How the Top Gas Recovery Turbine Works

Power This electricity can be

sold to the steel company for use in the plant or to the power grid, where

other consumers canpurchase the

electricity.

Blast Furnace Gas A byproduct of the

steelmaking process is produced at vast

quantities and pressures at the Blast

Furnace in a steel plant.

Electricity The high pressure of the blast furnace gas

turns a turbine creatingelectricity.

TERM SHEET BORROWER DEVELOPER GENERAL CONTRACTOR CUSTOMER LOAN AMOUNT USE OF FUNDS RATE LOAN FEE TO LENDER CONTRACT ANNUAL BENEFIT ANNUAL BENEFIT TO SSC SECURITY

SSC ENERGY DEVELOPMENT SAME AS ABOVE ZIMMERMAN AND JANSEN, GMBH OR OTHER BETHLEHEM STEEL SPARROWS POINT $12,900,000 EQUIPMENT AND INSTALLATION OF TOP GAS RECOVERY TURBINE TO BE DETERMINED 1 POINT OFF-BALANCE SHEET $3,347,000 SEE ATTACHED SCHEDULE $716,826-SEE ATTACHED SCHEDULE REQUIREMENTS CONTRACT (FIRST THROUGH THE METER) SECURITY INTEREST IN EQUIPMENT

EXECUTIVE SUMMARY Bethlehem Steel Corporation (BSC) is a well established integrated steel manufacture that as five mills located throughout the United States. In January 1 998, BSC entered into a partnership with Shared Savings Contracts, Inc. (SSC), a leading performance-based energy conservation consulting firm. The partnership started with a pilot project at Bethlehem’s Sparrows Point Division (SPD) and has since grown to have an SSC Project Team at each of Bethlehem’s facilities. SSC is paid for its consulting services only when bottom line energy reductions are achieved for their clients. The initial contract for the SPD is about to expire, however, a contract extension for additional energy projects has been executed and a contract for productivity improvements is in its final stages of approval. SSC assists its clients, such as BSC, in off-balance sheet financing and development of capital projects. SSC will develop, finance, own, and sell the electrical output of a Top Gas Recovery Turbine to SPD. Zimmermann & Jansen, GMBH, a leading supplier and engineering firm, will be the general contractor for the Top Gas Recovery Turbine Project. The “L” Blast Furnace at SPD is a high capacity blast furnace. The furnace’s world class technology includes hydraulically actuated bleeders, a Paul Wurth bell-less charging system, a Bishoff gas cleaning system, and Hoogovens Stoves. The furnace produces high- energy high-pressure byproduct gas. The mechanical energy of the gas pressure is currently dropped through a pressure regulating device within the system. The Top Gas Recovery Turbine Project installs a pressure recovery turbine designed to convert the lost mechanical energy into marketable electrical energy. The cost to install this project is $11,200,000. The value of generated electricity is $3,347,000 annually. SSC will own and contract the turbine’s output to SPD. Features of this loan proposal include:

• The lender will be granted specific security in the components of the project that will be isolated from the blanket security interests of BSC primary lenders and debt instrument holders.

• Zimmermann & Jansen, GMBH has been selected as the general contractor for this project. This firm has earned a worldwide reputation for quality engineering with

• the steel industry and has a proven track record with the installation of Top Gas Recovery Turbines throughout Europe.

• This system provides a 32.5% electrical load reduction from current blast furnace operation.

This proposal is for a construction loan of $11,200,000 to be made to SSC for the purpose of financing the cost of design, installation, and related costs of a Top Gas Recovery Turbine Project.

The following pages contain information about principle participants, project descriptions, an analysis of the financial benefit, and other supporting technical and financial information. Please address any inquires concerning this proposal to:

Michael Ratteree SSC Energy Development 17608 Burnham, Ste. 100 St. Louis, MO 63005 Telephone: (636) 519-7080 Fax: (636) 519-1101

