Free Stipulation - District Court of Federal Claims - federal

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 1 of 35

IN THE UNITED STATES COURT OF FEDERAL CLAIMS ) ) ) ) ) ) ) ) ) ) ) ) )

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. & SUBSIDIARIES, Plaintiff, v. THE UNITED STATES, Defendant.

No. 06-305 T Judge Marian Blank Horn

JOINT STATEMENT OF ISSUES OF FACT The Plaintiff, Consolidated Edison Company of New York and Subsidiaries, and the Defendant, the United States of America, pursuant to the Court's Scheduling Order revised August 31, 2007, and the Court's Order dated September 26, 2007, submit this Joint Statement of Issues of Fact. The Plaintiff and the Defendant agree that the following statement consists of all such issues of fact stated by either party. The parties reserve the right to argue, the appropriate weight, if any, to be given to these factual issues under applicable legal authorities. 1. What benefits or opportunities did Plaintiff receive, or could it reasonably expect

to receive, for its participation in the Transaction? When did Plaintiff receive, or could it reasonably expect to receive, the benefits or opportunities? What is the extent of these benefits or opportunities? 2. What burdens or risks, if any, did Plaintiff incur, or could it reasonably expect to

incur, on account of its participation in the Transaction? When did Plaintiff incur, or could it reasonably expect to incur, any burdens or risks? What is the extent of these burdens or risks? What steps, if any, were taken to mitigate these burdens or risks?

NYDB01 17471611 03-Oct-07 11:22

1

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 2 of 35

3.

What benefits or opportunities did EZH receive, or could it reasonably expect to

receive, for its participation in the Transaction? When did EZH receive, or could it reasonably expect to receive, the benefits or opportunities? What is the extent of these benefits or opportunities? 4. What burdens or risks, if any, did EZH incur, or could it reasonably expect to

incur, on account of its participation in this Transaction? When did EZH incur, or could it reasonably expect to incur, any burdens or risks? What is the extent of these burdens or risks? What steps, if any, were taken to mitigate or eliminate these burdens or risks? 5. As of December 15, 1997, what factors, economic or otherwise, could reasonably

be expected to bear on whether or not EZH will exercise its Sublease Purchase Option on January 2, 2018? 6. As of December 15, 1997, what was the likelihood, if knowable, that EZH would

exercise its Sublease Purchase Option on January 2, 2018? 7. As of December 15, 1997, what was the likelihood, if knowable, that Plaintiff

would exercise its Sublease Renewal Option on January 2, 2018? 8. As of December 15, 1997, what was the likelihood, if knowable, that Plaintiff

would exercise its Sublease Retention Option on January 2, 2018? 9. As of December 15, 1997, what were the expectations of value regarding

Plaintiff's leasehold interest in the RoCa3 Facility during the period after the expiration of the Sublease Basic Term? As of December 15, 1997, what were the expectations of value regarding Plaintiff's leasehold interest in the RoCa3 Facility during the period after the expiration of the Sublease Renewal Term?

NYDB01 17471611 03-Oct-07 11:22

2

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 3 of 35

10.

Whether the Transaction, objectively, had a reasonable possibility of, or was

likely to produce, a profit to Plaintiff absent claimed tax benefits? 11. Whether, and to what extent, if any, the Transaction has practical economic

effects aside from the creation of any tax benefits? 12. 13. prior to entry? 14. What were the circumstances surrounding Plaintiff's business plans and strategy What were Plaintiff's motivations in entering into the Transaction? What steps did Plaintiff take to evaluate the RoCa3 Facility and the Transaction

during the relevant time period, including, with regard to deregulation in the power industry? How were such plans carried out? 15. 16. What were the circumstances surrounding Plaintiff's entry into the Transaction? Whether the Transaction qualified for leveraged lease accounting for financial

reporting purposes? Whether or not Plaintiff reasonably believed that the Transaction qualified for leveraged lease accounting?" 17. What are the effects of leveraged lease accounting in the Transaction for financial

reporting purposes? 18. Whether, and to what extent, if any, the Transaction contains features or

components similar to other leveraged lease transactions? 19. 20. 21. What are the circumstances surrounding the loan from HBU to Plaintiff? Whether Plaintiff possesses genuine attributes of traditional lessor status? What are the circumstances surrounding the destruction, if any, of records

relevant to the Court's determination of disputed facts and issues?

NYDB01 17471611 03-Oct-07 11:22

3

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 4 of 35

In accordance with the Court's Order the parties offer the following glossary list of terms and acronyms.

ABB

"ABB" refers to Asea Brown Boveri AG & Co. Leasing KG, which is the lessor under the German Leases.

ABC

"ABC" refers to a software program for optimizing intricately structured financial transactions and comparing financial alternatives. It supports many types of models, including leveraged leasing, lease-versus-buy, project finance, debt and revenue optimization, securitization, and portfolio analysis.

ABN Acceptable Substitute Collateral

"ABN" refers to ABN AMRO Bank N.V. "Acceptable Substitute Collateral" refers to other forms of security that CEL is permitted under the lease to use, in lieu of Lease Collateral Deposit or Trustee Treasury Collateral, to secure a portion of the Final Basic Rent Payment owed EZH on February 24, 2041 in the event that the Sublease Renewal Option or Retention Option is exercised.

Acceptable Substitute Credit Protection

"Acceptable Substitute Credit Protection" refers to alternative security that EZH could elect to provide to CEL Trust and HBU if the rating of ABN's long-term unsecured senior debt obligations falls below A2 by Moody's or A by S&P.

NYDB01 17471611 03-Oct-07 11:22

4

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 5 of 35

Access Agreement

"Access Agreement" refers to the Access Agreement (RoCa Facility Trust No. 2) dated as of December 12, 1997, between EZH and WTC, as Trustee, which Agreement provides that EZH grants an easement to CEL Trust as necessary for the leasing and operation of the Facility.

