DESTEC ENERGY INC
8-K, 1996-09-30
COGENERATION SERVICES & SMALL POWER PRODUCERS
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<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549


                                   FORM 8-K


                                CURRENT REPORT

                      PURSUANT TO SECTION 13 OR 15(d) OF

                      THE SECURITIES EXCHANGE ACT OF 1934

     Date of Report (Date of earliest event reported):  September 13, 1996



                              DESTEC ENERGY, INC.
            (Exact name of registrant as specified in its charter)

       DELAWARE                     1-10592                 38-2875546
(State of Incorporation)     (Commission File No.)      (I.R.S. Employer
                                                         Identification No.)

                        2500 CITYWEST BLVD., SUITE 150
                             HOUSTON, TEXAS 77042
         (Address of principal executive offices, including zip code)



              Registrant's telephone number, including area code:
                                (713) 735-4000



                                NOT APPLICABLE
         (Former Name or Former Address, if changed since last report)
<PAGE>
 
ITEM 2.    ACQUISITION OR DISPOSITION OF ASSETS.

     On September 13, 1996, a consortium which includes an indirect wholly owned
subsidiary of Destec Energy, Inc. ("Destec") completed the acquisition of the
Hazelwood Power Station, a large coal-fired power generation facility, and the
adjacent Hazelwood Mine from the State of Victoria, Australia for approximately
$1.9 billion in cash. The purchase price was established pursuant to a bidding
process. In addition to the Destec subsidiary, which holds a 20% interest, the
consortium includes affiliates of the following entities: Pacificorp, a major
western electricity and coal producer based in Portland, Oregon, with a 19.9%
interest; National Power PLC, Great Britain's largest electricity generator,
with a 51.94% interest; and the Commonwealth Bank of Australia, with an 8.16%
interest.

     The consortium financed the acquisition with indebtedness of approximately 
$1.05 billion which was arranged and underwritten by Morwell Financial Services 
Pty Ltd, UBS Australia Limited, Citibank Limited, Societe Generale Australia 
Limited and the Commonwealth Bank of Australia, and with an equity contribution 
from each of the members of the consortium. Destec's share of the equity 
contribution was made from available cash.

ITEM 7.    FINANCIAL STATEMENTS AND EXHIBITS.

      (a)  FINANCIAL STATEMENTS FOR BUSINESS ACQUIRED.

           As of the date this report is being filed, it is impracticable to
           provide the required financial statements for the acquired business.
           The required financial statements will be filed as an amendment to
           this report as soon as practicable, but in any event not later than
           November 27, 1996.

      (b)  PRO FORMA FINANCIAL INFORMATION.

           As of the date this report is being filed, it is impracticable to
           provide the required pro forma financial information. The required
           pro forma financial information will be filed as an amendment to this
           report as soon as practicable, but in any event not later than
           November 27, 1996.

      (c)  EXHIBITS.

           The following materials are filed as Exhibits to this current report 
           of Form 8-K:

           2.1*  Share Sale Agreement dated August 4, 1996, among State
                 Electricity Commission of Victoria, the State of Victoria, the
                 Buyers (as defined) and the Guarantors (as defined).

           2.2*  Asset Sale Agreement dated August 4, 1996, between Hazelwood
                 Power Corporation Ltd. and Hazelwood Power Partnership.


______________
*         Confidential treatment has been requested with respect to portions
of these exhibits.
  


                                       1




 

  










<PAGE>
 
                                  SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the 
undersigned hereunto duly authorized.




                                DESTEC ENERGY, INC.

                                By: /s/ Marian M. Davenport 
                                   _______________________________
                                     Marian M. Davenport
                                     Vice President, General Counsel
                                     and Secretary



Date:  September 30, 1996







                                       2

<PAGE>
 
                                                                     EXHIBIT 2.1


                    STATE ELECTRICITY COMMISSION OF VICTORIA
                                      and
                             THE STATE OF VICTORIA
                                      and
                       THE BUYERS SPECIFIED IN SCHEDULE 1
                                      and
                     THE GUARANTORS SPECIFIED IN SCHEDULE 1

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

                              Share Sale Agreement
                  relating to HAZELWOOD POWER CORPORATION LTD

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

                          Freehill Hollingdale & Page
                                   Solicitors
                               101 Collins Street
                               Melbourne VIC 3000
                                   Australia
                           Telephone: (03) 9288 1234
                           Facsimile: (03) 9288 1567

                           Reference: RWN/BCF/1810621




***CERTAIN PORTIONS OF THIS EXHIBIT (MARKED WITH ASTERISKS) HAVE BEEN OMITTED 
HEREFROM AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION AS 
PART OF A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE 
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

<PAGE>
 
                               TABLE OF CONTENTS
 
1.   DEFINITIONS AND INTERPRETATION
l.1  Definitions                                              2
1.2  Interpretation                                           8

2.   SALE AND PURCHASE

2.1  Sale of Shares                                           9
2.2  Treasurer's Approval                                     9
2.3  Method of Payment                                        9
2.4  Dividend Payment                                         9 
2.5  Section 205                                              10

3.   DEPOSIT

3.1  Payment                                                  10
3.2  Non-refund                                               10  
3.3  Termination where Deposit Received                       10
3.4  Notice of Termination where no Deposit Received          10
3.5  Termination if Deposit not paid                          11
3.6  Remedies                                                 11

4.   PURCHASE PRICE

4.1  Amount                                                   11
4.2  Payment                                                  11
4.3  Interest on sums payable                                 11
4.4  Interest where Completion is delayed because of a
     Financial Assistance application                         11
4.5  Subsequent payments of Victorian Duty or State
     Equivalent Tax                                           11

5.   COMPLETION

5.1  Date for Completion                                      12
5.2  Delivery of documents relating to the Company            12
5.3  Meetings                                                 13
5.4  Buyers' obligations at Completion                        13
5.5  Remedies                                                 15

6.   POST COMPLETION MATTERS

6.1  Repayment of Loans                                       15
6.2  Definitions                                              16

7.   INTERDEPENDENCY

7.1  Interdependency between completions                      16
7.2  Deemed sequence                                          16
7.3  Rescission of Asset Sale Agreement                       17

8.   AUDITOR-GENERAL'S AUDIT

8.1  Audit by Auditor-General                                 17
8.2  Access to books                                          17

9.   BUYERS' OBLIGATIONS

9.1  Buyers' Warranties                                       17
<PAGE>

                                       2
 
9.2  Certification                                            19
9.3  Continued Holding                                        19
9.4  Buyers' Undertakings                                     19
9.5  Financial Assistance                                     20
9.6  Buyers' Indemnities                                      20

10.  EMPLOYEE EQUITY

11.  SELLER'S WARRANTIES

l1.l Giving of Warranties                                     2l
11.2 Reliance                                                 21
11.3 Acknowledgment                                           21
l1.4 Remedies                                                 22
11.5 Ability to claim                                         22
l1.6 Limitation on claims                                     23
11.7 Quantification of Claims                                 23
1l.8 State Equivalent Tax                                     23

12.  SELLER'S INDEMNITIES/COVENANTS

12.1 Tax Indemnity                                            24
12.2 Indemnity                                                24
12.3 Claims procedure                                         24

13.  ACTION PENDING COMPLETION

13.1 Carrying on of business                                  25
13.2 Buyers' Representative                                   26
13.3 Access                                                   26

14.  ANNOUNCEMENTS

14.1 Legal requirements                                       26
14.2 Disclosure to officers and professional advisers         27
14.3 Further publicity                                        27
14.4 Company's compliance with Electricity Act                27

15.  DUTIES, COSTS AND EXPENSES

15.1 Payment of Duty                                          27
15.2 Indemnity                                                27
15.3 Costs and expenses                                       27
15.4 Costs of performance                                     27

16.  GUARANTORS' GUARANTEE AND INDEMNITY

16.1 Guarantee                                                27 
16.2 Additional Funding                                       28
16.3 Indemnity                                                28
16.4 Extent of guarantee and indemnity                        28
16.5 Avoidance of payments                                    28
16.6 Continuing guarantee and indemnity                       29 
16.7 Warranties of the Guarantors                             29
<PAGE>

                                       3
 
16A  CBA GROUP UNDERTAKINGS

17.  STATE'S GUARANTEE AND INDEMNITY

17.1 Guarantee                                                30
17.2 Indemnity                                                30
17.3 Extent of guarantee and indemnity                        30
17.4 Avoidance of payments                                    30
17.5 Continuing guarantee and indemnity                       31
17.6 Warranties of the State                                  31

18.  NOTICES

18.1 General                                                  31
18.2 Legibility of facsimile transmission                     32

19.  ON-GOING OBLIGATIONS

19.1 Continued Access                                         32
19.2 Power Station Operations                                 33
19.3 IKEA Lease                                               33
19.4 Heads of Agreement                                       33
19.5 Novation of ETSA Agreements                              33
19.6 ***                                                      34

20.  GENERAL

20.1 Governing law and jurisdiction                           34
20.2 Waivers                                                  34
20.3 Variation                                                34
20.4 Further assurances                                       34
20.5 Third party rights                                       34
20.6 This agreement supersedes others                         35
20.7 Assignment                                               35

WARRANTY 1 SHARES AND CAPITAL

l.1  Title                                                     1
l.2  Consents                                                  l
1.3  Issued capital                                            1
1.4  Authorised capital                                        1
1.5  Fully paid                                                1
1.6  Issue of other securities                                 1
1.7  No legal impediment                                       1
1.8  Authorisations                                            2

WARRANTY 2 CORPORATE EXISTENCE

2.1  Corporate existence                                       2
2.2  Compliance with constituent documents                     2

WARRANTY 3 THE 1995 ACCOUNTS

3.1  Basis of preparation                                      2 
3.2  Fair Presentation                                         2

WARRANTY 4 PERIOD SINCE THE DRAFT BALANCE SHEET

4.1  Carrying on business                                      2
<PAGE>

                                       4
 
WARRANTY 5 ASSETS

5.1  Title to assets                                           3
5.2  Book Debts                                                3

WARRANTY 6 DISCLOSURE

6.1  Disclosure                                                4

WARRANTY 7 SECURED DEBT

WARRANTY 8 CONTRACTS

8.1  Foreign currency transactions                             4
8.2  Change of control                                         4
8.3  No notices                                                4

WARRANTY 9 DELEGATIONS AND OFFERS

9.1  Powers of attorney                                        4
9.2  Offers outstanding                                        4

WARRANTY 10 CREDITORS

10.1 Outstanding Notes                                         5

WARRANTY 11 CORPORATE STRUCTURE

11.1 Shareholdings                                             5
11.2 Permanent establishment                                   5
11.3 Memberships                                               5

WARRANTY 12 EMPLOYEES

12.1 Allowances                                                5
l2.2 Termination of employment                                 5
12.3 Employee Plans                                            5

WARRANTY 13 SUPERANNUATION SCHEMES

13.1 List complete                                             6
13.2 Funding                                                   6
13.3 Approvals                                                 6

WARRANTY 14 UNIONS

14.1 Agreements                                                6
14.2 Awards                                                    6

WARRANTY 15 COMPLIANCE WITH LAW

15.1 Compliance with law                                       7
15.2 Conduct and practices                                     7
15.3 Licences obtained                                         7

WARRANTY 16 LITIGATION

16.1 Company not a party to any litigation                     7
16.2 No litigation pending or threatened                       7

WARRANTY 17 SOLVENCY

17.1 No liquidation or winding-up                              7
17.2 No petition                                               8
<PAGE>

                                       5
 
17.3 No writ of execution                                      8
17.4 No receiver                                               8

WARRANTY 18 RECORDS AND CONSTITUENT DOCUMENTS

18.1 Records                                                   8
18.2 Memorandum and Articles                                   8
18.3 Register of members                                       8

WARRANTY 19 TAXES AND DUTIES

19.1 Provisioning                                              8
19.2 Documents stamped                                         8
19.3 Returns submitted                                         9

WARRANTY 20 INSURANCES

20.1 Premiums Paid                                             9
20.2 Maintenance of policies                                   9
<PAGE>
 
THIS SHARE SALE AGREEMENT is made on 4 August 1996 between the following
parties:

1. STATE ELECTRICITY COMMISSION OF VICTORIA of Level 5, 452 Flinders
   Street, Melbourne 3000 ("Seller");

2. THE HONOURABLE ALAN ROBERT STOCKDALE in his capacity as Treasurer of the
   State of Victoria for and on behalf of the Crown in right of the State
   ("State");

3. The Buyers specified in column A of Schedule l (each a "BUYER" and together
   the "Buyers"); and

4. The Guarantors specified in column C of Schedule 1 (each a "GUARANTOR" and
   together the "GUARANTORS").

RECITALS:

A. The Seller is the beneficial owner of the Shares.

B. The Seller agrees to sell (and procure the sale by the Nominees) and the
   Buyers agree to buy, the Shares on the terms and conditions set out in this
   agreement.

C. Immediately before the sale of the Shares, the Buyers will, under the Asset
   Sale Agreement, purchase the Assets from the Company on the terms and
   conditions set out in such Agreement.

D. The State agrees to guarantee the obligations of the Seller under this
   agreement.

E. Each Guarantor severally agrees to guarantee the obligations of its
   Respective Buyer's contribution to the payments to be made by the Buyers and
   the Company under this agreement on the terms and conditions set out in this
   agreement.
 
F. The estimated total proceeds to the State and the Seller from the
   transactions contemplated by this agreement are $2,400,000,000, assuming
   Completion occurs on 13 September 1996, the components of which are as
   follows:
 
                                                            S
   (a)  Dividend (clause 2.4)                       l,l81,400,551.13
   (b)  Estimated State Equivalent Tax:
        (clause 5.4(b) and 11.8)
        (1) Asset sale                                486,579,121.87
        (2) trading profits                                Nil
   (c)  Purchase Price (clause 5.4(a))                      1,000
   (d)  Repayment of SECV Loan (clause 6)             456,478,955
   (e)  Repayment of TCV Loan (clause 6)              142,025,344.52
   (f)  Estimated Victorian Duty (clause 5.4(c))      133,515,027.48
                                                   -----------------
   Estimated total proceeds                        $2,400,000,000.00
                                                   =================
<PAGE>
 
                                       2
 
THE PARTIES AGREE as follows:

                       1. DEFINITIONS AND INTERPRETATION

1.1 DEFINITIONS

In this agreement:

"1995 ACCOUNTS" means the audited balance sheet of the Company as at 30 June
1995, the audited profit and loss statement for the Company for the period 28
June 1994 to 30 June 1995 and all notes forming part of those accounts, a copy
of which is set out in Annexure A.

"ADVISERS" means all of the advisers of the State or the Seller in relation to
the sale of the Company and all other transactions contemplated by this
agreement including without limitation, CS First Boston Australia Limited, KPMG,
KPMG Corporate Finance (Vic.) Pty Ltd, Energy Projects Division of the
Department of Treasury and Finance and Freehill Hollingdale & Page.

"AFFILIATE" means any person or entity that has a relationship with a designated
person whereby either of such persons or entities directly or indirectly
controls, is controlled by or is under common control with the other. For this
purpose, the term "control" means the power, direct or indirect, of one person
to direct or cause the direction of the management or policies of another,
whether by contract, through voting, securities or otherwise.

"ALLOCATION STATEMENT" means, in relation to the Company, any statement which,
for the purposes of section 153B of the Electricity Act, is an allocation
statement pursuant to which any property, rights or liabilities of Generation
Victoria were vested in the Company and includes the Generation Victoria
allocation statement dated 31 January 1995 (as amended on 23 August 1995 and
29 February 1996) (the "GV ALLOCATION STATEMENT").

"APPROVAL DATE" means the date on which the Company is able to give the
Financial Assistance, being:

(a) (where no application is made under section 205(12) of the Corporations Law)
    the first Business Day after the 21 day notice period referred to in section
    205(12) has expired; or

(b) (where an application is or applications are made under section 205(l2) of
    the Corporations Law) the first Business Day after:

    (1) the application or each application has been withdrawn; or

    (2) the Court has approved the giving of the Financial Assistance,
        whichever applicable date first occurs.

"ASSETS" has the meaning given to that term in the Asset Sale Agreement.

"ASSET SALE AGREEMENT" means the agreement so titled of today's date entered
into between the Company and the Buyers under which the Buyers shall acquire
certain assets.

"ASSOCIATE" has the meaning given to that term in the Electricity Act.

"AUDITOR-GENERAL" means the Auditor-General for the State.

"AUTHORISATION" includes:

(a) any consent, registration, filing, agreement, notarisation, certificate,
    licence, approval, permit, authority or exemption from, by or with a
    Governmental Agency; and

(b) in relation to anything which may be proscribed or restricted in whole or in
    part by law or otherwise if a Governmental Agency intervenes or acts in any
    way within a specified
<PAGE>
 
                                       3
 
    period after lodgement, registration or other notification of anything, the
    expiration of that period without the intervention or action by that
    Governmental Agency.

"BALANCE SHEET" means the balance sheet of the Company as at 30 June 1996 set
out in Annexure C.

"BASE RATE" means, in respect of a given date, the rate percent per annum which
is described as the "Average Mid Rate" and appears on the page entitled "BBSW"
on the Reuters Monitor System at or about 10.00 am (Melbourne time) on that date
for a bank accepted bill of exchange having a tenor of 30 days.

"BUSINESS" means the businesses of the generation and supply of electricity, the
exploration for, mining, production and supply of coal and other raw products
used in the supply of electricity, the supply of coal to other persons, the
acquisition and trade of electricity, coal and other raw products used in the
generation of electricity and the provision of related field, technical and
engineering services carried on by the Company, including the construction and
operation of power stations.

"BUSINESS DAY" means a day on which banks are open for business in Melbourne,
excluding a Saturday or a Sunday or a public holiday.

"BUYERS' REPRESENTATIVE" has the meaning given to that term in clause 13.2.

"BUYERS' WARRANTIES" means the warranties and representations of the Buyers set
out in clause 9.1.

"COMPANY" means Hazelwood Power Corporation Ltd ACN 065 381 204.

"COMPANY'S FUND" means that part of the Victorian Electricity Industry
Superannuation Fund which relates to the Company.

"COMPLETION" means completion of the sale and purchase of the Shares under
clause 5.

"COMPLETION DATE" means the later of:

(a) 13 September 1996; and

(b) the first Business Day after the Approval Date, or such other date as is
    agreed in writing by the parties.

"CONTROL" has the same meaning as that in parts 3.6 and 3.7 of the Corporations
Law.

"CONTROLLING GROUP MEMBER" has the meaning given to that term in clause
5.4(f)(4).

"DATA ROOM DOCUMENTATION" means all documentation contained in the data room and
listed in the Data Room Index dated 6 June 1996 and any supplementary Data Room
Index sheets 1 to 26 and the Industry Index and supplementary indices A and OG.

"DEPOSIT" means $100,000,000.

"DISCLOSURES" means the information described in schedule 3.

"DISPOSE OF" includes transfer, sell or otherwise dispose of any right, title
or interest in or otherwise allow any person to acquire a Relevant Interest in,
but does not include the giving of any Security Interest to a bank or other
financial institution.

"DOLLARS" "A$" and "$" means the lawful currency of the Commonwealth of
Australia.

"DUTY" means any stamp, transaction or registration duty or similar charge
imposed by any State Governmental Agency and includes, but is not limited to,
any interest, fine, penalty, charge or
<PAGE>
 
                                       4
 
other amount imposed in respect of the above, but excludes any State Equivalent 
Tax or other Tax.

"ELECTRICITY ACT" means the Electricity Industry Act 1993.

"EMPLOYEES" means those employees engaged in the Business as at Completion.

"ENERGY BRIX OR EBAC" means Energy Brix Australia Corporation Pty Ltd
(ACN 051 705 364).

"EBAC COMPLETION DATE" means the first to occur of:

(a) the completion date as defined in the EBAC Share Sale Agreement; or

(b) the completion date as defined in any agreement for the sale of the whole of
    the issued share capital of EBAC to any buyer pursuant to the EBAC Support
    Deed, if completion of the EBAC Share Sale Agreement does not occur on the
    Completion Date as defined in the EBAC Share Sale Agreement.

"EBAC" SHARE SALE AGREEMENT" means the agreement so titled of today's date 
entered into between the Seller, the State and the buyer listed therein under 
which the buyer acquires all the issued shares of EBAC.

***

"EBAC TRUST CONTRIBUTION" means:

(a) forty two million, seven hundred thousand four hundred and ninety dollars
    ($42,700,490) if the buyer listed in the EBAC Share Sale Agreement acquires
    all of the issued shares in Energy Brix; or

(b) fifty million dollars ($50,000,000) if the Buyers' nominee acquires all the
    issued shares in Energy Brix under the EBAC Support Deed upon the occurrence
    of certain events.

"ENERGY LEVY ORDER" means any order made under section 158B of the Electricity 
Act.

"ENERGY SECURITIES" means, in relation to a company, fully or partly paid shares
in the capital of that company (including stock), options in respect of or 
rights to subscribe for any such shares, securities (debt or equity) convertible
into or exchangeable for any such shares, and equity securities the income 
and/or capital rights of which are determined by reference to the income and/or 
capital rights of any such shares in the company (together with options to 
subscribe for any such securities and securities convertible into or 
exchangeable for any such securities).

"ESTIMATED STATE EQUIVALENT TAX" has the meaning given to that term in clause 
11.8.

"ESTIMATED VICTORIAN DUTY" means the estimate of Victoria stamp duty referred to
in clause 5.4(c).

"ESTA AGREEMENTS" means the deeds described in clauses 17.2 to 17.10 (inclusive)
of the Generation Licence.

***

"EXEMPT PERSON" means a person who holds or will hold a beneficial interest in 
the shares held by a shareholder in a Buyer by virtue of its investment or 
interest in:
<PAGE>
 
                                       5
 
(a) a regulated superannuation fund, an approved deposit fund or a pooled
    superannuation fund in each case within the meaning of the Superannuation
    Industry (Supervision) Act 1993;

(b) or arising out of, a life policy within the meaning of the Life Insurance
    Act 1995; or

(c) prescribed interests issued pursuant to a deed which is an approved deed as
    defined in section 1066 of the Corporations Law.

"FINANCIAL ACCOMMODATION LEVY" means the levy payable pursuant to section 40N of
the Financial Management Act 1994 for the period from 1 July 1995 up to and
including the Completion Date.

"FINANCIAL ASSISTANCE" means the financial assistance which the Company may give
for the purpose of, or in connection with, the acquisition by the Buyers of the
Shares.

"FUND TRUSTEE" shall have the same meaning as ascribed to that expression under
the EBAC Support Deed.

"GENERATOR" means the holder of a generation licence issued under Part 12 of the
Electricity Act by the Office of the Regulator-General.

"GENERATION LICENCE" means the generation licence issued to the Company under
Part l2 of the Electricity Act by the Office of the Regulator-General on 31
January 1995 as amended on 7 August 1995, 1 March 1996 and 23 July 1996.

"GOVERNMENTAL AGENCY" means the government of any country or any state,
territory, municipality or other political subdivision of a country, and any
minister, administrative or judicial body, department, commission, authority,
instrumentality, tribunal, agency or entity of any such government.

"GROUNDWATER LICENCE" means the groundwater licence issued or to be issued to
the Company under section 51 of the Water Act 1989 in substantially and in all
material respects in the same form as the draft groundwater licence set out in
Annexure E.

"GROUP" means:

(a) in relation to each shareholder in each Buyer other than CISL (Hazelwood)
    Pty Ltd, ("CFS SPV") (and each person who holds a beneficial interest in the
    shares held by that shareholder) ("first named person"):

    (1) the Ultimate Holding Vehicle of that first named person; and

    (2) every person interposed between that Ultimate Holding Vehicle and the
        first named person,
   
    with each such vehicle, person or corporation being a "GROUP MEMBER"; and

(b) in relation to CFS SPV (and each person who holds a beneficial interest in
    the shares held by CFS SPV):

    (1) Commonwealth Investment Services Limited ("CISL"); and
 
    (2)  any:

         (A) regulated superannuation fund, approved deposit fund or pooled
             superannuation fund (in each case within the meaning of the
             Superannuation Industry (Supervision) Act 1993);

         (B) life insurance company as defined in the Life Insurance Act 1995;
             or
<PAGE>
 
                                      6
 
         (C) trust in relation to which there is an approved deed as defined in
             section 1066 of the Corporations Law,

         in respect of which CISL is the manager or has been granted full
         management rights in respect of any investment by that fund, life
         insurance company or trust in the Buyer.

    with each such corporation, fund, trust or person being a "Group Member.

"GV ALLOCATION STATEMENT" has the meaning given that term in the definition of
Allocation Statement".

"HEADS OF AGREEMENT" means the heads of agreement dated 31 July 1996 entered
into between the Company and Power Net Victoria under which the Company has
agreed to grant certain real property interests to Power Net Victoria.

"IKEA" means IKEA Deutschland Verkaufs - GmbH & Co. Einrichtungs KG, Am
Wandersmann 2-4, D-65719 Hofheim, Wallan, Federal Republic of Germany (formerly
named Ikea Einrichtungs - GmbH).

"IKEA LEASE" means the lease described in schedule 4.

"MATERIAL CONTRACT" has the meaning given that term in warranty 4.l(b) of
schedule 2.

"MAXIMUM CAPACITY" has the meaning given to that term in clause l9.2(a).

"MINING LICENCE" means the mining licence to be issued to the Company (to be
held on trust absolutely for the Buyers) under section 47A of the Electricity
Act in substantially and in all material respects in the same form as the draft
mining licence set out in Annexure F.

"NOMINEES" means Messrs Greaves, Drewett, Coughlin and McMahen.

"OFFICER" means a director or secretary of the relevant party or Company (as the
case may be).

"PARTNERSHIP DEED" means the partnership deed to be entered into by the Buyers
on or about the date of this agreement, as amended from time to time.

"PERMITTED TRANSFEREE" means as to any person or entity in respect of which
transfer is restricted under this agreement,

    (a) any Group Member or Affiliate of such person or entity; or

    (b) any other Buyer or Group Member or Affiliate of any other Buyer.

"POWER" means any right, power, authority, discretion or remedy conferred on the
parties by this agreement or any applicable law.

"PROHIBITED INTEREST" has the meaning given to that term in the Electricity Act.

"PURCHASE PRICE" means the price payable for the Shares under clause 4.l.

"RELEVANT AGREEMENT" has the meaning given to that term in the Electricity Act.

"RELEVANT INTEREST" has the meaning given to that expression in the Corporations
Law.

"RESPECTIVE BUYER" means, in relation to a Guarantor, the Buyer set out against
its name in schedule 1.

"SECURITY INTEREST" means an interest or power:

    (a) reserved in or over an interest in any asset including, but not limited
        to, any retention of title; or
<PAGE>
 
                                      7 

    (b) created or otherwise arising in or over any interest in any asset under
        a bill of sale, mortgage, charge, lien, pledge, trust or power,

by way of security for the payment of a debt or any other monetary obligation or
the performance of any other obligation and includes, but is not limited to, any
agreement to grant or create any of the above.

"SECV LOAN" means any liability pursuant to section l53F of the Electricity Act
(on such terms and conditions as apply on the Completion Date) of the Company to
the Seller arising as a result of a direction given by the Treasurer under sub-
section 153W(3) of the Electricity Act (which on the Completion Date shall not
exceed $456,478,955).

"SELLER'S WARRANTIES" means the warranties and representations of the Seller set
out in schedule 2.

"SHARES" means the fifteen issued ordinary shares of $1.00 each currently in the
capital of the Company and the further 985 ordinary shares in the Company to be
issued in accordance with clause 5.3(a).

"STATE EQUIVALENT TAX" means such amounts due to the Treasurer under section
88(1)(a) of the State Owned Enterprises Act 1992 in respect of tax (not being
sales tax) that would be payable by the Company if it were liable to pay taxes
under the law of the Commonwealth.

"STATION" has the meaning given to that term in clause 19.2(a).

"TARGET GROUP MEMBER" has the meaning given to that term in clause 5.4(f)(4).

"TARIFF ORDER" means any order made under section 158A of the Electricity Act.

"TAX" means any tax, levy, charge, impost, duty, fee, deduction or withholding
which is assessed, levied, imposed or collected by any State Governmental Agency
and includes, but is not limited to any interest, fine, penalty, charge, fee or
any other amount imposed on, or in respect of, any of the above and any amount
imposed under section 88 of the State Owned Enterprises Act 1992 but excludes:

    (a) any Duty; and

    (b) the SECV Loan. 

"TCV" means Treasury Corporation of Victoria. 

"TCV LOAN" means the sum of $142,025,344.52.

"THIRD PARTY CLAIM" has the meaning given to that term in clause 12.3.

"TREASURER" means the Treasurer of the State of Victoria.

"TREASURER'S ACCOUNTANTS" has the meaning given to that term in clause 8.1.

"ULTIMATE HOLDING VEHICLE" means:

    (a) in relation to a body corporate, the same meaning as that given to
        "Ultimate Holding Company" in the Corporations Law;
       
    (b) in relation to any other investment vehicle (trust or otherwise), the
        person who Controls that investment vehicle and is itself not Controlled
        by any person; and

    (c) in relation to Australian Power Partners CV shall mean Destec Energy,
        Inc, a Delaware Corporation.

"VESTED HEDGING CONTRACT" means an agreement entered into between any two of the
following:
<PAGE>
 
                                       8
 
    (a) the persons holding distribution licences issued under Part 12 of the
        Electricity Act;

    (b) the persons holding generation licences issued under Part 12 of the
        Electricity Act; and

    (c) the Seller,

    or between the Seller acting in one capacity and the Seller acting in
    another capacity, entered into on or about 31 March 1995 which incorporate
    the Master Vesting Terms and Conditions.

1.2 INTERPRETATION

In this agreement, unless the context otherwise requires:

    (a) headings and underlinings are for convenience only and do not affect the
        interpretation of this agreement;

    (b) words importing the singular include the plural and vice versa;

    (c) words importing a gender include any gender;

    (d) other parts of speech and grammatical forms of a word or phrase defined
        in this agreement have a corresponding meaning;

    (e) an expression importing a natural person includes any company,
        partnership, joint venture, association, corporation or other body
        corporate and any Governmental Agency;

    (f) a reference to a clause, party, annexure, exhibit or schedule is a
        reference tO a clause of, and a party, annexure, exhibit and schedule
        to, this agreement and a reference to this agreement includes any
        annexure, exhibit and schedule;

    (g) a reference to a statute, regulation, proclamation, ordinance or by-law
        includes al1 statutes, regulations, proclamations, ordinances or by-laws
        amending, consolidating or replacing it, and a reference to a statute
        includes all regulations, proclamations, ordinances and by-laws issued
        under that statute;

    (h) a reference to a document includes all amendments or supplements to, or
        replacements or novations of, that document;

    (i) a reference to a party to a document includes that party's successors
        and permitted assigns;

    (j) where the day on or by which any thing is to be done is not a Business
        Day, that thing must be done on or by the next Business Day;

    (k) no rule of construction applies to the disadvantage of a party because
        that party was responsible for the preparation of this agreement or any
        part of it;

    (l) a covenant or agreement on the part of two or more persons binds them
        jointly and severally;

    (m) a reference to an agreement other than this agreement includes an
        undertaking, agreement or legally enforceable arrangement or
        understanding whether or not in writing;

    (n) a reference to an asset includes all property of any nature, including,
        but not limited to, a business, and all rights, revenues and benefits;

    (o) a reference to a document includes any agreement in writing, or any
        certificate, notice, instrument or other document of any kind;

    (p) a reference to liquidation includes appointment of an administrator,
        compromise, arrangement, merger, amalgamation, reconstruction, winding-
        up, dissolution, assignment for the benefit of creditors, scheme,
        composition or arrangement with creditors,
<PAGE>
 
                                       9
 
        insolvency, bankruptcy, or any similar procedure or, where applicable,
        changes in the constitution of any partnership or person, or death;

    (q) terms used in this agreement and defined in the Corporations Law at the
        date of this agreement have the meanings given to them in the
        Corporations Law at that date;

    (r) the benefit of this agreement to the extent it relates to any
        undertaking given by the Buyers to the State in relation to
        contributions to the Company's Fund, shall be held by the State
        beneficially for itself and as trustee for all other contributing
        employers to, and the trustee of, that Fund; and

    (s) the benefit of this agreement to the extent it relates to a
        representative of the Company or an Adviser, shall be held by the State
        beneficially for itself and as trustee for that representative or
        Adviser (as the case may be).

                              2. SALE AND PURCHASE

2.1 SALE OF SHARES

Subject to the terms of this agreement, the Seller must sell (and procure the
Nominees to sell) free of Security Interests and other third party rights and
the Buyers must buy the Shares for the Purchase Price on Completion, as
follows:

      BUYER                                             INTEREST IN SHARES
National Power Australia Investments Limited                  51.94%
Hazelwood Pacific Pty Ltd                                     19.90%
Australian Power Partners C.V.                                20.00%
Hazelwood Investment Company Pty Ltd                           2.04%
CISL (Hazelwood) Pty Ltd                                       6.12%

The Seller and the Buyers agree that on Completion the Shares will be
transferred to National Power Australia Investments Limited as nominee for the
Buyers, to be held in accordance with the Partnership Deed.

2.2 TREASURER'S APPROVAL

For the purposes of section 12A(e) of the State Electricity Commission Act 1958,
the Treasurer (in his capacity as such) hereby approves the sale of the Shares
by the Seller on and subject to the terms of this agreement.

2.3 METHOD OF PAYMENT

All payments to be made under this agreement must be made by bank cheque or by
such other immediately available funds as may be agreed in writing between the
Seller and the Buyers.

2.4 DIVIDEND PAYMENT

The Seller shall procure that the board of directors of the Company comprising
nominees of the State declares, on the Completion Date, a dividend of
$1,181,400,551.13 to the Seller out of the accumulated profits (after State
Equivalent Tax) of the Company. The Buyers shall procure that the board of
directors of the Company comprising nominees of the Buyers pays, on Completion,
the amount of the dividend so declared.
<PAGE>
 
                                      10
 
2.5 SECTION 205

The Seller shall pass, and procure that the Nominees ensure that the Company
passes, the resolutions relating to the Financial Assistance which have been
notified by the Buyers to the Seller prior to execution of this agreement. The
parties further agree that their respective responsibilities in relation to
obtaining all approvals, authorisations or other requirements set out in
sections 205 and 206 of the Corporations Law are as set out in annexure D.

                                   3. DEPOSIT

3.1 PAYMENT

If Completion does not occur on the later of 13 September 1996 and the first
Business Day after the Approval Date then each Buyer must, on that date, pay to
the Seller its several proportion of the Deposit as referred to in Schedule 1,
unless the failure to Complete arises solely because of:

(a) a Court failing to make an order under sub-section 205(13) of the
    Corporations Law if a person not associated with the Buyers makes an
    application under sub-section 205(12) of the Corporations Law with respect
    to the Financial Assistance; or

(b) a default by the State or the Seller in meeting their obligations to
    complete under this agreement.

If any of the reasons specified in (a) or (b) above cease to prevent Completion
occurring then the Buyers must, on the first Business Day after the reason
ceases to prevent Completion occurring, pay to the Seller the Deposit.

