Operation and Offtake Contract - Anhui Provincial Electric Power Corp., Anhui Liyuan-AES Power Company Ltd. and Hefei Zhongli Energy Company Ltd.


   Information contained herein, marked with [***], is being filed separately
     with the Commission pursuant to a request for confidential treatment.




                   ANHUI PROVINCIAL ELECTRIC POWER CORPORATION

                                       AND

                       ANHUI LIYUAN-AES POWER COMPANY LTD.
                                       AND
                        HEFEI ZHONGLI ENERGY COMPANY LTD.







                         OPERATION AND OFFTAKE CONTRACT
                                       OF
                        HEFEI COMBINED-CYCLE POWER PLANT












                                 SEPTEMBER, 1996







                                TABLE OF CONTENTS

                                                                      PAGE

CHAPTER 1   GENERAL.....................................................3

CHAPTER 2   DEFINITIONS.................................................3

CHAPTER 3   REPRESENTATIONS, WARRANTIES AND COMMITMENTS
            OF THE  PARTIES ............................................8

CHAPTER 4   CONDITIONS AND REQUIREMENTS FOR INTERCONNECTION OF THE
            POWER PLANT................................................12

CHAPTER 5   METERING OF ELECTRICITY....................................13

CHAPTER 6   OPERATION OF THE POWER PLANT...............................13

CHAPTER 7   RESPONSIBILITIES OF PARTY B AND PARTY A....................17

CHAPTER 8   OTHER OPERATION MATTERS....................................19

CHAPTER 9   ON-GRID QUANTITY...........................................19

CHAPTER 10  ON-GRID TARIFF AND SETTLEMENT OF ELECTRICITY FEE...........20

CHAPTER 11  RESPONSIBILITY AND INDEMNITY...............................24

CHAPTER 12  DEFAULT AND TERMINATION....................................25

CHAPTER 13  FORCE MAJEURE..............................................27

CHAPTER 14  INSURANCE..................................................29

CHAPTER 15  GOVERNING LAWS AND DISPUTE RESOLUTION......................30

CHAPTER 16  ASSIGNMENT.................................................32

CHAPTER 17  NOTICE.....................................................32

CHAPTER 18  OTHER PROVISIONS...........................................33

APPENDIX 1  INVOICE FORMAT.............................................37

APPENDIX 2  AFTER-TAX CAPITAL RETURN...................................39

APPENDIX 3  CALCULATION OF TERMINATION FEES............................40

APPENDIX 4  ON-GRID TARIFF FORMULA.....................................41

APPENDIX 5  METERING AND RECORDING OF ELECTRICAL ENERGY................51

APPENDIX 6  PRE-OPERATION AND OPERATION SERVICES.......................53

APPENDIX 7  NECESSARY INSURANCE........................................59

APPENDIX 8  FUEL SPECIFICATION.........................................60

APPENDIX 9 FUEL OIL SUPPLY CONTRACT....................................61





                                CHAPTER 1 GENERAL

         This Operation and Offtake Contract  (hereinafter  referred to as "this
Contract") was entered into on ------- 1996 in Hefei City, the People's Republic
of China between the Anhui Provincial Electric Power Corporation on the one part
(hereinafter  referred  to as  "Party  A")  and a  consortium  comprising  Anhui
Liyuan-AES Power Company Ltd. and Hefei Zhongli Energy Company Ltd. on the other
part (each a  Sino-foreign  cooperative  joint  venture  company,  organized and
existing  under the laws of the  People's  Republic  of China  and  collectively
referred to as "Party B", and separately  referred to as "Liyuan-AES" and "Hefei
Zhongli" respectively,  together being jointly and severally responsible for the
liabilities and obligations of Party B hereunder). In this Contract, Party A and
Party B are individually termed as the "Party" or collectively as "the Parties".
The Parties reached the following  agreement  through friendly  consultations in
accordance with relevant laws and regulations of the People's  Republic of China
and on the basis of the principles of equality and mutual benefit.

                              CHAPTER 2 DEFINITIONS

2.01     DEFINITIONS

         Unless  otherwise  stated  in the  provisions  of  this  Contract,  the
following terms, either in singular or plural, shall have the meanings set forth
below:

          1)   "AFTER-TAX  CAPITAL  RETURN"  shall mean the amount in respect of
               each Year set out in Appendix 2 representing  the return to Party
               B on its  investment  in the Power  Plant at the  Annual  Minimum
               On-Grid Quantity.

          2)   "ANNUAL ACTUAL ON-GRID  QUANTITY"  means the On-Grid  Quantity of
               electricity  generated  by the  Power  Plant as  measured  at the
               Delivery  Point,  dispatched  by Party A and which this  Contract
               requires is purchased by Party A in any Year.

          3)   "ANNUAL  GENERATION  PLAN" means the plan proposed in November of
               each Year by Party A,  agreed by Party B, that  allows  the Power
               Plant to at least generate the Annual Minimum On-Grid Quantity.

          4)   "ANNUAL MINIMUM  ON-GRID  QUANTITY" shall mean the annual minimum
               quantity to be  generated by the Power Plant (prior to the Tariff
               Commencement  Date of the ST Unit is as  specified in Clause 9.01
               and thereafter  will,  subject to Clause 9.01(3),  stand at [***]
               kwh) which is sold to the Party A and purchased and to be paid on
               time by Party A in accordance with the "Take or Pay" principle in
               every Year during the Commercial Operation Period.

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.


          5)   "APPROVED GENERATION COST" shall mean in respect of a given Year,
               the Planned Generation Cost(in RMB Fen per KWH),  approved by the
               Anhui Provincial Pricing Bureau.

          6)   "CHANGES  OF LAW"  shall mean the  promulgation,  implementation,
               amendment,   reinterpretation  or  repeal  of  any  laws,  taxes,
               withholding taxes, regulations,  rules or policies by any Chinese
               governmental  authority  relevant to the construction,  operation
               and maintenance of the Power Plant, the production,  delivery and
               sale  of  electrical  energy,  or any  other  matters  since  the
               execution  of  this  Contract;  or the  promulgation,  extension,
               amendment or withdrawal of any approval, consent or permit by any
               Chinese  governmental  authority  relevant  to the  construction,
               operation and  maintenance  of the Power Plant,  the  production,
               delivery and sale of electrical energy or any other matters which
               has  resulted in the failure of Party B to achieve its  After-tax
               Capital  Return or of the  Investors  to receive  their  expected
               profit as set out in the Joint Venture Contracts or otherwise has
               a material and adverse impact upon the rights and  obligations of
               Party B or the Investors in other respects.

          7)   "CERTIFICATE   OF   PERFORMANCE   ACCEPTANCE"   shall   mean  the
               certificate  which,   according  to  Clause  5.3.3.  of  the  EPC
               Contract,  shall be agreed to by the Owner's  Engineer in writing
               and  signed by the  Parties  in  respect  of the  achievement  of
               Performance Acceptance of a Generating Unit or the Power Plant.

          8)   "COMMERCIAL OPERATION DATE" shall mean in respect of a Generating
               Unit or the Power Plant the date specified in the  Certificate of
               Performance  Acceptance  which is issued pursuant to Clause 5.3.3
               of the EPC Contract.

          9)   "COMMERCIAL  OPERATION  PERIOD"  shall mean the  period  from the
               Commercial  Operation  Date of the  Power  Plant  to the  date of
               termination of the Joint Venture Contract.

          10)  "COMMISSIONING"  shall  mean the  testing  of the  Power  Plant (
               including  Performance  Test and  Reliability  Run) in accordance
               with Article 5 of EPC Contract.

          11)  "DELIVERY  POINT" means the physical  point where the Power Plant
               and the Grid are to be connected at the Site as more particularly
               described in Clause 4.02.

          12)  "EPC  CONTRACT"  shall  mean  the  engineering,  procurement  and
               construction  services contract entered into by and between Party
               B and the EPC Contractor on -------- 1996.

          13)  "EPC  CONTRACTOR"  shall mean the Anhui Mingda Electric Power EPC
               Contract Company Ltd.

          14)  "EXCESS ON-GRID QUANTITY" shall mean the portion of Annual Actual
               On-grid Quantity which is in excess of the Annual Minimum On-Grid
               Quantity in a Year.


          15)  "FUEL OIL SUPPLY  CONTRACT" shall mean a contract entered into by
               and  between  Party A as operator of the Power Plant and the fuel
               oil  supplier for the  long-term  supply of fuel oil to the Power
               Plant that  satisfies  the Fuel  Specification.  For  details see
               Appendix 9 hereof.

          16)  "FUEL  SPECIFICATION"  means  the fuel  specification  set out in
               Appendix 8.

          17)  "GENERATING  UNIT"  shall mean any one of the two GT Units or the
               ST Unit which form the component parts of the Power Plant.

          18)  "GT#1  UNIT"  shall mean the first gas  turbine  generating  unit
               which is  composed of PG6551B and its  ancillary  facilities  and
               which will go into operation first.

          19)  "GT#2  UNIT" shall mean the second gas  turbine  generating  unit
               which is  composed of PG6551B and its  ancillary  facilities  and
               which will go into operation after the GT#1 Unit.

          20)  "INHERIT  EQUIPMENT  DEFECTS" shall mean the defects of the major
               equipments  of the  Power  Plant  (gas  turbine,  steam  turbine,
               generator) which could not be found during the  Commissioning and
               warranty period,  and is of manufacturing  defects in nature, and
               is not caused by normal  wear and tear and  degredation,  and can
               not be prevented with monitoring and maintenance(ie. such defects
               causing  the  forced   outages  of  the  Power  Plant   exceeding
               thirty(30) days accumulatively in a given Year). Such defects can
               only be called  Inherit  Equipment  Deftects  if only the Parties
               agree or after the  conclusive  determination  by the  Experts in
               accordance  with Section 15.03 of this Contract,  and the Experts
               can only be selected from world renowned independent  engineering
               firms or the members of related committee of the IEEE.

          21)  "INTERCONNECTION  CONTRACT"  shall mean the contract  executed by
               and between  Party B and Party A for the  connection of the Power
               Plant to the Power Grid.

          22)  "INTERCONNECTION  FACILITIES"  means all facilities and equipment
               including   any   telecommunications    systems   and   equipment
               telemetering   equipment,   transmission   lines  and  associated
               equipment  transformers  and  associated  equipment;   relay  and
               switching  equipment and protective  devices and safety equipment
               which must be constructed or installed to connect the Power Plant
               to the first transmission tower of the Grid.

          23)  "INVESTOR" means each of Anhui Liyuan Electric Power  Development
               Company  limited,  Hefei  municipal  Construction  and Investment
               Company and AES Anhui Power Company Ltd.

          24)  "JOINT VENTURE  CONTRACTS"  shall mean the contracts  executed on
               March 18 , 1996 and --------,  1996  respectively  by and between
               Anhui Liyuan  Electric  Power  Development  Company  Ltd.,  Hefei
               Municipal Construction and Investment Company and AES-Anhui Power
               Company Ltd. As well as all  subsequent  Admendments to the above
               contracts in connection with the establishment and reorganization
               of the Anhui  Liyuan-AES Power Company Ltd. and the Hefei Zhongli
               Energy Company Ltd.

          25)  "LAND AND  FACILITY  LEASE  AGREEMENT"  shall mean the  agreement
               entered  into by and  between  Party B and the  owner of the land
               useright and facility in  connection  with the lawful use of part
               of the land and facility  within the Hefei Power Plant during the
               term of the Joint Venture.

          26)  "LENDER" shall mean any legal person or natural person  providing
               financing for the Power Plant.

          27)  "LOAN REPAYMENT DATE" shall mean the date on which the principal,
               interest, expenses, costs and all other amounts payable under the
               US$ Loan Contracts have been completely repaid in accordance with
               the US$ Loan Contracts.

          28)  "MONTH" shall mean a calendar month.

          29)  "ON-GRID QUANTITY" means quantity of active electricity  measused
               at the metering point and sold to Party A.

          30)  "ON-GRID  TARIFF" shall mean the on-grid  tariff per KWH which is
               approved by Anhui Provincial  Pricing Bureau.  The On-grid Tariff
               shall be determined  and adjusted in accordance  with the On-grid
               Tariff Formula in Appendix 4.