Adjusted Undivided Interest

"Adjusted Undivided Interest" means for any Facility User or Leaseholder, initially their Undivided Interest Percentage and thereafter the initial Adjusted Undivided Interest Percentage as adjusted upwards or downwards pursuant to the provisions of the Facility Operating Agreement. CEL Trust's initial Adjusted Undivided Interest Percentage is the same as its Undivided Interest, i.e, the 47.468354430380% undivided interest in the RoCa3 Facility granted to the CEL Trust pursuant to the Lease Agreement.

Anchor & Cluster AREVA Arthur Andersen

"Anchor & Cluster" refers to an investment strategy used by Con Edison NY. "AVERA" refer to a successor entity to a portion of Duke Engineering. "Arthur Andersen" was an accounting firm that provided advice regarding the treatment of the Transaction for financial accounting purposes.

Banc One Banc One Trust

"Banc One" refers to Banc One Leasing Corp. "Banc One Trust" refers to the RoCa Facility Trust No. 1, which was formed for the benefit of Banc One to enter into a lease agreement and sublease agreement as well as other agreements that related to the portion of the RoCa3 Facility that was not part of the Transaction with the CEL Trust.

NYDB01 17471611 03-Oct-07 11:22

5

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 6 of 35

Base Load Power Plant

"Base Load Power Plant" refers to a plant that supplies a continuous level of electricity, as contrasted to peaking plants, which supply energy at a variable level.

Bayerische Landesbank

"Bayerische Landesbank" refers to Bayerische Landesbank Girozentrale, Luxembourg Branch, which was the issuer of the original Letter of Credit.

Board of Trustees

"Board of Trustees" refers to the Board of Trustees of Con Edison NY (the equivalent of a board of directors).

bundled

"Bundled" refers to the practice of the same legal entity both generating electricity and distributing that electricity to its customers.

Burdensome Buyout Event

"Burdensome Buyout Event" refers to events, and not intentionally caused by EZH, defined in the Participation Agreement and that make it illegal or more expensive for EZH to continue with the Transaction and allow EZH to choose to terminate the Sublease by assuming CEL Trust's obligations under the Lease, and paying to CEL Trust the Burdensome Buyout Value.

Burdensome Buyout Value

"Burdensome Buyout Value" refers to the payment that EZH is required to make in the event that it chooses to terminate the Sublease as the result of a Burdensome Buyout Event.

Capstar CECONY

"Capstar" refers to Capstar Partners, an advisor to EZH on the transaction. "CECONY" refers to Consolidated Edison Company of New York, Inc. and its subsidiaries.

NYDB01 17471611 03-Oct-07 11:22

6

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 7 of 35

CED

"CED" refers to Consolidated Edison Development, Inc., a subsidiary of Con Edison NY that was originally named Gramercy Development, Inc. ("GDI"). The activities of CED are not subject to PSC regulation.

CEE

"CEE" refers to Consolidated Edison Energy, Inc., an unregulated subsidiary of Con Edison NY that was formed to market specialized energy capacity and risk management services to wholesale customers in the Northeast and midAtlantic states.

CEI

"CEI" refers to Consolidated Edison, Inc. ("CEI"), a widely held and publicly traded company on the New York Stock Exchange that is the ultimate parent company of Con Edison NY, CED and CEL.

CEL

"CEL" refers to Consolidated Edison Leasing, Inc., a special purpose company formed for the purpose of serving as the grantor in the RoCa Facility Trust No. 2.

CEL Trust

"CEL Trust" refers to the RoCa Facility Trust No. 2, which was formed for the benefit of CEL to enter into the Lease Agreement and Sublease Agreement as well as other agreements that were involved in the Transaction.

CEPALCO

"CEPALCO" refers to Cagayan Electric Power and Light Company, an energy distribution company in the Philipines.

NYDB01 17471611 03-Oct-07 11:22

7

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 8 of 35

CES

"CES" refers to Consolidated Edison Solutions, Inc., formerly ProMark Energy, Inc., an unregulated subsidiary of Con Edison NY that was formed to provide electricity and natural gas to commercial and residential customers in the Northeast.

CHP Clifford Chance

"CHP" refers to a combined heat and power plant. Clifford Chance was Dutch Counsel for EZH, Stichting Rotte, Stichting Ijssel, Stichting Roca with respect to the RoCa3 transaction.

Closing Date Closing Funding Memorandum

"Closing Date" refers to December 15, 1997. "Closing Funding Memorandum" refers to the Closing Memorandum (RoCa Facility Trust No. 2) dated the Closing Date among EZH, [fill in] providing for various payments related to the Transaction due on the Closing Date.

COGEN

"COGEN" is sometimes used to refer to cogeneration, which is a process that involves the simultaneous production of both electricity and some other product, often heat or steam.

Cogeneration

"Cogeneration" refers to a process that involves the simultaneous production of both electricity and some other product, often heat or steam.

Common Facilities

"Common Facilities" refers to the improvements known as the pumproom, the office building containing, among other things, the control room, the gas receiving station and parking spaces, and generally described in the certificate EZH delivered pursuant to Section 3(t) of the Participation Agreement.

NYDB01 17471611 03-Oct-07 11:22

8

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 9 of 35

Common Facilities Use Agreement

"Common Facilities Use Agreeement" refers to the Common Facilities Use Agreement dated as of December 15, 1997, among N. V. Electriciteitsbedrijf Zuid-Holland and Wilmington Trust Company, a Trustee (ROCA Facility Trust No. 1 [Banc One Trust]), and Wilmington Trust Company, as Trustee (ROCA Facility Trust No. 2 [CEL Trust]) to establish their respective rights and obligations relating to the use of the Common Facilities.

Competitive Opportunities Proceeding

"Competitive Opportunities Proceeding" refers the proceedings of the PSC to evaluate ways the electric service industry could be restructured due to the increasing competitive options available to consumers.

Con Edison NY

"Con Edison NY" refers to Consolidated Edison Company of New York, Inc. and its subsidiaries.

Consolidated Edison Energy, Inc.

"Consolidated Edison Energy, Inc." refers to an unregulated subsidiary of Con Edison NY that was formed to market specialized energy capacity and risk management services to wholesale customers in the Northeast and midAtlantic states.

