ($ 1,426.1)
GE Contractual Services Fees (20)......... (257.5) (827.4) (852.2) (877.8) (904.1)
Plant Operations (21)..................... (777.2) (2,401.4) (2,473.5) (2,547.7) (2,624.1)
Other O&M and Plant Utilities (22)........ (134.0) (413.9) (426.4) (439.1) (452.3)
Administrative (23)....................... (317.6) (962.1) (1,011.6) (1,041.9) (1,073.2)
Taxes (24)................................ (266.9) (810.1) (1,434.4) (1,477.5) (1,521.8)
Syracuse University User Charge (25)...... (416.7) (1,250.0) (1,250.0) (1,250.0) (1,250.0)
----------------------------------------------------------------------------------
Total O&M and Administrative Expenses ($ 2,646.7) ($ 8,115.0) ($ 8,874.2) ($ 9,060.1) ($ 9,251.6)

==========================================
Partnership Fees (26)..................... (127.8) (394.9) (406.8) (419.0) (431.6)
-----------------------------------------------------------------------------------
Total Expenses....................... ($ 7,387.3) ($ 22,786.1) ($ 23,979.3) ($ 24,649.0) ($ 25,330.9)

Net Operating Cash Flow................... $ 5,288.0 $ 15,817.5 $ 15,673.5 $ 16,034.6 $ 16,442.4

2004 2005 2006 2007 2008 (1)
========================================== -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)............. 79.0 79.0 79.0 79.0 79.0
Availability (3).......................... 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4).............................. 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)............. 10,586.1 10,612.9 10,666.0 10,719.3 10,772.9
Electricity Produced (MWh) (6)............ 641,890.8 640,137.0 640,137.0 640,137.0 319,191.6
Steam Throughput (1,000lbs) (7)........... 639,385.1 639,385.1 639,385.1 639,385.1 319,692.6
Fuel Consumed (MMBtu) (8)................. 6,778,423.3 6,793,702.5 6,827,671.0 6,851,809.4 3,438,612.5
Entitlement Used (MMBtu) (9).............. 7,548,120.6 7,565,134.8 7,602,960.5 7,640,975.3 3,829,070.7

==========================================
Debt Offering Annual Interest Rate........ 10.50% 10.50% 10.50% 10.50% 10.50%

General inflation......................... 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CDN$).................. $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh) (10)... $ 36.79 $ 36.81 $ 36.81 $ 36.81 $ 36.81
Off-Peak Electricity Pricing ($MWh)....... $ 24.22 $ 26.23 $ 26.23 $ 26.23 $ 26.23
Indexed Swap Price ($MWh) (11)............ $ 61.37 $ 63.19 $ 65.04 $ 66.64 $ 67.88
Steam Price ($/1,000 lbs) (12)........... $ 4.55 $ 4.59 $ 4.63 $ 4.67 $ 2.31

==========================================
Power Put Contract
Energy Sales - On-Peak............... $ 9,710.6 $ 9,640.6 $ 9,602.9 $ 9,602.9 $ 4,857.9
Energy Sales - Off-Peak.............. 9,153.8 9,921.1 9,948.0 9,948.0 4,910.7
Capacity Sales - On Peak............. 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak............ 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------- --------------- ---------------
Total Power Put Payments (13)............. 18,864.4 19,561.7 19,550.9 19,550.9 9,768.7

Indexed Swap Contract
Floating (Payment)................... (19,484.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Floating (Payment): Capacity......... 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------- --------------- ---------------
Total Floating (Payments) (14)............ (19,484.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)

Fixed Payment........................ 40,690.0 41,895.3 43,122.0 44,185.0 22,503.5
---------------------------------------------------- --------------- ---------------
Total Indexed Swap Payment (15)........... 21,205.2 21,634.9 22,872.8 23,935.9 12,358.1

Steam Sales............................... 2,910.0 2,935.7 2,961.7 2,987.9 736.7
Fuel Commodity Sales...................... 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release Sales............... 0.0 0.0 0.0 0.0 0.0
--------------------------------------------------------------------------------------
Total Revenues....................... $ 42,979.6 $ 44,132.4 $ 45,385.4 $ 45,474.6 $ 22,865.5

==========================================
Commodity Expense (15).................... ($ 5,795.4) ($ 5,984.8) ($ 6,197.3) ($ 6,417.3) ($ 3,313.4)
Firm Service Transportation Expense (17).. (10,004.8) (10,304.9) (10,614.1) (10,932.5) (5,590.0)
Variable Fuel Expense (18)................ (375.8) (388.0) (401.6) (415.7) (214.6)
-------------------------------------------------------------------------------------
Total Fuel Expenses.................. ($ 16,176.0) ($ 16,677.7) ($ 17,213.0) ($ 17,765.5) ($ 9,126.9)

==========================================
GE Overhead Accrual & Directed Starts (19) ($ 1,430.0) ($ 1,426.1) ($ 1,426.1) ($ 1,426.1) ($ 711.1)
GE Contractual Services Fees (20)......... (931.3) (959.2) (988.0) (1,017.6) (521.2)
Plant Operations (21)..................... (2,702.8) (2,783.9) (2,867.4) (2,953.5) (1,512.6)
Other O&M and Plant Utilities (22)........ (465.9) (479.9) (494.3) (509.1) (260.7)
Administrative (23)....................... (1,105.4) (1,138.5) (1,172.7) (1,207.9) (618.6)
Taxes (24)................................ (1,577.7) (1,638.4) (1,700.7) (1,762.6) (1,277.6)
Syracuse University User Charge (25)...... (1,250.0) (1,250.0) (1,250.0) (1,250.0) (621.5)
-------------------------------------------------------------------------------------
Total O&M and Administrative Expenses ($ 9,463.1) ($ 9,676.0) ($ 9,899.2) ($ 10,126.8) ($ 5,523.3)

==========================================
Partnership Fees (26)..................... (444.5) (457.8) (471.6) (485.7) (248.8)
-------------------------------------------------------------------------------------
Total Expenses....................... ($ 26,063.6) ($ 26,811.5) ($ 27,583.7) ($ 28,376.0) ($ 14,899.0)

Net Operating Cash Flow................... $ 16,896.0 $ 17,328.6 $ 17,801.7 $ 10,005.7 $ 7,066.5
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
Cash Flow Waterfall & Distributable Cash CASE: Heat Rate Increased by 300 Btu/kWh 12/2/99 1:52 PM
($ in thousands)