          31)  "ON-GRID  TARIFF  FORMULA"  shall mean the document  agreed to by
               both Parties and approved by the Anhui Provincial  Pricing Bureau
               which  stipulates  the  initial  On-grid  Tariff  and  subsequent
               On-grid tariff  adjustment as more fully  described in Appendix 4
               hereof.

          32)  "OPERATION  SERVICES" means the services  described in Part II of
               Appendix 6.

          33)  "OWNER'S   ENGINEER"  shall  mean  the  independent   engineering
               consultant  or  engineering  firm with  international  reputation
               which is engaged by Party B to be responsible  for monitoring and
               supervising  the EPC  Contractor in  performing  the EPC Contract
               including  engineering,   design,  construction  and  performance
               acceptance under the EPC Contract.

          34)  "POWER  GRID"  shall mean the  electricity  transmission  grid of
               Anhui Province.

          35)  "POWER PLANT" shall mean the total facilities of a combined cycle
               generating set (the gross output under ISO condition is 115.2 MW)
               consisting of 2 GT Units,  one ST Unit, the heat recovery boilers
               and the relevant equipment,  the control equipment and all common
               facilities,  ancillary facilities the Interconnection  Facilities
               and the Site.

          36)  "PRE-OPERATION  SERVICES" means the services  described in Part I
               of Appendix 6.

          37)  "PLANNED  GENERATION  COST"  shall mean for a given Year the cost
               per KWH to Party A of the generating  the Annual Minimum  On-Grid
               Quantity  calculated  and  agreed  by  Party  A  and  Party  B in
               accordance  with clause 10.03(1) and Appendix 4, and submitted to
               the Anhui Provincial Pricing Bureau for approval.

          38)  "PRUDENT UTILITY PRACTICE" shall mean the international standard,
               practices   or  methods   generally   followed  for  the  design,
               construction,  commissioning,  operation and  maintenance  of the
               Power Plant and the generation and transmission of electricity on
               the basis of the principles of safety,  high efficiency,  economy
               and  reliability   and  in  compliance  with  the   manufacturers
               recommendations.


          39)  "QUARTER" shall mean a calendar  quarter(for  example,  the first
               quarter of a Year shall mean January, February and March)

          40)  "RENMINBI OR RMB" shall mean the lawful  currency of the People's
               Republic of China.

          41)  "STANDARD  OIL  CONSUMPTION"  shall mean the oil  consumed by the
               Power Plant based on the  Characteristic of gas turbine including
               additional  fuel  consumption for  degradation,  stirrup and shut
               down.

          42)  "SITE" shall mean the land located at Hefei City, Anhui Province,
               People's  Republic of China  leased by Party B on which the Power
               Plant  will be  constructed  as more  particularly  described  in
               Appendix G of the EPC Contract.

          43)  "ST  UNIT"  shall  mean the VEGA 206 steam  turbine  unit and its
               ancillary  facilities  which will make use of exhaust heat of the
               gas turbines to generate electricity.

          44)  "TAKE  OR PAY"  shall  mean  that  except  in the case of a Force
               Majeure event  stipulated  in this Contract or Inherit  Equipment
               Defects or the Party B's default  stipulated in the Section 12.02
               hereof,  Party A shall at least pay to Party B the amount for the
               Annual Minimum On-Grid  Quantity at the On-Grid  Tariff.  Even if
               Party A decides to reduce its purchase quantity,  or is unable to
               purchase all the Annual Minimum On-Grid  Quantity,  it has to pay
               to Party B the same amount as if it has  purchased all the Annual
               Minimum On-Grid Quantity.

          45)  "TARIFF  COMMENCEMENT  DATE" shall mean the  earlier  date of the
               following:  for the  GT#1  and  GT#2  Units:  (i) the  Commercial
               Operations  Date of both GT#1 and GT#2  Units,  or (ii) August 1,
               1997; for the ST Unit: (i) the Commercial  Operations  Date of ST
               Unit, or (ii) July 1, 1998.

          46)  "TECHNICAL  SPECIFICATION"  means the design specification of the
               Power Plant as referred to in the EPC Contract.

          47)  "US DOLLAR OR USD OR US$" shall mean the lawful  currency  of the
               United States of America.

          48)  "US$ LOAN  CONTRACTS"  shall mean US$ loan  contract or contracts
               entered  by  Liyuan-AES  and/or  Hefei  Zhongli  with one or more
               Lenders  by which to  obtain  construction  funds  for the  Power
               Plant.

          49)  "US$ LOAN  EXPENSES"  shall  mean the  total  amount  payable  by
               Liyuan-AES  and/or  Hefei  Zhongli to  Lenders  prior to the Loan
               Repayment Date (including without limitation principal, interest,
               expenses,  costs or any other  amounts)  pursuant to the US$ Loan
               Contracts.

          50)  "VARIABLE  COST"  shall  mean the cost per KWH for  fuel,  water,
               materials,  repair  and  maintenance  and  all  other  costs  and
               expenses that vary directly with the production of electricity by
               the  Power  Plant as  approved  by the Anhui  Provincial  Pricing
               Bureau.


          51)  "YEAR" shall mean a calendar Year from January 1 to December 31.


              CHAPTER 3 REPRESENTATIONS, WARRANTIES AND COMMITMENTS
                                 OF THE PARTIES

3.01     THE PARTIES

         The Parties to this Contract are as follows:

         (1) Party A:  Anhui  Provincial  Electric  Power  Corporation  which is
established  pursuant to Chinese laws and  registered at the Bureau for Industry
and Commerce of Anhui Province.  It has an independent  status of a legal person
and its legal address is No. 415 Wuhu Road, Hefei City, Anhui Province.

               Legal representative
               Name: Guangjie Cheng
               Title: General Manager
               Nationality: Chinese

         The  Anhui  Provincial  Electric  Power  Corporation  is an  integrated
electric  power  enterprise  of the Anhui  Province  of China is also one of the
member  companies  of the  East  China  Electric  Power  Group of  China.  It is
responsible  for  the  production,  management,  dispatch  and  construction  of
electric power of the whole province,  including the administration of the urban
and rural electric power trade of the whole province.  The Corporation which has
42 units directly  under its  jurisdiction  is engaged in diversified  operation
including  electric  power  production,   management,   dispatch,  construction,
scientific research and education.

         (2) Party B: a consortium  comprising  Anhui  Liyuan-AES Power Company,
Ltd. and Hefei  Zhongli  Energy  Company,  Ltd.  each of which are  Sino-Foreign
cooperative joint ventures established and existing pursuant to Chinese laws.

               (i)  Anhui Liyuan-AES Power Company,  Ltd. is a limited liability
                    company  registered  at the local  bureau for  industry  and
                    commerce.  Its legal  address is No.  415 Wuhu  Road,  Hefei
                    City, Anhui Province.

                       Legal Representative
                       Name: Guangjie Cheng
                       Title: Chairman of the Board of Directors
                       Nationality: Chinese

               (ii) Hefei Zhongli Energy  Company,  Ltd. is a limited  liability
                    company  registered  at the local  bureau for  industry  and
                    commerce.  Its legal  address is No.  415 Wuhu  Road,  Hefei
                    City, Anhui Province.

                       Legal Representative
                       Name: Guangjie Cheng
                       Title: Chairman of the Board of Directors
                       Nationality: Chinese

3.02   REPRESENTATIONS AND WARRANTIES

         Owing to the  shortage  of  electric  power  supply,  particularly  the
shortage  of supply in  peaking  capacity  in Anhui  Province,  Party B plans to
develop,  construct and own the Hefei Combined-Cycle Power Plant in the northern
suburb of Hefei City,  Anhui  Province.  The facilities of the Power Plant which
include two GT Units,  one ST Unit and other  relevant and ancillary  facilities
will be interconnected  with the Power Grid and be placed under the dispatch and
management of the Party A. The Power Plant will supply  electrical energy to the
Power  Grid and will be used by the  Hefei  city on a  priority  basis.  Party B
hereby appoints Party A to operate and maintain the Power Plant.

         As consideration  for Party B's investment in the Power Plant,  Party A
agrees to purchase the Annual Minimum On-Grid  Quantity every Year in accordance
with the principle of "Take or Pay".  Party A agrees to operate and maintain the
Power Plant in accordance with the terms of this Contract.

         To that effect:

         (a) Party A hereby represents and warrants that:

               (1)  Party  A  is  a  state-owned   enterprise   established   in
                    accordance  with Chinese laws and validly  existing,  it has
                    observed all applicable Chinese laws, and to the best of its
                    knowledge it is not aware of any pending  legal action or is
                    subject  to any legal  proceedings  which  might lead to the
                    dissolution of Party A:

               (2)  Party A has all the necessary  right and capacity for action
                    to enter into and perform this Contract,  and has sufficient
                    financial  resources necessary to make all payments required
                    to be made by it from time to time pursuant to this Contract
                    (including without limitation payment for the Annual Minimum
                    On-Grid  Quantity) and has the capacity to undertake all its
                    other obligations and liabilities under this Contract.

               (3)  Party A has obtained  all  necessary  approvals  and support
                    from  the  provincial   government   departments  and  other
                    relevant departments for its execution and implementation of
                    this Contract;

         (b) Anhui  Liyuan-AES  Power  Company,  Ltd.  represents  and  warrants
             as follows:

               (1)  Anhui Liyuan-AES is a Sino-Foreign cooperative joint venture
                    established  in  accordance  with  Chinese  laws and validly
                    existing,  it has observed all applicable  Chinese laws, and
                    to the best of its  knowledge it is not aware of any pending
                    legal  action or is subject to any legal  proceedings  which
                    might lead to the dissolution of Liyuan-AES.

               (2)  Anhui  Liyuan-AES  has obtained all the necessary  right and
                    capacity to execute and perform this Contract.

         (c) Hefei Zhongli represents and warrants as follows:

               (1)  Hefei Zhongli is a  Sino-Foreign  cooperative  joint venture
                    respectively established in accordance with Chinese laws and
                    validly  existing,  it has observed all  applicable  Chinese
                    laws,  and to the best of its  knowledge  it is not aware of
                    any  pending  legal  action  or  is  subject  to  any  legal
                    proceedings  which  might lead to the  dissolution  of Hefei
                    Zhongli.

               (2)  Hefei  Zhongli  has  obtained  all the  necessary  right and
                    capacity to execute and perform this Contract.

3.03  COMMITMENT

(a) Party A hereby undertakes as follows:

         (1)  Party  A  will   operate   and   maintain   the  Power  Plant  and
         Interconnection  Facilities  in  accordance  with the  Prudent  Utility
         Practice and without  unfavorable impact upon the Power Plant and shall
         cause the Power Plant to be  connected  to the Power Grid,  so that the
         Power Plant can meet the  requirements of the Technical  Specifications
         and the Interconnection  Contract and conform to the health, safety and
         environmental  protection standards as imposed by relevant Chinese laws
         and regulations;

         (2) Party A shall  issue  dispatch  instructions  to the Power Plant in
         accordance with the Technical  Specifications  and the  Interconnection
         Contract,  and shall ensure that the Power Grid will accept electricity
         generated by the Power Plant in accordance with such instructions;  Any
         dispatch  instructions  issued by Party A shall be in  accordance  with
         Prudent Utility Practice,  this Contract, the Interconnection  Contract
         and the Technical Specifications.

         (3) Party A shall  purchase on the basis of the On-grid  Tariff all the
         Annual Minimum On-Grid Quantity,  and Excess On-Grid Quantity generated
         by the Power Plant;

         (4) Party A shall do its best  efforts to assist  Party B in  obtaining
         all necessary  governmental  approvals including without limitation the
         approval of the Anhui  Provincial  Pricing Bureau of the On-Grid Tariff
         (and its adjustment in accordance with the terms of this Contract).