Consolidated Edison Solutions, Inc.

"Consolidated Edison Solutions, Inc.", formerly ProMark Energy, Inc., refers to an unregulated subsidiary of Con Edison NY that was formed to provide electricity and natural gas to commercial and residential customers in the Northeast.

Cornerstone

"Cornerstone" refers to Cornerstone Financial Advisors L.P., an advisor on the Transaction.

NYDB01 17471611 03-Oct-07 11:22

9

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 10 of 35

Corporate Planning

"Corporate Planning" refers to a department within Con Edison NY that engaged in corporate planning.

CPC

"CPC" refers to the Corporate Policy Committee of senior executives of Con Edison NY.

CSFB Custody Account

"CSFB" refers to Credit Suisse First Boston. "Custody Account" means CSFB's account at Citibank, New York ABA 021000089 Acct. No. 2F4A2 maintained pursuant to the Custody Agreement as a custodial account in the name of EZH subject to a lien for the benefit of CEL Trust.

Custody Agreement

"Custody Agreement" refers to the Custody Agreement (RoCa Facility Trust No. 2), dated as of December 15, 1997, among Stichting IJssel, WTC, CEL, EZH, and CSFB, to secure EZH's obligations under the Sublease and other Operative Documents.

Davis Polk Wardwell

Davis Polk Wardwell was US counsel for Bayersiche Landesbank and HBU with respect to the RoCa3 transaction.

Debt Defeasance Deposit Deloitte Duke Engineering E.On/E.On Benelux/E.On Benelux Generation

"Debt Defeasance Deposit" refers to the Custody Account.

"Deloitte" refers to Deloitte & Touche LLP. "Duke Engineering" refers to Duke Engineering & Services. "E.On" or "E.On Benelux" or "E. On Benelux Generation" refers to a successor in interest to Preussen Elektra, who acquired EZH.

NYDB01 17471611 03-Oct-07 11:22

10

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 11 of 35

EBO

"EBO" is an acronym for Early Buyout Option. In this case, EBO refers to the Sublease Purchase Option.

EEGSA

"EEGSA" refers to Enpresa Electrica de Guatemala, S.A. is Guatemala's largest distribution utility.

EIF

"EIF" refers to Energy Investors Fund, who sponsored Project Finance Fund III, LP, a fund in which CED invested.

ENECO

"ENECO" refers to N.V. Eneco. a gas distribution company in the Netherlands in the mid to late 1990s, CED made bid, which was accepted on a transaction involving ENECO, but withdrew before the transaction was completed.

Entitlement Shares

"Entitlement Shares" equal any Leaseholder's Adjusted Undivided Interest Percentage and a Facility User's Adjusted Undivided Interest.

EPO

"EPO" is an acronym for Early Buyout Option. In the case, EBO refer to the Sublease Purchase Option.

EPON

"EPON" refers to Elektriciteits-Produktiemaatschappij O+B41ost- en NoordNederland. CED considered a lease-leaseback transaction involving EPON but decided not to pursue it.

Equity Investor

"Equity Investor," in this context, refers to the person making the equity investment to enter into the transaction, i.e., CEL.

EZH

"EZH" refers to Electriciteitsbedrijf Zuid-Holland. EZH owned the RoCa3 Facility.

NYDB01 17471611 03-Oct-07 11:22

11

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 12 of 35

Facility

"Facility" refers to the Unit, the Common Facilities, the Cooling Water Station, the Cooling Water Tower, and the Network, including the Facility Personal Property (such as desks, computers, and the like), and any and all Modifications thereto and Parts thereof.

Facility Operating Agreement

"Facility Operating Agreement" refers to the Facility Operating Agreement dated as of December 15, 1997, among EZH, WTC, as Trustee (ROCA Facility Trust No. 1 [Banc One Trust]), and WTC, as Trustee (ROCA Facility Trust No. 2 [CEL Trust]) to establish their respective rights and obligations in respect of matters relating to the operation of the RoCa3 Facility during the Lease Term.

Facility Operating Agreement Default

"Facility Operating Agreement Default" refers to any default by the Operator under the Facility Operating Agreement that remains uncured after appropriate notice.

Facility Support Agreement

"Facility Support Agreement" refers to the Facility Support Agreement dated as of December 15, 1997, among EZH and WTC, as Trustee (ROCA Facility Trust No. 1 [Banc One Trust]), and WT, as Trustee (ROCA Facility Trust No. 2 [CEL Trust]) in order to make the Common Facilities available for the operation of the other units that shared the site.

NYDB01 17471611 03-Oct-07 11:22

12

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 13 of 35

Facility User

"Facility User" refers to (i) any Lessee (except if such Lessee has subleased its Undivided Interest to another Person) or any Person during the time, and to the extent its subleasing an Undivided Interest; (ii) EZH after the termination of either Trustee's Lease; or (iii) EZH or any other Person during the time such person has been given the rights to market and sell Energy from the RoCa3 facility.

FAS FASB FASB 13

"FAS" is an acronym for "Financial Accounting Standards." "FASB" is an acronym for "Financial Accounting Standards Board." "FAS 13" refers to the Financial Accounting Standard that addresses the financial accounting for leveraged lease transactions.

Final Basic Rent Payment

"Final Basic Rent Payment" refers to the payment in the amount of approximately $831.5 million that was the second installment that the CEL Trust was required to pay EZH under the Lease Agreement on the Lease Termination Date, i.e, February 24, 2041.

Final Sublease Basic Rent

"Final Sublease Basic Rent" refers to the payment in the amount of $7,362,950.53 payable by EZH to CEL Trust under the Sublease Agreement due on January 2, 2018.

Finance Committee GAAP

A committee of the Board of Trustees of Con Ed New York. "GAAP" is an acronym for "Generally Accepted Accounting Standards."

NYDB01 17471611 03-Oct-07 11:22

13

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 14 of 35

Gasunie

The Dutch owner and manager of the high pressure natural gas grid in the Netherlands. Gasunie provides the natural gas used to run the RoCa 3 facility.