3.2 NON-REFUND

The Deposit shall only be refunded to the Buyers (and the Seller must refund the
Deposit) if the Buyers are not in breach of this agreement and either the State
and the Seller, or the Buyers, exercise their rights to terminate this agreement
under clause 5.5. The Deposit shall be regarded as part of the payments which
the Seller and the State are expecting to receive on the Completion Date and not
merely a deposit on the Purchase Price subject to clause 3.6. The Buyers
acknowledge that it may be retained by the Seller in the circumstances mentioned
above even though many of the payments are expected to be made by the Company.

3.3 TERMINATION WHERE DEPOSIT RECEIVED

If the Deposit is paid as contemplated under clause 3.1:

(a) the State and the Seller may at their complete discretion and on such terms
    as they see fit negotiate with persons other than the Buyers for the sale
    and purchase of the Shares and all related transactions including the sale
    of the Assets;

(b) the State and the Seller may terminate this agreement by notice in writing
    any time after 31 October 1996 (and, if designated as a notice under this
    clause, such termination shall be regarded as termination under this clause
    and not clause 5.5); and

(c) after termination of this agreement, the Seller and the State may complete
    the sale and purchase of the Shares and the sale of the Assets with another
    person.

3.4 NOTICE OF TERMINATION WHERE NO DEPOSIT RECEIVED

If the Buyers do not pay to the Seller the Deposit as contemplated under clause
3.1, then the Seller may, at any time after 13 September 1996 give written
notice (the "First Notice") to the Buyers that it may terminate this agreement
(and the Asset Sale Agreement) by a further notice in writing to the Buyers, if
the Buyers do not pay the Deposit (together with interest calculated in
<PAGE>
 
                                      11
 
accordance with clause 4.3) within three Business Days of receipt of the First
Notice by the Buyers.

3.5 TERMINATION IF DEPOSIT NOT PAID

If the Deposit and interest is not paid within such period then the Seller may
at any time after the expiration of the three Business Day period terminate this
agreement promptly by notice in writing to the Buyers. On termination of this
agreement, the Asset Sale Agreement shall automatically terminate.

3.6 REMEDIES

If this agreement is terminated under this clause 3 then in addition to any
other rights provided by law, the State and the Seller retain the rights they
have against the Buyers, including without limitation, the right to retain the
Deposit (on account of liquidated damages), to the extent of any deficiency upon
resale (including without limitation the time value of money) in the aggregate
proceeds of sale (however described) and any resulting expenses.

                               4. PURCHASE PRICE

4.1 AMOUNT

The price ("Purchase Price") payable is $1,000.

4.2 PAYMENT

On and subject to the terms and conditions of this agreement the Buyers must in
the proportions set forth in column B of schedule 1 pay the Purchase Price on
the Completion Date.

4.3 INTEREST ON SUMS PAYABLE

Subject to clause 4.4, if any party or the Company fails to pay any sum payable
by it under or in accordance with this agreement at the time and otherwise in
the manner provided in this agreement, the Buyers must pay interest on that sum
from the due date of payment until that sum is paid in full at the Base Rate
plus 4% except interest under this clause 4.4 shall not be payable by any party
on the TCV Loan and interest payable thereon pursuant to clause 6.l(b).

4.4 INTEREST WHERE COMPLETION IS DELAYED BECAUSE OF A FINANCIAL ASSISTANCE
    APPLICATION

The parties acknowledge and agree that if Completion does not occur on 13
September 1996 solely because an application is made under section 205(12) of
the Corporations Law in respect of the Financial Assistance, then the Buyers
must pay interest on all sums payable by the Company and the Buyers on
Completion (less the Deposit paid) from that date until the sum is paid in full
at the rate equal to the Base Rate, except interest under this clause 4.3 shall
not be payable by any party on the TCV Loan or any interest payable thereon
pursuant to clause 6.1(b). Interest accrues from day to day and is payable on
demand.

4.5 SUBSEQUENT PAYMENTS OF VICTORIAN DUTY OR STATE EQUIVALENT TAX

The Seller:

(a) shall pay any State Equivalent Tax which becomes payable by the Company
    after Completion and any State Equivalent Tax payable by the Company under
    clause 11.8, and shall be entitled to collect the amount of any refund of
    State Equivalent Tax payable to the Company after the Completion Date;

(b) shall pay any Victorian Duty payable by the Company or the Buyers after
    Completion, and shall be entitled to collect the amount of any refund of
    Victorian Duty payable to the
<PAGE>
 
                                      12
 
Company or the Buyers after the Completion Date, where the Victorian Duty is in
respect of:

(l) the sale of the Assets by the Company to the Buyers;

(2) the sale of the Shares under this agreement; or

(3) any financing of the Company or the Buyers entered into on or before
    Completion to finance the transactions contemplated by this agreement and
    security granted on or before Completion to secure that financing.

For the avoidance of doubt, the obligations of the Seller to make the payments
described in this clause do not extend to the payments required to be made by
the Buyer or the Company under clauses 5.4(b) (other than State Equivalent Tax
referred to in l1.8 (if any)) and 5.4(c).

                                 5. COMPLETION

5.1 DATE FOR COMPLETION

Completion must take place at 10 am on the Completion Date at the office of the
Seller's solicitors, Freehill Hollingdale & Page, 48th Floor, 101 Collins
Street, Melbourne.

5.2 DELIVERY OF DOCUMENTS RELATING TO THE COMPANY

At Completion, the Seller must:

(a) deliver to the Buyers share certificates for the Shares;

(b) deliver to the Buyers completed transfers of the Shares to the Buyers in
    registrable form, pursuant to instructions provided by the Buyers, executed
    by the Seller and, where applicable, the Nominees;

(c) deliver to the Buyers the certificate of incorporation, common seal and all
    statutory, minute and share certificate books of the Company;

(d) deliver to the Buyers the written resignations of all directors of the
    Company except those directors to whom the Buyers notify the Seller no later
    than 8 September 1996 that it wishes to retain, to be effective on the
    appointment of the directors to be appointed at the Board meeting to be
    convened under clause 5.3; 

(e) make available to the Buyers at the respective offices or places of business
    of the Company:

    (1) all ledgers, journals and books of account of the Company;

    (2) all cheque books of the Company and a list of all bank accounts 
        maintained by the Company; and

    (3) all documents in the possession of the Company relating to the ownership
        and use of the assets of the Company;

(f)  deliver to the Buyers:

     (1)  the Generation Licence;

     (2)  the Groundwater Licence;

     (3) a certificate of the Treasurer pursuant to section 171A of the
         Electricity Act with respect to PacifiCorp Holdings, Inc. and its
         related corporations and the matters set out in paragraphs (a) and (b)
         of that section;
<PAGE>
 
                                      13
 
     (4) a full discharge and release in respect of the Company's obligation to
         pay the Financial Accommodation Levy; and

     (5) the consent of the Generators controlled by the State to the Company
         declaring that it holds the ETSA Agreements on trust for the Buyers;
         and

(g) procure that the Financial Accommodation Levy is paid by the Company to the
    State (and for the avoidance of doubt, this payment does not form part of
    the total proceeds payable to the State and the Seller from the
    transactions contemplated by this agreement).

5.3 MEETINGS

At Completion, the Seller must ensure that a meeting of the directors or
shareholders (as appropriate) of the Company is convened and conducts the
following business:

(a) allotment of 985 ordinary shares in the Company to the Seller credited as
    fully paid out of the profits of the Company;

(b) approval of the registration of the Buyers as the holders of the Shares in
    the books of the Company, subject to the payment of Duty on the transfer of
    the Shares;

(c) appointment of the nominees of the Buyers as directors of the Company; and

(d) declaration of the dividend required to be paid pursuant to clause 2.4.

5.4 BUYERS' OBLIGATIONS AT COMPLETION

At Completion the Buyers must:

(a) pay the Seller the Purchase Price;

(b) procure that the Company pays to the State the Estimated State Equivalent
    Tax;

(c) pay or procure the payment of the Estimated Victorian Duty payable by the
    Company and the Buyers in respect of the matters set out in clause 4.5(b)(1)
    to (3) (inclusive) which is equal to $133,515,027.48,

(d) procure that the Company pays to the Seller the dividend required to be paid
    under clause 2.4;

(e) deliver to the State covenants (in form and substance satisfactory to the
    State) from each shareholder in each Buyer (and each person who holds a
    beneficial interest in the shares held by that shareholder) (not being a
    person who holds that interest by virtue of its shareholding or investments
    in an Ultimate Holding Vehicle listed on a recognised stock exchange or an
    Exempt Person) that it will not, except with the prior written consent of
    the Treasurer, for two years after the Completion Date and, except with the
    prior written agreement of the Treasurer on timing (which agreement will not
    be unreasonably withheld, having regard to other privatisations being
    conducted by the State), for 3 years after the Completion Date:

    (1) create, grant or issue any Equity Securities, units or other interests
        in that Buyer (other than to a Permitted Transferee);

    (2) dispose of any Equity Securities, units or other interests (or rights to
        acquire Equity Securities, units or other interests) in that Buyer
        (other than to a Permitted Transferee); or

    (3) transfer, sell or otherwise dispose of any right, title or interest in
        the whole or any substantial part of the undertaking or assets of that
        Buyer (other than to a Permitted Transferee);
<PAGE>
 
                                      14
 
(f) deliver to the State in respect of each Group, covenants (in form and
    substance satisfactory to the State) from each Group Member (not being a
    Group Member who holds that interest by virtue of its shareholding or
    investment in an Ultimate Holding Vehicle listed on a recognised stock
    exchange or an Exempt Person), that it will not, except with the prior
    written consent of the Treasurer, for two years after the Completion Date
    and, except with the prior written agreement of the Treasurer on timing
    (which agreement will not be unreasonably withheld, having regard to other
    privatisations being conducted by the State) for 3 years after the
    Completion Date:

    (1) create, grant or issue (or permit the creation, grant or issue of) any
        Equity Securities, units or other interests in any Group Member it
        Controls (other than to a Permitted Transferee); or

    (2) dispose of any Equity Securities, units or other interests (or rights to
        acquire Equity Securities, units or other interests) in any Group Member
        it Controls (other than to a Permitted Transferee); or

     unless

    (3) it (the "CONTROLLING GROUP MEMBER") is able to show to the Treasurer,
        that the book value at cost of the Group's investment in the Buyers
        constitutes less than 50% of the book value at cost of the total assets
        (excluding intangibles, cash and short term marketable securities) of
        the Group Member it Controls ("TARGET GROUP MEMBER"),

    in which event

    (4) the Controlling Group Member may dispose of up to 49.9% of the Target
        Group Member (or 49.9% of the Target Group Member after allowing for
        full dilution on the creation, grant or issue of any Equity Securities,
        units or other interests in the Target Group Member); and

    (5) where the Controlling Group Member is the Ultimate Holding Vehicle of
        the Target Group Member, any restriction that might otherwise be imposed
        on the shareholders or investors in that Vehicle shall not apply;

(g) deliver to the State, in relation to each of the covenants delivered under
    clauses 5.4(e) and (f) evidence (in form and substance satisfactory to the
    State) of:

    (1) each covenantor's power and authority to enter into the covenant;
    
    (2) the due execution of the covenant by each covenantor; and

(h) deliver to the State (in form and substance satisfactory to the State):

    (l) certified copies of the certificates of incorporation and memorandum and
        articles of association or other constituent documents of each Buyer;
        and

    (2) certified copies of each power of attorney pursuant to which this
        agreement and any document contemplated by this agreement is executed by
        each Buyer and each Guarantor or evidence (in form and substance
        satisfactory to the State) of each Buyer's and each Guarantor's power
        and authority to enter into this agreement and any document contemplated
        by this agreement and of the due execution of this agreement and any
        such document by each Buyer and each Guarantor; and

5.5 TERMINATION BY LAPSE OF TIME

If:
<PAGE>
 
                                      15


(a) this agreement has not already been terminated by the State under clause
    3.3; and

(b) Completion has not occurred on or before 31 October 1996 (or such other date
    as the parties may have agreed in writing),

then either the Buyers on the one part or the State and the Seller on the other
part may, if not in breach of this agreement, give written notice to the others
of their intention to terminate this agreement (and the Asset Sale Agreement)
after three Business Days of receipt of the notice. After such notice has been
delivered both parties shall use their best efforts to reach Completion within
the three day notice period. If Completion does not occur within such period
then this agreement and the Asset Sale Agreement shall automatically terminate
on an expiration of the three Business Day notice period.

5.5 REMEDIES

If this agreement is terminated under clause 5.5 then in addition to any other
rights provided by law:

(a) each party is released from its obligations to continue performance under
    this agreement except those imposing obligations of confidentiality;

(b) each party retains the rights it has against any other party in respect of
    any past breach; and

(c) the Buyers shall receive a refund of the Deposit.

                          6. POST COMPLETION MATTERS

6.1 REPAYMENT OF LOANS

Immediately after Completion:

(a) the Buyers shall ensure that the Company has available to it sufficient
    funds to repay, and the Buyers shall procure that the Company repays:

    (1) the SECV Loan; and

    (2) the TCV Loan;

(b) (if Completion does not occur on 13 September 1996), the Buyers must pay
    interest accrued on the TCV Loan at the Cash Rate plus 2% per annum, reset
    and compounded daily from and including 13 September 1996 up to and
    including the Completion Date;

(c) the Buyers shall ensure the Company has available to it sufficient funds to
    pay and the Buyers shall procure that the Company pays (or the State, as the
    case may be, shall procure TCV to pay) the following payments:

    (1) if on the Completion Date the outstanding level of cash advances made by
        TCV for working capital requirements on or after the 5 August 1996
        exceeds the money standing to the credit of the Company with TCV in
        respect of dealings with TCV on or after the 5 August 1996, then the
        Company must pay to TCV the amount of the excess;

    (2) all Accrued Interest; and

    (3) all outstanding TCV administration fees (being an amount not to exceed
        $3,000 per month);

(d) the State shall deliver to the Buyers a full discharge and release in
    respect of the SECV Loan, the TCV Loan and any liability to the Treasurer
    under section 153F of the
<PAGE>
 
                                      16


    Electricity Act and, if on the Completion Date, the level of money standing
    to the credit of the Company with TCV in respect of dealings with TCV on or
    after 5 August 1996 exceeds the level of outstanding cash advances made by
    TCV for working capital requirements on or after 5 August 1996, then the
    Seller shall procure that TCV shall pay to the Company the amount of the
    excess; and

(e) the Seller will procure that the Mining Licence is issued to the Company.

6.2 DEFINITIONS

For the purposes of this clause 6:

(a) a certificate signed by an officer of TCV stating the aggregate amount of
    such cash advances, deposits, all Accrued Interest and all TCV
    administration fees is, in the absence of manifest error, conclusive
    evidence of that value;

(b) "ACCRUED INTEREST" means in respect of transactions with TCV referred to in
    clauses 6.1(c)(1) and 6.1(d) on or after 5 August 1996, the net amount of
    interest which has accrued but remains unpaid to the account of TCV or the
    Company from and including 5 August 1996 to the Completion Date. For the
    purposes of calculating the accrued interest:

    (1) interest shall be calculated each day on the balance owing to TCV or the
        Company;

    (2) where on the relevant day there is a cash advance owing from the Company
        to TCV, the interest rate shall be the Cash Rate plus 0.05 per cent per
        annum;

    (3) where on the relevant day there is a deposit from the Company to TCV,
        the interest rate shall be the Cash Rate less 0.05 per cent per annum;
        and

    (4) the aggregate amount of daily interest payable or receivable shall be
        paid by TCV or the Company (as appropriate) on the last day of each
        calendar month prior to Completion and on Completion (in respect of the
        period from the first day of the month in which Completion occurs to
        Completion); and

(c) "CASH RATE" means on the relevant date, the rate per cent per annum
    determined by TCV by taking the rates quoted on the page entitled "II AM" on
    the Reuters Monitor System at or about 11:00 am (Melbourne time).

                               7. INTERDEPENDENCY

7.1 INTERDEPENDENCY BETWEEN COMPLETIONS 

It is the intention of the parties that:

(a) Completion under this agreement;

(b) subject to clause 7.3 of this agreement, completion under the Asset Sale
    Agreement; and

(c) payment of the SECV Loan and TCV Loan under clause 6,

are interdependent, so that if the obligations of the parties in respect of
completion or payment under clause 6 are not satisfied, then no delivery or
payment which has been made, will be deemed to have been made.

7.2 DEEMED SEQUENCE

For the avoidance of doubt the parties acknowledge and agree that once
Completion under this agreement, completion under the Asset Sale Agreement and
the payments under clause 6 have
<PAGE>
 

                                      17


occurred, as a chronological sequence of events, all deliveries and payments
will be deemed to have taken place in the order in which they occurred.

7.3 RESCISSION OF ASSET SALE AGREEMENT

For the avoidance of doubt, if:

(a) the Buyers rescind or purport to rescind or fail to complete the Asset Sale
    Agreement for any reason including without limitation pursuant to any rights
    conferred by section 32 of the Sale of Land Act 1962; or

(b) the Buyers do not accept title to the land or the Assets sold under the
    Asset Sale Agreement,

the Buyers must still complete the sale and purchase of the Shares and comply
with their obligations under this agreement in accordance with its terms, save
that the amount of the dividend referred to in clause 2.4 shall be decreased by
an amount equal to the profit on sale of the Assets (after State Equivalent Tax)
and the Purchase Price shall be increased by the same amount. Any reduction in
State Equivalent Tax and Victorian Duty paid by the Company and the Buyers as a
result of the Assets not being sold shall result in a corresponding increase in
the Purchase Price under clause 4.1.

                           8. AUDITOR-GENERAL'S AUDIT

8.1 AUDIT BY AUDITOR-GENERAL

The Buyers acknowledge and agree that:

(a) they will procure that the Auditor-General is responsible for auditing the
    financial statements for the Company for the year ended 30 June 1996 and
    will ensure that the Company does not appoint any other auditor under
    section 327 of the Corporations Law to audit those financial statements; and

(b) financial statements as nominated by the Treasurer for the period from l
    July 1996 until the Completion Date may also be audited by the Auditor-
    General (or his agent) and/or reviewed by independent accountants appointed
    by the Treasurer ("TREASURER'S ACCOUNTANTS"), who may publish accounts for
    any period up to and including the Completion Date or his (or their) report
    on such accounts.

8.2 ACCESS TO BOOKS

The Buyers must grant, and procure that the Company grants, the Auditor-General
and/or the Treasurer's Accountants (and/or the agents of any of them) full and
free access at all reasonable times to those employees of the Company whose
knowledge or information is needed by the Auditor-General and/or the Treasurer's
Accountants (and/or the agents of any of them) and to all books, records and
other data pertaining to the Company, in order to enable the Auditor-General
and/or the Treasurer's Accountants to conduct his (or their) audit.

                             9. BUYERS' OBLIGATIONS

9.1 BUYERS' WARRANTIES

Each Buyer represents and warrants to the Seller and the State severally with
respect to itself and its Group Members as at:

(a) the date of this agreement and the Completion Date that, except as set out
    in Annexure B, no person other than a person who holds that interest by
    virtue of its shareholding or
<PAGE>
 
                                      18


    investments in an ultimate holding vehicle listed on a recognised stock
    exchange or an Exempt Person has any legal or beneficial interest (or
    obligation (actual, contingent or otherwise) to acquire a legal or
    beneficial interest) in:

    (1) the capital of the Buyer; or
    
    (2) the capital of each Group Member;

(b) the date of this agreement and the Completion Date, that annexure B sets out
    complete and accurate details of:

    (1) all agreements, arrangements or understandings between or among a Group
        Member or shareholder in a Buyer (or each person who holds a beneficial
        interest in the shares held by that shareholder other than a person who
        holds that interest by virtue of its shareholding or investments in an
        ultimate holding vehicle listed on a recognised stock exchange or an
        Exempt Person) and a Group Member or shareholder of any other Buyer
        which have (directly or indirectly) an impact on or relate to:

        (A) the financial and operating policies or management of the Company or
            the Business;

        (B) the activities of the Company as a licensee; or

        (C) the exercise of any voting power in another Group Member; and

    (2) the form and relative amount of the return to the Buyer and its Group
        Members whether by way of dividend, fee or otherwise for the period of
        three years from the Completion Date, together with al1 agreements,
        arrangements or understandings relating to those returns;

(c) the date of this agreement and the Completion Date, that the Buyer has the
    corporate power to enter into this agreement and has taken all necessary
    action (including obtaining all shareholder approvals and Authorisations) to
    authorise the execution, delivery and performance of this agreement;

(d) the date of this agreement and the Completion Date, that the agreement
    constitutes a legally valid and binding obligation of the Buyer enforceable
    in accordance with its terms;

(e) the date of this agreement and the Completion Date that, the Buyer will on
    Completion have sufficient funds available to pay its share of the Purchase
    Price and ensure that, with respect to the Buyer's share the Company has
    sufficient funds available to it to repay the SECV Loan, the TCV Loan and
    any other amounts owing to TCV, to pay the Estimated State Equivalent Tax,
    to pay the dividend payable under clause 2.4 and to pay or procure the
    payment of Estimated Victorian Duty as contemplated by clause 5.4(c) and
    otherwise satisfy its obligations (and the Company's obligations) on
    Completion;

(f) the date of this agreement and the Completion Date, that the execution,
    delivery and performance of this agreement by the Buyer (and, subject to the
    resolutions relating to the Financial Assistance being passed and no
    successful application being made under section 205(12) of the Corporations
    Law, the giving of the Financial Assistance) will not violate any provision
    of:

    (l) any law, regulation, order, rule or decree of any Governmental Agency of
        the Commonwealth of Australia or any state or territory or, where the
        Buyer is incorporated outside Australia, of the place of its
        incorporation, or any recognised
<PAGE>
 
                                      19


stock exchange on which its shares or the shares of any related body corporate
are listed;

    (2) the memorandum or articles of association (or equivalent constituent
        documentation) of the Buyer; and

    (3) any security agreement, deed, contract, undertaking or other instrument
        to which the Buyer is a party or which is binding on it and does not and
        will not result in the creation or imposition of any security over any
        of its assets pursuant to the provision of any such security agreement,
        deed, contract, undertaking or other instrument;

(g)  the Completion Date that:

     (1) neither the Buyer nor any of its Associates will hold a Prohibited
         Interest; and

     (2) the Buyer is not aware of any fact, matter or circumstance (including
         without limitation any pending or contemplated Relevant Agreement to
         which it or any of its Associates is or may be a party) which might,
         after the Completion Date, result in the Company acquiring a Prohibited
         Interest or the Buyer or any Associate of the Buyer holding a
         Prohibited Interest; and

(h) the date of this agreement, that the Buyer has (and on the Completion Date
    it will have) disclosed to the State complete and accurate details of all
    Relevant Agreements to which it or any of its Associates is or may be a
    party under which a Prohibited Interest has or may be acquired.

9.2 CERTIFICATION

Subject to clause 9.1 (h), PacifiCorp Holdings, Inc. must before Completion
apply to the Treasurer for a certificate under section 171 A of the Electricity
Act.

9.3 CONTINUED HOLDING

Except with the prior written consent of the Treasurer, for the period of two
years commencing on the Completion Date and, except with the prior written
agreement of the Treasurer on timing (which agreement will not be unreasonably
withheld, having regard to other privatisations being conducted by the State),
for three years after the Completion Date, the Buyers must not, and must cause
the Company not to:

(a) create, grant or issue any Equity Securities, units or other interests in
    the Company, other than to a Buyer or a Group Member of a Buyer;

(b) dispose of the Shares or any Equity Securities, units or other interests (or
    rights to acquire shares, Equity Securities, units or other interests) in
    the Company to any person, other than to a Buyer or a Group Member of a
    Buyer; or

(c) transfer, sell or otherwise dispose of any right, title or interest in the
    whole or any substantial part of the Business, provided that this shall not
    prohibit the Buyers creating any security in relation to any bona fide loan
    or debt, other than to the Buyer or a Group Member of a Buyer.

9.4 BUYERS' UNDERTAKINGS

The Buyers undertake to the State that they will:

(a) on and from the Completion Date ensure that the Company pays, in a timely
    manner, al1 superannuation contributions imposed on the Company by the
    trustee (acting on the advice of the actuary) of the Company's Fund;
<PAGE>
 
                                      20

 
(b) during a period of three years commencing on the Completion Date promptly
    notify the State in writing of any variations to the agreements,
    arrangements and understandings set out in annexure B;

(c) ensure via terms of the Partnership Deed that:

    (1) a person who holds office as an executive director of a company holding
        an electricity distribution licence issued under Part 12 of the
        Electricity Act is ineligible to hold office on the partnership board;

    (2) a person who holds office as a non-executive director of a company
        holding an electricity distribution licence issued under Part 12 of the
        Electricity Act is eligible to hold office on the partnership board only
        in a non-executive capacity; and

    (3) as and when requested by the Treasurer or the Officer of the Regulator-
        General the Buyers will make a copy of the then current Partnership Deed
        available to the State or the Office of the Regulator General; and

(d) ensure that the Partnership Deed prohibits flows of Restricted Information
    to Powercor Australia Ltd. For the purposes of this clause "Restricted
    Information" means any information which relates to electricity hedging
    contracts proposed to be entered into between the partners and any customers
    other than Powercor Australia Ltd.

9.5 FINANCIAL ASSISTANCE

Notwithstanding the allocation of responsibilities in annexure D, the Buyers
undertake to the State that they will, on and from the date of this Agreement,
use their reasonable endeavours to procure the requirements under section 205 of
the Corporations Law are satisfied. The Buyers' obligations under this clause
9.5 are in addition to those under clause 2.5 and include, without limitation:

(a) taking all steps within their power to ensure that the Financial Assistance
    can be given on the first Business Day after the 21 day notice period
    referred to in section 205(12) of the Corporations Law has expired;

(b) where an application or applications are made under section 205(12), taking
    all steps within their power to ensure each application is withdrawn or the
    Court approves the giving of the Financial Assistance; and

(c) not taking any step to encourage or assist in any way directly or indirectly
    any person to bring or carry on or to assist in the bringing or carrying on
    of any such application.

9.6 BUYERS' INDEMNITIES

Without prejudice to clause 1l, each Buyer severally (in the proportions set out
in column B of schedule 1) indemnifies the Seller and the State against any
liability or loss suffered or incurred by one or both of them which arises from
(and any costs, charges or expenses incurred by one or both of them in
connection with):

(a) any breach of, or default under, this agreement by that Buyer; and

(b) any act or decision of the directors of the Company as requested by that
    Buyer or failure to comply with section 205(10) of the Corporations Law.

                               10. EMPLOYEE EQUITY

The Buyers undertake to the State that if, at any time, the Company or the
Buyers (or any other company/trust which is controlled by the Buyers which owns
or conducts the Business or any substantial part of the assets used to conduct
any part of the Business) is listed on the Australian
<PAGE>
 
                                      21

 
Stock Exchange Limited, they will ensure that as part of that listing, employees
of the Business will be given an opportunity to invest in the relevant company
or trust.

                            11. SELLER'S WARRANTIES

11.1 GIVING OF WARRANTIES

The Seller gives the Seller's Warranties in favour of the Buyers as at the date
of this agreement and, where specified in schedule 2, as at the Completion Date.

11.2 RELIANCE

The Buyers have entered into this agreement in reliance on the Seller's
Warranties and other terms of this agreement and nothing else.

11.3 ACKNOWLEDGMENT

The Buyers acknowledge and agree that:

(a) on the basis that the Disclosures have, to the knowledge and belief of the
    State, been made in good faith and that the State has no knowledge that the
    information therein is misleading or deceptive (but acknowledging that the
    State is under no obligation to make any enquiries to verify that state of
    knowledge) any statement, representation, term, warranty, condition, promise
    or undertaking made, given or agreed to by the Seller, the State, a
    representative of the Company or an Adviser in any prior negotiation,
    arrangement, understanding or agreement, has no effect except to the extent
    expressly set out or incorporated by reference in this agreement;

(b) they have entered into this agreement after satisfactory inspection and
    investigation of the affairs of the Company based on the Disclosures and
    other information available to them;

(c) no representation or warranty is made by the Seller or the State (nor has
    the Seller or the State any liability whatsoever to the Buyers) in relation
    to:

    (1) the principles to be applied by the Officer of the Regulator-General or
        its successor(s) or other Governmental Agencies with respect to the
        regulation of the Victorian electricity industry and in particular
        matters affecting prices and charges;

    (2) the regulation of the Victorian electricity industry (including any act
        or omission by the Officer of the Regulator-General, Victorian Power
        Exchange, the Pool Consultative Committee, the Chief Electrical
        Inspector or any responsible Minister of the Crown) and other industries
        in Victoria (and the relationship of such other industry regulation to
        the regulation of the Victorian electricity industry);

    (3) the status of relations between the Company and its employees;

    (4) the future wholesale price of electricity to be paid to, and its impact
        on, the Company, other than the existence and terms of the Vested
        Hedging Contracts entered into by the Company and contained in the Data
        Room Documentation;

    (5) the value of the Shares or the value ascribed by the Electricity Act and
        Allocation Statement to each asset acquired by the Company (in
        particular the Assets and land and mine development costs), for the
        purposes of depreciation, amortisation, capital gains or otherwise;
<PAGE>
 
                                      22


    (6) the basis on which any allowance or deduction for depreciation of any of
        the Assets and other assets of the Company may be calculated or allowed
        for Federal tax purposes;

    (7) the performance, future action, operation, profitability and commercial
        direction of any entity participating in the Victorian wholesale
        electricity market and, on the commencement of a "national" electricity
        market involving some or all of the eastern States of Australia and the
        Australian Capital Territory, of any entity participating in that
        "national" electricity market; and

    (8) the giving of the Financial Assistance by the Company;

(d) they have made their own enquiries about the structure and ambit of the
    development of a "national" electricity market involving some or all of the
    eastern States of Australia and the Australian Capital Territory and the
    impact such a market and market rules would (or would be likely to) have on
    the profitability or otherwise of the Company or the Business or any part
    thereof and the position of the Station in relation to that market;

(e) the energy levy under the pool rules to the extent, if any, as modified by
    the Energy Levy Orders is an integral part of the regulatory framework under
    which the Company carries on the Business and accordingly the Buyers will
    not, and will ensure the Company does not, challenge the appropriateness,
    amount or basis of such levy at the rate set by or pursuant to, any law as
    at the date of this agreement;

(f) the Buyers will not, and will ensure that the Company does not, challenge
    the obligation of the Company to pay the Financial Accommodation Levy or the
    appropriateness, amount or basis of the Financial Accommodation Levy at the
    rate set by or pursuant to any law at the date of this agreement; and

(g) they are aware of the arrangements relating to the take or pay element of
    Generation Victoria's gas supply contract and are aware of the approval
    requirements imposed by the State on the electricity contracting activities
    of the Company in the four month period prior to the date of this agreement.

11.4 REMEDIES

The sole remedy of the Buyers for breach of any Seller Warranty is to damages in
accordance with this clause 11 or the indemnities in accordance with clause 12,
and in no event are the Buyers to be entitled to rescind this agreement.

11.5 ABILITY TO CLAIM

The Buyers are precluded from bringing a claim for breach of any Seller Warranty
or under the indemnities in clause 12, to the extent:

(a) that the claim is based on any fact, matter or circumstance:

    (1) set out in the Disclosures;

    (2) within the actual knowledge of the Buyers or which ought to have been
        known by the Buyers, having regard to their knowledge (and the knowledge
        of their advisers) of the electricity industry (including, without
        limitation, the mining of coal) and having regard to their opportunities
        to make enquiries of the State and the Company; or

    (3) which, before the date of this agreement, had been communicated in
        writing to the Buyers;
<PAGE>
 
                                      23


(b) that the claim arises or is increased directly as a result of action taken
    (or not taken as the case may be) by the Seller or the Company on or after
    the date of this agreement, after consultation with, and receipt of no
    objection within a reasonable period from, the Buyers;

(c) that provision has been made in the Balance Sheet for any fact, matter or
    circumstance on which the claim is based;

(d) to which the claim is recoverable (or would have been recoverable under
    insurance if notified to the Seller or the insurers in a timely manner after
    the date of this agreement);

(e) that the claim is based on any risk (actual or potential), fact, matter or
    circumstance which was generally known in relation to the Victorian or
    Australian electricity industry before the Completion Date;

(f) of any change after the Completion Date in any applicable law (other than
    any act or subordinate legislation of the State) which has retrospective
    effect;

(g) that either the Buyers have or the Company has failed to comply with the
    procedures set out in clause 12.3, so that the State is effectively unable
    to assume or conduct (or is materially prejudiced in so assuming or
    conducting) any defence or other action contemplated by that clause; or

(h) that the claim is based on any forecasts, projections or representations as
    to the future revenue or profits in respect of the Company or the Business
    given by or on behalf of the Seller, the State, representatives of the
    Company or the Advisers.

11.6 LIMITATION ON CLAIMS

The Buyers' right to claim under the Seller's Warranties and the indemnity in
clause 12.2 is limited to $1.00. The Buyers' right to claim under the
indemnities in clause 12.1 is limited as follows:

(a) the Buyers must give written notice to the State of the general nature of
    the claim as soon as is reasonable after they become aware of the facts,
    matters or circumstances on which the claim is based (and where the claim is
    recoverable under insurance the time limits imposed by the relevant insurer
    shall be taken into account in determining what is reasonable) and in any
    event within 12 months after the Completion Date;

(b) in the case of a single claim, where the amount claimed exceeds $1,000,000
    provided that no claim may be brought by the Buyers unless and until the
    aggregate of all such claims exceeds $3,000,000 (and then only to the extent
    of the excess); and

(c) the maximum aggregate amount which the Buyers may recover from the Seller
    under the indemnity in clause 12.1 in respect of all claims is $40,000,000.

11.7 QUANTIFICATION OF CLAIMS

The quantum of any liability the Seller has to the Buyers under the Seller's
Warranties, clause 12 and otherwise under this agreement shall be determined
solely by reference to the direct financial impact on the Company or the Buyers
which results from the facts, matters or circumstances on which the claim is
based, not being as warranted and in no event will the Buyers be entitled to
claim a multiple of that direct financial impact.

11.8 STATE EQUIVALENT TAX

The State Equivalent Tax imposed on the Company with respect to the period
commencing on and from l July 1996 and ending on the Completion Date is
estimated to be as follows:
<PAGE>
 
                                      24


(a) profit (before State Equivalent Tax) on sale of the Assets by the Company:
    $486,579,121.87;

(b) operating profit (before State Equivalent Tax) earned by the Company in the
    months of:

    1 September to 13 September             Nil
    14 September to 30 September            $2,500,000
    October                                 $2,500,000

(in aggregate the "ESTIMATED STATE EQUIVALENT TAX" with any amount referred to
in paragraph (b) being reduced proportionately if the period is less than the
relevant period set out above). The Buyers shall procure the Company does not
challenge the basis of the amounts specified above.

The Buyers shall procure that the Company lodges a return in respect of the
State Equivalent Tax payable by the Company for the above periods within 30 days
after the Completion Date. The Company must prepare the return consistently with
past practice and in particular consistent with binding tax rulings and
instructions of the Treasurer.