4 months ended Projected Fiscal Years Ending December 31,
-----------------------------------------------------------------------
12/31/99 2000 2001 2002 2003
-----------------------------------------------------------------------
======================================================
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow................................... $ 5,288.0 $ 15,817.5 $ 15,673.5 $ 16.034.6 $ 16.442.4
Interest Income (Security Accounts)....................... 25.7 400.7 538.5 252.3 255.1
-----------------------------------------------------------------------
Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax (27)......... 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses......................... 127.8 394.9 406.8 419.0 431.6
-----------------------------------------------------------------------
Cash Available for Debt Service........................... $ 5,441.5 $ 16,613.1 $ 16,618.7 $ 16,705.9 $ 17,128.1

Withdrawals from Debt Service Reserve Account............. 0.0 46.2 0.0 0.0 0.0
Withdrawals from Working Capital Reserve Account.......... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Restricted Cash Deposit Account.......... 0.0 0.0 8,261.4 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account..... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Escrow Reserve Account................... 0.0 450.0 0.0 0.0 0.0

======================================================
Interest Payments......................................... 0.0 (5,516.6) (6,274.3) (5,640.6) (4,917.7)
Principal Payments........................................ 0.0 (6,800.0) (5,950.0) (6,630.0) (7,650.0)
-----------------------------------------------------------------------
Total Debt Service........................................ 0.0 (12,316.6) (12,224.3) (12,270.6) (12,567.7)

Cash Available after Debt Service......................... 5,441.5 4,792.7 12,655.9 4,435.3 4,561.4

Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax.............. 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses......................... (127.8) (394.9) (406.8) (419.0) (431.6)

======================================================
Deposits to Debt Service Reserve Account (DSRA)........... $0.0 $0.0 ($23.2) ($148.5) ($10.0)
Deposits to Working Capital Reserve Account (WCRA)........ (1,000.0) 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account (RCDA)........ (4,313.7) (3,947.8) 0.0 0.0 0.0
-----------------------------------------------------------------------
Total Deposits to Security Accounts....................... ($5,313.7) ($3,947.8) ($23.2) ($148.5) ($10.0)

Distributable Cash........................................ $0.0 $450.0 $12,226.0 $3,867.8 $4,119.9

======================================================
Cash Available for Debt Service........................... 5,441.5 16,613.1 16,618.7 16,705.9 17,129.1
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7

Debt Service Coverage Ratio............................... NA 1.35x 1.36x 1.36x 1.36x
------------
Minimum Coverage Ratio.................... 1.35x
------------
Average Coverage Ratio.................... 1.39x
------------

Cash Available for Debt Service + RCDA.................... 5,441.5 20,926.8 24,880.2 16,705.9 17,129.1
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7

Debt Service Coverage Ratio............................... NA 1.70x 2.04x 1.36x 1.36x
------------
Minimum Coverage Ratio.................... 1.36x
------------
Average Coverage Ratio.................... 1.52x
------------

Cash Available for Debt Service + RCDA + DSRA............. $11,599.8 $27,085.2 $30,992.3 $22,841.2 $23,412.9
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7

Debt Service Coverage Ratio............................... NA 2.20x 2.54x 1.86x 1.86x
------------
Minimum Coverage Ratio.................... 1.86x
------------
Average Coverage Ratio.................... 2.02x
------------

------------
Adjusted EBITDA/Interest Expense(28)...... 2.65x NA 3.01x 2.65x 2.96x 3.48x
------------
Total Debt/Adjusted EBITDA................ 4.09x NA 4.09x 3.68x 3.31x 2.84x
------------

<CAPTION>
-------------------------------------------------------------------
2004 2005 2006 2007 2008
-------------------------------------------------------------------
=======================================================
<S>.......................................................... <C> <C> <C> <C> <C>
Net Operating Cash Flow...................................... $ 16,896.0 $ 17,320.8 $ 17,801.7 $ 18,096.7 $ 7,966.5
Interest Income (Security Accounts).......................... 256.1 259.7 262.8 149.0 17.5
-------------------------------------------------------------------
Syracuse University User Charge.............................. 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax (27)............ 10.3 23.9 37.8 49.8 59.1
Fees & Other Partnership Expenses............................ 444.5 457.8 471.6 485.7 248.8
-------------------------------------------------------------------
Cash Available for Debt Service.............................. $ 17,696.9 $ 18,062.3 $ 18,573.8 $ 18,781.2 $ 8,291.9

Withdrawals from Debt Service Reserve Account................ 0.0 0.0 0.0 6,512.5 0.0
Withdrawals from Working Capital Reserve Account............. 0.0 0.0 0.0 0.0 1,000.0
Withdrawals from Restricted Cash Deposit Account............. 0.0 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account........ 0.0 0.0 0.0 3,600.0 0.0
Withdrawals from Escrow Reserve Account...................... 0.0 0.0 0.0 3,000.0 0.0

=======================================================
Interest Payments............................................ (4,087.7) (3,159.5) (2,124.2) (955.0) 0.0
Principal Payments........................................... (8,500.0) (9,520.0) (10,880.0) (12,070.0) 0.0
-------------------------------------------------------------------
Total Debt Service........................................... (12,587.7) (12,679.5) (13,004.2) (13,025.0) 0.0

Cash Available after Debt Service............................ 5,019.3 5,382.9 5,569.7 18,768.7 9,291.9

Syracuse University User Charge.............................. 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax................. (10.3) (23.9) (37.8) (49.8) (59.1)
Fees & Other Partnership Expenses............................ (444.5) (457.8) (471.6) (485.7) (248.8)

=======================================================
Deposits to Debt Service Reserve Account (DSRA).............. ($45.9) ($162.3) ($10.4) $0.0 $0.0
Deposits to Working Capital Reserve Account (WCRA)........... 0.0 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposits Account (RCDA).......... 0.0 0.0 0.0 0.0 0.0
-------------------------------------------------------------------
Total Deposits to Security Accounts.......................... ($45.9) ($162.3) ($10.4) $0.0 $0.0

Distributable Cash........................................... $4,518.5 $4,738.8 $5,049.9 $18,233.2 $8,984.0

=======================================================
Cash Available for Debt Service.............................. 17,606.9 18,062.3 18,573.8 16,781.2 8,291.9
Total Debt Service........................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio.................................. 1.40x 1.42x 1.43x 1.44x NA

-----------
Minimum Coverage Ratio.................... 1.35x
-----------
Average Coverage Ratio.................... 1.39x
-----------

Cash Available for Debt Service + RCDA....................... 17,606.9 18,062.3 18,573.8 18,781.2 8,291.9
Total Debt Service........................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio.................................. 1.40x 1.42x 1.43x 1.44x NA

-----------
Minimum Coverage Ratio.................... 1.36x
-----------
Average Coverage Ratio.................... 1.52x
-----------

Cash Available for Debt Service + RCDA + DSRA................ $23,900.7 $24,402.1 $25,075.9 $25,293.7 $8,291.9
Total Debt Service........................................... 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio.................................. 1.90x 1.92x 1.93x 1.94x NA
-----------
Minimum Coverage Ratio.................... 1.86x
-----------
Average Coverage Ratio.................... 2.02x
-----------

-----------
Adjusted EBITDA/Interest Expense(28)...... 2.65x 4.31x 5.72x 8.74x 19.67x NA
-----------
Total Debt/Adjusted EBITDA................ 4.09x 2.33x 1.80x 1.24x 0.64x NA
-----------
</TABLE>

<PAGE>

PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR NOTES WITH REG. RIGHTS
- ---------------------------------------------------------------------------

HEAT RATE INCREASE FOOTNOTES TO MODEL

All footnotes are the same as the Base Case Footnotes except the following:

5) The heat rate is increased 300 btu/kWh over the base case. It is an all-in
heat rate which includes fuel used in the duct burners and the Syracuse boilers.
This increases the total commodity cost of the fuel and the variable
transportation cost, but does not cause the Project to consume all of the
pre-paid fuel entitlement.