GDI

"GDI" refers to Gramercy Development, Inc., a subsidiary of Con Edison NY that later changed its name to Consolidated Edison Development, Inc. ("CED").

GENOR

"GENOR" refers to Generadora Electrica del Norte, Limitada, a relatively small power facility (40 MW) in Eastern Guatemala. CED indirectly acquired an approximate 44% ownership interest in GENOR.

German Equipment

"German Equipment" refers to a steam turbine generator and a gas turbine generator in the RoCa3 Facility that are subject to the German Leases.

German Leases

"German Leases" refer to two leases under German law with ABB for the German Equipment.

Gramercy Development, Inc.

Gramercy Development, Inc. ("GDI") refers to a subsidiary of Con Edison NY that later changed its name to Consolidated Edison Development, Inc. ("CED").

Greenfield Projects

"Greenfield Projects" refer to projects where the project needs to be built in contrast to projects where one purchases an existing asset.

HBU

"HBU" refers to Hollandsche Bank-Unie N.V. HBU makes the HBU Loan to CEL Trust.

NYDB01 17471611 03-Oct-07 11:22

14

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 15 of 35

HBU Loan

"HBU Loan" refers to the non-recourse loan from Hollandsche Bank-Unie N.V. ("HBU") in the amount of $80,792,270.36 at 7.10% interest to the CEL Trust.

Hurdle Rate

Hurdle Rates" or "Hurdle Rates" are a minimum rate or rates of return sometimes used by companies to determine whether to undertake particular project.

IEP

"IEP" refers to International Energy Partners, L.P. CED entered into an agreement with IEP to participate in certain international energy infrastructure investment opportunities identified by IEP.

Ijssel Agreement

"IJssel Agreement" refers to the IJsell Agreement (RoCa Facility Trust No. 2), dated as of December 15, 1997, among Stichting Ijssel, WTC, CEL, and Stichting Roca, to provide security for EZH's obligations under the Operative Documents.

Ijssel Collateral

"IJssel Collateral" refers to a first priority security interest granted by Stichting IJssel in the Account, the U.S. Government Obligations, and any earnings thereon.

Ijssel Deposit

"IJssel Deposit" refers to all U.S. Government Obligations and any funds in the Custody Account, together with the proceeds thereon.

NYDB01 17471611 03-Oct-07 11:22

15

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 16 of 35

Ijssel Foundation

"IJssel Foundation" refers to Stichting IJssel, [a Dutch legal entity], EZH established to purchase debt instruments, to make deposits, and to grant security interests in its assets to third parties to secure certain of EZH's payment obligations under the Sublease and other Operative Documents.

Incremental Collateral Pledge

"Incremental Collateral Pledge" refers to U.S. Government Securities or certain corporate bonds in a custodial account that shall be established by CEL, for the benefit of CEL, with a security interest in EZH's favor to secure a portion of the Final Basic Rent Payment owed EZH on February 24, 2041, in the event that the Retention Option is exercised, unless CEL provides Acceptable Alternative Collateral.

Initial Basic Rent Payment

"Initial Basic Rent Payment" or "Prepayment Amount" refers to the payment in the amount of approximately $120.1 million that was the first installment of rent that the CEL Trust was required to pay EZH under the Lease Agreement on the Closing Date.

Investor Defeasance Deposit Investor Secured Obligations IRR KEMA

"Investor Defeasance Deposit" refers to the Ijssel Deposit.

"Investor Secured Obligations" refers all of EZH's, as Sublessee's, and the IJssel Foundation's, obligations to CEL under the Operative Documents. IRR is an acronym for Internal Rate of Return. A company founded and owned by the four Licensed Producers, SEP and a large number of distribution companies to be their technology consultant.

NYDB01 17471611 03-Oct-07 11:22

16

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 17 of 35

Lease Agreement or Lease

"Lease Agreement" or "Lease" refers to the Lease Agreement (RoCa Facility Trust No. 2) dated as of December 15, 1997, between EZH and WTC, as Trustee, which provides that the CEL Trust is the Lessee of a 47.468354430380% undivided interest (the Undivided Interest) in the RoCa3 facility for 43.2 years (the Lease Interest), commencing with the Closing Date (i.e., December 15, 1997) and ending on the Lease Termination Date (i.e., February 24, 2041) (the Lease Term).

Lease Certificate of Acceptance

"Lease Certificate of Acceptance" refers to the Lease Certificate of Acceptance (RoCa Facility Trust No. 2) dated December 12, 1997, which provides that EZH delivered and leased to CEL Trust under the Lease and CEL Trust accepted and leased the Undivided Interest from EZH under the Lease, for all purposes of the Lease.

Lease Collateral Deposit

"Lease Collateral Deposit" refers to a desposit CEL shall make, unless it provides Acceptable Alternative Collateral, and pledge to EZH to secure a portion of the Final Basic Rent Payment owed it on February 24, 2041 in the event that the Sublease Renewal Option is exercised.

Lease Rent

"Lease Rent" refers to the amounts payable by CEL Trust to EZH under the Lease Agreement.

Lease Term

"Lease Term" refers to the period commencing with the Closing Date (i.e., December 15, 1997) and ending on the Lease Termination Date (i.e., February 24, 2041) under the Lease Agreement

NYDB01 17471611 03-Oct-07 11:22

17

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 18 of 35

Lease Termination Date Leaseholder

"Lease Termination Date" is February 24, 2041.

"Leaseholder" refers to any Trustee (CEL Trust or Banc One Trust) or EZH, to the extent its rights to the RoCa3 Facility are not subject to a lease by either Trustee.

Lessee Lessor Letter of Credit

The Participation Agreement provides that "Lessee" refers to CEL Trust. The Participation Agreement provides that "Lessor" refers to EZH. "Letter of Credit" refers to one or more letters of credit in favor of CEL Trust and CEL, which the Participation Agreement provides that EZH is required to maintain for the benefit of CEL Trust and CEL, to secure obligations of EZH to CEL Trust and CEL under the Operative Documents.