                       12. SELLER'S INDEMNITIES/COVENANTS

12.1 TAX INDEMNITY

The Seller indemnifies the Buyers as a continuing indemnity against any
liability or loss suffered or incurred by the Company which arises from (and any
costs, charges or expenses incurred by the Company in connection with) any
liability to pay Tax which is not fully provided for in the Balance Sheet and
which arises in respect of the period before 30 June 1996.

12.2 INDEMNITY

Subject to clauses 11.5, 11.6 and 11.7, the Seller indemnifies the Buyers
against any liability or loss suffered or incurred by the Buyers and arising
from (and any costs, charges or expenses incurred by the Buyers or in connection
with) any breach of, or default under, this agreement by the Seller.

12.3 CLAIMS PROCEDURE

On receipt of a notice under clause 11.6(a) which involves a Third Party Claim,
the State shall assume the defence of the claim unless the claim is covered by
insurance, in which event the defence will be conducted by the insurer's
lawyers. The Buyers shall have the right, at their own cost, to employ separate
lawyers or other advisers in any such action or claim and, subject to the
consent of the relevant insurance company, to participate in the defence. The
Buyers agree that:

(a) they shall not, and shall ensure the Company does not, pay or settle any
    claim in respect of which an indemnity may be claimed under this clause 12
    or make any admission in respect of any claim in respect of which an
    indemnity may be claimed under this clause 12 without the prior written
    consent of the State;

(b) they shall1 procure that the Company executes such forms and documents and
    also makes such personnel and documents available to the State as the State
    may reasonably require to enable the State to assume, defend or take such
    other action in respect of any such Third Party Claim (including without
    limitation the lodgment of an objection to the assessment or decision by the
    Victorian Commissioner of State Revenue or other responsible person relating
    to Tax within the time required by the relevant applicable law); and
<PAGE>
 
                                      25


(c) they must promptly notify the State of receipt by it or the Company of any
    advice, correspondence or other communication with the third party (or its
    advisers) which relates to the Third Party Claim.

In this clause "THIRD PARTY CLAIM" means any liability of the Company to a third
party which arises out of or results from claims asserted against the Company
by a third party, and in respect of which the Seller or the State may be liable
to the Buyers under this agreement.

12.4 EBAC TRUST CONTRIBUTION

The State covenants that the State will pay the EBAC Trust Contribution to the
Fund Trustee on the Completion Date as defined by the EBAC Share Sale Agreement.

12.5 INDEMNITY

Notwithstanding anything contained in this Agreement the State indemnifies the
Buyers without limitation and as a continuing indemnity against any liability
incurred and against any loss or damage suffered by the Buyers arising from a
breach of clause 12.4.

                         13. ACTION PENDING COMPLETION

13.1 CARRYING ON OF BUSINESS

(a) Before Completion the Seller and the State will ensure that, except as
    expressly contemplated by this agreement, the Company carries on the
    Business (including payment of its debts as and when they fall due) in the
    ordinary and normal course so as to preserve the value of the assets,
    financial and trading position of the Business.

(b) The Seller and the State must also ensure that before Completion unless the
    Buyers consent (or fail to object) in accordance with clause 13.2 or as
    otherwise contemplated by this agreement:

    (1) the Company does not enter into any contractual commitment requiring the
        Company to pay:

        (A) more than $1,000,000 (or commitments with a particular person where
            the aggregate value of those commitments is more than $1,000,000);
            or

        (B) more than $200,000 per annum in any period more than 5 years from
            the Completion Date, except as otherwise disclosed in the
            Disclosures;

    (2) the Company does not issue any shares, options or securities which are
        convertible into shares in the Company, other than in accordance with
        this agreement;

    (3) the Company does not dispose of, or agree to dispose of or grant an
        option to purchase, any material asset of the Company or the Business,
        or any interest in such asset except pursuant to the Asset Sale
        Agreement;

    (4) the Company does not engage any new employee with an annual remuneration
        package in excess of $100,000, (and, except in the ordinary course of
        business) terminate any of the Employees or change the terms of
        employment (including remuneration) of any of the Employees;

    (5) the Company manages the working capital requirements and any liabilities
        of the Company in the ordinary course of business (with both the Seller
        and the Buyers
<PAGE>
 
                                      26


        having the right to have their respective representatives observe
        management in carrying out such activities);

    (6) the Company does not incur any expenditure or make any payment in excess
        of $1,000,000;

    (7) the Company does not incur any indebtedness except pursuant to the
        Company's overdraft facilities or with TCV in the ordinary course of
        business;

    (8) the Company does not declare or pay any dividend or make any
        distribution of profits or capital;

    (9) the Company does not grant any mortgage or floating charge; and

   (10) the Company does not acquire any assets outside the ordinary course of
        business or acquire any Equity Security.

13.2 BUYERS' REPRESENTATIVE

(a) The Buyers must nominate a person ("BUYERS' REPRESENTATIVE") who has
    authority to act on behalf of the Buyers in relation to any queries,
    consents or approvals required under this agreement. The Buyers'
    Representative shall be Mr. Bob Rollinson.

(b) If the Buyers' Representative does not consent or object to the entry into
    of a particular contract or conduct of the type described in clause 13.1(b)
    within 5 Business Days of being notified of the Company's intention to enter
    into that contract or implement that conduct, the Buyers shall be deemed to
    have consented to the entry into of that contract or implementation of that
    course of conduct.

13.3 ACCESS

Before the Completion Date the Seller and the State must use reasonable
endeavours to:

(a) ensure that the Buyers are, and any person authorised by the Buyers is,
    given all reasonable access during normal business hours to the assets,
    properties, books of account, records and documents of the Company;

(b) promptly provide the Buyers with al1 explanations and information it
    requests in respect of the Company or the Business;

(c) ensure that the Buyers are, and any person authorised by the Buyers is,
    given reasonable access to senior management of the Company; and

(d) provide the Buyers' Representative with an office at the Company's offices
    at the Station.

                               14. ANNOUNCEMENTS

14.1 LEGAL REQUIREMENTS

The Buyers may not disclose anything in respect of this agreement or the terms
of sale of the Shares or Assets except as required:

(a) by applicable law; or

(b) by the requirements of any recognised stock exchange on which its shares or
    the shares of any related body corporate are listed,

but must consult with the State before making the disclosure; and the Buyers
must

(c) use reasonable endeavours to accommodate reasonable requests by the State as
    to the form and content of the disclosure; and
<PAGE>
 
                                      27


(d) claim and apply for, to the maximum extent possible, any exemptions or
    rights of confidentiality that may be afforded the Buyers under such laws or
    requirements.

14.2 DISCLOSURE TO OFFICERS AND PROFESSIONAL ADVISERS

A party may disclose anything in respect of this agreement or the terms of the
sale of the Shares or Assets to such of the Officers, employees and professional
advisers of that party and its related bodies corporate and to its lenders and
the lender's professional advisers as need to know that thing for the ordinary
business purposes of the Company or the Buyers but it must use its best
endeavours to ensure all matters disclosed are kept confidential.

14.3 FURTHER PUBLICITY

Subject to clauses l4.l and 14.2 the Buyers must not disclose the provisions of
this agreement, the Asset Sale Agreement, the terms on which the Shares are sold
or the terms on which the Assets are sold unless the State has first consented
in writing.

14.4 COMPANY'S COMPLIANCE WITH ELECTRICITY ACT

The Buyers, the Seller and the State each acknowledge that the Company is, while
it is a public generation company under the Electricity Act, under obligations
to provide information to the Minister or the Treasurer under sections 35 and 36
of the Electricity Act.

                         15. DUTIES, COSTS AND EXPENSES

15.1 PAYMENT OF DUTY

Subject to clauses 4.5 and 5.4 the Company must pay:

(a) any Duty in respect of the execution, delivery and performance of this
    agreement and any document entered into or signed under this agreement; and

(b) any fine, penalty or other cost in respect of a failure to pay any Duty.

15.2 INDEMNITY

The Buyers indemnify the Seller against any amount payable under clause l5. 1.

15.3 COSTS AND EXPENSES

Subject to clause 4.5 and clause l5.l, each party must pay its own costs and
expenses in respect of the negotiation, preparation, execution, delivery,
stamping and registration of this agreement or other document described in
clause l5.l(a).

15.4 COSTS OF PERFORMANCE

Any action to be taken by a party in performing its obligations under this
agreement must be taken at its own cost and expense unless otherwise provided in
this agreement.

                    16. GUARANTORS' GUARANTEE AND INDEMNITY

16.1 GUARANTEE

Subject to clauses 16.2 and 16.6, each Guarantor unconditionally and irrevocably
severally, in the proportions set forth in column D of schedule l, guarantees to
the Seller and the State ("the Guarantee") the due and punctual performance of
its Respective Buyer's obligations under this agreement:

(a) to pay its proportion of the Deposit (if it is required to be paid pursuant
    to clause 3); and
<PAGE>
 
                                      28


(b) to make or procure to be made its proportion of the payments required to be
    made by the Buyers and the Company at Completion.

16.2 ADDITIONAL FUNDING

Notwithstanding the fact that the Buyers and the Guarantors have arranged
funding facilities to enable the Buyers to meet their obligations under this
agreement (including payment of the Deposit and making the payments required to
be made by the Buyers and the Company on Completion), the Buyers and the
Guarantors acknowledge that the Buyers must meet those obligations even if the
funding facilities are not available. Furthermore, in the event that the funding
facilities are not available, and Hazelwood Investment Company Pty Ltd or CISL
(Hazelwood) Pty Ltd are not able to meet, or meet in full, their obligations
under this agreement, PacifiCorp Holdings, Inc. and National Power PLC shall
provide additional funding (to the extent of 22.22% and 77.78% respectively) to
enable the Buyers, collectively, to meet their obligations under this agreement.

16.3 INDEMNITY

Subject to clause 16.6, as a separate and independent principal obligation, each
Guarantor severally indemnifies (in the proportions set out in column D of
schedule 1) the Seller and the State against al1 liabilities, losses, damages,
costs or expenses incurred or suffered by the Seller or the State and al1
actions, proceedings, claims or demands made against the Seller or the State as
a result of default of its Respective Buyer in the performance of such Buyer's
obligation set forth in clause 16.1 or from any such express or implied
obligations being unenforceable.

16.4 EXTENT OF GUARANTEE AND INDEMNITY

(a) This clause 16 applies to this agreement, as amended, supplemented, renewed
    or replaced.

(b) The obligations of the Guarantors under this clause 16 extend to any change
    in the obligations of the Buyers as a result of:

    (1) any amendment, supplement, renewal or replacement of this agreement; or

    (2) the occurrence of any other thing.

(c) This clause 16.4 applies:

    (l) regardless of whether the Guarantors are aware of, or have consented to,
        or have given notice of, any amendment, supplement, renewal or
        replacement of any agreement to which the Seller, the State or the
        Buyers are a party or the occurrence of any other thing; and

    (2) irrespective of any rule of law or equity to the contrary.

16.5 AVOIDANCE OF PAYMENTS

(a) If any payment, conveyance, transfer or other transaction relating to or
    affecting any obligation of a Guarantor's Respective Buyer under this
    agreement is:

    (1) void, voidable or unenforceable in whole or in part; or

    (2) is claimed to be void, voidable or unenforceable and that claim is
        upheld, conceded or compromised in whole or in part,

    the liability of that Guarantor under this clause 16 and any Power is the
    same as if:

    (3) that payment, transaction, conveyance or transfer (or the void, voidable
        or unenforceable part of it); and
<PAGE>
 
                                      29


    (4) any release, settlement or discharge made in reliance on any thing
        referred to in clause l6.5(a)(3),

    had not been made and the Guarantor must immediately take all action and
    sign all documents necessary or required by the Seller or the State to
    restore to the Seller and the State this clause 16 and any Security Interest
    held by the Seller or the State immediately before the payment, conveyance,
    transfer or transaction.

(b) Clause 16.5(a) applies whether or not the Seller or the State knew, or ought
    to have known of, anything referred to in that clause.

16.6 CONTINUING GUARANTEE AND INDEMNITY

This Guarantee and indemnity shall terminate and shall be of no further effect
upon Completion and the making of all payments required to be made by the Buyers
and the Company at Completion (including for the avoidance of doubt, the
payments to be made under clause 6).

16.7 WARRANTIES OF THE GUARANTORS

Each Guarantor severally represents and warrants that:

(a) it has the corporate power to enter into this guarantee and indemnity and
    has taken all necessary action to authorise the execution, delivery and
    performance of this agreement;

(b) this guarantee and indemnity constitutes a legally valid and binding
    obligation of the Guarantor enforceable in accordance with its terms; and

(c) the execution, delivery and performance of this guarantee and indemnity will
    not violate any provision of:

    (l) any law or regulation or any order or decree of any Governmental Agency
        of the Commonwealth of Australia or any state or territory;

    (2) the memorandum or articles of association of the Guarantor or equivalent
        constituent documents; and

    (3) any security agreement, deed, contract, undertaking or other instrument
        to which the Guarantor is a party or which is binding on it and does not
        and will not result in the creation or imposition of any security over
        any of its assets pursuant to the provision of any such security
        agreement, deed, contract, undertaking or other instrument.

                           16A CBA GROUP UNDERTAKINGS

16A.1 HAZELWOOD INVESTMENT COMPANY PTY LTD UNDERTAKING

Hazelwood Investment Company Pty Ltd shall on the date of this agreement deliver
to the State and the Seller an undertaking given by Commonwealth Bank of
Australia (ACN 123 123 124) in the form set out in Schedule 5.

16A.2 CISL (HAZELWOOD) PTY LTD UNDERTAKING

CISL (Hazelwood) Pty Ltd shall on the date of this agreement deliver to the
State and the Seller an undertaking given by Commonwealth Investment Services
Ltd (ACN 003 049 830) in the form set out in Schedule 5.
<PAGE>
 
                                      30
 
                      17. STATE'S GUARANTEE AND INDEMNITY

17.1 GUARANTEE

The Treasurer on behalf of the State at the request of the Seller, pursuant to
section 85B of the State Electricity Commission Act 1958, unconditionally and
irrevocably guarantees to the Buyers the due and punctual performance of the
Seller's obligations under this agreement (including any indemnities given in
favour of the Buyers).

17.2 INDEMNITY

As a separate and independent principal obligation, the State indemnifies the
Buyers against all liabilities, losses, damages, costs or expenses incurred or
suffered by the Buyers and al1 actions, proceedings, claims or demands made
against the Buyers as a result of default by the Seller in the performance of
any such obligation or from any such express or implied obligations being
unenforceable.

17.3 EXTENT OF GUARANTEE AND INDEMNITY

(a)  This clause 17 applies:

     (1) to the present and future obligations of the Seller under this
         agreement; and
 
     (2) to this agreement, as amended, supplemented, renewed or replaced.

(b) The obligations of the State under this clause 17 extend to any change in
    the obligations of the Seller as a result of:

    (1) any amendment, supplement, renewal or replacement of this agreement; or

    (2) the occurrence of any other thing.

(c) This clause 17 is not affected, nor are the obligations of the State under
    this agreement released or discharged or otherwise affected, by anything
    which, but for this provision, might have that effect.

(d) This clause 17.3 applies:

    (1) regardless of whether the State is aware of, or has consented to, or is
        given notice of, any amendment, supplement, renewal or replacement of
        any agreement to which the Buyers and the Seller are a party or the
        occurrence of any other thing; and

    (2) irrespective of any rule of law or equity to the contrary.

(e) The indemnity in clause 17.2 does not apply to the giving of the Financial
    Assistance nor the resolutions to be passed by the Seller and the directors
    of the Company as contemplated by this agreement.

17.4 AVOIDANCE OF PAYMENTS

(a) If any payment, conveyance, transfer or other transaction relating to or
    affecting any obligation of the Seller under this agreement is:

    (1) void, voidable or unenforceable in whole or in part; or

    (2) is claimed to be void, voidable or unenforceable and that claim is
        upheld, conceded or compromised in whole or in part, 

    the liability of the State under this clause 17 and any Power is the
    same as if:

    (3) that payment, transaction, conveyance or transfer (or the void, voidable
        or unenforceable part of it); and
<PAGE>
 
                                      31
 
    (4) any release, settlement or discharge made in reliance on any thing
        referred to in clause 17.4(a)(3),

    had not been made and the State must immediately take all action and sign
    all documents necessary or required by the Buyers to restore to the Buyers
    this clause 17 and any Security Interest held by the Buyers immediately
    before the payment, conveyance, transfer or transaction.

(b) Clause 17.4(a) applies whether or not the Seller knew, or ought to have
    known of, anything referred to in that clause.

17.5 CONTINUING GUARANTEE AND INDEMNITY

This is a continuing obligation of the State, despite:

(a) any settlement of account; or

(b) the occurrence of any other thing, 

and remains in full force and effect until:

(c) the obligations of the Seller under this agreement have been performed; and

(d) this clause 17 has been finally discharged by the Seller.

17.6 WARRANTIES OF THE STATE

The State represents and warrants that this guarantee and indemnity constitutes
a legally valid and binding obligation of the guarantor enforceable in
accordance with its terms.

                                  18. NOTICES

18.1 GENERAL

Any notice or other communication including, but not limited to, any request,
demand, consent or approval, to or by a party to this agreement:

(a) must be in legible writing and in English addressed as shown:

    (1) if to the Seller:            The Administrator,

        Address:                     State Electricity Commission of Victoria,
                                     Level 5, 452 Flinders Street
                                     Melbourne 3000
        Attention:                   Mr G Brooke

        Facsimile:                   (03) 9679 4747;

    (2) if to the State:             The Treasurer
                                     Address:  Office of the Treasurer
                                     Level 4, 1 Treasury Place
                                     East Melbourne 3002

        Attention:                   Director of Energy Projects Division

        Facsimile:                   (03) 965 l 3610;

    (3) if to the Buyers:            C/- Phillips Fox

        Address:                     120 Collins Street
                                     Melbourne, 3000
<PAGE>
 
                                      32
 
        Attention:                   Judith Earls/Stephen Sawer
      
        Facsimile:                   (03) 9274 5111; and

    (4) if to the Guarantors:        C/- Phillips Fox

        Address:                     120 Collins Street
                                     Melbourne, 3000

        Attention:                   Judith Earls/Stephen Sawer

        Facsimile:                   (03) 9274 5111

        or as specified to the sender by any party by notice;

(b) where the sender is a company, must be signed by an Officer or under the
    common seal of the sender;

(c) is regarded as being given by the sender and received by the addressee:

    (1) if by delivery in person, when delivered to the addressee; or

    (2) if by facsimile transmission, when transmitted legibly to the addressee,

    but if the delivery or receipt is on a day which is not a Business Day
    or is after 4:00 pm (addressee's time) it is regarded as received at
    9:00 am on the following Business Day; and

(d) can be relied upon by the addressee and the addressee is not liable to any
    other person for any consequences of that reliance if the addressee believes
    it to be genuine, correct and authorised by the sender.

18.2 LEGIBILITY OF FACSIMILE TRANSMISSION

A facsimile transmission is regarded as legible unless the addressee telephones
the sender within 2 hours after the transmission is received or regarded as
received under clause 18.1(c)(2) and informs the sender that it is not legible.

                            19. ON GOING OBLIGATIONS

19.1 CONTINUED ACCESS

The Buyers acknowledge that the State has continuing reporting obligations
under:

(a) the uniform budget presentation standards and Australian loan council
    standards, as agreed from time to time by the Premiers of various States
    within Australia; and

(b) the Financial Management Act 1994. 

Accordingly, the Buyers must ensure that from Completion up until 30 June 1997:

(c) the State is granted full and free access at all reasonable times to those
    employees of the Company whose knowledge or information is needed by the
    State (together with all books, records and other data pertaining to the
    Company and which are referrable to the period on and before the Completion
    Date) to enable it to comply with these obligations;

(d) if, to comply with such reporting obligations, the Auditor-General or the
    Treasurer requires the Company to prepare any accounts or other financial
    information, the Company must, subject to any changes in the Australian
    Accounting Standards Board accounting standards:
<PAGE>

 
                                      33
 
    (1) prepare such accounts or other financial information on a basis
        consistent with the accounting policies and practices applied by the
        Company in the 1995 Accounts; or

    (2) prepare such accounts or other financial information on the basis of its
        then current accounting policies and practices, but with a
        reconciliation setting out the difference between its current accounting
        policies and practices and those which applied in the 1995 Accounts; and

(e) the Company at all times keeps the State promptly informed on all rulings
    received on key matters relating to federal tax.

19.2 ***













19.3 IKEA LEASE

The Buyers and the State must use their best endeavours to effect the novation
of the IKEA Lease from Generation Victoria to the Buyers. In doing so, the
Buyers must use their best endeavours to provide any credit support personally
required by IKEA, as soon as reasonably practicable following Completion. If the
IKEA Lease cannot be novated to the Buyers the State must procure that
Generation Victoria declares that it holds its rights under the IKEA Lease upon
trust for the Buyers, subject to the Buyers indemnifying Generation Victoria in
respect of all liabilities under the IKEA Lease.

19.4 HEADS OF AGREEMENT

The Buyers acknowledge that the Company and Power Net Victoria have entered into
the Heads of Agreement and the Buyers and Seller must use their best endeavours
(and must procure that the Company uses its best endeavours) to document and
finalise the real property interests set out in the Heads of Agreement as soon
as reasonably practicable following Completion.

19.5 NOVATION OF ETSA AGREEMENTS

In the period up to Completion and in the three (3) month period following
Completion, the State will procure that the Generators controlled by the State
consent to the novation of the ETSA
<PAGE>

 
                                      34
 
Agreements from the Company to the Buyers within ten (10) Business Days receipt
of a request for such consent from the Buyers.

19.6 ***













                                  20. GENERAL

20.1 GOVERNING LAW AND JURISDICTION

(a) This agreement is governed by the laws of Victoria. Each party irrevocably
    submits to the exclusive jurisdiction of the courts of Victoria.

(b) Each party irrevocably waives any objection to the venue of any legal
    process on the basis that the process has been brought in an inconvenient
    forum.

20.2 WAIVERS

(a) Waiver of any right arising from a breach of this agreement or of any Power
    arising upon default under this agreement must be in writing and executed by
    the party granting the waiver.

(b) A failure or delay in exercise, of:

    (l) a right arising from a breach of this agreement; or

    (2) a Power created or arising upon default under this agreement, 

    does not result in a waiver of that right or Power.

(c) A party is not entitled to rely on a delay in the exercise or non-exercise
    of a right or Power arising from a breach of this agreement or on a default
    under this agreement as constituting a waiver of that right or Power.

(d) A party may not rely on any conduct of another party as a defence to
    exercise of a right or Power by that other party.

(e) This clause 20.2 may not itself be waived except in writing executed by the
    party granting the waiver.

20.3 VARIATION

A variation of any term of this agreement must be in writing and executed by the
parties.

20.4 FURTHER ASSURANCES

Each party must do all things, and execute all further documents, necessary to
give full effect to this agreement.

20.5 THIRD PARTY RIGHTS

No person (including, but not limited to, an Employee) other than a party to
this agreement and those persons expressly referred to in paragraphs (r) and (s)
of clause l.2 and an assignee
<PAGE>
 
                                      35

pursuant to the proviso to clause 20.7 has or is intended to have any right, 
power or remedy or derives or is intended to derive any benefit under this 
agreement.

20.6    THIS AGREEMENT SUPERSEDES OTHERS

This agreement and the Asset Sale Agreement embody the entire agreement between 
the parties with respect to the subject matter of this agreement and supersede 
any prior negotiation, arrangement, understanding or agreement with respect to 
the subject matter or any term of this agreement.

20.7    ASSIGNMENT

A party may not assign its rights under this agreement without the consent of 
the other parties provided that, this prohibition shall not apply to a person 
wishing to provide security by way of an assignment of its interest in this 
agreement.


EXECUTED by the parties as an agreement.


SIGNED by the Honourable Alan Robert
Stockdale for and on behalf of the
STATE OF VICTORIA in the presence of:

[signature appears here]                       /S/ ALAN ROBERT STOCKDALE
- -------------------------------                ---------------------------
Witness                                        Alan Robert Stockdale


[Name appears here]
- -------------------------------
Name (please print)



THE COMMON SEAL of
STATE ELECTRICITY COMMISSION
OF VICTORIA was affixed to this                    [Seal appears here]
document in accordance with the
State Electricity Commission Act in
the presence of:


/S/ GRAHAM BROOKE                              /S/ N. J. MCMANEN           
- -------------------------------                ---------------------------
Administrator                                  Witness



                                               N. J. McManen
                                               ---------------------------
                                               Name (please print)

<PAGE>
 
                                      36

SIGNED for NATIONAL POWER
AUSTRALIA INVESTMENTS LIMITED
by its duly authorised signatory:


   [SIGNATURE APPEARS HERE]                   /s/ Max Hebert  
- --------------------------------              -----------------------------
Witness                                       Authorised Signatory


   [NAME APPEARS HERE]                       Max Hebert
- --------------------------------              -----------------------------  
Name (please print)                           Name (please print)



SIGNED for HAZELWOOD PACIFIC
PTY LTD by its attorney
in the presence of:

/s/ S.J.E. Uthmeyer                           /s/ Daniel L. Spalding
- --------------------------------             ------------------------------
Witness                                       Attorney

    Simon J.E. Uthmeyer                           Daniel L. Spalding
- --------------------------------             ------------------------------
Name (please print)                           Name (please print)     



SIGNED for AUSTRALIAN POWER
PARTNERS C.V. by its attorney
in the presence of:

/s/ Reggie G. Rice                            /s/ Louis Dorey
- --------------------------------             ------------------------------
Witness                                      Attorney

    Reggie G. Rice                                Louis Dorey
- --------------------------------             ------------------------------
Name (please print)                          Name (please print)

<PAGE>
 
                                      37


SIGNED for HAZELWOOD     
INVESTMENT COMPANY           
PTY LTD by its attorney
in the presence of:


/s/  J.C. Sheridan                            /s/  Carolyn Lawson-Kerr
- --------------------------------              -----------------------------
Witness                                       Attorney            


     J.C. Sheridan                                 Carolyn Lawson-Kerr
- --------------------------------              -----------------------------  
Name (please print)                           Name (please print)



SIGNED for CISL (HAZELWOOD) 
PTY LTD by its attorney
in the presence of:

/s/  J.C. Sheridan                            /s/  Susan Kalius        
- --------------------------------              -----------------------------
Witness                                       Attorney

     J.C. Sheridan                                 Susan Kalius  
- --------------------------------              -----------------------------
Name (please print)                           Name (please print)     



SIGNED for NATIONAL POWER
PLC by its attorney
in the presence of:

/s/  Simon J.E. Uthmeyer                     /s/   Max Hebert 
- --------------------------------             ------------------------------
Witness                                      Attorney

     Simon J.E. Uthmeyer                           Max Hebert 
- --------------------------------             ------------------------------
Name (please print)                          Name (please print)



<PAGE>
 
                                      38

SIGNED for PACIFICORP
HOLDINGS, INC. by its
attorney in the presence of:

/s/ Simon J.E. Uthmeyer                         /s/ Daniel L. Spalding
- -------------------------------                 -----------------------------
Witness                                         Attorney

Simon J.E. Uthmeyer                             Daniel L. Spalding
- -------------------------------                 ----------------------------- 
Name (please print)                             Name (please print)




SIGNED for DESTEC
ENERGY, INC. by its attorney
in the presence of:

/s/ Reggie G. Rice                              /s/ Louis Dorey
- -------------------------------                 -----------------------------
Witness                                         Attorney

Reggie G. Rice                                  Louis Dorey
- -------------------------------                 -----------------------------
Name (please print)                             Name (please print)




<PAGE>

<TABLE> 
<CAPTION> 
 
                                                            
                                                            SCHEDULE 1
                                                 DETAILS OF BUYERS AND GUARANTORS
<S>     <C>                                         <C>             <C>                                          <C>
- ------------------------------------------------------------------------------------------------------------------------------------
        COLUMN A                                    COLUMN B                  COLUMN C                            COLUMN D    

        BUYER                                      OWNERSHIP                  GUARANTOR                       MAXIMUM AMOUNT OF
                                                INTEREST/SHARE                                             GUARANTOR'S GUARANTEE OF
                                                  OF BUYERS'                                                ITS RESPECTIVE BUYER'S
                                                  OBLIGATIONS                                                 OBLIGATIONS AUST $
- -----------------------------------------------------------------------------------------------------------------------------------
1       National Power Australia Investments        51.94%          National Power PLC (Company No.:236693)      $1,397,983,334
        Limited (Company No.:2782480)                               Windmill Hill Business Park, Whitehill Way,
        Windmill Hill Business Park                                 Swindon, Wiltshire SN5 6PB, England
        Whitehill Way, Swindon, Wiltshire SN5
        6PB England
- ------------------------------------------------------------------------------------------------------------------------------------
2       Hazelwood Pacific Pty Ltd                   19.90%          PacifiCorp Holdings, Inc. 700 N.E.             $470,416,666    
        (ACN 074 351 376)                                           Multnomah Street, Suite 1600
        Level 3, 77 Southbank Boulevard                             Portland, Oregon 97232-4116, USA    
        Southbank Victoria 3006
- ------------------------------------------------------------------------------------------------------------------------------------
3       Australian Power Partners C.V., 1077        20.00%          Destec Energy, Inc.                            $450,000,000     
        WV Amsterdam,                                               2500 Citywest Boulevard,
        Prinses Irenestraat 61,                                     Suite 150, PO Box 4411
        The Netherlands                                             Houston, Texas, 7721-4411, USA
- ------------------------------------------------------------------------------------------------------------------------------------
4       Hazelwood Investment Company Pty Ltd         2.04%                                                       See Schedule 5
        (ACN 075 041 360)
        Level 19, 385 Bourke Street
        Melbourne Victoria 3000
- ------------------------------------------------------------------------------------------------------------------------------------
5       CISL (Hazelwood) Pty Ltd                     6.12%                                                       See Schedule 5
        (ACN 074 747 185)
        Level 19, 385 Bourke Street
        Melbourne Victoria 3000
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE> 
<PAGE>
 
                                  SCHEDULE 2
                              SELLER'S WARRANTIES

                                  WARRANTY 1
                              SHARES AND CAPITAL

In this schedule and clause 11.3, a reference to the knowledge and belief or
opinion of the State or the Seller shall be limited to and constituted by the
knowledge and belief or opinion obtained or formed by the State or the Seller
(as the case may be) after due enquiry of Peter Troughton and Brian Leighs.

1.1 TITLE

The Seller will at Completion be the beneficial owner of the Shares (which are
free of all Security Interests and other third party interests or rights) with
the legal ownership of the Shares held as follows:

the Seller:            996 ordinary shares; 
Mr. Graeme Greaves:    one ordinary share; 
Mr. John Drewett:      one ordinary share; 
Mr. Peter Coughlin:    one ordinary share; and 
Mr. Noel McMahen:      one ordinary share.

1.2 CONSENTS

On Completion the Seller and Nominees will be able to sell and transfer the
Shares without the consent of any other person and free of any pre-emptive
rights or rights of first refusal.

1.3 ISSUED CAPITAL

On Completion the Shares will be all the issued Equity Securities in the capital
of the Company. 

1.4 AUTHORISED CAPITAL

The authorised capital of the Company at the date of this agreement is
$500,000,000 divided into 500,000,000 ordinary shares of $1.00 each.

1.5 FULLY PAID

On Completion the Shares will be fully paid and no money will be owing in
respect of them. 

1.6 ISSUE OF OTHER SECURITIES

The Company is not under any obligation to issue or allot, and has not granted
any person the right to call for the issue or allotment of, any shares or other
securities of the Company at any time.

1.7 NO LEGAL IMPEDIMENT

Except for those matters relating to the giving of the Financial Assistance by
the Company, the execution, delivery and performance by the Seller and the State
of this agreement complies with:

(a) each law, regulation, Authorisation, ruling, judgment, order or decree of
    any Governmental Agency; and

(b) any Security Interest or document which is binding on the Seller.
<PAGE>
 
                                       2



1.8 AUTHORISATIONS

The Treasurer has the power to execute this agreement on behalf of the State,
and, except for those matters relating to the giving of the Financial Assistance
by the Company, the Seller has taken all necessary action to authorise the
execution, delivery and performance of this agreement in accordance with its
terms.

                             WARRANTY 2
                         CORPORATE EXISTENCE

2.1 CORPORATE EXISTENCE

The Company:

(a) is a public limited company;

(b) has the power to own its assets and carry on its business as it is now
    being conducted;

(c) is not registered and is not required to be registered in any place outside
    its place of incorporation;

(d) does not carry on business in any place other than Australia; and

(e) is incorporated in the State of Victoria.

2.2 COMPLIANCE WITH CONSTITUENT DOCUMENTS

The business affairs of the Company have been conducted in accordance with its
memorandum and articles of association.

                                  WARRANTY 3
                               THE 1995 ACCOUNTS

3.1 BASIS OF PREPARATION

The 1995 Accounts have been prepared in accordance with the Corporations Law and
on the basis set out in section 96 of the Electricity Act and have been prepared
in a manner consistent with all applicable accounting standards.

3.2 FAIR PRESENTATION

Subject to the qualifications set out in any auditors report which forms part of
the 1995 Accounts, the 1995 Accounts show a true and fair view of:

(a) the financial position and the assets and liabilities of the Company as at
    the relevant balance date; and

(b) the income, expenses and results of the operations of the Company for the
    financial period ended on the relevant balance date.

                                  WARRANTY 4
                     PERIOD SINCE THE DRAFT BALANCE SHEET

4.1 CARRYING ON BUSINESS

Since 30 June 1996 and up to and including the date of this agreement:

(a) the Company has carried on the Business in the ordinary and normal course;
<PAGE>
 
                                       3

(b) the Company has not entered into any contractual commitment requiring the
    Company to pay:

    (1) more than $1,000,000 (or commitments with a particular person where
        the aggregate value of those commitments is more than $1,000,000); or

    (2) more than $200,000 per annum in any period more than 5 years from the
        Completion Date, 

(each a "MATERIAL CONTRACT") except as otherwise specifically disclosed in
the Disclosures;

(c) the Company has not issued any Equity Securities in the Company;

(d) except for the sale of the Assets to the Buyers the Company has not
    disposed of, or agreed to dispose of or grant an option to purchase, any
    material asset of the Company or the Business, or any interest in such an
    asset other than in the ordinary course of business;

(e) no dividend or other distribution of profits or capital has been made to
    shareholders in the Company except for a dividend to be paid to the Seller
    as contemplated under this agreement;

(f) the Company has not engaged any new employee with an annual remuneration
    package in excess of $200,000 or, except in the ordinary course of the
    Business or pursuant to an enterprise bargaining agreement (or interim
    agreement), changed the terms of employment (including remuneration) of any
    of the Employees; and

(g) the Company has not altered its memorandum or articles of association.