EXECUTIVE SUMMARY Bethlehem Steel Corporation (BSC) is a well-established integrated steel manufacture that as five mills located throughout the United States. In January 1 998, BSC entered into a partnership with Shared Savings Contracts, Inc. (SSC), a leading performance-based energy conservation consulting firm. The partnership started with a pilot project at Bethlehem’s Sparrows Point Division (SPD) and has since grown to have an SSC Project Team at each of Bethlehem’s facilities. SSC is paid for its consulting services only when bottom line energy reductions are achieved for their clients. The initial contract for the SPD is about to expire, however, a contract extension for additional energy projects has been executed and a contract for productivity improvements is in its final stages of approval. SSC assists its clients, such as BSC, in off-balance sheet financing and development of capital projects. SSC will develop, finance, own, and sell the electrical output of a Top Gas Recovery Turbine to SPD. Zimmermann & Jansen, GMBH, a leading supplier and engineering firm, will be the general contractor for the Top Gas Recovery Turbine Project. The “L” Blast Furnace at SPD is a high capacity blast furnace. The furnace’s world class technology includes hydraulically actuated bleeders, a Paul Wurth bell-less charging system, a Bishoff gas cleaning system, and Hoogovens Stoves. The furnace produces high- energy high-pressure byproduct gas. The mechanical energy of the gas pressure is currently dropped through a pressure-regulating device within the system. The Top Gas Recovery Turbine Project installs a pressure recovery turbine designed to convert the lost mechanical energy into marketable electrical energy. The cost to install this project is $11,200,000. The value of generated electricity is $3,347,000 annually. SSC will own and contract the turbine’s output to SPD. Features of this loan proposal include:

• The lender will be granted specific security in the components of the project that will be isolated from the blanket security interests of BSC primary lenders and debt instrument holders.

• Zimmermann & Jansen, GMBH has been selected as the general contractor for this project. This firm has earned a worldwide reputation for quality engineering with the steel industry and has a proven track record with the installation of Top Gas Recovery Turbines throughout Europe.

• This system provides a 32.5% electrical load reduction from current blast furnace operation.

This proposal is for a construction loan of$1 1,200,000 to be made to SSC for the purpose of financing the cost of design, installation, and related costs of a Top Gas Recovery Turbine Project.

The following pages contain information about principle participants, project description, an analysis of the financial benefit, and other supporting technical and financial information, Please address any inquires concerning this proposal to:

John Duffy SSC, Incorporated One City Centre 515 North Sixth Street, Suite 1325 St. Louis, MO 63101 Telephone: (314) 241-2201 ext. 224 Fax: (314) 436-1966

SHARED SAVINGS CONTRACTS, INC (SSC) Shared Savings Contracts, Inc. is proposing to develop and finance the project and operate the facility in order to sell generated electricity to Bethlehem Steel Sparrows Point through a “first through the meter” priority purchasing arrangement. SSC is an innovative leader in providing energy and productivity savings for its large industrial manufacturing partners. As a performance based contractor, SSC is compensated only for achieving bottom-line savings associated with energy and productivity improvements for its clients. The mission of SSC is to from long-term partnerships with industrial manufacturers. This approach combines the valuable resources and expertise of both SSC and its client-partner. The result is a client who is more competitive and profitable in their respective marketplace. SSC provides capital and develops equipment improvements to further enhance savings at no cost to the client. These projects are structured to self amortize from savings identified as arising. This allows the client-partners to invest their time and capital into other core productivity concerns. The cumulative effect of both efforts maximizes cost savings benefits because more projects can be completed in a shorter period of time with fewer dollars required from the client’s capital budget. Likewise, this off-balance sheet approach keeps the associated capital assets off the books and increases bottom-line profitability for its partners. SSC implements all these strategies and trains the plant employees to monitor and maintain the improvements to insure continuous success. Bethlehem Steel Sparrows Point spends $200 million per year on energy consumption and productivity costs are even greater. Initial cost savings initiatives have been implemented to date and SSC’s existing lender has absorbed most upfront risks that may be associated with these projects. More importantly, SSC has generated about $6,830,000 to date in cash receipts from the Bethlehem Steel Sparrows Point project, thereby demonstrating the financial strength of this partnership. The financial upside of this project remains and the startup risk is gone, resulting in substantial value to the lender in the form of risk mitigation. SSC has invested approximately $4 million dollars in equity to date in Bethlehem Steel Sparrows Point.