Licensed Producer

"Licensed Producer" is a company that qualifies as such under the laws governing electric utilities in the Netherlands. EZH is a Licensed Producer

Licensed Producer

"Licensed Producer" refers to one of four regulated electricity production companies licensed by the Dutch government to generate the public supply of electricity in the Netherlands during 1997. EZH was one of the four Licensed Producers in the Netherlands in 1997.

NYDB01 17471611 03-Oct-07 11:22

18

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 19 of 35

Lien of the Loan Agreement

"Letter of Credit" refers to one or more letters of credit in favor of CEL Trust and CEL, which the Participation Agreement provides that EZH is required to maintain for the benefit of CEL Trust and CEL, to secure obligations of EZH to CEL Trust and CEL under the Operative Documents. Lien of the Loan Agreement" refers to a lien CEL Trust assigns to HBU on, among other things, the Lease Agreement, the Sublease Agreement, all rents, profits, revenues and other income from the property subjected to the Lien of the Loan, CEL Trust's right to receive rent from EZH, to secure amounts due with respect to all Loan Certificates issued under the Loan and Security Agreement.

LILO Loan and Security Agreement

"LILO" is an acronym for "Lease-In, Lease-Out." "Loan and Security Agreement" (RoCa Facility Trust No. 2) dated as of December 12, 1997, among WTC, as Trustee and HBU, which provides for the non-recourse loan from HBU in the amount of $80,792,270.36 at 7.10% interest to the CEL Trust.

Loan Certificate

"Loan Certificate" refers to the Loan Certificate due January 2, 2027 (RoCa Facility Trust No. 2) dated December 15, 1997, for the HBU Loan.

Loeff Claeys Verbeke

Loeff Claeys Verbeke was Dutch counsel to Con Ed. with respect to the Transaction.

Loyens & Volkmaars

Loyens & Volkmaars was Dutch counsel to EZH with respect to the Transaction.

NYDB01 17471611 03-Oct-07 11:22

19

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 20 of 35

Maasvlakte

Maasvlakte was a coal fired plant owned by EZH in the Netherlands in the late 1990s.

MEGA

"MEGA" refers to Maatsschapppij voor Elektriciteit en Gas Limburg. CED considered a lease-leaseback transaction involving MEGA but its proposal was not accepted.

megawatt

"Megawatt" or "MW" is a measure of electricity. The output of electrical generating facilities, such as the RoCa3 Facility, is often measured in megawatts.

Megawatt hour

"Megawatt hour" or "MWh" is a basic unit of electrical energy equal to one megawatt of power used for one hour.

MW

"MW" is an abbreviation for megawatt, which is a measure of electricity equal to one million watts. The output of electrical generating facilities, such as the RoCa3 Facility, is often measured in megawatts.

MWh

"MWh" is an abbreviation for megawatt hour, which is a basic unit of electrical energy equal to one megawatt of power used for one hour.

Nauta Dutilh

Nauta Dutilh was Dutch counsel to HBU and ABN AMRO with respect to the Transaction.

Net Present Value

Net Present Value" as the present value of a stream of cash flows using assumed discount rate and calculated as of a particular date.

Network

Network refers to the pipelines from and to the Unit for the delivery of CO2.

NYDB01 17471611 03-Oct-07 11:22

20

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 21 of 35

NUON

"NUON" refers to NUON Energie-Onderneming voor Gelderland, Friesland en Flevoland, a utility serving the Provinces of Gelderland, Friesland and Flevoland located in the central portion of the Netherlands. CED entered into a lease-leaseback transaction with NUON.

NPV Benefit

"NPV Benefit" means the amount expressed as a percentage of the Value of the Undivided Interest obtained by subtracting from the Prepayment Amount the sum of (i) the net present value as of the Closing Date of the Equity Portion of the scheduled Sublease Basic Rent and of the Equity Portion of the Sublease Purchase Option Price, in each case discounted at the Discount Rate, and (ii) the net present value as of the Closing Date of the Debt Portion of the scheduled Sublease Basic Rent and the Debt portion of the Sublease Purchase Option Price, in each case discounted at the Discount Rate.

O&R

"O&R" refers to Orange & Rockland, Inc, a regulated power subsidiary of CEI located in New York.

Offering Memorandum

"Offering Memorandum" refers to a document providing information about an investment that is sometimes provided to potential investors. No offering memorandum was prepared for the Transaction.

NYDB01 17471611 03-Oct-07 11:22

21

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 22 of 35

Operative Documents

"Operative Documents" are the agreements listed in the Participation Agreement by which EZH and CEL, directly or through the CEL Trust, along with other third parties, entered into the Transaction, including, among others: (1) the Participation Agreement; (2) the Lease Agreement; (3) the Lease Certificate of Acceptance; (4) the Sublease Agreement; (5) the Sublease Certificate of Acceptance; (6) the Loan and Security Agreement; (7) the Sublessee Loan Agreement, (8) the Tax Indemnity Agreement; (9) the IJssel Agreement; (10) the Rotte Agreement; (11) the Sublease Deposit, Pledge and Repledge Agreement; (12) the Sublessee Pledge and Security Agreement; (13) the Custody Agreement; (14); the Facility Operating Agreement; (15) the Common Facilities Use Agreement; (16) the Facility Support Agreement; and (17) the Access Agreement.

Operator

"Operator" refers to EZH, in its capacity as Operator of the Facility, and its successors as such Operator in accordance with Section 2.1 of the Facility Operating Agreement.

Oppenhoff & Radler

Oppenhoff & Radler was German counsel to Con Ed and HBU with respect to the RoCa3 transaction.

Participation Agreement

"Participation Agreement" refers to the Participation Agreement (RoCa Facility Trust No. 2), dated as of December 15, 1997 among EZH, CEL, HBU and WTC which is an umbrella agreement containing general conditions, representations and covenants of the parties in the Transaction and the events that will occur at the closing of the Transaction.