E-14
<PAGE>

<TABLE>
<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE: $200,000 of NOx Credits Purchased 12/2/99 1:45 PM
($ in thousands) accepted prices per MWH)
4 Months ended Project Fiscal Years Ending December 31,
12/31/99 2000 2001 2002 2003
================================================== ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)..................... 79.0 79.0 79.0 79.0 79.0
Availability (3).................................. 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4)...................................... 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)..................... 10,000.0 10,050.0 10,100.3 10,150.3 10,201.5
Electricity Produced (MWH) (6).................... 213,963.6 641,890.8 640,137.0 640,137.0 640,137.0
Steam Throughout (1,000 lbs) (7).................. 202,302.0 639,385.1 639,385.1 639,385.1 639,385.1
Fuel Consumed (MMBtu) (8)......................... 2,139,636.0 6,451,002.5 6,485,543.7 6,497,871.5 6,530,360.8
Entitlement Used (MMBtu) (9)...................... 2,382,594.0 7,183,520.9 7,199,713.3 7,235.711.8 7,271.890.4
==================================================
Debt Offering Annunal Interest Rate............... 10.50% 10.50% 10.50% 10.50% 10.50%

General Inflation................................. 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CON$).......................... $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh)(10)............ $ 30.43 $ 32.41 $ 34.85 $ 33.94 $ 36.56
Off-Peak Electricity Pricing ($MWh)............... $ 22.38 $ 22.36 $ 23.70 $ 25.30 $ 25.30
Indexed Swap Price ($MWh)(11)..................... $ 54.23 $ 54.80 $ 56.51 $ 58.04 $ 59.70
Steam Price ($/1,000lbs)(12)...................... $ 4.36 $ 4.39 $ 4.43 $ 4.47 $ 4.51

==================================================
Power Put Contract
Energy Sales - On Peak......................... $ 2,708.4 $ 8,455.0 $ 9,091.6 $ 8,854.2 $ 9,575.1
Energy Sales - Off Peak........................ 2,796.6 8,519.5 8,988.4 9,595.3 9,569.4
Capacity Sales - On Peak....................... 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak...................... 0.0 0.0 0.0 0.0 0.0
----------------------------------------------------------------------------
Total Power Put Payments (13)..................... 5,505.0 16,974.5 18,080.0 18,449.4 19,144.5

==================================================
Commodity Expense (16)........................... ($1,592.8) $ 4,892.9) ($5,053.1) ($5,232.7) ($5,418.7)
Firm Service Transportation Expense (17).......... (2,876.7) (8,889.1) (9,155.8) (9,430.5) (9,713.4)
Variable Fuel Expense (18)........................ (102.3) (317.8) (328.1) (339.6) (351.5)
----------------------------------------------------------------------------
Total Fuel Expenses.......................... ($4,571.9) ($14,099.8) ($14,536.9) ($15,002.8) ($15,483.6)

==================================================
GE Overhaul Accrual & Directed starts (19)........ ($476.7) ($1,430.0) ($1,426.1) ($1,426.1) ($1,426.1)
GE Contractual Services Fees (20)................. (257.5) (827.4) (852.2) (877.8) (904.1)
Plant Operations (21)............................. (772.2) (2,401.4) (2,473.5) (2,547.7) (2,624.1)
Other O&M and Plant Utilities (22)................ (134.0) (413.9) (426.4) (639.1) (658.3)
Administrative (23)............................... (317.8) (982.1) (1,011.6) (1,041.9) (1,073.2)
Taxes (24)........................................ (266.9) (810.1) (1,434.4) (1,477.5) (1,521.8)
Syracuse University User Charge (25).............. (416.7) (1,250.0) (1,250.0) (1,250.0) (1,250.0)
----------------------------------------------------------------------------
Total O&M and Administrative Expenses........ ($2,646.7) ($8,115.0) ($8,874.2) ($9,260.1) ($9,457.6)

==================================================
Partnership Fees (26)............................. (127.8) (394.9) (406.8) (419.0) (431.6)
----------------------------------------------------------------------------
Total Expenses............................... ($7,346.4) ($22,608.0) ($23,817.9) ($24,681.9) ($25,372.8)
Net Operating Cash Flow........................... $ 5,338.8 $ 15,973.8 $ 15,834.9 $ 16,001.8 $ 16,409.8

<CAPTION>
PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cash Flow CASE: $200,000 of NOx Credits Purchased 12/2/99 1:45 PM
($ in thousands) accepted prices per MWH)
2004 2005 2006 2007 2008(1)
================================================== -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Average Capacity (MW) (2)..................... 79.0 79.0 79.0 79.0 79.0
Availability (3).................................. 92.5% 92.5% 92.5% 92.5% 92.5%
Capacity (4)...................................... 92.5% 92.5% 92.5% 92.5% 92.5%
Heat Rate HHV (MMBtu/kWh) (5)..................... 10,252.5 10,303.8 10,355.3 10,407.1 10,459.1
Electricity Produced (MWH) (6).................... 641,890.8 640,137.0 640,137.0 640,137.0 319,191.6
Steam Throughout (1,000 lbs) (7).................. 639,385.1 639,385.1 639,385.1 639.385.1 319,692.6
Fuel Consumed (MMBtu) (8)......................... 6,580,993.5 6,595,827.7 6,628,806.8 6,661,950.8 3,338,458.7
Entitlement Used (MMBtu) (9)...................... 7,328,272.5 7,344,791.1 7,381,515.1 7,418,422.6 3,717,544.3
==================================================
Debt Offering Annunal Interest Rate............... 10.50% 10.50% 10.50% 10.50% 10.50%