(b) Party B hereby undertakes as follows:

         (1) Party B shall appoint the Anhui Mingda  Electric Power EPC Contract
         Company  Ltd.,  the  wholly-owned  subsidiary  of  Party  A, as the EPC
         Contractor,  so as to ensure  that the design and  construction  of the
         Power Plant  (including the  Interconnection  Facilities) will meet the
         requirements of the Technical  Specifications  and the  Interconnection
         Contract and conform to the health, safety and environmental protection
         standards as imposed by relevant Chinese laws and regulations;

         (2) Party B hereby  appoints  Party A (and Party A hereby  accepts  the
         appointment) to operate and maintain the Power Plant in accordance with
         the  Prudent  Utility  Practice  so as not to produce  any  unfavorable
         impact on the voltage level and frequency of the Power Grid;

         (3) Party B shall,  pursuant to the provisions of this  Contract,  sell
         the  Annual  Minimum  On-Grid  Quantity,  and Excess  On-Grid  Quantity
         generated by the Power Plant to Party A.


                    CHAPTER 4 CONDITIONS AND REQUIREMENTS FOR
                       INTERCONNECTION OF THE POWER PLANT


4.01  INTERCONNECTION OF THE POWER PLANT WITH THE POWER GRID

         Party  A  shall  obtain  all  necessary   approvals   relevant  to  the
interconnection  of the Power  Plant with the Power  Grid.  Both  Parties  shall
strictly abide by the  Interconnection  Contract and ensure normal production of
the Power Plant and the safe operation of the Power Grid.

4.02     DELIVERY POINT

         The Delivery Point shall mean either the first 220KV transmission tower
or from  the  Power  Plant.  Party A shall  own and  maintain  the  transmission
facilities from the Grid to the and the Delivery Point,  while Party B shall own
and  maintain the  transmission  facilities  connecting  the Power Plant and the
Delivery Point.

4.03     TRANSMISSION AND INTERCONNECTION

         Party A shall be responsible  for the design,  construction,  operation
and maintenance of any extension to the Grid ("the Grid Extension")  required to
interconnect  the Power Plant and the Grid.  Party B entrusts the EPC Contractor
to be responsible for designing and constructing the Interconnection Facilities,
in accordance with the terms of the EPC Contract. Party A as the operator of the
Power  Plant shall be  responsible  for the  operation  and  maintenance  of the
Interconnection   Facilities.   The   constraction   fund  of   [***]   for  the
Interconnection  Facility and the Grid  Extension has been encloded in the total
price of EPC Contract as stipulated in section 4.5 of the EPC Contract.

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

         The  construction  and testing of the Grid  Extension  by Party A shall
proceed  simultaneously  with the  construction  and testing of GT#1 Unit of the
Power  Plant  and  shall  be  completed   one  month  before  the  start-up  and
synchronization  of the GT#1 Unit.  Party A's  obligation to purchase the Annual
Minimum  On-Grid  Quantity and to pay  electricity fee pursuant to this Contract
shall be calculated from the Tariff Commencement Date of the GT#1 and GT#2 Units
irrespective  of whether or not the Grid  Extension  has been  completed by that
date.


4.04     TELECOMMUNICATIONS

         The communication and dispatch  automation  equipment between the Power
Plant and the Dispatch  Center is a part of this Project.  Party A shall own the
equipment  between the  Delivery  Point and the Dispatch  Center,  while Party B
shall own the  equipment  between the Delivery  Point and the Power  Plant.  All
procurement  and  installation  of such equipment  shall be performed by the EPC
Contractor  according the EPC Contract and the total cost of the procurement and
installation  of such equipment shall also be included in the total turnkey cost
of the EPC Contract.

                        CHAPTER 5 METERING OF ELECTRICITY

5.01     ON-GRID METERING DEVICE

         The  electrical   energy  metering  point  (the  "Metering  Point")  is
installed at the higher voltage side of the main  transformer of each Generating
Unit.  Time-phased active and reactive  electrical energy metering devices shall
be installed  at the metering  point.  In order to meet the  requirement  of the
metering  system of the Power Grid,  Party B's  metering  device  shall have the
function of meeting the technical requirements for total load and remote gauging
transmission  of  the  Power  Grid  and  shall  be  equipped  with  data  memory
transmission and delivery device.  The above metering devices will measure Party
B's on-grid electricity quantity in kwhs.

5.02     METERING OF ELECTRICITY FROM THE POWER GRID

         After the  Commercial  operation  of each  Unit of the  Power  Plant is
synchronized for power generation,  the high voltage auxiliary transformer shall
install metering device interconnected with the Power Grid which can measure the
quantity of  electricity  that Party B purchases from Party A. The price of such
electricity  shall be the average of retail  price of all power  plants  without
investment or loans from contral goverment in Anhui Province.


5.03     MANAGEMENT OF METERING DEVICES

         Party B  entrusts  the  EPC  Contractor  and  Party  A  operator  to be
responsible for purchasing,  installing, replacing and managing the various sets
of metering devices of the  above-mentioned  metering points. The calibration of
the  metering  devices  shall  be  done by  qualified  state-approved  firms  in
accordance with stipulations and jointly participated in by both Parties.

5.04     FAULT PROCESSING OF METERING DEVICES

         In case of any anomaly or fault in metering  devices  during  operation
which may affect the functioning of electrical energy metering devices,  Party A
shall notify Party B on time and make  arrangements to restore normal  metering.
The method of metering and the On-Grid  Quantity during abnormal period shall be
determined in accordance with the procedures stipulated in Appendix 5 hereof.

                     CHAPTER 6 OPERATION OF THE POWER PLANT

6.01     ENGAGEMENT OF OPERATION

         Party B  hereby  engages  Party A as  operator  of the  Power  Plant to
manage,  operate and maintain the Power Plant and to provide Operation  Services
and Pre-Operation Services as stipulated in this Contract as well as a supply of
fuel oil that satisfies the Fuel Specification.  The term of engagement shall be
the same as the term of this Contract.

6.02     BASIC REQUIREMENTS

         1)  Party  A  shall  perform  of the  Pre-Operation  Services  and  the
Operation  Services  in  compliance  with the any laws  and  regulations  of the
People's Republic of China and the provisions this Contract and the requirements
of the  Interconnection  Contract  and the  Dispatch  Agreement  relevant to the
operation and maintenance of the Power Plant. Party A will, on demand, indemnify
Party B on and from any costs, losses or  expenses(including  fines) incurred or
imposed as a consequence of any breach of this  paragraph,  and pay directly the
related  expenses  and  penalties  under the  Interconnection  Contract  and the
Dispatch Agreement to the dispatcher of the Power Grid.

         2) Party A shall operate the Power Plant in accordance with the Prudent
Utility  Practice and shall perform the  Operation  Services on the basis of the
goal of achieving the After-tax Capital Return.

         3)  Party A shall  ensure  that  the  Power  Plant  is  maintained  and
overhauled  on a regular and proper  basis and that the Power Plant can generate
the  greater  of (i) the Annual  Minimum  On-Grid  Quantity  and (ii) the annual
actual  demand of the Power  Grid,  every Year during the  Commercial  Operation
Period.

         4) Party A shall operate the Power Plant in accordance  with  Technical
Specifications,  operation  regulations of the Ministry of Electric Power and in
compliance with the recommendation of the equipment manufactures,  and shall try
in every  possible way to generate as much  electricity  as possible on a stable
basis and within the allowable limits of the Power Grid.

6.03     PRE-OPERATION SERVICES

         Party A shall perform the Pre-Operation Services and the other services
listed below from the date of execution of this  Contract  until the  Commercial
Operation Date of the Power Plant.

         1)  Party A shall be  responsible  for  doing a good job of  production
readiness  before the Commercial  Operation Date of the Power Plant and to carry
out on-post training for production personnel.

         2) provide all the  necessary  personnel and material for Party B so as
to  enable  Party B and the EPC  Contractor  to  perform  their  obligations  in
connection with the construction and Commissioning of the Power Plant.

         3) provide  relevant  advises and support to Party B in connection with
the  construction  of the Power Plant and the  Commissioning  of the  Generating
Units and participate in the  Commissioning  of the Generating Units pursuant to
requests put forward by Party B from time to time.

         4) perform the Pre-Operation Services specified in Appendix 6 hereof.

6.04   OPERATION SERVICES

         On and from the Commercial  Operation  Date,  Party A shall provide the
following services:

         1) To perform all its duties and  obligations  in  connection  with the
operation and  maintenance  of the Power Plant in  accordance  with the terms of
this Contract.

         2) To provide  relevant  advises and  support to Party B in  connection
with the operation and  maintenance  of the Power Plant and pursuant to requests
put forward by Party B from time to time.

         3) To provide the Operation Services specified in Appendix 6 hereof.

6.05     FUEL OIL SUPPLY

         During the Commercial  Operation  Period,  Party A shall be responsible
for  supplying  to the Power Plant on a long term basis fuel oil that  satisfies
the Fuel  Specification so as to ensure that the Power Plant has sufficient fuel
oil to generate the Annual  Minimum  On-Grid  Quantity  stipulated  in Article 9
hereof and the Excess On-Grid  Quantity that matches the annual actual demand of
the Power Grid at any time in the Commercial  Operation  Period.  Subject to the
agreement  from Party B, Party A shall  enter into the Fuel Oil Supply  Contract
for the long term  supply of fuel oil to the Power  Plant.  For  details see the
Fuel Oil Supply Contract in Appendix 9.

         It shall be deemed the  responsibility of Party A, if the fuel oil does
not satisfy the Fuel Specification or is in short supply,  thus resulting in the
failure of the Power Plant to generate the Annual Minimum  On-Grid  Quantity and
the Excess  On-Grid  Quantity that matches the annual actual demand of the Power
Grid at any time in the Commercial Operation Period.

6.06     GENERATION PLAN AND COST BUDGET

         Party A shall be responsible for formulating the Annual Generation Plan
and assisting  Party B in calculating  the Planned  Generation Cost of the Power
Plant in November of each Year for the  following  Year.  The Annual  Generation
Plan shall guarantee the generation of the Annual Minimum On-Grid Quantity.  The
Planned  Generation  Cost shall take into  account  the  expected  or  potential
increase in the generation  costs  incurred in the succeeding  Year. The Planned
Generation Cost shall become the Approved Generation Cost of the succeeding Year
upon approval of the Anhui Provincial Pricing Bureau and the approved Generation
lost shall be deducted  from the  Electricity  Fee in  accordance  with  Section
10.03, Section 10.04 and Appendix 1 of this Contract.

         If on or after the end of a given  Year the  actual  cost to Party A of
generating the Annual Minimum On-Grid  Quantity is recognized by both Parties as
exceeding the Approved Generation Cost for the Year, the excess portion shall be
paid by Party A. Such excess plus the actual  interest  cost incurred by Party A
in funding such excess ("Total Excess Amount") shall be included in the proposed
On-grid Tariff of the succeeding Year. Upon approval by Anhui Provincial Pricing
Bureau,  such Total Excess Amount shall become a part of the Approved Generation
Cost of the  succeeding  Year and be deducted from the monthly  Electricity  Fee
according to Section 10.03, Section 10.04, and Appendix 1 of this Contract.

         If the  On-grid  Tariff  for the  succeeding  Year is  lower  than  the
proposed  On-grid Tariff  submitted for approval and the On-grid Tariff does not
include  the full  amount of the Total  Excess  Amount  referred  to in previous
paragraph,  then the Total Excess  Amount shall be divided in to two parts:  (a)
the part not due to the changes in inflation and foreign exchange shall be borne
by the Party A and (b) the part due to the  changes  in  inflation  and  foreign
exchange(if  any)  shall  be borne  by  Party B and  repaid  to Party A in equal
Monthly  installments at the end of each Month from the "Annual Adjustment Fees"
listed in Appendix 4.

         If the actual cost to Party A of generating the Annual Minimum  On-Grid
Quantity is lower than the  Approved  Generation  Cost in any Year,  taking into
account the efforts  which Party A has made in the  management  and operation of
the Power Plant,  Party B will  (provided  the Planned  Generation  Cost for the
following is not reduced by the Anhui Provincial Pricing Bureau) reward [***] of
the difference  between the Approved  Generation Cost and actual cost to Party A
of generating the Annual Minimum On-Grid Quantity.

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.


6.07     INFORMATION

         At the request of Party B, Party A shall periodically  furnish to Party
B information  monthly in connection  with the operation and  maintenance of the
Power Plant and its performance of the Pre-Operation  Services and the Operation
Services.  Party A shall also, pursuant to Appendix 6 hereof, furnish to Party B
a monthly  statement  which  includes a  financial  statement  and a  production
statement  (For  details,  see  Appendix  6  hereof).  At any  time  during  the
Commercial  Operation Period, Party B has the right of access to all records and
information of the Power Plant.