NYDB01 17471611 03-Oct-07 11:22

22

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 23 of 35

Payment Obligations

"Payment Obligations" refers either to payments that Stichting IJssel agrees to make under the IJssel Agreement or payments that Stichting Rotte agrees to make under the Rotte Agreement.

Planning and Environmental Committee

"Planning and Environmental Committee" refers to the Planning and Environmental Committee of the Board of Trustees of Con Edison NY, which would review plans for Con Edison NY's future actions, including Con Edison NY's response to the deregulation process, provide advice and consent to the management of Con Edison NY regarding such plans, and submit recommendations to the Board of Trustees of Con Edison NY regarding such plans.

Premature Terminations

"Premature Terminations" refers to events that could result in a termination of the the Sublease to EZH prior to the expiration of the Sublease Term.

Prepayment Amount

"Prepayment Amount" or "Initial Basic Rent Payment" refers to the payment in the amount of approximately $120.1 million that was the first installment of rent that the CEL Trust was required to pay EZH under the Lease Agreement on the Closing Date.

Preussen Elektra

Preussen Elektra was the company that acquired EZH, see E.On/E.On Benelux/E.On Benelux Generation.

Price Waterhouse

"Price Waterhouse" refers to Price Waterhouse, LLP, an accounting firm that provided advice regarding the treatment of the Transactions for financial accounting purposes.

NYDB01 17471611 03-Oct-07 11:22

23

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 24 of 35

Pricing Runs

"Pricing Runs" refers to the output of financial software optimization programs, such as the ABC software program, that are used throughout the leasing industry to structure and price transactions.

PSC

"PSC" refers to the New York Public Service Commission, which is responsible for regulating the power industry in the State of New York.

PSEG Resources, Inc.

PSEG Resources, Inc. was a subsidiary of PSEG (Public Service Enterprise Group), a co-investor with Con Ed in the NUON transaction.

PW

"PW" refers to Price Waterhouse, an accounting firm that provided advice regarding the treatment of the Transactions for financial accounting purposes.

Reimbursement Agreement

"Reimbursement Agreement" refers to the Reimbursement Agreement between Bayerische and EZH.

RoCa Facility Trust No. 1

"RoCa Facility Trust No. 1" is the same as the Banc One Trust and refers to the trust, which was formed for the benefit of Banc One to enter into a lease agreement and sublease agreement as well as other agreements that related to the portion of the RoCa3 Facility that was not part of the Transaction with the CEL Trust.

RoCa Facility Trust No. 2

"RoCa Facility Trust No. 2" is the same as the CEL Trust and refers to the trust, which was formed for the benefit of CEL to enter into the Lease Agreement and Sublease Agreement as well as other agreements that were involved in the Transaction

NYDB01 17471611 03-Oct-07 11:22

24

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 25 of 35

RoCa3 Facility

"RoCa3 Facility" refers to a power generation facility and related property located near Rotterdam, The Netherlands, that is the subject of this transaction. All of the property included in the definition of Facility is included as part of this definition.

ROE Rotte Agreement

"ROE" is an acronym for Return on Equity "Rotte Agreement" refers to the Rotte Agreement (RoCa Facility Trust No. 2), dated December 15, 1997, among EZH, Stichting Rotte, Stichting Roca and WTC to provide security for EZH's obligations under the Operative Documents.

Rotte Foundation

"Rotte Foundation" refers to Stichting Rotte [a Dutch legal entity], EZH established to purchase debt instruments, to make deposits, and to grant security interests in its assets to third parties to secure EZH's payment obligations under the Sublease and other Operative Documents.

Secured Amounts

"Secured Amounts" refer to the amounts owed by CEL Trust to HBU pursuant to the Loan Agreement and Loan Certificates, not in excess of the amount of Sublease Rent required to be paid pursuant to the terms of the Sublease Agreement.

SEP

"SEP" refers to N.V. Samenwerkende Elektriciteits Produktiebedrijven, an entity responsible for coordinating the Licensed Producers in the Netherlands in 1997. In that year, the shares of SEP were owned by the four Licensed Producers, which includes EZH. They also owned and managed the high voltage grid in 1997.

NYDB01 17471611 03-Oct-07 11:22

25

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 26 of 35

Shearman & Sterling

Shearman & Sterling was a US law firm that represented Con Edison NY with respect to the transaction.

Sigma Energy SILO Stichting IJssel

Sigma Energy is a successor entity to a portion of Duke Engineering. "SILO" is an acronym for "Sale-In, Lease-Out." "Stichting IJssel" refers to Stichting IJssel, a stichting (foundation) established by Deed of Establishment of Stichting Ijssel, having its registered office in The Hague.

Stichting Roca

"Stichting Roca" refers to Stichting Roca, a stichting (foundation) established by Deed of Establishment of Stichting Roca, having its registered office in The Hague.

Stichting Rotte

"Stichting Rotte" refers to Stichting Rotte, a stichting (foundation) established by Deed of Establishment of Stichting Rotte, having its registered office in The Hague.

Strandable Costs

"Strandable Costs" refer to those costs incurred by utilities that may become unrecoverable ("stranded") during the transition from regulation to a competitive market for electricity.

Stranded Costs

"Stranded Costs" refer to those costs incurred by utilities that become unrecoverable during the transition from regulation to a competitive market for electricity.

NYDB01 17471611 03-Oct-07 11:22

26

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 27 of 35

STRIPS

STRIPS is an acronym for Separate Trading of Registered Interest and Principal of Securities. "Treasury Strips" refer to zero-coupon treasury bonds with a face value payable at maturity. Treasury Strips are purchased at a discount from the face value at maturity and promise a fixed rate of return for the life of the security called the yield to maturity.

Sublease Agreement or Sublease

"Sublease Agreement" or "Sublease" refers to the Sublease Agreement (RoCa Facility Trust No. 2) dated as of December 12, 1997, between WTC, as Trustee, and EZH, which, in conjunction with Appendix A of the Participation Agreement, provides that CEL Trust leases the Undivided Interest in the RoCa3 Facility to EZH for a period of 20.1 years (the "Sublease Basic Term"), commencing on the Closing Date (i.e., December 15, 1997) and expiring on the Sublease Basic Termination Date (i.e., January 2, 2018).