General Inflation................................. 3.0% 3.0% 3.0% 3.0% 3.0%
Exchange Rate (US$/CON$).......................... $ 0.67 $ 0.67 $ 0.67 $ 0.67 $ 0.67
On-Peak Electricity Pricing ($MWh)(10)............ $ 36.79 $ 36.81 $ 36.81 $ 36.81 $ 36.81
Off-Peak Electricity Pricing ($MWh)............... $ 24.22 $ 26.23 $ 26.23 $ 26.23 $ 26.23
Indexed Swap Price (SWWh) (11).................... $ 61.37 $ 63.19 $ 65.04 $ 66.64 $ 87.88
Steam Price ($/1,000 lbs) (12).................... $ 4.55 $ 4.59 $ 4.83 $ 4.67 $ 2.31

==================================================
Power Put Contract
Energy Sales - On Peak......................... $ 9,710.6 $ 9,640.6 $ 9,602.9 $ 9,602.9 $ 4,857.9
Energy Sales - Off Peak........................ 9,153.8 9,921.1 9,948.0 9,948.0 4,910.7
Capacity Sales - On Peak....................... 0.0 0.0 0.0 0.0 0.0
Capacity Sales - Off Peak...................... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Power Put Payments (13)..................... 18,864.4 19,561.7 19,550.9 19,550.9 9,768.7

Indexed Swap Contract
Floating (payment)............................ (19,448.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)
Floating (payment): Capacity.................. 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Floating (Payments) (14).................... (19,448.8) (20,260.4) (20,249.2) (20,249.2) (10,145.4)

Steam Sales....................................... 2,910.0 2,935.7 2,961.7 2,987.9 738.7
Fuel Commodity Sales.............................. 0.0 0.0 0.0 0.0 0.0
Fuel Capacity Release sales....................... 0.0 0.0 0.0 0.0 0.0
---------------------------------------------------------------------------
Total Revenues............................... $ 42,979.6 $ 44,132.4 $ 45,385.4 $ 48,474.6 $ 22,885.5

==================================================
Commodity Expense (16)............................ ($5,626.6) ($5,810.5) ($6,016.8 ($6,230.4) ($3,216.9)
Firm Service Transportation Expense (17).......... (10,004.8) (10,304.9) (10,614.1) (10,932.5) (5,559.0)
Variable Fuel Expense (18)........................ (364.9) (376.7) (389.9) (403.8) (208.3)
---------------------------------------------------------------------------
Total Fuel Expenses.......................... ($15,996.2) ($16,492.1) ($17,020.8) ($17,566.5) ($9,024.2)

==================================================
GE Overhaul Accrual & Directed starts (19)........ ($1,430.0) ($1,426.1) ($ 1,426.1) ($1,426.1) ($711.1)
GE Contractual Services Fees (20)................. (931.3) (959.2) (988.0) (1,017.6) (521.2)
Plant Operations (21)............................. (2,702.8) (2,783.9) (2,867.4) (2,953.5) (1,512.6)
Other O&M and Plant Utilities (22)................ (678.1) (698.4) (719.4) (740.9) (379.5)
Administrative (23)............................... (1,105.4) (1,138.5) (1,172.7) (1,207.9) (618.6)
Taxes (24)........................................ (1,577.7) (1,638.4) (1,700.7) (1,762.6) (1,277.6)
Syracuse University User Charge (25).............. (1,250.0) (1,250.0) (1,250.0) (1,250.0) (621.5)
---------------------------------------------------------------------------
Total O&M and Administrative Expenses........ ($9,675.3) ($9,894.6) ($10,124.3) ($10,358.6) ($5,842.0)

==================================================
Partnership Fees (26)............................. (444.5) (457.8) (471.6) (485.7) (248.8)
---------------------------------------------------------------------------
Total Expenses............................... ($26,116.0) ($26,844.5) ($27,616.6) ($28,410.8) ($14,915.0)
Net Operating Cash Flow........................... $ 16,563.6 $ 17,287.9 $ 17,768.6 $ 18,043.8 $ 7,950.5
</TABLE>

<PAGE>

4 months ended Projected Fiscal Years Ending December 31,
------------------------------------------------------------------------
12/31/99 2000 2001 2002 2003
------------------------------------------------------------------------
==========================================================
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow................................... $ 5,338.8 $ 15,973.8 $ 15,834.9 $ 16,001.8 $ 16,409.6
Interest Income (Security Accounts)....................... 25.8 402.5 249.3 252.3 255.1
------------------------------------------------------------------------

Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax(27).......... 0.0 0.0 0.0 0.0 0.0
Fees & Other Partnership Expenses......................... 127.8 394.9 406.8 419.0 431.6
------------------------------------------------------------------------

Cash Available for Debt Service........................... $ 5,492.4 $ 16,771.2 $ 16,491.0 $ 16,673.1 $ 17,096.2

Withdrawals from Debt Service Reserve Account............. 0.0 46.2 0.0 0.0 0.0
Withdrawals from Working Capital Reserve Account.......... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Restricted Cash Deposit Account.......... 0.0 4,364.6 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account..... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Escrow Reserve Account................... 0.0 450.0 0.0 0.0 0.0

==========================================================
Interest Payments......................................... 0.0 (5,516.6) (6,274.3) (5,640.6) (4,917.7)
Principal Payments........................................ 0.0 (6,800.0) (5,950.0) (6,630.0) (7,650.0)
------------------------------------------------------------------------
Total Debt Service........................................ 0.0 (12,316.6) (12,224.3) (12,270.6) (12,567.7)

Cash Available after Debt Service......................... 5,492.4 9,315.4 4,266.7 4,402.5 4,528.5

==========================================================
Deposits to Debt Service Reserve Account(DSRA)............ $ 0.0 $ 0.0 ($23.2) ($148.5) ($10.0)
Deposits to Working Capital Reserve Account(WCRA)......... (1,000.0) 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)......... (4,364.6) 0.0 0.0 0.0 0.0
------------------------------------------------------------------------
Total Deposits to Security Accounts....................... ($5,364.6) $0.0 ($23.2) ($148.5) ($10.0)

Distributable Cash........................................ $ 0.0 $ 8,920.5 $ 3,836.8 $ 3,835.0 $ 4,087.0

==========================================================
Cash Available for Debt Service........................... 5,492.4 16,771.2 16,491.0 16,673.1 17,096.2
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7

Debt Service Coverage Ratio............................... NA 1.36x 1.35x 1.36x 1.36x
--------------
Minimum Coverage Ratio...................... 1.35x
--------------
Average Coverage Ratio...................... 1.39x
--------------

Cash Available for Debt Service + RCDA.................... 5,492.4 21,135.9 16,491.0 16,673.1 17,096.2
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7

Debt Service Coverage Ratio............................... NA 1.72x 1.35x 1.36x 1.36x
--------------
Minimum Coverage Ratio...................... 1.35x
--------------
Average Coverage Ratio...................... 1.43x
--------------

