Public Energy Authority of Kentucky Gas Supply Revenue Bonds 2018 Series A

This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. expected thatdeliveryoftheBonds willbemadeonoraboutFebruary[ ],2018,throughthefacilities ofDTC. James, Esq.,Carrollton,Kentucky, generalcounseltoPEAK,forMSCGbyHaynesandBoone,LLP, fortheUnderwriterbyKutakRockLLP.Itis Herrington &SutcliffeLLP,BondCounsel toPEAK,andcertainotherconditions.Certainlegalmatters willbepasseduponforPEAKbyG.Edward Mandatory PurchaseDate. OR ANYPOLITICALSUBDIVISIONTHEREOF,ISPLEDGEDFORTHE PAYMENTOFTHEBONDS.PEAKHASNOTAXINGPOWER. POLITICAL SUBDIVISIONTHEREOF,PEAK,ORANYMEMBEROF PEAK, NORTHETAXINGPOWEROFCOMMONWEALTHKENTUCKY LIMITATION OFTHECOMMONWEALTHKENTUCKY.NEITHER THEFAITHANDCREDITOFCOMMONWEALTHKENTUCKY,ANY PROJECT PARTICIPANT,ANDARENOTANINDEBTEDNESSWITHIN THEMEANINGOFANYCONSTITUTIONALPROVISIONORSTATUTORY OR OBLIGATIONOFTHECOMMONWEALTHKENTUCKY,ANY POLITICALSUBDIVISIONTHEREOF,ORANYMEMBEROFPEAK sale ofallthenaturalgastobedeliveredunderGasPurchaseAgreement. and throughitsBoardofDirectorsforUtilitiesDepartmentPublic Utilities(“CitizensGas”)(collectively,the“ProjectParticipants”)for (Alabama); JacksonEnergyAuthority(Tennessee);MetropolitanUtilities District(Omaha,Nebraska);andtheCityofIndianapolis,Indiana,actingby Kentucky; PatriotsEnergyGroup(“PEG”);TheSoutheastAlabamaGasDistrict;LasCruces,NewMexico;Clarke-MobileCounties District certain investmentrisksasdescribedherein. (“MS&Co.”), MorganStanley,theCommoditySwapCounterparty,AGMorProjectParticipants(definedbelow).PurchasesofBonds involve guaranteed byMorganStanley(“”).The payment oftheBondsisnotguaranteedbyPEAK,MSCG,MorganStanley&Co.LLC mandatory redemptionoftheBonds.ThepaymentobligationsMSCGunderGasPurchaseAgreement,asdescribedherein,areunconditionally Payment uponanyearlyterminationoftheGasPurchaseAgreement.AnAgreementwillresultinextraordinary to PEAK,makepaymentsforanygasnotdeliveredortaken,undercertaincircumstancesremarkettakenandaTermination Agreement”) withMorganStanleyCapitalGroupInc.(“MSCGpursuanttowhichisobligateddeliverspecifieddailyquantitiesofgas Estate pledgedundertheIndenture,whichincludesrevenuesreceivedbyPEAKGasSupplyContractsandother funds. “ Subaccount of the Debt ServiceAccount created pursuantto the Indenture, and (e) pay the costsof issuance ofthe Bonds, asdescribed herein. See Accounts createdpursuanttotheIndentureinformofinsurancepoliciesbeissuedbyAGM,(d)fundadepositintoCapitalized Interest policies beingfortheprimarybenefitofBPEnergyCompany(the“CommoditySwapCounterparty”)),(c)fundadepositintoDebtService Reserve in theformofinsurancepoliciestobeissuedbyAssuredGuarantyMunicipalCorp.(“AGM” or the “Surety PolicyProvider”) (such Accounts and an approximately30-yearsupplyofnaturalgas,(b)fundadepositintotheCommoditySwapReserveAccountscreatedpursuantto Indenture Mandatory PurchaseDate. purchase on April 1, 2024 (the“MandatoryPurchaseDate”).TheBondsare not subjecttotenderattheoptionofholdersthereofprior Bonds setforthontheinsidecoverpageofthisOfficialStatement.ThematuringafterApril1,2024arerequiredtobetenderedfor ending on(andincluding)March31,2024,duringwhichperiodtheBondsshallbearinterestatratesperannumforeachMaturity Date ofthe in thisOfficialStatement. See “TheBonds—Book-EntrySystem”herein.Capitalizedtermsusedonthiscoverpageandnototherwisedefinedwillhavethemeaningsetforth directly toDTC,andwillsubsequentlybedisbursedDTCParticipantsthereafterBeneficialOwnersoftheBonds,allasdescribedherein. participants indenominationsof$5,000oranymultiplethereof.Paymentsprincipalof,premium,ifany,andinterestontheBondswillbemade issued inbook-entryformthroughthefacilitiesofTheDepositoryTrustCompany(“DTC”).Purchaseswillbemade (the “Trustee”).InterestontheBondsispayablesemiannuallyApril1andOctoberofeachyear,commencing1,2018.Thewillbe a TrustIndenturedatedasofFebruary1,2018(the“”),betweenPEAKandTheBankNewYorkMellonCompany,N.A.,trustee Authority Act of the Commonwealth of Kentucky (KRS §353.400 et seq.), is issuing its Gas Supply Revenue Bonds, 2018 Series A (the “Bonds”) under “ essential tothemaking ofaninformedinvestment decisionwithrespecttotheBonds, givingparticularattentiontothe mattersdiscussedunder be asummaryofthetermsof,or securityfor,theBonds.InvestorsareadvisedtoreadthisOfficial Statementinitsentiretytoobtaininformation other taxconsequencesrelatedtotheownershipordispositionof,amount,accrualreceiptofintereston,Bonds.See“TAXMATTERS.” the Bondsisnotaspecificpreferenceitemforpurposesoffederalalternativeminimumtax.BondCounselexpressesnoopinionregardingany valorem taxesleviedbytheCommonwealthofKentuckyandallpoliticalsubdivisionsthereof.InfurtheropinionBondCounsel,intereston interest thereonisexcludedfromgrossincomeoftherecipientsthereofforKentuckytaxpurposesandsuchBondsareexemptad on theBondsisexcludedfromgrossincomeforfederaltaxpurposesunderSection103ofInternalRevenueCode1986,and judicial decisions,andassuming,amongothermatters,theaccuracyofcertainrepresentationscompliancewithcovenants,interest D N * Preliminary, subjecttochange. I E nvestmnt ated ew stimated I The Bondsareoffered,subjecttopriorsale,when,asandifissued acceptedbytheUnderwriter,subjecttoapprovaloflegalityOrrick, This OfficialStatementdescribestheBondsonlyduring LongRatePeriodineffectfromtheIssueDateofBondsto THE BONDSARESECUREDSEPARATELYFROMALLOTHEROBLIGATIONS ISSUEDBYPEAK. THE BONDS ARE NOTANINDEBTEDNESS PEAK willenterintoGasSupplyContracts,tobedatedasofFebruary1,2018,withCarrolltonUtilities,Kentucky(“Carrollton”);Henderson, PEAK willenterintoaPrepaidGasPurchaseandSaleAgreement(the“”or The proceedsoftheBondswillbeusedprimarilyto(a)financeCostAcquisitionGasProject,whichconsistsaprepayment for The Bondsaresubjecttooptional,extraordinarymandatoryandsinkingfundredemptionpriormaturityasdescribedherein. The BondsarebeingissuedatfixedratesandaLongRate,foraninitialRatePeriodcommencingontheIssueDateof and Public EnergyAuthorityofKentucky(“PEAK”orthe“Issuer”),aNaturalGasAcquisitionformedunder In theopinionofOrrick,Herrington&SutcliffeLLP,BondCounsel,baseduponananalysisexistinglaws,regulations,rulingsand The purchaseandownershipofthe Bondsinvolveinvestmentrisksandmaynotbesuitableforallinvestors. Thiscoverpageisnotintendedto : D ssue ate

–B S

C ources onsiderations O ook f I ssuance

-E A nd ntry

U se ” herein.ThisOfficial Statementisdated[______], 2018andtheinformationcontained hereinspeaksonlyasofthatdate.

O nly PRELIMINARY OFFICIAL STATEMENT DATED JANUARY 18, 2018 f

unds P .” TheBondsarespecialandlimitedobligationsofPEAKpayablesolelyfromsecuredbytheTrust u b lic E ner G as g S Morgan Stanley y $825,000,000* upply 2018 S A uthority R evenue eries A B

onds of K entucky D ue : A pril Ratings: (See“Ratings”Herein) 1,A s S hown O n I nside F ront C over

MATURITY SCHEDULE, INTEREST RATES, PRICES OR YIELDS, AND CUSIPS†

$825,000,000* PUBLIC ENERGY AUTHORITY OF KENTUCKY GAS SUPPLY REVENUE BONDS 2018 SERIES A

$17,125,000* Serial Bonds

PRINCIPAL INTEREST MATURITY† AMOUNT RATE YIELD CUSIP†

April 1, 2019 $1,350,000 % % April 1, 2020 2,375,000 April 1, 2021 2,350,000 April 1, 2022 2,445,000 April 1, 2023 3,330,000 April 1, 2024 5,275,000

$807,875,000* ____% Term Bond due April 1, 2048, Yield ____% CUSIP‡ ______

*Preliminary, subject to change. † Bonds maturing after April 1, 2024 are required to be purchased pursuant to a mandatory tender on April 1, 2024. ‡ CUSIP® is a registered trademark of the American Bankers Association. The CUSIP number listed above is being provided solely for the convenience of bondholders only, and neither PEAK nor the Underwriter make any representation with respect to such number or undertake any responsibility for its accuracy. The CUSIP number is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of the Bonds.

PUBLIC ENERGY AUTHORITY OF KENTUCKY 516 Highland Street Carrollton, Kentucky 41008 (502)732-0991

OFFICERS AND DIRECTORS

DIRECTORS OFFICERS

Owen R. Reeves Gerald L. Ballinger Gregory D. Goff Larry Conder Bill R. Osborne Steve Austin

PROJECT PARTICIPANTS Carrollton Utilities Henderson, Kentucky Citizens Gas (Kentucky) The Southeast Alabama Gas District (Indianapolis, IN) Patriots Energy Group Las Cruces, New Mexico Metropolitan Utilities District (South Carolina) Clarke-Mobile Counties Gas District (Omaha, NE) Jackson Energy Authority (Alabama) (Tennessee)

SPECIAL GAS COUNSEL GENERAL COUNSEL BOND COUNSEL McCarter & English, LLP G. Edward James, Esq. Orrick, Herrington & Sutcliffe LLP Suite 1200 P.O. Box 373 51 West 52nd Street 1015 15th Street, NW 516 Highland Avenue New York, New York 10019 Washington, DC 20005 Carrollton, Kentucky 41008

GAS COUNSEL TO MSCG TRUSTEE UNDERWRITER’S COUNSEL Haynes and Boone, LLP The Bank of New York Mellon Trust Kutak Rock LLP Suite 2100 Company, N.A. 1650 Farnam Street 1221 McKinney Street 505 North 20th Street, Suite 950 Omaha, Nebraska 68102 Houston, Texas 77010 Birmingham, AL 35203

FINANCIAL ADVISOR TO PEAK Municipal Capital Markets Group, Inc. 8400 E. Prentice Avenue Greenwood Village, Colorado 80111

[This page intentionally left blank]

The information contained in this Official Statement has been obtained from PEAK, the Project Participants, MSCG, MS&Co., Morgan Stanley, the Commodity Swap Counterparty, AGM (defined below), DTC and other sources believed to be reliable. This Official Statement is submitted in connection with the sale of the securities described herein and may not be reproduced or used, in whole or in part, for any other purpose. The information contained in this Official Statement is subject to change without notice and neither the delivery of this Official Statement nor any sale made by means of it shall, under any circumstances, create any implication that there have not been changes in the affairs of any party since the date of this Official Statement.

No broker, dealer, salesman or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such information or representations must not be relied upon as having been authorized by PEAK or the Underwriter. This Official Statement does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized, or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation.

The Bonds will not be registered under the Securities Act of 1933, as amended, and will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state, municipal or other government entity or agency has or will have passed upon the adequacy of this Official Statement or, except for PEAK, approved the Bonds for sale.

Assured Guaranty Municipal Corp. (“AGM” or the “Surety Policy Provider”) makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “THE SURETY POLICY PROVIDER.”

______

In making an investment decision, investors must rely on their own examination of the terms of the offering, including the merits and risks involved. These securities have not been recommended by any federal or state securities commission or regulatory authority. No commission or authority has confirmed the accuracy or determined the adequacy of this document. ______

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICES OF THE BONDS. SUCH TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

Certain statements included or incorporated by reference in this Official Statement constitute “forward- looking statements.” Such statements are generally identifiable by the terminology used, such as “plan,” “project,” “expect,” “anticipate,” “intend,” “believe,” “estimate,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. PEAK does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur.

TABLE OF CONTENTS

Page Page

SUMMARY STATEMENT ...... S-1 Purchase and Sale ...... 32 INTRODUCTION ...... 1 Delivery of Gas ...... 32 General ...... 1 Failure to Deliver or Receive Gas ...... 33 Tax Matters ...... 3 Gas Remarketing ...... 33 THE GAS PROJECT ...... 3 Ledger Limit Event ...... 35 Prepaid Gas Purchase and Sale Agreement ...... 3 Payment Provisions ...... 35 Morgan Stanley Guaranties ...... 4 Force Majeure ...... 36 Project Participants ...... 4 Assignment ...... 36 Gas Supply Contracts ...... 4 Termination ...... 36 Commodity Swaps ...... 5 Termination Payment ...... 38 Custodial Agreement ...... 5 Security ...... 38 Termination of the Prepaid Gas Purchase and MSCG, MS&CO. AND MORGAN STANLEY ...... 38 Sale Agreement ...... 6 THE COMMODITY SWAPS ...... 39 Flow Chart ...... 7 General ...... 39 ESTIMATED SOURCES AND USES OF FUNDS ...... 8 Form of Commodity Swaps ...... 40 INVESTMENT CONSIDERATIONS ...... 8 Payment ...... 40 Special and Limited Obligations ...... 8 Early Termination ...... 40 Bonds Subject to Mandatory Tender or Replacement Commodity Swap Counterparty ...... 42 Mandatory Redemption on the Mandatory Custodial Agreement ...... 42 Purchase Date ...... 8 THE COMMODITY SWAP COUNTERPARTY ...... 43 Sufficiency of Necessary Funds on the THE GAS SUPPLY CONTRACTS ...... 43 Mandatory Purchase Date ...... 9 General ...... 43 Structure of the Gas Project ...... 10 Pricing Provisions ...... 44 Performance by Others ...... 11 Billing and Payment ...... 45 Gas Remarketing ...... 12 Annual Refund ...... 45 Limitations on Exercise of Remedies ...... 13 Covenants of the Project Participants ...... 45 Enforceability of Contracts ...... 13 Transportation; Title to Gas and Risk of Loss ...... 46 No Established Trading Market ...... 13 Failure to Perform ...... 46 Continuing Compliance with Tax Covenants ...... 13 Remarketing of Gas...... 47 PUBLIC ENERGY AUTHORITY OF KENTUCKY...... 14 Force Majeure ...... 47 General ...... 14 Default ...... 47 PEAK Members ...... 14 Assignment ...... 48 Organization ...... 14 Carrollton Utilities ...... 48 Officers and Management ...... 15 THE SURETY POLICY PROVIDER ...... 48 PEAK Financial Information ...... 16 Current Financial Strength Ratings ...... 49 THE PROJECT PARTICIPANTS ...... 17 Capitalization of AGM ...... 49 General ...... 17 Incorporation of Certain Documents by Summary Operating and Financial Information...... 18 Reference ...... 50 Ratings of the Project Participants ...... 18 Miscellaneous Matters ...... 50 SECURITY FOR THE BONDS ...... 19 CONTINUING DISCLOSURE ...... 51 The Indenture ...... 19 PEAK’s Continuing Disclosure Obligations ...... 51 Flow of Funds ...... 20 PEG’s Continuing Disclosure Obligations ...... 51 Debt Service Account ...... 22 Citizens’ Continuing Disclosure Obligations ...... 51 Redemption Account ...... 22 LITIGATION ...... 51 Commodity Swap Reserve Accounts ...... 22 UNDERWRITING ...... 52 Debt Service Reserve Accounts ...... 23 CERTAIN RELATIONSHIPS ...... 52 Surety Policy Provider Reimbursement ...... 24 RATINGS...... 53 No Additional Bonds ...... 24 FINANCIAL ADVISOR ...... 53 Amendment of Indenture ...... 24 TAX MATTERS ...... 53 Investment of Funds ...... 24 APPROVAL OF LEGAL MATTERS ...... 55 Enforcement of Gas Supply Contracts, the DOCUMENT AVAILABILITY ...... 55 Prepaid Gas Purchase and Sale Agreement MISCELLANEOUS ...... 55 and the PEAK Commodity Swap ...... 25 APPENDIX A — CERTAIN INFORMATION REGARDING THE BONDS ...... 26 THE MAJOR PROJECT PARTICIPANTS ...... A-1 General ...... 26 APPENDIX B — DEFINITIONS OF CERTAIN TERMS...... B-1 Interest ...... 26 APPENDIX C — SUMMARY OF CERTAIN PROVISIONS Redemption ...... 27 OF THE INDENTURE ...... C-1 All Bonds are Subject to Mandatory Tender or APPENDIX D — FORM OF CONTINUING DISCLOSURE Mandatory Redemption on the Mandatory UNDERTAKING ...... D-1 Purchase Date ...... 29 APPENDIX E — PROPOSED FORM OF OPINION OF Sufficiency of Necessary Funds on the BOND COUNSEL ...... E-1 Mandatory Purchase Date ...... 30 APPENDIX F — BOOK-ENTRY SYSTEM ...... F-1 Book-Entry System ...... 31 APPENDIX G — AMORTIZED VALUE SCHEDULE OF DEBT SERVICE REQUIREMENTS ...... 32 THE BONDS ...... G-1 THE PREPAID GAS PURCHASE AND SALE APPENDIX H — SCHEDULE OF TERMINATION AGREEMENT ...... 32 PAYMENT ...... H-1

SUMMARY STATEMENT

The following information is furnished solely to provide limited introductory information regarding the Bonds and does not purport to be comprehensive. This Summary Statement is subject in all respects to the more detailed descriptions contained in this Official Statement.

PUBLIC ENERGY AUTHORITY OF KENTUCKY

Public Energy Authority of Kentucky (“PEAK”) is a Natural Gas Acquisition Authority formed under the Natural Gas Acquisition Authority Act of the Commonwealth of Kentucky (KRS §353.400 et seq.). See “PUBLIC ENERGY AUTHORITY OF KENTUCKY” herein.

THE BONDS

General. The $825,000,000* Gas Supply Revenue Bonds, 2018 Series A (the “Bonds”) will be issued pursuant to a Trust Indenture, dated as of February 1, 2018 (the “Indenture”), between PEAK and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Bonds will be issued in book-entry only form and will be subject to optional, extraordinary mandatory and mandatory sinking fund redemption as described herein. See “THE BONDS.”

Interest Rate Periods for the Bonds. The Bonds are being issued at fixed rates and at a Long Rate, for an initial Long Rate Period commencing on the Issue Date of the Bonds and ending on (and including) March 31, 2024. During such Long Rate Period, the Bonds will bear interest at the rates set forth on the inside cover page of this Official Statement corresponding to the Maturity Date for each such Bond. Interest on each Bond is payable semi-annually on April 1 and October 1 of each year, commencing April 1, 2018, and on the Mandatory Purchase Date (defined below), any redemption date for such Bond, and the Maturity Date of such Bond.

Authorized Denominations. The Bonds will be issued in authorized denominations of $5,000 or any integral multiple thereof. See “THE BONDS.”

Mandatory Purchase of the Bonds. The Bonds, to the extent they have not matured on or prior to such date, are required to be tendered for purchase on the Mandatory Purchase Date, which will occur on April 1, 2024 (the “Mandatory Purchase Date”), at a Purchase Price equal to the principal amount thereof. Such Purchase Price will be paid in immediately available funds from (i) the proceeds of the remarketing of the bonds on deposit in the Remarketing Proceeds Account of the Bond Purchase Fund, and (ii) moneys that MSCG has elected to deposit in the Gas Supplier Purchase Account of the Bond Purchase Fund in accordance with the Gas Purchase Agreement. See “THE BONDS—Mandatory Tender Provisions.”

Failed Bond Remarketing. Under the terms of the Indenture, a “Failed Bond Remarketing” will occur unless, as of February 29, 2024 (being the last Business Day of the Month that is two Months prior to the Mandatory Purchase Date, and herein referred to as the “Determination Date”) (i) amounts on deposit in the Remarketing Proceeds Account of the Bond Purchase Fund together with amounts that the Gas Supplier has elected to deposit in the Gas Supplier Purchase Account of the Bond Purchase Fund on or before the Mandatory Purchase Date are in the aggregate sufficient to pay the Purchase Price of the Bonds to be tendered on the Mandatory Purchase Date, and (ii) a new Long Rate Period (and corresponding new Long Rate) that is to begin on such Mandatory Purchase Date has been established in accordance with the Indenture. A Failed Bond Remarketing will result in an Extraordinary Redemption

* Preliminary, subject to change.

