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Value oFSeller's First Lien Security Interest Assets CAPP is not aware of any asset valuation of the TCEH Pledged Entities' collateral undertaken with respect to the EFH LBO financing and there has been no current valuation relating to the PPA. CAPP cannot make any representation regarding the current or future value of collateral pledged under the LBO Financing Documents. Because the cost of electricity within ERCOT has historically been based on the cost of natural gas as a fuel source, it is assumed the value of the electric generation facilities comprising a substantial portion of the collateral pledged under the LBO Financing Documents, at any point in time, will depend heavily upon the price of natural gas and the assumptions related to the future prices of natural gas. Natural gas prices have been historically volatile and no prediction or estimate can be made regarding the future value of pledged collateral of the TCEH Pledged Entities. If the value of Seller's assets pledged as security under the PPA decreases, there is no requirement in the PPA for Seller to provide additional collateral to CAPP, and CAPP could experience the situation where the value of the collateral under the LBO Financing Documents is insufficient to cover the Secured Obligations under the LBO Financing Documents, including the PPA. If in the event of Bankruptcy, CAPP decides to terminate the PPA and collateral is insufficient to cover CAPP's security, CAPP would not be able to defease all of its contract revenue bonds and a portion of each Participating Member's capacity payments under the Member Contract will remain, even though such Participating Member will not receive any electric energy through the then terminated PPA. New Governmental Charges Under Article 20 of the PPA, CAPP and the Participating Members will be responsible for new governmental charges (taxes and required capital improvements at the PPA Facilities), which include the cost of potential carban and green house gas remediation and taxes, assessments and other governmental impositions and compliance costs imposed on the PPA Facilities ("New Governmental Charges"). Certain taxes, such as income, employment and margin taxes are excluded. To the extent these charges are imposed on the PPA Facilities (all of which will be providing electricity to CAPP under the PPA), CAPP and the Participating Members will be responsible for a proportionate share of the cost of any such New Governmental Charges in excess of operating expenses of $100,000 annually or capital expenses greater than $1,000,000 over the term of the PPA. Such share of the PPA Facilities allocated to CAPP is approximately three percent (3%). To the extent these New Governmental Charges are imposed, the annual energy cost for which each Participating Member is responsible will increase to cover the proportionate share of such charges. 6 fm V0 Ll)lIt