Cash Available for Debt Service + RCDA + DSRA............. $ 11,650.7 $ 27,294.2 $ 22,603.2 $ 22,808.4 $ 23,380.1
Total Debt Service........................................ 0.0 12,316.6 12,224.3 12,270.6 12,567.7

Debt Service Coverage Ratio............................... NA 2.22x 1.85x 1.86x 1.86x
--------------
Minimum Coverage Ratio...................... 1.85x
--------------
Average Coverage Ratio...................... 1.93x
--------------
--------------
Adjusted EBITDA / Interest Expense (28)..... 2.63x NA 3.04x 2.63x 2.96x 3.48x
--------------
Total Debt / Adjusted EBITDA................ 4.05x NA 4.05x 3.71x 3.31x 2.84x
--------------
<CAPTION>
==========================================================
<S> <C> <C> <C> <C> <C>
Net Operating Cash Flow................................... $ 16,863.6 $ 17,287.9 $ 17,768.8 $ 18,063.8 $ 7,950.5
Interest Income (Security Accounts)....................... 256.1 259.7 262.8 149.0 17.5
------------------------------------------------------------------------

Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax(27).......... 10.3 23.9 37.8 49.8 59.1
Fees & Other Partnership Expenses......................... 444.5 457.8 471.6 485.7 248.8
------------------------------------------------------------------------

Cash Available for Debt Service........................... $ 17,574.5 $ 18,029.4 $ 18,540.9 $ 18,748.4 $ 8,275.9

Withdrawals from Debt Service Reserve Accout.............. 0.0 0.0 0.0 6,512.5 0.0
Withdrawals from Working Capital Reserve Account.......... 0.0 0.0 0.0 0.0 1,000.0
Withdrawals from Restricted Cash Deposit Account.......... 0.0 0.0 0.0 0.0 0.0
Withdrawals from Capital Expenditures Reserve Account..... 0.0 0.0 0.0 3,500.0 0.0
Withdrawals from Escrow Reserve Account................... 0.0 0.0 0.0 3000.0 0.0

==========================================================
Interest Payments......................................... (4,087.7) (3,159.5) (2,124.2) (955.0) 0.0
Principal Payments........................................ (8,500.0) (9,520.0) (10,880.0) (12,070.0) 0.0
------------------------------------------------------------------------
Total Debt Service........................................ (12,587.7) (12,679.5) (13,004.2) (13,025.0) 0.0

Cash Available after Debt Service......................... 4,986.8 5,350.0 5,536.8 18,735.9 9,275.9

Syracuse University User Charge........................... 0.0 0.0 0.0 0.0 0.0
PILOT - Incremental Electric Tariff Rate Tax.............. (10.3) (23.9) (37.8) (49.8) (59.1)
Fees & Other Partnership Expenses......................... (444.5) (457.8) (471.6) (485.7) (248.8)

==========================================================
Deposits to Debt Service Reserve Account(DSRA)............ ($45.9) ($162.3) ($10.4) $ 0.0 $ 0.0
Deposits to Working Capital Reserve Account(WCRA)......... 0.0 0.0 0.0 0.0 0.0
Deposits to Restricted Cash Deposit Account(RCDA)......... 0.0 0.0 0.0 0.0 0.0
------------------------------------------------------------------------
Total Deposits to Security Accounts....................... ($45.9) ($162.3) ($10.4) $ 0.0 $ 0.0

Distributable Cash........................................ $ 4,486.1 $ 4,705.8 $ 5,017.0 $ 18,200.3 $ 8,968.0

==========================================================
Cash Available for Debt Service........................... 17,574.5 18,029.4 18,540.9 18,748.4 8,275.9
Total Debt Service........................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio............................... 1.40x 1.42x 1.43x 1.44x NA
--------------
Minimum Coverage Ratio...................... 1.35x
--------------
Average Coverage Ratio...................... 1.39x
--------------

Cash Available for Debt Service + RCDA.................... $ 17,574.5 18,029.4 18,540.9 18,748.4 8,275.9
Total Debt Service........................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Cash Available for Debt Service + RCDA + DSRA............. $ 23,868.3 $ 24,369.1 $ 25,043.0 $ 25,260.8 $ 8,275.9
Total Debt Service........................................ 12,587.7 12,679.5 13,004.2 13,025.0 0.0

Debt Service Coverage Ratio............................... 1.90x 1.92x 1.93x 1.94x NA
--------------
Minimum Coverage Ratio...................... 1.85x
--------------
Average Coverage Ratio...................... 1.93x
--------------

--------------
Adjusted EBITDA / Interest Expense (28)..... 2.63x 4.30x 5.71x 8.73x 19.63x NA
--------------
Total Debt / Adjusted EBITDA................ 4.05x 2.33x 1.80x 1.24x 0.64x NA
--------------
</TABLE>
<PAGE>

PROJECT ORANGE ASSOCIATES L.P. 144A SENIOR SECURED NOTES WITH REG. RIGHTS
- ------------------------------------------------------------------------------

$200,000 NOx CREDIT PURCHASES FOOTNOTES TO MODEL

All footnotes are the same as the Base Case Footnotes except the following:

22) $200,000 per year of NOx credit purchases is assumed beginning in 2001.
Other O&M and Plant Maintenance figures are based on historical data from
January 1996 through August 1999. Figures are projected forward at the assumed
inflation rate.

E-17
<PAGE>

______________, 2000

Project Orange Associates L.P.
Project Orange Capital Corp.

Exchange Offer

$68,000,000
10.5% Senior Secured Notes due 2007

_________________________________________________

PROSPECTUS

_________________________________________________

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

We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell the notes or our
solicitation of your offer to buy the notes in any jurisdiction where that would
not be permitted or legal. Neither the delivery of this prospectus nor any
sales made after the date of this prospectus shall create an implication that
the information contained in this prospectus or the affairs of Project Orange
Associates L.P. or Project Orange Capital Corp. have not changed since the date
of this prospectus.
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

Project Orange Associates L.P.

Section 17-108 of the Delaware Revised Uniform Limited Partnership Act
empowers a Delaware limited partnership to indemnify and hold harmless any
partner or other person from and against all claims and demands whatsoever.

The Second Amended and Restated Agreement of Limited Partnership of Project
Orange Associates, L.P. (the "Partnership Agreement") provides that the General
Partners shall be indemnified by the Partnership against any liability incurred
by any of them for any act or omission performed or omitted in good faith and
reasonably believed by the General Partner to be within the scope of authority
granted to it under the Partnership Agreement. Such liabilities include all
losses, claims, damages, expenses, judgments, fines, penalties, interest,
settlements and other amounts, provided that with respect to any criminal
proceeding, the indemnitee had no reasonable cause to believe its conduct was
unlawful. The holders of limited partnership interests are not personally liable
for indemnification.