6.08     STAFF

         Party A shall,  after  consultations with Party B, appoint a qualified,
competent  and  experienced  person as the  manager  of the  Power  Plant who is
concurrently  the deputy general  manager for operation of Party B and who shall
not be  replaced  without  prior  consultation  with  Party  B. If such  manager
resigns,  or is  dismissed,  or fails to perform  his (or her)  duties for other
causes, Party A shall consult with Party B as soon as possible,  so that another
qualified,  competent and experienced person to fill this vacancy can be quickly
appointed.

6.09     SUBCONTRACTING

         1) Party A shall not delegate or subcontract  the entire  Pre-Operation
or Operation Services to a third party or parties.

         2)  Subject  to  Section  6.09 1)  hereof,  Party A may with the  prior
written consent of Party B,  subcontract if necessary part of the  Pre-Operation
Services  or  Operation  Services to experts or other  subcontractors,  so as to
ensure that Party A can perform its  responsibilities.  Such  subcontracting can
not relieve  Party A from any of its  duties,  responsibilities  or  obligations
under this  Contract.  Party A shall be fully  responsible  for the  actions and
defaults  of its  subcontractors  just as they are  Party  A's own  actions  and
defaults.

6.10     STRICTNESS OF RESPONSIBILITY

         The  responsibility  and  liability  of Party A under this  Contract is
strict.  Party  A  shall  not be  relieved  of any  of its  responsibilities  or
liabilities   under  this  Contract  because  of  Party  B's   performance,   or
non-performance,  or delayed performance of its obligations under this Contract,
or because of Party B's act or default.

                CHAPTER 7 RESPONSIBILITIES OF PARTY B AND PARTY A

7.01     RESPONSIBILITIES OF PARTY B

1) INITIAL WORKING CAPITAL

         Prior to the Commercial Operation Date of the GT#1 Unit, Liyuan-AES and
Hefei  Zhongli shall provide  Party A an initial  working  capital  amounting to
[***].

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

2) PAYMENTS FOR PRE-OPERATION SERVICES

         To enable  Party A to perform the  Pre-Operation  Services  pursuant to
Section 6.03 hereof and in view of the fact that the EPC Contractor is Party A's
wholly-owned  subsidiary,  Party A hereby acknowledges and agrees that the total
price of the EPC  Contract,  as  stipulated  in Section 4.1 of the EPC Contract,
payable to the EPC Contractor shall be deemed to include an amount in respect of
the Pre-Operation  Services and no additional amount shall be payable to Party A
under this Contract in respect of the Pre-Operational Services.

3) PAYMENTS FOR OPERATION SERVICE

         To enable Party A to perform the Operation  Services as the operator of
the Power Plant,  Party B shall pay Party A a monthly  operation and  management
fee.  The  operation  and  management  fee  shall  be  included  in the  Planned
Generation  Cost of the succeeding  Year. The operation and management fee shall
only be  payable  to  Party  A to the  extent  it is  included  in the  Approved
Generation Cost as part of the On-grid Tariff for the succeeding Year.

4)  BONUS FEES

         Within 30 days after the end of each Year, Party A shall inform Party B
in  written  form the due  amount  of bonus  payable  for the  previous  Year in
accordance  with this  Contract  ("Bonus  Notice").  The  amount of bonus  shall
include the bonus for  costsaving (as provided for in clause 6.06) and the bonus
for Excess On-Grid  Quantity(as  provided for in clause 9.03). Within 14 days of
receiving  the Bonus  Notice and the last  Electricity  Fee Payment of the year,
Party A and Party B shall settle the bonus payment.

7.02  RESPONSIBILITY OF PARTY A

          Party A shall ensure that the Power Plant generates the Annual Minimum
On-Grid  Quantity and shall  purchase  the Annual  Minimum  On-Grid  Quantity in
accordance with the principle of "Take or Pay", and shall pay  electricity  fees
on time.  Starting from the Commercial  Operation Date, Party A shall in its own
name  arrange  and  obtain  necessary  and  supplementary  working  capital  for
production  according to needs and the accrued interest expenses therefrom shall
be included in the Planned  Generation  Cost  submitted to the Anhui  Provincial
Pricing Bureau for approval. Party A's obligation to make payment for the Annual
Minimum On-Grid Quantity in accordance with the principle of "Take or Pay" shall
not be affected by any  circumstance,  other than Force Majeure or the Party B's
default stipulated in Section 12.02 hereof, including without limitation:


(i)  any delay in the  construction or  commissioning  of the Power Plant or any
     Unit of the Power Plant including the Interconnection Facilities;

(ii) any delay in the construction or commissioning of the Grid Extension;

(iii)the  inability  of the Power  Plant to deliver the Annual  Minimum  On-Grid
     Quantity for any reason including without limitation:

     (a)  any failure or  inability  of Party A to obtain  fuel,  spare parts or
          replacement  parts,  services or other  matters or things;
     (b)  any act or default of any employee, agent or officer of Party A,
     (c)  the inability of the Interconnection Facilities, the Grid Extension or
          the Power Grid to receive or transmit electricity; or
     (d)  any outages at the Power Plant, whether scheduled or forced outages.

                        CHAPTER 8 OTHER OPERATION MATTERS

8.01  OPERATION PLAN

         Prior to the end of November  each Year,  Party A shall  formulate  the
Annual  Generation Plan for the following Year which  determines the anticipated
term of outage  because of major and minor  overhaul as well as the  anticipated
average load curve of power generation.

8.02  EMERGENCY PLAN

         Party A shall hold  regular  meetings  with Party B in respect of power
demands  and  offtake  obligations,  so that , subject to the above  provisions,
Party  A can  amend  the  relevant  operation  schedule  if  necessary,  but the
amendment of the operation schedule shall not affect the liability of Party A to
purchase the Annual Minimum On-Grid Quantity in accordance with the principle of
"Take or Pay".

8.03  RECORDS

         The Parties  shall keep  complete  and  detailed  records and all other
information which they need, so as to carry out properly this Contract.

         The  above-mentioned  records shall be kept for at least 60 Months from
the  date of  formation,  or for a longer  period  required  by the  supervisory
authorities  having  jurisdiction  over the  Parties,  but the  Parties  are not
allowed to deal with or destroy any of the above  records upon  expiration of 60
months  without 30 days'  prior  written  notice to the other  Party.  Under the
circumstances of giving reasonable notice to any other Party at a proper time in
advance,  any Party has the right to review in any business  hours the operation
and dispatch  records and  information in connection with this Contract or Power
Grid which the other  Party has kept  within the term of keeping all the records
and information pursuant to this Article.


                           CHAPTER 9 ON-GRID QUANTITY

9.01  ANNUAL MINIMUM ON-GRID QUANTITY

         Party  A,  as the  operator  and  offtaker  of the  Power  Plant  shall
guarantee the Power Plant to generate the Annual Minimum On-Grid Quantity:

         (1) GT#1 Unit and GT#2 Unit: From the Tariff  Commencement  Date of the
GT#1  and GT#2  Unit to the end of the  same  Year  (Dec.  31)  when the  Tariff
Commencement Date of the ST Unit starts,  the Annual Minimum On-Grid Quantity of
two Units  shall be [***] KWH  calculated  pro rata if it less than a Year ( 365
days); plus

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

         (2) ST Unit:  From the Tariff  Commencement  Date of the ST Unit to the
end of that Year (Dec.  31),  the Annual  Minimum  On-Grid  Quantity of the Unit
shall be [***] KWH calculated pro rata if it reaches a Year (365 days); or

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

         (3) From the first Year following the Tariff  Commencement  Date of the
ST Unit to the expiration of the term of the Joint Venture Contract,  the Annual
Minimum On-Grid Quantity of the Power Plant each Year shall be [***] KWH.

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

9.02   EXCESS ON-GRID QUANTITY

         In order to  maximize  Party B's profits  and to  encourage  Party A to
purchase as much electricity as is generated,  Party A shall purchase the Excess
On-Grid  Quantity at the On-grid Tariff,  the net profits from this income after
deducting  the Variable  Cost and taxes payable by Party B will first be used to
make up any shortfalls in Party B's After-tax  Capital Return in accordance with
Appendix 2 for the  current  Year,  and then the  remaining  amount  ("Remaining
Amount") distributed in accordance with the following principles:

          (1)  If the Annual Actual On-Grid  Quantity exceeds the Annual Minimum
               On-Grid  Quantity by [***],  then [***] of the  Remaining  Amount
               shall be paid to Party A;


[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

          (2)  If the Annual Actual On-Grid  Quantity exceeds the Annual Minimum
               On-Grid Quantity by more than [***],  then [***] of the Remaining
               Amount from any output in excess of [***] over the Annual Minimum
               On-Grid Quantity shall be paid to Party A;

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

          (3)  The remaining portion shall be distributed to Party B.

 9.03 VARIABLE COST

         Party A shall also receive as operator  the Variable  Cost for each KWH
of Excess On-Grid Quantity but shall not be entitled to the Approved  Generation
Cost.


           CHAPTER 10 ON-GRID TARIFF AND SETTLEMENT OF ELECTRICITY FEE

10.1     ON-GRID TARIFF

         Party A and Party B have, through full negotiations,  reached unanimity
in respect of the On-grid Tariff on the following principles:

          1)   The composition of the On-grid Tariff

               The  composition  of the On-grid  Tariff shall be calculated  and
               adjusted in accordance with Appendix 4 hereof.

          2)   The principles  for  submitting  the proposed  On-grid Tariff for
               approval

               a)   Theannual  On-Grid  Quantity of the Power Plant shall be the
                    Agreed Annual  kilowatt-hours as defined in Appendix 4 which
                    also is the same as Annual Minimum On-Grid Quantity of [***]
                    kwh as  specified  in section 9.01 such number is set at the
                    time of signing this Contract based on [***] in the On- Grid
                    Tariff   Formula  of  Article  2  of   Appendix  4  and  the
                    characteristics of gas turbine PG6551B;

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

               b)   It  is  based  on  the  amount  of  principal  and  interest
                    repayment as stipulated in the US$ Loan Contracts,  the term
                    for  repayment  and  the  amount  of  anticipated  After-tax
                    Capital  Return (as  provided for in Appendix 2) and Planned
                    Generation  Cost during the term of the joint  venture based
                    on  the  number  of  utilization  hours  as  listed  in  the
                    preceding section;

               c)   To set up the Annual  adjustment  fees which will be used to
                    compensate  for the increase in costs or any adverse  effect
                    on  amounts  payable  under  the US$ Loan  Contracts  or the
                    After-tax  Capital  Return  resulting  from  changes in such
                    factors as fuel costs,  exchange rates, and taxation and any
                    other factors;

               d)   The  performance  parameter of a  Generating  Unit which was
                    determined before it was put into commercial operation shall
                    be one of the bases for calculation;

               e)   The total  revenue of the Power Plant in each Year under the
                    above-mentioned  conditions  shall be  sufficient to pay all
                    the costs  expenses  After-tax  Capital Return and the other
                    items,  composing the On-grid Tariff as detailed in Appendix
                    4.


          3)   Adjustment of On-grid Tariff


               By the  end  of  November  of  each  Year  after  the  Commercial
               Operation Date of the Power Plant,  Party B shall,  in compliance
               with the  On-grid  Tariff  Formula  in  Appendix 4 hereof and the
               adjustment  mechanism provided for in Appendix 4, and taking into
               consideration  all the factors  stipulated in Section 10.1 (1)and
               (2),  calculate the tariff and then submit the on-grid tariff for
               the following Year after full  consultation with Party A in order
               to compensate  any increase in cost resulting from the changes in
               fuel, exchange rate, taxation and other factors.


          4)   Approval and Implementation of the On-grid Tariff


               Party B shall be responsible  for calculating the proposed tariff
               and for submitting it to the Anhui Provincial  Pricing Bureau for
               approval  after  full  consultation  with  Party A. The  approved
               On-grid  Tariff  shall be the  settlement  price for the  On-Grid
               Quantity and shall be strictly implemented by both Parties.