S-1

of the Bonds on the Mandatory Purchase Date. See “THE BONDS—Redemption—Mandatory Redemption Upon Early Termination.”

In addition to the above, a Failed Bond Remarketing will not occur in the event, on or before the Determination Date, the Gas Supplier has become obligated to deposit with the Trustee, on or before the Business Day preceding the Mandatory Purchase Date, for transfer to the Assignment Payment Fund created under the Indenture, an amount equal to the Termination Payment. Under such circumstances, the Trustee is to apply amounts on deposit in the Assignment Payment Fund (a) to the extent all of the Outstanding Bonds have not been redeemed or defeased on or before the Mandatory Purchase Date, to the Redemption Account for the redemption of all Outstanding Bonds on the Mandatory Redemption Date, or (b) following the redemption or defeasance of all Outstanding Bonds, to pay any amount payable in connection with the Gas Supplier’s assignment of the Gas Purchase Agreement to a third party in accordance with the terms of the Gas Purchase Agreement.

Redemption Provisions. The Bonds are also subject to optional redemption, extraordinary redemption and mandatory sinking fund redemption under the circumstances, on the dates and in the amounts set forth herein and in the Indenture. See “THE BONDS—Redemption.”

INVESTMENT CONSIDERATIONS

The Bonds are special and limited obligations of PEAK payable solely from the revenues, moneys, securities, funds and agreements pledged therefor in the Indenture, including payments under the Gas Supply Contracts with each Project Participant. PEAK’s ability to meet its debt service and redemption obligations to Bondholders is dependent on the performance of:

• Morgan Stanley Capital Group Inc. (“MSCG”), as Gas Supplier and counterparty under the Gas Supplier Commodity Swap (defined herein);

• In the event of a failure in the timely performance and payment by MSCG, Morgan Stanley (“Morgan Stanley”), the guarantor of MSCG’s payment obligations under the Gas Purchase Agreement (the “Morgan Stanley/PEAK Guaranty”) and the Gas Supplier Commodity Swap (the “Morgan Stanley/BP Guaranty”, and together with the Morgan Stanley/PEAK Guaranty, the “Morgan Stanley Guaranties”) under separate guaranties delivered by Morgan Stanley on the date of issuance of the Bonds;

• Each of the Project Participants to make timely payments under its Gas Supply Contract;

• Assured Guaranty Municipal Corp. (“AGM” or the “Surety Policy Provider”), as provider of the insurance policies for the Commodity Swap Reserve Accounts and the Debt Service Reserve Accounts (as defined herein), in the event of a failure in the timely performance and payment by one or more Project Participants. Such insurance policies are collectively referred to herein as the “Policies”; and

• The issuer of any Qualified Investments deposited in the Debt Service Account.

A default in the performance by any one of the entities listed above may result in insufficient funds being available to meet PEAK’s debt service or redemption obligations.

S-2

THE GAS PROJECT

The “Gas Project” consists of the acquisition of a fixed quantity of natural gas to be delivered over a period of approximately 30 years (3591 months) by MSCG (in such capacity, the “Gas Supplier”) under a Prepaid Gas Purchase and Sale Agreement (the “Prepaid Gas Purchase and Sale Agreement” or “Gas Purchase Agreement”) between MSCG and PEAK. MSCG has agreed to deliver specified daily quantities of gas each month to designated delivery points, and PEAK has agreed to make a lump sum prepayment to MSCG for all of the cost of the gas. The Bonds are being issued primarily to (a) finance the Cost of Acquisition of the Gas Project, (b) fund a deposit into the Commodity Swap Reserve Accounts created pursuant to the Indenture in the form of insurance policies to be issued by the Surety Policy Provider (such Accounts being for the primary benefit of the Commodity Swap Counterparty), (c) fund a deposit into the Debt Service Reserve Account created pursuant to the Indenture in the form of insurance policies to be issued by the Surety Policy Provider, (d) fund a deposit into the Capitalized Interest Subaccount of the Debt Service Account created pursuant to the Indenture and (e) pay the costs of issuance of the Bonds. The total quantity of gas to be delivered by MSCG over the term of the Gas Purchase Agreement is approximately 380,128,915 MMBtus1.

THE PREPAID GAS PURCHASE AND SALE AGREEMENT

The Gas Purchase Agreement provides for the delivery of gas to designated delivery points. MSCG is obligated to make payments to PEAK for gas not delivered or taken under the Gas Purchase Agreement for any reason, including force majeure events. PEAK may elect to remarket quantities of gas not taken by the Project Participants, subject to certain conditions set forth in the Gas Purchase Agreement. MSCG has the option, and in certain circumstances the obligation, to remarket or cause to be remarketed such amounts of gas as are identified by PEAK or the Trustee. To the extent that MSCG is unable to remarket any such gas affected by a Project Participant’s payment default after using commercially reasonable efforts, MSCG has agreed to purchase such gas for its own account.

Various termination events are specified in the Gas Purchase Agreement. Upon the occurrence of certain of these events, the Gas Purchase Agreement may be terminated by PEAK or MSCG, and upon the occurrence of other such events, the Gas Purchase Agreement will terminate automatically. If the Gas Purchase Agreement is terminated, MSCG will be required to pay a scheduled termination payment (the “Termination Payment”) to PEAK. Any termination of the Gas Purchase Agreement will result in extraordinary mandatory redemption of the Bonds. The amount of the Termination Payment declines over time as MSCG performs its gas delivery obligations under the Gas Purchase Agreement.

The amount of the Termination Payment, together with the amounts required to be on deposit in certain Funds and Accounts held by the Trustee, including any Qualified Investments deposited in the Debt Service Account or the Capitalized Interest Subaccount contained therein, has been calculated to provide a sum at least sufficient to pay the Redemption Price of the Bonds, assuming that MSCG (or, if applicable Morgan Stanley), the Project Participants and the Surety Policy Provider, if applicable, pay and perform their contract obligations when due. A performance shortfall from any one of these entities could result in a payment shortfall to Bondholders.

See “THE GAS PROJECT,” “THE PREPAID GAS PURCHASE AND SALE AGREEMENT,” “THE BONDS—Redemption” and APPENDIX H.

1 Alternatively, prior to the initial pricing of the Bonds PEAK and the Project Participants may elect to begin gas deliveries on October 1, 2018, rather than on April 1, 2018, in which case PEAK would acquire approximately 375,974,365 MMBtus of natural gas from MSCG pursuant to the Gas Purchase Agreement and gas would be delivered over a period of approximately 353 months.

S-3

MSCG, MS&CO. AND MORGAN STANLEY

MSCG is wholly owned by the publicly listed company Morgan Stanley. MSCG is engaged, among other things, in client facilitation and market-making activities in commodities and commodity derivative contracts. MSCG is provisionally registered as a swap dealer with the Commodity Futures Trading Commission. The payment obligations of MSCG under the Gas Purchase Agreement and under the Gas Supplier Commodity Swap are guaranteed by Morgan Stanley.

Morgan Stanley & Co. LLC (“MS&Co.”) is serving as the underwriter for the Bonds. MS&Co. is a Delaware corporation (incorporated in 1969) and is a wholly-owned subsidiary of Morgan Stanley.

Morgan Stanley is a global financial services firm that, through its subsidiaries and affiliates, provides its products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Morgan Stanley was originally incorporated under the laws of the State of Delaware in 1981, and its predecessor companies date back to 1924. Morgan Stanley conducts its business from its headquarters in and around New York City, its regional offices and branches throughout the United States and its principal offices in London, Tokyo, Hong Kong and other world financial centers.

See “MSCG, MS&CO. AND MORGAN STANLEY,” and “THE PREPAID GAS PURCHASE AND SALE AGREEMENT—Security.”

THE PROJECT PARTICIPANTS

PEAK will enter into Gas Supply Contracts (the “Gas Supply Contracts”) with each of Carrollton Utilities, Kentucky; Henderson, Kentucky; Patriots Energy Group (South Carolina); The Southeast Alabama Gas District; Las Cruces, New Mexico; Clarke-Mobile Counties Gas District (Alabama); Jackson Energy Authority (Tennessee); Metropolitan Utilities District (Omaha, Nebraska); and the City of Indianapolis, Indiana, acting by and through its Board of Directors for Utilities of its Department of Public Utilities (“Citizens Gas”) (each, a “Project Participant” and collectively, the “Project Participants”). The Gas Supply Contracts provide for the sale, on a pay-as-you-go basis, of all of the natural gas to be delivered to PEAK over the term of the Gas Purchase Agreement. Citizens Gas has agreed to purchase approximately 34.2% of the gas to be delivered to PEAK; Carrollton Utilities has agreed to purchase approximately 19.4% of the gas; Metropolitan Utilities District (Omaha) has agreed to purchase approximately 13.6% of the gas; Patriots Energy Group has agreed to purchase approximately 13.1% of the gas and the remaining Project Participants have agreed to purchase the remaining 19.7% of the gas.1 See “THE GAS SUPPLY CONTRACTS – General” and “THE GAS SUPPLY CONTRACTS – Carrollton Utilities” herein. The public gas systems owned by the Project Participants provide natural gas distribution service to retail consumers located in their respective service areas.

Each of the Project Participants, along with its total average annual volume expressed in MMBtus and as a percentage of the total average annual volume of gas to be delivered to PEAK by MSCG under the Gas Purchase Agreement, is discussed under the heading “THE PROJECT PARTICIPANTS — Summary Operating and Financial Information” herein. See also APPENDIX A for certain information about Carrollton Utilities, Patriots Energy Group, Metropolitan Utilities District (Omaha) and Citizens Gas, as the Project Participants taking in excess of 10% of the total gas volumes.

1 Prior to the initial pricing of the Bonds, PEAK and the Project Participants may elect to begin gas deliveries on October 1, 2018, rather than April 1, 2018, in which case the portion of the total contract quantity purchased by Citizens Gas would decrease to approximately 34.1%, and the portion purchased by Carrollton Utilities, Metropolitan Utilities District and Jackson Energy Authority would increase to approximately 19.5%, 13.7% and 5.6%, respectively.

S-4

THE GAS SUPPLY CONTRACTS

Under the Gas Supply Contracts, PEAK has agreed to deliver and each Project Participant has agreed to purchase specified daily quantities of gas at designated delivery points. Each Project Participant is obligated to pay PEAK for any quantities of gas tendered for delivery by PEAK but not taken by the Project Participant, in which case it is eligible to receive a credit based on revenues received if the gas is remarketed successfully. The Project Participants have no obligation to pay for gas that PEAK fails to deliver. Gas sold under the Gas Supply Contracts is priced at the applicable monthly market index price for the delivery point, less a specified discount, and plus any physical premium. The payments required to be made by the Project Participants under the Gas Supply Contracts, together with any net amounts received by PEAK under the PEAK Commodity Swap described below, constitute the primary and expected source of the revenues pledged to the payment of the Bonds. The obligations of the Project Participants under the Gas Supply Contracts are payable solely from the revenues derived from the operation of their respective natural gas systems. See “THE GAS SUPPLY CONTRACTS.”

COMMODITY SWAPS

PEAK will enter into a natural gas commodity price swap agreement (the “PEAK Commodity Swap”) with BP Energy Company (the “Commodity Swap Counterparty”) under which, over the term of the Gas Purchase Agreement, PEAK will pay a floating natural gas price at certain pricing points and receive a fixed natural gas price for notional quantities of natural gas that correspond to the quantities and related delivery points under the Gas Purchase Agreement. MSCG will enter into a comparable fixed-to- floating commodity swap agreement (the “Gas Supplier Commodity Swap” and, together with the PEAK Commodity Swap, the “Commodity Swaps”) with the Commodity Swap Counterparty under which MSCG pays a fixed natural gas price over the same period and receives a floating natural gas price at the same pricing points for the same notional quantities, also corresponding to the quantities and related delivery points under the Gas Purchase Agreement. The Commodity Swap Counterparty’s payment obligations to each of PEAK and MSCG will be guaranteed by BP Corporation North America Inc., an Indiana corporation (“BPNA” or the “Commodity Swap Counterparty Guarantor”). MSCG’s payment obligations to the Commodity Swap Counterparty will be guaranteed by Morgan Stanley. The Commodity Swap Counterparty, MSCG, the Trustee and The Bank of New York Mellon Trust Company, N.A., as custodian (in such capacity, the “Custodian”) will enter into a Custodial Agreement (the “Custodial Agreement”), in order to administer payments under the Gas Supplier Commodity Swap. See “THE COMMODITY SWAPS” and “THE COMMODITY SWAP COUNTERPARTY.”

SECURITY FOR THE BONDS

The Bonds are payable solely from and secured solely by the Trust Estate which consists of the following: (a) the proceeds of the sale of the Bonds, (b) all right, title and interest of PEAK in, to and under the PEAK Commodity Swap, the Policies, the Gas Purchase Agreement, including any Assignment Payment, as defined in the Gas Purchase Agreement, the Morgan Stanley/PEAK Guaranty and the Gas Supply Contracts, (c) the Revenues, (d) any Termination Payment or the right to receive such Termination Payment, and (e) all Funds established by the Indenture (other than the Bond Purchase Fund, the Rebate Account in the Operating Fund, the Administrative Fee Fund and the Rate Stabilization Fund) including Qualified Investments deposited therein and the investment income, if any, thereof subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture (the “Trust Estate”); provided that “Trust Estate” shall not include the rights, title and interest of PEAK under the Gas Supply Contracts to which the Surety Policy Provider is subrogated under the Gas Supply Contracts and the related Financial Guaranty Agreements from time to time.

S-5

The Bonds are expected to be paid from the Revenues described herein. The Revenues include payments made by the Project Participants under the Gas Supply Contracts, any net amounts received by PEAK under the PEAK Commodity Swap, any amounts received by PEAK under the Gas Purchase Agreement (excluding the Termination Payment, which is to be deposited directly into the Redemption Account of the Debt Service Fund), and all other income from or attributable to the Gas Project. The Revenues are to be applied in accordance with the priorities established under the Indenture. See “SECURITY FOR THE BONDS.”

DEBT SERVICE RESERVE ACCOUNTS

The Indenture establishes Debt Service Reserve Accounts, one for each Project Participant, held by the Trustee, which will initially be funded with insurance policies to be issued by AGM. Amounts on deposit in the Debt Service Reserve Accounts will be applied from time to time by the Trustee to a Project Participant’s Revenue Account and used first to make scheduled deposits to the Debt Service Account of the Debt Service Fund in the event a Project Participant fails to make full and timely payment of amounts owed under its Gas Supply Contract.

The Debt Service Reserve Requirement is sized independently for each Project Participant. The Debt Service Reserve Requirement for each Project Participant represents the maximum consecutive two months of payments to the Debt Service Account, calculated based on the maximum payment to be made in any two consecutive months on such Project Participant’s contracted volumes of gas at the fixed prices under the PEAK Commodity Swap.

See “SECURITY FOR THE BONDS—Debt Service Reserve Accounts.”

COMMODITY SWAP RESERVE ACCOUNTS

The Indenture establishes a separate Commodity Swap Reserve Account for each Project Participant, held by the Trustee, each of which is to be funded with an insurance policy issued by AGM. Amounts on deposit in the Commodity Swap Reserve Accounts will be applied from time to time by the Trustee to the related Project Participant’s Revenue Account and used to make Commodity Swap Payments in the event such Project Participant fails to make full and timely payment of amounts owed under its Gas Supply Contract.

The Commodity Swap Reserve Requirement, as more specifically defined in Appendix B hereto, is sized independently for each Project Participant. See “SECURITY FOR THE BONDS—Commodity Swap Reserve Accounts.”

S-6

DEBT SERVICE FUND REPURCHASE AGREEMENT

On the date of delivery of the Bonds, it is expected that the Trustee will enter into a repurchase agreement with respect to the Debt Service Account of the Debt Service Fund, and the Capitalized Interest Subaccount therein (the “Debt Service Fund Agreement”). Any such Debt Service Fund Agreement will (a) be coterminous with the initial Long Rate Period ending on March 31, 2024, (b) constitute a Qualified Investment under the Indenture, and (c) be entered into with a qualified repurchase agreement counterparty as soon as practicable following the pricing of the Bonds.

Required qualifications for an eligible repurchase agreement include: (a) that the obligations of the seller (repurchase agreement counterparty) are secured by a perfected security interest in cash and other eligible securities held by a third-party custodian and valued daily, and (b) that such seller, or any guarantor of such seller’s obligations, have an initial long-term Moody’s credit rating of at least A3.

Any Debt Service Fund Agreement will provide that, in the event of early termination, all invested funds will be returned to the Trustee. A market value adjustment may also be payable to the Trustee. Any Debt Service Fund Agreement will not require a market value adjustment to be payable by the Trustee to the seller in the event of early termination.

Any Debt Service Fund Agreement will provide for a fixed interest rate to be paid on the funds invested and for scheduled withdrawals in connection with each Bond Payment Date. Upon the termination of the transaction, whether by extraordinary mandatory redemption or final maturity, the funds invested under any Debt Service Fund Agreement will be available to pay the redemption price, interest, or other amounts due on the Bonds.

CERTAIN RELATIONSHIPS

MSCG, which is the Gas Supplier and is a party to the Gas Supplier Commodity Swap, is wholly- owned by Morgan Stanley. The payment obligations of MSCG under the Gas Purchase Agreement and the Gas Supplier Commodity Swap are unconditionally guaranteed by Morgan Stanley under the Morgan Stanley/PEAK Guaranty and the Morgan Stanley/BP Guaranty, respectively. MS&Co., the underwriter, is also wholly-owned by Morgan Stanley. BP Energy Company is the Commodity Swap Counterparty to PEAK.

The various relationships described above could create an actual or apparent conflict of interest.

S-7

[This page intentionally left blank]

OFFICIAL STATEMENT

$825,000,000* PUBLIC ENERGY AUTHORITY OF KENTUCKY GAS SUPPLY REVENUE BONDS 2018 SERIES A

INTRODUCTION

General

This Official Statement, which includes the cover page, Summary Statement and appendices attached hereto, contains information concerning (a) Public Energy Authority of Kentucky (“PEAK”), a Natural Gas Acquisition Authority formed under the Natural Gas Acquisition Authority Act of the Commonwealth of Kentucky (KRS §353.400 et seq.) (the “Act”), (b) PEAK’s Gas Supply Revenue Bonds, 2018 Series A (the “Bonds”), being issued in the aggregate principal amount of $825,000,000*, and (c) the Gas Project (defined below) being financed with proceeds of the Bonds.

The Bonds are being issued pursuant to the authority contained in the Act, and will be issued and secured under a Trust Indenture, dated as of February 1, 2018 (the “Indenture”), between PEAK and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). Capitalized terms used and not otherwise defined herein have the meanings set forth in “APPENDIX B – “DEFINITIONS OF CERTAIN TERMS.”

PEAK was organized under the provisions of the Act for the purpose of, among other things, securing reliable and economical supplies of natural gas for the benefit of its gas purchasers including Carrollton Utilities (“Carrollton”); Henderson, Kentucky; Patriots Energy Group (“PEG”); The Southeast Alabama Gas District; Las Cruces, New Mexico; Clarke-Mobile Counties Gas District; Jackson Energy Authority; Metropolitan Utilities District (Omaha, Nebraska), and; the City of Indianapolis, Indiana, acting by and through its Board of Directors for Utilities of its Department of Public Utilities (“Citizens Gas”) (each a “Project Participant,” and collectively the “Project Participants”). Citizens Gas has agreed to purchase approximately 34.2% of the gas to be delivered to PEAK; Carrollton Utilities has agreed to purchase approximately 19.4% of the gas; Metropolitan Utilities District (Omaha) has agreed to purchase approximately 13.6% of the gas; Patriots Energy Group has agreed to purchase approximately 13.1% of the gas and the remaining Project Participants have agreed to purchase the remaining 19.7% of the gas.1 See “THE GAS SUPPLY CONTRACTS” herein for a list of the total average daily volumes of gas expressed in MMBtus and as a percentage of the total volumes of Gas to be delivered to PEAK by MSCG under the Gas Purchase Agreement. For additional information about the Project Participants, see “THE PROJECT PARTICIPANTS” and APPENDIX A.

PEAK is issuing the Bonds to finance the Cost of Acquisition of approximately a 30-year (359- month1) supply of natural gas (the “Gas Project”) under a Prepaid Gas Purchase and Sale Agreement (the “Prepaid Gas Purchase and Sale Agreement” or “Gas Purchase Agreement”) between PEAK and Morgan Stanley Capital Group Inc. (“MSCG” and in such capacity, the “Gas Supplier”). The Gas Purchase Agreement provides for the purchase and sale of an aggregate of 380,128,915 MMBtus1 of natural gas. On the date of issuance of the Bonds, PEAK will apply proceeds of the Bonds to make a

* Preliminary, subject to change. 1 Prior to the initial pricing of the Bonds, PEAK and the Project Participants may elect to begin gas deliveries on October 1, 2018, rather than on April 1, 2018, in which case PEAK would acquire approximately 375,974,365 MMBtus of natural gas (the “Total Contract Quantity”) from MSCG pursuant to the Gas Purchase Agreement and gas would be delivered over a period of approximately 353 months. In addition, the portion of the Total Contract Quantity purchased by Citizens Gas would decrease to approximately 34.1%, and portion purchased by Carrollton Utilities, Metropolitan Utilities District and Jackson Energy Authority would increase to approximately 19.5%, 13.7% and 5.6%, respectively.

lump sum prepayment to MSCG for the cost of all of the gas to be delivered over the term of the Gas Purchase Agreement.