Project Orange Capital Corp.

Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.

Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities described above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine that despite the adjudication of liability, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.

Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue, or matter referred to in these subsections, he shall be
indemnified against any expenses actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and that II-1 224 the corporation may purchase and maintain insurance
on behalf of a director, officer, employee or agent of the corporation against
any liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under Section 145.

Section 102(b)(7) of the DGCL provides that a corporation in its original
certificate of incorporation or an amendment thereto validly approved by
stockholders may eliminate or limit personal liability of members of its board
of directors or governing body for breach of a director's fiduciary duty.
However, no such provision may eliminate or limit the liability of a director
for breaching his duty of loyalty, failing to act on good faith, engaging in
intentional misconduct
<PAGE>

or knowingly violating a law, paying a dividend or approving a stock repurchase
which was illegal or obtaining an improper personal benefit. A provision of this
type has no effect on the availability of equitable remedies, such as injunction
or rescission, for breach of fiduciary duty.

The Certificate of Incorporation of Project Orange Capital Corp. contains a
provision which limits the liability of the directors to the fullest extent
permitted by the DGCL. Specifically, Article IX of the Certificate of
Incorporation contains the following applicable provisions:

(a) No director of the Corporation shall have any personal liability
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director of the Corporation, except (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit.

(b) The Corporation shall indemnify any director or officer of the
Corporation and may indemnify any employee or agent of the Corporation who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
---- ----------
shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.

(c) The Corporation shall indemnify any director or officer of the
Corporation and may indemnify any employee or agent of the Corporation who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.

In addition, the Bylaws of Project Orange Capital Corp. (the "Bylaws"), in
substance, require the Corporation to indemnify each person who is or was a
director, officer, employee or agent of the Corporation to the full extent
permitted by the laws of the State of Delaware in the event such person is
involved in legal proceedings by reason of the fact that he is or was a
director, officer, employee or agent of the general partner, or is or was
serving at the general partner's request as a director, officer, employee or
agent of the general partner and its subsidiaries, another corporation,
partnership or other enterprise. The provisions of the Bylaws and Certificate
of Incorporation specifically provide that the indemnification rights,
respectively granted, are non-exclusive.

See Item 22 of this Registration Statement regarding the position of the
Securities and Exchange Commission on indemnification for liabilities arising
under the Securities Act.
<PAGE>

Item 21. Exhibits and Financial Statement Schedules

Exhibit
No. Description
--- -----------
<S> <C>
1.1* Purchase Agreement dated December 2, 1999 among Project Orange
Associates L.P. (as successor to Project Orange Funding, L.P.), Project
Orange Capital Corp. and Donaldson, Lufkin & Jenrette Securities
Corporation
2.1* Agreement and Plan of Merger of Project Orange Funding, L.P. into
Project Orange Associates L.P. dated December 6, 1999
2.2 Assumption Agreement dated December 6, 1999 of Project Orange
Associates L.P.
3.1* Second Amended and Restated Agreement of Limited Partnership of Project
Orange Associates L.P.

3.2* Articles of Organization for Project Orange Capital Corp.
3.3* Bylaws of Project Orange Capital Corp.
3.4* Operating Agreement for G.A.S. Orange Associates, L.L.C.

4.1* Indenture dated as of December 6, 1999 among Project Orange Associates
L.P. (as successor to Project Orange Funding, L.P.), Project Orange
Capital Corp. and U.S. Bank Trust National Association, as trustee,
including the form of 10.5% Senior Secured Notes due 2007
4.2* A/B Exchange Offer Registration Rights Agreement dated as of December
6, 1999 among Project Orange Associates L.P. (as successor to Project
Orange Funding, L.P.), Project Orange Capital Corp. and Donaldson
Lufkin & Jenrette Securities Corporation
4.3* Deposit and Disbursement Agreement dated as of December 6, 1999 between
Project Orange Associates L.P. (as successor to Project Orange Funding,
L.P.) and U.S. Bank Trust National Association
4.4* Mortgage and Assignment of Rents (First Mortgage) dated as of December
6, 1999 by the City of Syracuse Industrial Development Agency and
Project Orange Associates L.P. to U.S. Bank Trust National Association
4.5* Security Agreement dated as of December 6, 1999 between Project Orange
Associates L.P. (as successor to Project Orange Funding, L.P.) and U.S.
Bank Trust National Association
4.6* Security Agreement dated as of December 6, 1999 between the City of
Syracuse Industrial Development Agency and U.S. Bank Trust National
Association
4.7* Pledge and Security Agreement dated as of December 6, 1999 among G.A.S.
Orange Partners, L.P., Project Orange Associates L.P. (as successor to
Project Orange Funding, L.P.) and U.S. Bank Trust National Association
4.8* Pledge and Security Agreement dated as of December 6, 1999 among G.A.S.
Orange Associates, L.L.C., National Association
4.9* Pledge and Security Agreement dated as of December 6, 1999 among A.V.
Grantor Trust, G.A.S. Orange Partners, L.P. and U.S. Bank Trust
National Association
4.10* Pledge and Security Agreement dated as of December 6, 1999 among G.A.S.
Orange Development, Inc., G.A.S. Orange Partners, L.P. and U.S. Bank
Trust National Association
4.11* Letter of Transmittal

5.1 Opinion of Piper Marbury Rudnick & Wolfe LLP

10.1* Power Put Agreement dated September 18, 1986 between Project Orange
Associates L.P. and Niagara Mohawk Power Corporation