               If the approved  On-grid Tariff is lower than the proposed tariff
               submitted  for  approval,  Party A shall use its best  efforts to
               generate and purchase more On-Grid Quantity,  so as to offset the
               unfavorable  impact on Party B resulting  from the On-grid Tariff
               being less than the proposed tariff submitted for approval.

10.02  ELECTRICITY FEE

          1)   On-Grid Quantity Before the Tariff Commencement Date

         In  accordance  with the  provision  of  Section  5.2.5  under  the EPC
Contract and subject to the provision of Section 7.01 2) hereof,  the revenue on
all the  generated  by each  Generating  Unit  before its  corresponding  Tariff
Commencement  Date shall belong to the EPC Contractor while all cost,  including
fuel cost and generation  cost,  associated  with such revenue shall be borne by
the EPC Contractor.

          2)   Failure to Accept Annual Minimum On-Grid Quantity

         Starting  from the  Commercial  Operation  Date of the Power Plant,  if
Party A fails to accept the Annual  Minimum  On-Grid  Quantity,  in  addition to
paying the electricity  fees for the Actual On-Grid  Quantity in accordance with
the On-grid Tariff, Party A shall also pay a compensation fee for the difference
between the Annual Minimum  On-Grid  Quantity and the Actual  On-Grid  Quantity.
Such compensation fee shall be calculated as follows:

                                      [***]

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

          3)   Annual Minimum On-Grid Quantity and Excess On-Grid Quantity

         Party A shall purchase all the Annual Minimum On-Grid  Quantity and the
Excess  On-Grid  Quantity  generated by the Power Plant in  accordance  with the
On-grid Tariff.

10.03    METHOD OF SETTLEMENT

          1)   Party B shall make a  calculation  of the On-grid  Tariff and the
               Planned  Generation  Cost.  This Planned  Generation Cost will be
               part of the tariff  calculation  prior to the end of  November of
               each Year and submit it to the Anhui  Provincial  Pricing  Bureau
               for approval  after full  consultation  with Party A. The Planned
               Generation  Cost shall  include  the  Variable  Cost,  salary and
               welfare overhaul expense and other costs of Party A as stipulated
               in Appendix 4 hereof.  In settling  the  electricity  fees,  both
               Parties must strictly implement the Approved  Generation Cost and
               the On-grid Tariff.

          2)   Party A is both the operator and the offtaker of the Power Plant.
               In respect of Party B, it is the Party A's strict  responsibility
               to ensure the generation of Annual Minimum  On-Grid  Quantity and
               the  purchase of Annual  Minimum  On-Grid  Quantity.  In order to
               accelerate  the turnover of funds,  both  Parties  agree that the
               electricity  fees which Party A pays to Party B and the  Approved
               Generation  Cost which Party B pays to Party A in respect of each
               KWH of generation up to the level of the Annual  Minimum  On-Grid
               Quantity shall adopt the method of offsetting and deduction. Only
               Approved  Generation  Cost  shall be  deducted  from each  amount
               payable by Party A pursuant to this  Contract,  together with the
               provision of a tax payment  receipt to Party B in connection with
               the VAT and  other  Tax (as in  Appendix  4 )  relevant  to power
               generation  which is  withheld by Party A, (the above tax payment
               receipt shall be the amount to be paid in full in accordance with
               the state  regulation on electric  power VAT and in which the VAT
               for purchase is not withheld.) the balance after  deduction shall
               be remitted to the bank account designated by Party B in the form
               of a written notice to Party B.

          3)   Party  A  shall  open  a  special-purpose  account  for  settling
               electricity  fees in the Anhui  Branch of the Bank of China,  and
               will settle accounts with  Liyuan-AES and Hefei Zhongli,  Party A
               shall   guarantee   that  there  is   sufficient   funds  in  the
               special-purpose  account for settling  electricity  fees so as to
               pay  all  the  accounts  due  and  payable  under  this  Contract
               (including  without limitation this Section 10.03 , Section 10.04
               and  Section   12.05).   Liyuan-AES   and  Hefei   Zhongli  shall
               respectively  open  accounts  in the Anhui  Branch of the Bank of
               China     whose     account     numbers     are      respectively
               Liyuan-AES:---------,  and Hefei Zhongli: --------; Party A shall
               execute a relevant agreement with the Anhui Branch of the Bank of
               China to cause  the  latter  to  transfer  each  [***] of all the
               amounts  respectively  to the  above two bank  accounts  from the
               special-purpose account for settlement which Party A shall pay in
               accordance with the stipulations of this Contract.

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

          4)   Party A shall pay  electricity  fees to Party B prior to the 14th
               of each month which is equivalent to [***] of the electricity fee
               of the preceding  month actual on-grid  quantity,  and shall have
               settled the electricity  fees for the Minimum On-Grid Quantity of
               the  Preceding  Quarter  prior to the 14th of the first  month of
               each Quarter which shall be calculated as [***];  The electricity
               fees for the first half of the year and the preceding  year shall
               be settled prior to July 14 and January 14 each Year on the basis
               of the greater of the following On-Grid Quantity:


[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

               (a)  the minimum On-Grid Quantity calculated pro rata time,

               (b)  Actual On-Grid Quantity.

          5)   If Party B is requested to pay value added  tax(VAT) or other Tax
               (as in Appendix 4) in respect of any sums  received  from Party A
               under this  Contract,  the amount of such  business  tax shall be
               Other Tax (as in  Appendix  4)shall be  reimbursed  to Party B by
               Party A for Party B on demand.

10.04   INVOICES AND PAYMENT

          1)   The  representatives  appointed  by  Party  A and  Party  B shall
               jointly make meter readings on the first working day every month.
               Party B shall deliver the invoice prior to the 7th of each month,
               and  Party A shall  pay the  amount  of  money  specified  in the
               invoice  within the term  stipulated  in Section  10.03(c)  after
               having  received the invoice,  interest shall be accrued for late
               payment, and Party A shall pay to Party B late payment penalty on
               the basis of [***] per day on an accumulative basis from the date
               due and  payable to the  actual  payment  date. 

         Party A's excess payment or under payment as shown in any invoice shall
be deducted or increased from the payable amount due in the next invoice.

         This Section is also  applicable  to any payments to be Paid under this
Contract by Party B to Party A.

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

          2)   Invoice in dispute:  Should there be any dispute over the invoice
               amount,  Party A shall still pay the full invoice amount to Party
               B.  Upon  resolution  of  the  dispute,  if any  amount  is to be
               refunded to Party A it shall  include  together with the interest
               on the basis of [***] per day on an  accumulative  basis shall be
               returned  to Party A. Such  interest  shall  accrue from the date
               when Party A starts to pay  according  to the  invoice  until the
               date when the required amount has been returned to Party A.

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

          3)   Party A's payment  obligations  under this Contract are absolute,
               unconditional and independent of any other  transactions  between
               both Parties.

                     CHAPTER 11 RESPONSIBILITY AND INDEMNITY

11.01 Party A shall bear  responsibility for and shall have no recourse to Party
B  and/or  its  Contractor  for the  project-related  property  loss  or  damage
including  damage to,  premature,  deterioration  of or loss of the Power Plant,
personal  injury  and  all  expenses  arising  therefrom  or  relating  thereto,
including  but not  limited to  reasonable  legal fees which must be suffered by
Party B and /or its Contractor arising out of Party A's negligence breach of the
Contract or other act or default. Party A also agrees to fully indemnify Party B
and/or its  Contractor in respect of the  above-mentioned  conditions,  but such
indemnity  shall not be extended to any loss,  damage,  injury (or any  relevant
claim)  or  relevant  fees or  expenses  arising  out of Party  B's  and/or  its
Contractor's  action or  inaction  or  failure  to take  measures  to reduce the
consequences.

11.02 Party B shall bear  responsibility for and shall have no recourse to Party
A  and/or  its  Contractor  for the  project-related  property  loss or  damage,
personal  injury  and  all  expenses  arising  therefrom  or  relating  thereto,
including  but not  limited to  reasonable  legal fees which must be suffered by
Party A and/or its  Contractor  arising out of Party B's  negligence or improper
action.  Party B also agrees to fully indemnify Party A and/or its Contractor in
respect  of the  above-mentioned  conditions,  but such  indemnity  shall not be
extended to any loss, damage, injury (or any relevant claim) or relevant fees or
expenses arising out of Party A's and/or its Contractor's  action or inaction or
failure to take measures to reduce the consequences.

11.03 If any third party  institutes  a claim or legal  proceedings  against the
indemnified Party in respect of indemnity  matters  stipulated in this Contract,
the  indemnified  Party is  entitled  ( but is not  obliged ) to  respond to the
claim,  to defend  the claim or to  institute  legal  action  and may  decide to
appoint an attorney to represent it in respect of any claims, defense or action,
and the relevant  reasonable fees and expenses  thereto shall be included in the
indemnity responsibility borne by the indemnifier pursuant to this Contract.

         But if the indemnifier  recognizes in written form to have  indemnified
the  indemnified in respect of all the losses  pursuant to what is stipulated in
Sections 11.01 and 11.02,  the indemnifier,  after having promptly  notified the
indemnified  in advance and paid the  indemnified  for the  reasonable  fees and
expenses,  is  entitled  to  counterplead  in  respect  of the  claim  or  legal
proceedings,  and to appoint an attorney by itself with all the relevant fees at
its own expense.

         Without the prior consent of the other Party in written form, any Party
shall  not  settle or  compromise  presumptuously  by itself  any claim or legal
proceedings  from which it is entitled to obtain indemnity from the other Party,
but the other  Party  shall not refuse to agree for no reason;  unless the other
Party  refuses to agree for no reason,  if one Party is  originally  entitled to
obtaining  indemnity from the other Party, but it  presumptuously  resolves such
claim or legal proceedings or makes a compromise  thereto without the consent of
the other Party in written form,  then the other Party can relieve any indemnity
obligation which it bears to the Party which makes the settlement or compromise.

         The indemnity as stipulated in Sections  11.01 and 11.02 shall under no
circumstances  be extended to indirect  loss or damage,  and neither Party shall
bear any  responsibility  in relation to indirect loss or damage  arising out of
its performance of obligations or exercise of rights pursuant to this Contract.

                       CHAPTER 12 DEFAULT AND TERMINATION

12.01    TERM OF EFFECTIVENESS

         This Contract  shall come into effect on the date as defined in Section
18.01  hereof,  and the  purchase  of  electricity  shall  start from the Tariff
Commencement  Date of the GT#1 and GT#2 Units until the termination of the Joint
Venture  Contract  unless  otherwise  sooner  terminated in accordance with this
Contract.

12.02    DEFAULT

          1)   Unless the  default of Party B is due to Party A's  default,  the
               following events shall be considered as the default of Party B:

               a)   Liyuan-AES or Hefei  Zhongli  Energy goes bankrupt or become
                    insolvent  and such  condition has remained  unremedied  for
                    ninety (90) days;

               b)   Party B has abandoned this project for six (6) months.

          2)   The  following  event shall be considered as the default of Party
               A:

               a)   Party A fails to make payment  pursuant to this Contract and
                    such case has remained unremedied for forty five (45) days;

               b)   Party A breaches  any other  obligation  stipulated  in this
                    Contract and such case has remains unremedied for forty five
                    (45) days;

               c)   Party A as the operator of the Power Plant fails to generate
                    electricity  for twenty (20) days (except for planned  major
                    and minor overhaul and Force Majeure);

               d)   Party A,  pursuant to laws,  is  dissolved  or  reorganized,
                    provided  that  Party A  shall  not be  considered  to be in
                    default if the reorganization does not affect the ability of
                    the  reorganized  entity to  perform  Party A's  obligations
                    under  this  Contract  and  the   re-organized   entity  has
                    undertaken  unconditionally the obligations of Party A under
                    this Contract (the past or the future) .