Sublease Basic Rent

"Sublease Basic Rent" refers to the amounts payable by EZH to CEL Trust under the Sublease Agreement during the Sublease Basic Term (i.e., until January 2, 2018).

Sublease Basic Term

"Sublease Basic Term" refers to the period commencing on the Closing Date (i.e., December 15, 1997) and expiring on the Sublease Basic Termination Date (i.e., January 2, 2018).

Sublease Basic Termination Date

"Sublease Basic Termination Date" is January 2, 2018.

NYDB01 17471611 03-Oct-07 11:22

27

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 28 of 35

Sublease Certificate of Acceptance

"Sublease Certificate of Acceptance" refers to the Sublease Certificate of Acceptance (RoCa Facility Trust No. 2) dated December 12, 1997, which provides that CEL Trust delivered and leased to EZH under the Sublease and EZH accepted and leased the Undivided Interest from CEL Trust under the Sublease, for all purposes of the Sublease.

Sublease Deposit

"Sublease Deposit" refers to a deposit of the Sublease Deposit Amount by the Rotte Foundation with ABN, together with all interest accrued thereon.

Sublease "Sublease Deposit Amount" or "Sublease Payment Amount" refers to a Deposit Amount payment of $80,792,270.36 that the Rotte Agreement provides EZH shall pay to the Rotte Foundation on the Closing Date. Sublease Deposit, Pledge and Repledge Agreement "Sublease Deposit, Pledge and Repledge Agreement" refers to the Sublease Deposit, Pledge and Repledge Agreement (Roca Facility Trust No. 2) dated December 15, 1997, among Stichting Rotte, ABN, WTC, EZH, and HBU, which provides Security for EZH's obligations under the Operative Documents. Sublease Early "Sublease Early Purchase Option Event" refers to CEL's (or an affiliate of Purchase Option Event CEL's) acquisition of, merger or consolidation with, or purchase of a competitor of EZH that triggers EZH's right to purchase CEL Trust's Lease Interest pursuant to section 9(c) of the Sublease. Sublease Facility Event of Loss "Sublease Facility Event of Loss" refers to damage to the Facility or a change in law that prevents the continued operation of the Facility.

NYDB01 17471611 03-Oct-07 11:22

28

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 29 of 35

Sublease Facility Partial Event of Loss Sublease Payment Amount

"Sublease Facility Partial Event of Loss" refers to an event which results in a significant reduction in the output capacity and/or efficiency of the Facility. "Sublease Payment Amount" or "Sublease Deposit Amount" refers to a payment of $80,792,270.36 that the Rotte Agreement provides EZH shall pay to the Rotte Foundation on the Closing Date.

Sublease "Sublease Purchase Option" refers to the option provided to EZH whereby at Purchase Option the end of the Sublease Basic Term (i.e., January 2, 2018), EZH can elect to purchase CEL Trust's remaining Lease Interest for the Sublease Purchase Option Price (together with any unpaid Sublease Basic Rent due and payable before the Sublease Basic Termination Date), plus the assumption by EZH of all of CEL Trust's obligations under the Lease, including the obligation to make the Final Basic Rent Payment. Sublease "Sublease Purchase Option Price" is 143.63396613% of the appraised value Purchase Option Price of the Undivided Interest, which equates to $215,450,949.20. Sublease Renewal Option "Sublease Renewal Option" refers to a conditional option granted the CEL Trust under Section 20(a)(i) of the Sublease Agreement to require EZH to renew the Sublease for an additional 16.5 years from the Sublease Basic Termination Date, January 2, 2018, and ending on June 15, 2034 (the "Sublease Renewal Term").

NYDB01 17471611 03-Oct-07 11:22

29

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 30 of 35

Sublease Renewal Rent

"Sublease Renewal Rent" refers to the amounts payable by EZH to CEL Trust under the Sublease Agreement during the Sublease Renewal Term, i.e., the period from the Sublease Basic Termination Date, January 2, 2018, and ending on June 15, 2034.

Sublease Renewal Term

"Sublease Renewal Term" refers to an additional 16.5 year period from the Sublease Basic Termination Date, January 2, 2018, and ending on June 15, 2034, that arises if the Sublease Renewal Option is exercised.

Sublease Rent

"Sublease Rent" refers to amounts payable by EZH to CEL Trust under the Sublease Agreement.

Sublease Retention Option

"Sublease Retention Option" refers to a conditional option granted the CEL Trust under Section 20 of the Sublease Agreement to require EZH to return the Sublessor's Lease Interest to CEL Trust as of January 2, 2018. The Sublease Retention Option is described more fully in paragraphs 179 through 184 of the Stipulation.

Sublease Special Special Termination Value

"Sublease Special Special Termination Value" is computation based on the information contained in Exhibits F and D to the Sublease and the date on which the calculation needs to be made.

Sublease Special Termination Value

"Sublease Special Termination Value" is a computation based on the information contained in Exhibits D and E to the Sublease and the date on which the calculation needs to be made.

NYDB01 17471611 03-Oct-07 11:22

30

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 31 of 35

Sublease Termination Date Sublease Termination Value

"Sublease Termination Date" is January 2, 2018, unless the Sublease Renewal Term has commenced, in which case the term means June 15, 2034. "Sublease Termination Value" a computation based on the information contained in Exhibits C and E to the Sublease and the date on which the calculation needs to be made.

Sublessee Sublessee Loan

The Participation Agreement provides that "Sublessee" refers to EZH. "Sublessee Loan" refers to a loan from CEL Trust to EZH in the amounts set forth on Schedule A to the Sublessee Loan Agreement bearing interest at 7.43% per annum.

Sublessee Loan Agreement

"Sublessee Loan Agreement" refers to the Sublease Loan Agreement (RoCa Facility Trust No. 2) dated as of December 12, 1997, between WTC, as Trustee, and EZH, which provides for a loan from CEL Trust to EZH.