                                  WARRANTY 5
                                    ASSETS

5.1 TITLE TO ASSETS

All the assets used in the Business and appearing in the Company's fixed asset
register which still exist at the date of this agreement are or will, at
Completion, be:

(a) except for land of the Company currently leased or licensed to or the
    subject of easements in favour of third parties, in the possession of the
    Company or able to be accessed by the Company;

(b) except for telecommunications cabling and assets and other assets used by
    telecommunications companies, water authorities, Integrated Systems
    Solutions Corporation Australia Ltd (ACN 001 538 736), distribution
    companies, Power Net Victoria, Victorian Power Exchange, other generators,
    retailers, customers and site contractors and for land of the Company
    currently leased to third parties, used solely by the Company;

(c) the absolute property of the Company free of al1 Security Interests; and

(d) except for land of the Company currently leased to third parties, not the
    subject of any lease or hire purchase agreement or agreements for purchase
    on deferred terms.

5.2 BOOK DEBTS

The Company will not assign or transfer in law or in equity any of its book
debts prior to Completion.
<PAGE>
 
                                       4

                                  WARRANTY 6
                                  DISCLOSURE

6.1 DISCLOSURE

No trade secret or confidential information of the Company has been disclosed or
made available to any person except in the ordinary course of business or in the
course of the sale of the Shares.

                                  WARRANTY 7
                                 SECURED DEBT

  The Company has not granted or created, or agreed to grant any mortgages or
floating charges.

                                  WARRANTY 8
                                  CONTRACTS

8.1 FOREIGN CURRENCY TRANSACTIONS

The Company is not party to any foreign currency transaction other than in the
ordinary course of business.

8.2 CHANGE OF CONTROL

The Company is not party to any Material Contract (other than certain property
leases) under which any third party is entitled, as a result of a change in
ownership of the Shares:

(a) to terminate the contract; or

(b) to impose or require the adoption of terms which are less favourable to the
    Company than the current terms.

8.3 NO NOTICES

The Company has not received any written notice which might affect any rights of
the Buyers or the exercise of any rights by the Buyers in respect of any
Material Contract.

                                  WARRANTY 9
                            DELEGATIONS AND OFFERS

9.1 POWERS OF ATTORNEY

No power of attorney given by the Company is in force except as disclosed in the
Disclosures.

9.2 OFFERS OUTSTANDING

Any offer, tender or quotation made by the Company in respect of the Business
which is outstanding and capable of acceptance by a third party, was made in the
ordinary course of the Business.
<PAGE>
 
                                       5

                                  WARRANTY 10
                                   CREDITORS

10.1 OUTSTANDING NOTES

No cheque, promissory note or bill of exchange drawn, accepted or endorsed by
the Company is still outstanding, other than:

(a)  bills drawn in the course of refinancing by the Company of debt owed to the
     State or its instrumentalities; and

(b)  cheques drawn to pay for obligations incurred by the Company in the
     ordinary course of the Business.

                                  WARRANTY 11
                              CORPORATE STRUCTURE

11.1 SHAREHOLDINGS

The Company is not the holder or the beneficial owner of any shares or other
capital or securities convertible into shares or other capital in any other
company other than 100 shares of $1.00 each in PowerWorks Pty Ltd.

11.2 PERMANENT ESTABLISHMENT

The Company does not have any permanent establishment (as that expression is
defined in any relevant taxation agreement to which Australia is a party)
outside Australia.

11.3 MEMBERSHIPS

The Company is not a member of any joint venture, partnership or unincorporated
association (including a recognised trade association) other than:

(a)  Co-operative Research Centre for New Technologies for Power Generation from
     Low Rank Coal; and

(b)  Electricity Supply Association of Australia.

                                  WARRANTY 12
                                   EMPLOYEES

12.1 ALLOWANCES

Other than contributions to the Company's Fund and payments required under
personal employment contracts, the Company is not currently liable to pay any
annuity, superannuation benefit, pension or other like payment in respect of the
death, disability, retirement, resignation or dismissal of any Employee or any
former employee of the Company.

12.2 TERMINATION OF EMPLOYMENT

The employment of each Employee can be lawfully terminated by such notice as is
required by law without payment of any damages or compensation, including any
severance or redundancy payments, in excess of the amount (if any) required by
law.

12.3 EMPLOYEE PLANS

Except as set out in the Disclosures, the Company has no generally available
compensation plans, benefit plans or agreements for the benefit of any Employee.
<PAGE>
 
                                       6

                                  WARRANTY 13
                             SUPERANNUATION SCHEMES

13.1 LIST COMPLETE

The Company's Fund is the only superannuation scheme or other pension
arrangement:

(a)  in operation by or in relation to the Employees; and

(b)  to which the Company contributes which provides its directors or Employees
     or their dependents with pensions, annuities or lump sum payments.

13.2 FUNDING

With respect to the Company's Fund:

(a)  there were at 30 June 1996 no outstanding and unpaid contributions other
     than as provided in the Balance Sheet on the part of the Company or any
     Employee; and

(b)  based on the actuarial reviews (copies of which form part of the
     Disclosures) the Seller is not aware of any fact or circumstance which, if
     included or taken into account in the preparation of those actuarial
     reviews by William M Mercer Pty Ltd of the Company's Fund, would have led
     to a different conclusion.

13.3 APPROVALS

Where the Company's Fund requires approval from any authority to obtain the
benefit of any reduced or concessional tax rate, the approval has been obtained
and is still current and the Seller has no reason to believe that it may be
revoked.

                                  WARRANTY 14
                                    UNIONS

14.1 AGREEMENTS

The Company is not a party to any agreement, arrangement or understanding with a
union or industrial organisation in respect of the Employees other than in
respect of:

(a)  awards made by, agreements certified by, or agreements the 
     implementation of which has been approved by the Australian Industrial 
     Relations Commission under the Industrial Relations Act 1958 (Cth); and

(b)  human resources policies.

14.2 AWARDS

No industrial awards apply to the Company other than:

(a)  the State Electricity Commission of Victoria Electrical, Electronic and
     Engineering Employees Award, 1989;

(b)  the State Electricity Commission of Victoria Engine Drivers and Firemens
     Award 1989;

(c)  the State Electricity Commission of Victoria Metal Industry Employees
     Award 1989;

(d)  the Transport Workers (State Electricity Commission of Victoria) Award
     1990; and

(e)  the State Electricity Commission of Victoria, Maintenance and Services
     Award 1989.
<PAGE>
 
                                       7

                                  WARRANTY 15
                              COMPLIANCE WITH LAW

15.1 COMPLIANCE WITH LAW

Save for the matters referred to in the "no-action" letter from the Office of
the Regulator-General to the Company dated l August 1996 the ownership and use
of the Company's assets by the Company comply with al1 applicable laws specific
to the electricity industry.

15.2 CONDUCT AND PRACTICES

The Company only engages in, and has at all times only engaged in, conduct or
practices which comply with al1 applicable laws concerning consumer transactions
which affect the Company's operations (including any consumer protection, fair
trading, restrictive trade practices or antitrust legislation).

15.3 LICENCES OBTAINED

(a)  The Company has all necessary Authorisations required to conduct the
     Business and has paid all fees due in relation to them and complied with
     all conditions under them.

(b)  There is no factor which might prejudice the continuance or renewal of any
     such Authorisation.

                                  WARRANTY 16
                                  LITIGATION

16.1 COMPANY NOT A PARTY TO ANY LITIGATION 

The Company is not:

(a)  a party to any investigation, prosecution, litigation, arbitration
     proceedings or any other form of mediation or dispute resolution; or

(b)  subject to any audit or investigation by any Governmental Agency;

other than:

(c)  the matters referred to in the "no-action" letter referred to in warranty
     15.1; and

(d)  workers compensation and personal injury claims previously disclosed in the
     Disclosures. 

16.2 NO LITIGATION PENDING OR THREATENED

No audit, investigation, prosecution, litigation, proceeding or any other form
of mediation or dispute resolution referred to in Warranty 16.1 is pending or
threatened, except as otherwise disclosed in the Disclosures.

                                  WARRANTY 17
                                   SOLVENCY

17.1 NO LIQUIDATION OR WINDING-UP

The Company has not gone into liquidation or passed a winding-up resolution nor
received a notice under sections 572 or 573 of the Corporations Law.
<PAGE>
 
                                       8

17.2 NO PETITION

No petition or other process for winding-up has been presented or threatened
against the Company and there are no circumstances justifying a petition or
other process.

17.3 NO WRIT OF EXECUTION

No writ of execution has issued against the Company or the property of the
Company and there are no circumstances justifying a writ.

17.4 NO RECEIVER

No receiver, receiver and manager or administrator of any part of the
undertaking or assets of the Company has been appointed or is threatened or
expected to be appointed and there are no circumstances justifying an
appointment.

                                  WARRANTY 18
                       RECORDS AND CONSTITUENT DOCUMENTS

18.1 RECORDS

All accounts, books, ledgers and financial and other records of the Company are
either:

(a)  in the possession or under the control of the Company and located at the
     Company's premises at Morwell and Melbourne;

(b)  under the direction of the Company at Integrated Systems Solutions
     Corporation Australia Ltd (ACN 001 538 736);

(c)  under the direction and/or control of Australian Science Archives Project
     in Carlton and Morwell and at other locations authorised by Australian
     Science Archives Project; or

(d)  held on behalf of the Company by various contractors for the purposes of
     providing services to the Company.

18.2 MEMORANDUM AND ARTICLES

The Seller has supplied accurate and up-to-date copies of the memorandum and
articles of association of the Company to the Buyers.

18.3 REGISTER OF MEMBERS

The Company has not received notice of any application or intended application
for the rectification of its register of members or any other register which it
is required by law to maintain.

                                  WARRANTY 19
                               TAXES AND DUTIES

19.1 PROVISIONING

Adequate provision is made in the Balance Sheet for any federal tax or Duty on
the Company which is payable or may become payable by the Company in respect of
the period before 30 June 1996 but which was unpaid at that date.

19.2 DOCUMENTS STAMPED

Any Duty payable in relation to any transaction or agreement to which the
Company is or has been a party or by which the Company derives or has derived a
substantial benefit has been paid.
<PAGE>
 
                                       9

19.3 RETURNS SUBMITTED

The Company has submitted any necessary information, notices, computations,
returns, declarations and elections to the relevant Governmental Agency in
respect of any federal tax or any Duty relating to the Company.

                                  WARRANTY 20
                                  INSURANCES

20.1 PREMIUMS PAID

The Company's insurance policies as set forth in the Disclosures have been
validly entered into and all premiums due and payable under the Company's
insurance policies have been paid.

20.2 MAINTENANCE OF POLICIES

The Company's insurance policies will be maintained in full1 force and effect
until the Completion Date.
<PAGE>
 
                                  SCHEDULE 3
                                  DISCLOSURES

1.  All Data Room Documentation.

2.  All information which is available on public record up to and including 26
    July 1996.

3.  All information set out in the Information Memorandum dated 7 June 1996
    (Volume 1 and 2) and 13 June 1996 (Volume 3).

4.  All audit files made available for review by the Auditor-General regarding
    the 1995 Accounts, as follows:

   File 1 of 5 - Executive Summary File:

   .      Signed copy of the financial statements and Auditor-General's opinion;

   .      Official Report and client response;

   .      Management Letter and client response;

   .      General correspondence;

   .      Discussions with Management;

   .      Analytical Review; and

   .      Matters raised by Auditors.

   File 2 of 5 - Financial Statements File: 
   .      Trial Balance; 

   .      Post Closing Journals;

   .      General Ledger and Journals;

   .      Statement of Cash Flows;

   .      Review of Notes to Financial Statements;

   .      Subsequent Events Review;

   .      Review of Minutes; and

   .      Issues.

   File 3 of 5 - Current File:

   .      Cash;

   .      Debtors;

   .      Inventories;

   .      Investments; and

   .      Intangibles.

   File 4 of 5 - Current File:

   .      Fixed Assets; and

   .      Other Assets.
<PAGE>
 
   File 5 of 5 - Current File:

   .      Creditors;

   .      Payroll;

   .      Provisions;.

   .      Borrowings;

   .      Other Liabilities;

   .      Share Capital; and

   .      Contingencies and Commitments.

5. All slides and visual aides used as part of the executive presentations made
   by the Company to the Buyers on the following dates (or other times as
   arranged):

<TABLE>
<CAPTION>
________________________________________________________________________________________________________
 DATE                             PRESENTER             TOPIC                    VENUE           
________________________________________________________________________________________________________
<S>                  <C>           <C>                    <C>                    <C> 
 17 June 96          2:00 pm       Bernie Smith         Corporate Summary        29/120 Collins 
                                                                                                                 
                     3:30 pm       Ian Derham           Mine                     29/120 Collins
                                                                                                                 
                     5:00 pm       Graeme Dineen        Power Station            29/120 Collins  
                                                                                                                 
                                                                                                                 
 18 June 96         12:00 pm       Geo Eng              Hazelwood mine           29/120 Collins 
                                                                                                                 
                                                                                                                 
 20 June 96          2:00 pm       Garry Watkinson      Human Resources          29/120 Collins 
                                                                                                                 
                     3:30 pm       Brian Clark          Finance                  29/120 Collins
                                                                                                                 
                     5:00 pm       Alistair Tompkin     Support Services         29/120 Collins
                                                                                                                 
                                                                                                                 
 24 June 96         10:30 am       Stephen Orr          Sales and Marketing      29/120 Collins 
                                                                                                                 
                                                                                                                 
 26 June 96          9:00 am       Rodney Ward/         NSW and progress         29/120 Collins 
                                   John Mather          towards the National                        
                                                        Market                                      
                                                                                                    
                                                                                                    
 27 June 96          9:30 am       Neville Henderson    National Electricity     27/101 Collins        
                                                        Market                                      
                                                                                                    
                    11:00 am       Jim Gallagher        National Electricity     27/101 Collins        
                                                        Market                                      
                                                        Implementation                              
                                                                                                    
                                                                                                    
28 June 96           9:00 am       Hugh Bannister       Pool Prices               5/161 Collins (Rm 588) 
                                                                                                    
                    11:00 pm       David Stephens  -    Pool Price Outlook        5/161 Collins (Rm 588) 
                                   McKinsey & Co.  
________________________________________________________________________________________________________
</TABLE>
<PAGE>
 
                                   SCHEDULE 4
                                   IKEA LEASE

The cross-border sale and lease-back arrangement relating to Bucket Wheel
Excavator Type S1500/25 and comprising the following agreements and guarantees:

1.  Purchase agreement dated 31 August 1989 between the Seller and IKEA, with
    the rights and obligations of the Seller having been assumed by Generation
    Victoria ("GenVic") under letter agreement dated 29 December 1993.

2.  Lease agreement dated 31 August 1989 between IKEA and the Seller with the
    rights and obligations of SECV having been assumed by Genvic under letter
    agreement dated 29 December 1993.

3.  Accounts receivable purchase agreement dated 31 August 1989 between Inter
    IKEA Finance S.A. and IKEA.

4.  Accounts receivable purchase agreement dated 31 August 1989 between the
    Seller and Inter IKEA Finance S.A., with the rights and obligations of the
    Seller having been assumed by GenVic under letter agreement dated 29
    December 1993.

5.  Assumption agreement dated 3l August 1989 between the Seller and Cross
    Leasing S.A. with the rights and obligations of the Seller having been
    assumed by GenVic under letter agreement dated 29 December 1993.

6.  Remarketing agreement dated 31 August 1989 between IKEA and Cross Leasing
    S.A.

7.  Remarketing agreement dated 31 August 1989 between Cross Leasing S.A. and
    the Seller, with the rights and obligations of the Seller having been
    assumed by GenVic under letter agreement dated 29 December 1993.

8.  Guarantee dated 30 August 1989 from IKEA Verwaltungs - GmbH to the Seller
    with the benefit of the Guarantee having been assigned to GenVic under a
    deed of assignment dated 24 January 1994.

9.  Guarantee dated 22 August 1989 from Ingka Holding B.V. and the Seller with
    the benefit of the guarantee having been assigned to GenVic under a deed of
    assignment dated 24 January 1994.
<PAGE>
 
                                  Schedule 5

                            CBA Group Undertakings

<PAGE>
 
                  [COMMONWEALTH BANK LETTERHEAD APPEARS HERE]





2 August 1996



State Electricity Commission of Victoria and
The Honourable Alan Robert Stockdale in his capacity as Treasurer of the
State of Victoria for and on behalf of the Crown in right of the State



In pursuance of a broad investment approval by the board of Commonwealth Bank of
Australia ACN 123 123 124 ("CBA") at its July 1995 meeting, CBA undertakes that,
if the Share Sale Agreement relating to Hazelwood Power Corporation Ltd is
entered into by Hazelwood Investment Company Pty Ltd ACN 075 041 360 ("HICPL")
CBA will ensure that HICPL has sufficient moneys to fulfil its obligations under
the Share Sale Agreement:

(a)     to pay when due the proportion of the Deposit payable by HICPL; and

(b)     to pay when due its contribution towards the Purchase Price

provided that the total of those amounts does not exceed $25 million.

Yours sincerely



I.K. Payne
Executive Director

<PAGE>
 
[COMMONWEALTH FINANCIAL SERVICES LETTERHEAD APPEARS HERE]



TO:     STATE ELECTRICITY COMMISSION OF VICTORIA

        AND

        THE HONORABLE ALAN ROBERT STOCKDALE IN HIS CAPACITY AS TREASURER OF THE
        STATE OF VICTORIA FOR AND ON BEHALF OF THE CROWN IN RIGHT OF THE STATE


Commonwealth Investment Services Limited ACN 003 049 830 ("CISL") confirms that 
as of the date hereof it has funds under its management in excess of $13 billion
on behalf of various clients.

CISL undertakes that, if the Share Sale Agreement relating to Hazelwood Power 
Corporation Ltd is entered into by CISL (Hazelwood) pty Ltd ACN 074 747 185 
("CHPL"), CISL will ensure that CHPL is provided with sufficient moneys from the
funds under CISL's management to fulfil its obligations under the Share Sale 
Agreement:

(a)     to pay when due the proportion of the Deposit payable by HIC; and

(b)     to pay when due its contribution towards the Purchase Price

provided that such moneys shall be limited in aggregate, to $75 million.

Yours sincerely



JOHN RAWLINS
GENERAL MANAGER

<PAGE>
                                  ANNEXURE A
                                 1995 Accounts      
<PAGE>
 
        TABLE OF CONTENTS


Page

26      Directors' Report
28      Profit and Loss Account
29      Balance Sheet
30      Statement of Cash Flow
        Notes To and Forming Part of the Financial Statements
31      Note 1    Summary of Significant Accounting Policies
34      Note 2    Revenue
34      Note 3    Operating Profit
34      Note 4    Abnormal Item
35      Note 5    Income Tax
36      Note 6    Current Assets - Cash
36      Note 7    Current Assets - Receivables
36      Note 8    Current Assets - Inventories
37      Note 9    Non-current Assets - Investments
37      Note 10   Non-current Assets - Inventories
37      Note 11   Non-current Assets - Property, Plant and Equipment
38      Note 12   Non-current Assets - Other
39      Note 13   Current Liabilities - Creditors and Borrowings
39      Note 14   Current Liabilities - Provisions
39      Note 15   Non-current Liabilities - Creditors and Borrowings
40      Note 16   Non-current Liabilities - Provisions
41      Note 17   Share Capital
41      Note 18   Cash Flow
42      Note 19   Expenditure Commitments
43      Note 20   Employee Entitlements
44      Note 21   Site Restoration Costs
45      Note 22   Provisions for Redundancies
45      Note 23   Contingent Assets and Liabilities
45      Note 24   Remuneration of Auditors
46      Note 25   Remuneration of Directors
46      Note 26   Remuneration of Executives
46      Note 27   Remuneration of Consultants
46      Note 28   Related Party Disclosures
47      DIRECTORS' STATEMENT
48      AUDITORS' REPORT

<PAGE>
 
In accordance with the Corporations Law, the Directors of Hazelwood Power 
Corporation Ltd. submit their report for the year ended 30 June 1995.

DIRECTORS

The names of the Directors of Hazelwood Power Corporation Ltd. in office at the 
date of this report are: Frank H. Osborn (Chairman), Randolph E. Creswell, Mark 
W. Sibree, Nancy J. Hogan, and Roland P. Newman.

PRINCIPAL ACTIVITIES

The principal activities undertaken by Hazelwood Power Corporation Ltd. were the
mining of coal and the generation and sale of electricity. These activities
commenced on 1 February 1995.

RESULTS AND DIVIDENDS

                                                $ 000
Operating profit after tax and abnormals       15,331

Dividends paid                                    Nil

No dividend was provided as at 30 June 1995.

REVIEW OF OPERATIONS

The operating performance of Hazelwood Power Station during the five months to 
June 1995 has been excellent with an available capacity factor of 92.6% for the 
six unit operation.

Generation sent out of 1,908 GWh was 10% better than expected and revenue from
generation was 20% higher than anticipated and reflects the benefit of being
able to provide reserve plant to the market during times of high demand and/or
low availability of other plant. Total sales revenue (including sales of coal to
Energy Brix Australia Corporation) was 20% higher than expected.

The increase in sales of electricity consequently meant an increase in the
supply of coal and a total of 3,685 kt of coal was mined to satisfy demand by
Hazelwood Power Station and Energy Brix Australia Corporation at 100%
reliability of supply.

Profit After Tax of $15.3 M is a very satisfactory result given the constraints
of the initial allocation of electricity sales contracts following the
disaggregation of the generation sector.

In recognition of the company's ethical obligations in relation to the 
environment, the Directors have made a commitment to the restoration of the 
sites occupied by the power station and the mine to an acceptable environmental 
standard at the end of their economic life.  Provision for this is progressively
being made through the Profit and Loss Account over the remaining lives of the 
power station and mine.

PERSONNEL

Personnel numbers reduced from 781 (as at 1 February 1995) to 657 as at 30 June 
1995, a reduction of 124 or 16%.  This reduction was achieved almost entirely 
through a voluntary redundancy program.  Lower workforce numbers are a key 
factor in the restructuring and ongoing viability of the company.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

During the year, there have been a number of significant changes to the state of
affairs of the company.  During the period 1 July 1994 to 18 January 1995, the 
company, then known as Violet Tower Pty Ltd, lay dormant and did not trade.  On 
19 January 1995 the company changed its name to Hazelwood Power Corporation Pty 
Ltd, and on 9 February 1995, it became a public company known as Hazelwood Power
Corporation Ltd.

Effective from 1 February 1995, Hazelwood Power Corporation Ltd, as per the
Allocation Statement pursuant to the Electricity Industry (Further Amendment) 
Act 1994, had vested in it the assets and liabilities of Generation Victoria 
associated with the mining and electricity generation facilities of the Morwell 
Mine and Hazelwood Power Station, plus a corporate centre complex.

BOARD MEETINGS

The Directors for the period 1 July 1994 to 29 August 1994 were Mesdames S. M.
McGarry and K. M. Russell. They both attended the only meeting held during this
period and both resigned as Directors on 29 August 1994.

Messrs. J. B. Drewett and R. A. Evans were appointed Directors on 30 August
1994. Mr. J. B. Herbert was appointed a Director on 18 January 1995. These
Directors resigned on 30 January 1995. During this period, three Directors'
meetings were held, with Messrs. Drewett and Evans attending all three meetings.

Mr. Herbert attended the only meeting for which he was eligible. Messrs. F. H.
Osborn, R. E. Cresswell and M. W. Sibree were appointed Directors on 31 January
1995 to 30 June 1995 comprising six scheduled meetings and one special meeting.
Messrs. Osborn, Creswell and Sibree attended all meetings and Miss Hogan and Mr.
Newman attended the two meetings held following their appointment.

There were two Audit Commitee meetings held during the year.  The members of the
committee are Mr. M. W. Sibree (Chairman), Mr. R. P. Newman and Mr. B. C. Clark.

The Board is also supported by an Environmental Compliance Committee which is 
chaired by Mr. R. E. Cresswell.

<PAGE>
 
INSURANCE OF DIRECTORS AND OFFICERS

With effect from 1 February 1995, Directors (as named in this report) and 
Officers of the company were insured for a sum of $ 50 M against certain 
liabilities and costs which they may incur as a direct result of their position 
in the company, for which they were not otherwise indemnified and which were not
unlawfully incurred, through a policy placed by the company with Utilities 
Insurance Co Pty Ltd. The premium paid by the company for this cover was
$ 35 100.

ROUNDING

Amounts in this report have been rounded off to the nearest one thousand dollars
in accordance with section 311 of the Corporations Law and the Regulations 
unless otherwise indicated.

Signed in accordance with a resolution of the Directors.

/s/ F.H. Osborn
- ---------------
    F.H. Osborn
    Chairman


/s/ M.W. Sibree
- ---------------
    M.W. Sibree
    Director

Melbourne
8 September 1995

<PAGE>
 
HAZELWOOD POWER CORPORATION LTD
PROFIT AND LOSS ACCOUNT
For the year ended 30 June 1995


<TABLE> 
<CAPTION> 


                                                                                                  1995
                                                                                  Notes          $ 000
<S>                                                                               <C>            <C> 

Operating profit before abnormal items and income tax                              2,3          17,375
Income tax attributable to operating profit before abnormal items                    5          (6,381)
                                                                                            ----------
OPERATING PROFIT AFTER INCOME TAX BEFORE ABNORMAL ITEMS                                         10,994
                                                                                            ----------
Abnormal item before income tax                                                      4           5,632
Income tax attributable to abnormal item                                           4,5          (1,295)
                                                                                            ----------
ABNORMAL ITEM AFTER INCOME TAX                                                                   4,337
                                                                                            ----------
OPERATING PROFIT AFTER INCOME TAX                                                               15,331
Retained profits/(accumulated losses) at the beginning of the financial year                      -
                                                                                            ----------
TOTAL AVAILABLE FOR APPROPRIATION                                                               15,331
Dividends provided for or paid                                                                    -
                                                                                            ----------
RETAINED PROFITS AT THE END OF THE FINANCIAL YEAR                                               15,331
                                                                                            ----------

The above profit and loss account should be read in conjunction with the accompanying notes.

</TABLE> 

<PAGE>
 
HAZELWOOD POWER CORPORATION LTD
BALANCE SHEET
As at 30 June 1995


<TABLE> 
<CAPTION> 

                                                                  1995
                                                Notes            $ 000
<S>                                             <C>              <C> 

CURRENT ASSETS
Cash                                              6              9,204
Receivables                                       7             41,185
Inventories                                       8              4,974
                                                               -------
TOTAL CURRENT ASSETS                                            55,363
                                                               -------
NON-CURRENT ASSETS
Investments                                       9                 39
Inventories                                      10              4,362
Property, plant and equipment                    11            667,973
Other                                            12              6,761
                                                               -------
TOTAL NON-CURRENT ASSETS                                       679,135
                                                               -------
TOTAL ASSETS                                                   734,498
                                                               -------
CURRENT LIABILITIES
Creditors and borrowings                         13            518,958
Provisions                                       14             36,850
                                                               -------
TOTAL CURRENT LIABILITIES                                      555,808
                                                               -------
NON-CURRENT LIABILITIES
Creditors and borrowings                         15            148,125
Provisions                                       16             15,234
                                                               -------
TOTAL NON-CURRENT LIABILITIES                                  163,359
                                                               -------
TOTAL LIABILITIES                                              719,167
                                                               -------
NET ASSETS                                                      15,331
                                                               -------
SHAREHOLDERS' EQUITY
SHARE CAPITAL                                    17                  0
RETAINED PROFITS                                                15,331
                                                               -------
TOTAL SHAREHOLDERS' EQUITY                                      15,331
                                                               -------

The above balance sheet should be read in conjunction with the accompanying notes.

</TABLE> 

<PAGE>
 
HAZELWOOD POWER CORPORATION LTD
STATEMENT OF CASH FLOWS
For the year ended 30 June 1995

<TABLE> 
<CAPTION> 

                                                                          1995
                                                            Notes        $ 000
<S>                                                         <C>          <C> 
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers                                                 59,727
Payments to suppliers and employees                                    (32,856)
Payments relating to redundant employee terminations                    (7,966)
                                                                     ---------
NET CASH INFLOW FROM OPERATING ACTIVITIES                    18.1       18,905
                                                                     ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire property, plant and equipment                       (1,544)
Proceeds from sale of property, plant and equipment                         47
                                                                     ---------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES                              (1,497)
                                                                     ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Interest and other items of a similar nature received                       66
Interest and other costs of finance paid                                (8,286)
Proceeds from borrowings                                                28,735
Repayment of borrowings                                                (30,245)
                                                                     ---------
NET CASH OUTFLOW FROM FINANCING ACTIVITIES                              (9,730)
                                                                     ---------
INCOME TAX PAID                                                           -
                                                                     ---------
NET INCREASE IN CASH HELD                                                7,678

CASH FLOW EFFECT OF THE VESTING OF ASSETS AND LIABILITIES   
AS PER THE ALLOCATION STATEMENT EFFECTIVE 1 FEBRUARY 1995    18.2         (242)

CASH AT BEGINNING OF THE FINANCIAL YEAR                                   -
                                                                     ---------
CASH AT END OF THE FINANCIAL YEAR                               6        7,436
                                                                     ---------


The above statement of cash flows should be read in conjunction with the accompanying notes.


</TABLE> 

<PAGE>
 
       1   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     1.1   BASIS OF ACCOUNTING

   1.1.1   GENERAL SYSTEM OF ACCOUNTING

           The financial statements are prepared on an accrual basis and in
           accordance with the relevant Accounting Standards, the Corporations
           Law and Schedule 5 to the Corporations Regulations, and the Victorian
           Financial Management Act 1994 and the Financial Management
           Regulations 1994. They are prepared in accordance with the historical
           cost convention.

   1.1.2   PRINCIPLES OF CONSOLIDATION

           Hazelwood Power Corporation Ltd is not a "parent entity" and does not
           have any controlled entities. Therefore, no consolidiated accounts
           are presented.

   1.1.3   ELECTRICITY SUPPLY INDUSTRY REFORM

           As a result of the ongoing reform of the electricity supply industry
           by the Victorian State Government, Generation Victoria was
           disaggregated on 1 February 1995 and Hazelwood Power Corporation Ltd
           became responsible for the operations of the Hazelwood Power Station
           and Morwell Mine. Pursuant to the Allocation Statement of the
           Electricity Industry (Further Amendment) Act 1994, the assets and
           liabilities associated with the mining and electricity generation
           facilities of the mine and power station plus the corporate centre
           complex were vested in Hazelwood Power Corporation Ltd, effective
           1 February 1995.

           The financial statements, in effect, report the results for the
           operations of the company for the five months from 1 February 1995 to
           30 June 1995.

           The balance sheets and capital structure (including the value
           attributable to property, plant and equipment) were determined by the
           shareholder (Victorian State Government) and reflect the economic
           value of the business over the estimated remaining operating life of
           the mine and power station of twenty-one years. This economic value
           was based on the net present value of estimated future cash flows. As
           part of the ongoing reform of the electricity supply industry in
           Victoria, the State Government has announced its intention to sell
           the generation entities.

     1.2   ACCOUNTING FOR INCOME TAX

           As a government business enterprise, Hazelwood Power Corporation Ltd
           is exempt from Federal income tax, but is subject to the Victorian
           State Government Tax Equivalent System pursuant to Section 88 of the
           State Owned Enterprises Act 1992.
           
           The company has adopted the liability method of tax-effect accounting
           whereby income tax is regarded as an expense and is matched with the
           accounting profit after allowing for permanent differences.

           To the extent that timing differences occur between the point in time
           when items are recognised in the accounts and when items are taken
           into account in determining taxable income, the net related taxation
           benefit or liability is disclosed as a future income tax benefit or a
           provision for deferred income tax. These account balances are
           calculated with reference to the rates of income tax which are
           expected to apply when those timing differences reverse.

           Future income tax benefits are not brought to account unless
           realisation of the asset is assured beyond reasonable doubt. The
           future income tax benefit arising from tax losses is only carried
           forward as an asset when the benefit is virtually certain of being
           realised.

           Upon privatisation, the company will become subject to the Federal
           income tax regime. The Federal Treasurer has announced that when a
           tax exempt entity becomes taxable certain provisions (for example,
           employee entitlements) carried forward will not give rise to
           allowable deductions when settled. This means that the future income
           tax benefit normally associated with these provisions is not assured
           beyond reasonable doubt, and has not been carried forward.

     1.3   CLASSIFICATION OF ASSETS AND LIABILITIES

           Assets and liabilities are classified as current and non-current.
           Current assets are cash or other assets that would, in the ordinary
           course of business, be consumed or converted into cash within twelve
           months. Current liabilities are liabilities that would, in the
           ordinary course of business, be due and payable within twelve months.

     1.4   INVENTORIES

           Construction and maintenance stocks, general purpose materials, and
           fuels are stated at the lower of cost and net realisable value. Cost
           comprises the expenditure incurred in acquiring and bringing the
           stock to its existing condition and location and includes an
           appropriate proportion of fixed and variable overhead expenditure. In
           each case, cost is determined on the basis of weighted average costs.
           An estimate of items which are unlikely to be issued in the next
           twelve months is classified as non-current.

     1.5   ESTIMATED DOUBTFUL DEBTS

           The value of estimated doubtful debts is reviewed annually on an 
           individual debtor basis, and an appropriate provision is made.








  
<PAGE>
 
      1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

    1.6  CAPITAL PROJECT COSTS

         The cost of non-current assets constructed by the company includes the
         cost of all materials used in construction, direct labour on the
         project, and, for a significant project (being those with an estimated
         lead time of at least one year and direct expenditure in excess of
         $ 100 M), interest and finance charges and foreign exchange differences
         during construction and an appropriate portion of overheads.

    1.7  DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT

         Depreciation is calculated using the straight line method to write off
         the net cost or revalued amount of each item of property, plant and
         equipment (excluding land) over its expected useful life. Estimates of
         remaining useful lives are made on a regular basis for all assets.

         Major spares purchased specifically for particular plant are included 
         in the cost of plant and are depreciated.

    1.8  MINE DEVELOPMENT

         Mine development expenditure for the initial establishment of access to
         coal reserves is capitalised to the extent that the expenditure results
         in significant future benefits. These amounts are amortised over the
         current estimated lives of the coal fields to which they relate on a
         production output basis.

    1.9  RECOVERABLE AMOUNT OF NON-CURRENT ASSETS

         The recoverable amount of an asset is the net amount expected to be
         recovered through the net cash inflows arising from its continued use
         and subsequent disposal. Where the carrying amount of a non-current
         asset is greater than its recoverable amount, the asset is revalued to
         its recoverable amount. Where net cash inflows are derived from a group
         of assets working together, recoverable amount is determined on the
         basis of the relevant group of assets. To the extent that a revaluation
         decrement reverses a revaluation increment previously credited to, and
         still included in the balance of, the asset revaluation reserve, the
         decrement is debited directly to that reserve. Otherwise, the decrement
         is recognised as an expense in the profit and loss account. The
         expected net cash flows included in determining the recoverable amounts
         of non-current assets are discounted to their present values using a
         market-determined, risk-adjusted discount rate.

    1.10 INVESTMENTS

         Interests in listed and unlisted securities are brought to account at
         cost and dividend income is recognised in the profit and loss account
         when receivable. Information prepared on an equity accounting basis is
         disclosed in the notes to the financial statements.