12.03    TERMINATION IN ADVANCE

          1)   If any event  described in Section  12.02  occurs,  any Party may
               terminate  this Contract in advance and do so in accordance  with
               the following termination procedures:

          a)   The Party which exercises the right of terminating  this Contract
               shall notify the  defaulting  party of its intention to terminate
               this  Contract  and shall  describe in details the  condition  of
               default;

          b)   After the defaulting  party has received the termination  notice,
               it shall  remedy or mitigate  the  condition of within forty five
               (45) days or  fifteen  days (15) (in the case of  failure to make
               payment  pursuant  to this  Contract.  If such  condition  is not
               remedied within the stipulated  period, the Party which exercises
               the  right of  terminating  this  Contract  may  issue  the final
               notification of termination to the defaulting Party.

          2)   Party B may  terminate  this  Contract in advance if the Central,
               Provincial or local government of the People's  Republic of China
               requisitions,  levies by coercion,  or nationalizes the assets or
               rights and interests of Party B or the Investors.

          3)   Party B may  terminate  this  Contract  in advance if the On-grid
               Tariff proposed by Party B to Anhui Provincial  Pricing Bureau is
               not  approved  at the  level  first  proposed  by Party B for two
               consecutive Years.

12.04    NORMAL TERMINATION

         If this Contract  terminates upon its  expiration,  Party A shall repay
the initial working capital amounting to [***] to Party B.

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.


12.05    TERMINATION FEES

         If this  Contract is terminated by Party B because of Party A's default
or pursuant to Section  12.03  hereof,  Party A shall  forthwith  pay to Party B
termination  fees  calculated in accordance  with  Appendix 3 :  Calculation  of
Termination  Fees.  After Party A has paid the  termination  fees, all Party B's
assets and rights and interest shall be transferred to Party A.

                            CHAPTER 13 FORCE MAJEURE

13.01    DEFINITION OF FORCE MAJEURE

         "Force Majeure" shall mean any of the following events:

         1) war, hostility or insurrection;

         2) plague or other epidemics;

         3) fire not caused by negligence or deliberate arson;

         4) lightning;

         5) earthquake;

         6) other natural forces including natural calamities.

         Provided  that no event  shall be  regarded  as a Force  Majeure  event
unless it simultaneously bears the following six features:

         1) arising after the execution of this Contract;

         2) unforeseen or unavoidable;

         3) beyond the control of a relevant party;

         4) occurring within the Power Plant Site;

         5) directly  hampering  the  performance  of this Contract by one
            Party; and

         6) unpreventable  in spite of all the  best  efforts  made by the
            relevant Party.

13.02    NOTIFICATION OF FORCE MAJEURE

          1)   The Party  claiming  Force  Majeure (the "Force  Majeure  Party")
               shall promptly notify the other Party of any Force Majeure event,
               no later than five working days after the following date:

               a)   The  commencement  date of a Force Majeure event that causes
                    loss or damage to the Power Plant; or

               b)   The date that in the  event of a Force  Majeure  event  that
                    does not cause loss or damage to the Power Plant, such Party
                    knows or ought  reasonably to know of the  occurrence of the
                    Force Majeure event.

         Notwithstanding  the above,  if the Force  Majeure event results in the
suspension of  communication  so that the Force Majeure Party is unable to issue
the notice within the above-stipulated time limit, the Force Majeure Party shall
promptly issue notice as soon as the  communication is restored but shall not be
later than one working day after the communication is restored to normal.

         The Force Majeure Party shall within 15 days provide the details of the
Force Majeure event and the certificate issued by the local notary  organization
or equivalent  organization which will account for the reasons why a part or all
of the  obligations  of  this  Contract  cannot  be  performed  out or  must  be
postponed.

          2)   The Force Majeure Party must notify the other Party in respect of
               the following:


               a)   The cessation of the Force Majeure event; and

               b)   The  cessation of the impact of the Force Majeure event upon
                    the enjoyment of rights or  performance  of  obligations  of
                    such Party under this Contract.

         The  above  notice  shall  be  issued  promptly  after  the  conditions
mentioned in a) and b) above are known to such Party.  With the exception of the
suspension of  communication  as  stipulated in the second  paragraph of Section
13.02 (1), the notice must under any of the  above-mentioned  circumstances,  be
issued within two working days after having known the relevant conditions.

     3)   If notice of the Force  Majeure event is not issued to the other Party
          in strict compliance with the provisions of Section 13.02(1),  a Party
          shall not be entitled to claim relief from the Force Majeure event and
          shall be relieved from performing to obligations under this Contract.

13.03    MITIGATION OF CONSEQUENCES

         The Party  affected  by the Force  Majeure  event  shall  mitigate  the
consequences  of the Force Majeure event upon its enjoyment of its rights or the
performance of its obligations under this Contract.

13.04    DELAY CAUSED BY FORCE MAJEURE EVENT

         Subject to Sections  13.02(3) and Section  13.03,  if one or more Force
Majeure events or their consequences result in any Party's incapability or delay
in  performing  its  obligations  under this  Contract,  such Party shall to the
extent necessary be excused from performing its obligations  hereunder while the
Force  Majeure event (or its effects ) are in  existence.  Correspondingly,  the
term of performance of contractual obligations by such Party, and the expiration
date of the Contract shall be extended. The number of days of postponement shall
be the same as those which one or more Force Majeure events have their sustained
impact  upon the  period of  material  and  adverse  affect  upon  such  Party's
performance of its obligations under this Contract, or

         Provided that notwithstanding anything else to the contrary referred to
above,  no relief shall be granted to the affected  Party to the extent that the
affected  Party would not have been able to perform its  obligations  under this
Contract had the Force Majeure event not occurred.

          The other Party shall not bear any  liability  for any loss or expense
suffered by the affected Party as a result of a Force Majeure event.

13.05    ADJUSTMENT TO THE ANNUAL MINIMUM ON-GRID QUANTITY BECAUSE OF FORCE

         If Party A is a affected  by a Force  Majeure  event and is entitled to
relief from the performance of its obligations  hereunder in accordance with the
provisions  of Section  13.01,  13.02,  13.03 and 13.04 then the Annual  Minimum
On-Grid Quantity shall be adjusted as follows:

                                      [***]

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

         Provided that the Annual Minimum  On-Grid  Quantity shall not under any
circumstances  be reduced  below that  minimum  volume  necessary to ensure that
adequate revenue is derived by Party B to enable Liyuan-AES and Hefei Zhongli to
pay the US$ Loan Expenses due under the US$ Loan Contracts.

                              CHAPTER 14 INSURANCE

14.01    INSURANCE FROM THE PARTY B

         Liyuan-AES  and Hefei  Zhongli  shall  jointly  obtain and maintain the
insurance listed in Appendix 7 and shall include business  interruption and lost
profit insurance caused by machinary  breakdown.  The insurance premium shall be
included in the On-grid Tariff.

14.02    INSURANCE FROM PARTY A

         Party  A  shall  in its own  name  obtain  and  maintain  insurance  in
connection  with workers and staff and vehicles and as required by relevant laws
and regulations of the People's Republic of China.

14.03    ASSISTANCE WITH CLAIMS

         Party A shall comply with all the demands of such  insurance  and shall
provide Party B all information  and assistance  within its capability to enable
Party B to make or process  claims under its  insurance.  Party A shall promptly
notify Party B as soon as any accident or event bearing on insurance occurs.

                CHAPTER 15 GOVERNING LAWS AND DISPUTE RESOLUTION

15.01 The  execution,  effectiveness,  interpretation,  performance  and dispute
resolution of this Contract shall be in compliance with publicly  available laws
promulgated in the People's Republic of China. Any specific matter in connection
with this Contract which is stipulated neither in the publicly available laws of
China nor in the international agreement or treaty to which China is a Party may
refer  to  generally  accepted  international  practice.  If  there  is any  new
stipulation in Chinese laws during the  implementation  of this Contract and its
effectiveness is  retrospective,  the stipulation of the new law shall apply. If
any Change in Law affects the  implementation of this Contract and the interests
of any of the  investors,  Party A and  Party B shall  promptly  hold  necessary
consultations and make necessary adjustment, and then submit the adjusted matter
to the relevant  competent  authority  for  examination  and approval , so as to
ensure that the rights  interests and  financial  returns of  Liyuan-AES,  Hefei
Zhongli, the Investors and Party A are not affected by any Change in Law.


15.02    DISPUTE RESOLUTION

         Any dispute in relation to or arising from this Contract shall first of
all be settled by all means through friendly  negotiations by all the Parties in
dispute.  If the Parties in dispute fail to settle the dispute through  friendly
negotiations within 14 days after the dispute in question,  and if the matter in
dispute  falls within the scope of technical or accounting  expertise,  or it is
agreed by the Parties in dispute to submit it to the experts for  settlement  or
according to the  stipulation  of this  Contract,  then any Party is entitled to
submit the above  dispute to the  experts  for  arbitration  pursuant to Section
15.03;  as to any other  disputes any party is entitled to submit the dispute to
arbitrate settlement pursuant to Section 15.04.

15.03    EXPERT

     1)   Thenomination of the expert shall be agreed to by the Parties.  If the
          both Parties fail to designate  jointly an expert  acceptable to them,
          both Parties shall each  designate one expert and the two experts will
          jointly designate a third expert to form an expert group.

     2)   Any Party to the dispute shall submit relevant  dispute in the form of
          written  notice to  experts  for  decision,  and  shall put  forward a
          written explanation in connection with the dispute.

     3)   Such  expert  has the full  right to  self-determination  to decide on
          relevant  procedures  within  the  permissible  scope  of law so as to
          ensure impartial, prompt and economical settlement of the dispute, but
          such  expert  must  adopt  the  procedures  which  both  Parties  deem
          appropriate for the settlement of the dispute.

     4)   Unless otherwise  agreed to by both Parties,  such expert shall decide
          on the matter which is submitted to him (her) for arbitration.

     5)   Such decision must be delivered in written form to both Parties within
          28 days  after the  submission  of the  written  explanatory  notes as
          described in Section  15.03(2)  hereof and shall include the result of
          arbitration and the causes thereto.

     6)   Such expert makes a decision  only in the capacity of an expert within
          the scope of its professional  function and not in the capacity of and
          function  as an  arbitrator  under  applicable  laws,  therefore,  any
          articles and  provisions  of laws that are related to an arbitrator or
          arbitration  are not  applicable  to such  expert and the  decision he
          (she) makes, or the procedures by which such expert makes a decision.

     7)   If any Party does not accept the experts decision,  the Parties to the
          dispute  shall within 14 days and in  accordance  with the  procedures
          stipulated  above,  jointly  call  in  another  expert  who  shall  be
          empowered to settle the dispute.  The submission of the dispute to the
          second  expert for  resolution  for the second time shall abide by the
          stipulation of Section 15.03 hereof.

     8)   The decision  made by the second  expert for the second time is final,
          definitely  established  and binding on all the Parties to the dispute
          which have no right whatsoever to submit such decision to any court or
          arbitral body.

     9)   The expert  expenses  shall be shared on an average  basis by the both
          Parties to the dispute,  meantime, the Parties shall bear respectively
          their expenses for preparing and submitting written  explanatory notes
          to experts.

15.04    CONSULTATION, MEDIATION, ARBITRATION

         The Parties shall meet within seven (7) days after a Party has received
a written  notice of a dispute from the other Party.  Any dispute may be settled
through friendly consultation or conciliation among the Parties if they agree to
do so. Disputes may also be mediated by a third party  appointed  jointly by the
Parties . If the settlement of the dispute by  consultation  or mediation is not
successful  within  sixty  (60)  consecutive  days of a Party's  receipt of said
notice in respect of a dispute,  the  dispute may be  submitted  by any Party to
binding, non-appealable arbitration for final adjudication.

         Arbitration Procedures

         Any Party may, after serving notice to the other Party of its intention
for  arbitration,  submit the dispute to the China  International  Economic  and
Trade  Arbitration  Commission for arbitration in accordance with its rules then
in force. The arbitrated  award shall be final and binding on both Parties.  The
costs  of  arbitration  shall  be borne by the  losing  Party  unless  otherwise
stipulated in the arbitration award.

         The  arbitration  court shall be composed of three  arbitrators  with a
third arbitrator whose nationality shall be different from that of the other two
arbitrators. The arbitration shall be made in Chinese and English.
Unless the Parties otherwise agree, the arbitration shall occur in Beijing.

         The Parties  shall  continue to perform  all of their  obligations  and
responsibilities while the arbitration is in process.

