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RISKS AND CONSIDERATIONS PPA Seller's Leveraged Buvout and Securitv for Seller's ObliQations under PPA Seller's ultimate parent entity, Energy Future Holdings Company ("EFH"), Energy Future Competitive Holdings Company ("EFCH") and Texas Competitive Electric Holdings Company, LLC ("TCEH"), borrowed approximately $46 billion in October 2007 to privately purchase, through a leveraged buyout, the publicly traded TXU Corp. ("TXU"), formerly the largest electric utility holding company within ERCOT (the "EFH LBO"). Approximately $26 billion was borrowed from Citibank, N.A., Goldman Sachs Credit Partners L.P., J. Aron & Company, JPMorgan Chase Bank, N.A., Credit Suisse and other lenders and parties who were provided a first lien security interest in the assets (excluding assets related to Oncor Electric Delivery Company, LLC), Seller and the certain other TCEH affiliates and subsidiaries (collectively, "TCEH Pledged Entities"), including all generation assets formerly owned by TXU. Another approximately $20 billion was borrowed through unsecured debt of EFH and TCEH. EFH, TCEH and EFCH each have credit ratings below investment grade or "junk" ratings. For a more complete description of the EFH LBO, EFCH and the associated credit ratings, see the presentation entitled "Energy Future Holdings Post Merger Overview," dated January 7, 2008; the publicly available filings of EFH with the U.S. Securities and Exchange Commission (www.energyfutureholdings.com/financial/) (the "SEC Filings"); and the Standard and Poor's Ratings Service ("S&P") reports of July 15, 2008 and March 21, 2008 (to the extent not superseded by the July 15, 2008 report) relating to EFH and the S&P report of October 11, 2007 (to the extent not superseded by the July 15, 2008 and March 21, 2008 reports) relating to TCEH (collectively, the "S&P Reports"). As to the S&P Reports, such reports reflect only the view of S&P, and CAPP makes no representation as to the appropriateness of such reports. There is no assurance that any of the facts, views or opinions reflected therein will continue for any given period of time or that they will not be revised or withdrawn entirely by S&P, if in the judgment of S&P, circumstances so warrant. The first lien security interest of the secured lenders/parties are governed by the various documents related to the EFH LBO financing, including the Credit Agreement, the Intercreditor Agreement, the Security Agreement, the Guarantee and the Pledge Agreement as well as other documents (collectively, the "LBO Financing Documents"). The PPA provides, as it relates to CAPP's rights and security with Seller, as follows (for purposes of this paragraph, undefined capitalized terms will have the meanings set forth in the aforementioned Intercreditor Agreement): 1. The PPA is a Secured Commodity Hedge and Power Sales Agreement under the Intercreditor Agreement and, under the LBO Financing Documents, the PPA is a Secured Obligation having a first lien security interest in the pledged assets of the TCEH Pledged Entities pari passu (on equal footing) with the other secured lenders. Thus, CAPP will have a 2 - 61OG0l10