10.2* ISDA Master Agreement dated June 30, 1998 between Project Orange
Associates L.P. and Niagara Mohawk Power Corporation (with attached
Schedule dated as of June 30, 1998)
10.3* Restated Gas Sale and Purchase Agreement dated as of March 18, 1991
between Project Orange
</TABLE>
- --------------------------
* Previously filed.
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Associates L.P., Noranda Inc. and Canadian
Hunter Exploration Ltd.
10.4* Three Party Letter Agreement dated December 6, 1999 among Project
Orange Associates L.P., Canadian Hunter Exploration Ltd. and Union
Pacific Resources Inc.
10.5* Firm Natural Gas Transportation Agreement dated March 29, 1991 between
Project Orange Associates L.P. & Tennessee Gas Pipeline Company
10.6* Gas Transportation Agreement (For use under Rate Schedule IT) dated
November 11, 1999 between Project Orange Associates L.P. and Tennessee
Gas Pipeline Company
10.7* Steam Contract dated February 27, 1990 between Project Orange
Associates L.P. and Syracuse University
10.8* Operating Agreement dated February 27, 1990 between Project Orange
Associates L.P. and Syracuse University
10.9* Lease Agreement dated February 27, 1990 between Project Orange
Associates L.P. and Syracuse University
10.10* Lease and Sublease Agreement dated April 5, 1991 between the City of
Syracuse Industrial Development Agency and Project Orange Associates
L.P.
10.11* Cogeneration Facility Operation and Maintenance Agreement dated
November 1, 1998 between Project Orange Associates L.P. and General
Electric International, Inc. (as successor to GE Energy Plant
Operations, Inc.)
10.12* Payment in Lieu of Taxes Agreement dated April 5, 1991 between the
City of Syracuse, the City of Syracuse Industrial Development Agency
and Project Orange Associates L.P.
10.13* Asset Management Letter Agreement dated December 6, 1999 between
Niagara Mohawk Energy Marketing, Inc. and Project Orange Associates
L.P.
10.14* Marketing Letter Agreement dated December 6, 1999 between Niagara
Mohawk Energy Marketing, Inc. and Project Orange Associates L.P.
10.15* Host Community Agreement dated April 5, 1991 between Project Orange
Associates L.P., the City of Syracuse and the Syracuse Housing
Authority
10.16* Consent and Agreement dated as of December 6, 1999 among Project
Orange Associates L.P., Syracuse University and U.S. Bank Trust
National Association
10.17* Subordination Agreement dated as of December 6, 1999 among Project
Orange Associates L.P., Syracuse University and U.S. Bank Trust
National Association
10.18* Consent and Agreement dated as of December 6, 1999 among the City of
Syracuse Industrial Development Agency, Project Orange Associates L.P.
and U.S. Bank Trust National Association
10.19* Consent and Agreement dated as of December 6, 1999 among the City of
Syracuse, the City of Syracuse Industrial Development Agency, Project
Orange Associates L.P. and U.S. Bank Trust National Association
10.20* Consent dated as of December 2, 1999 executed by Niagara Mohawk Power
Corporation
10.21* Consent and Agreement (Cogeneration Facility Operation and Maintenance
Agreement) dated as of December 6, 1999 by General Electric
International Inc.
10.22* Consent and Agreement (Restated Gas Sale and Purchase Agreement) dated
December 6, 1999 by Canadian Hunter Exploration Ltd.
10.23* Consent and Agreement (Interruptible Gas Transportation Agreement,
Firm Gas Transportation Agreement, Hot Tap Reimbursement Agreement and
Letter of Credit Drawing Agreement) dated as of December 6, 1999 by
Tennessee Gas Pipeline Company
10.24* Consent and Agreement dated December 6, 1999 among TransCanada
Pipelines Limited, Canadian Hunter Exploration Ltd., Project Orange
Associates L.P. and U.S. Bank Trust National Association
10.25* Consent and Agreement (Asset Management Agreement) dated as of
December 6, 1999 by Niagara Mohawk Energy Marketing, Inc.
10.26* Agency Agreement dated as of January 14, 2000 between Niagara Mohawk
Energy Marketing, Inc. and Project Orange Associates L.P.
12.1 Computation Schedule for Ratio of Earnings to Fixed Charges for the
five years ended December 31, 1999
23.1* Consent of Stone & Webster Management Consultants, Inc., Independent
Engineer
23.2 Consent of Deloitte & Touche LLP, Independent Auditors
23.3 Consent of Piper Marbury Rudnick & Wolfe LLP (included in Exhibit 5.1)

</TABLE>
<PAGE>

25.1* Form T-1 Statement of Eligibility of U.S. Bank Trust National
Association to act as Trustee under the Indenture

27.1 Financial Data Schedules

Item 22. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
under the foregoing provisions, or otherwise, the Company has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The undersigned Registrants hereby undertake:

1. To respond to requests for information that is incorporated by reference
into the prospectus under Items 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the
request;

2. To supply by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved, that was not the
subject of and included in the registration statement when it became
effective;

3. To file, during any period in which offers or sales are being made, a post-
effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment to the registration statement) which, individually
or in the aggregate, represent a fundamental change in the information
presented in the registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;

4. That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering.

5. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
<PAGE>

SIGNATURES

Pursuant to the requirement of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Syracuse, State of New
York, on the 26th day of April, 2000.

PROJECT ORANGE ASSOCIATES L.P.

By: G.A.S. ORANGE ASSOCIATES, LLC,
its General Partner

By: /s/ Adam H. Victor
______________________________
Adam H. Victor
President

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
- --------- ------ ----
<S> <C> <C>

/s/ Adam H. Victor
- -------------------------------------- President, Treasurer and Manager April 26, 2000
Adam H. Victor (Principal executive financial and
accounting officer)

/s/ Douglas Corbett
- -------------------------------------- Vice President and Manager April 26, 2000
Douglas Corbett

/s/ Richard S. Scolaro
- -------------------------------------- Manager April 26, 2000
Richard S. Scolaro
</TABLE>

<PAGE>

SIGNATURES

PROJECT ORANGE CAPITAL CORP.

By: /s/ Adam H. Victor
______________________________
Adam H. Victor
President

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
- --------- ------ ----
<S> <C> <C>

/s/ Adam H. Victor
- -------------------------------------- President, Treasurer and Manager April 26, 2000
Adam H. Victor (Principal executive financial and
accounting officer)

/s/ Douglas Corbett
- -------------------------------------- Vice President and Manager April 26, 2000
Douglas Corbett

/s/ Richard S. Scolaro
- -------------------------------------- Manager April 26, 2000
Richard S. Scolaro
</TABLE>

<PAGE>

EXHIBIT 2.2

ASSUMPTION AGREEMENT
--------------------

Project Orange Associates, L.P. ("Orange L.P."), the surviving corporation
of the merger on the date hereof of Project Orange Funding, L.P. ("Funding
L.P.") with and into Orange L.P., hereby expressly assumes, and agrees to
perform and discharge, all of the obligations and liabilities of Funding L.P.
under the Indenture (the "Indenture") dated as of December 6, 1999 among Funding
L.P., Project Orange Capital Corp. ("Capital Co." and, together with Funding
L.P., the "Issuers") and U.S. Bank Trust National Association, in its capacity
as Trustee (the "Trustee") for the benefit of the holders from time to time of
the Issuers' $68 million aggregate principal amount of 10.5% Senior Secured
Notes due 2007 (the "Notes"), the Notes and the other Financing Documents
referred to in the Indenture, and expressly confirms the grant to U.S. Bank
Trust National Association, in its capacity as Collateral Agent (the "Collateral
Agent") under the Collateral Documents for the benefit of the Secured Parties of
the Liens on the existing and after-acquired assets of Orange L.P. pursuant to
the Collateral Documents, as more fully set forth therein. All references in the
Financing Documents to (i) to Funding L.P. or the "Borrower" shall hereafter
refer to Orange L.P. and its successors and (ii) to the Issuers shall be to
Capital Co. and Orange L.P. and their respective successors. All capitalized
terms used but not otherwise defined herein shall have the meaning ascribed to
them in the Indenture.