Bethlehem Steel — Sparrows Point Encompassing more than 2,000 acres, the operations at Sparrows Point have access to the Atlantic Ocean with their location on the Chesapeake Bay near Baltimore, Maryland. The principal products of these operations are hot-rolled and cold-rolled sheets, tin mill products, galvanized sheet and Galvalume® sheet. Principal facilities include a sintering plant, a large blast furnace, two basic oxygen furnaces with an annual raw steel production capability of approximately 4 million tons, a two-strand continuous slab caster with a present annual production capability of approximately 3.6 million tons, a 68-inch hot-strip mill, two cold-reducing mills (56-inch and 48-inch), continuous and batch annealing facilities, a galvanizing line, two Galvalume® lines, a 48-inch hot-dip galvanizing line and tin mill facilities. Sparrows Point obtains coke from various commercial sources. Sparrows Point continuously casts essentially 100 percent of its total production volume. Nearly every production unit set records in 1997, while improving quality and on-time deliveries for customers. Raw Materials Handling The two-berth ore pier, 1 ,020 feet long by 83 feet wide, and two stacking-reclaiming machines have an unloading capacity of 1,000 tons per hour. The reclaiming rate is 4,500 tons per hour. Sinter Plant A single-strand machiner has a capacity of4 million tons per year of sinter and includes blending and screening areas. Blast Furnace “L” blast furnace, which holds many of the iron production records in the United States, averages 9,700 tons per day of molten metal. The furnace received a $100 million dollar re-line during the summer of 1999, enabling an almost continuous (94.75%) furnace campaign through 2011. In September of2000, Sparrows Point commissioned a $60 million dollar pulverized coal injection (PCI) facility built, owned an operated by a subsidiary of Detroit Edison Energy Services to provide an alternative, high BTU fuel for the furnace. Basic Oxygen Furnaces The BOF’s two vessels each have a capacity of 290 tons and produce a heat of steel in about 40 minutes. The shop’s annual capacity is 4 million tons. During summer of 1999, steelmaking completed $60 million dollars in upgrades to the BOF. With the re-lining of #2 vessel, the BOF is targeting over 3 Y2 years of continuous two vessel operation.

Continuous Slab Caster The facility has two single stand casting machines. Number one caster has recently been replaced with a 104” wide state-of-the-art line. The caster facility now has a 4 million ton annual capacity. Hot Strip Mill The 68-inch hot strip mill is a series of individual mill stands that reduce slabs into thin strip steel before being coiled. The mill also has offline skin pass and slitting/trimming units. Cold Sheet Mills The new cold mill will produce cold rolled sheets primarily for the metal construction and appliance industries. Sparrows Point has long been a leading supplier to the metal construction industry, beginning with its pioneering production and patenting of the zinc/aluminum coated Galvalume (TM). Material in the thin-to-mid range of gauge will be used in prepainted roofing panels and metal siding, steel studs, exposed lighting fixtures and metal furniture. Material in the heaviest range is being marketed for access flooring systems, air conditioning ductwork and large vehicles like buses. The mill is capable of pickling 1 .7 million tons annually, with annual cold rolled capacity of about 1 .5 million. About one million tons of annual output will be coated before shipment to the customer. About 850,000 tons annually will be coated at Sparrows Point’s Galvalume(TM) or galvanized coating lines installed in 1993. The new mill employs about 300 people who were extensively trained during the past year to operate the highly sophisticated mill. Tin Mills Sparrows Point has Behtlehem’s sole production facility for tin mill products, and it is one of the division’s most stable and valued markets, with shipments of about 600,000 tons annually. Its products include tinplate, chrome plate, black plate and tin-coated sheets. The most intensive and difficult to make of the division’s products, tin and chrome plate required the greatest number of production steps. The multi-step process involves a pickling line, cold reduction on the 48-inch tancem mill, a washing line, continuous or batch annealing, a skin mill, a double reduction mill, two halogen tin-coating lines, a chrome line, and an automated packaging line.

ZIMMERMANN & JANSEN, GMBH Zimmermann & Jansen, GMI3H (Z&J) has over 125 years experience in manufacturing large gas valves for high temperature applications in the Iron and Steel, Chemical, Power Generating and Glass industries. The specialty valves include Hot Blast, Control and Swing Goggle, Angle, Butterfly, 4-Way Ball and Check Valves. In the integrated steel industry Z&J is the standard by which other manufacturers are measured. Zimmermann & Jansen also provide engineering solutions to problems identified by the industries they support. One such solution is energy recovery plants for the Iron and Steel Industry. Today, Z&J is the leading designer and developer of turnkey Blast Furnace Top Gas Recovery Turbine Plants. The plants were developed to recovery high-pressure energy that had historically been reduced by regulating systems. These plants designed and installed by Z&J have over 20 years of operation in Blast Furnaces worldwide.