                              CHAPTER 16 ASSIGNMENT

16.01  Neither  Party  shall  assign  or  transfer  their  rights,  benefits  or
obligations  under this  Contract  to any other  Party  except in the  following
circumstances:

     1)   Assignment of Party A: Subject to the approval of Party B, Party A may
          assign its rights and  obligations  under this  Contract  to its legal
          successor.  Such successor shall provide  evidence to the satisfaction
          of  Party  B of its  ability,  experience  and  economic  strength  to
          continue to perform the obligations under this Contract.  In addition,
          such legal successor shall explicitly agree in written form that it is
          completely bound by the obligations under this Contract.

     2)   Assignment  of  the  Party  B:  Party  B may  assign  its  rights  and
          obligations  under this  Contract  to its  Corporation,  subsidiaries,
          Investors or  associated  company.  Such  assignment  shall be for the
          purpose of  construction,  ownership  and  operation  of the  project.
          Meanwhile,  the assignee  shall fully agree in written form that it is
          bound by the  obligations of Party B under this Contract.  Party B may
          also  assign its rights and  obligations  under this  Contract  or its
          revenue from electricity  operation to any financial institution or to
          other Lenders as security. In case such financial institution or other
          Lender  exercises its rights under such assignment  security,  or such
          financial   institution   or  other   Lender   undertakes   Party  B's
          obligations,  the assignee shall perform Party B's  obligations  under
          this Contract.

                                CHAPTER 17 NOTICE

17.01 (1) Any notice issued  pursuant to this Contract  shall be made in written
form, and shall be signed by the officially  authorized staff or  representative
or any of the following persons of the notice-issuing Party, and is delivered by
courier,  or telex or fax to the  following  address or other  address as may be
notified to the other Party by the following persons):

         (a) Party A: Anhui Provincial Electric Power Corporation
             Address:  #415, Wuhu Road, Hefei City, Anhui Province
             Fax No. :  86-551-3633393
             Addressee: Cheng Guangjie

         (b) Party B :
             Anhui Liyuan-AES Power Company Ltd.
             Address : #415, Wuhu Road, Hefei City
             Fax No. : 86-551-3637642
             Addressee : Thomas T.M. Wu

             Hefei Zhongli Energy Company Ltd.
             Address : #415, Wuhu Road, Hefei City
             Fax No. : 86-551-3637642
             Addressee : Thomas T.M. Wu

     (2)  Any of the  above-mentioned  notice  shall  be  deemed  to  have  been
          delivered or received under the following circumstances;

          (a)  If  delivered  by  hand,  it is  delivered  to or  placed  in the
               addressee's address;

          (b)  If delivered  by mail,  it is the fifth day (not Sunday or public
               holiday) after mailing;

          (c)  If  delivered by telex or fax, it is the next day; and any notice
               sent by telex or fax shall be deemed to have been received  after
               confirming the correct response code of the text.

17.02    All the notices shall become effective at the actual time of receipt.


                           CHAPTER 18 OTHER PROVISIONS

18.01    CONDITIONS

The rights and obligations of both Parties under this Contract shall be based on
the following conditions as conditions precedent:

     1)   All the conditions  precedent stipulated in Section 6.05 of each Joint
          Venture Contract have been fulfilled;

     2)   The Fuel Oil Supply  Contract and the  Interconnection  Contract  have
          been  drafted in  accordance  with the  stipulated  form and have been
          officially executed and come into full force.

         The date of the fulfillment of the above-mentioned conditions precedent
shall be the date of  effectiveness  of this Contract,  and Party B shall notify
Party  A  in  written   form  within  five   working  days  after  the  date  of
effectiveness.


18.02    PERFORMANCE GUARANTEE

         Party A shall cause [***] to issue  for  Party  A's  performance of the
payment  obligations under this Contract a payment guarantee  amounting to [***]
with Party B as the beneficiary. If Party A fails to settle the electricity fees
for the first half of the Year the  previous  Year before July 14 and January 14
each Year  respectirely  pursuant  to  Section  10.03 and 10.04 and fails to pay
termination  fee pursuant to Section 12.05 of the Contract,  Party B may ask for
payment from [***].  The  performance  guarantee of payment shall be fully valid
throughout the effectiveness of this Contract. The guaranty fee shall be paid by
Party B and be included in the On-grid Tariff each year.

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

18.03    WRITTEN AMENDMENT

         The amendment of this  Contract is subject to written  agreement by the
both Parties.

18.04    HEADINGS

         The headings  contained  in this  Contract are inserted for the sake of
convenience, they do not constitute a part of this Contract, nor can the heading
be used in any form to interpret this Contract.

18.05    WAIVER

         Failure of a Party to exercise and delay in  exercising or carrying out
any right or remedial  measure under this Contract does not  constitute a waiver
of such right or remedial  measure.  Separate or partial  exercising or carrying
out any right or  remedial  measure  under  this  Contract  does not  exclude or
restrict further exercising or carrying out such right or remedial measure.  The
right  and  remedial  measure  stipulated  in  this  Contract  are  concurrently
applicable  and does not  exclude any right or remedial  measure  stipulated  in
laws.

18.06    LANGUAGE

         This  Contract is written in English and Chinese.  Both the English and
Chinese versions are equally authentic.

18.07    FINAL REPRESENTATION

         This Contract  (including  all its  appendices)  represents  the entire
understanding  reached by the both  Parties in respect of the subject  matter of
this Contract and shall supersede any written or verbal understanding,  proposal
or other document in relation to this Contract heretofore.


18.08    CONFIDENTIALITY

     1)   A Party shall keep  confidential  the  Contract and  confidential  all
          agreements  and  documents as well as all other  information  (whether
          they are technical or commercial  documents)  which are related to the
          construction,  operation maintenance,  management and financing of the
          Power  Plant,  which  are of a  confidential  nature.  Except  for the
          purpose of performing the  obligations  under this  Contract,  all the
          above-mentioned  agreements,  documents and  information  shall not be
          made  public  or be  disclosed  or  used  in  other  form  (except  as
          stipulated by law or relevant management authority, or being disclosed
          to Party B's  potential  lenders,  Party B's  Investors,  professional
          consultants  to all the Parties to this  Contract or the  professional
          consultants to the above-mentioned lenders and Investors).

     2)   The  stipulation  in  Section   18.08(1)  is  not  applicable  to  the
          following:

          (a)  Any information  which is made public not because of violation of
               this Contract;

          (b)  The receiving Party has already possessed the information  before
               the disclosure  herein before,  and such information was obtained
               without undertaking any obligation of keeping it confidential;

          (c)  Any  information  which is  obtained  from a third  party who may
               freely disclose it without  undertaking any obligation of keeping
               it confidential.

18.09    SUCCESSOR AND ASSIGNEE

         This  Contract  is binding on the  Parties to this  Contract  and their
respective successors and permissible assignees.

18.10    PARTIAL INEFFECTIVENESS

         If a part of any article of this  Contract is  adjudicated  by a law of
competent  jurisdiction to be unlawful,  invalid or unenforceable,  it shall not
affect the lawfulness,  validity or enforceability of the other articles of this
Contract,  nor shall it affect the  lawfulness  of any other  provision  of this
Contract.






IN WITNESS  WHEREOF,  each of the Parties hereto have caused this Contract to be
executed by their duly  authorized  representatives  on the date first set forth
above and have caused it to be effective.


Party A: Anhui Provincial Electric Power Corporation

         Name :   [Signature Illegible]

         Title :

         Nationality :


Party B: Anhui Liyuan-AES Power Company Ltd.   Hefei Zhongli Energy Company Ltd.

         Name :   [Signature Illegible]  Name :            [Signature Illegible]

         Title :                         Title :

         Nationality :                   Nationality :




                            APPENDIX 1 INVOICE FORMAT

Invoice for Electricity Fee Payment from Month:      Date:
to Month:         Date:

                                    Date of Meter Recording:

                                    Date of Table fill - in:

This month is the _ month of this Quarter,
The meter reading of the  preceding  month was-----------,
The meter reading of this month is----------,
The Actual On-Grid  Tariff this month is -----------.
The Actual  On-Grid  Quantity of the first  month of this  Quarter is --------.
The Actual  On-Grid  Quantity of the second month of this Quarter is ---------.
The On-Grid Quantity of the third month of this Quarter is----------.
Payment due under the current month --------------.
Payment due from previous months---------------
Amount payable (Payment due under current month + Payment due from previous
months)-----------------


                                      [***]

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

                    Sum of money due =

                    1)   For the first, second, fourth, fifth, seventh,  eighty,
                         tenth, and eleventh month:

                         [***]

                    2)   For the third and ninth month:

                         [***]

                    3)   For the sixth month to be calculated in accordance with
                         the greater of the following two formulas:

                         [***]

                    4)   for the twelfth month

                         [***]

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.




                       APPENDIX 2 AFTER-TAX CAPITAL RETURN

                                      [***]


[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.



                   APPENDIX 3 CALCULATION OF TERMINATION FEES


                                     [***]


[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.




                        APPENDIX 4 ON-GRID TARIFF FORMULA


                       ANHUI LIYUAN-AES POWER COMPANY LTD.
                        HEFEI ZHONGLI ENERGY COMPANY LTD.



                             ON-GRID TARIFF FORMULA




ARTICLE 1.        AGREEMENT

The formula of  calculating  the  On-grid  Tariff of the Hefei 115MW Gas Turbine
Combined-cycle  Power Plant is determined through the joint study and discussion
of all the Investors.  The formation,  structure and calculation  method of this
formula have been unanimously agreed to and confirmed by all the Investors.


The Investors:

AES Anhui Power Company Limited

Anhui Liyuan Electric Power Development Company Ltd.

Hefei Municipal Construction & Investment Company


The Joint Ventures(hereinafter referred as the "Company"):

Anhui Liyuan-AES Power Company Ltd. (hereinafter refereed as "Liyuan-AES")

Hefei Zhongli Energy Company Ltd. (hereinafter refereed as "Hefei Zhongli")







ARTICLE 2         THE APPROVED ON-GRID TARIFF

In the  fourth  quarter  of each  Year,  Liyuan - AES and  Hefei  Zhongli  shall
estimate and submit for approval the On-grid  Tariff of the  succeeding  Year in
accordance with the following formula:


                                      [***]

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

where:


                                      [***]


[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

The  agreed   annual   kilowatt-hours   (herein   refereed  as  "Agreed   Annual
Kilowatt-hours")refers to the Annual Minimum On-Grid Quantity [***] specified in
the Operation and Offtake Contract plus the auxiliary load of the Power Plant.

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

The On-grid  Tariff shall be estimated in Renminbi.  The US dollar portion shall
be converted at the median price of the official  foreign  exchange  rate on the
last business day prior to the estimation of the On-grid Tariff.

Full details and method of calculation are given in Article 3 and 4.







ARTICLE 3         METHOD OF THE ON-GRID TARIFF CALCULATION

                                      [***]

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.





                ARTICLE 4 ANNUAL ADJUSTMENT TO THE ON-GRID TARIFF


                                      [***]


[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.




             APPENDIX 5 METERING AND RECORDING OF ELECTRICAL ENERGY

1.   [***]

[***]  Filed separately with the Commission pursuant to a request for 
confidential treatment.
    

2.   Under normal operation,  electricity from the Power Plant to the Power Grid
     shall be  transmitted  through the --- KV step-up  substation  of the Power
     Plant----------- and the -- KV transmission lion.

3.   The  accuracy of  electrical  Energy  metering  devices  shall  comply with
     accuracy standards for Class 1 metering device, namely:

         Active Power Meter:                Grade 0.5
         Reactive Power Meter:              Grade 2.0
         PT:                                Grade 0.2
         CT:                                Grade 0.2

         The metering  devices shall be managed in accordance with  "Regulations
for  Management  of  Electric  Energy  Meters"  promulgated  by the  Ministry of
Electric Power.

4.   Under normal  operation,  the  auxiliary  power of the Power Plant shall be
     provided by the high-voltage station service transformer; in case of outage
     of the station service transformer, it shall be provided by the KV start-up
     transformer.