<PAGE>

IN WITNESS WHEREOF, Orange L.P. has caused its duly authorized officer to
execute and deliver this Assumption Agreement as of December 6, 1999,
simultaneously with the effectiveness of the Merger referred to in the
Indenture.

PROJECT ORANGE ASSOCIATES, L.P.

By: G.A.S. Orange Associates, LLC, a
Delaware limited liability company,
its general partner

/s/ Douglas Corbett
By: __________________________________________
Name: Douglas Corbett
Title: Vice President

<PAGE>

Exhibit 5.1

Piper Marbury Rudnick & Wolfe LLP
1251 Avenue of the Americas
New York, New York 10020-1104
www.piperrudnick.com

PHONE (212) 835-6000
FAX (212) 835-6001

April 25, 2000

Project Orange Associates L.P.
Project Orange Capital Corp.
c/o Scolaro, Shulman, Cohen, Lawler & Burstein, P.C.
90 Presidential Plaza
Syracuse, New York 13202-2200

Re: Project Orange Associates L.P. and Project Orange Capital Corp.:
----------------------------------------------------------------
Registration Statement on Form S-4
----------------------------------

Ladies and Gentlemen:

As counsel for Project Orange Associates L.P., a Delaware limited
partnership ("POA"), and Project Orange Capital Corp., a Delaware corporation
("Capital Corp." and together with POA, the "Issuers"), we have been requested
to furnish our opinion as to matters hereinafter set forth in connection with
the proposed issuance by the Issuers of $68,000,000 in aggregate principal
amount of 10.5% Senior Secured Notes Series B due 2007 (the "Exchange Notes"),
under an Indenture dated as of December 6, 1999, among POA (as successor to
Project Orange Funding, L.P.), Capital Corp. and U.S. Bank Trust National
Association (the "Trustee"), in exchange for the Issuers' outstanding 10.5%
Senior Secured Notes Series A due 2007 (the "Exchange Offer"). The issuance of
the Exchange Notes pursuant to the Exchange Offer will be registered under the
Securities Act of 1933, as amended (the "Act"), pursuant to a registration
statement on Form S-4 (the "Registration Statement"), which Registration
Statement sets forth the terms and conditions of the Exchange Offer. In
connection herewith, we have examined the Charter and Partnership Agreement of
POA, the Charter and Bylaws of Capital Corp. and the resolutions of the Issuers
with respect to the registration of the Exchange Notes and the issuance of the
Exchange Notes. We have also examined such other documents, records,
certificates of public officials and such matters of law as we have deemed
necessary or appropriate for the purpose of rendering this opinion.

We have not reviewed and we express no opinion with respect to the laws
of any jurisdiction other than the State of New York and the corporate laws of
the State of Delaware.

Project Orange Associates L.P.
Project Orange Capital Corp.
April 25, 2000
Page 2

Based upon the foregoing, we are of the opinion that when the Exchange
Notes are duly executed by the Issuers and authenticated by the Trustee in
accordance with the terms of the Indenture and issued in accordance with the
terms of the Exchange Offer, the Exchange Notes will be duly authorized and
constitute valid and binding obligations of the Issuers.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm appearing in the
Prospectus under the heading "Legal Matters." In giving the foregoing consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act or the rules or regulations of the
Securities and Exchange Commission thereunder.

Very truly yours,

/s/ Piper Marbury Rudnick & Wolfe LLP

- 2 -

<PAGE>

EXHIBIT 12.1
------------

PROJECT ORANGE ASSOCIATES, L.P.
Ratio of Earnings to Fixed Charges for the five years ended December 31, 1999

<TABLE>
<CAPTION>
12 Months Ended December 31
----------------------------------------------------------------
1995 1996 1997 1998 1999
------ ------ ------ ------ ------

(Dollars in thousands)

<S> <C> <C> <C> <C> <C>
1 EARNINGS
2 Net Income/loss $(2,946) $ 62 $(2,689) $ 5,029 $ 14,410
3 Interest Charges 15,333 15,063 14,694 7,364 555
4
5 Total Earnings (lines 2 and 3) 12,387 15,125 12,005 12,393 14,965
6
7 FIXED CHARGES
8 Interest Expense 15,333 15,063 14,694 7,364 476
9 Amortization of debt discount and financing costs - - - - 79
10
11 Total Fixed Charges (lines 8 + 9) 15,333 15,063 14,694 7,364 555
12
13 Ratio of Earnings to Fixed Charges (line 5/line 11) 0.8 1.0 0.8 1.7 27.0
</TABLE>

The ratio of earnings (net income/loss plus interest charges) to fixed
charges is computed by dividing earnings by fixed charges. Fixed charges
include interest expense and amortization of debt discount and financing
costs. The deficiency in earnings for the year ended December 31, 1997 and
1995 was $2,689,000 and $2,946,000, respectively.

<PAGE>

EXHIBIT 23.2

Independent Auditors' Consent

We consent to the use in the Amendment No.1 to Registration Statement Nos. 333-
30266 and 333-30266-01 of Project Orange Associates L.P. and Project Orange
Capital Corp. of our report dated March 30, 2000 appearing in the Prospectus,
which is a part of this Registration Statement, and to the reference to us under
the heading "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

April 25, 2000
Parsippany, New Jersey

<PAGE>
<ARTICLE> 5
<CIK> 0001105663
<NAME> PROJECT ORANGE ASSOCIATES LP

<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<CASH> 18,478 19,286 18,677
<SECURITIES> 0 0 0
<RECEIVABLES> 6,713 3,389 3,651
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 21,311 10,753 10,948
<PP&E> 121,135 120,696 120,652
<DEPRECIATION> 32,565 22,519 15,801
<TOTAL-ASSETS> 244,577 257,940 199,582
<CURRENT-LIABILITIES> 37,224 29,369 14,558
<BONDS> 66,854 0 160,030
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (27,741) 16,506 19,243
<TOTAL-LIABILITY-AND-EQUITY> 244,577 257,940 199,582
<SALES> 15,114 30,148 40,498
<TOTAL-REVENUES> 58,650 51,667 40,498
<CGS> 15,158 18,095 17,595
<TOTAL-COSTS> 44,036 39,509 28,931
<OTHER-EXPENSES> 204 7,129 14,256
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 555 7,364 14,694
<INCOME-PRETAX> 14,410 5,029 (2,689)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 14,410 5,029 (2,689)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 14,410 5,029 (2,689)
<EPS-BASIC> 0 0 0
<EPS-DILUTED> 0 0 0

</TABLE>