ANNUAL PRO FORMA CASH FLOW AT DIFFERENT SELLING

PRICES

PROPOSED FINANCIAL MODEL

BETWEEN LENDER AND BORROWER

RE: Financial structure for Top Gas Recovery Turbine Project Bethlehem Sparrows Point, MD Borrower: A special purpose entity to be formed

by majority shareholder SSC Inc. to own the assets of he project.

Lender: Purpose: Funding for the construction of a 13.5

MW Top Gas Recovery Turbine at Bethlehem Sparrows Point, MD steel production facility (the “Project”).

Term: The term of the loan will begin upon financial closing, which is expected to coincide with the commencement of construction of the Project. The loan will terminate on the earlier of: (A) {120} months from Financial closing, and (B) the date on which all principal and interest and any additional amounts due under the terms and conditions of the loan have been paid.

Loan Amount: Requested loan amount is 11,200,000. Upon opening the construction loan, the project Special Purpose Entity will draw $500,000 in partial repayment of marketing, development and engineering costs incurred for this project. (SSC has invested more than $4.5M in hard costs to date at Sparrows Point).

Amortization : A percentage of all monthly “Net

Revenue” associated with the Project will be applied to principal and interest. Net revenue is equal to the total power sales revenue and all other revenue derived from the Project, minus all direct operating costs and any authorized revenues for major maintenance. The amortization sweep percentage will be 75% of net revenues.

Interest Rate: The note will accrue interest at a floating rate equal to Prime plus (four percent (4%)). Interest on any funds committed but not drawn during the construction period shall be at an annual equal to (two percent (2%)). The rate is capped at 13%.

Bethlehem Savings:

Bethlehem will purchase power from the project at a discount from the lower of: (a) The monthly average of the actual PJM hourly power price for power purchased from the project. (b) Bethlehem’s monthly average cost of energy commodity power purchased from the grid. The discount to be applied is established on a sliding scale from 5% up to a cost described above of $30.00 per MKWH, to 10% at a cost described above of $40.00 per MKWH. This is a straight-line scale at 1/2% discount per dollar increase in cost. The 10% rate will apply to costs above $40.00, up to a maximum, discounted cost to Bethlehem of $40.00 per MKWH.

Marketing Rights: Borrower or Lender at it’s option shall have the right to purchase all power produced from the Project at a price equal to the PJM hourly price for the term of the loan agreement.

Security: Lender will receive a first priority security interest in all assets of the Project, including any and all contract rights.

Continuing Interest:

Following the term of the loan agreement, Lender (or an of Lender) shall receive a (1 0%) preferred distribution from the Net Revenue of the Project for a period of five (5) years following the termination of the loan.

Expenses: Legal, title, and Project due diligence expenses shall be paid for by the Borrower. The Borrower requests that these costs and construction interest be added to the loan amount.

Commodity Price: Lender or borrower shall have the option to hedge the power prices for all power produced from the project.

Other Standard Terms:

Other standard elements for transactions of this type would be included, including but not limited to representations and warranties, affirmative covenants, financial covenants, negative covenants, reporting requirements, events of default, cash management requirements and conditions precedent to closing having to do with due diligence.

Key Assumptions Bethlehem Contract:

Assumptions about the terms of the agreement with Bethlehem: Bethlehem commitment to supply all of the blast furnace Gas from furnace “L” to the Project. Bethlehem commitment to purchase the power output of the Project as the first power through the meter for the Bethlehem Sparrows Point, MD plant. In the event Bethlehem fails to provide such credit support, the Project would have the right to sell power directly to the PJM Power grid.

Appropriate rights granted to the Project for the use of the land and any common facilities necessary for the construction and operation of the Project.

Key Assumptions Regarding the EPC Contract:

In preparing this Letter of Interest, Aquila made certain assumptions about the terms of the agreement with EPC contractor. Guaranteed fixed price contract with EPC contractor, with Applicable surety bond to ensure project completion. Satisfactory liquidated damages for failure to meet project Schedule and key performance criteria. Demonstration of financial strength for EPC contractor.