5.   The electricity transmitted from the Power Plant to the Power Grid shall be
     calculated in accordance with the following formula:

                                      [***]

[***]  Filed   separately  with  the  Commission   pursuant  to  a  request  for
confidential treatment.

         This  formula  shall  also be used for  calculate  the  Actual  On-Grid
Quantity.

6.   The electricity transmitted from the Power Grid to the Power Plant shall be
     the active power  quantity  measured by KWH meter  Breaker #4, #5 and #6 at
     the high voltage side of the start-up transformer.

7.   Party B and Party A shall jointly designate the operator of the Power Plant
     to be responsible for recording all KWH meters.  At noon of the last day of
     each month or at other time in the same day as agreed upon by the  Parties,
     Party B and Party A shall send  representatives  to the site to witness the
     recording. In case that any one party is absent at such an agreed time, the
     Party present shall  witness the  recording  alone,  and the result of such
     recording shall be binding on both Parties.

8.   Party B and  Party A shall  jointly  appoint  a  qualified  institution  to
     calibrate all meters and their auxiliary  equipment every Year. At the time
     when   calibration   takes   place,   Party  B  and  Party  A  shall   send
     representatives  to the site to witness the calibration.  In case any Party
     side is absent at such an agreed time,  the Party present shall witness the
     calibration  alone, and the result of such calibration  shall be binding on
     both Parties.

9.   If any Party finds,  for some  reason,  that the above  metering  device is
     inaccurate,  that party  shall  immediately  notify the other  Party of the
     situation.  The inaccurate metering device shall be tested and recalibrated
     promptly.  The output of electric  energy  during the period of  inaccuracy
     shall be  calculated  at a  temporary  metering  point  determined  by both
     Parties.


                 APPENDIX 6 PRE-OPERATION AND OPERATION SERVICES

PART I   PRE-OPERATION SERVICES

         Before  the  Commercial  Operation  Date  of the  units,  Party A shall
provide the following pre-operation services:

1        PREPARATION FOR OPERATION
         -------------------------

         Party A shall

1.1      in   consultation   with  the  Party  B  establish  the   maintenance
         and administrative management system for the Power Plant;

1.2      three months prior to the full start-up and interconnection of the Unit
         I of the Power Plant, formulate and submit to the Party B the operation
         and safety  codes  applicable  to the Power Plant  (provisional  copy).
         Within three months after  commencement of commercial  operation of the
         Power  Plant,  the above codes shall be improved  and  followed  during
         operation  of the Power  Plant.  Copies of such codes  shall be sent to
         Party B for the record;

1.3      develop a complete set of training  program for the Power Plant's O & M
         employees to familiarize themselves with the Power Plant and to fulfill
         their responsibility satisfactorily. The training program shall include
         seminars, site visits, and training given by Construction contractor of
         the Power Plant and equipment manufacturers. The training program shall
         be based on  technical  data and manuals  provided by the  construction
         contractor of the Power Plant,  including  information  about start-up,
         operation, basic maintenance, fire fighting and safety;

1.4      in consultation  with the Party B, formulate a criteria for recruitment
         of employees of the Power Plant, and recruit  qualified and experienced
         employees according to such criteria;

1.5      assist Party B in monitoring, operating and testing the Power Plant;

1.6      send to Party B and relevant operational (a) departments technical data
         and final drawings provided by the construction contractor of the Power
         Plant,  while the  original  copy of which  shall be debt in the safest
         place in the Power Plant;

1.7      in  consultation  with Party B,  formulate  a list of all  consumables,
         spare  parts,  tools  and  materials  needed by the  Power  Plant,  and
         purchase  the above  things  needed by the Power Plant during the first
         Year of commercial operation;

1.8      in consultation with Party B, formulate a detailed maintenance plan and
         methods for the first Year of commercial  operation of the Power Plant;
         and  in  consideration  of the  rights  and  obligations  of  Party  B,
         formulate a skeleton plan for the scheduled overhaul for the first two-
         Year commercial operation of the Power Plant.


2        START-UP, INTERCONNECTION, COMMISSIONING AND TEST
         -------------------------------------------------

         Party A shall

2.1      provide spare parts, consumables,  fuel oil, water, coal and lubricants
         necessary for timely, safe and stable start-up of the Units;

2.2      be  responsible  for  implementing  and  ensuring the Units to meet the
         conditions  for  interconnection  as  stipulated  in  Article  2 of the
         Interconnection Contract;

2.3      provide  sufficient  numbers of qualified and experienced  engineers to
         perform start-up,  commissioning,  interconnection  and 72-hour and 24-
         hour performance tests of the Units;

2.4      Provide all necessary  electrical energy for carrying out commissioning
         of the Power Plant (including those needed for start-up);

2.5      record in detail and keep all the data of the start-up and  performance
         tests of the Power Plant:

2.6      provide other necessary services.

PART II           OPERATION SERVICES

1        RECRUITMENT AND TRAINING
         ------------------------

         Party A Shall

1.1      ensure  the  required  personnel  of the  Power  Plant;  in case of any
         vacancy, recruit qualified and experienced staff;

1.2      provide  relevant class and site training for new  employees,  to train
         them to be qualified employees for their duties;

1.3      ensure the  continuity of training  programs,  the staff training shall
         include  safety  measures.  O & M procedures,  and  establish  relevant
         examination and promotion system;

1.4      provide other necessary services related to recruitment and training.

2        OPERATION OF THE POWER PLANT
         ----------------------------

2.1      Party A shall maintain, operate, test and inspect the Power Plant:

         1)       to keep the Power Plant in good  condition  during the term of
                  the Joint Venture Contract.

         2)       to maintain  high  availability  and  efficiency of generation
                  facilities of the Power Plant:

         3)       to minimize the  occurrence of accidents  and damages,  and to
                  minimize their duration.

2.2      provide  to the  Party B on a timely  basis  and at  monthly  intervals
         reports on operation,  repairs,  tests,  maintenance and examination of
         the Units;

2.3      carry out the  performance  test stipulated by the Ministry of Electric
         Power for similar thermal power plants;

2.4      ensure  that  the  Power  Plant  shall  abide by all  applicable  laws,
         regulations, safety rules and other stipulations.

2.5      perform  relevant  obligations  and  responsibilities  of the  Party  B
         related  to the  operation  of the  Power  Plant as  stipulated  in the
         "Interconnection Contract" and "Dispatch Contract"; if any reduction of
         power generation occurs due to Party A's  responsibility,  Party A (the
         Operator of the Power Plant) shall indemnify the Party B for the losses
         incurred by such reductions.  As the operator of the Power Plant, Party
         A shall  indemnify  the Party B for any penalties  under  Sections 3.7,
         3.11 and 8.2 of the Interconnection Contract ;

2.6      be responsible for daily  maintenance and overhaul as well as major and
         minor  repair,  and for  providing  planned  or  provisional  emergency
         maintenance;

2.7      make annual  generation  and  maintenance  plan in accordance  with the
         "Operation and Offtake Contract" and implement the same;

2.8      dispose of all the unnecessary materials and wastes of the Power Plant.

3.       MANAGEMENT
         ----------

         Party A shall

3.1      keep  the  Power  Plant  in  good  operation   condition  and  maintain
         appropriate level of spare parts reservation  according to good utility
         practice of similar thermal power plants;

3.2      manage the necessary maintenance of the Power Plant;

3.3      in the event of any  emergency or unusual  event  affecting  the normal
         operation of the Power Plant,  take all necessary  measures to minimize
         injury to persons and damage to the Power Plant and promptly  report to
         the  Party B the  nature of such  emergency  or  unusual  event and its
         consequences.

4.       PROCUREMENT
         -----------

         Party A shall

4.1      check regularly the demands for spare parts,  consumables and materials
         of the Power Plant (taking into account the designed life of equipment,
         actual overhaul records and any technical  changes to the Power Plant),
         and formulate  corresponding plans and make purchasements  according to
         these plans;

4.2      be responsible  for organizing the coal supply,  and ensure enough fuel
         for continuous,  steady and safe operation of the Power Plant, at least
         to meet the need of generating the Annual Minimum On-Grid Quantity.

5        STATEMENTS AND REPORTS
         ----------------------

         Party A shall, before delivery of the first Unit for operation, provide
suggestions on forms of the following  daily,  monthly and annual  reports,  and
determine the forms in consultation with the Party B.

5.1      DAILY REPORTS

         Party A shall  provide  the  Party B with  daily  reports  on the daily
operation of the Power Plant, including without limitation the following items:

         1)       net generation of each unit;

         2)       coal consumption of each Unit;

         3)       causes for deviation of each Unit from the daily load curve;

         4)       description of emergencies or unusual events resulting in 
                  deduction of power generation and personal injuries.

5.2      MONTHLY REPORTS

         Party A shall,  within the first 10 days of each month,  provide to the
Party B a monthly report on the performance of the Units for the previous month.
The report shall include, but not be limited to the following:

         1)       statistical statement on operation in the form required by the
                  Ministry of Electric Power;

         2)       major repair and maintenance activities carried out during the
                  previous month, and those planned for the next month;

         3)       expenses of the previous  month and those planned for the next
                  month;

         4)       statistical  statement  of safety and  accidents  of the Power
                  Plant during the previous month;

         5)       summary of unusual  events and  accidents  during the previous
                  month,  and measures  already taken by Party A to mitigate the
                  effects.

5.3      ANNUAL REPORT

         Party A shall,  within  60 days  after the end of each  calendar  Year,
submit to the JV Company an annual report which shall include but not be limited
to the following:

         1)       statistical summary of annual operation;

         2)       summary of repair and maintenance;

         3)       statistical summary of safety and accidents;

         4)       financial statement;

         5)       summary of any disputes relating to the Power Plant;

         6)       environmental monitoring;

         7)       other information reasonably required by Party B

5.4      OTHER REPORTS

         Party A shall provide:

         1)       a safety report  required by relevant  authority in connection
                  with personal injuries or damages of the Power Plant

         2)       other reports reasonably required by Party B;

6.       ACCESS TO THE POWER PLANT
         -------------------------

6.1      Party A shall  provide all necessary  working and living  facilities to
         the resident representatives of the Party B in the Power plant.

6.2      Party A shall  allow  representatives  or  consultants  from Party B to
         inspect and monitor the operation of the Power Plant at any time.

6.3      Party  A  shall,  upon  request  of  Party  B,  allow  Party  B or  its
         representatives to have access at any time to any information, data and
         records held by Party A.

7.       OTHER RESPONSIBILITY
         --------------------

         Party A shall be  responsible  for  responding  to other demands on the
Power Plant raised by relevant authorities in charge of electric power.





                         APPENDIX 7 NECESSARY INSURANCE

1        Third party Liability Insurance

2        Personal injury and Medical Insurance

3        Property All Risk Insurance ( Substitute Value)

4        Vehicle Insurance (Vehicles and the Third Party Liability Insurance)

5        Employer's Liability Insurance

6        Profit Loss  Insurance-Limit:  6 month After tax - capital - Return and
         US$ loan Expenses.

7        Water Transport and Land Transport Cargo Insurance

8        Boiler and Machinery  (including  construction  and operation  periods)
         Insurance

All  insurance  shall be bought  in  accordance  with the phase IV Wuhu  Project
Operation insurance Contract in type term, limits, deductibles. expect as noted.




                          APPENDIX 8 FUEL SPECIFICATION

         ITEM                                        VALUE

         1)  Alkyl 16 min                              50

         2)  Distillate temperature
               50%, oC, max                           300

               90%, oC, max                           355

               95%, oC, max                           365

         3)  Viscose, 20 oC, cst, max                 3-8

         4)  Residual carbon, (m/m)                   0.4
               10% Evaporation  Remains

         5)  Ash, %(m/m) max                        0.025

         6)  Sulfur contain, % max                    0.2

         7)  Water contain, % max                    mark

         8)  Flash point, oC, min                      60

         9)  Condensing point, oC, max                  0

         10) Copper corrosion, 50 oC, 3 hours   qualified
 
         11) Acid water dissolved                      no

         12) Actual colloidal, ml/100mg, max           70

         13) LHV, KJ/Kg                            43,100





                       APPENDIX 9 FUEL OIL SUPPLY CONTRACT

For this Appendix,  please  reference the Fuel Oil Supply  Contract  entered and
provided by Party A.