    1.11 EMPLOYEE ENTITLEMENTS

  1.11.1 WAGES AND SALARIES AND ANNUAL LEAVE

         Liabilities for wages and salaries and annual (recreation) leave are
         recognised, and are measured as the amount unpaid at the reporting date
         at current pay rates in respect of employees' services up to that date
         and include related on-costs.

  1.11.2 LONG SERVICE LEAVE

         A liability for long service leave is recognised, and is measured as
         the present value of expected future payments to be made in respect of
         services provided by employees up to the reporting date and include
         related on-costs. Consideration is given to expected future wage and
         salary levels, experience of employee departures, patterns of leave
         taken and periods of service.

         Expected future payments are discounted using interest rates attaching,
         as at the reporting date, to national government guaranteed securities
         with terms to maturity that match, as closely as possible, the
         estimated future cash outflows.

  1.11.3 REDUNDANCIES

         A liability for redundancy costs is recognised and is measured as the
         amount unpaid at the reporting date relating to employees who have left
         the organisation up to that date and an estimate of the redundancy
         payments, based on the employees' services up to that date, to be made
         in relation to the number of employees required to depart the company
         in order to meet targeted employee levels.

  1.11.4 SUPERANNUATION

         Hazelwood Power Corporation Ltd contributes towards the VEI
         Superannuation Fund on behalf of its employees. These contributions are
         charged as expense when they are paid or become payable. No further
         liability is recognised in the accounts.

  1.12   PROVISION FOR SITE RESTORATION FOR POWER STATION AND MINE

         A liability for the cost of restoring the operating site (power station
         and mine) to an acceptable environmental standard at the end of the
         operation's useful life has been recognised.

         The net present value of the estimated future site restoration costs is
         expensed in annual increments over the estimated remaining life of the
         site. 

         Expected future payments are discounted using interest rates attaching,
         as at the reporting date, to national government guaranteed securities
         with terms to maturity that match, as closely as possible, the
         estimated future cash outflows.

<PAGE>
 

1.13    INSURANCE

        Hazelwood Power Corporation Ltd takes out insurance cover for
        catastrophic losses. For each potential catastrophic risk and insured
        event, it carries an economically determined level of excess. Other
        risks are self insured, except for certain specific items (such as,
        WorkCover and third party motor vehicle). Provision is made in the
        accounts for identified uninsured losses.

1.14    LEASES
        
        Hazelwood Power corporation Ltd classifies its leases into finance and
        operating leases. Finance leases are those which transfer from the
        lessor to the company the majority of the risks and benefits incidental
        to ownership of the leased non-current asset. Operating leases are those
        under which the lessor effectively retains all such risks and benefits.

        For operating leases, the payments are charged to the profit and loss
        account in the periods in which they are incurred as this represents the
        pattern of benefits derived from the leased assets. Finance leases are
        capitalised. A lease asset and liability are established at the present
        value of minimum lease payments. Lease payments are allocated between
        the principal component of the lease liability and the interest
        expense. The lease asset is amortised on a straight line basis over the
        term of the lease or, where it is likely that the company will obtain
        ownership of the asset, over the life of the asset.

1.15    DEFEASANCE OF DEBT ON LEASES

        Agreements exist whereby the (finance) lease liability has been defeased
        (extinguished). Any gains or losses on the defeasance of lease
        liabilities are recognised in the profit and loss account at the time of
        entering into the agreement.

1.6     PROFIT OR LOSS ON SALE OF ASSETS FOR LEASEBACK

        Profit or loss on sale of assets for leaseback is classified as deferred
        revenue or deferred expenditure, and amortised over the associated lease
        period. Where the lease liability has been defeased, the profit or loss
        on sale for leaseback of these assets is recognised in the period that
        this occurs.

1.7     NEGOTIABLE SECURITIES ISSUED BY HAZELWOOD POWER CORPORATION LTD

        Transacting of negotiable securities is conducted by Treasury 
        Corporation Victoria on behalf of Hazelwood Power Corporation Ltd.

        Where interest is paid in advance on negotiable securities the interest
        is recognised as an asset and progressively charged against the profit
        and loss account over the term of those securities. Interest payable in
        arrears is accrued over the term of each security in direct proportion
        to the estimated amounts owing in the relevant accounting periods.

        Discounts and premiums on face value on the issue of negotiable
        securities are recognised as variations of the liability to which they
        relate. The variations are amortised over the term of the issue, using
        the effective yield method.

1.18    BUYBACKS OF NEGOTIABLE SECURITIES ISSUED BY HAZELWOOD POWER CORPORATION 
        LTD

        Any gains or losses arising from the buyback of negotiable securities 
        are charged to the profit and loss account as incurred.

1.19    CASH

        For the purposes of the statement of cash flows, cash includes cash on
        hand and deposits at call which are readily convertible to cash, net of
        outstanding bank overdrafts.

1.20    RESEARCH AND DEVELOPMENT EXPENDITURE

        Expenditure on research and development is written off against earnings
        as incurred, except that when a project reaches the stage where such
        expenditure is expected to be recouped through development or sale, all
        subsequent expenditures are capitalised.

        Unamortised costs are reviewed at each balance date to determine the
        amount (if any) that is no longer recoverable and any amount so
        identified is written off.

1.21    COMPARATIVE FIGURES

        Comparative figures are not included in each of the financial statements
        or notes due to the amounts being immaterial. During the year ended 
        30 June 1994, the company had laid dormant and did not trade. As at 
        30 June 1994, the company had issued and paid up capital of $ 12 with an
        equal amount deposited with the State Electricity Commission of
        Victoria. There were no other assets or liabilities, contingent or real.
<PAGE>
 


  2     REVENUE                                                 $ 000
        
        SALES REVENUE
        Electricity                                            82,839
        Coal                                                    1,691

        OTHER REVENUE                                             
        Interest received/receivable                              138
        Proceeds from sale of non-current assets                   41
        Other                                                   1,906
                                                               ------
        TOTAL REVENUE                                          86,615


  3     OPERATING PROFIT

3.1     OPERATING PROFIT BEFORE INCOME TAX IS ARRIVED AT 
        AFTER CREDITING AND CHARGING THE FOLLOWING ITEMS
        (REFER NOTE 4 FOR ABNORMAL ITEMS):

        AFTER CREDITING AS REVENUE:
        Interest received/receivable                              138
        Profit on sale of non-current assets                       31

        AFTER CHARGING/DEDUCTING AS EXPENSES:
        Depreciation of property, plant and equipment          13,006
        Amortisation
        Mine development                                          131
        Plant and equipment under finance lease                   515
        Bad debts written off-sundry debtors                       33
        Interest paid/payable                                   7,668
        State government brown coal mining royalties            1,301 
        Rent expense relating to operating leases                 301
        Provisions
        Employee entitlements                                    (178)
        Site restoration                                          927
        Research and development expenditure                       71

3.2     OPERATING PROFIT AFTER INCOME TAX IS DETERMINED 
        AS FOLLOWS:

        Operating profit before abnormal items and income      
        tax                                                    17,375 
        Abnormal item before income tax                         5,632
                                                               ------
        Operating profit before income tax                     23,007
        Income tax attributable to operating profit            (7,676)
                                                               ------
        OPERATING PROFIT AFTER INCOME TAX                      15,331
                                                               ------

  4     ABNORMAL ITEM
        
        Operating profit after income tax is arrived at 
        after crediting the following abnormal item:

        Write back of provision for redundancy                  5,632
        Income tax attributable to abnormal item               (1,295)
                                                               ------
        ABNORMAL ITEM AFTER INCOME TAX                          4,337
                                                               ------
<PAGE>
 
    5   INCOME TAX                                                      $ 000

  5.1   PRIMA FACIE INCOME TAX PAYABLE  

        The prima facie income tax payable on the operating 
        profit differs from income tax provided in the accounts 
        and is reconciled as follows:

5.1.1   OPERATING PROFIT BEFORE ABNORMAL ITEM                          17,375

        Prima facie income tax payable at 33%                           5,734
        Income tax attributable to profit before abnormal item          6,381
                                                                       ------
        Variation from prima facie income tax                             647
                                                                       ------

        The following major items caused the charge for income tax 
        to vary from the prima facie income tax payable on reported
        profit.

        Permanent differences
        Non-deductible restoration costs                                  927  
        Non-deductible depreciation and amortisation                      209
        Timing differences not brought to account                         823
        Sundry items (including entertainment)                              3
                                                                       ------
        Total permanent differences                                     1,962

        Tax effect of permanent differences at 33%                        647

        Consequent increase in income tax charge                          647
                                                                       ------

5.1.2   ABNORMAL ITEM                                                   5,632

        Prima facie income tax payable at 33%                           1,858
        Income tax attributable to abnormal item                        1,295
                                                                       ------
        Variation from prima facie income tax                            (563)
                                                                       ------
        Change arising from restatement of deferred income tax
        balances due to increase in the Australian tax rate from
        33% to 36%                                                       (563)

        CONSEQUENT DECREASE IN INCOME TAX CREDIT                         (563)
                                                                       ------
   
  5.2   INCOME TAX PROVIDED

        Income tax attributable to operating profit before abnormal
        item                                                            6,381
        Income tax attributable to abnormal item                        1,295
                                                                       ------
        Income tax attributable to operating profit                     7,676
                                                                       ------

  5.3   ANALYSIS OF FUTURE INCOME TAX BENEFIT CARRIED FORWARD

        Future income tax benefit arising from tax losses which
        have been brought to account                                    4,973
        Future income tax benefit arising from timing differences      10,580
        Provision for deferred income tax offset                       (8,792)
                                                                       ------
        Future income tax benefit                                       6,761
                                                                       ------

        The future income tax benefit arising from tax losses is 
        mainly attributable to available tax depreciation deductions
        being significantly greater than accounting depreciation.

<PAGE>
 
    5   INCOME TAX (CONTINUED)                                          $000

        The benefit for tax losses will only be obtained if:
 
        (i)     the economic entity derives future assessable
                income of a nature and of an amount sufficient
                to enable the benefit from deductions for the 
                losses to be realised;

        (ii)    the economic entity continues to comply with the 
                conditions for deductibility imposed by tax
                legislation; and

        (iii)   no changes of tax legislation adversely affect the
                economic entity in realising the benefit from the 
                deduction for the losses.

    6   CURRENT ASSETS--CASH                                                

        Cash on hand                                                       4
        Short term deposits and securities                             9,200
                                                                      ------
        Total cash                                                     9,204
                                                                      ------
        The above figure is reconciled to cash at the end of the
        financial year as shown in the statement of cash flows,
        as follows.

        Balance as above                                               9,204 
        Less bank overdraft                                           (1,768)  
                                                                      ------
        Cash at end of the financial year                              7,436
                                                                      ------

    7   CURRENT ASSETS--RECEIVABLES
        
        Trade debtors                                                 38,591
        Sundry debtors                                                 2,522 
        Interest receivable                                               72
                                                                      ------
        Total current receivables                                     41,185
                                                                      ------
        The trade debtors balance represents the amounts within
        normal trading terms.

    8   CURRENT ASSETS--INVENTORIES

        Raw materials and stores--at cost                              4,974
                                                                      ------
        Total current inventories                                      4,974
                                                                      ------

     
  
<PAGE>
 
    9   NON-CURRENT ASSETS--INVESTMENTS                                 $000

  9.1   INVESTMENT AT COST

        The investments include:
        Unlisted investments
        Shares in associated companies at cost                             0
        Shares in other corporations at cost                              39
                                                                      ------
        Total investments                                                 39
                                                                      ------
        Shares in other corporations at cost represents an 
        investment in 13.9% of the issued capital of
        Energy Business Centre Pty Ltd.

  9.2   SHARE IN ASSOCIATED COMPANY

                            Principal    Ownership     Investment
        Name of Entity      Activity      Interest     Carrying Amount

        PowerWorks Pty Ltd  Information     33.3%      $ 100
                            centre for                    
                            promotion of
                            Victorian 
                            electricity
                            generation industry

        The above investment is held by Hazelwood Power Corporation
        Ltd and comprises the ordinary share capital of the associate.
        There were no dividends received or receivable by Hazelwood
        Power Corporation Ltd during the financial year.  The balance 
        date of the associate is 30 June and it was incorporated in
        Australia.  There are no material post balance day events or
        dissimilar accounting policies.

        Investment in the associated company is accounted for on a cost 
        basis in the Hazelwood Power Corporation Ltd accounts.

   10   NON-CURRENT ASSETS--INVENTORIES
        Raw materials and stores--at cost                              4,362    
                                                                      ------
        Total non-current inventories                                  4,362
                                                                      ------

   11   NON-CURRENT ASSETS--PROPERTY, PLANT AND EQUIPMENT

 11.1   LAND AND BUILDINGS
        
        Land and buildings at cost                                     7,935
        Less accumulated depreciation                                     85
                                                                      ------
                                                                       7,850
                                                                      ------
 11.2   PLANT AND EQUIPMENT

        Coal production
        At cost                                                      128,346  
        Less accumulated depreciation                                  2,829
                                                                     -------
                                                                     125,517    
<PAGE>
 
   11   NON-CURRENT ASSETS--PROPERTY, PLANT AND 
        EQUIPMENT (CONTINUED)                                           $  000
                                                                          
        Power generation                                                  
        At cost                                                        506,347
        Less accumulated depreciation                                    9,714
                                                                       ------- 
                                                                       496,633 
        Vehicles                                                          
        At cost                                                          1,642
        Less accumulated depreciation                                       87
                                                                       -------
                                                                         1,555
        General                                                           
        At cost                                                          4,825
        Less accumulated depreciation                                      291
                                                                       ------- 
                                                                         4,534
                                                                       -------
                                                                          
        Plant and equipment at cost                                    641,160
        Less accumulated depreciation                                   12,921
                                                                       ------- 
                                                                       628,239
                                                                       -------  
 11.3   PLANT AND EQUIPMENT UNDER FINANCE LEASE                           
                                                                          
        Coal production                                                   
        At cost                                                         27,110
        Less accumulated amortisation                                      515
                                                                       -------
                                                                        26,595
                                                                       -------
        Total plant and equipment at cost                              668,270 
        Less accumulated depreciation/amortisation                      13,436
                                                                       -------
                                                                       654,834 
                                                                          
 11.4   MINE DEVELOPMENT                                                  
                                                                          
        Total mine development                                           5,420
        Less accumulated amortisation                                      131 
                                                                       ------- 
                                                                         5,289
                                                                       -------
 11.5   TOTAL                                                             
                                                                          
        Total property, plant and equipment at cost                    681,625 
        Total accumulated depreciation/amortisation                     13,652
                                                                       -------
        Net book value                                                 667,973
                                                                       -------
                                                                          
                                                                          
   12   NON-CURRENT ASSETS--OTHER                                         
                                                                          
        Future income tax benefit                                        6,761
                                                                       -------
        Total non-current assets other                                   6,761
                                                                       -------
        
<PAGE>
 
   13   CURRENT LIABILITIES--CREDITORS AND BORROWINGS                    $ 000

 13.1   CURRENT CREDITORS AND BORROWINGS

        Bank overdraft                                                   1,768
        Promissory notes                                                29,557
        Inscribed stock                                                  3,262
        Interest accrued                                                 4,083
        Loan from shareholder                                          456,479
        Trade creditors                                                 23,352
        Sundry creditors                                                   457
                                                                       ------- 
        Total current creditors and borrowings                         518,958 
                                                                       ------- 
        Details of financial arrangements are set out in note 15.3        
                                                                          
 13.2   LOAN FROM SHAREHOLDER                                             
                                                                          
        Loan from shareholder is a non-interest bearing loan from         
        the State Electricity Commission of Victoria which represents     
        an equity position as far as the Government and the company       
        are concerned. The Victorian Treasurer can direct that the        
        loan be recalled at any time. It is unlikely that the debt        
        will be repaid unless privatisation occurs. In the event of       
        privatisation, the Victorian Treasurer would require the loan     
        to be repaid.                                                     
                                                                          
   14   CURRENT LIABILITIES--PROVISIONS                                   
                                                                          
        Employee entitlements                                           10,416
        Redundancies (refer note 22)                                    23,987
        Site restoration (refer note 21)                                   675
        Research and development                                         1,467
        Uninsured losses                                                   305
                                                                       -------
        Total current provisions                                        36,850 
                                                                       ------- 
                                                                          
                                                                          
   15   NON-CURRENT LIABILITIES--CREDITORS AND BORROWINGS                 
                                                                          
 15.1   NON-CURRENT CREDITORS AND BORROWINGS                              
                                                                          
        Inscribed stock                                                148,088
        Other                                                               37
                                                                       ------- 
        Total non-current creditors and borrowings                     148,125 
                                                                       ------- 
                                                                          
 15.2   NET DEBT                                                          
                                                                          
        Promissory notes                                                29,557 
        Inscribed stock                                                151,350 
                                                                       ------- 
                                                                       180,907 
        Bank overdraft                                                   1,768
        Loan from shareholder                                          456,479 
                                                                       ------- 
        Total debt                                                     639,154 
        Short-term deposits and securities                              (9,200)
                                                                       ------- 
        Net debt                                                       629,954 
                                                                       ------- 
        The market value of the promissory notes and inscribed stock
        as at 30 June 1995 was $195,286,000.


<PAGE>
 
   15   NON-CURRENT LIABILITIES--CREDITORS AND BORROWINGS (CONTINUED)    $ 000

 15.3   FINANCING ARRANGEMENTS

        Hazelwood Power Corporation Ltd has a bank overdraft facility
        of $5,000,000 with the National Australia Bank to provide
        for daily liquidity requirements.

        Additional financing arrangements for Hazelwood Power 
        Corporation Ltd are arranged with the Treasury Corporation
        of Victoria.

        Access was available at 30 June 1995 to the following lines 
        of credit:

        Total facilities                                                 
        Bank Overdraft                                                   5,000 
        Loan facilities                                                199,895 
                                                                          
        Used at balance date                                              
        Bank overdraft                                                   1,768
        Loan facilities                                                179,650
                                                                          
        Unused at balance date                                            
        Bank overdraft                                                   3,232
        Loan facilities                                                 20,245

        Hazelwood Power Corporation Ltd obtains approval of borrowing
        limits with the Department of Treasury and Finance on an 
        annual basis.

 15.4   SECURITY FOR BORROWINGS

        Legal liability for the borrowings disclosed by Hazelwood Power 
        Corporation Ltd rests with either the State Electricity Commission 
        of Victoria (SECV), or Treasury Corporation of Victoria (TCV), 
        depending on whether or not the debt has been novated to TCV, 
        or still remains as an SECV legal liability.  These loans are 
        guaranteed by the State Government of Victoria.

        For debt already novated to TCV, back-to-back loans have been 
        established between TCV and Hazelwood Power Corporation Ltd. 
        Pursuant to Section 36D of the Treasury Corporation of Victoria
        (Debt Centralisation) Act 1933, Hazelwood Power Corporation Ltd
        will reimburse TCV for all settlement amounts relating to these
        loans.

        For debt not yet novated to TCV, Hazelwood Power Corporation Ltd 
        effectively operates as a paying agent for the SECV, settling all
        obligations direct with the investors or their paying agents.

   16   NON-CURRENT LIABILITIES--PROVISIONS

        Employee entitlements                                            3,392
        Site restoration (refer note 21)                                11,842 
                                                                       -------  
        Total non-current provisions                                    15,234
 
<PAGE>
 
   17   SHARE CAPITAL                                                    $ 000

 17.1   AUTHORISED CAPITAL

        500,000,000 ordinary shares of $1.00 each                      500,000  
                                                                          
 17.2   ISSUED AND PAID UP CAPITAL                                        
                                                                          
        15 ordinary shares of $1.00 each fully paid                        $15
                                                                          
        On 30 June 1994, the company had on issue 12 ordinary shares,     
        fully paid.  On 18 January 1995, an additional 3 ordinary         
        shares, fully paid were issued.                                   
                                                                          
                                                                          
   18   CASH FLOW                                                         
                                                                          
 18.1   RECONCILIATION OF OPERATING PROFIT AFTER INCOME TAX TO NET        
        CASH INFLOW FROM OPERATING ACTIVITIES                             
                                                                          
        Operating profit after income tax                               15,331 
        Profit on sold and scrapped assets                                 (37)
        Interest received                                                  (66)
        Interest and other costs of finance                              7,668
        Depreciation and amortisation                                   13,652
        Income tax expense                                               7,676
        Change in assets and liabilities:                                 
        Decrease in provisions                                         (13,569)
        Increase in trade and sundry creditors                          14,208
        Increase in trade and sundry debtors                           (26,736) 
        Decrease in prepayments                                            967
        Increase in inventories                                           (189)
                                                                       ------- 
        Net cash inflow from operating activities                       18,905
                                                                       ------- 
                                                                          
 18.2   VESTING OF ASSETS AND LIABILITIES                                 
                                                                          
        On 1 February 1995, assets and liabilities from Generation          
        Victoria were vested in Hazelwood Power Corporation Ltd under     
        the Allocation Statement (refer note 1.2) as follows:             
                                                                          
        Consideration                                                     
        The fair value of the net assets vested was $456,479,000.          
        The consideration provided by Hazelwood Power Corporation Ltd     
        for these net assets was the loan from the shareholder.           
                                                                          
        Fair value of net assets vested                                   
        Current assets                                                    
        Cash                                                                 4
        Receivables                                                     14,450
        Prepayments                                                        967
        Inventories                                                      6,397
                                                                       -------
        Total current assets                                            21,818 
                                                                       ------- 

<PAGE>
 
 18.2   ACQUISITION OF ASSETS AND LIABILITIES (CONTINUED)               $ 000

        NON-CURRENT ASSETS
        Investments                                                        39
        Inventories                                                     2,750
        Property, plant and equipment                                 679,655 
        Other                                                          14,437
                                                                       ------ 
        TOTAL NON-CURRENT ASSETS                                      696,881 
                                                                       ------ 
        TOTAL ASSETS                                                  718,699 
                                                                       ------ 
        CURRENT LIABILITIES
        Creditors and borrowings                                       48,435
        Provisions                                                     49,742
                                                                       ------
        TOTAL CURRENT LIABILITIES                                      98,177
                                                                       ------ 
        NON-CURRENT LIABILITIES
        Creditors and borrowings                                      148,283 
        Provisions                                                     15,760
                                                                       ------
        TOTAL NON-CURRENT LIABILITIES                                 164,043
                                                                       ------  
        TOTAL LIABILITIES                                             262,220 
                                                                       ------
        NET ASSETS - REPRESENTED BY LOAN FROM SHAREHOLDER             456,479 
                                                                       ------ 
        As part of the above net assets, Hazelwood Power Corporation Ltd 
        had vested in it a bank overdraft of $ 246,000.


   19   EXPENDITURE COMMITMENTS

 19.1   CAPITAL EXPENDITURE COMMITMENTS
        
        Contracted commitments for capital expenditure not taken up in
        the accounts at balance date are:
        
        Not later than one year                                         1,685
        Later than one year but not later than two years                 -
        Later than two years but not later than five years               -
        Later than five years                                            -
                                                                       ------
        Total capital commitments                                       1,685
                                                                       ------
 19.2   NON-CAPITAL EXPENDITURE COMMITMENTS

        Contracted commitments for non-capital expenditure not taken
        up in the accounts at balance date are:

        Not later than one                                              7,971
        Later than one year but not later than two years                2,553
        Later than two years but not later than five years              1,126
        Later than five years                                            -
                                                                       ------
        TOTAL NON-CAPITAL COMMITMENTS                                  11,650 
                                                                       ------
<PAGE>
 
 19.3   LEASE EXPENDITURE COMMITMENTS                                   $ 000

        Total commitments for lease expenditure not taken
        up in the accounts at balance date are:

        Not later than one year                                           311
        Later than one year but not later than two years                   45
        Later than two years but not later than five years                 49
        Later than five years                                             -
                                                                       ------
        TOTAL LEASE COMMITMENTS                                           405
                                                                       ------
        REPRESENTING:
        Cancellable operating leases                                      405
        Non-cancellable operating leases                                 -


   20   EMPLOYEE ENTITLEMENTS

 20.1   EMPLOYEE ENTITLEMENT LIABILITY

        Accrued wages and salaries                                        356
        Provision for redundancy payments                              23,987
        Provision for employee entitlements (includes on-costs)        13,808
                                                                       ------
        Employee entitlement liability                                 38 151
                                                                       ------

        As explained in note 1.11.2 the amounts for long service 
        leave are measured at their present values.  The following
        assumptions were adopted in measuring the present values
        of the entitlements which are not expected to be paid
        or settled within 12 months of balance date.

        Weighted average rate of increase in annual employee 
        entitlements to settlement of the liabilities                    3.3%
        Weighted average discount rate                                   8.9%
        Weighted average term to settlement of the liabilities        9 years

 20.2   SHARE OWNERSHIP PLANS

        Hazelwood Power Corporation Ltd does not operate any share
        ownership plans.

 20.3   SUPERANNUATION FUND

        All permanent employees of the company and casual employees
        hired directly are entitled to benefits on termination from
        the Victorian Electricity Industry Superannuation Fund.
        Casual employees, some executives and all permanent employees
        engaged after 31 March 1995 are members of an accumulation fund 
        known as Division D or other external accumulation funds.  All
        other permanent employees are members of Division B and C of 
        the Fund which provide defined benefits in the form of pensions
        (Division B) or lump sums (Division C).  Both defined benefit 
        schemes are closed to new members.  Division B members contribute
        at 6% of superannuation salary and Division C members can 
        contribute at 0%, 3% or 6%.  During 1994/95 Hazelwood Power
        Corporation Ltd contributed to the Fund at a rate of 10% for the
        defined benefit schemes.

<PAGE>
 
 20.3   SUPERANNUATION FUND (CONTINUED)                                  $ 000

        The effective date of the most recent detailed 
        valuation of the Fund was 30 June 1995.  The
        review was undertaken by Mr G.I. Burgess, FIA,
        FIAA, of William M. Mercer Pty Ltd.  Based on 
        that assessment, the situation for the company
        as at 30 June 1995 was:

        Present value of employees' accrued benefits                    52,100
        Net market value of assets held by the Fund to                    
        meet future benefit payments                                    55,800
        Excess of assets held to meet future benefits over                
        present value of employees' benefits                             3,700
        Vested benefits                                                 53,700
                                                                          
        The employer contributions to the Fund listed below relate        
        to the financial year ended 30 June 1995.                         
        Standard employer contributions to the Fund                      1,274
        Additional contributions to the Fund to compensate for            
        differences between the resignation benefit and the               
        retrenchment benefit in relation to voluntary retrenchments.     1,289
                                                                       -------
        Total employer contributions to the Fund                         2,563
                                                                       -------

        The present value of employees' accrued benefits is equal to 
        the past membership liability calculated in accordance with
        Australian Accounting Standard AAS 25 "Financial Reporting
        by Superannuation Plans".

        Vested benefits are those benefits which would have been paid
        on voluntary termination from the Fund.

        Hazelwood Power Corporation Ltd has no legal liability to 
        rectify any deficiencies in the Fund. However, the company
        will ensure that the Fund has sufficient assets to meet the
        benefit payments of its employees as they fall due.


   21   SITE RESTORATION COSTS

        Provision for restoration of the mine and power station sites to 
        an acceptable environmental standard at the end of their economic 
        life is recognised in the accounts.  The charge to the profit and
        loss account during 1994/95 was $927,000.  The total provision as
        at 30 June 1995 is $12,517,000.

        The total net present value of the estimated future cash
        outflows attributable to site restoration is:

        Mine                                                            12,347
        Power Station                                                   46,825
                                                                       -------
                                                                        59,172
                                                                       -------

        The majority of the site restoration costs are expected to be
        expended in the year 2016/17.

<PAGE>
 

22      PROVISION FOR REDUNDANCIES                                     $000

        A provision for redundancies amounting to $35,625,000 was 
        transferred from Generation Victoria on 1 February 1995 as 
        part of the assets and liabilities vested through the 
        Allocation Statement.

        This provision was in recognition that the number of 
        employees allocated to Hazelwood Power Corporation Ltd was
        higher than the number of employees that the company needed
        to conduct its operations in a satisfactory manner.  The
        provision was intended to relieve the company of the cost of 
        future redundancy payments to the excess employees transferred 
        from Generation Victoria.  The required reduction in employee 
        numbers was expected to occur before 30 June 1995.

        As at 30 June 1995, the full reduction in employee numbers had 
        not been achieved due to the failure to conclude enterprise 
        agreement negotiations and a disappointing response from
        excess employees to an enhanced voluntary departure offer
        made by the company in June 1995.
        
        The provision balance was reassessed at 30 June 1995 and, as 
        a result of changes to the voluntary departure package 
        arrangements, $ 5 632 000 was written back to the profit and
        loss account and disclosed as an abnormal item.

        The provision for redundancies of $ 23,987,000 as at 30 June 
        1995 represents the unpaid amounts relating to employees who
        had left the company up to that date, plus a estimate of 
        redundancy payments, based on employees' service, to be made
        in relation to the number of employees in excess of the 
        original number required by the company to operate at current
        production levels.  The Board of Directors have made a firm 
        commitment to reducing staffing levels to the numbers required
        to efficiently operate the company.


23      CONTINGENT ASSETS AND LIABILITIES

        As at 30 June 1995, Hazelwood Power Corporation Ltd has no
        contingent liabilities.

        As a consequence to a change to the electricity market pool
        rules, the distribution companies have lodged a claim for 
        the retrospective application of the rule change.  This
        claim is being disputed by the company, but a reduction in 
        sales revenue and receivable of $5,388,706 has been included
        in the accounts to reflect a conservative position on the 
        final outcome of this dispute.

24      REMUNERATION OF AUDITORS

        Amounts received or due and receivable by the auditors for:
        Audit of financial statements by Auditor-General                 43
                                                                       ----

        TOTAL REMUNERATION OF AUDITORS                                   43
                                                                       ----


<PAGE>
 


25      REMUNERATION OF DIRECTORS                                       $000

        Remuneration received, or due, and receivable by the 
        Directors                                                         42

        Number of Directors whose income from Hazelwood Power 
        Corporation Ltd was within the following bands:

        $'000        $'000      Number
           0     -     10         4
          10     -     20         1

        Aggregate amounts paid/payable to superannuation funds on 
        account of Directors                                               2


26      REMUNERATION OF EXECUTIVES

        Remuneration received, or due and receivable, for the five 
        months to 30 June 1995, by executives of Hazelwood Power 
        Corporation Ltd                                                  468

        The numbers of executives of Hazelwood Power Corporation
        Ltd as at 30 June 1995 whose income was within the specified
        bands is listed below.  Remuneration received includes 
        termination benefits for the two executives listed

        $'000        $'000      Number
         220     -    230         1
         240     -    250         1


27      REMUNERATION OF CONSULTANTS

27.1    REMUNERATION OF CONSULTANTS IN EXCESS OF $ 50,000

        Consultants name            Consultancy details                  
        Fish and Nankivell          Senior Executive Recruitment         111
                                                                        ----
        Total remuneration of consultants in excess of $ 50,000          111

        There are no future commitments contracted with the
        consultant disclosed above.


27.2    REMUNERATION OF CONSULTANTS BELOW $ 50,000
        
        Total remuneration of consultants below $ 50,000                 190

        29 consultants with remuneration below $ 50,000 were 
        engaged during the financial year.
                                                                        ----
        Total remuneration of consultants                                301
                                                                        ----


28      RELATED PARTY DISCLOSURES

28.1    DIRECTORS

        The directors who held office during the year were: 
        S.M. McGarry, K.M. Russell, J.B. Drewett, R.A. Evans, J.B.
        Herbert, F.H. Osborn, R.E. Creswell, M.W. Sibree, N.J. Hogan
        and R.P. Newman

        Information on the remuneration of Directors is disclosed 
        in note 25.

        No retirement benefits or loans were provided to the Directors.
        There were no other transactions that occurred with the Directors
        or director-related parties.
<PAGE>
 
<TABLE> 
<CAPTION> 

<S>     <C>                                                                             <C> 
28.2    TRANSACTIONS AND OUTSTANDING BALANCES WITH OTHER RELATED ENTITIES               $000
</TABLE> 

        The Australian Securities Commission has, pursuant to subsection 313(2)
of the Corporations Law, made an order relieving the Directors of Hazelwood 
Power Corporation Ltd from compliance with paragraphs 28-36 of Accounting 
Standard AASB 1017: Related Party Transactions, as required by section 298 of 
the Corporations Law, in so far as those paragraphs require disclosure in the 
financial statements for the year ended 30 June 1995 of transactions which:

        (i)    relate to the generation of electricity and the purchase of 
               operating supplies and other related services;
        (ii)   occurs within a customer or supplier relationship on normal 
               commercial terms and conditions which are at arm's length; and
        (iii)  do not have the potential to adversely affect decisions about the
               allocation of scarce resources made by user of the accounts, or
               the discharge of accountability by the Directors, 

               on condition that details of the relief are included in the
               accounts.


DIRECTORS' STATEMENT

In the opinion of the Directors:

(a)  the financial statements set out on pages 28 to 47 are drawn up in
     accordance with applicable Accounting Standards, Divisions 4, 4A and 4B of
     Part 3.6 of the Corporations Law and the Financial Management Act 1994 so
     as to give a true and fair view of the results and cash flows for the
     financial year ended 30 June 1995, and the state of affairs at 30 June
     1995, of Hazelwood Power Corporation Ltd;

(b)  at the date of this statement there are reasonable grounds to believe that 
     the company will be able to pay its debts as and when they fall due.

     The financial statements disclose an excess of current liabilities over
     current assets as at 30 June 1995. A large portion of the current
     liabilities relates to the loan from the shareholder. The Directors are of
     the opinion that the company will be able to pay its debts as and when they
     fall due as the loan from the shareholder represents an equity position as
     far as the Government and the company are concerned, and is unlikely to be
     recalled before privatisation. The company will generate sufficient cash
     flows to meet the other debts.

(c)  at the date of this statement there were no circumstances which would
     render any particulars in the financial statements to be misleading or
     inaccurate.

This statement is made in accordance with a resolution of the Directors.

<TABLE> 

<S>                      <C>                             <C>                         <C> 
F.H. Osborn                                              M.W. Sibree
Chairman                 [signature appears here]        Directors                   [signature appears here]

B.R. Smith                                               B.C. Clark    
Chief Executive Officer  [signature appears here]        Chief Financial Officer    [signature appears here]

</TABLE> 


Melbourne
8 September 1995
<PAGE>
 

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF HAZELWOOD POWER CORPORATION LTD

Audit Scope

The accompanying financial statements of Hazelwood Power Corporation Ltd for the
financial year ended 30 June 1995, comprising a profit and loss account, balance
sheet, statement of cash flows and notes to the financial statements, have been
audited. The company's directors are responsible for the preparation and
presentation of the financial statements and the information they contain. An
independent audit of these financial statements has been carried out in order to
express an opinion on them to the members of the company as required by the
Corporations Law and the Audit Act 1994.
        The audit has been conducted in accordance with Australian Auditing 
Standards to provide reasonable assurance as to whether the financial statements
are free of material misstatement.  The audit procedures included an 
examination, on a test basis, of evidence supporting the amounts and other 
disclosures in the financial statements, and the evaluation of accounting 
policies and significant accounting estimates.  These procedures have been 
undertaken to form an opinion as to whether, in all material respects, the 
financial statements are presented fairly in accordance with applicable 
Accounting Standards and other mandatory professional reporting requirements and
comply with the Corporations Law, so as to present a view which is consistent 
with my understanding of the company's financial position and the results of its
operations and its cash flows.
        The audit opinion expressed on the financial statements has been formed
on the above basis.