Total Project Cost Breakdown Cost of Equipment $6,770,000

Expansion Turbine Generator Switchgear Transfonier Auxiliary Systems (Pumps, Motors, and Starters)

Installation $4,430,000

New TGRT Building Electrical Mechanical & Piping Construction Engineering Start-up & Training Contingency (15%)

Total Project Revenue Breakdown Annual Power Production

Megawatt / Hour Operating Time Annual Megawatts

13.591.3 %

107,967

Revenue

Unit Price Total Value Bethlehem Benefit (9.5%) SSC Income

$31.00$3,347,000

$ 317,965$3,029,035

Expenses

Debt Service Maintenance Engineer Insurance Total

$1,912,209$ 150,000$ 150,000$ 100,000

$2,312,209 Net Benefit to SSC

Annual $ 716,826

PROJECT DESCRIPTION PROJECT TITLE: TOP GAS RECOVERY TURBINE A. Current Conditions: The blast furnace produces a combustible byproduct gas during operation. The Blast Furnace Gas (BEG) is produced at approximately 3 1 psia and is projected to have an average flowrate of325,000 SCFM with Pulverized Coal Injection fully functioning. The BFG is cleaned using a Bishoff Scrubber. The cleaning process uses 1.5psi of BFG pressure. Pennwood Power Station is designed to utilize the BFG at 1 .5-psia. Piping losses between the Blast Furnace and Pennwood Power Station account for another 1.0- psi of pressure drop. The remaining 27-psia must be dropped since the piping between the Blast Furnace and Pennwood cannot support the high-pressure gas. Currently the pressure is dropped across the RS elements of the Bishoff Scrubber. This pressure drop is a significant energy loss. The lost energy will be recovered with the installation of a 13.5 MKWH Top Gas Recovery Turbine. The turbine converts high-pressure BFG into mechanical energy, which rotates a generator to make electrical power. The low-pressure outlet of the turbine is supplied to Pennwood and BF Stoves for combustion. Bethlehem Steel first investigated the installation of a Top Gas Recovery Turbine in 1982. Due to contractual limitations with the local Power Company and high capital costs, this project has only reached the Engineering Proposal level. Recent changes in the electrical contract have created opportunity for new generation capability at Sparrows Point. Additionally, the turnkey cost of the Top Gas Recovery Turbine is 60% of the original costs. B. Project Scope: The turbine will be installed in a building to be erected southeast of the “L” Blast Furnace. The installation of the Turbine will not require any additional Blast Furnace outages. This area has been allocated for such an installation. BFG main tap connections, after the Bishoff scrubber, were installed during the 1980’s, to facilitate this project. The rated turbine output is sized for the new Pulverized Coal Injection (PCI) operation. The electrical connections will be provided through the existing Steel Side Substation. The operation of the turbine including start-up and shutdown does not impact Blast Furnace operations. A Programmable Logic Controller signals the transition of the BFG Main By-pass through these sequences. Additionally, the required auxiliary services (industrial water, nitrogen, sewer connection, and etc.) are available and within system limits.

C. Benefit Analysis: The financial benefit is derived from the value of selling the electrical energy produced by the turbine connected to a generator. The average value of a generated megawatt on the PJM Grid in 1 999 sold for $3 1 .00. The following benefit is based upon that value:

Total Generation — 115 MKWH Blast Furnace and Turbine Availability —91.3%

Total MKWH = Generation * Availability * Hours/Year

= 13.5 * .913 * 8,760 = 13.5 * 7,997.88 = 107,971 MKWH/year

Value = 107,971 * $31.00 = $3,347,000

Additional benefits of the Top Gas Recovery Turbine include:

Improved Control of Blast Furnace Top Pressure Reduced wear on the Gas Cleaning System Reduced water consumption of Gas Cleaning System Optimized operation of the Gas Cleaning System Additional Dust Cleaning of the BFG prior to end-users Operates without impact to Blast Furnace Operations

These are collateral benefits that provide significant improvement to “L” Blast Furnace efficiency and performance. These benefits are not included in the financial calculations of this project. D. Implementation Time Frame Zimmermann & Jansen utilizing a complete turnkey approach will provide turbine installation. A Build — Operate — Transfer (BOT) method will utilize the following timeline:

Build — 18 months to complete the turnkey installation Operate — 8-10 years of SSC controlled operation Transfer — Options

o Bethlehem Purchase Turbine o SSC Continue to Operate Turbine o Third Party Purchase and Operate Turbine

Implementation of this project requires a high level of urgency. The current end of campaign for the “L” Blast Furnace is scheduled for 2012. The installation time required for the turbine is 1.5 years. The timing allows only 6 month to begin construction.