Sublessee Pledge and Security Agreement

"Sublessee Pledge and Security Agreement" refers to the Sublessee Pledge and Security Agreement (RoCa Facility Trust No. 2) dated as of December 15, 1997 among Stichting IJssel, as Pledgor, WTC, as Collateral Agent and Pledgee, WTC, as Trustee, CEL and EZH, which provides Security for EZH's obligations under the Operative Documents.

Sublessee Secured Obligations

"Sublessee Secured Obligations" refers all of the IJssel Foundation's obligations to return all monies and securities in the IJssel Deposit, following satisfaction of all Payment Obligations, upon termination of the IJssel Agreement.

NYDB01 17471611 03-Oct-07 11:22

31

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 32 of 35

Sublessor T&D

The Participation Agreement provides that "Sublessor" refers to CEL Trust. "T&D" refers to transmission and distribution, e.g., the process of taking the electricity that has been generated and delivering it to consumers.

Tauw Milieu or Tauw

"Tauw Milieu" or "Tauw" refers to Tauw Milieu, which performed an environmental study of the RoCa3 Facility as part of this Transaction.

Tax Indemnity Agreement

"Tax Indemnity Agreement" refers to the Tax Indemnity Agreement (RoCa Facility Trust No. 2) dated as of December 12, 1997, between EZH and WTC, as Trustee, which Agreement provides representations and agreements related to various tax aspects of the Transaction.

Transaction

"Transaction" refers to a lease of the Undivided Interest in the RoCa3 Facility to CEL Trust pursuant to a Lease Agreement and a shorter-term sublease of this Undivided Interest in the RoCa3 Facility from CEL Trust to EZH pursuant to a Sublease Agreement, and all other Operative Documents.

Transaction Expenses

"Transaction Expenses" refers to certain expenses incurred in connection with the negotiation, preparation delivery and recording documents used in the Transaction that were paid by CEL Trust. Transaction Expenses as defined do not include all expenses incurred with respect to the Transaction.

Transmission and Distribution

"Transmission and Distribution" refers to the process of taking the electricity that has been generated and delivering it to consumers.

NYDB01 17471611 03-Oct-07 11:22

32

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 33 of 35

Treasury Strips

"Treasury Strips" refer to zero-coupon treasury bonds with a face value payable at maturity. Treasury Strips are purchased at a discount from the face value at maturity and promise a fixed rate of return for the life of the security called the yield to maturity. STRIPS is an acronym for Separate Trading of Registered Interest and Principal of Securities.

Trust Agreement

"Trust Agreement" refers to a Trust Agreement with WTC, under which the Trustee agreed to act as trustee of a trust, RoCa Facility Trust No. 2, for the benefit of CEL (the "CEL Trust") in connection with the Transaction.

Trustee

"Trustee" refers to Wilmington Trust Company, which served as the trustee for the CEL Trust.

Trustee Secured Obligations

"Trustee Secured Obligations" refers to all of EZH's, as Sublessee's, and the IJssel Foundation's obligations.

Trustee Treasury Collateral

"Trustee Treasury Collateral" refers to U.S. Government Securities in a custodial account that shall be established by CEL, for the benefit of CEL, with a security interest in EZH's favor to secure a portion of the Final Basic Rent Payment owed EZH on February 24, 2041 in the event that the Sublease Renewal Option or Retention Option is exercised, unless CEL provides Acceptable Alternative Collateral.

U.S. Government Obligations

"U.S. Government Obligations" refers to United States Treasury securities (including STRIPS) maintained in the commercial book-entry system entitled Treasury/Reserve Automated Debt Entry System.

NYDB01 17471611 03-Oct-07 11:22

33

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 34 of 35

unbundled

"Unbundled" refers to the practice of having ownership of the legal entity that generates electricity separate from ownership of the legal entity that distributes such electricity to the customers.

Undivided Interest

"Undivided Interest" refers to the 47.468354430380% undivided interest in the RoCa3 Facility granted to the CEL Trust pursuant to the Lease Agreement.

Unit

"Unit" refers to the gas-fired electric generating unit known as RoCa3 having a rated capacity of 220 net MW.

VAT Voluntary Termination for Economic Obsolescence

"VAT" is an acronym for "Value Added Tax." "Voluntary Termination for Economic Obsolescence" refers to EZH's right to terminate the Sublease, after December 15, 2002, if EZH determines the Facility is technologically or economically obsolete, or is surplus to EZH's needs.

Warren & Selbert

"Warren & Selbert" refers to Warren & Selbert, Inc. which maker of ABC and other computer programs.

Watson Farley & Williams

Watson Farley & Williams was US counsel to Con Edison NY in 2005 regarding certain matters related to the EZH and NUON transactions.

White & Case

White & Case was US Counsel for EZH, Stichting Rotte, Stichting Ijssel, Stichting Roca with respect to the RoCa3 transaction.

WTC

"WTC" refers to Wilmington Trust Company.

NYDB01 17471611 03-Oct-07 11:22

34

Case 1:06-cv-00305-MBH

Document 59

Filed 10/03/2007

Page 35 of 35

Dated: October 3, 2007

/s/ David F. Abbott David F. Abbott Attorney of Record MAYER BROWN LLP 1675 Broadway New York, NY 10019-5820 Tel: (212) 506-2642 Fax: (212) 849-5642 [email protected] Attorney for Plaintiff

/s/ David N. Geier David N. Geier Attorney of Record Joseph A. Sergi Adam Smart Trial Attorneys, Tax Division U.S. DEPARTMENT OF JUSTICE Post Office Box 26, Ben Franklin Station Washington, D.C. 20044 Tel. (202) 616-3448 Fax: (202) 307-0054 [email protected] Richard T. Morrison Assistant Attorney General David Gustafson Chief, Court of Federal Claims Section Steven I. Frahm Assistant Chief, Court of Federal Claim Section

NYDB01 17471611 03-Oct-07 11:22

35