THE BONDS ARE SECURED SEPARATELY FROM ALL OTHER OBLIGATIONS ISSUED BY PEAK. THE BONDS ARE NOT AN INDEBTEDNESS OR OBLIGATION OF THE COMMONWEALTH OF KENTUCKY, ANY POLITICAL SUBDIVISION THEREOF, OR ANY MEMBER OF PEAK OR ANY PROJECT PARTICIPANT, AND ARE NOT AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION OF THE COMMONWEALTH OF KENTUCKY. NEITHER THE FAITH AND CREDIT OF THE COMMONWEALTH OF KENTUCKY, ANY POLITICAL SUBDIVISION THEREOF, PEAK, OR ANY MEMBER OF PEAK, NOR THE TAXING POWER OF THE COMMONWEALTH OF KENTUCKY OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED FOR THE PAYMENT OF THE BONDS. PEAK HAS NO TAXING POWER. NO REGISTERED OWNER OF THE BONDS SHALL EVER HAVE THE RIGHT TO REQUIRE OR COMPEL THE EXERCISE OF THE TAXING POWERS OF THE COMMONWEALTH OF KENTUCKY, PEAK OR ANY PROJECT PARTICIPANT, OR THE TAXATION IN ANY FORM ON ANY REAL OR PERSONAL PROPERTY TO PAY THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST ON THE BONDS. THE OBLIGATIONS OF THE PROJECT PARTICIPANTS TO MAKE PAYMENTS TO PEAK UNDER THE GAS SUPPLY CONTRACTS ARE NOT, NOR SHALL THEY BE CONSTRUED AS, A GUARANTY OR ENDORSEMENT OF OR A SURETY FOR THE BONDS. THE OBLIGATIONS OF THE PROJECT PARTICIPANTS UNDER THE GAS SUPPLY CONTRACTS ARE NOT AN OBLIGATION OF THE COMMONWEALTH OF KENTUCKY OR A GENERAL OBLIGATION OF THE PROJECT PARTICIPANTS AND ARE PAYABLE SOLELY FROM THE REVENUES DERIVED FROM THE OPERATION OF THEIR RESPECTIVE NATURAL GAS SYSTEMS. THE INDENTURE DOES NOT MORTGAGE THE GAS PROJECT OR ANY TANGIBLE PROPERTIES OR ASSETS OF PEAK OR OF THE PROJECT PARTICIPANTS.

The Bonds are special and limited obligations of PEAK, payable solely from the revenues, moneys, securities, funds and agreements pledged therefor in the Indenture, including payments under the Gas Supply Contracts with each Project Participant. PEAK’s ability to meet its debt service and redemption obligations to Bondholders is dependent on the performance of:

• MSCG, as Gas Supplier and counterparty under the Gas Supplier Commodity Swap (defined herein);

• In the event of a failure in the timely performance and payment by MSCG, Morgan Stanley, the guarantor of MSCG payment obligations under the Gas Purchase Agreement and the Gas Supplier Commodity Swap;

• Each of the Project Participants to make timely payments under its Gas Supply Contract;

• Assured Guaranty Municipal Corp. (“AGM” or the “Surety Policy Provider”) as provider of the insurance policies for the Commodity Swap Reserve Accounts and the Debt Service Reserve Accounts (as defined herein) in the event of a failure in the timely performance and payment by one or more Project Participants. Such insurance policies are collectively referred to herein as the “Policies”; and

• The issuer of any Qualified Investments deposited in the Debt Service Account.

The default by any one of the entities listed above may result in insufficient funds being available to meet PEAK’s debt service or redemption obligations.

This Official Statement includes information regarding and descriptions of PEAK, the Gas Project, MSCG, MS&Co., Morgan Stanley, the Commodity Swap Counterparty referred to herein, the Project Participants and the Bonds, and summaries of certain provisions of the Indenture, the Gas Supply Contracts, the Gas Purchase Agreement, the Commodity Swaps, the Commodity Swap Reserve Account, the Debt Service Account and the Custodial Agreement referred to herein. Such descriptions and summaries do not purport to be complete or definitive, and such summaries are qualified by reference to such documents, copies of which may be obtained upon written request to PEAK. Descriptions of the Indenture, the Bonds, the Gas Supply Contracts, the Commodity Swaps, the Commodity Swap Reserve Accounts, the Debt Service Reserve Accounts, the Custodial Agreement, and the Gas Purchase Agreement are qualified by reference to bankruptcy laws affecting the remedies for the enforcement of the rights and security provided therein and the effect of the exercise of police and regulatory powers by federal and state authorities.

See APPENDIX B for the meanings of certain defined terms, as well as a description of certain provisions of the Indenture.

Tax Matters

In the Opinion of Bond Counsel, interest on the Bonds is excluded from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. In Bond Counsel’s further opinion, under the existing laws of the Commonwealth of Kentucky, interest on the Bonds is excluded from the gross income of the recipients thereof for Kentucky income tax purposes and such Bonds are exempt from ad valorem taxes by the Commonwealth of Kentucky and all political subdivisions thereof. See “TAX MATTERS” and “APPENDIX E—PROPOSED FORM OF OPINION OF BOND COUNSEL.”

THE GAS PROJECT

Prepaid Gas Purchase and Sale Agreement

The Gas Project consists of the acquisition by PEAK of the right to receive approximately 380,128,915 MMBtus1 of natural gas from MSCG pursuant to the terms of the Gas Purchase Agreement. The gas is to be delivered to PEAK at designated delivery points in specified daily quantities each month over the term of the Gas Purchase Agreement of approximately 30 years, beginning April 1, 20181.

In addition to its gas delivery obligations under the Gas Purchase Agreement, MSCG is obligated to make payments to PEAK for any gas not delivered or taken for any reason, including force majeure events. MSCG also has the option (and in the case of a payment default by a Project Participant, the obligation) to remarket, on a daily, monthly or seasonal basis, quantities of gas designated by PEAK or the Trustee. In the event that MSCG is unable to remarket any such gas affected by a Project Participant’s payment default after using commercially reasonable efforts, it has agreed to purchase such gas for its own account.

For a description of certain provisions of the Gas Purchase Agreement, see “THE PREPAID GAS PURCHASE AND SALE AGREEMENT.”

1 Alternatively, prior to the initial pricing of the Bonds PEAK and the Project Participants may elect to begin gas deliveries on October 1, 2018, in which case PEAK would acquire approximately 375,974,365 MMBtus of natural gas from MSCG pursuant to the Gas Purchase Agreement.

Morgan Stanley Guaranties

The payment obligations of MSCG under the Gas Purchase Agreement referred to herein are unconditionally guaranteed by Morgan Stanley under a guaranty agreement (the “Morgan Stanley/PEAK Guaranty”). The payment obligations of MSCG under the Gas Supplier Commodity Swap are unconditionally guaranteed by Morgan Stanley under a guaranty agreement (the “Morgan Stanley/BP Guaranty” and, collectively with the Morgan Stanley/PEAK Guaranty, the “Morgan Stanley Guaranties”). The Morgan Stanley/PEAK Guaranty does not guarantee the gas delivery and other performance obligations of MSCG under the Gas Purchase Agreement. THE MORGAN STANLEY/PEAK GUARANTY DOES NOT GUARANTEE THE PAYMENT OF THE BONDS.

For information regarding MSCG, MS&Co. and Morgan Stanley, see “MSCG, MS&Co. AND MORGAN STANLEY.” For a description of certain security provisions of the Gas Purchase Agreement, see “THE PREPAID GAS PURCHASE AND SALE AGREEMENT —Security.”

Project Participants

PEAK will enter into a separate Gas Supply Contract (each, a “Gas Supply Contract,” and collectively, the “Gas Supply Contracts”) with each of the Project Participants. The public gas systems owned by or served by the Project Participants provide natural gas distribution service to retail consumers located in their respective service areas. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF PEAK, THE PROJECT PARTICIPANTS, THE COMMONWEALTH OF KENTUCKY NOR ANY POLITICAL SUBDIVISION OR INSTRUMENTALITY THEREOF, IS PLEDGED FOR THE PAYMENT OF THE BONDS. PEAK HAS NO TAXING POWER. See “THE PROJECT PARTICIPANTS” and APPENDIX A for certain financial information about certain of the Project Participants.

Gas Supply Contracts

PEAK has agreed to sell all of the gas to be delivered to it under the Gas Purchase Agreement to the Project Participants under the Gas Supply Contracts. PEAK has agreed to deliver (and each Project Participant has agreed to purchase) specified daily quantities of gas at designated delivery points. Total Gas deliveries under the Gas Supply Contracts in each month at each delivery point equal the same quantity of gas required to be tendered for delivery each month by MSCG at that delivery point under the Gas Purchase Agreement. Each Project Participant is obligated to pay PEAK for the quantities of gas tendered for delivery under its Gas Supply Contract whether taken or not. If gas is tendered for delivery by PEAK but not taken by a Project Participant, revenues from the sales of such gas, including sales to other Project Participants and other qualified users, are credited to the Project Participant under certain circumstances. The Project Participants have no obligation to pay for gas that PEAK fails to deliver. Under the Gas Supply Contracts, the Project Participants pay a monthly market index price for each MMBtu delivered reduced by a specified discount, plus any applicable physical premium. The Gas Supply Contracts allow for an annual refund under certain circumstances, but no assurance can be given as to an annual refund.

Each Project Participant’s obligation to make required payments under its Gas Supply Contract is a several obligation and not a joint obligation with the obligations of any other Project Participant. Each Project Participant has agreed to make such payments from the revenues of its gas system, and only as a charge against such revenues and as an operating expense of its gas system and a cost of purchased natural gas.

Each Project Participant has covenanted and agreed to establish, maintain, and collect rates and charges for the gas services furnished by its gas system so as to provide revenues sufficient, together with

other available gas system revenues, to enable the Project Participant to pay to PEAK all amounts payable under the related Gas Supply Contract, to pay all other amounts payable from the revenues of the gas system of such Project Participant, and to maintain any required reserves.

For a description of certain provisions of the Gas Supply Contracts, see “THE GAS SUPPLY CONTRACTS.”

Commodity Swaps

In order to hedge against reductions in its gas sale revenues resulting from changes in monthly market index prices, PEAK will enter into a floating-to-fixed commodity price swap agreement (the “PEAK Commodity Swap”) with BP Energy Company (the “Commodity Swap Counterparty”). The notional gas quantities and pricing points under the PEAK Commodity Swap correspond to the scheduled gas quantities and delivery points under the Gas Purchase Agreement. The index used to compute the floating price payable by PEAK under the PEAK Commodity Swap for each pricing point corresponds to the index used to compute the price payable to PEAK under the Gas Supply Contracts for gas delivered to the Project Participants at the corresponding delivery points.

MSCG will enter into a comparable fixed-to-floating commodity price swap agreement (the “Gas Supplier Commodity Swap”) with the Commodity Swap Counterparty. The notional gas quantities and pricing points under the Gas Supplier Commodity Swap match those under the PEAK Commodity Swap, and accordingly those under the Gas Purchase Agreement.

The PEAK Commodity Swap and the Gas Supplier Commodity Swap (collectively, the “Commodity Swaps”) extend for the term of the gas delivery period under the Gas Purchase Agreement, but are subject to early termination upon the occurrence of certain events. Termination of either of the Commodity Swaps without timely replacement by PEAK and MSCG will give rise to early termination rights under, and in some cases result in automatic termination of, the Gas Purchase Agreement, termination of which would result in extraordinary, mandatory redemption of the Bonds.

For a description of certain provisions of the Commodity Swaps, see “THE COMMODITY SWAPS.” For information regarding the Commodity Swap Counterparty, see “THE COMMODITY SWAP COUNTERPARTY.”

Custodial Agreement

The Custodial Agreement. The Custodial Agreement (the “Custodial Agreement”), by and among the Trustee, MSCG, the Commodity Swap Counterparty and The Bank of New York Mellon Trust Company, N.A., as custodian (in such capacity, the “Custodian”), contains provisions designed to mitigate risks to the Bondholders resulting from a failure of the Commodity Swap Counterparty to make payments to PEAK under the PEAK Commodity Swap. Payments made by MSCG to the Commodity Swap Counterparty under the Gas Supplier Commodity Swap will be made to a custodial account maintained by the Custodian under the Custodial Agreement. Such amounts will not be released until the Custodian has confirmation that the amount payable to PEAK by the Commodity Swap Counterparty under the PEAK Commodity Swap for such month has been paid. If the Commodity Swap Counterparty does not make a required payment under the PEAK Commodity Swap and such payment remains unpaid after the expiration of any grace period, the Custodian will pay the amount that MSCG paid under the Gas Supplier Commodity Swap (which such amount is held in custody) to PEAK for deposit in the Revenue Fund and that payment will be treated as a Commodity Swap Receipt. Additionally, if the Gas Supplier Commodity Swap terminates or otherwise ceases to be in effect for any reason, MSCG is required to make payments to the Custodian that otherwise would have been payable under the Gas Supplier

Commodity Swap to the Commodity Swap Counterparty until expiration of the applicable swap replacement period or termination of the Gas Purchase Agreement, which payments will be used by the Custodian, to the extent necessary, to pay to PEAK unpaid amounts due from the Commodity Swap Counterparty under the PEAK Commodity Swap. Payments made under the PEAK Commodity Swap are not subject to the Custodial Agreement.

Termination of the Prepaid Gas Purchase and Sale Agreement

Upon the occurrence of various events, including a failure by MSCG to perform its gas delivery or payment obligations, PEAK may elect to terminate the Gas Purchase Agreement. Upon the occurrence of other events, MSCG may elect to terminate the Gas Purchase Agreement. In addition, upon the occurrence of certain events, including a Failed Bond Remarketing, as described herein, or the remarketing of gas not taken by the Project Participants to non-qualified users in excess of certain thresholds, the Gas Purchase Agreement will terminate automatically. If the Gas Purchase Agreement is terminated, MSCG will be required to pay a scheduled termination payment (the “Termination Payment”) to PEAK. In addition, if the Gas Purchase Agreement is terminated as a result of MSCG’s default thereunder (excluding a default caused by MSCG’s insolvency or bankruptcy), MSCG will be required to pay PEAK an amount in addition to the Termination Payment (the “Additional Termination Payment”). Any termination of the Gas Purchase Agreement will result in an extraordinary mandatory redemption of the Bonds. The amount of the Termination Payment declines over time as MSCG performs its gas delivery obligations under the Gas Purchase Agreement. The amount of the Termination Payment, together with the amounts required to be on deposit in certain Funds and Accounts held by the Trustee, including any Qualified Investments deposited in the Debt Service Account or the Capitalized Interest Subaccount contained therein, has been calculated to provide a sum at least sufficient to pay the Redemption Price of the Bonds, assuming that MSCG (or, if applicable, Morgan Stanley), the Project Participants and the Surety Policy Provider, if applicable, pay and perform their contract obligations when due. A performance shortfall from any one of these entities could result in a payment shortfall to Bondholders. See “THE PREPAID GAS PURCHASE AND SALE AGREEMENT—Termination” and “THE BONDS—Redemption.” A schedule of the Termination Payment payable each month over the term of the Gas Purchase Agreement is attached as Appendix H.

[Rest of page intentionally left blank]

Flow Chart

Commodity Swap Counterparty

Fixed Price Index Index Fixed Price (Monthl y) Price Price (Monthly) 4 (Monthly) (Monthly) 3

Gas Volumes Gas Volumes (Monthly) Guaranty Payment PEAK Obligations Project Participants 5 2 MSCG Morgan Stanley

Index Price Prepayment Less Discount (Upfront) (Monthl y)

Fixed Debt Service Proceeds ( Semi- annually) (Upfront)

The Bonds

Transaction Overview

1 Bond Issuance: PEAK issues fixed and Mandatory Put bonds (that bear interest at a fixed rate during the initial Long Rate Period) to fund the prepayment for natural gas, and pay costs of issuance.

2 Prepayment: PEAK will apply bond proceeds to prepay MSCG for approximately 30 years of natural gas deliveries. Under the Prepaid Gas Purchase and Sale Agreement, MSCG will be obligated (a) to deliver specified monthly quantities of gas to PEAK for approximately 30 years, (b) to make payments for any gas not delivered based on replacement cost or the monthly market index price, whichever is higher, plus an administrative fee, and (c) to make a termination payment upon any early termination of the Prepaid Gas Purchase and Sale Agreement.

3 Gas Supplier: MSCG Enters into a Commodity Swap with the Commodity Swap Counterparty to facilitate MSCG’s ability to purchase at market prices the specified gas volumes required to be delivered each month throughout the term of the Prepaid Gas Purchase and Sale Agreement.

4 PEAK Commodity Swap: PEAK enters into a Commodity Swap with the Commodity Swap Counterparty to effectively fix the discount below the market price at which gas is sold to the Project Participants under the Gas Supply Contracts, aligning variable gas revenues with fixed debt service obligations. Volumes, term, and pipelines for PEAK Commodity Swap directly offset the Gas Supplier Commodity Swap.

5 Project Participants: Under the Gas Supply Contracts, PEAK has agreed to sell 100% of the gas delivered by MSCG, on a pay-as- you-go basis, at a price equal to the applicable monthly market index less a discount set such that the month’s net proceeds under the Gas Supply Contracts (net of swap payments and receipts and investment income from the Debt Service Fund) will allow PEAK to pay debt service requirements on the Bonds and program expenses. when due.

The payment obligations of MSCG will be guaranteed by Morgan Stanley. The cumulative effect of the Prepaid Natural Gas Sales Agreement, the Commodity Swap, the Gas Supply Contracts, and related documents is intended to enable PEAK to receive dependable natural gas supplies and the resulting monthly net revenues, regardless of changes in gas prices, are expected to be adequate, together with investment income on the Debt Service Fund to pay debt service requirements on the Bonds and program expenses when due. . *The illustration and information provided above are only a summary of certain information contained in this Official Statement and are qualified in their entirety by the more detailed information appearing elsewhere in this Official Statement. No person is authorized to detach this page from the Official Statement or to use it otherwise without the entire Official Statement.

ESTIMATED SOURCES AND USES OF FUNDS

The sources and uses of funds in connection with the issuance of the Bonds are estimated to be as follows:

SOURCES: Par Amount $ Net Original Issue Premium ______Total Sources $ USES: Deposit to Gas Project Account(1) $ Costs of Issuance(2) Deposit to Capitalized Interest Subaccount ______Total Uses $ ______(1) Includes the prepayment amount. (2) Includes management, underwriting, rating agency, Trustee and legal fees, premiums for the Policies, and other expenses related to the issuance of the Bonds and the acquisition of the Gas Project.

INVESTMENT CONSIDERATIONS

The purchase of the Bonds involves certain investment considerations discussed throughout this Official Statement. Prospective purchasers of the Bonds should make a decision to purchase the Bonds only after reviewing the entire Official Statement and making an independent evaluation of the information contained herein. Certain of those investment considerations are summarized below. This summary does not purport to be complete, and the order in which the following investment considerations are presented is not intended to reflect their relative significance.

Special and Limited Obligations

The Bonds are special and limited obligations of PEAK and are payable solely from and secured solely by the Trust Estate pledged pursuant to the Indenture. The Trust Estate includes only the proceeds, revenues, funds and rights related to the Gas Project, as described under “SECURITY FOR THE BONDS – The Indenture” below, and does not include any other revenues or assets of PEAK. The Bonds are not general obligations of PEAK, and PEAK has no taxing power.

Only PEAK is obligated to pay the Bonds. None of the Project Participants is obligated to make payments in respect of the debt service on the Bonds. The Project Participants are obligated only to purchase and pay for gas tendered for delivery by PEAK at a contract price, which is a market-based price. See the “THE GAS SUPPLY CONTRACTS – Pricing Provisions.” MSCG, Morgan Stanley, the Commodity Swap Counterparty and the Surety Policy Provider are not obligated to make debt service payments on the Bonds, and none of them has guaranteed payment of the Bonds.

Bonds Subject to Mandatory Tender or Mandatory Redemption on the Mandatory Purchase Date

Mandatory Purchase Date. On the Mandatory Purchase Date, the outstanding principal of all Bonds will be paid as follows:

(a) for all Bonds maturing on such date, the outstanding principal amount will be paid from amounts on hand in the Debt Service Account;

(b) unless a Failed Bond Remarketing (as described below) has occurred, all Outstanding Bonds (other than Bonds maturing on such date) must be tendered for purchase and all such Bonds are to be purchased at the outstanding principal amount thereof from amounts available in the Bond Purchase Fund; or

(c) if a Failed Bond Remarketing has occurred, the Gas Purchase Agreement will terminate and all Outstanding Bonds (other than Bonds maturing on such date described above) will be subject to extraordinary mandatory redemption utilizing the Termination Payment and other amounts required to be on deposit in certain Funds and Accounts held by the Trustee, including any Qualified Investments deposited in the Debt Service Account or the Capitalized Interest Subaccount contained therein, the sum of which has been calculated to provide an amount at least sufficient to redeem all of the Outstanding Bonds on the Mandatory Purchase Date (assuming that the Gas Supplier (or, if applicable, Morgan Stanley), the Project Participants and the Surety Policy Provider, if applicable, pay and perform their contractual obligations when due). See “THE BONDS—Redemption—Extraordinary Mandatory Redemption Upon Early Termination.”