Audit Opinion

In my opinion, the financial statements of Hazelwood Power Corporation Ltd are 
properly drawn up:

(a)     so as to give a true and fair view of:
        (i)  the company's state of affairs as at 30 June 1995 and of its profit
             and cash flows for the financial year ended on that date; and
        (ii) the other matters required by Divisions 4, 4A and 4B of Part 3.6 of
             the Corporations Law to be dealt with in the financial statements; 
(b)     in accordance with the Corporations Law; and
(c)     in accordance with applicable Accounting Standards and other mandatory 
        professional reporting requirements.



C.A. Baragwanath
Auditor-General           [signature appears here]

Melbourne
28 September 1995

<PAGE>
 
                                   Annexure B
        Agreements etc. between Group Members/Shareholders in the Buyers
<PAGE>













                                     *** 
<PAGE>
 
                                  ANNEXURE D
                            SECTION 205 PROCEDURES

     SELLER'S  RESPONSIBILITIES                BUYERS' RESPONSIBILITIES

 .    Approve the form of the section 205   .   Propose to the Seller the form 
     resolution, notice of meeting and         of the section 205 resolution,
     advertisement                             notice of meeting and 
                                               advertisement

 .    Procure the Company and the Seller to .   Procure new directors to provide
     pass the approved section 205             section 206(6) certificate 
     resolutions                               (if necessary)



 .    Administer section 205(10)(a)-(j)     .   All other things necessary  for
     compliance:                               section 205 compliance
     - relevant resolutions
     - ASC lodgment
     - Advertisement

 .    Court searches (Supreme Court, 
     Melbourne and Federal Court, Melbourne) 
     to ensure no applications filed
<PAGE>
 
                                   Annexure E
                           Draft Groundwater Licence
<PAGE>
 
                                 WATER ACT 1989
                                   SECTION 51

                         GROUNDWATER LICENCE NO 2007412
                     (Licence to take and use groundwater)

OBJECTIVE
The objective of this licence is to allow the efficient depressurising of the
Morwell open cut mine whilst minimising adverse impacts on the Gippsland
Groundwater Basin.

DEFINITIONS
In this licence-

"MINING LICENCE" means a mining licence issued under the provisions of the
Electricity Industry Act 1993.

"APPROVED WORK PLAN" means the mining licence work plan applicable to Mining
Licence No 5004

"REGIONAL MONITORING PROGRAM" means the monitoring program described in Part B
of the approved work plan.

"REHABILITATION PLAN" means a rehabilitation plan approved under the provisions
of the Electricity Industry Act 1993.

PREAMBLE
The extraction of groundwater for the purpose of achieving safe and stable
conditions in the Morwell open cut mine is authorised under this Groundwater
Licence issued by the Minister responsible for the Water Act, 1989. The
administration of the licence may be delegated by the Minister to the Gippsland
and Southern Rural Water Authority

The extraction of groundwater at mine sites in the Latrobe Valley results in a
regional cone of depression of the groundwater and in ground subsidence.

The monitoring and reporting of regional groundwater and land level trends is to
be carried out by the licensee as part of the approved work plan under the
Mining Licence.

The Minister or his delegate may set annual charges under this licence to
recover the costs incurred in:

 . ensuring compliance with licence conditions;
 . assessing and reviewing the regional monitoring program; and
 . managing and administering the licence.

LICENCE AUTHORISATION
<PAGE>
 
HAZELWOOD POWER CORPORATION LIMITED OF PO BOX 195 MORWELL 3840 is authorised
to take and use groundwater subject to the following conditions:

1.   This licence is valid for a period of thirty years from 1 September 1995.

2.   The licensee is authorised to take and use groundwater to facilitate mining
     for coal and generation of electrical energy and purposes incidental
     thereto.

3.   The licensee is authorised to extract groundwater from the aquifers at
     quantities and during the times specified in the First Schedule or on
     application by the licensee such other quantities and during such other
     times as from time to time approved by the Minister or his delegate.

4.   The licensee may vary the maximum monthly rate of extraction from any
     particular aquifer or the maximum annual volume to be extracted from any
     particular aquifer provided that the total monthly rate of extraction and
     the total annual volume from all aquifers is not exceeded and shall report
     at monthly intervals such variations as they occur to the Minister or his
     delegate.

5.   The licensee may only take and use groundwater under this licence on the
     land with respect to which the licensee holds a mining licence for the
     Hazelwood Power mine.

6.   Annual fee at date of issue S19,300.

7.   The licensee shall pay annual charges for the forthcoming year due under
     the licence in quarterly installments or on an annual basis as agreed
     between the licensee and the Minister or his delegate.

8.   The licensee shall meter all groundwater extractions and shall keep an
     accurate record of the quantity of groundwater taken or used under this
     licence and allow the Minister or his delegate to inspect this record
     during normal business hours and to provide a copy of such record to the
     Minister or his delegate within seven days of a notice given by post to the
     licensee at the address contained in this licence.

9.   The licensee shall provide to the Minister or his delegate annually details
     of the location of each bore from which groundwater is extracted under this
     licence.

10.  By the issue of this licence the Minister or his delegate in no way accepts
     any liability for injury to any party arising as a consequence of any
     adverse effects that may be deemed to have been caused by the extraction of
     groundwater under the licence.

11.  The licensee shall compensate any person whose existing authorised use of
     water is adversely and materially affected by the taking of water under
     this licence. The
<PAGE>
 
     compensation may be either financial or may be constituted by the making
     available of, or granting access to, water. If the licensee is unable
     to or unwilling to make compensation by the making available of or granting
     access to water in the quantities previously enjoyed by the person so
     affected then the amount of financial compensation payable shall be that as
     determined by a Valuer nominated by the President of the Victorian Division
     of The Australian Institute of Valuers and Land Economists (Inc)

12.  The licensee shall undertake a regional monitoring program of the nature
     scope and extent as that previously undertaken by the State Electricity
     Commission of Victoria as detailed in the approved work plan and the
     information is to be provided on request to the Minister or his delegate
     and as required under the work plan.

13.  All information obtained from the regional monitoring program belongs to
     the generation companies, the State Electricity Commission of Victoria and
     the Minister jointly.

14.  The licensee must maintain the existing data bases, and undertake
     additional work that may be required from time to time by the Minister or
     his delegate to maintain the effectiveness of the regional monitoring
     program.

15.  If the licensee fails to provide the information required under condition
     12 the Minister or his delegate may undertake any necessary work to obtain
     the information and recover the costs of such work from the licensee.

16.  The regional monitoring program and any remedial measures must be
     incorporated in the approved work plan and the rehabilitation plan to the
     satisfaction of the Minister or his delegate.

17.  The licensee shall comply with the provisions in its mining licence,
     approved work plan and the rehabilitation plan dealing with the regional
     monitoring program and remedial action.



                                  PATRICK JOHN McNAMARA
                                  MINISTER FOR AGRICULTURE AND RESOURCES

                                  Date
<PAGE>

FIRST SCHEDULE

<TABLE> 
<CAPTION> 
                 M1 AQUIFER                M2 AQUIFER   
  YEAR  -----------------------------  -------------------   TOTAL ANNUAL
           RATE OF    ANNUAL VOLUME     RATE OF    ANNUAL       VOLUME
          EXTRACTION       ML          EXTRACTION  VOLUME         ML
           ML/MONTH                     ML/MONTH     ML
- --------------------------------------------------------------------------
<S>          <C>          <C>            <C>       <C>          <C>       
  1996       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  1997       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  1998       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  1999       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  2000       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  2001       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  2002       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  2003       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  2004       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  2005       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  2006       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  2007       367          3,212          1,640     19,680       22,892    
- --------------------------------------------------------------------------
  2008       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2009       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2010       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2011       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2012       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2013       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2014       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2015       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2016       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2017       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2018       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2019       367          3,212          1,606     19,272       22,484    
- --------------------------------------------------------------------------
  2020       367          3,212          1,439     17,268       20,480    
- --------------------------------------------------------------------------
  2021       367          3,212          1,439     17,268       20,480    
- --------------------------------------------------------------------------
  2022       367          3,212          1,439     17,268       20,480    
- --------------------------------------------------------------------------
  2023       367          3,212          1,439     17,268       20,480    
- --------------------------------------------------------------------------
  2024       367          3,212          1,439     17,268       20,480    
- --------------------------------------------------------------------------
  2025       367          3,212          1,439     17,268       20,480    
- --------------------------------------------------------------------------
</TABLE> 

<PAGE>
 
                         ELECTRICITY INDUSTRY ACT 1993

                             MINING LICENCE NO 5004

This mining licence is granted to HAZELWOOD POWER CORPORATION LIMITED C/- PO BOX
195 MORWELL 3840. This licence is granted under section 47A of the Act, for a
term of thirty years from the date of issuing this licence by the Generation
Council.

This licence is subject to the following Conditions and Schedule of Conditions
attached:

1.   The authority given under this licence applies only within the land
     indicated on the attached plan and is subject to the depth restrictions, if
     any, indicated on that plan under Section 15(9) or 16(5) of the Mineral
     Resources Development Act 1990.

2.   The licensee must keep a copy of -

     (a) this licence; and

     (b) any approved work plan or approved variation to a work plan; and

     (c) any registered authority to commence work at a location near the
         licensed area; so that an Inspector and any other authorised officer
         can readily inspect them.

3.   On receiving a registered authority to commence work, the licensee must
     notify an Inspector of Mines and if required by that Inspector must arrange
     an on-site briefing for any people the Inspector may nominate.

4.   On discovering additional economic deposits of minerals, the licensee must
     report the occurrence to the Minister giving the estimated size, grade,
     suitability for mining, and an estimate of value at the time of discovery.
 
5.   Pursuant to Section 47A of the Electricity Industry Act 1993 the work plan,
     including the rehabilitation plan and the authority to commence work are
     deemed to be registered from the date of issuing of this licence by the
     Governor in Council.
<PAGE>
 
                    [MAP OF SHIRE OF LATROBE APPEARS HERE]
<PAGE>
 
                                  ANNEXURE F
                             DRAFT MINING LICENCE
<PAGE>
 
                            SCHEDULE OF CONDITIONS
                            MINING LICENCE NO. 5004

1.    WORK PLANS & ENVIRONMENTAL MANAGEMENT

1.1   Work shall be carried out in accordance with the aproved work plan,
      (incorporating a rehabilitation plan) as amended from time to time in
      accordance with the Mineral Resources Development Act 1990 (MRD Act).
      Where any inconsistency occurs between the work plan and other licence
      conditions or regulations, the licence conditions and regulations have
      precedence.

1.2   The licensee shall, within 60 days of being requested by the Executive
      Director, Minerals and Petroleum of the Department of Natural Resources
      and the Environment, submit a report on the status of work as per Schedule
      14 of the MRD Act.

1.3   An Environmental Review Committee (ERC) shall be formed, comprising
      appropriate representatives from the Department of Natural Resources and
      the Environment (DNRE), representatives of the licensee, the Environment
      Protection Authority, the responsible water authority and a representative
      of the Minister responsible for the Water Act 1989, the LaTrobe Council
      and any other relevant agency with an interest or control over the site or
      operations. The community shall also be represented, with nominations to
      come from the Latrobe Council. Up to two community representatives may be
      selected for renewable fixed terms. The ERC shall be convened at least
      once in every 6 months to review environmental effects of the project.

1.4   Results of environmental monitoring conducted under the Environmental
      Monitoring Program (EMP) shall be regularly reported to the ERC in a
      format agreed to by the Committee to enable it to assess environmental
      performance.

1.5   The ERC may from time to time recommend variations to the EMP and licence
      conditions where appropriate. Any variations to the EMP as accepted by the
      licensee and DNRE shall be registered as a variation to the work plan and
      shall be implemented.

2.    FENCING AND SECURITY

2.1   Where public access is a safety hazard within the mining licence, the
      licensee must fence and signpost the area to ensure public safety is
      maintained.

2.2   When directed by an Inspector of Mines (hereinafter referred to as an
      Inspector), a fence or fences shall be erected around specified work site
      areas to a written specification which may include time limits. Gates of a
      similar standard shall be provided when directed. Gates and fences shall
      be maintained during the term of the licence to the satisfaction of an
      Inspector.










<PAGE>
 
3.   ROADS

3.1  Internal roads additional to those shown in the working plan shall be sited
     as approved or directed by an Inspector after consultation with the
     Department of Natural Resources and the Environment in the case of Crown
     land.

3.2  Subject to the approval of the Mine Manager and appropriate site induction 
     any such road may be used:

     (a)  officers of or persons authorised by the DNRE or employees or persons
          engaged in fire control. (Mine Managers approval not required by
          authorised fire fighters in an emergency provided they are under the
          supervision of a mine employee).

     (b)  for the extraction of forest produce or for mining purposes by any
          other licensee under the MRD Act 1990 or Forests Act 1958 (or any
          successor legislation) under such conditions as may be determined by
          agreement between the parties concerned; and

     (c)  by the landowners or their agents where the licence covers private
          land.

3.3  The licensee shall ensure that all internal roads are properly formed,
     drained, surface treated and maintained to the satisfaction of an Inspector
     and that any dust nuisance originating from use of the roads by the
     licensee shall be controlled to the satisfaction of an Inspector.

4.   SURFACE DISTURBANCE

4.1  The area of surface disturbance must be kept to a minimum.

4.2  Adequate provision shall be made for the separate stockpiling or immediate
     utilisation for rehabilitation of any soils. These materials, if stored,
     are to be stored in neat and tidy dumps not exceeding 2 metres in height
     and such dumps are to be protected from erosion.

4.3  No area shall be opened up for exploration, mining and ancillary
     operations, except where approved as part of the approved work plan.

4.4  Where the licence covers Crown land, all surface activity may be subject to
     compliance with the Forests Act 1958 and Regulations.

4.5  Where the licence covers private land, such fire fighting equipment and
     appliances shall be kept on site in working order as may be required by the
     Country Fire Authority. With respect to public land, the Forest Fire
     Regulations 1992 require the provision of fire fighting equipment and the
     provision of spark arrestors on engine powered equipment.

4.6  Burning of any timber at the site shall be done in accordance with any
     requirements of the Local Municipality, DNRE and the Country Fire
     Authority.
 

<PAGE>
 
5.   DRAINAGE AND DISCHARGE CONTROL

5.1  Any discharges from the licence area shall be minimised and any water
     discharged must be as free as possible of pollutants, save as provided by
     any licence issued pursuant to the Environment Protection Act.

5.2  All discharges shall meet the standards required under the State
     Environment Protection Policies under the Environment Protection Act 1970.

5.3  Sediment retention structures, including dams, shall be constructed in
     accordance with the approved work plan. An Inspector may also direct such
     works to be undertaken, where necessary, to control drainage from any
     disturbed area.

5.4  Rainfall and other natural waters shall be diverted away from works area so
     as to control erosion, pursuant to Condition 7. However, such works shall,
     as far as practicable, not cause undue alteration to the general drainage
     pattern beyond the licensed area.

6.   TAILING DAMS

6.1  All proposed work associated with the construction of tailing dams or other
     tailing impoundment areas, shall be subject to written approval by the
     Chief Administrator (or his delegate) following certification by an
     approved geotechnical engineer.

7.   GROUNDWATER

7.1  Any aquifer dewatering and/or depressurisation must be carried out in
     accordance with the conditions specified in the Groundwater Licence issued
     by the Minister responsible for the Water Act 1989.


7.2  A monitoring program consistent with the programs previously carried out by
     the State Electricity Commission of Victoria and Generation Victoria to
     determine the impacts of dewatering/depressurisation both on site and
     regionally must be maintained to the satisfaction of an Inspector and the
     responsible Minister under the Water Act 1989 or his delegate.

     The licensee shall ensure that results of the monitoring program are
     reported to the responsible Minister under the Water Act 1989 or his
     delegate and the Environmental Review Committee annually and at whatever
     times required by the Groundwater Licence.

7.3  In the event that the monitoring program in 7.2 indicates material adverse
     impacts beyond those evident at the date of issue of the licence which are
     attributable to the dewatering/depressurisation by the licensee after the
     date of issuing of the licence then the licensee must institute such
     reasonable remedial action as may be required by the Inspector and the
     responsible Minister under the Water Act 1989 or his delegate to ameliorate
     these effects, proportionate to the licensee's contribution.
<PAGE>
 
7.4  For the purposes of 7.3 material adverse impacts comprise effects on
     aquifers in the LaTrobe Valley such that the interests of other users are
     materially prejudiced or subsidence on a significant scale occurs as a
     direct result of ground water extraction which materially adversely affects
     private property or public lands.

7.5  Any remedial action under 7.3 must be to the satisfaction of the Inspector
     and the responsible Minister under the Water Act 1989 or his delegate.

8.   EROSION

8.1  The licensee shall undertake all necessary works to ensure that the
     potential for erosion of land affected by mining is minimised.

8.2  Should erosion occur, the licensee shall take all practical steps to
     minimise the erosion to the satisfaction of an Inspector.

9.   HYDROCARBONS

9.1  Storage of hydrocarbons shall be undertaken in general accordance with AS
     1940. Bunding or other methods to the satisfaction of an Inspector, capable
     of containing 125% of the maximum volume stored, shall be constructed
     around all fuel and lubricant storage facilities.

9.2  Any drainage from an area that may be subject to hydrocarbon spillage, such
     as a machinery maintenance area, shall be free from hydrocarbon
     contamination and directed to a sump or interceptor trap.

10.  DUST EMISSIONS

10.1 Dust control measures must be in place to minimise dust generation so that
     detriment is not caused to surrounding areas and residents.

10.2 Dust resulting from all operations including extraction, loading,
     transport, and stockpiling shall be controlled to the satisfaction of an
     Inspector. The licensee must install any dust control measures to the
     satisfaction of an Inspector.

11.  NOISE

11.1 Precautions to the satisfaction of an Inspector shall be taken to ensure
     that noise emissions comply with the provisions of any regulations under
     the MRD Act as they relate to noise exposure to workmen. Noise emissions
     measured at any residence within the vicinity of the licensed area shall
     comply with limits set using the procedures described in State Environment
     Protection Policy No. N1 (SEPPN-1) or any other limit set under the
     Environment Protection Act where SEPP N-1 is not applicable.

11.2 The mines are permitted to operate 24 hours per day 7 days per week.




















 


<PAGE>
 
12.   PARKING AREAS

      Parking areas are to be provided within the licensed area for all vehicles
      used in connection with the operation, including private vehicles used by
      employees and visitors.

13.   DERELICT AND REDUNDANT PLANT

      All derelict and redundant plant, vehicles, machinery and equipment shall
      be either:

      .  removed from the licensed area and deposited at an appropriate waste 
         disposal site; or

      .  properly stored/stockpiled on the licensed area in a location and 
         manner approved by an Inspector.

14.   BUFFER ZONES AND VISUAL SCREENING

14.1  No excavation shall take place within 20 metres of the licence boundary,
      expect that this requirement shall not apply with respect to any common
      licence boundary with an adjacent mining licence.

14.2  Existing vegetation outside of the area subject to surface disturbance
      shall be preserved and maintained provided due regard is taken of fire
      protection arrangements.

14.3  The licensee shall supplement existing vegetation by additional planting
      to provide a screen for mining and allied operations as required by the
      rehabilitation plan and any additional plantings as required by an
      Inspector. The fire protection at the site shall be considered.

14.4  Unless otherwise approved by an Inspector, the licensee shall take
      precautions to ensure that no species inconsistent with the surrounding
      vegetation are introduced to the area.

15.   PROGRESSIVE REHABILITATION

15.1  Progressive reclamation will be conducted as per the rehabilitation plan.
      In addition, any further rehabilitation work will be carried out at the
      direction of an Inspector.

15.2  As and when directed by an Inspector of Mines, despite any compensation
      agreements between the licensee and the owner of any private land in the
      licence, the licensee shall undertake progressive reclamation of land on
      the area subject to surface disturbance.

16.   FINAL REHABILITATION

16.1  Final reclamation will be in accordance with the rehabilitation plan and 
      any additional requirements as directed by an Inspector.
<PAGE>
 
16.2  Failure to complete works in accordance with the rehabilitation plan or in
      accordance with the directions of an Inspector, shall constitute grounds
      upon which the rehabilitation bond may be forfeited either in whole or in
      part in accordance with Section 83 of the MRD Act.

17.   HERITAGE SITES

17.1  Any significant historic sites or relics that are to be removed shall be
      accurately mapped and documented prior to the commencement of any mining
      or allied operations. Such documentation shall be made available to the
      relevant section of the Department of Natural Resources and the
      Environment.

17.2  Tenure of this licence does not exempt the holder from the following
      provisions of the Archaeological and Aboriginal Relics Preservation Act
      1972:

      Section 21(1) - "A person who wilfully or negligently defaces or damages
      or otherwise interferes with a relic or carries out an act likely to
      endanger a relic shall be guilty of an offence against this Act"; and

      Section 23(1) - "A person who discovers a relic shall forthwith report the
      discovery ... unless he has reasonable grounds to believe that the relic
      is recorded in the register ...". Reports in compliance with Section 23(1)
      should be submitted to:

                 The Director
                 Aboriginal Affairs Victoria
                 Department of Human Services
                 2nd Floor
                 115 Victoria Parade
                 FITZROY VIC  3065
                 (Telephone (03) 9412 7498)

18.   BUILDINGS

18.1  No buildings shall be erected before any relevant building permits have
      been obtained.

18.2  All fixed plant and buildings shall be painted or surface treated in a
      colour to blend with the surroundings to the satisfaction of an Inspector
      in consultation with the local municipality and in the case of Crown land,
      Department of Natural Resources and the Environment.

19.   ROYALTY

19.1  Each mining company must pay to the Minister for payment to the
      Consolidated Fund in each financial year an amount equal to the prescribed
      amount in respect of each gigajoule unit of coal produced from its brown
      coal workings in the State and used or sold by the company in the last
      preceding financial year.

<PAGE>
 
19.2  For the purposes of 19.1, a gigajoule unit of coal is a quantity of coal
      which, when mined, has a net wet specific energy content of 1 gigajoule.

19.3  The net wet specific energy content of coal produced by a company from its
      brown coal workings and used or sold by the company in a financial year
      shall be calculated in such manner and in accordance with such method of
      sampling as is agreed to by the Minister and the company or as is, in
      default of the agreement, determined by the Governor in Council.

19.4  For the purposes of 19.1, the prescribed amount shall be the amount 
      derived by multiplying $0.0239 by

      A where-
      B

              A   is the consumer price index number in respect of the relevant
                  quarter; and

              B   is the consumer price index in respect of the quarter ending
                  on 30 June 1993.

19.5  The payment of the amount to the Minister under 19.1 shall be made in
      accordance with the Mineral Resources (Royalties) Regulations 1991.

19.6  In this section -

      "CONSUMER PRICE INDEX NUMBER" means the all groups consumer price index
      number for Melbourne published by the Commonwealth Statistician in respect
      of the quarter ending on 30 June in each year or, if that statistic is no
      longer calculated, the nearest substitute for it;

      "RELEVANT QUARTER" means the quarter ending on 30 June immediately
      preceding the financial year in relation to which the prescribed amount is
      being calculated.

20.   REHABILITATION BOND

20.1  The licensee shall lodge with the DNRE a rehabilitation bond as described
      in Section 80(1) of the Act when required in accordance with these
      conditions. The bond must be lodged in the form of a bank guarantee issued
      by a bank licensed under the Banking Act 1959 (Cth).

20.2  The licensee shall be required to lodge that bond upon the licensee
      ceasing to be a State Owned Corporation and upon being directed to do so
      by the Minister for Agriculture and Resources.

20.3  The level of this bond has initially been assessed at $15 million.

21.   APPLICATION OF REGULATIONS

21.1  The Mineral Resources (Health and Safety for large Open Cut Mines) 
      Regulations 1995 will apply to the licensee.

21.2  Any subsequent Regulations issued under the act will also apply.







<PAGE>
 
                          AUTHORITY TO COMMENCE WORK
                          Sec 42 of the MRD ACt 1990

 
 
MINING LICENCE NUMBER:                          Mining Licence 5004

NAME(S) OF LICENSEE(S):                         Hazelwood Power Corporation Ltd

ADDRESS(S) OF LICENSEE(S):                      P O Box 195 Morwell Vic 3840

AREA TO WHICH AUTHORITY                         As per workplan dated 1.6.95
TO COMMENCE WORK RELATES:

LOCATION OF LICENCE:                            La Trobe Valley





AN AUTHORITY TO COMMENCE WORK IS HEREBY GRANTED

       Date of Registration
             /    /
       --------------------

       Time of Registration
                      am/pm
       ---------------

       MINING REGISTRAR
          MRDA 1990

<PAGE>
 
                                                                     EXHIBIT 2.2


                        HAZELWOOD POWER CORPORATION LTD
                                 ACN 065 381 204

                                      and

                          HAZELWOOD POWER PARTNERSHIP



                           NATIONAL POWER CONSORTIUM
                              ASSET SALE AGREEMENT



                          Freehill Hollingdale & Page
                                   Solicitors
                               l0l Collins Street
                               Melbourne VIC 3000
                                   Australia
                            Telephone: (03) 288 1234
                            Facsimile: (03) 288 1567
                           Reference: RWN/BCF/1810621





***CERTAIN PORTIONS OF THIS EXHIBIT (MARKED WITH ASTERISKS) HAVE BEEN OMITTED 
HEREFROM AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION AS 
PART OF A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 UNDER THE 
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

<PAGE>
 
                               TABLE OF CONTENTS
 1.   DEFINITIONS AND INTERPRETATION                                           1
 1.l  Definitions                                                              l
 l.2  Interpretation                                                           6
 2.   SALE AND PURCHASE                                                        7
 2.l  Sale of Assets                                                           7
 2.2  Dates for Payment                                                        7
 2.3  Method of Payment                                                        7
 3.   COMPLETION                                                               7
 3.1  Date for Completion                                                      7
 3.2  Delivery of documents                                                    7
 3.3  Asset Buyer's obligations at Completion                                  8
 3.4  Property and Risk                                                        8
 3.5  Interdependency between this agreement and Share Sale Agreement          8
 3.6  Inconsistencies                                                          8
 3.7  Exercise of Rights                                                       8
 3.8  Termination                                                              8
 4.   EMPLOYEES                                                                8
 4.1  Employment Contracts held on trust                                       8
 4.2  Asset Buyer's Indemnity with respect to Employees                        8
 5.   OUTGOINGS AND EXPENSES                                                   9
 6.   ASSUMPTION OF LIABILITIES AND CREDITORS                                  9
 7.   CONTRACTS                                                                9
 7.l  Assignment of Contracts                                                  9
 7.2  Novation of Contracts                                                    9
 7.3  Asset Buyer's obligations after Completion                               9
 7.4  Non-assignment of the Contract                                           9
 7.5  Asset Buyer's indemnity in respect of the non-assignment
      of the Contract                                                         l0
 7.6  Equipment Leases                                                        l0
 7.7  Transfer of the Real Property Leases                                    l0
 8.   LICENCES                                                                10
 8.l  Transfer                                                                l0
 8.2  Further Acts                                                            10
 9.   INDEMNITY                                                               10
10.   DECLARATION OF TRUST                                                    10
l0.l  Declaration of Trust                                                    10
10.2  Indemnity                                                               11
11.   MINING LICENCE                                                          11
ll.l  Tender                                                                  11
<PAGE>
 
                                       2

11.2 Trust                                                        11
12.  LAND                                                         11
12A  TRADE DEBTS                                                  11
13.  ASSET BUYER'S WARRANTIES                                     11
13.1 Asset Buyer's Warranties                                     11
13.2 Acknowledgment                                               12
14.  DUTIES, COSTS AND EXPENSES                                   12
14.1 Payment of Duty                                              12
14.2 Indemnity                                                    12
14.3 Costs and expenses                                           12
14.4 Costs of performance                                         12
15.  NOTICES                                                      12
l5.1 General                                                      12
15.2 Legibility of facsimile transmission                         13
16.  GENERAL                                                      13
16.1 Governing law and jurisdiction                               13
16.2 Waivers                                                      l3
16.3 Variation                                                    14
16.4 Further assurances                                           l4
16.5 Third party rights                                           14
16.6 This agreement supersedes others                             14
<PAGE>
 
THIS ASSET SALE AGREEMENT is made on 4 August 1996 between the following
parties:

1.  HAZELWOOD POWER CORPORATION LTD ACN 065 381 204 of Commercial Road, Morwell,
    Victoria 3840 ("Seller"); and

2.  HAZELWOOD POWER PARTNERSHIP a partnership pursuant to the Partnership Act
    1958 (Vic.) between:

    NATIONAL POWER AUSTRALIA INVESTMENTS LTD a company incorporated in England
    and having its registered office at Windmill Hill Business Park, Whitehill
    Way, Swindon, Wiltshire, England SN5 6PB;

    HAZELWOOD PACIFIC PTY LTD (ACN 074 351 376) a company incorporated in the
    State of Victoria, Australia and having its registered office at Level 3, 77
    Southbank Boulevard, Southbank, Victoria, Australia;

    AUSTRALIAN POWER PARTNERS CV a limited liability partnership under the laws
    of Netherlands and having its registered office at 1077 WV Amsterdam,
    Prinses Irenestraat 61, The Netherlands;

    HAZELWOOD INVESTMENT COMPANY PTY LIMITED (ACN 075 041 360) a company
    incorporated in the State of Victoria, Australia and having its registered
    office at Level l9, 385 Bourke Street, Melbourne, Victoria;

    and

    CISL (HAZELWOOD) PTY LTD (ACN 074 747 185) a company incorporated in the
    State of Victoria, Australia and having its registered office at Level l9,
    385 Bourke Street, Melbourne, Victoria

    (together the "ASSET BUYER").

RECITALS:

A.  The Seller is the owner of the Assets.

B.  The Seller agrees to sell and the Asset Buyer agrees to buy the Assets on
    the terms and conditions set out in this agreement.

THE PARTIES AGREE as follows:

                       1. DEFINITIONS AND INTERPRETATION

1.1 DEFINITIONS

In this Agreement:

"ALLOCATION STATEMENT" means, in relation to the Seller, any statement which,
for the purposes of section 153B of the Electricity Act, is an allocation
statement pursuant to which any property, rights or liabilities of Generation
Victoria were vested in the Seller and includes the Generation Victoria
allocation statement dated 31 January 1995 (as amended on 23 August 1995 and 29
February 1996) (the "GV ALLOCATION STATEMENT").

"ASSETS" means:

(a) Plant and Equipment;
       
(b) Business Records;
<PAGE>
 
                                       2


(c)  Contract Benefits;

(d)  Core Technology;

(e)  Land;

(f)  Intellectual Property Rights;

(g)  Licences;

(h)  all the Seller's entitlements under the Real Property Leases;

(i)  inventories, raw materials and stores;

(j)  future income tax benefit;

(k)  cash on hand and deposits and securities in the name of the Seller;

(l)  Equipment Lease Benefits;

(m)  Business Records, and

(n)  all other tangible or intangible assets owned by the Seller whether or not
     listed in the balance sheet of the Seller at Completion,

other than Specified Licences, Specified Contracts, Trade Debts and the Mining
Licence.

"ASSET BUYER'S WARRANTIES" means the warranties and representations of the
Asset Buyer set out in clause 13.1.

"AUTHORISATION" includes:

(a)  any consent, registration, filing, agreement, notarisation, certificate,
     licence, approval, permit, authority or exemption from, by or with a
     Governmental Agency; and

(b)  in relation to anything which may be proscribed or restricted in whole or
     in part by law or otherwise if a Governmental Agency intervenes or acts in
     any way within a specified period after lodgement, registration or other
     notification of anything, the expiration of that period without the
     intervention or action by that Governmental Agency. 

"BUSINESS" means the businesses of the generation and supply of electricity, the
exploration for, mining, production and supply of coal and other raw products
used in the supply of electricity, the supply of coal to other persons, the
acquisition and trade of electricity, coal and other raw products used in the
generation of electricity and the provision of related field, technical and
engineering services carried on by the Seller, including the construction and
operation of power stations.

"BUSINESS DAY" means a day on which banks are open for business in Melbourne,
excluding a Saturday or a Sunday or a public holiday.

"BUSINESS RECORDS" means all of the Seller's financial and business data,
employee data, technical data and all the Seller's other records, data,
information and documents.

"COMPLETION" means completion of the sale and purchase of the Assets under
clause 3.

"COMPLETION DATE" is the day on which Completion (as defined in the Share Sale
Agreement) occurs under the Share Sale Agreement.

"CONTRACT BENEFITS" means all express or implied rights, benefits and interests
of the Seller pursuant to the Contracts.

"CONTRACTS" means all oral or written contracts, agreements and arrangements to
which the Seller is a party except for the Specified Contracts.
<PAGE>
 

                                       3


"CONTRACT LIABILITIES" means al1 express or implied liabilities, obligations and
burdens of the Seller pursuant to the Contracts which arise in relation to the
performance or failure in performance of such Contracts.

"CORE TECHNOLOGY" has the meaning given to that term in section 73B of the
Income Tax Assessment Act 1936 as amended.

"CREDITORS" means all amounts owing by the Seller including al1 provisions in
the accounts of the Seller including provisions for site restoration, diminution
in the value of inventory, research and development, uninsured losses, deferred
income tax (other than in respect of plan; and equipment), employee
entitlements, redundancies and all bank overdraft arrangements.

"DEBTOR" means a person who owes a Trade Debt.

"DOLLARS" "A$" and "$" means the lawful currency of the Commonwealth of
Australia.

"DUTY" means any stamp, transaction or registration duty or similar charge
imposed by any Governmental Agency and includes, but is not limited to, any
interest, fine, penalty, charge or other amount imposed in respect of the above,
but excludes any Tax.

"ELECTRICITY ACT" means the Electricity Industry Act 1993.

"EMPLOYEES" means al1 employees of the Seller.

"EMPLOYMENT CONTRACTS" means the employment contracts between the Seller and the
Employees.

"EQUIPMENT LEASE" means each and every agreement relating to the finance,
leasing, hire or hire purchase of equipment and motor vehicles used in the
Business.

"EQUIPMENT LEASE BENEFITS" means the benefits and rights arising pursuant to the
Equipment Leases.

"ETSA AGREEMENTS" means the deeds described in clauses 17.2 and 17.10
(inclusive) of the Generation Licence.

***

"GENERATION LICENCE" means the generation licence issued to the Seller under
Part 12 of the Electricity Act in the from set out in Annexure A.

"GIPPSLAND WATER SUPPLY AGREEMENT" means the agreement in the form set out in
Annexure D.

"GOVERNMENTAL AGENCY" means the government of any country or the government of
any state, territory, municipality or other political subdivision of a country,
and any minister, administrative or judicial body, department, commission, 
authority, instrumentality, tribunal, agency or entity of any such government.

"GROUNDWATER LICENCE" means the licence to be issued to the Seller under section
5l of the Water Act 1989 in substantially and all material respects the same
form as the draft groundwater licence set out in Annexure C.