Failed Bond Remarketing. Under the terms of the Indenture, a “Failed Bond Remarketing” will occur unless, as of February 29, 2024 (being the last Business Day of the Month that is two Months prior to the Mandatory Purchase Date and herein referred to as the “Determination Date”) (i) amounts on deposit in the Remarketing Proceeds Account of the Bond Purchase Fund together with amounts that the Gas Supplier has elected to deposit in the Gas Supplier Purchase Account of the Bond Purchase Fund on or before the Mandatory Purchase Date are in the aggregate sufficient to pay the Purchase Price of the Bonds to be tendered on the Mandatory Purchase Date, and (ii) a new Long Rate Period (and corresponding new Long Rate) that is to begin on such Mandatory Purchase Date has been established in accordance with the Indenture. A Failed Bond Remarketing will result in an Extraordinary Redemption of the Bonds on the Mandatory Purchase Date. See “THE BONDS—Redemption—Mandatory Redemption Upon Early Termination.”

In addition to the above, a Failed Bond Remarketing will not occur in the event, on or before the Determination Date, the Gas Supplier has become obligated to deposit with the Trustee, on or before the Business Day preceding the Mandatory Purchase Date, for transfer to the Assignment Payment Fund created under the Indenture, an amount equal to the Termination Payment. Under such circumstances, the Trustee is to apply amounts on deposit in the Assignment Payment Fund (a) to the extent all of the Outstanding Bonds have not been redeemed or defeased on or before the Mandatory Purchase Date, to the Redemption Account for the redemption of all Outstanding Bonds on the Mandatory Redemption Date, or (b) following the redemption or defeasance of all Outstanding Bonds, (b) to pay of any amount payable in connection with the Gas Supplier’s assignment of the Gas Purchase Agreement to a third party in accordance with the terms of the Gas Purchase Agreement.

Sufficiency of Necessary Funds on the Mandatory Purchase Date

Under the Gas Purchase Agreement and the Indenture, there is required to be on deposit in certain Funds and Accounts held by the Trustee, including the Debt Service Fund and funds represented by any Debt Service Fund Agreement deposited in the Debt Service Account, not later than the Determination Date, an amount calculated to be sufficient to purchase all of the Outstanding Bonds on the Mandatory Purchase Date (assuming that MSCG pays and performs its contractual obligations when due). For this purpose, the term “on deposit” means and includes any contractually obligated payments that are due from MSCG (directly or through the Custodial Agreement relating the Commodity Swap) after the Determination Date but on or before the Mandatory Purchase Date.

If under any circumstance the amount on deposit in the necessary Funds and Accounts on the Determination Date is not sufficient to purchase all of the Outstanding Bonds on the Mandatory Purchase Date then a full termination of the Gas Purchase Agreement will occur automatically on the Determination Date. Upon a full termination of the Gas Purchase Agreement, MSCG is required to pay a Termination Payment on the last business day of the month following such Determination Date and any remaining payments in respect of the PEAK Commodity Swaps and the Gas Supply Contracts will be due by the 25th day of that same month. Those payments, taken together with other amounts to be on deposit in certain Funds and Accounts held by the Trustee under the Indenture, including any Qualified Investments deposited in the Debt Service Account, are calculated to be sufficient (assuming that MSCG, the Project Participants and the Surety Policy Provider, if applicable, pay and perform their contractual obligations when due) to redeem all Bonds on the first day of the following month (which day is also the Mandatory Purchase Date). Any failure to pay in full the amount owed on all Bonds on the Mandatory Purchase Date will result in default under the Indenture.

Structure of the Gas Project

The Gas Purchase Agreement, the Gas Supply Contracts, the Commodity Swaps, the Indenture, the Bonds and related agreements have been structured so that, assuming timely performance and payment by the Gas Supplier and the Project Participants (or the Surety Policy Provider, if applicable), of their respective obligations, the Revenues (defined herein) available to PEAK from the Gas Project are calculated to be sufficient at all times to provide for the timely payment of Operating Expenses and the scheduled debt service requirements on the Bonds. These arrangements include:

• MSCG is required to deliver gas under the Gas Purchase Agreement in specified daily quantities at designated delivery points that correspond to the daily quantities of gas and delivery points that PEAK has committed to serve under the Gas Supply Contracts. In the event MSCG fails to deliver gas for any reason, including force majeure events, it is required to pay specified amounts. MSCG’s payment obligations under the Gas Purchase Agreement are guaranteed by Morgan Stanley under the Morgan Stanley/PEAK Guaranty.

• Each Project Participant has agreed to pay for gas tendered for delivery under the Gas Supply Contracts at prices based upon a monthly market index price and to pay specified damages to PEAK for such Project Participant’s failure to accept gas tendered for delivery by PEAK.

• In the event that any Project Participant fails to pay for gas tendered for delivery by PEAK, the Surety Policy Provider, as provider of the insurance policies for the Debt Service Reserve Accounts, is to provide necessary funds, in an amount or amounts up to the Debt Service Reserve Requirement, to the Trustee in a timely manner. PEAK has covenanted in the Indenture to exercise its right under the Gas Supply Contracts to suspend further deliveries of gas to any defaulting Project Participant.

• In the event of a suspension of gas deliveries to a defaulting Project Participant, MSCG will remarket such quantities of gas pursuant to the Gas Purchase Agreement. The Gas Purchase Agreement provides that MSCG will pay remarketing proceeds to PEAK, less certain applicable fees, provided that, assuming delivery by PEAK of a timely monthly remarketing request, payment will be subject to a minimum floor based on the market-based price applicable under the Gas Supply Contracts.

• If the Commodity Swap Counterparty does not make a required payment under the PEAK Commodity Swap and such payment remains unpaid by each of the Commodity Swap Counterparty and the Commodity Swap Counterparty Guarantor after the expiration of any grace period, the Custodian under the terms of the Custodial Agreement related to the Gas Supplier Commodity Swap will pay the amount that MSCG paid under the Gas Supplier Commodity Swap (which amount is held in custody by the Custodian) to PEAK and such payment will be treated as a Commodity Swap Receipt.

PEAK’s ability to meet its obligations under the Gas Purchase Agreement, the Gas Supply Contracts, the PEAK Commodity Swap, the Indenture and the Bonds will depend materially upon the full and timely performance by (i) MSCG of its gas delivery and other obligations under the Gas Purchase Agreement, the Gas Supplier Commodity Swap and, in the event of nonperformance by MSCG, upon the performance by Morgan Stanley of its payment obligations under the Morgan Stanley Guaranties, (ii) each Project Participant of its gas purchase obligation under the applicable Gas Supply Contract and (iii) the Surety Policy Provider of its obligations under the Policies. In the event MSCG fails to deliver gas for a sustained period as set forth in the Gas Purchase Agreement, PEAK may terminate the Gas Purchase Agreement and require MSCG, or in the event of a failure in the timely performance and payment of MSCG, Morgan Stanley, to pay the scheduled Termination Payment and, under certain circumstances, an Additional Termination Payment (defined herein). In that event, the Bonds are to be redeemed at fixed redemption prices, regardless of reinvestment rates at the time.

Performance by Others

The Gas Purchase Agreement contains a number of listed events and conditions that will give either PEAK, MSCG, or each of them the option to terminate the Gas Purchase Agreement, and, upon the occurrence of certain events, the Gas Purchase Agreement will terminate automatically. These events and conditions are described below under “THE PREPAID GAS PURCHASE AND SALE AGREEMENT— Termination.” Early termination of the Gas Purchase Agreement will result in an extraordinary mandatory redemption of the Bonds.

In addition, as discussed above, the ability of PEAK to pay timely the scheduled debt service on the Bonds depends on the timely performance and payment by the Gas Supplier, Morgan Stanley, the Project Participants and the Surety Policy Provider of their obligations under the contractual arrangements that comprise the Gas Project. The failure by any one or more of such parties to meet such obligations could materially and adversely affect the ability of PEAK to pay timely the scheduled debt service on the Bonds and to meet its other obligations under the Indenture, the Gas Purchase Agreement, the Gas Supply Contracts and the PEAK Commodity Swap. The failure of the Gas Supplier, Morgan Stanley, as the guarantor of MSCG’s obligations under the Gas Purchase Agreement, the Project Participants and the Surety Policy Provider to meet their obligations to PEAK could result in insufficient Revenues being available for the payment of debt service on the Bonds.

The events and conditions that could result in either a default in the payment of debt service on the Bonds or early termination of the Gas Purchase Agreement (or both) include items that may be within or outside the control of PEAK or of MSCG (or both), such as:

• Timely performance by MSCG of its obligations under the Gas Purchase Agreement to deliver gas and to make specified payments for gas not delivered or taken;

• In the event of nonperformance by MSCG of its obligations under the Gas Purchase Agreement or the Gas Supplier Commodity Swap, timely payment by Morgan Stanley of the guaranteed amounts under the Morgan Stanley Guaranties;

• The prospects and financial and operational performance of MSCG and Morgan Stanley and their continuing ability to meet their respective obligations under the Gas Purchase Agreement, the Gas Supplier Commodity Swap, and the Morgan Stanley Guaranties, respectively, for their full terms;

• Timely performance by PEAK of its gas delivery obligations under the Gas Supply Contracts;

• Timely performance by each Project Participant of its gas purchase obligations under its respective Gas Supply Contract and in the event of nonperformance by one or more Project Participants, timely performance by AGM, as provider of the insurance policies for the Debt Service Reserve Accounts;

• Performance by MSCG of its gas remarketing obligations under the Gas Purchase Agreement, including particularly its continuing ability to remarket gas to Municipal Utilities;

• Timely performance by the Commodity Swap Counterparty of its obligations under its Commodity Swaps with PEAK and MSCG, and upon a failure of the Commodity Swap Counterparty, the timely payment by the Commodity Swap Counterparty Guarantor of the guaranteed amounts under the guaranties related thereto or the performance and enforcement of the Custodial Agreement and MSCG’s performance under the Gas Supplier Commodity Swap;

• Timely performance by MSCG and PEAK of their respective obligations under the applicable Commodity Swap;

• The ability of MSCG and PEAK to replace timely any Commodity Swap that has been terminated; and

• The timely performance of any Qualified Investments in which amounts held in the Funds and Accounts are invested.

Upon early termination of the Gas Purchase Agreement, MSCG will be obligated to pay the scheduled Termination Payment and, under certain circumstances, to pay an Additional Termination Payment. The scheduled amount of the Termination Payment, together with the amounts required to be on deposit in certain Funds and Accounts held by the Trustee, including any Qualified Investments deposited in the Debt Service Account or the Capitalized Interest Subaccount contained therein, has been calculated to provide PEAK with an amount at least sufficient to redeem all of the Bonds, assuming that MSCG, the Project Participants and the Surety Policy Provider, if applicable, pay and perform their contract obligations when due.

Gas Remarketing

Under the Gas Purchase Agreement PEAK has the right to remarket gas not taken by a Project Participant, subject to certain conditions. MSCG, upon written notice from PEAK (or in certain cases the Trustee) has the option, and in certain cases the obligation, to remarket or cause to be remarketed, on a daily, monthly or seasonal basis, such amounts of gas as are identified by PEAK or the Trustee. With respect to Gas associated with a Project Participant payment default or certain terminations of a Gas Supply Contract, in whole or in part, to the extent that MSCG is unable to remarket all or any portion of such gas after using commercially reasonable efforts, MSCG will purchase such gas for its own account. See “THE PREPAID GAS PURCHASE AND SALE AGREEMENT—Gas Remarketing.”

Both PEAK and MSCG have agreed to use commercially reasonable efforts to remarket gas to Municipal Utilities pursuant to provisions that are intended to maintain the tax-exempt status of interest on the Bonds, but, if either PEAK or MSCG cannot do so, PEAK (under certain circumstances) or MSCG, as the case may be, is also permitted to sell to any other third party. Under certain circumstances and upon reaching certain thresholds, the remarketing of gas to entities other than Municipal Utilities could result in a termination of the Gas Purchase Agreement. See “THE PREPAID GAS PURCHASE AND SALE AGREEMENT – Gas Remarketing.”

Limitations on Exercise of Remedies

The remedies available to the Trustee, PEAK and the Holders of the Bonds upon an Event of Default under the Indenture are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory provisions and judicial decisions, the remedies provided in the Indenture may not be readily available or may be limited.

Enforceability of Contracts

The enforceability of the various legal agreements relating to the Gas Project may be limited by bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the rights of creditors or secured parties generally and by the exercise of judicial discretion in accordance with general principles of equity. The Gas Purchase Agreement and other agreements relating to the Gas Project are executory contracts. If PEAK or MSCG, Morgan Stanley, the Commodity Swap Counterparty, the Project Participants, the Surety Policy Provider or any of the parties with which PEAK has contracted under such agreements (including the Gas Purchase Agreement) is involved in a bankruptcy proceeding, the relevant agreement could be discharged in return for a claim for damages against the party’s estate with uncertain value. In such an event, PEAK’s Revenues could be materially and adversely affected. Similarly, in the event that PEAK is involved in a bankruptcy proceeding, exercise of the remedies afforded to the Trustee under the Indenture may be stayed, and PEAK’s Revenues could be materially and adversely affected.

No Established Trading Market

The Bonds constitute a new issue with no established trading market. The Bonds have not been registered under the Securities Act of 1933 in reliance upon exemptions contained therein. Although the Underwriter has informed PEAK that it currently intends to make a market in the Bonds, it is not obligated to do so, and may discontinue any such market making at any time without notice. There can be no assurance as to the development or liquidity of any market for the Bonds. If an active public market does not develop, the market price and liquidity of the Bonds may be adversely affected.

Continuing Compliance with Tax Covenants

The Indenture, the Tax Agreement delivered by PEAK, the Gas Purchase Agreement and the Gas Supply Contracts contain various covenants and agreements on the part of PEAK, MSCG and the Project Participants that are intended to establish and maintain the tax-exempt status of interest on the Bonds. A failure by PEAK, MSCG or the Project Participants to comply with such covenants and agreements could, directly or indirectly, adversely affect the tax-exempt status of interest on the Bonds. Any loss of the tax- exempt status of interest on the Bonds could be retroactive to the Issue Date and could cause all of the interest on the Bonds to be includible in gross income for purposes of federal income taxation. The loss of the tax-exempt status of interest on the Bonds is not a termination event and will not result in the payment of a Termination Payment and the redemption of the Bonds. PEAK, MSCG and the Project Participants

have each agreed to abide by the various covenants and agreements designed to protect the tax-exempt status of interest on the Bonds

PUBLIC ENERGY AUTHORITY OF KENTUCKY

General

PEAK is a Natural Gas Acquisition Authority formed under the Natural Gas Acquisition Authority Act of the Commonwealth of Kentucky (KRS §353.400 et seq.). The purpose of PEAK is to act as the agency, instrumentality and constituted authority of the Members and other public agencies that contract with PEAK to develop, acquire, finance and promote secure, reliable and economic sources and supplies of natural gas for the benefit of the Members and other public agencies. Such purpose includes acquisition, transportation, storage, management and related services and functions to provide supplies of natural gas to the Members and other public agencies.

PEAK Members

Carrollton, Kentucky and Henderson, Kentucky are Members of PEAK. Carrollton and Henderson are Cities (Public Agencies) in Kentucky that each own and operate a municipal gas system. Any Public Agency (as defined in the Interlocal Agreement) may become a Member if such Public Agency authorizes, approves and executes a supplement or counterpart to the Interlocal Agreement and the Board of Directors of PEAK (the “Board”) approves and accepts such Public Agency as an additional Member. Each Member must (i) be a Public Agency as defined in the Interlocal Agreement, (ii) own and operate a municipal gas system, and (iii) possess the power to engage in acts and enter into agreements and transactions as required by the Interlocal Agreement. All Members are bound by the terms and conditions of the Interlocal Agreement.

In addition, each Public Agency that contracts with PEAK for limited or specific gas supply, transportation and/or management services may become an Associate Member of PEAK. Associate Members are not Members of PEAK under the Interlocal Agreement and cannot vote on matters relating to PEAK, but may be represented on a project management Committee for a specific project. Municipal Utilities may participate in a gas project (i.e., a natural gas prepay transaction) as a Project Participant.

Organization

Member Representatives. Concurrently with its authorization and approval of the Interlocal Agreement, the governing body of each Member appoints a representative (the “Member Representative”). Such Member Representative serves at the pleasure of such governing body. Each Member Representative must be an elected or appointed officer, official or employee of the Member. The Member Representatives meet at least annually to (i) approve any amendments to or restatements of the Articles of Incorporation of PEAK, (ii) elect directors to fill any expired or new positions on the Board, and (iii) take any other action required of the Member Representatives by law or the Interlocal Agreement.

Board of Directors. The government and management of the affairs of PEAK are vested in the Board. All the powers, duties and functions of PEAK are exercised, performed or controlled by or under the authority of the Board. A majority of all votes cast by the directors serving on the Board (the “Directors”) is required for the Board to take action. The Board must have at least four and not more than nine Directors that are appointed or elected by the Member Representatives as provided in the Interlocal Agreement. The Board currently consists of four Directors:

Director Municipality Title

Owen R. Reeves Henderson Chairman

Gregory D. Goff Carrollton Vice Chairman

Bill R. Osborne Carrollton Secretary-Treasurer

Steve Austin Henderson Director

Project Management Committee. The Interlocal Agreement provides that the operations of each gas project of PEAK will be under the direct supervision of a “Project Management Committee” comprised of representatives of all participants in the project. The Board will, to the fullest extent possible, defer to the particular concerns and objectives of each Project Management Committee with respect to the project that is governed by such committee and act upon and in furtherance of the recommendations of each such Project Management Committee with respect to the project. The Board will act with respect to a project only by approving or disapproving a specific decision made by the Project Management Committee for such project. If the Board disapproves a decision of the Project Management Committee it must state its reasons for doing so and must refer the matter back to the Project Management Committee for further consideration and revision of the decision. The Gas Project acquired by PEAK under the Gas Purchase Agreement constitutes a separate project of PEAK and a separate Project Management Committee for this project has been established.

Officers and Management

Owen R. Reeves, Chairman and Director. Mr. Reeves is the General Manager of Henderson Municipal Gas and has served in that capacity since 1999. As General Manager, he supervises the gas utility operations of the city. Prior to his present position he worked in the power industry for Big Rivers Electric. He has served as a Director of PEAK since 2004. He is a member of the Board of the Directors of the American Public Gas Association and Kentucky Gas Association. Mr. Reeves graduated from West Virginia University with a B.S. in Civil Engineering and is a registered engineer in Pennsylvania and a licensed surveyor in West Virginia. He also holds an MBA from the University of Southern Indiana.

Gregory D. Goff, Vice Chairman and Director. Mr. Goff is CEO of the First National Bank of Carrollton, located in Carrollton, Kentucky. He is a 1983 graduate of Carroll County High School in Carrollton. Mr. Goff, his wife and two children reside in Carroll County. He graduated from the LSU Graduate School of Banking in 2001 in Baton Rouge, Louisiana and has worked for the First National Bank of Carrollton for the past 21 years. Mr. Goff serves as a Commissioner of the Carrollton Utilities Commission, a member of the Carroll County Public Library Board of Directors, Vice Chairman of the Carroll County Community Development Corporation and is the Past President of the Carroll County Chamber of Commerce. He has served as a Director of PEAK since August 2007.

Bill R. Osborne, Secretary-Treasurer and Director. Mr. Osborne is the General Manager of Carrollton Utilities and has served in that capacity since 1999. As General Manager, he supervises the gas, water and wastewater utility operations. He has served as a Director of PEAK since its origination in 2003. He is a member of the Board of Directors of the Kentucky Gas Association and a past President of the Association. He graduated from the University of Kentucky in 1989 with a B.S. in Civil Engineering and is a registered professional engineer in Kentucky.

Steve Austin, Director. Steve Austin is Mayor of Henderson and has served in that position since January 2010. He has served as a director of PEAK since his election to office. He formerly managed a group of eight newspapers, four printing facilities and a radio station located in Western Kentucky and Northern Tennessee before retiring in 2010.

Gerald L. Ballinger, President and General Manager. Mr. Ballinger assumed his position with PEAK in 2003 when PEAK was organized and had served as the General Manager of PEAK Trust, the predecessor to PEAK, since 1999. Prior to employment with PEAK he was the General Manager of Carrollton Utilities for eight years and General Manager of Richmond Utilities (Kentucky) for 13 years. As General Manager of these utilities, he supervised the gas, water and wastewater energy utility operations of the cities. He is a past president of the American Public Gas Association and Kentucky Gas Association. Mr. Ballinger graduated from Berea College, Kentucky in 1979 with a B.S. in Business Management.

Larry Conder, Director Gas Supply. Mr. Conder assumed his position with PEAK in 2000. Prior to being employed with PEAK he was owner and President of Innovative Gas Services, LLC and Paragon Gas Services, LLC, both natural gas marketing/consulting business for five years. He began in the natural gas business in 1980 with Texas Gas Transmission Corporation as Manager of Operations before transferring to TXG Gas Marketing Co. in 1985, where he served as a Manager of Transportation and Exchange until 1995. Mr. Conder graduated from the Brescia University in 1983 with a B.S. in Business Administration and a minor in Economics.

PEAK Financial Information

On June 15, 2006 PEAK issued $1,030,769,000 of its Gas Supply Variable Rate Revenue Bonds, 2006 Series A (the “2006 Series A Bonds”) to finance a prepayment for a ten-year supply of natural gas (the “2006 Prepayment Transaction”). The gas purchased by PEAK in the 2006 Prepayment Transaction was sold to its Members, other municipal utilities and joint action agencies pursuant to long-term gas sale contracts. The 2006 Series A Bonds matured on August 1, 2016.

On December 21, 2007 PEAK issued $450,870,000 of its Gas Supply Variable Rate Revenue Bonds 2007 Senior Series A-1 and A-2 and $5,225,000 of its Gas Supply Subordinate Revenue Bonds, 2007 Junior Series (collectively, the “2007 Series Bonds”) to finance prepayment for a twenty-year supply of natural gas. This gas supply transaction terminated effective February 28, 2012 with all 2007 Series Bonds redeemed on March 1, 2012.

THE BONDS, AND ANY ISSUE OF BONDS ISSUED IN THE FUTURE WILL BE SEPARATE AND DISTINCT OBLIGATIONS OF PEAK. ANY SUCH BONDS ISSUED IN THE FUTURE WILL NOT BE SECURED BY OR PAYABLE FROM THE REVENUES PLEDGED TO THE PAYMENT OF THE BONDS, AND THE BONDS WILL NOT BE SECURED BY OR PAYABLE FROM THE REVENUES PLEDGED TO THE PAYMENT OF ANY BONDS SO ISSUED IN THE FUTURE.

PEAK entered into a Natural Gas Sale Agreement (the “TEAC Agreement”) with Tennessee Energy Acquisition Corporation dated as of July 20, 2006. The TEAC Agreement provides for the delivery and purchase of natural gas supply totaling 79,589,475 MMBtu. The TEAC Agreement includes specifically stated daily natural gas quantities through July 2026.

PEAK entered into a Natural Gas Supply Agreement (the “CMC Agreement”) with Clarke- Mobile Counties Gas District dated as of May 1, 2016. The CMC Agreement provides for the delivery and purchase of natural gas supply totaling 21,209,475 MMBtu. The CMC Agreement includes specifically stated daily natural gas quantities through May 2046.

PEAK has no substantial assets or revenues other than those that are pledged to the payment of the Bonds.

THE PROJECT PARTICIPANTS

General

PEAK and each of Carrollton Utilities; Henderson, Kentucky; Patriots Energy Group; The Southeast Alabama Gas District; Las Cruces, New Mexico; Clarke-Mobile Counties Gas District; Jackson Energy Authority, Citizens Gas and; Metropolitan Utilities District (Omaha, Nebraska) (each such entity is herein referred to as a “Project Participant” and collectively the “Project Participants”) will enter into a Gas Supply Contract relating to the sale by PEAK to the Project Participants of all of the Gas acquired pursuant to the Gas Purchase Agreement. The public gas systems owned or served by the Project Participants provide natural gas utility service to retail consumers located in their respective service areas.

Each Gas Supply Contract extends for a period of approximately 30 years, ending on the date on which all payments required to be made in respect of Gas deliveries made by PEAK to the Project Participant thereunder on or prior to the last day of February, 2048 have been made, as further provided in the Gas Supply Contracts. All payments to be made by a Project Participant under its Gas Supply Contract are limited obligations payable solely from the revenues of the Project Participant’s gas utility system and in no event will any Project Participant be obligated to exercise the power of taxation in order to make such payments. See “THE GAS PROJECT – Gas Supply Contracts.”

APPENDIX A to this Official Statement contains certain financial and other information about PEAK Members and Project Participants receiving approximately 10% or more of the Gas supply: (i) Carrollton Utilities, (ii) Henderson, Kentucky, (iii) Patriots Energy Group, (iv) Metropolitan Utilities District (Omaha) and (v) Citizens Gas. See “THE GAS SUPPLY CONTRACTS” herein for a list of the total average daily volumes of each Project Participant displayed in MMBtus and as a percentage of the total average daily volume of Gas to be delivered to PEAK by MSCG under the Gas Purchase Agreement.

Summary Operating and Financial Information

The following table sets forth selected information for the public gas systems operated by the Project Participants for the calendar year ended 2016, unless otherwise noted, and includes the percentage of the total quantity of gas to be delivered by MSCG over the term of the Gas Purchase Agreement (the “Total Contract Quantity”) that each such Project Participant will purchase during such term under its Gas Supply Contract:

ANNUAL % OF TOTAL TOTAL THROUGH CONTRACT OPERATING PROJECT PARTICIPANT CUSTOMERS PUT(MMBtu) QUANTITY(5) REVENUES Citizens Gas 268,612 70,545,549 34.2% 227,427,000 Carrollton Utilities, Kentucky(1)(2)(3) 2,370 10,729,485 19.4% $ 37,342,620 Metropolitan Utilities District (Omaha) 230,779 29,375,105 13.6% 176,613,598 Patriots Energy Group(1) 94,292 12,822,154 13.1% 60,416,969 Jackson Energy Authority 30,204 6,707,387 5.5% 30,424,584 Las Cruces, New Mexico 40,142 3,124,392 5.1% 20,263,253 The Southeast Alabama Gas District(4) 28,758 11,045,655 3.4% 56,421,788 Clarke-Mobile Counties Gas District 6,170 15,097,704 3.4% 40,479,986 Henderson, Kentucky(1)(2) 9,359 3,746,357 2.2% 15,563,582 ______(1) For the fiscal year ended June 30, 2017. (2) Unaudited. (3) Carrollton Utilities will enter into two separate Gas Supply Contracts and, subject to the satisfaction of certain conditions, may assign one Gas Supply Contract, representing 10.9% of the transaction to Middle Tennessee Natural Gas Utility District. (4) For the fiscal year ended September 30, 2016. (5) May not sum to 100% due to rounding. In addition, prior to the initial pricing of the Bonds PEAK and the Project Participants may elect to begin gas deliveries on October 1, 2018, rather than April 1, 2018, in which case the portion of the Total Contract Quantity purchased by Citizens Gas would decrease to approximately 34.1%, and the portion purchased by Carrollton Utilities, Metropolitan Utilities District and Jackson Energy Authority would increase to approximately 19.5%, 13.7% and 5.6%, respectively.

Ratings of the Project Participants

Each of the Project Participants, other than Carrollton Utilities and Henderson, Kentucky, are currently rated by Moody’s. The current ratings for such Project Participants are as set forth in the following table. Certain of each Project Participant’s obligations under such Project Participant’s Gas Supply Contract are insured by a Commodity Swap Reserve Policy and a Debt Service Reserve Policy issued by the Surety Policy Provider. See “SECURITY FOR THE BONDS—Debt Service Reserve Accounts” and “—Commodity Swap Reserve Accounts.”

Moody’s1 Project Participant Rating

Citizens Gas (Indianapolis) A1 Carrollton Utilities, Kentucky NR Metropolitan Utilities District (Omaha) Aa2 Patriots Energy Group A2 Jackson Energy Authority Aa2 Las Cruces, New Mexico Aa2 The Southeast Alabama Gas District A2 Clarke-Mobile Counties Gas District A1 Henderson, Kentucky NR

SECURITY FOR THE BONDS

The Indenture

The Bonds are secured under the Indenture solely by a pledge of and lien on the “Trust Estate,” which is defined in the Indenture to include (a) the proceeds of the sale of the Bonds (subject to the application of the proceeds of the Bonds for the purposes and on the terms and conditions set forth in the Indenture), (b) all right, title and interest of PEAK in, to and under the Commodity Swap, the Policies, the Gas Purchase Agreement, the Morgan Stanley/PEAK Guaranty and the Gas Supply Contracts, (c) the Revenues, (d) any Termination Payment and the right to receive such Termination Payment, (e) all Funds and Accounts established by the Indenture (other than the Bond Purchase Fund, the Rebate Payments held in the Rebate Account of the Operating Fund, Administrative Fee Fund and Rate Stabilization Fund) including the investments therein and the investment income, if any, therefrom. The pledge of the Trust Estate under the Indenture is subject to the application thereof for the purposes and on the terms specified in the Indenture, including the first charge on Revenues each month to pay the Administrative Fee and the second charge each month to pay the Commodity Swap Payments. With respect to the Commodity Swap Reserve Accounts in the Indenture, PEAK has granted to the Trustee, for the benefit first of the PEAK Commodity Swap Counterparty, and then the Holders of the Bonds, a prior lien on and a security interest in the Commodity Swap Reserve Accounts. Provided, however, that the Trust Estate shall not include the rights, title and interest of PEAK under the Gas Supply Contracts to which AGM is subrogated under the Gas Supply Contracts and the Financial Guaranty Agreement from time to time.

The term “Revenues” is defined in the Indenture to include (a) all revenues, income, rents, user fees or charges, and receipts derived or to be derived by PEAK from or attributable or relating to the ownership and operation of the Gas Project, including all revenues attributable or relating to the Gas Project or to the payment of the costs thereof received or to be received by or on behalf of PEAK under the Gas Supply Contracts or otherwise payable to it for the sale and/or transportation of Gas or otherwise with respect to the Gas Project (including Commodity Swap Receipts and proceeds of remarketing of Gas), excluding the Bond Purchase Fund, the Administrative Fee Fund, the Rate Stabilization Fund, any Termination Payment, any Additional Termination Payment, amounts paid by a Project Participant under its Gas Supply Contract that are required to be deposited in the Rate Stabilization Fund pursuant to the Indenture, and amounts paid by a Project Participant under its Gas Supply Contract which are payable to

1 Source: PEAK obtained these ratings from the Moody’s Investor Services, Inc. website, a source that PEAK believes to be reliable. PEAK and Morgan Stanley & Co., as Underwriter, assume no responsibility for such information and cannot guarantee the accuracy thereof.

AGM pursuant to (I) its rights of subrogation and assignment under the Gas Supply Contract and the Financial Guaranty Agreement and (II) its rights of reimbursement under the Gas Supply Contract, and (b) interest received or to be received on any moneys or securities (other than moneys or securities held in the Gas Project Account in the Project Fund, moneys or securities held in the Redemption Account in the Debt Service Fund, or moneys held in the Rebate Account of the Operating Fund required for Rebate Payments) held pursuant to this Indenture and paid or required to be paid into the Revenue Fund.

The term “Operating Expenses” is defined in the Indenture to mean, (a) PEAK’s expenses for operation of the Gas Project, including all Contract Charges, Rebate Payments, costs, collateral deposits and other amounts (other than Commodity Swap Payments) necessary to maintain any Commodity Swap, and payments required under the Gas Purchase Agreement (which may, under certain circumstances, include imbalance charges and other miscellaneous payments) or required to be incurred under or in connection with the performance of PEAK’s obligations under the Gas Supply Contracts; (b) any other current expenses or obligations required to be paid by PEAK under the provisions of the Indenture (other than debt service on the Bonds) or by law or required to be incurred under or in connection with the performance of PEAK’s obligations under the Gas Purchase Agreement or the Gas Supply Contracts; (c) Fiduciaries’ fees and expenses; and (d) administrative costs of PEAK allocable to the Gas Project.

THE BONDS ARE SECURED SEPARATELY FROM ALL OTHER OBLIGATIONS ISSUED BY PEAK. THE BONDS ARE NOT AN INDEBTEDNESS OR OBLIGATION OF THE COMMONWEALTH OF KENTUCKY, ANY POLITICAL SUBDIVISION THEREOF, OR ANY MEMBER OF PEAK OR ANY PROJECT PARTICIPANT, AND ARE NOT AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION OF THE COMMONWEALTH OF KENTUCKY. NEITHER THE FAITH AND CREDIT OF THE COMMONWEALTH OF KENTUCKY, ANY POLITICAL SUBDIVISION THEREOF, PEAK, OR ANY MEMBER OF PEAK, NOR THE TAXING POWER OF THE COMMONWEALTH OF KENTUCKY OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED FOR THE PAYMENT OF THE BONDS. PEAK HAS NO TAXING POWER. THE OBLIGATIONS OF THE PROJECT PARTICIPANTS TO MAKE PAYMENTS TO PEAK UNDER THE GAS SUPPLY CONTRACTS ARE NOT, NOR SHALL THEY BE CONSTRUED AS, A GUARANTY OR ENDORSEMENT OF OR A SURETY FOR THE BONDS. THE OBLIGATIONS OF THE PROJECT PARTICIPANTS UNDER THE GAS SUPPLY CONTRACTS ARE NOT AN OBLIGATION OF THE COMMONWEALTH OF KENTUCKY OR A GENERAL OBLIGATION OF THE PROJECT PARTICIPANTS AND ARE PAYABLE SOLELY FROM THE REVENUES DERIVED FROM THE OPERATION OF THEIR RESPECTIVE NATURAL GAS SYSTEMS. THE INDENTURE IS SECURED BY THE TRUST ESTATE ONLY AND IS NOT SECURED BY ANY OTHER TANGIBLE PROPERTIES OR ASSETS OF PEAK OR OF THE PROJECT PARTICIPANTS.

Flow of Funds

All Revenues (Revenues does not include any Termination Payment received under the Gas Purchase Agreement, which is to be deposited into the Redemption Account), must be deposited upon receipt thereof to the credit of the Project Participant’s corresponding Project Participant Revenue Account of the Revenue Fund. Moneys must be disbursed from the Revenue Fund monthly, on or before the days and to the extent and in the manner and order set forth below:

FIRST, From each Project Participant Revenue Account to the Administrative Fee Fund administrative fees required under the Indenture which shall not exceed for any Month and any Gas Supply Contract the product of the quantity of Gas required to be delivered under such Gas Supply Contract during such Month multiplied by $0.03 per MMBtu;

SECOND, From each Project Participant Revenue Account to the Operating Fund, not later than the 25th day of such Month, for credit to the Commodity Swap Payment Account, the portion, if any, of the Commodity Swap Payments coming due for such Month allocable to such Project Participant;

THIRD, from each Project Participant Revenue Account into the Debt Service Fund for credit to the Debt Service Account, not later than the 25th day of such Month and following deposit of Commodity Swap Receipts into the respective Project Participant Revenue Accounts, an amount equal to the greater of (a) the Scheduled Debt Service Deposit for such Project Participant for such Month, as set forth in the Indenture, or (b) the amount necessary to cause the cumulative Scheduled Debt Service Deposits for such Account to be on deposit therein; notwithstanding the foregoing, if on the Business Day prior to an Interest Payment Date the amount in the Debt Service Fund is not sufficient to make the Debt Service payments on the Bonds, then from each Project Participant Revenue Account into the Debt Service Account such amounts so that the amounts on deposit therein are sufficient to make such payments;

FOURTH, into the Rebate Account of the Operating Fund, the amount indicated by the Rebate Analyst;

FIFTH, from each Project Participant Revenue Account into the Operating Expense Account of the Operating Fund, not later than the 25th day of such Month, the amount, if any, required so that the balance credited to the Operating Fund equals the amount necessary for the payment of the Contract Charges and other Operating Expenses coming due for the following Month;

SIXTH, if one or more Project Participant Debt Service Reserve Accounts is funded in whole or in part by cash, and the Trustee has applied some or all of such cash to a Payment Shortfall Amount pursuant to the Indenture, from the applicable Project Participant Revenue Account into such Project Participant Debt Service Reserve Account not later than the 25th day of such Month, the amount, if any, required so that the balance in the Debt Service Reserve Account, taking into account the undrawn amount under the Debt Service Reserve Policy, equals the Debt Service Reserve Requirement relating to such Project Participant as of the last day of the then current Month; and

SEVENTH if one or more Project Participant Commodity Swap Reserve Accounts is funded in whole or in part by cash, and the Trustee has applied some or all of such cash to a Payment Shortfall Amount pursuant to the Indenture, from the applicable Project Participant Revenue Account to such Project Participant Commodity Swap Reserve Account, not later than the 25th day of such Month, the amount, if any, required so that the balance in the Commodity Swap Reserve Account, taking into account the undrawn amount under the Commodity Swap Reserve Policy, shall equal the Commodity Swap Reserve Requirement relating to such Project Participant as of the last day of the then current Month.

See “Establishment of Funds and Application Thereof—Revenues and Revenue Fund” and “Payments into Certain Funds and Accounts” in APPENDIX C.

Debt Service Account

The amounts deposited into the Debt Service Account in the Debt Service Fund under the Indenture must be held in such Account and applied on each Bond Payment Date to the payment of Debt Service payable on such Bond Payment Date. Amounts on deposit in the Debt Service Account may be invested in Qualified Investments which mature or are payable at such times as shall be necessary to provide moneys when needed for payments to be made from such Account.

Redemption Account

In the event of an early termination of the Gas Purchase Agreement, MSCG must pay the Termination Payment directly to the Trustee for the account of PEAK into the Redemption Account of the Debt Service Fund. Amounts deposited into the Redemption Account shall be applied by the Trustee to the redemption of Outstanding Bonds as described below under “THE BONDS—Redemption— Extraordinary Mandatory Redemption.”

Commodity Swap Reserve Accounts

The Indenture establishes for each Project Participant within the Revenue Fund a Commodity Swap Reserve Account. Each Commodity Swap Reserve Account may be funded by cash, a Commodity Swap Reserve Policy or a combination thereof. Initially, each Commodity Swap Reserve Account is to be funded with a Commodity Swap Reserve Policy in an amount of not less than the corresponding Commodity Swap Reserve Requirement. The Commodity Swap Reserve Requirement, as more specifically defined in Appendix B hereto, is sized independently for each Project Participant.

If a Project Participant fails to make full and timely payment under its Gas Supply Contract in any Month (a “Payment Shortfall”), then the Trustee is to give notice to PEAK and AGM of the identity of the Project Participant and the amount of the Payment Shortfall by the close of business on the 20th day of such Month (or the next Business Day if such day is not a Business Day). Provided the Project Participant has not cured the nonpayment by 5:00 p.m. Central Prevailing Time (as defined in the Gas Supply Contracts) on the Business Day that is two Business Days preceding the 25th day of the current Month (or if the 25th of such Month is not a Business Day two (2) Business Days prior to the Business Day next succeeding the 25th of such Month), the Trustee is deliver a Notice of Claim (as defined in the Commodity Swap Reserve Policy) to AGM in an amount equal to the lesser of (i) the amount necessary to make the portion of the Commodity Swap Payment related to such Participant, net of amounts otherwise available for such payment in the related Project Participant Revenue Account (as more specifically defined in Appendix B hereto, the “CSRA Shortfall”) or (ii) the available Commodity Swap Reserve Policy Coverage, by 7:00 p.m. Central Prevailing Time on such Business Day in accordance with the related Commodity Swap Reserve Policy for payment by AGM on the 25th day of the current Month (or the next Business Day if the 25th day is not a Business Day) (the “Shortfall Payment Deadline”). If, by 2:00 p.m. Central Prevailing Time on the Business Day immediately preceding the Shortfall Payment Deadline, the Trustee has received from the defaulting Project Participant the full amount of the CSRA Shortfall, the Trustee is to immediately withdraw the Notice of Claim and deposit such payment into the related Project Participant Revenue Account prior to transferring amounts to the Commodity Swap Payment Account under the Indenture. If the Trustee has not received payment equal to the full amount of the CSRA Shortfall by the Shortfall Payment Deadline, the Trustee shall on that day, after giving credit for partial payments, if any, toward the amount of the CSRA Shortfall received from the Project Participant, deposit the proceeds of the draw on the Commodity Swap Reserve Policy into the related Project Participant Revenue Account, prior to transferring amounts into the Commodity Swap Payment Account under the Indenture. See “Establishment of Funds and Accounts and Application Thereof — Revenue Fund – Project Participant Commodity Swap Reserve Accounts” in APPENDIX C.

If a Notice of Claim is delivered by the Trustee to AGM as described in the preceding paragraph, the Trustee is, on the same date, to cause a GSC Mandatory Gas Remarketing Notice (as defined in the Gas Purchase Agreement), for the following Month, to be delivered to the Gas Supplier. If the related Project Participant has not cured its nonpayment by 5:00 p.m. Central Prevailing Time on the 25th day of the current Month, its gas will be suspended as prescribed by the related Gas Supply Contract. If the Trustee has received from the defaulting Project Participant the full amount of the Payment Shortfall by 5:00 p.m. Central Prevailing Time on the 25th day of the current Month, the GSC Mandatory Gas Remarketing Notice is to be withdrawn.

If a Project Participant’s Commodity Swap Reserve Account is funded in whole or in part by cash, in the event a Payment Shortfall occurs the Trustee is to reduce the amount of the draw on the related Commodity Swap Reserve Policy by the amount of such available cash and apply such cash in the same manner as the proceeds of the draw on the Commodity Swap Reserve Policy as described above.

For information concerning the Surety Policy Provider, see “THE SURETY POLICY PROVIDER” herein.