"HEDGING CONTRACTS" means al1 the contracts listed in Annexure F and any other
contract of a similar nature to which the Seller is a party.

"INTELLECTUAL PROPERTY RIGHTS" means the rights of the Seller to al1 patents,
copyrights or designs; and

(a) rights under Licence in respect of such patents, copyrights or design; and

<PAGE>
 
                                       4

(b) equitable rights in respect of such patents, copyrights or designs or such
    licences.

"LAND" means the land described in Crown Grant Volume 10248 Folio 674 including
fixtures and capital improvements of the Seller and the Hazelwood Cooling Pond
and the Seller's interest in the water in it.

"LICENCES" means every licence, permit, registration or other authority
whatsoever which is held by the Seller and which is necessary to properly and
efficiently carry on the Business, except the Specified Licences and the Mining
Licence.

"LOSS" means any and all losses (including loss of profit and loss of expected
profit), claims, actions, liabilities, damages, expenses, diminutions in value
or deficiencies of any kind or character (whether consequential or otherwise or
whether or not known or asserted on or before the Completion Date) including,
without limitation, all interest and other amounts payable to third parties, all
liabilities on account of Taxes and al1 legal (on a full indemnity basis) and
other expenses reasonably incurred in connection with investigating or defending
any claims or actions, whether or not resulting in any liability and all amounts
paid in settlement of claims or actions.

"METERING AGREEMENT" means the agreement to be entered into by the Seller and
Victorian Power Exchange in relation to metering and connection points.

"MINING LICENCE" means the licence to be issued to the Seller under Section 47A
of the Electricity Act in substantially and in all material respects the same
form as the draft mining licence set out in Annexure B.

"MINING LICENCE CASH BIDDING PAYMENT" means $50,000,000.

"OFFICER" means a director or secretary of the relevant party (as the case may
be).

"PLANT AND EQUIPMENT" means all plant, equipment and articles owned by the
Seller including without limitation all mining equipment, equipment used for the
conveyance and storage of coal, turbines, generators, pumps, boilers and boiler
plant, precipitators, mills, electricity transmission lines, power poles,
cables, stations, substations, switch yard equipment and al1 other plant and
equipment used in the mining and transportation of coal and in the generation,
reticulation, transformation or metering of electrical power which, in its
ordinary use, is located in a fixed position wherever located, but excludes any
of the foregoing that are:

(a)  any improvements, buildings or fixtures;

(b)  motor vehicles owned or leased by the Seller; and

(c)  the Hazelwood Cooling Pond,

and, for the avoidance of doubt, does not include capital works in progress

"POWER" means any right, power, authority, discretion or remedy conferred on the
parties by this agreement or any applicable law.

"REAL PROPERTY INTERESTS" means all rights and benefits of the Seller under the
Real Property Leases.

"REAL PROPERTY INTERESTS" means all agreements pursuant to which the Seller
leases or licences or is the lessee or licensee of real property.

"SECURITY INTEREST" means an interest or power:

(a)  reserved in or over an interest in any asset excluding any retention of
     title; or

(b)  created or otherwise arising in or over any interest in any asset under
     a bill of sale, mortgage, charge, lien, pledge, trust or power,

<PAGE>
 
                                       5


by way of security for the payment of a debt or any other monetary obligation or
the performance of any other obligation and includes, but is not limited to, any
agreement to grant or create any of the above.

"SECV LOAN" has the meaning given to that term in the Share Sale Agreement.

"SHARE SALE AGREEMENT" means the agreement so titled to be entered into between
State Electricity Commission of Victoria, the State of Victoria, the Asset Buyer
and National Power PLC, PacifiCorp Holdings, Inc. and Destec Energy, Inc. under
which the Asset Buyer shall acquire, inter alia, all the issued ordinary shares
in the capital of the Seller.

"SPECIFIED CREDITORS" means the TCV Loan and the SECV Loan.

"SPECIFIED CONTRACTS" means:

(a)  the Connection AGREEMENT dated 3 October 1994 between Generation Victoria
     and Power Net Victoria (allocated to the Seller under the Allocation
     Statement);

(b)  the Use of System Agreement dated 3 October 1994 between Generation
     Victoria and Power Net Victoria (allocated to the Seller under the
     Allocation Statement);

(c)  the Ancillary Services Agreement dated 3 October 1994 between Generation
     Victoria and Victorian Power Exchange (allocated to the Seller under the
     Allocation Statement);

(d)  all Vesting Contracts entered into by the Seller;

(e)  the Gippsland Water Supply Agreement;

(f)  all Hedging Contracts to which the Seller is a party;
         
(g)  the Metering Agreement;
         
(h)  the ETSA Agreements; and
         
(i)  ***

"SPECIFIED LICENCES" means the Generation Licence and Groundwater Licence.

"TAX" means any tax, levy, charge, impost, duty, fee, deduction or withholding
which is assessed, levied, imposed or collected by any State Government Agency
and includes, but is not limited to, any interest, fine, penalty, charge, fee or
any other amount imposed on, or in respect of, any of the above and any amount
imposed under section 88 of the State Owned Enterprises Act 1992 but excludes
any Duty.

"TCV" MEANS TREASURY CORPORATION OF VICTORIA.

"TCV LOAN" has the meaning given to that term in the Share Sale Agreement.

"TOTAL PURCHASE PRICE" means $2,399,999,000 being the sum of the value of the
Assets, Mining Licence, the Trade Debts specified by the Asset Buyer pursuant to
clause l2A, and the fair value, if any, of the declaration of trust of the
rights attached to those items set out in clause l0.l(a) to (f) net of Contract
Liabilities and Creditors (excluding Specified Creditors) assumed under this
agreement.

"TRADE DEBTS" means each and every amount due to the Seller on the Completion
Date in connection with the Business by or in respect of trade debtors, payments
in advance, trade bills receivable and like trade obligations and includes
sundry debtors, prepayments and other receivables.

"TRADE DEBT VALUE" MEANS the full face value of the Trade Debts at the time of
assignment less any provision for doubtful debts recorded in the accounts of the
Seller at the time of such assignment.
<PAGE>
 
                                       6

"VESTING CONTRACT" MEANS AN AGREEMENT entered into between any two of the
following:

(a) the persons holding distribution licences issued under Part 12 of the
    Electricity Act;

(b) the persons holding generation licences issued under Part 12 of the
    Electricity Act; and

(c) the State Electricity Corporation of Victoria

or between the State Electricity Corporation of Victoria acting in one capacity
and the State Electricity Corporation of Victoria acting in another capacity,
entered into on or about 31 March 1995 which incorporate the Master Vesting
Terms and Conditions.

1.2 INTERPRETATION

In this agreement, unless the context otherwise requires:

(a) headings and underlinings are for convenience only and do not affect the
    interpretation of this agreement;

(b) words importing the singular include the plural and vice versa;

(c) words importing a include any gender;

(d) other parts of speech and grammatical forms of a word or phrase defined
    in this agreement have a corresponding meaning;

(e) an expression importing a natural person includes any company, partnership,
    joint venture, association, corporation or other body corporate and any
    Governmental Agency;

(f) a reference to a clause, party, annexure, exhibit or schedule is a reference
    to a clause of, and a party, annexure, exhibit and schedule to, this
    agreement and a reference to this agreement includes any such annexure,
    exhibit and schedule;

(g) a reference to a statute, regulation, proclamation, ordinance or by-law
    includes all statutes, regulations, proclamations, ordinances or by-laws
    amending, consolidating or replacing it, and a reference to a statute
    includes all regulations, proclamations, ordinances and by-laws issued
    under that statute;

(h) a reference to a document includes all amendments or supplements to, or
    replacements or novations of, that document;

(i) a reference to a party to a document includes that party's successors and
    permitted assigns;

(j) where the day on or by which any thing is to be done is not a Business Day,
    that thing must be done on or by the next Business Day;

(k) no rule of construction applies to the disadvantage of a party because that
    party was responsible for the preparation of this agreement or any part of
    it;

(1) a covenant or agreement on the part of two or more persons binds them
    jointly and severally;

(m) a reference to an agreement other than this agreement includes an
    undertaking, agreement or legally enforceable arrangement or understanding
    whether or not in writing;

(n) a reference to an asset includes all property of any nature, including, but
    not limited to, a business, and all rights, revenues and benefits;

(o) a reference to a document includes any agreement in writing, or any
    certificate, notice, instrument or other document of any kind;

(p) a reference to liquidation includes appointment of an administrator,
    compromise,

<PAGE>
 
                                       7

    for the benefit of creditors, scheme, composition or arrangement with
    creditors, insolvency, bankruptcy, or any similar procedure or, where
    applicable, changes in the constitution of any partnership or person, or
    death; and

    (q)  terms deemed in the Corporations Law at the date of this agreement have
         the meanings given to them in the Corporations Law at that date.

                              2. SALE AND PURCHASE

2.1 SALE OF ASSETS

Subject to the terms of this agreement, to the extent permissible by law, the
Seller must sell free of Security Interests and the Asset Buyer must buy the
Assets on the Completion Date. The parties agree that the allocation of the
Total Purchase Price is as follows:

    (a)  ASSETS (OTHER THAN PLANT & EQUIPMENT AND LAND) = the aggregate fair
         value of such assets;

    (b)  MINING LICENCE = the Mining Licence Cash Bidding Payment;

    (c)  CONTRACT LIABILITIES AND CREDITORS (EXCLUDING SPECIFIED CREDITORS) = 
         the book value of such liabilities;

    (d)  THE TRADE DEBTS SPECIFIED BY THE ASSET BUYER PURSUANT TO CLAUSE 12A =
         so much of the Trade Debt Value that relates to the Trade Debts
         specified by the Asset Buyer under clause 12A;

    (e)  the fair value, if any, of the declaration of trust of the rights
         attached to those items set out in clause l0.l(a) to (f);

    (f)  PLANT & EQUIPMENT AND LAND = the Total Purchase Price PLUS the amount
         of the Contract Liabilities and Creditors (excluding Specified
         Creditors) LESS the sum of:

         (l) the aggregate fair value at Completion of all Assets other than the
             Plant & Equipment and Land);

         (2) Mining Licence Cash Bidding Payment; and

         (3) the amounts referred to in clause 2.l(d) and clause 2.l(e).

2.2 DATES FOR PAYMENT

On and subject to the terms of this agreement the Asset Buyer must pay the Total
Purchase Price on the Completion Date.

2.3 METHOD OF PAYMENT

All payments to be made under this agreement must be made by bank cheque or in
such other method as may be agreed in writing between the Seller and the Asset
Buyer.

                                 3. COMPLETION

3.1 DATE FOR COMPLETION

Completion must take place on the Completion Date at l0 am at the office of the
Seller's solicitors, Freehill Hollingdale & Page, l0l Collins Street, Melbourne.

3.2 DELIVERY OF DOCUMENTS

At Completion, the Seller must deliver to the Asset Buyer a copy of the special
resolution passed by the State Electricity Commission of Victoria (as 
shareholder) approving the sale of Assets and
<PAGE>
                                      8

 
the Trade Debts specified by the Asset Buyer pursuant to clause 12A by the
Seller on and subject to the terms of this agreement.

3.3 ASSET BUYER'S OBLIGATIONS AT COMPLETION

At Completion the Asset buyer must pay the Seller the Total Purchase Price as 
described in clause 2.

3.4 PROPERTY AND RISK

Property and risk in the Assets shall pass to the Asset Buyer at Completion.

3.5 INTERDEPENDENCY BETWEEN THIS AGREEMENT AND SHARE SALE AGREEMENT

It is the intention of the parties that:

(a) subject to clause 7.3 of the Share Sale agreement, completion under this
    agreement;

(b) completion under the Share Sale Agreement; and

(c) payment of the SECV Loan and TCV Loan and any other amounts owing to 
    TCV under clause 6 of the Share Sale Agreement,

are interdependent, so that if the obligations of the parties in respect of a
particular completion or payment under clause 6 of the Share Sale Agreement are
not satisfied, then no delivery of payment which has been made, will be deemed
to have been made.

For the avoidance of doubt the parties acknowledge and agree that once 
Completion under this agreement, completion under the Share Sale Agreement and 
the payments under clause 6 of the Share Sale Agreement have occurred, as a 
chronological sequence of events, all deliveries and payments will be deemed to 
have taken place in the order in which they occurred.

3.6 INCONSISTENCIES

In the event there are any inconsistencies between this agreement and the Share
Sale Agreement, the provisions of the Share Sale Agreement shall prevail.

3.7     EXERCISE OF RIGHTS

With effect from completion, the Seller shall exercise all of its statutory and
other rights with respect to the Assets including, without limitation, its
rights under Part 3 of the Electricity Act, consistently with ownership of the
Assets having been vested in the Asset Buyer and shall act in accordance with
any directions given by the Asset Buyer to the Seller as to the manner of
exercise of such rights.

3.8 TERMINATION

This agreement shall automatically terminate on termination of the Share Sale 
Agreement.

                                4.   EMPLOYEES

4.1 EMPLOYMENT CONTRACTS HELD ON TRUST

Following completion, the Seller agrees to hold the benefit of the Employment
Contracts upon trust absolutely for the Asset Buyer pursuant to clause 10.

4.2 ASSET BUYER'S INDEMNITY WITH RESPECT TO EMPLOYEES

Without limiting the generality of clause 9, following Completion, the Asset
Buyer indemnifies the Seller against all Losses incurred by the Seller in
respect of any entitlement to salary, annual leave, holiday pay, redundancy pay,
long service leave, commissions or other incentive

<PAGE>

                                       9



 
entitlements claimed against the Seller by any Employee employed by the Seller
as at and after Completion.

                         5.   OUTGOINGS AND EXPENSES

The Asset Buyer shall indemnify and continue to indemnify the Seller against any
Loss in respect of the period following Completion including, arising from
outgoings and expenses, without limitation, payments in respect of land tax,
council rates, water rates, garbage disposal and all services of the Business
for electricity, oil heating, gas or otherwise and the amount of any deposit
paid in respect of such services.

                 6.   ASSUMPTION OF LIABILITIES AND CREDITORS

Following Completion, the Asset buyer assumes with effect from Completion all
liabilities of the Seller to the Creditors and agrees to pay all Creditors in
the normal course of business for obligations of the Seller existing before and
after the Completion Date and without limiting the generality of clause 9, the
Asset Buyer indemnifies and shall keep the Seller indemnified against all Losses
incurred by the Seller arising from the non-payment of Creditors. 

                                7.   CONTRACTS

7.1  ASSIGNMENT OF CONTRACTS

Subject to clause 7.4, the Seller, with effect from Completion, assigns to the
Asset Buyer all its right, title and interest in the Contract Benefits.

7.2  NOVATION OF CONTRACTS

Following Completion, the Seller shall use its best endeavours, at the Asset
Buyer's expense and request, to procure the novation to the Asset Buyer of all
Contracts and Equipment Leases in addition to making an assignment of the
benefit of Contracts under clause 7.1.

7.3  ASSET BUYER'S OBLIGATIONS AFTER COMPLETION

(a)  Following Completion, the Asset Buyer shall duly carry out and perform all
     obligations under the Contracts and Equipment Leases.

(b)  The Asset Buyer shall assume responsibility for the Contract Liabilities
     from Completion and keep the Seller indemnified against any Loss arising
     from the performance or non-performance of the Contract Liabilities after
     Completion.

7.4  NON-ASSIGNMENT OF THE CONTRACT

Following Completion, if any other party to a Contract objects or refuses to 
consent to an assignment or novation of a Contract to the Asset Buyer.

(a)  the Asset Buyer shall duly perform the Contracts on behalf of the Seller at
     the Asset Buyer's expense;

(b)  the Seller shall enforce the Contract against the other party to the
     Contract in such manner as the Asset Buyer may reasonably direct the Seller
     from time to time and the Seller shall pay all benefits arising therefrom
     to the Asset Buyer;

(c)  the Seller shall not agree to any amendment of the Contract or waiver of
     the Seller's rights thereunder without the prior written approval of the
     Asset Buyer; and
<PAGE>
                                      10



 
(d)  the Seller shall hold the Contract upon trust for the Asset Buyer pending
     consent to an assignment or novation.

7.5  ASSET BUYER'S INDEMNITY IN RESPECT OF THE NON-ASSIGNMENT OF THE CONTRACT

Following Completion, the Asset Buyer indemnifies the Seller against all Losses
incurred by the Seller under any Contract which arises or relates to the
performance or non-performance of the Contracts whether assigned or novated in
favour of the Asset Buyer or not.

7.6  EQUIPMENT LEASES

Following Completion, the Asset Buyer shall, subject to the consent of the other
parties to the Equipment Leases, accept an assignment or novation of all of the
Equipment Leases and assume full and on-going liability for all monies remaining
due and unpaid under the Equipment Leases whether by leasing installments,
residual payments or otherwise.

7.7  TRANSFER OF THE REAL PROPERTY LEASES

Following Completion, the Seller shall use reasonable endeavours to novate or
assign (with the written consent of each of the lessors and mortgagees (if any)
of the Real Property) as soon as practically possible the Real Property Leases
to the Asset Buyer.

                                 8.   LICENCES

8.1  TRANSFER

Following Completion, the Seller shall, to the extent that the Licences are
transferable, use all reasonable endeavours to transfer or cause to be
transferred to the Asset Buyer the Licences at the cost and expense of the Asset
Buyer.

8.2  FURTHER ACTS

If the Asset Buyer does not acquire good title to the Licences following the
actions described in clause 8.1, the Seller undertakes to do any further acts or
things reasonably requested by the Asset Buyer to effect a valid and effectual
transfer of the Licences within a reasonable time.

                                9.   INDEMNITY

Following Completion, the Asset Buyer indemnifies the Seller in respect of all
liabilities arising and debts incurred connection with the Business and the
Assets.

                          10.   DECLARATION OF TRUST

10.1 DECLARATION OF TRUST

The Seller hereby declares that on and from the Completion Date it holds and 
will hold:

(a)  the Specified Contracts;

(b)  the Specified Licences;

(c)  the Mining Licence when issued;

(d)  the Employment Contracts;

(e)  motor vehicles owned or leased by the Seller; and

(f)  any other Assets received by, or Licences issued to, the Seller after the
     Completion Date to the extent that they cannot be assigned, novated or
     transferred to the Asset Buyer.








<PAGE>
                                      11



upon trust for the Asset Buyer and agrees to account for benefits thereof and to
transfer and deal with all the rights attaching thereto in such manner as the
Asset Buyer shall from time to time direct.

10.2  INDEMNITY

The Asset Buyer will at all times following Completion indemnify and keep
indemnified the Seller against all liabilities which the Seller may incur by
reason of this declaration of trust. Without limiting the generality of the
foregoing, the Asset Buyer Specifically indemnifies and will keep indemnified
the Seller against all liabilities which the Seller may incur by reason of the
Specified Contracts and Specified Licences being so registered in the name of
the Seller.

                             11.   MINING LICENCE

11.1  TENDER

Pursuant to the Asset Buyer's bid letter dated 2 August 1996 the Asset Buyer
tendered a Mining Cash Bidding Payment for the issue of the Mining Licence. The
State has consented to the issue of the Mining Licence to the Seller to hold on
trust absolutely for the Asset Buyer.

11.2  TRUST

The Seller hereby declares that it shall on and from the issue of the Mining
Licence hold the Mining Licence on trust for the Asset Buyer and hereby agrees
to account for all benefits therefrom and to transfer and deal with all rights
attaching thereto in such manner as the Asset Buyer shall from time to time
direct.

                                  12.   LAND

The Conditions set out in Annexure E will apply to this agreement so far as it 
relates to the sale of the Land.

                               12A   TRADE DEBTS

On Completion, the Seller shall transfer to the Asset Buyer completely and
unconditionally any Trade Debts owing to the Seller which the Asset Buyer
specifies to the Seller at the Completion Date.

                         13   ASSET BUYER'S WARRANTIES

13.1  ASSET BUYER'S WARRANTIES

The Asset Buyer represents and warrants to the Seller as at the date of this 
agreement and as at Completion that:

(a)   it has corporate power to enter into this agreement and has taken all
      necessary action (including all shareholder approvals and Authorisations)
      to authorise the execution, delivery and performance of this agreement;

(b)   the agreement constitutes a legally valid and binding obligation of the 
      Asset Buyer enforceable in accordance with its terms; and

(c)   the execution, delivery and performance of this agreement will not violate
      any provision of:












<PAGE>
                                      12



 
           (1)  any law, regulation, order, rule or decree of any Governmental
                Agency of the Commonwealth of Australia or any state or
                territory or any recognised stock exchange on which its shares
                or the shares of any related body corporate are listed;

           (2)  the memorandum or articles of association (or equivalent 
                constituent documentation) of the Asset Buyer; and

           (3)  any security agreement, deed, contract, undertaking or other
                instrument to which the Asset Buyer is a party or which is
                binding on it does not and will not result in the creation or
                imposition of any security over any of its assets pursuant to
                the provision of any such security agreement, deed, contract,
                undertaking or other instrument.

13.2  ACKNOWLEDGMENT

The Seller acknowledges and agrees that in no event is it entitled to rescind 
this agreement or claim damages under this agreement.

                        14   DUTIES, COSTS AND EXPENSES

14.1  PAYMENT OF DUTY

The Seller must pay:

(a)   any Duty in respect of the execution, delivery and performance of this
      agreement and any document entered into or signed under this agreement;
      and

(b)   any fine, penalty or other cost in respect of a failure to pay any Duty.

14.2  INDEMNITY

The Asset Buyer indemnifies the Seller against any amount payable under clause 
14.1.

14.3  COSTS AND EXPENSES

Subject to clause 14.1, each party must pay its own costs and expenses in 
respect of the negotiation, preparation, execution, delivery, stamping and 
registration of this agreement or other document described in clause 14.1(a).

14.4  COSTS OF PERFORMANCE

Any action to be taken by a party in performing its obligations under this
agreement must be taken at its own cost and expense unless otherwise provided in
this agreement.

                                 15.   NOTICES

15.1  GENERAL

Any notice or other communication including, but not limited to, any request, 
demand, consent or approval, to or by a party to this agreement:

(a)   must be in legible writing and in English addressed as shown:

      (1)   if to the Seller:            The Secretary,
         
            Address:                     Hazelwood Power Corporation Ltd,
                                         Commercial Road
                                         Morwell Vic  3840

            Attention:                   Mr B. Clark  

<PAGE>
 
                                      13


             Facsimile:              (051) 35 3185;

        (2)  if to the Asset Buyer:  Hazelwood Power Partnership

             Address:                C/-Phillips Fox

                                     120 Collins Street
                                     Melbourne, 3000

             Attention:              Judith Earls

             Facsimile:              9274 5111,

             or as specified to the sender by any party by notice;

(b)     where the sender is a company, must be signed by an Officer or under the
        common seal of the sender;

(c)     is regarded as being given by the sender and received by the addressee:

        (1)  if by delivery in person, when delivered to the addressee;

        (2)  if by post within Australia, 3 Business Days from and including the
             date of postage; or

        (3)  if by facsimile transmission, when transmitted legibly to the 
             addressee,

        but if the delivery or receipt is on a day which is not a Business Day
        or is after 4.00 pm (addressee's time) it is regarded as received at
        9.00 am on the following Business Day; and

(d)     can be relied upon by the addressee and the addressee is not liable to
        any other person for any consequences of that reliance if the addressee
        believes it to be genuine, correct and authorised by the sender.

15.2    LEGIBILITY OF FACSIMILE TRANSMISSION

A facsimile transmission is regarded as legible unless the addressee telephones 
the sender within 2 hours after the transmission is received or regarded as 
received under clause 15.1(c)(3) and informs the sender that it is not legible.

                                 16.  GENERAL

16.1    GOVERNING LAW AND JURISDICTION

(a)     This agreement is governed by the laws of Victoria. Each party
        irrevocably submits to the exclusive jurisdiction of the courts of
        Victoria.

(b)     Each party irrevocably waives any objection to the venue of any legal
        process on the basis that the process has been brought in an
        inconvenient forum.

16.2    WAIVERS

(a)     Waiver of any right arising from a breach of this agreement or of any
        Power arising upon default under this agreement must be in writing and
        executed by the party granting the waiver.

(b)     A failure or delay in exercise, of:

        (1)  a right arising from a breach of this agreement; or

        (2)  a Power created or arising upon default under this agreement, does
             not result in a waiver of that right or Power.








<PAGE>
 
                                      14



(c)     A party is not entitled to rely on a delay in the exercise or non-
        exercise of a right or Power arising from a breach of this agreement or
        on a default under this agreement as constituting a waiver of that right
        or Power.

(d)     A party may not rely on any conduct of another party as a defence to 
        exercise of a right or Power by that other party.

(e)     This clause 16.2 may not itself be waived except by writing executed by 
        the party granting the waiver.

16.3    VARIATION

A variation of any term of this agreement must be in writing and executed by the
parties.

16.4    FURTHER ASSURANCES

Each party must do all things, and execute all further documents, necessary to 
give full effect to this agreement.

16.5    THIRD PARTY RIGHTS

No person other than a party to this agreement is intended to have any right, 
power or remedy or derives or is intended to derive any benefit under this 
agreement.

16.6    THIS AGREEMENT SUPERSEDES OTHERS

This agreement and the Share Sale Agreement embody the entire agreement between 
the parties with respect to the subject matter of this agreement and supersede 
any prior negotiation, arrangement, understanding or agreement with respect to 
the subject matter or any term of this agreement.


<PAGE>
                                      15

 

EXECUTED by the parties as an agreement.



THE COMMON SEAL of HAZELWOOD POWER
CORPORATION LTD
was affixed to this
document in the presence of:


/s/  Brian C. Clark                                /s/ Frank H. Osborn     
______________________________                     _____________________________
Secretary                                          Director 

     Brian C. Clark                                     Frank H. Osborn       
______________________________                     _____________________________
Name (please print)                                 Name (please print)
 

SIGNED for HAZELWOOD
PACIFIC PTY LIMITED by
its attorney in the presence of:

/s/  S.J.E. Uthmeyer                               /s/  Daniel L. Spalding     
______________________________                     _____________________________
 Witness                                           Attorney


     Simon J.E. Uthmeyer                                Daniel L. Spalding     
______________________________                     _____________________________
Name (please print)                                Name (please print)  


SIGNED 
for NATIONAL POWER
AUSTRALIA INVESTMENTS LTD
by its attorney in
the presence of:


/s/  S.J.E. Uthmeyer                               /s/  Max Herbert          
______________________________                     ____________________________
Witness                                            Authorized Representative 


     Simon J.E. Uthmeyer                                Max Herbert            
______________________________                     _____________________________
Name (please print)                                Name (please print) 
<PAGE>
 
                                      16



SIGNED for AUSTRALIAN POWER
PARTNERS CV by its attorney
in the presence of:


/s/  Reggie G. Rice                                /s/  Louis Dorey           
______________________________                     _____________________________
Witness                                            Attorney


     Reggie G. Rice                                     Louis Dorey           
______________________________                     _____________________________
Name (please print)                                 Name (please print)


SIGNED for HAZELWOOD
INVESTMENT COMPANY
PTY LIMITED by its attorney
in the presence of:


/s/  J.C. Sheridan                                 /s/  C. Lawson-Kerr        
______________________________                     _____________________________
Witness                                            Attorney


     J.C.  Sheridan                                     C. Lawson-Kerr        
______________________________                     _____________________________
SIGNED for CISL (HAZELWOOD)                        Name (please print)
PTY LIMITED by its attorney
in the presence of:


/s/  J.C. Sheridan                                 /s/  Susan Kalius         
______________________________                     _____________________________
Witness                                            Attorney 


     J.C. Sheridan                                      Susan Kalius          
______________________________                     _____________________________
Name (please print)                                Name (please print)
<PAGE>
                                  ANNEXURE A

                              GENERATION LICENCE
<PAGE>
 
                                  GENERATION 
                                    LICENCE

                                   issued to

                        HAZELWOOD POWER CORPORATION LTD

                                ACN 065 381 204



                       OFFICE OF THE REGULATOR - GENERAL
<PAGE>
 
                              GENERATION LICENCE

1.   DEFINITIONS AND INTERPRETATION

1.1  In this licence, words and phrases appearing in italics have the meaning 
     ascribed to them in part 1 of schedule 1.

1.2  This licence must be interpreted in accordance with the rules set out in 
     part 2 of schedule 1.

2.   GRANT OF LICENCE

2.1  The Office, in exercise of the powers conferred by section 162 and section 
     168 of the Act, licenses the Licensee to:

     (a)  generate electricity for supply and sale at; and

     (b)  supply and sell electricity generated at,

     the licensed power station subject to the conditions set out in this 
     licence.

3.   TERM

3.1  This licence takes effect on and from the date on which the first
     allocation statement prepared in accordance with section 153B of the Act
     becomes effective (31 January 1995).

3.2  The Office may at any time agree with the Licensee that this licence should
     be revoked, in which case the term of this licence ends on the day agreed.

3.3  The Office may at any time give at least 20 business days notice of
     revocation to the Licensee if the Licensee does not comply with an
     enforcement order or an undertaking, and the Office decides that it is
     necessary or desirable to revoke this licence in order to achieve the
     policy objectives, in which case the term of this licence ends, subject to
     clause 3.4, on the expiration of the period of the notice.

3.4  The term of this licence does not end at the expiration of the period of a
     notice of revocation given under clause 3.3 if, before the expiration, the
     Licensee complies with the enforcement order or the undertaking (as the
     case may be).

4.   OBLIGATION TO OFFER TO PROVIDE ANCILLARY SERVICES

4.1  Whenever requested to do so by Victorian Power Exchange, the Licensee must
     state to Victorian Power Exchange the terms, which must be fair and
     reasonable in the opinion of the Office, on which the Licensee will provide
     ancillary services including, without limitation, automatic generation
     control capability.

4.2  The Licensee must on request from Victorian Power Exchange provide
     ancillary services of the kind specified in clause 4.1 on the terms stated
     to Victorian Power Exchange pursuant to clause 4.1

4.3  In determining whether or not the terms on which the Licensee will provide
     ancillary services are fair and reasonable, the Office will have regard to
     clause 4.4 of the Tariff Order, which limits the amount which Victorian
     Power Exchange may seek to recover










<PAGE>
 
                                       2

      through Victorian Power Exchange's Pool fees for meeting the costs of
      ancillary services provided to Victorian Power Exchange.

5.    COMPLIANCE WITH CODES AND RULES

5.1   The Licensee must comply with applicable provisions of the Wholesale
      Metering Code, the System Code, the Distribution Code and the Pool Rules.

5.2   Subject to any limitation on the Licensee's ability to do so under any of
      the codes or rules referred to in clause 5.1, if the Licensee becomes
      aware of a material breach of any of the codes or rules by the Licensee,
      the Licensee must notify the Office of the material breach in accordance
      with any guidelines issued by the Office or, in the absence of such
      guidelines, as soon as practicable.

5.3   The Office may, on application of the Licensee, make a determination that
      the provisions of any of the codes or rules referred to in clause 5.1 are
      to apply in relation to the Licensee, either generally or in a particular
      case or class of cases, as if a specified provision or provisions were
      omitted or were modified or varied in a specified manner and, subject to
      section 27 of the Office of the Regulator-General Act 1994, when such a
      determination is made, the relevant code or rule applies accordingly.

5.4   An application by the Licensee under clause 5.3 must set out a draft of 
      the determination the Licensee seeks.

5.5   If:

      (a)  the Office has received an application from the Licensee for a
           determination under clause 5.3 and Victorian Power Exchange has
           received a copy of the application; and

      (b)  at the end of 20 business days after the day on which the later of 
           those two events occurred the Office has not:

           (1)  made a determination; or

           (2)  advised the Licensee that a determination will not be made,

      then the Office will be deemed to have made a determination in the form of
      the draft determination set out in the application.

6.    ENERGY TO BE SOLD THROUGH THE POOL

      The Licensee must ensure that all electricity generated at a power station
      forming part of the licensed power station is dealt with in one or a
      combination of the following ways:

      (a)  sold through the Pool in accordance with the Pool Rules; or

      (b)  consumed by the Licensee in the operation of plant or equipment which
           is:

           (1)  necessary for the generation of electricity at the power 
                station; or

           (2)  used in mining activities at an open cut mine where the majority
                of the coal produced at the mine is used in the generation of
                electricity at the power station; or

<PAGE>
                                      3



           (3)  used in activities conducted solely at the power station or the
                open cut mine referred to in paragraph (2) relating to the
                operation or maintenance of the power station or that open cut
                mine; or

           (4)  used in activities relating to the management of the Licensee
                conducted solely at the power station or on land belonging to
                the Licensee which is adjacent to the power station; or

      (c)  consumed in a manner approved by the Office after consultation with
           all persons holding a licence issued under part 12 of the Act.

      For the purposes of paragraph (b)(4), the reference to the power station
      and land adjacent to the power station will be taken not to include any
      land acquired by the Licensee after 1 July 1996.

7.    STANDARDS AND PROCEDURES

7.1   At the written request of the Office, the Licensee must participate to the
      extent specified by the Office in the development, issue and review of any
      standards and procedures specified by the Office.

7.2   The Licensee must in accordance with guidelines published by the Office
      under the Office of the Regulator-General Act 1994, or as directed by the
      Office, report to the Office on its performance against applicable
      standards and procedures.

7.3   If the Office considers that:

      (a)  the Licensee has failed to comply with clause 7.1; or

      (b)  standards and procedures applicable to the Licensee have been shown
           to be insufficient to prevent abuses by the Licensee of any monopoly
           power it enjoys,

      the Office may issue standards and procedures applicable to the Licensee 
      and with which the Licensee must comply.

8.    ACCOUNTS

      The Licensee must ensure that its accounts are prepared in accordance with
      guidelines set by the Office, and must maintain its accounting records
      accordingly.

9.    PROVISION OF INFORMATION TO VICTORIAN POWER EXCHANGE

9.1   Following a request in writing from Victorian Power Exchange, the Licensee
      must provide to Victorian Power Exchange such documents or information as
      Victorian Power Exchange may reasonably require to perform its functions
      and exercise its powers under the Act.

9.2   A question as to the reasonableness of a requirement by Victorian Power
      Exchange for documents or information as contemplated by clause 9.1 shall
      be decided by the Office on the basis of the Office's opinion of the
      reasonableness of the requirement.

9.3   If a document or information is provided to Victorian Power Exchange
      following a request under clause 9.1, Victorian Power Exchange must only
      use the document or information for the purpose for which it was provided
      and must not disclose the
<PAGE>
                                       4


 
      document or information to any other person except to the Office under
      Victorian Power Exchange's Wholesale Electricity Market and Transmission
      Licence, or as required by a law or the lawful requirement of a government
      or government authority or with the agreement of the Licensee. If
      Victorian Power Exchange is required to disclose a document or information
      provided to Victorian Power Exchange following a request under clause 9.1
      to the Office or by law or the lawful requirement of a government or
      government authority, then Victorian Power Exchange must notify the
      Licensee before so disclosing the document or information.

10.   PROVISION OF INFORMATION TO THE OFFICE

      The Licensee must provide to the Office, in the manner and form decided by
      the Office such information as the Office may from time to time require.