Debt Service Reserve Accounts

The Indenture establishes for each Project Participant within the Revenue Fund a Debt Service Reserve Account. Each Debt Service Reserve Account may be funded by cash, a Debt Service Reserve Policy or a combination thereof. Initially, each Debt Service Reserve Account is to be funded with the Debt Service Reserve Policy in the amount not less than the corresponding Debt Service Reserve Requirement. The Debt Service Reserve Requirement, as more specifically defined in Appendix B hereto, is sized independently for each Project Participant. The Debt Service Reserve Requirement for each Project Participant represents the highest consecutive two months of payments to the Debt Service Account for that Project Participant, calculated based on the maximum payment made in two consecutive months on such Project Participant’s contracted volumes of gas at the fixed prices under the PEAK Commodity Swap.

Amounts on deposit in a Debt Service Reserve Account (including amounts drawn under the related Debt Service Reserve Policy) are to be applied only to make transfers to the related Project Participant Revenue Account after payments have been made from such account to the Commodity Swap Payment Account (and treating such account as if it were fully funded) as discussed under the heading “SECURITY FOR THE BONDS – Flow of Funds – FIRST,” above. If a Payment Shortfall occurs in any Month resulting in a shortfall in the amount available to be transferred from such Participant’s Project Participant Revenue Account to the Debt Service Fund (such shortfall, as more specifically defined in Appendix B hereto, the “DSRF Shortfall”), provided the Project Participant has not cured the nonpayment, the Trustee is to draw on the related Debt Service Reserve Policy in an amount equal to the lesser of (i) the DSRF Shortfall, or (ii) the amounts available under the Debt Service Reserve Policy. If the Trustee has not received payment in full of the DSRF Shortfall by the Shortfall Payment Deadline, the Trustee will then, after giving credit for any partial payments (such credit being first applied against the draw under the Commodity Swap Reserve Policy), deposit the proceeds of such draw into the related Project Participant Revenue Account, after transferring amounts into the Commodity Swap Payment Account as discussed under the heading “SECURITY FOR THE BONDS – Flow of Funds – FIRST,” above and treating the Commodity Swap Payment Account as if it were fully funded, but prior to transferring amounts from such Project Participant Revenue Account into the Debt Service Account as discussed under the heading “SECURITY FOR THE BONDS – Flow of Funds – SECOND,” above. If the Project Participant cures the DSRF Shortfall by the Business Day preceding the Shortfall Payment Deadline, the Trustee is to cancel the draw on the Debt Service Reserve Policy and deposit the payment from the Project Participant into the related Project Participant Revenue Account after payments have

been made from such account to the Commodity Swap Payment Account (and treating such account as if it were fully funded) as discussed under the heading “SECURITY FOR THE BONDS – Flow of Funds – SECOND,” above.

If a Project Participant’s Debt Service Reserve Account is funded in whole or in part by cash and a Payment Shortfall occurs in any Month, the Trustee is to reduce the amount of any draw on the related Debt Service Reserve Policy by the amount of such available cash and apply such cash in the same manner as the proceeds of the draw on the Debt Service Reserve Policy as described above.

No Commodity Swap Counterparty shall have any claim upon the amounts on deposit in the Debt Service Reserve Account and no Commodity Swap Payments shall be made from the Debt Service Reserve Account.

For information concerning the Surety Policy Provider, see “THE SURETY POLICY PROVIDER” herein.

Surety Policy Provider Reimbursement

Under the Indenture, if PEAK or any Project Participant pays to the Trustee any amount, the right or claim to which AGM is subrogated or otherwise entitled to reimbursement pursuant to the provisions of the Financial Guaranty Agreement or the related Gas Supply Contract, such amount is not subject to the pledge and lien of the Trust Estate, and the Trustee is to hold such amount for the express trust of AGM and promptly remit such amount to AGM. Amounts received from a Project Participant following a draw on the related Project Participant Commodity Swap Reserve Policy or Debt Service Reserve Policy are to be applied to reimburse AGM first for draws on the Commodity Swap Reserve Policy and second for draws on the Debt Service Reserve Policy. Amounts received from such Project Participant that remain after such reimbursements are to be deposited into the related Project Participant Revenue Account.

For information concerning the Surety Policy Provider, see “THE SURETY POLICY PROVIDER” herein.

No Additional Bonds

Other than the Bonds and any refunding bonds, no additional bonds may be issued under the Indenture.

Amendment of Indenture

PEAK and the Trustee may, subject to the conditions and restrictions in the Indenture, enter into a Supplemental Indenture or Indentures without the consent of the Bondholders for certain purposes upon receipt of a Rating Confirmation. See “Supplemental Indentures” and “Amendment” in APPENDIX C hereto.

Investment of Funds

Subject to the provisions of the Indenture, amounts on deposit in the Funds and Accounts may be invested in Qualified Investments including, among other things, certain agreements that provide for a specified rate of return over a specified time period. See “Definitions of Certain Terms – Qualified Investments” in APPENDIX B and “Investment of Certain Funds” in APPENDIX C.

Enforcement of Gas Supply Contracts, the Prepaid Gas Purchase and Sale Agreement and the PEAK Commodity Swap

Gas Supply Contracts. PEAK has covenanted in the Indenture that it will enforce the provisions of the Gas Supply Contracts, as well as any other contract or contracts entered into relating to the Gas Project, and that it will duly perform its covenants and agreements thereunder. PEAK has also covenanted to promptly exercise its right to suspend all gas deliveries under a Gas Supply Contract to any Project Participant that fails to pay when due any amounts owed to PEAK thereunder. PEAK has further covenanted that it will not consent or agree to or permit any termination or rescission of or amendment to or otherwise take any action under or in connection with any Gas Supply Contract which will impair the ability of PEAK to comply during the current or any future year with the collection of fees and charges pursuant to the Indenture.

PEAK has covenanted in the Indenture to fix, establish, maintain and collect (or cause to be collected) fees and charges, to the limited extent permitted under the provisions of the Gas Supply Contracts, which will be sufficient to provide Revenues each fiscal year which, together with the other amounts available therefor, will be equal to the amounts required in the Operating Fund, the Debt Service Fund and any other Fund established pursuant to the Indenture, if necessary, and all other charges or liens whatsoever payable out of Revenues during PEAK’s fiscal year.

A Project Participant’s obligation to make required payments under its Gas Supply Contract is a several obligation and not a joint obligation with the obligations of any other Project Participant. Each Project Participant has agreed to make such payments from the revenues of its gas system, and only from such revenues, and as a charge against such revenues, as an operating expense of its gas system and a cost of purchased natural gas.

The Project Participants have each covenanted and agreed that they will establish, maintain, and collect rates and charges for the gas services furnished by their respective gas systems so as to provide revenues sufficient, together with other available gas system revenues, to enable each Project Participant to pay to PEAK all amounts payable under the respective Gas Supply Contracts, to pay all other amounts payable from the revenues of each Project Participant’s respective gas systems, and to maintain any required reserves.

Under the Indenture, PEAK is required to suspend gas deliveries under a Gas Supply Contract following a Payment Default (as defined in each Gas Supply Contract). If, for a Project Participant (i) such Payment Default is the first Payment Default arising under the related Gas Supply Contact and (ii) funds are drawn under the related Commodity Swap Reserve Policy or the related Debt Service Reserve Policy as a result of such Payment Default, then (A) the Trustee is to immediately notify PEAK of such drawing and the identity of the defaulting Project Participant and (B) then PEAK (or the Trustee, if PEAK fails to do so) is to notify such Project Participant that its Gas Supply Contract will terminate automatically on the Business Day following 30 days’ of suspension of gas deliveries related to such Payment Default if the related Commodity Swap Surety Policy and Debt Service Reserve Policy have not been reinstated, and deficiencies replenished, at such time as required by the Indenture. If such a Payment Default is not the first Payment Default arising under a Gas Supply Contract, then immediately upon such Payment Default PEAK (or the Trustee, if PEAK fails to do so) is to (i) give notice of termination of such Gas Supply Contract to be effective on the following Business Day, and (ii) give a related gas remarketing notice on the 23rd day of the current Month. See also “THE PREPAID GAS PURCHASE AND SALE AGREEMENT—Gas Remarketing.”

Under the Indenture, PEAK has appointed and directed the Trustee as its agent to issue certain notices and to take certain other actions that PEAK is required or permitted to take under (a) the Gas

Supply Contracts, (b) the Gas Purchase Agreement and (c) the Morgan Stanley/PEAK Guaranty. PEAK has retained, in the absence of any conflicting action by the Trustee, the right to exercise any rights for which it has appointed the Trustee as its agent as described in the preceding sentence; provided, however, if an Event of Default has occurred, the Trustee will have the right to notify PEAK to cease exercising such rights and, upon PEAK’s receipt of such notice the Trustee will have exclusive authority to exercise such rights.

Prepaid Gas Purchase and Sale Agreement. PEAK has covenanted in the Indenture that it will enforce the provisions of the Gas Purchase Agreement and the Morgan Stanley/PEAK Guaranty and that it will duly perform its covenants and agreements under the Gas Purchase Agreement. The Trustee has covenanted to promptly notify PEAK of any payment default that has occurred and is continuing on the part of the Gas Supplier under the Gas Purchase Agreement or the Morgan Stanley/PEAK Guaranty. PEAK has further covenanted that it will not consent or agree to or permit any rescission of or amendment to or otherwise take any action under or in connection with the Gas Purchase Agreement which would in any manner materially impair or materially adversely affect its rights under the Gas Purchase Agreement or the rights or security of the Bondholders under the Indenture; provided, however, that the Gas Purchase Agreement may be amended without Bondholder consent upon receipt of a Rating Confirmation.

Commodity Swap. PEAK has covenanted in the Indenture that it will enforce the provisions of the PEAK Commodity Swap and duly perform its covenants and agreements thereunder. PEAK also has covenanted in the Indenture that it will not consent or agree to or permit any termination or rescission of or amendment to or otherwise take any action under or in connection with the PEAK Commodity Swap which will impair the ability of PEAK to comply during the current or any future year with the provisions of the Indenture. In the event that the PEAK Commodity Swap is terminated by PEAK and is not replaced as provided in the Gas Purchase Agreement, PEAK has covenanted and agreed that it will exercise its right to terminate the Gas Purchase Agreement in accordance with its terms. Unless required to do so pursuant to the terms of the Gas Purchase Agreement, PEAK will not, without a Rating Confirmation, terminate or permit the termination of the PEAK Commodity Swap unless PEAK either exercises its right to terminate the Gas Purchase Agreement or enters into a replacement commodity swap as provided in the Gas Purchase Agreement.

THE BONDS

General

The Bonds will mature (subject to redemption as described below) on April 1 of the years and in the principal amounts shown on the inside cover page of this Official Statement. The Bonds will be issued in denominations of $5,000 and whole multiples thereof (the “Authorized Denominations”). The Bonds will be initially issued in book-entry only form through the facilities of The Depository Trust Company, New York, New York (“DTC”). See THE BONDS—Book-Entry System” and APPENDIX F for a description of DTC and its book-entry system.

Interest

The Bonds shall initially bear interest at fixed rates and at a Long Rate for the Long Rate Period commencing on the Issue Date of the Bonds and ending on (and including) March 31, 2024. During such initial Long Rate Period, the Bonds of each Maturity Date shall bear interest at the interest rate per annum for such Maturity Date set forth on the inside cover page of this Official Statement.

Interest on each Bond is payable semi-annually on April 1 and October 1, commencing April 1, 2018, and on any Mandatory Purchase Date, any redemption date for such Bond, and each Maturity Date for such Bond. Such interest shall be calculated on the basis of a 360 day year of twelve 30 day months.

Interest on any Bond which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Bond is registered at the close of business on the date (the “Regular Record Date”) which is the 15th day of the calendar month next preceding such Interest Payment Date.

Any interest on any Bond which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (“Defaulted Interest”) shall forthwith cease to be payable to the Person who was the registered owner on the relevant Regular Record Date; and such Defaulted Interest shall be paid by PEAK to the Persons in whose names the Bonds are registered at the close of business on a date (the “Special Record Date”) for the payment of such Defaulted Interest, which shall be fixed in the following manner. PEAK shall notify the Bond Registrar in writing of the amount of Defaulted Interest proposed to be paid on each Bond and the date of the proposed payment, and at the same time PEAK shall deposit with the Paying Agent an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Paying Agent for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in the Indenture. The Bond Registrar will then fix a Special Record Date for the payment of such Defaulted Interest which will be not more than 15 nor less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Bond Registrar of the notice of the proposed payment. The Bond Registrar shall promptly notify PEAK of such Special Record Date and, in the name and at the expense of PEAK, will cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class postage prepaid, to each Bondholder at its address as it appears upon the registry books, not less than 10 days prior to such Special Record Date.

Redemption1

Optional Redemption. The Bonds are subject to redemption at the option of PEAK in whole on January 2, 2024, and thereafter on the fifteenth calendar day or the last calendar day of any Month (unless such day is not a Business Day, in which case on the preceding Business Day), at a Redemption Price equal to the Amortized Value thereof, plus accrued and unpaid interest to the date of redemption.

Extraordinary Mandatory Redemption Upon Early Termination of Gas Purchase Agreement. The Bonds are subject to extraordinary mandatory redemption in whole, and not in part, at the Amortized Value thereof, plus accrued interest, if any, to the redemption date, on the first day that follows an Early Termination Payment Date under the Gas Purchase Agreement, which will be on a Mandatory Purchase Date if a Failed Bond Remarketing occurs. See “THE PROJECT—Termination of the Prepaid Gas Purchase and Sale Agreement” and “THE PREPAID GAS PURCHASE AND SALE AGREEMENT — Termination Payment.”

Extraordinary Mandatory Redemption for Remediation. The Bonds are subject to mandatory redemption prior to maturity in whole or in part on any date, at a Redemption Price equal to the Amortized Value thereof, plus accrued interest, if required under the Indenture in connection with a Ledger Limit Event under and as defined in the Gas Purchase Agreement (see “THE PREPAID GAS PURCHASE AND SALE AGREEMENT—Ledger Limit Event,” below). PEAK is to provide the

1 Preliminary, subject to change.

Trustee with written notice of the requirement for any such redemption, and, if in part, of the Bonds to be so redeemed, not more than five days after determining that such redemption will be required.

“Amortized Value” means, with respect to any Bond to be redeemed during the initial Long Rate Period, an amount equal to the principal amount of such Bond multiplied by the price of such Bond expressed as a percentage, calculated based on the industry standard method of calculating bond prices (as such industry standard prevails on the date of delivery of the Bonds), with a delivery date equal to the date of redemption, a maturity date equal to the earlier of (a) the stated maturity date of such Bond or (b) the Mandatory Purchase Date, and a yield equal to such Bond’s original reoffering yield, which, in the case of certain dates, produces the amounts for all of the Bonds set forth in APPENDIX G.

Mandatory Sinking Fund Redemption. The Bonds are not subject to mandatory sinking fund redemption prior to the April 1, 2024 Mandatory Purchase Date.

Notice of Redemption. In the case of every redemption of Bonds, the Trustee must cause notice of such redemption to be given to the Holder of any Bonds designated for redemption in whole or in part, at such Holder’s address as the same shall last appear upon the registration books maintained by the Trustee, by mailing a copy of the redemption notice, by first-class mail, postage prepaid, not less than 20 days and not more than 45 days prior to the redemption date.

Each notice of redemption must identify the Bonds to be redeemed and specify the redemption date, the Redemption Price or the manner in which it will be calculated, that the Bonds must be surrendered to collect the Redemption Price, the address at which the Bonds must be surrendered, and that on and after said date interest on the Bonds will cease to accrue. Neither any defect in any redemption notice nor the failure of any Holder to receive any such notice will affect the validity of the proceedings for the redemption of the Bonds or any portions thereof with respect to any Holder to whom notice as required by the Indenture was given.

With respect to any notice of optional redemption of Bonds, unless upon the giving of such notice such Bonds will be deemed to have been paid under the Indenture, such notice must state that such redemption will be conditioned upon the receipt by the Trustee on or prior to the date fixed for such redemption of money sufficient to pay the Redemption Price of and interest on the Bonds to be redeemed, and that if such money shall not have been so received said notice will be of no force and effect, and PEAK will not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such money is not so received, the redemption will not be made and the Trustee must within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such money was not so received and that such redemption was not made.

Effect of Redemption. On any redemption date, the Redemption Price of each Bond to be redeemed, together with the accrued interest thereon to such date, will become due and payable, and from and after such date, notice having been given and moneys available solely for such redemption being on deposit with the Trustee in accordance with the provisions of the Indenture governing redemption of such Bonds, then, notwithstanding that any Bonds called for redemption may not have been surrendered, no further interest will accrue on any of such Bonds. From and after such date of redemption (such notice having been given and moneys available solely for such redemption being on deposit with the Trustee), the Bonds to be redeemed will not be deemed to be Outstanding under the Indenture, and PEAK will be under no further liability in respect thereof.

Partial Redemption of Bonds. If less than all of the Bonds of a like maturity and series are called for redemption, such Bonds or portions of Bonds must be redeemed in increments of Authorized Denominations, and such increments to be called for redemption must be selected at random by the

Trustee in such manner as the Trustee deems fair and appropriate. Upon surrender of any Bond called for redemption in part only, PEAK must execute, and the Trustee must authenticate and deliver to the Holder thereof, a new Bond or Bonds of Authorized Denominations and the same series and maturity in an aggregate principal amount equal to the unredeemed portion of the Bond surrendered.

All Bonds are Subject to Mandatory Tender or Mandatory Redemption on the Mandatory Purchase Date

Mandatory Purchase Date. On the Mandatory Purchase Date, the outstanding principal of all Bonds will be paid as follows:

(a) for all Bonds maturing on such date, the outstanding principal amount will be paid from amounts on hand in the Debt Service Account;

Failed Bond Remarketing. Under the terms of the Indenture, a “Failed Bond Remarketing” will occur unless, as of the February 29, 2024 Determination Date (i) amounts on deposit in the Remarketing Proceeds Account of the Bond Purchase Fund together with amounts that the Gas Supplier has elected to deposit in the Gas Supplier Purchase Account of the Bond Purchase Fund on or before the Mandatory Purchase Date are in the aggregate sufficient to pay the Purchase Price of the Bonds to be tendered on the Mandatory Purchase Date, and (ii) a new Long Rate Period (and corresponding new Long Rate) that is to begin on such Mandatory Purchase Date has been established in accordance with the Indenture. A Failed Bond Remarketing will result in an Extraordinary Redemption of the Bonds on the Mandatory Purchase Date. See “THE BONDS—Redemption—Mandatory Redemption Upon Early Termination.”

In addition to the above, a Failed Bond Remarketing will not occur in the event, on or before the Determination Date, the Gas Supplier has become obligated to deposit with the Trustee, on or before the Business Day preceding the Mandatory Purchase Date, for transfer to the Assignment Payment Fund created under the Indenture, an amount equal to the Termination Payment. Under such circumstances, the Trustee is to apply amounts on deposit in the Assignment Payment Fund (a) to the extent all of the Outstanding Bonds have not been redeemed or defeased on or before the Mandatory Purchase Date, such amount is to be transferred to the Redemption Account and applied to the redemption of all Outstanding Bonds on the Mandatory Redemption Date, or (b) following the redemption or defeasance of all Outstanding Bonds, (b) to pay of any amount payable in connection with the Gas Supplier’s assignment

of the Gas Purchase Agreement to a third party in accordance with the terms of the Gas Purchase Agreement.

Payment of Purchase Price. The Purchase Price of any Bond to be purchased on a Mandatory Purchase Date will be payable only upon surrender of such Bond to the Trustee at is Principal Office at or prior to 10:00 a.m. New York City time on such date, accompanied by an instrument of transfer thereof, in form satisfactory to the Trustee, executed in blank by the holder thereof or by the Bondholder’s duly authorized attorney. Such Purchase Price will be paid (i) first, from the proceeds of remarketing of the Bonds deposited in the Remarketing Proceeds Account and (ii) second, in the event amounts available pursuant to clause (i) are insufficient, from amounts, if any, in the Gas Supplier Purchase Account.

Effect of Mandatory Tender for Purchase. If any Bond subject to mandatory tender for purchase has not been delivered to the Trustee as and when described above and funds are available for payments to the Bondholder on the date and at the time specified, from and after the date and time of that required delivery, (i) such Bond will be deemed to be purchased and will no longer be deemed to be Outstanding under the Indenture, (ii) interest will no longer accrue on such Bond, and (iii) funds in the amount of the Purchase Price of such Bond will be held by the Trustee for the benefit of the Owner thereof, to be paid on delivery (and proper endorsement) of such Bond to the Trustee at its Principal Office for delivery of Bonds. The Trustee may refuse to accept delivery of any Bond for which a proper instrument of transfer has not been provided, but such refusal will not affect the validity of the purchase of such Bond.

Sufficiency of Necessary Funds on the Mandatory Purchase Date

If under any circumstance the amount on deposit in the necessary Funds and Accounts on the Determination Date is not sufficient to purchase all of the Outstanding Bonds on the Mandatory Purchase Date then a full termination of the Gas Purchase Agreement will occur automatically on the Determination Date. Upon a full termination of the Gas Purchase Agreement, MSCG is required to pay a Termination Payment on the last business day of the month following such Determination Date and any remaining payments in respect of the PEAK Commodity Swaps and the Gas Supply Contracts will be due by the 25th day of that same month. Those payments, taken together with other amounts on deposit in certain Funds and Accounts held by the Trustee, including any Qualified Investments deposited in the Debt Service Account, are calculated to be sufficient (assuming that MSCG, the Project Participants and the Surety Policy Provider, if applicable, pay and perform their contractual obligations when due) to redeem all Bonds on the first day of the following month (which day is also the Mandatory Purchase Date). Any failure to pay in full the amount owed on all Bonds on the Mandatory Purchase Date will result in default under the Indenture.

Book-Entry System

The Bonds will be initially issued in book-entry only form through the facilities of DTC. The Bonds will be transferable and exchangeable as set forth in the Indenture and, when issued, will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository for the Bonds. So long as Cede & Co. is the registered owner of the Bonds, principal of and premium, if any, and interest on the Bonds are payable by wire transfer by the Trustee to Cede & Co., as nominee for DTC, which, in turn, will remit such amounts to DTC Participants (as defined herein) for subsequent disbursement to the Beneficial Owners. See APPENDIX F – “BOOK-ENTRY SYSTEM.”

[Rest of page intentionally left blank]

DEBT SERVICE REQUIREMENTS1

Set forth in the following table are the debt service requirements on the Bonds in each year to the Mandatory Purchase Date.

Year Ending Principal April 1 Amount Interest Total

2018 $ $ $ 2019 2020 2021 2022 2023 2024 Total $ $ $

THE PREPAID GAS PURCHASE AND SALE AGREEMENT

Set forth below is a summary of certain provisions of the Gas Purchase Agreement. This summary does not purport to be a complete description of the terms and conditions of the Gas Purchase Agreement and accordingly is qualified by reference to the full text thereof.

Purchase and Sale

Under the Gas Purchase Agreement, MSCG has agreed to deliver gas to PEAK at designated delivery points and in specified daily quantities each month for approximately 30 years (359 months2), beginning April 1, 20182 at a fixed price, and PEAK has agreed to make a lump sum advance payment to MSCG for the cost of all of the gas to be delivered. The total quantity of gas to be delivered by MSCG over the term of the Gas Purchase Agreement is approximately 380,128,915 MMBtus2.

Delivery of Gas

MSCG is required to deliver a fixed quantity of gas at the delivery points set forth in the Gas Purchase Agreement on a firm basis. PEAK determined these delivery points based on its delivery point obligations under the Gas Supply Contracts. The aggregate fixed quantity of gas to be delivered at all delivery points on each day during the term of the Gas Purchase Agreement varies based on the quantities of gas that PEAK has agreed to deliver to the Project Participants under the Gas Supply Contracts. The approximate aggregate monthly quantities of gas to be delivered under the Gas Purchase Agreement range from a high of approximately 1,537,476 MMBtus in some months to a low of approximately 670,500 MMBtus in other months.

1 Preliminary, subject to change. 2 Alternatively, prior to the initial pricing of the Bonds PEAK and the Project Participants may elect to begin gas deliveries on October 1, 2018, in which case PEAK would acquire approximately 375,974,365 MMBtus of natural gas from MSCG pursuant to the Gas Purchase Agreement over a period of approximately 353 months).

Failure to Deliver or Receive Gas

Because PEAK will have prepaid for all gas to be delivered under the Gas Purchase Agreement, MSCG will be required to pay PEAK for all gas that MSCG fails to deliver or PEAK fails to take for any reason, including events of force majeure. The amount MSCG is required to pay is equal to the quantity that was not delivered or received multiplied by a price that is determined in a manner depending upon the reason for such failure:

• If either MSCG fails to deliver gas or PEAK fails to receive gas due to force majeure, MSCG is required to pay the applicable Monthly Index Price plus a Delivery Point Premium (as defined herein). Alternatively, the parties may agree to make up volumes in-kind for quantities not delivered or received in lieu of a financial remedy. See “THE GAS SUPPLY CONTRACTS – Pricing Provisions” herein.

• If MSCG fails to deliver gas for reasons other than force majeure and PEAK or the Project Participants purchase replacement gas, MSCG is required to pay replacement damages incurred to PEAK equal to the higher of (i) the price paid by PEAK or the Project Participant for replacement gas per MMBtu or (ii) the Monthly Index Price per MMBtu, plus, in either case, an administrative fee of $0.05/MMBtu. If no replacement gas is actually purchased to cover the delivery shortfall, MSCG is required to pay PEAK the Monthly Index Price, plus any applicable Delivery Point Premium, plus an administrative fee of $0.05/MMBtu. The parties may agree to make up volumes in-kind in lieu of financial remedy for MSCG shortfall quantities.

• If PEAK fails to take gas for reasons other than force majeure and does not remarket such gas or request that MSCG remarket such gas, MSCG is required to pay the lesser of the Monthly Index Price or, if applicable, the actual sales price, less in either case an administrative charge of $0.05/MMBtu. The parties may agree to make up volumes in-kind in lieu of financial remedy for PEAK take failures.

PEAK will have the right to terminate the Gas Purchase Agreement by notice to MSCG given within 15 days of the occurrence of a Persistent Delivery Failure by MSCG. A “Persistent Delivery Failure” occurs if MSCG fails to deliver gas (for reasons not due to force majeure or to the actions or inactions of PEAK) which results in a shortfall in aggregate gas deliveries across all delivery points that is:

• Equal to all of the gas required to be delivered on any 45 consecutive days;

• Equal to 50% or more of the aggregate amount of gas required to be delivered on any 90 consecutive days; or

• Equal to more than 30% of the aggregate amount of gas required to be delivered on any 180 days (consecutive or non-consecutive) during any period of 365 consecutive days.

Gas Remarketing

Under the Gas Purchase Agreement PEAK has the right to remarket gas not taken by any Project Participant, subject to certain conditions. Gas remarketed on a daily or intra-month basis by PEAK must be sold (a) at the same delivery point to which such gas was delivered or was to be delivered by MSCG (or, after delivery by MSCG at such delivery point, sold at another delivery point if PEAK pays for related transportation costs) and (b) for a Qualifying Use, provided that the Project Participant remains

obligated to pay the Contract Price in accordance with its Gas Supply Contract, except that PEAK may sell such gas to a person other than a Municipal Utility if, having used commercially reasonable efforts, PEAK is unable to remarket such gas to a Municipal Utility. Gas remarketed on a seasonal or monthly basis by PEAK must be sold (a) at the same delivery point to which such gas was delivered (or, after delivery by MSCG at such delivery point, sold at another delivery point if PEAK pays for related transportation costs), (b) for a Qualifying Use, provided that the Project Participant remains obligated to pay the Contract Price in accordance with its Gas Supply Contract, (c) at or above the Contract Price and (d) solely to the extent no payment default, IURC Event or similar event exists under the relevant Gas Supply Contract. See “THE GAS SUPPLY CONTRACTS – Pricing Provisions” herein.

MSCG, upon written notice from PEAK (or the Trustee, if applicable), has the option, and in the case of a payment default by a Project Participant or an IURC Event, the obligation, to remarket or cause to be remarketed, on a daily, monthly or seasonal basis, such amounts of gas as are identified by PEAK or the Trustee. PEAK may (or shall, if PEAK fails to satisfy the remarketing conditions applicable to seasonal or monthly remarketing) tender to MSCG a daily remarketing notice, a monthly remarketing notice or a seasonal remarketing notice identifying quantities of gas not taken by a Project Participant and not remarketed by PEAK.

If a Project Participant fails to make when due any payment to PEAK under its Gas Supply Contract, PEAK is obligated to request MSCG in writing to remarket any quantities of gas affected by such payment default. MSCG is obligated to remarket the affected quantities of gas for the remainder of the month in which it received such notice from PEAK and for all succeeding months for which such gas needs to be remarketed.

Both PEAK and MSCG have agreed to use commercially reasonable efforts to remarket gas first to Municipal Utilities (and in the case of a remarketing by MSCG, second to other qualified governmental users) pursuant to provisions that are intended to maintain the tax-exempt status of interest on the Bonds, but, if neither PEAK nor MSCG can do so, PEAK (solely in connection with daily remarketing and subject to certain conditions) or MSCG, as the case may be, is also permitted to sell to any other third party. Under certain circumstances and upon reaching certain thresholds, the remarketing of gas to entities other than Municipal Utilities or other qualified entities could result in a termination of the Gas Purchase Agreement.

In the case of any gas remarketed by MSCG at the request of PEAK, MSCG shall pay PEAK the actual sales price, less an administrative charge of $0.05/MMBtu, provided that, in the case of any quantities of gas that are subject to a remarketing notice as a result of a Project Participant’s payment default or other occurrence constituting a GSC Mandatory Gas Remarketing Notice, such amount shall in no event be less than the Monthly Index Price applicable to such gas, less the Price Reduction Amount, plus the Delivery Point Premium applicable to such gas (with such price floor commencing as of the month after MSCG receives the applicable remarketing notice if such notice is received on or prior to the date that is two Business Days prior to the 25th day of a month (or, if the 25th is not a Business Day, two Business Days prior to the next succeeding Business Day after the 25th), and otherwise commencing in the second month after MSCG receives such notice).

To the extent that neither PEAK nor MSCG remarkets any quantities of gas (i) not taken by any Project Participant in respect of a payment default by such Project Participant, (ii) associated with IURC Event, or (iii) associated with certain terminations (in whole or in part) of a Gas Supply Contract, MSCG shall, assuming timely delivery of the applicable remarketing notice, purchase such gas for its own account as if the gas had been remarketed and pay to PEAK the sum of the Monthly Index Price applicable to such gas, less the Price Reduction Amount, plus the delivery point premium applicable to such gas. To the extent that neither PEAK nor MSCG remarkets any quantities of gas not taken by any

Project Participant other than as described in the preceding sentence, PEAK will be deemed to have failed to take such gas.

PEAK must track in ledgers information relating to the remarketing proceeds, including volume and dollar sales made to Municipal Utilities and other qualified users, and to entities that are not Municipal Utilities or an otherwise qualified user (i.e. non-qualified users). MSCG and PEAK will seek to make additional sales of gas or electricity to Municipal Utilities and other qualified users to reduce the ledger amounts associated with sales to non-qualified users (such ledger amounts referred to as “Disposition Proceeds”).

Ledger Limit Event

PEAK and MSCG are required to exercise commercially reasonable efforts to remarket any gas described above first to Municipal Utilities (and in the case of remarketing by MSCG, second to other qualified governmental users), but, if PEAK or MSCG cannot do so, MSCG (and PEAK, solely in connection with daily remarketing) is permitted to sell to any other third party, which thereby generates Disposition Proceeds. To the extent PEAK or MSCG remarkets such gas to parties other than Municipal Utilities or other qualified users (i.e. non-qualified users), the purchase by PEAK of any other gas or electricity it actually acquires thereafter (other than gas purchased as part of the Gas Project) for the Project Participants, Municipal Utilities or other qualified users will be deemed to have been made using Disposition Proceeds on a first-in, first-out basis and on at least a pari passu and non-discriminatory basis in relation to other gas purchased by PEAK or a Project Participant using tax-exempt bond proceeds pursuant to a long-term gas purchase agreement comparable to the Gas Purchase Agreement. MSCG may also advance money to or on behalf of PEAK, with the proceeds of any such advances used by MSCG to purchase and sell gas or electricity to Municipal Utilities or other qualified users on PEAK’s behalf.

If there are Disposition Proceeds that remain un-remediated two years after the related remarketing of gas to purchasers other than Municipal Utilities or other qualified users, such balance will count against either a limit equivalent to a quantity of gas, in MMBtu, equal to $15 million or a limit of 10% of the original quantities of gas purchased under the Gas Purchase Agreement (as such limits may be adjusted or eliminated pursuant to a determination by Bond Counsel), depending on the status of the purchaser at the time the proceeds are received by PEAK. Both limits apply in the aggregate over the life of the Gas Purchase Agreement. Once either limit has been reached, a “Ledger Limit Event” will be deemed to occur and an Early Termination Date shall occur with respect to the Gas remaining to be delivered under the Gas Purchase Agreement, unless the parties amend the Gas Purchase Agreement to reduce the Daily Contract Quantity and satisfy other applicable conditions, including receipt of an Opinion of Bond Counsel as to the tax-exempt status of the Bonds. The limits described above are mandated by certain tax requirements and are subject to change or elimination based on future changes in tax requirements.

Payment Provisions

The prepayment from PEAK to MSCG will be due prior to the inception of the term of the Gas Purchase Agreement. To the extent any other amount becomes due to MSCG or PEAK thereunder (for example, as a result of remarketing, failure to deliver by MSCG or failure to take by PEAK), such amount will be due to the other party on or before the 25th day of the month following the month in which such amount accrues.

Force Majeure

Each of PEAK and MSCG are excused from their respective obligations to receive and deliver gas under the Gas Purchase Agreement to the extent prevented by force majeure, defined generally as any event that is not within the reasonable control of the party claiming suspension, and which by the exercise of due diligence by such party, such party is unable to prevent or overcome with respect to the receipt or delivery of gas. This excuse to performance includes such events as natural disasters, curtailment of gas transportation, declarations of force majeure by suppliers of gas to MSCG, government actions, and strikes. The force majeure provisions of the Gas Purchase Agreement do not relieve MSCG from the obligation to pay PEAK with respect to gas that PEAK fails to take or MSCG fails to deliver for reasons attributable to force majeure. (See “Failure to Deliver or Receive Gas” above.)

Assignment

Neither party may assign the Gas Purchase Agreement or any of its rights or obligations thereunder without the other party’s prior written consent except that (a) pursuant to the Indenture, PEAK may, without the consent of MSCG, transfer, sell, pledge encumber or assign the Gas Purchase Agreement in connection with any financing or other financial arrangements, and (b) upon written notice to PEAK, MSCG may, without the consent of PEAK, assign all or any of its rights under the Gas Purchase Agreement to an affiliate of MSCG, which assignment shall constitute a novation, provided that if the Morgan Stanley/PEAK Guaranty has not been terminated in accordance with its terms as of the date of such assignment, then (i) the Morgan Stanley/PEAK Guaranty shall continue to apply to the obligations of such assignee or (ii) the assignee shall provide to PEAK a Morgan Stanley guaranty, together with rating confirmation letters from the relevant rating agencies confirming that the rating of the Bonds will not be impaired. Notwithstanding the foregoing, neither PEAK nor MSCG may assign the Gas Purchase Agreement unless contemporaneously with the effectiveness of such assignment, the transferring party also assigns the PEAK Commodity Swap (and the Custodial Agreement) or the Gas Supplier Commodity Swap, as applicable, to the same assignee.

PEAK may also require MSCG to assign the Gas Purchase Agreement to a third party, effective March 1, 2024 (being the first day of the last month of the initial Long Rate Period), in connection with a refunding and optional redemption of all outstanding Bonds (the “Refunding”). In connection with any such assignment, MSCG would be obligated to deposit with the Trustee an amount equal to the Termination Payment on or before the last Business Day of the Month preceding the Mandatory Purchase Date. The Trustee is to deposit such amount in the Assignment Payment Fund created by the Indenture and (a) pay such amount to the assignee of the Gas Purchase Agreement as consideration for such assignment or (b) to the extent all of the Outstanding Bonds have not been redeemed or defeased on or before the Mandatory Purchase Date as a result the Refunding, transferred to the Redemption Account and applied to the redemption of all Outstanding Bonds on the Mandatory Redemption Date.

Termination

PEAK will have the right to terminate the Gas Purchase Agreement prior to the expiration of the term under the following circumstances:

• MSCG’s insolvency or bankruptcy;

• Any representation or warranty made by MSCG in the Gas Purchase Agreement is proven to have been incorrect in any material respect when it was made;

• MSCG’s persistent unexcused failure to deliver gas as required by the Gas Purchase Agreement in amounts that exceed thresholds defined in the Gas Purchase Agreement and discussed under “THE PREPAID GAS PURCHASE AND SALE AGREEMENT—Failure to Deliver or Receive Gas”;

• Any interpretation, enactment or change or amendment to any governmental approval or law occurring after the effective date of the Gas Purchase Agreement that results or would result in the performance of any obligation of MSCG to deliver gas or PEAK to receive gas under the Gas Purchase Agreement being prohibited or unlawful or the subject of a special penalty; or

• The occurrence of a change in the law that fundamentally alters industry practices and that would materially and adversely affect the terms of the Gas Purchase Agreement (excluding changes in law that affect the taxability of the Bonds or otherwise affect the obligations of PEAK under the Bonds or the Indenture).

MSCG will have the right to terminate the Gas Purchase Agreement prior to the expiration of the term under the following circumstances:

• PEAK’s failure to pay when due any amounts owed to MSCG pursuant to the Gas Purchase Agreement within five business days after receiving notice of a late payment;

• PEAK’s insolvency or bankruptcy;

• Any representation or warranty made by PEAK in the Gas Purchase Agreement is proven to have been incorrect in any material respect when it was made, or PEAK fails to perform any covenant under the Gas Purchase Agreement and such failure is not cured within 30 days after receiving notice of such failure (or such longer period as is reasonably necessary if such failure cannot be cured within 30 days);

• The occurrence of a change in the law that fundamentally alters industry practices and that would materially and adversely affect MSCG’s rights or obligations under terms of the Gas Purchase Agreement.

The Gas Purchase Agreement will automatically terminate prior to the expiration of the term under the following circumstances:

• MSCG and Morgan Stanley’s failure to pay when due any amounts owed to PEAK pursuant to the Gas Purchase Agreement within ten business days after receiving notice of a late payment;

• The Gas Supplier Commodity Swap terminates for the failure of MSCG and Morgan Stanley to pay amounts due thereunder;

• The Gas Supplier Commodity Swap terminates for any reason other than failure to pay by MSCG and Morgan Stanley and either the Gas Supplier Commodity Swap or the PEAK Commodity Swap is not replaced within the applicable replacement period;

• The PEAK Commodity Swap terminates for any reason and either the PEAK Commodity Swap or the Gas Supplier Commodity Swap is not replaced within the applicable replacement period;

• A Failed Bond Remarketing occurs;

• Either limit applicable to remarketing proceeds has been reached as described under “Ledger Limit Event” above (subject to the exception described therein); or

• The Morgan Stanley/PEAK Guaranty will not be in force during the next succeeding Long Rate Period.

Termination Payment

If the Gas Purchase Agreement is terminated before the expiration of the term for any reason, MSCG will be required to pay a scheduled Termination Payment to PEAK. The Termination Payment schedule is generally based on the unamortized portion of the prepayment proceeds that were received by MSCG. The amount of the Termination Payment, together with the amounts required to be on deposit in certain Funds and Accounts held by the Trustee, including any Qualified Investments deposited in the Debt Service Account or the Capitalized Interest Subaccount contained therein, has been calculated to provide a sum at least sufficient to pay the Redemption Price of the Bonds, assuming that MSCG, the Project Participants and the Surety Policy Provider, if applicable, pay and perform their contract obligations when due. See APPENDIX H for a schedule of Termination Payments under the Gas Purchase Agreement.

In addition to this scheduled Termination Payment, if the Gas Purchase Agreement terminates as a result of (i) MSCG’s failure to pay, material misrepresentation or Persistent Delivery Failure thereunder or (ii) termination of the Gas Supplier Commodity Swap as a result of MSCG’s default under the Gas Supplier Commodity Swap, MSCG will be required to pay PEAK an Additional Termination Payment.

Security

MSCG’s payment obligations under the Gas Purchase Agreement are unconditionally guaranteed by Morgan Stanley under the Morgan Stanley/PEAK Guaranty.

MSCG, MS&CO. AND MORGAN STANLEY

Set forth below is certain information regarding MSCG, MS&Co. and Morgan Stanley that has been obtained from such persons and other sources believed to be reliable. PEAK assumes no responsibility for such information and cannot guarantee the accuracy thereof. Under no circumstance is MSCG, MS&Co. or Morgan Stanley obligated to pay any amounts owed in respect of the Bonds.

MSCG is a direct, wholly-owned subsidiary of the publicly listed company Morgan Stanley. MSCG is engaged, among other things, in client facilitation and market-making activities in commodities and commodity derivative contracts. MSCG is provisionally registered as a swap dealer with the Commodity Futures Trading Commission. The payment obligations of MSCG under the Gas Purchase Agreement are guaranteed by Morgan Stanley.

Morgan Stanley & Co. LLC (“MS&Co.”) is serving as the underwriter for the Bonds. MS&Co. and one of its subsidiaries are registered with the U.S. Securities and Exchange Commission (“SEC”) as broker-dealers. MS&Co. is also registered as a futures commission merchant and provisionally registered as a swap dealer with the Commodity Futures Trading Commission.

MS&Co. is a wholly owned subsidiary of Morgan Stanley Domestic Holdings, Inc. (“MSDHI”). MSDHI is a wholly owned subsidiary of Morgan Stanley Capital Management, LLC, which is a wholly owned subsidiary of Morgan Stanley.

Morgan Stanley is a global financial services firm that, through its subsidiaries and affiliates, provides a wide variety of products and services to a large and diversified group of clients and customers, including corporations, governments, financial institutions and individuals. Morgan Stanley was originally incorporated under the laws of the State of Delaware in 1981, and its predecessor companies date back to 1924. Morgan Stanley is a financial holding company regulated by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended. Morgan Stanley conducts its business from its headquarters in and around New York City, its regional offices and branches throughout the U.S. and its principal offices in London, Tokyo, Hong Kong and other world financial centers. Morgan Stanley’s principal executive offices are at 1585 Broadway, New York, New York 10036, and its telephone number is (212) 761-4000.