11.   PAYMENT OF LICENCE FEES

11.1  The Licensee must pay the fees and charges in respect of this licence
      determined by the Minister under section 163(4) of the Act.

11.2  The licence fee determined by the Minister under section 163(4) of the Act
      in respect of this licence must be paid in four equal installments on the
      last days of January, April, June and October in each year in the manner
      notified to the Licensee by the Office.

11.3  A fee or charge determined by the Minister under section 163(4) of the Act
      in respect of this licence (other than the licence fee referred to in
      clause 11.2) must be paid at the times and in the manner notified to the
      Licensee by the Office.

12.   ADMINISTRATOR

12.1  If an administrator is appointed to the Licensee's business under section
      166 of the Act, the administrator must exercise its functions and powers
      in such a manner as may be specified by the Office in the instrument of
      appointment.

12.2  The Licensee is responsible for the acts and defaults of the 
      administrator.

13.   COMPLIANCE WITH LAWS

      The Licensee must comply with all applicable laws including but not 
      limited to the Tariff Order.

14.   VARIATION

14.1  This licence may be varied in accordance with:

      (a)  the procedures specified in section 164 of the Act; or

      (b)  section 167(8) of the Act; or

      (c)  clause 14.2 or 14.3.

14.2  The Office may, if it considers it expedient, vary this licence to provide
      for arbitration of disputes between the Licensee and other persons
      regarding the terms and conditions of access to any essential facilities
      in the Victorian electricity supply industry.

14.3  The Treasurer of the State of Victoria may, by notice to the Licensee,
      vary the conditions of this licence at any time prior to completion
      occurring under a contract for the sale of





<PAGE>
 
                                       5

 

      all of the issued shares in the Licensee by the State Electricity
      Commission of Victoria and the nominees of the State Electricity
      Commission of Victoria.

5.    TRANSFER OF LICENCE

      This licence may be transferred in accordance with section 167 of the Act.

6.    COMMUNICATIONS

6.1   Unless the context otherwise requires, a communication must be in writing.

6.2   A communication is to be regarded as having been given by the sender and 
      received by the addressee: 

      (a)  when delivered in person to the addressee;

      (b)  3 business days after the date of posting, if the communication is 
           posted within Australia;

      (c)  7 business days after the date of posting, if the communication is 
           posted outside Australia; or 

      (d)  when, according to the sender's transmission report, received by
           facsimile transmission by the addressee.

7.    GENERATOR CO-INSURANCE SCHEME AND SUPPORT ARRANGEMENTS

7.1   The Licensee must, by 30 June 1995, enter into a contract entitled
      Generator Co-Insurance Scheme contract in a form certified by the Minister
      and expiring no later than 30 September, 1996.

7.2   The Licensee must enter into deed entitled "ETSA Contract: Generator
      Contribution Deed" with Generation Victoria in a form certified by the
      Minister if directed by the Minister in writing to do so.

7.3   The Licensee must enter into a deed entitled "ETSA Contract: Generator
      Contribution Deed" with Loy Yang Power Limited (ACN 065 381 240) in a form
      certified by the Minister if directed by the Minister in writing to do so.

7.4   The Licensee must enter into a deed entitled "ETSA Contract: Generator
      Contribution Deed" with Southern Hydro Limited (ACN 065 325 091) in a form
      certified by the Minister if directed by the Minister in writing to do so.

7.5   The Licensee must enter into a deed entitled "ETSA Contract: Generator
      Contribution Deed" with Energy Brix Australia Corporation Pty Ltd
      (ACN 074 735 833) in a form certified by the Minister if directed by the
      Minister in writing to do so.

7.6   The Licensee must enter into a deed entitled "ETSA Contract: Generator
      Contribution Deed" with the State Electricity Commission of Victoria (in
      its capacity as IOA Trader) in a form certified by the Minister if
      directed by the Minister in writing to do so.

7.7   The Licensee must enter into a deed entitled "ETSA Contract: Generator
      Contribution Deed" with the State Electricity Commission of Victoria (in
      its capacity as LYB Trader) in a form certified by the Minister if
      directed by the Minister in writing to do so.

7.8   The Licensee must enter into a deed entitled "IOA Trader: Support Deed"
      with the State Electricity Commission of Victoria (in its capacity as IOA
      Trader) in a form certified by the Minister if directed by the Minister in
      writing to do so.


<PAGE>

                                       6
 
7.9   The Licensee must enter into a deed entitled "ETSA Contract: SECV Shell
      Contribution Deed" with the State Electricity Commission of Victoria (in
      its capacity as IOA Trader) in a form certified by the Minister if
      directed by the Minister in writing to do so.

7.10  The Licensee must enter into a deed entitled "ETSA Contract Support
      Agreement" with the State Electricity Commission of Victoria (in its
      capacity as IOA Trader) in a form certified by the Minister if directed by
      the Minister in writing to do so.

COMMON SEAL of             )
OFFICE OF THE              )
REGULATOR-GENERAL          )
affixed pursuant to        )
authority of the Office    )
31 January 1995            )



ROBIN C. DAVEY
Regulator-General
<PAGE>
                                       7

 
                  SCHEDULE 1:  DEFINITIONS AND INTERPRETATION

   8.   DEFINITIONS

        In this licence:

   8.1  "Act" means the Electricity Industry Act 1993;

        (a)  "administrator" means an administrator appointed by the Office
             under section 166 of the Act in respect of the business carried on
             by the Licensee under this licence;

        (b)  "business day" means a day on which banks are open for general 
             banking business in Melbourne, excluding a Saturday or Sunday;

        (c)  "communication" means any notice, agreement, consent, direction, 
             representation, advice, statement or other communication required
             or given pursuant to or in connection with this licence;

        (d)  "customer" means a person, other than a retailer, who buys or
             wishes to buy electricity directly through the Pool or from a
             retailer;

        (e)  "distribute", in relation to electricity, means to distribute 
             electricity using a distribution system;

        (f)  "Distribution Code" means the code of that name dated 3 October 
             1994 which:

             regulates:

             (1)  the supply of electricity to or from distributors' 
                  distribution systems; and

             (2)  the way in which customers' electrical installations affect 
                  the distribution system to which they are connected; and

             (3)  is certified by the Office;

        (g)  "distribution licence" means a licence to distribute and supply 
             electricity granted under section 162 of the Act;

        (h)  "distribution system" means in relation to a distributor a system
             of electric lines (generally at nominal voltage levels of 66kV or
             below) which that distributor is licensed to use to distribute
             electricity for supply under its distribution licence.

        (i)  "distributor" means a holder of a distribution licence or a person
             who has been exempted from (?????) requirement to obtain a
             distribution licence under section 160 of the Act;

        (j)  "electrical installation" means any electrical equipment at a
             customer site that is not part of a distributor's electrical
             system;

        (k)  "electricity transmission system" means a transmission system in
             Victoria (generally at nominal voltage levels of 66kV or above),
             which the holder of a transmission licence may use to transmit
             electricity;

        (l)  "enforcement order" means a provisional or final order made and
             served by the Office under section 35 of the Office of the
             Regulator-General Act 1994;

        (m)  "generation licence" means a licence to generate electricity for
             supply or sale granted under section 162 of the Act;


<PAGE>
 
                                       8


(n)     "generator" means a holder of a generation licence or a person who has
        been exempted from requirement to obtain a generation licence under
        section 160 of the Act;

(o)     "licensed power station" means Hazelwood power station;

(p)     "licensee" means Hazelwood Power Corporation Ltd ACN 065 381 204;

(q)     "Minister" means the person who is the Minister for the purposes of
        section 163(4) of the Act;

(r)     "Office" means the Office of the Regulator-General under the Office of 
        the Regulator-General 1994;

(s)     "policy objectives" means the objectives specified in section 157 of the
        Act and section 7 of the Office of the Regulator-General Act 1994 and,
        to the extent the context requires, in a statement (????) government
        policy under section 10 of the Office of the Regulator-General Act 1994;

(t)     "Pool" means the market for wholesale trading in electricity operated
        and administered by Victorian Power Exchange;

(u)     "Pool Rules" means rules prepared by Victorian Power Exchange and
        certified by the Office relating to, among other things, the operation
        and administration of the Pool;

(v)     "Retailer" means a holder of a retail licence or a person who has been
        exempted from the requirement to obtain a retail licence under section
        160 of the Act;

(w)     "Retail licence" means a licence to sell electricity otherwise than 
        through the Pool granted under section 162 of the Act;

(x)     "Standards and procedures" means overall performance standards which are
        issued by the licensee under clause 7.1 or by the Office under clause
        7.3;

(y)     "Supply", in relation to electricity, means the delivery of electricity;

(z)     "System Code" means the code prepared by Victorian Power Exchange and 
        certified by the office relating to, among other things:

                the achievement of a secure system;

                the operation of an electricity transmission system and 
                equipment connected to an electricity transmission system;

                design and technical requirements for connection to an
                electricity transmission system and quality of supply standards
                which apply at points of connection to an electricity
                transmission system; and

                technical performance requirements that are placed on 
                generators, distributors and certain customers;

(aa)    "Tariff Order" means the Victorian Electricity Supply Industry Tariff 
        Order made under section A of the Act;

(bb)    "Transmission licence" means a licence to transmit electricity granted 
        under section 162 of the Act.

(cc)    "Transmit", in relation to electricity, means to transfer electricity in
        bulk;

(dd)    "Undertaking" means an undertaking given by the Licensee under section 
        35(5)(a) of the Office of the Regulator-General Act 1994;








<PAGE>
 
                                       9

(ee)  "Wholesale Metering Code" means the code prepared by Victorian Power 
      Exchange and certified by the Office relating to, amongst other things,
      the provision of metering of electrical energy transfers used in
      connection with wholesale trading of electricity in the Pool; and

(ff)  "writing" includes any mode of representing or reproducing words,
      figures, drawings or symbols in a visible form.

9.   INTERPRETATION

     In this licence, unless the context otherwise requires:

(a)  headings are for convenience only and do not affect the interpretation of 
     this licence;

(b)  words importing the singular include the plural and vice versa;

(c)  words importing a gender include any gender;

(d)  an expression importing a natural person includes any company, partnership,
     trust, joint venture, association, corporation or other body corporate and 
     any governmental agency;

(e)  a reference to a condition, clause, schedule or part is to a condition, 
     clause, schedule or part of this licence;

(f)  a reference to terms of an offer or agreement is to terms, conditions or 
     provisions thereof;

(g)  a reference to any statute, regulation, proclamation, order in council, 
     ordinance or by-law includes all statutes, regulations, proclamations,
     order in council, ordinances or by-laws varying, consolidating, re-
     enacting, extending or replacing them and a reference to a statute includes
     all regulations, proclamations, orders in council, ordinances, by-laws and
     determinations issued under that statute ;

(h)  a reference to a document or a provision of a document includes an 
     amendment or supplement to, or replacement or novation of, that document or
     that provision of that document;

(i)  a reference to a person includes that person's executors, administrators, 
     successors, substitutes (including, without limitation, persons taking by
     novation) and permitted assigns;

(j)  when italicised, other parts of speech and grammatical forms of a word or 
     phrase defined in this licence have a corresponding meaning;

(k)  a period of time:

     (1)  which dates from a given day or the day of an act or event is to be 
          calculated exclusive of that day; or

     (2)  which commences on a given day or the day of an act or event is to be 
          calculated inclusive of that day; and

(l)  an event which is required under this license to occur on or by a 
     stipulated day which is not a business day may occur on or by the next
     business day.



<PAGE>
 
                                  ANNEXURE B


                                MINING LICENCE
<PAGE>
 
                         ELECTRICITY INDUSTRY ACT 1993

                            MINING LICENCE NO 5004

This mining licence is granted to HAZELWOOD POWER CORPORATION LIMITED C/-PO BOX
195 MORWELL 3840. This licence is granted under section 47A of the Act, for a
term of thirty years from the date of issuing this licence by the Generation
Council.

This licence is subject to the following Conditions and Schedule of Conditions 
attached:-

     1.   The authority given under this licence applies only within the land
          indicated on the attached plan and is subject to the depth
          restrictions, if any, indicated on that plan under Section 15(9) or
          16(5) of the Mineral Resources Development Act 1990.

     2.   The licensee must keep a copy of - 

          (a)  this licence; and
          
          (b)  any approved work plan or approved variation to a work plan; and 
 
          (c)  any registered authority to commence work at a location near the 
               licensed area;

          so that an Inspector and any other authorised officer can readily 
          inspect them.

     3.   On receiving a registered authority to commence work, the licensee
          must notify an Inspector of Mines and if required by that Inspector
          must arrange an on-site briefing for any people the Inspector may
          nominate.

     4.   On discovering additional economic deposits of minerals, the licensee
          must report the occurrence to the Minister giving the estimated size,
          grade, suitability for mining, and an estimate of value at the time of
          discovery.

     5.   Pursuant to Section 47A of the Electricity Industry Act 1993 the work
          plan, including the rehabilitation plan and the authority to commence
          work are deemed to be registered from the date of issuing of this
          licence by the Governor in Council.
<PAGE>

Department of                    PLAN OF AREA
Energy and                  APPLIED FOR ON LICENCE
Minerals         under Mineral Resources Development Act 1990      MIN. NO 5004

                       Hazelwood Power Corporation Ltd.
- -------------------------------------------------------------------------------
                                                            
SHIRE OF        LATROBE                        TOTAL AREA  +/- 2725   Hectares

                                               NET AREA               Hectares
- -------------------------------------------------------------------------------




                              [MAP APPEARS HERE]






                           *General Location Plan (Subject to survey
                           *Land Ownership Detail Not Shown
                           *Hazelwood Power Station Excluded from this Licence 
<PAGE>
 
                            SCHEDULE OF CONDITIONS 
                            MINING LICENCE NO. 5004


1.   WORK PLANS & ENVIRONMENTAL MANAGEMENT

1.1  Work shall be carried out in accordance with the aproved work plan,
     (incorporating a rehabilitation plan) as amended from time to time in
     accordance with the Mineral Resources Development Act 1990 (MRD Act). Where
     any inconsistency occurs between the work plan and other licence conditions
     or regulations, the licence conditions and regulations have precedence.

1.2  The licensee shall, within 60 days of being requested by the Executive
     Director, Minerals and Petroleum of the Department of Natural Resources and
     the Environment, submit a report on the status of work as per Schedule 14
     of the MRD Act.

1.3  An Environmental Review Committee (ERC) shall be formed, comprising
     appropriate representatives from the Department of Natural Resources and
     the Environment (DNRE), representatives of the licensee, the Environment
     Protection Authority, the responsible water authority and a representative
     of the Minister responsible for the Water Act 1989, the LaTrobe Council and
     any other relevant agency with an interest or control over the site or
     operations. The community shall also be represented, with nominations to
     come from the LaTrobe Council. Up to two community representatives may be
     selected for renewable fixed terms. The ERC shall be convened at least once
     in every 6 months to review environmental effects of the project.

1.4  Results of environmental monitoring conducted under the Environmental
     Monitoring Program (EMP) shall be regularly reported to the ERC in a format
     agreed to by the Committee to enable it to assess environmental
     performance.

1.5  The ERC may from time to time recommend variations to the EMP and licence
     conditions where appropriate. Any variations to the EMP as accepted by the
     licensee and DNRE shall be registered as a variation to the work plan and
     shall be implemented.

2.   FENCING AND SECURITY

2.1  Where public access ia a safety hazard within the mining licence, the
     licensee must fence and signpost the area to ensure public safety is
     maintained.

2.2  When directed by an Inspector of Mines (hereinafter referred to as an
     Inspector), a fence or fences shall be erected around specified work site
     areas to a written specification which may include time limits. Gates of a
     similar standard shall be provided when directed. Gates and fences shall be
     maintained during the term of the licence to the satisfaction of an
     Inspector.


















      
<PAGE>
 
3.   ROADS

3.1  Internal roads additional to those shown in the working plan shall be sited
     as approved or directed by an Inspector after consultation with the
     Department of Natural Resources and the Environment in the case of Crown
     land.

3.2  Subject to the approval of the Mine Manager and appropriate site induction 
     any such road may be used:

     (a)  Officers of or persons authorized by the DNRE or employees or persons
          engaged in fire control. (Mine Managers approval not required by
          authorised fire fighters in an emergency provided they are under the
          supervision of a mine employee).

     (b)  for the extraction of forest produce or for mining purposes by any
          other licensee under the MRD Act 1990 or Forests Act 1958 (or any
          successor legislation) under such conditions as may be determined by
          agreement between the parties concerned; and

     (c)  by the landowners or their agents where the licence covers private 
          land.

4.   SURFACE DISTURBANCE

4.1  The area of surface disturbance must be kept to a minimum.

4.2  Adequate provision shall be made for the separate stockpiling or immediate
     utilisation for rehabilitation of any soils. These materials, if stored,
     are to be stored in neat and tidy dumps not exceeding 2 metres in height
     and such dumps are to be protected from erosion.

4.3  No area shall be opened up for exploration, mining and ancillary 
     operations,except where approved as part of the approved work plan.

4.4  Where the licence covers Crown land, all surface activity may be subject to
     compliance with the Forests Act 1958 and Regulations.

4.5  Where the licence covers private land, such fire fighting equipment and
     appliances shall be kept on site in working order as may be required by the
     County Fire Authority. With respect to public land, the Forest Fire
     Regulations 1992 require the provision of fire fighting equipment and the
     provision of spark arrestors on engine powered equipment.

4.6  Burning of any timber at the site shall be done in accordance with any
     requirements of the Local Municipality, DNRE and the Country Fire
     Authority.



<PAGE>
 
5.   DRAINAGE AND DISCHARGE CONTROL

5.1  Any discharges from the licence area shall be minimised and any water
     discharged must be as free as possible of pollutants, save as provided by
     any licence issued pursuant to the Environment Protection Act.

5.2  All discharges shall meet the standards required under the State
     Environment Protection Policies under the Environment Protection Act 1970.

5.3  Sediment retention structures, including dams, shall be constructed in
     accordance with the approved work plan. An Inspector may also direct such
     works to be undertaken, where necessary, to control drainage from any
     disturbed area.

5.4  Rainfall and other natural waters shall be diverted away from works area so
     as to control erosion, pursuant to Condition 7. However, such works shall,
     as far as practicable, not cause undue alteration to the general drainage
     pattern beyond the licensed area.

6.   TAILING DAMS

6.1  All proposed work associated with the construction of tailing dams or other
     tailing impoundment areas, shall be subject to written approval by the
     Chief Administrator (or his delegate) following certification by an
     approved geotechnical engineer.

7.   GROUNDWATER

7.1  Any aquifer dewatering and/or depressurisation must be carried out in
     accordance with the conditions specified in the Groundwater Licence issued
     by the Minister responsible for the Water Act 1989.

7.2  A monitoring program consistent with the programs previously carried out by
     the State Electricity Commission of Victoria and Generation Victoria to
     determine the impacts of dewatering/depressurisation both on site and
     regionally must be maintained to the satisfaction of an Inspector and the
     responsible Minister under the Water Act 1989 or his delegate.

     The licensee shall ensure that results of the monitoring program are
     reported to the responsible Minister under the Water Act 1989 or his
     delegate and the Environmental Review Committee annually and at whatever
     times required by the Groundwater Licence.

7.3  In the event that the monitoring program in 7.2 indicates material adverse
     impacts beyond those evident at the date of issue of the licence which are
     attributable to the dewatering/depressurisation by the licensee after the
     date of issuing of the licence then the licensee must institute such
     reasonable remedial action as may be required by the Inspector and the
     responsible Minister under the Water Act 1989 or his delegate to ameliorate
     these effects, proportionate to the licensee's contribution.







 











<PAGE>
 

7.4     For the purposes of 7.3 material adverse impacts comprise effects on
        aquifers in the LaTrobe Valley such that the interests of other users
        are materially prejudiced or subsidence on a significant scale occurs as
        a direct result of ground water extraction which materially adversely
        affects private property or public lands.

7.5     Any remedial action under 7.3 must be to the satisfaction of the
        Inspector and the responsible Minister under the Water Act 1989 or his
        delegate.

8.      EROSION

8.1     The licensee shall undertake all necessary works to ensure that the 
        potential for erosion of land affected by mining is minimised.

8.2     Should erosion occur, the licensee shall take all practical steps to 
        minimise the erosion to the satisfaction of an Inspector.
 
9.      HYDROCARBONS

9.1     Storage of hydrocarbons shall be undertaken in general accordance with
        AS 1940. Bunding or other methods to the satisfaction of an Inspector,
        capable of containing 125% of the maximum volume stored, shall be
        constructed around all fuel and lubricant storage facilities.

9.2     Any drainage from an area that may be subject to hydrocarbon spillage,
        such as a machinery maintenance area, shall be free from hydrocarbon
        contamination and directed to a sump or interceptor trap.

10.     DUST EMISSIONS

10.1    Dust control measures must be in place to minimise dust generation so 
        that detriment is not caused to surrounding areas and residents.

10.2    Dust resulting from all operations including extraction, loading,
        transport and stockpiling shall be controlled to the satisfaction of an
        Inspector. The licensee must install any dust control measures to the
        satisfaction of an Inspector.

11.     NOISE

11.1    Precautions to the satisfaction of an Inspector shall be taken to ensure
        that noise emissions comply with the provisions of any regulations under
        the MRD Act as they relate to noise exposure to workmen. Noise emissions
        measured at any residence within the vicinity of the licensed area shall
        comply with limits set using the procedures described in State
        Environment Protection Policy No. N1 (SEPPN-1) or any other limit set
        under the Environment Protection Act where SEPP N-1 is not applicable.

11.2    The mines are permitted to operate 24 hours per day 7 days per week.


<PAGE>
 

12.     PARKING AREAS

        Parking areas are to be provided within the licensed area for all
        vehicles used in connection with the operation, including private
        vehicles used by employees and visitors.

13.     DERELICT AND REDUNDANT PLANT

        All derelict and redundant plant, vehicles, machinery and equipment 
        shall be either:

        .       removed from the licensed area and deposited at an appropriate 
                waste disposal site; or

        .       properly stored/stockpiled on the licensed area in a location 
                and manner approved by an Inspector.

14.     BUFFER ZONES AND VISUAL SCREENING

14.1    No excavation shall take place within 20 metres of the licence boundary,
        except that this requirement shall not apply with respect to any common
        licence boundary with an adjacent mining licence.

14.2    Existing vegetation outside of the area subject to surface disturbance
        shall be preserved and maintained provided due regard is taken of fire
        protection arrangements.

14.3    The licensee shall supplement existing vegetation by additional planting
        to provide a screen for mining and allied operations as required by the
        rehabilitation plan and any additional plantings as required by an
        Inspector. The fire protection at the site shall be considered.

14.4    Unless otherwise approved by an Inspector, the licensee shall take
        precautions to ensure that no species inconsistent with the surrounding
        vegetation are introduced to the area.

15.     PROGRESSIVE REHABILITATION

15.1    Progressive reclamation will be conducted as per the rehabilitation
        plan. In addition, any further rehabilitation work will be carried out
        at the direction of an Inspector.

15.2    As and when directed by an Inspector of Mines, despite any compensation
        agreements between the licensee and the owner of any private land in the
        licence, the licensee shall undertake progressive reclamation of land
        on the area subject to surface disturbance.

16.     FINAL REHABILITATION

16.1    Final reclamation will be in accordance with the rehabilitation plan and
        any additional requirements as directed by an Inspector.

<PAGE>
 
16.2    Failure to complete works in accordance with the rehabilitation plan or
        in accordance with the directions of an Inspector, shall constitute
        grounds upon which the rehabilitation bond may be forfeited either in
        whole or in part in accordance with Section 83 of the MRD Act.

17.     HERITAGE SITES

17.1    Any significant historic sites or relics that are to be removed shall be
        accurately mapped and documented prior to the commencement of any mining
        or allied operations. Such documentation shall be made available to the
        relevant section of the Department of Natural Resources and the
        Environment.

17.2    Tenure of this licence does not exempt the holder from the following
        provisions of the Archaeological and Aboriginal Relics Preservation Act
        1972:

        Section 21(1) - "A person who wilfully or negligently defaces or damages
        or otherwise interferes with a relic or carries out an act likely to
        endanger a relic shall be guilty of an offence against this Act"; and

        Section 23(1) - "A person who discovers a relic shall forthwith report
        the discovery .... unless he has reasonable grounds to believe that the
        relic is recorded in the register ....". Reports in compliance with
        Section 23(1) should be submitted to:

                The Director
                Aboriginal Affairs Victoria
                Department of Human Services
                2nd Floor
                115 Victoria Parade
                FITZROY VIC 3065
                (Telephone (03) 9412 7498)

18.     BUILDINGS

18.1    No buildings shall be erected before any relevant building permits have 
        been obtained.

18.2    All fixed plant and buildings shall be painted or surface treated in a
        colour to blend with the surroundings to the satisfaction of an
        Inspector in consultation with the local municipality and in the case of
        Crown land, Department of Natural Resources and the Environment.

19.     ROYALTY

19.1    Each mining company must pay to the Minister for payment to the
        consolidated Fund in each financial year an amount equal to the
        prescribed amount in respect of each gigajoule unit of coal produced
        from its brown coal workings in the State and used or sold by the
        company in the last preceding financial year.



<PAGE>
 
19.2    For the purposes of 19.1, a gigajoule unit of coal is a quantity of coal
        which, when mined, has a net wet specific energy content of 1 gigajoule.

19.3    The net wet specific energy content of coal produced by a company from
        its brown coal workings and used or sold by the company in a financial
        year shall be calculated in such manner and in accordance with such
        method of sampling as is agreed to by the Minister and the company or as
        is, in default of the agreement, determined by the Governor in Council.

19.4    For the purposes of 19.1, the prescribed amount shall be the amount 
        derived by multiplying $0.0239 by

        Awhere-
        -
        B

                A       is the consumer price index number in respect of the 
                        relevant quarter; and
                B       is the consumer price index in respect of the quarter 
                        ending on 30 June 1993.

19.5    The payment of the amount to the Minister under 19.1 shall be made in 
        accordance with the Mineral Resources (Royalties) Regulations 1991.

19.6    In this section-

        "CONSUMER PRICE INDEX NUMBER" means the all groups consumer price index
        number for Melbourne published by the Commonwealth Statistician in
        respect of the quarter ending on 30 June in each year or, if that
        statistic is no longer calculated, the nearest substitute for it;

        "RELEVANT QUARTER" means the quarter ending on 30 June immediately
        preceding the financial year in relation to which the prescribed amount
        is being calculated.

20.     REHABILITATION BOND

20.1    The licensee shall lodge with the DNRE a rehabilitation bond as
        described in Section 80(1) of the Act when required in accordance with
        these conditions. The bond must be lodged in the form of a bank
        guarantee issued by a bank licensed under the Banking Act 1959 (Cth).

20.2    The licensee shall be required to lodge that bond upon the licensee
        ceasing to be a State Owned Corporation and upon being directed to do so
        by the Minister for Agriculture and Resources.

20.3    The level of this bond has initially been assessed at $15 million.

21.     APPLICATION OF REGULATIONS

21.1    The Mineral Resources (Health and Safety for large Open Cut Mines) 
        Regulations 1995 will apply to the licensee.

21.2    A subsequent Regulations issued under the act will also apply.
<PAGE>
 


                          AUTHORITY TO COMMENCE WORK
                          Sec 42 of the MRD Act 1990



MINING LICENCE NUMBER:                          Mining Licence 5004


NAME(S) OF LICENSEE(S):                         Hazelwood Power Corporation Ltd


ADDRESS(S) OF LICENSEE(S):                      PO Box 195 Morwell Vic 3840


AREA TO WHICH AUTHORITY                         As per workplan dated 1.6.95
TO COMMENCE WORK RELATES:


LOCATION OF LICENCE                             La Trobe Valley








AN AUTHORITY TO COMMENCE WORK IS HEREBY GRANTED









                                ___________________________
                                |                         |
                                |   Date of Registration  |
                                |     ___/_____/___/      |
                                |                         |
                                |   Time of Registration  |
                                |     _________am/pm      |
                                |                         |
                                |     MINING REGISTRAR    | 
                                |         MRDA 1990       |
                                |_________________________| 
<PAGE>
 

                                  ANNEXURE C


                              GROUNDWATER LICENCE



<PAGE>
 
DRAFT HAZELWOOD LICENCE
________________________________________________________________________________


                                WATER ACT 1989
                                  SECTION 51

                        GROUNDWATER LICENCE NO 20027412
                     (LICENCE TO TAKE AND USE GROUNDWATER)


OBJECTIVE
The objective of this licence is to allow the efficient depressurising of the 
Morwell open cut mine whilst minimising adverse impacts on the Gippsland 
Groundwater Basin.

DEFINITIONS
In this licence-

"MINING LICENCE" means a mining licence issued under the provisions of the 
Electricity Industry Act 1993.

"APPROVED WORK PLAN" means the mining licence work plan applicable to Mining 
Licence No 5004

"REGIONAL MONITORING PROGRAM" means the monitoring program described in Part B 
of the approved work plan.

"REHABILITATION PLAN" means a rehabilitation plan approved under the provisions 
of the Electricity Industry Act 1993.

PREAMBLE
The extraction of groundwater for the purpose of achieving safe and stable 
conditions in the Morwell open cut mine is authorised under this Groundwater 
Licence issued by the Minister responsible for the Water Act, 1989.  The 
administration of the licence may be delegated by the Minister to the Gippsland 
and Southern RURAL Water Authority

The extraction of groundwater at mine sites in the Latrobe Valley results in a 
regional cone of depression of the groundwater and in ground subsidence.

The monitoring and reporting of regional groundwater and land level trends is to
be carried out by the licensee as part of the approved work plan under the
Mining Licence.

The Minister or his delegate may set annual charges under this licence to 
recover the costs incurred in:
 .       ensuring compliance with licence conditions;
 .       assessing and reviewing the regional monitoring program; and
 .       managing and administering the licence.

LICENCE AUTHORISATION




<PAGE>
 

DRAFT HAZELWOOD LICENCE
________________________________________________________________________________


HAZELWOOD POWER CORPORATION LIMITED OF PO BOX 195 MORWELL 3840 is authorised to 
take and use groundwater subject to the following conditions:

1.   This licence is valid for a period of thirty years from 1 September 1995

2.   The licensee is authorised to take and use groundwater to facilitate mining
     for coal and generation of electrical energy and purposes incidental
     thereto.

3.   The licensee is authorised to extract groundwater from the aquifers at
     quantities and during the times specified in the First Schedule or on
     application by the licensee such other quantities and during such other
     times as from time to time approved by the Minister or his delegate.

4.   The licensee may vary the maximum monthly rate of extraction from any
     particular aquifer or the maximum annual volume to be extracted from any
     particular aquifer provided that the total monthly rate of extraction and
     the total annual volume from all aquifers is not exceeded and shall report
     at monthly intervals such variations as they occur to the Minister or his
     delegate.

5.   The licensee may only take and use groundwater under this licence on the
     land with respect to which the licensee holds a mining licence for the
     Hazelwood Power mine.

6.   Annual fee at date of issue $19,300.

7.   The licensee shall pay annual charges for the forthcoming year due under
     the licence in quarterly installments or on an annual basis as agreed
     between the licensee and the Minister or his delegate.

8.   The licensee shall meter all groundwater extractions and shall keep an
     accurate record of the quantity of groundwater taken or used under this
     licence and allow the Minister or his delegate to inspect this record
     during normal business hours and to provide a copy of such record to the
     Minister or his delegate within seven days of a notice given by post to the
     licensee at the address contained in this licence.

9.   The licensee shall provide to the Minister or his delegate annually details
     of the location of each bore from which groundwater is extracted under this
     licence.

10.  By the issue of this licence the Minister or his delegate in no way accepts
     any liability for injury to any party arising as a consequence of any
     adverse effects that may be deemed to have been caused by the extraction of
     groundwater under the licence.

11.  The licensee shall compensate any person whose existing authorised use of
     water is adversely and materially affected by the taking of water under
     this licence. The



<PAGE>
 
DRAFT HAZELWOOD LICENCE
________________________________________________________________________________


     compensation may be either financial or may be constituted by the making
     available of, or granting access to, water. If the licensee is unable to or
     unwilling to make compensation by the making available of or granting
     access to water in the quantities previously enjoyed by the person so
     affected then the amount of financial compensation payable shall be that as
     determined by a Valuer nominated by the President of the Victorian Division
     of the Australian Institute of Valuers and Land Economists (Inc)

12.  The licensee shall undertake a regional monitoring program of the nature
     scope and extent as that previously undertaken by the State Electricity
     Commission of Victoria as detailed in the approved work plan and the
     information is to be provided on request to the Minister or his delegate
     and as required under the work plan.

13.  All information obtained from the regional monitoring program belongs to
     the generation companies, the State Electricity Commission of Victoria and
     the Minister jointly.

14.  The licensee must maintain the existing data bases, and undertake
     additional work that may be required from time to time by the Minister or
     his delegate to maintain the effectiveness of the regional monitoring
     program.

15.  If the licensee fails to provide the information required under condition
     12 the Minister or his delegate may undertake any necessary work to obtain
     the information and recover the costs of such work from the licensee.

16.  The regional monitoring program and any remedial measures must be
     incorporated in the approved work plan and the rehabilitation plan to the
     satisfaction of the Minister or his delegate.

17.  The licensee shall comply with the provisions in its mining licence,
     approved work plan and the rehabilitation plan dealing with the regional
     monitoring program and remedial action.





                                                
                                          PATRICK JOHN MCNAMARA
                                          MINISTER FOR AGRICULTURE AND RESOURCES


                                          DATE






<PAGE>
 
DRAFT HAZELWOOD LICENCE
________________________________________________________________________________

FIRST SCHEDULE

<TABLE> 
   ____________________________________________________________________________ 
                      M1 AQUIFER                 M2 AQUIFER
     YEAR    _____________________________________________________  TOTAL ANNUAL
                RATE OF     ANNUAL VOLUME     RATE OF    ANNUAL        VOLUME
               EXTRACTION        ML          EXTRACTION  VOLUME          ML
                ML/MONTH                      ML/MONTH     ML
   ____________________________________________________________________________
     <S>          <C>           <C>           <C>        <C>           <C> 
     1996         367           3,212          1,640     19,680        22,892
   ____________________________________________________________________________
     1997         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     1998         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     1999         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     2000         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     2001         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     2002         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     2003         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     2004         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     2005         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     2006         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     2007         367           3,212          1,640     19,680        22,892 
   ____________________________________________________________________________ 
     2008         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2009         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2010         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2011         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2012         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2013         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2014         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2015         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2016         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2017         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2018         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2019         367           3,212          1,606     19,272        22,484 
   ____________________________________________________________________________ 
     2020         367           3,212          1,439     17,268        20,480  
   ____________________________________________________________________________ 
     2021         367           3,212          1,439     17,268        20,480  
   ____________________________________________________________________________ 
     2022         367           3,212          1,439     17,268        20,480  
   ____________________________________________________________________________ 
     2023         367           3,212          1,439     17,268        20,480  
   ____________________________________________________________________________ 
     2024         367           3,212          1,439     17,268        20,480  
   ____________________________________________________________________________ 
</TABLE> 



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