The senior unsecured long-term debt of Morgan Stanley is rated “A3” (stable outlook) by Moody’s, “BBB+” (stable outlook) by S&P and “A” (stable outlook) by Fitch.

Morgan Stanley has provided a guaranty to PEAK pursuant to which it guarantees MSCG’s payment obligations to PEAK under the Gas Purchase Agreement. Morgan Stanley has also provided a guaranty to the Commodity Swap Counterparty pursuant to which it guarantees MSCG’s payment obligations to the Commodity Swap Counterparty under the Gas Supplier Commodity Swap. Under no circumstance is MSCG, MS&Co. or Morgan Stanley obligated to pay any amounts owed in respect of the Bonds.

THE COMMODITY SWAPS

Set forth below is a summary of certain provisions of the Commodity Swaps. This summary does not purport to be a complete description of the terms and conditions of the Commodity Swaps and accordingly is qualified by reference to the full text of the Commodity Swaps.

General

PEAK will enter into the PEAK Commodity Swap under which, over approximately 30 years (359 months), PEAK will pay a floating natural gas price at certain pricing points (which may include a monthly premium representing the costs of delivery of gas to related delivery points), and receive a fixed natural gas price for notional quantities of natural gas that correspond to the quantities and related delivery points under the Gas Purchase Agreement. Under the PEAK Commodity Swap, for each calendar month that the relevant floating price of natural gas (including any monthly transportation premium) at a delivery point is greater than the fixed price specified in the PEAK Commodity Swap, PEAK will be obligated to pay to the Commodity Swap Counterparty an amount equal to the product of (x) the difference between (i) the floating price (including any applicable premium), and (ii) the fixed price, multiplied by (y) a notional quantity equal to the quantity of gas scheduled to be delivered at the delivery point during such month by MSCG under the Gas Purchase Agreement. If the fixed price specified in the PEAK Commodity Swap is greater than the relevant floating price of natural gas (including any applicable premium) at a delivery point for a month, the Commodity Swap Counterparty

will be obligated to pay PEAK an amount equal to the product of (x) the difference between (i) the fixed price and (ii) the floating price (including any applicable premium), multiplied by (y) a notional quantity equal to the quantity of gas scheduled to be delivered at the delivery point during such month by MSCG under the Gas Purchase Agreement. If the relevant floating price, plus the applicable premium, for a calendar month is equal to the specified fixed price, no payment will be owing by either party to the other under the PEAK Commodity Swap. The Commodity Swap Counterparty’s payment obligations to PEAK under the PEAK Commodity Swap will be guaranteed by the Commodity Swap Counterparty Guarantor.

MSCG will enter into a comparable Gas Supplier Commodity Swap with the Commodity Swap Counterparty under which MSCG pays a fixed natural gas price over the same period of approximately 30 years (359 months) and receives a floating natural gas price for the same notional quantities at the same pricing points, together with any monthly premium relating to the costs of the delivery of gas to the related delivery points. MSCG’s payment obligations to the Commodity Swap Counterparty under the Gas Supplier Commodity Swap will be guaranteed by Morgan Stanley. The Commodity Swap Counterparty’s payment obligations to MSCG under the Gas Supplier Commodity Swap will be guaranteed by the Commodity Swap Counterparty Guarantor.

Form of Commodity Swaps

Each of the Commodity Swaps will be entered into as a confirmation under a 2002 ISDA Master Agreement published by the International Swaps and Derivatives Association, Inc. (available at www.isda.org),with certain amendments and elections under the Master Agreement that have been agreed to by the parties.

Payment

For each month of scheduled gas deliveries and notional amounts, each party with a net obligation under a Commodity Swap (based on the relative values of the fixed price, relevant index prices and the relevant premium charges) will pay that net obligation to the other party on the 25th day of the following month or, if such day is not a business day, the next following business day, unless such postponement of payment would cause such payment to be made in the month following the month in which such 25th day falls, in which case such payment shall be made on the preceding business day.

Early Termination

Each of the Commodity Swaps will be subject to early termination under certain circumstances. This early termination can be triggered automatically or upon the election by the non-defaulting or non- affected party as described below.

Except as specifically described below, no settlement or other termination payment (other than previously accrued, unpaid amounts) would be due to any party as a result of any early termination of any Commodity Swap.

Automatic Termination of Both Commodity Swaps. The termination of the Gas Purchase Agreement for any reason would result in the automatic termination of both the PEAK Commodity Swap and the Gas Supplier Commodity Swap on the same date on which the early termination of the Gas Purchase Agreement is effective.

Other Termination of the PEAK Commodity Swap. The PEAK Commodity Swap will be documented using the form of 2002 ISDA Master Agreement published by the International Swaps and Derivatives Association, Inc. (available at www.isda.org), which incorporates a set of standard events of

default and termination events. All such standard events of default and termination events will apply to the PEAK Commodity Swap except (i) with regard to PEAK, (A) the events of default set forth in Section 5(a)(i) (“Failure to Pay or Deliver”), Section 5(a)(ii)(1) (“Breach of Agreement”), Section 5(a)(ii)(2)(“Repudiation of Agreement”), Section 5(a)(iii) (“Credit Support Default”), Section 5(a)(v) (“Default Under Specified Transaction”) and Section 5(a)(vi) (“Cross-Default”) and (B) the termination event described in Section 5(b)(ii) (“Force Majeure Event”), (ii) with regard to the Commodity Swap Counterparty (A) the events of default set forth in Section 5(a)(i) (“Failure to Pay or Deliver”), Section 5(a)(ii)(2)(“Repudiation of Agreement”), Section 5(a)(v) (“Default Under Specified Transaction”) and Section 5(a)(vi) (“Cross-Default”), and (iii) except as set forth in the preceding paragraph, the automatic early termination provision contained in Section 6(a) of the 2002 ISDA Master Agreement will not apply to PEAK or to the Commodity Swap Counterparty. In addition, the schedule that will be attached to the 2002 ISDA Master Agreement will provide that the PEAK Commodity Swap (i) may be terminated by PEAK (a) upon a failure of the Commodity Swap Counterparty to make any payment when due if such failure is not remedied by the third local business day after notice of such failure is given to the Commodity Swap Counterparty, (b) upon a ratings downgrade of (x) the Commodity Swap Counterparty or, (y) in the event the Commodity Swap Counterparty’s senior, unsecured long-term debt obligations are not rated by Moody’s or S&P, as applicable, the Commodity Swap Counterparty Guarantor, to below “Baa3” by Moody’s or “BBB” by S&P, or (c) in connection with termination of the commodity swap agreement between the Gas Supplier and the Commodity Swap Counterparty, (ii) may be terminated by the Commodity Swap Counterparty (a) upon a failure of PEAK to make any payment when due if such failure is not remedied by the 120th day after notice of such failure is given to PEAK, (b) upon the modification of the Indenture in breach of the Commodity Swap Counterparty’s consent rights under the Indenture and such breach is not cured within 10 days of the effective date thereof, (c) if the termination provisions of the Gas Purchase Agreement are modified or amended without the prior written consent of the Commodity Swap Counterparty, unless the Commodity Swap Counterparty elects not to object to such modifications or amendments within 30 days after its receipt of notice of such modifications or amendments or (d) upon PEAK’s failure to promptly exercise its right to suspend all gas deliveries under the related Gas Supply Contract to any Project Participant that fails to pay when due any amounts owed to PEAK thereunder, or (iii) will be terminated upon PEAK’s receipt of notice from the Gas Supplier designating an early termination date under the Gas Supplier Commodity Swap.

Other Termination of the Gas Supplier Commodity Swap. The Gas Supplier Commodity Swap will be documented using the form of 2002 ISDA Master Agreement published by the International Swaps and Derivatives Association, Inc. (available at www.isda.org), which incorporates a set of standard events of default and termination events. All such standard events of default and termination events will apply to the Gas Supplier Commodity Swap except the events of default set forth in Section 5(a)(ii)(2)(“Repudiation of Agreement”) and Section 5(a)(v) (“Default Under Specified Transaction”), and the termination event described in Section 5(b)(ii) (“Force Majeure Event”), will not apply and except as set forth in the second preceding paragraph, above, the automatic early termination provision contained in Section 6(a) of the 2002 ISDA Master Agreement will not apply to the Gas Supplier or to the Commodity Swap Counterparty. In addition, the schedule that will be attached to the 2002 ISDA Master Agreement will provide that the Gas Supplier Commodity Swap (i) may be terminated by the Gas Supplier (a) upon a ratings downgrade of (x) the Commodity Swap Counterparty or, (y) in the event the Commodity Swap Counterparty’s senior, unsecured long-term debt obligations are not rated by Moody’s or S&P, as applicable, the Commodity Swap Counterparty Guarantor, to below “Baa3” by Moody’s or “BBB” by S&P, or (b) at its election upon notice of at least one (1) local business day to the Commodity Swap Counterparty, subject to the condition that the PEAK Commodity Swap must be terminated on the same day and subject to the Gas Supplier’s payment to the Commodity Swap Counterparty of a termination payment under certain circumstances and (ii) may be terminated by the Commodity Swap Counterparty (a) if the termination provisions of the Gas Purchase Agreement are modified or amended without the prior written consent of the Commodity Swap Counterparty, unless the Commodity Swap

Counterparty elects not to object to such modifications or amendments within 30 days after its receipt of notice of such modifications or amendments, or (b) if the Gas Supplier assigns, without the Commodity Swap Counterparty’s consent, its rights and obligations under the Gas Purchase Agreement to another party, and the assignee’s obligations under the Gas Purchase Agreement are not guaranteed by a Morgan Stanley Guaranty in accordance with the Gas Purchase Agreement.

Replacement Commodity Swap Counterparty

Under certain circumstances PEAK may replace the PEAK Commodity Swap with a similar agreement upon delivery to the Trustee of either (i) confirmation from each Rating Agency then rating the Bonds that the rating of the Bonds will not be reduced or withdrawn as a result of such replacement or (ii) a Written Certificate of the Issuer to the effect that (A) the Commodity Swap Counterparty for the proposed replacement PEAK Commodity Swap meets the requirements set forth in the definition of the term “Commodity Swap Counterparty” as contained within the Indenture and (B) the proposed replacement PEAK Commodity Swap is similar to the then-existing PEAK Commodity Swap; provided, however, that in no circumstance is the replacement to occur without the prior written consent of MSCG.

Under the Indenture, “Commodity Swap Counterparty” is defined to mean (a) initially, BP Energy Company and any successor thereto and (b) thereafter, (i) any Person that at the time of entering into a replacement Commodity Swap has (or has a credit support provider that has) credit ratings equal to at least the lower of (1) the credit ratings of the Gas Supplier, or if the Gas Supplier is not rated, the guarantor of the Gas Supplier or (2) the ratings then assigned by each Rating Agency to the Bonds; or (ii) any Person that PEAK determines has provided such collateral and security arrangements as PEAK determines to be necessary, which may consist of custodial arrangements for payments consistent with the custodial payment arrangements entered into by BP Energy Company on or before the initial issuance of the Bonds.

Custodial Agreement

Payments made by MSCG to the Commodity Swap Counterparty under the Gas Supplier Commodity Swap will be made to a custodial account maintained by The Bank of New York Mellon Trust Company, N.A., as custodian (in such capacity, the “Custodian”) under the Custodial Agreement. Such amounts will not be released until the Custodian has confirmation that the amount payable to PEAK by the Commodity Swap Counterparty under the PEAK Commodity Swap for such month has been paid. If the Commodity Swap Counterparty does not make a required payment under the PEAK Commodity Swap and such payment remains unpaid after the expiration of any grace period, the Custodian will pay the amount that MSCG paid under the Gas Supplier Commodity Swap (which amount is held in the custodial account) to the Trustee for deposit in the Revenue Fund and that payment will be treated as a Commodity Swap Receipt under the Indenture. Additionally, if the Gas Supplier Commodity Swap terminates, MSCG is required to make payments to the Custodian that otherwise would have been payable under the Gas Supplier Commodity Swap to the Commodity Swap Counterparty until (x) the Gas Supplier Commodity Swap and PEAK Commodity Swap have been replaced in accordance with the requirements of the Gas Purchase Agreement or (y) termination of the Gas Purchase Agreement, which payments will be used by the Custodian, to the extent necessary, to pay to PEAK unpaid amounts due from the Commodity Swap Counterparty under the PEAK Commodity Swap. Payments made under the PEAK Commodity Swap are not subject to the Custodial Agreement, and payments made by the Commodity Swap Counterparty to MSCG under the Gas Supplier Commodity Swap are not subject to the Custodial Agreement.

THE COMMODITY SWAP COUNTERPARTY

Set forth below is certain information regarding the initial Commodity Swap Counterparty. PEAK assumes no responsibility for such information and cannot guarantee the accuracy thereof. Under no circumstance is the Commodity Swap Counterparty obligated to pay any amount owed in respect of the Bonds.

The initial Commodity Swap Counterparty is BP Energy Company (“BP”). The obligations of the Commodity Swap Counterparty are guaranteed by BP Corporation North America, Inc., an Indiana corporation (“BPNA” or the “Commodity Swap Counterparty Guarantor”). BPNA is an indirect parent company of BP and guarantor of the obligations of BP as the Commodity Swap Counterparty.

Financial information regarding BPNA is available without charge upon request to: Debt Administration, BP Corporation North America Inc., 501 Westlake Park Blvd., Houston, TX 77079. Telephone and email requests may be directed to 832-619-6679 and treasurydebtadmin@bp.com.

The foregoing information regarding the Commodity Swap Counterparty has been obtained from sources PEAK believes to be reliable, but PEAK assumes no responsibility for the content thereof.

THE GAS SUPPLY CONTRACTS

General

Under the Gas Supply Contracts, PEAK must tender on a firm basis for delivery to each of the Project Participants at the points of delivery identified in the Gas Supply Contracts (each a “Delivery Point”), and each Project Participant must purchase and receive on a firm basis from PEAK at the applicable Delivery Point(s), the daily quantities of gas for each month set forth in the applicable Gas Supply Contract (the “Daily Quantity”). The delivery period in the case of each Gas Supply Contract extends through the last day of February, 2048.

The Gas Supply Contracts will remain in full force and effect for a primary term ending on the maturity date of the Bonds, except as otherwise provided therein; provided, however, that if the Gas Purchase Agreement terminates earlier, the Gas Supply Contracts will terminate on the Early Termination Date.

The following table sets forth the average annualized Daily Quantity of gas that each Project Participant has agreed to purchase from PEAK under the Gas Supply Contracts and each Project Participant’s percentage of the total average annualized Daily Quantity.

Average Daily Quantity of Gas To be Purchased by each Project Participant Under the Gas Supply Contracts

PERCENTAGE OF AVERAGE DAILY TRANSACTION BY PROJECT PARTICIPANT QUANTITY(MMBtu)(1) PARTICIPANT(3)(4) Citizens Gas 11,895 34.2% Carrollton, Kentucky(2) 6,760 19.4% Metropolitan Utilities District (Omaha) 4,746 13.6% Patriots Energy Group 4,542 13.1% Jackson Utility District 1,928 5.5% Las Cruces, New Mexico 1,767 5.1% Clarke-Mobile Counties Gas District 1,192 3.4% The Southeast Alabama Gas District 1,192 3.4% Henderson, Kentucky 766 2.2% TOTAL 34,788 100.0%

______(1) The average Daily Quantities presented in this table are calculated over the term of each Gas Supply Contract, assuming gas deliveries begin on April 1, 2018. If PEAK and the Project Participants elect to begin deliveries on October 1, 2018, the average Daily Quantity purchased by each Project Participant will increase by an average of 0.6%. (2) Carrollton Utilities will enter into two separate Gas Supply Contracts and, subject to the satisfaction of certain conditions, may assign one Gas Supply Contract, representing 10.9% of the transaction to Middle Tennessee Natural Gas Utility District. See “THE GAS SUPPLY CONTRACTS—Carrollton Utilities.” (3) Does not sum to 100% due to rounding. (4) Prior to the initial pricing of the Bonds, PEAK and the Project Participants may elect to begin gas deliveries on October 1, 2018, rather than April 1, 2018, in which case the portion of the total contract quantity purchased by Citizens Gas would decrease to approximately 34.1%, and the portion purchased by Carrollton Utilities, Metropolitan Utilities District and Jackson Energy Authority would increase to approximately 19.5%, 13.7% and 5.6%, respectively.

For additional information regarding the Project Participants, see “THE PROJECT PARTICIPANTS” and APPENDIX A.

Pricing Provisions

A Project Participant must pay PEAK a market-based price for each MMBtu of gas delivered each month equal to the Monthly Index Price (defined below) at each applicable delivery point, less a discount or Price Reduction Amount, plus any physical premium that may apply for delivery of the gas to a delivery point (the “Contract Price”). The “Monthly Index Price” means the price of spot gas delivered to pipelines reported for the month of delivery in “Inside FERC’s Gas Market Report” as published by Platts, a division of S&P Global, or “Natural Gas Intelligence Bidweek Survey,” as published by Intelligence Press, Inc., as set forth in each Gas Supply Contract for a Delivery Point. If either of the foregoing reports ceases to be published, the Monthly Index Price shall be derived via an alternative index.

This pricing structure allows the Project Participants to pay a below market price by reducing the monthly market index prices for each MMBtu delivered by a specified Price Reduction Amount. The Gas Supply Contract further allows for an annual refund (discussed below). No assurance can be given as to the annual refund.

The physical premium for the delivery of gas to a specific Delivery Point is termed the Delivery Point Premium. This amount is established by PEAK and the Gas Supplier from time to time under the Gas Purchase Agreement and flows through to each Project Participant under the related Gas Supply Contract. Under the terms of the Gas Purchase Agreement, the Delivery Point Premium may change during the transaction as market conditions change.

Billing and Payment

Not later than the 10th day of each month during the delivery period under each Gas Supply Contract, PEAK must provide a monthly statement of the amount due for gas delivered by PEAK. The due date for payment by the Project Participants will be the 20th day of the month (and if the 20th day of the month is not a business day, the next day that is a business day). If a Project Participant disputes the appropriateness of any charge or calculation in any billing statement, such Project Participant must notify PEAK of the existence of and basis for such dispute and must, within the time provided for payment, pay all amounts billed by PEAK, including any amounts in dispute, except in the case of manifest error. If it is ultimately determined that such Project Participant did not owe the disputed amount, PEAK must pay such Project Participant the disputed amount plus interest.

Annual Refund

Following the completion of the annual audit of PEAK’s financial statement each fiscal year during the term of the Gas Supply Contracts, PEAK must perform a comparison for such fiscal year of its revenues received from the sale of gas under the Gas Supply Contracts and its expenses in providing gas supply service under the Gas Supply Contracts. If such annual comparison demonstrates that revenues exceeded expenses during a fiscal year and there are amounts on deposit in the applicable funds established by the Indenture and available for such purpose, then PEAK will make refunds to each Project Participant pro rata based on a Project Participant’s annualized Daily Quantities subject to adjustments; provided, however, the amount available for such refunding will be subject to any allowances for any necessary and appropriate reserves and contingencies as determined by PEAK.

Covenants of the Project Participants

Operating Expense. Each Project Participant has (i) certified its reasonable expectation that all amounts paid for gas acquired pursuant to the Gas Supply Contract will be derived from current revenues of such Project Participant’s gas distribution business and payable as an operation and maintenance cost of such business that is payable prior to debt service on any revenue bonds of the Project Participant and (ii) has covenanted and agreed that amounts payable by such Project Participant do not constitute an indebtedness or liability of the Project Participant within the meaning of any constitutional or statutory limitation applicable to the Project Participant

Maintenance of Rates and Charges. Each Project Participant has covenanted and agreed that it will establish, maintain, and collect rates and charges for the gas services furnished by its respective gas systems so as to provide revenues sufficient, together with other available gas system revenues, to enable such Project Participant to pay to PEAK all amounts payable under its Gas Supply Contract.

No Encumbrance of Gas System Revenues. Each Project Participant has covenanted and agreed that the Project Participant will not pledge or encumber the revenues of its gas system in any way that creates a right to payment that is prior to the rights of PEAK (or the Surety Policy Provider as assignee or subrogee) under the applicable Gas Supply Contract.

Tax-Exempt Status of Bonds. Each Project Participant has agreed that it will not take any action, or fail to take any action, if such action or failure to take action would adversely affect the exclusion from the gross income of the Holders thereof of interest on the Bonds under the Code. Without limiting the foregoing, each Project Participant has further agreed that the Gas purchased under its Gas Supply Contract (a) will be used at all times by the Project Participant in its normal and customary governmental utility operations to provide utility service to consumers located within its governmental service territory pursuant to the Project Participant’s rate schedules and tariffs as they exist from time to time and (b) in a manner that will not result in any private business use of that gas within the meaning of Section 141 of the Code without the prior written consent of PEAK.

Continuing Disclosure. The Project Participants have covenanted and agreed that they will provide PEAK with such annual operating and financial information relating to their respective gas systems as is required to enable PEAK to comply with its Undertaking (as defined herein). See also “CONTINUING DISCLOSURE” and APPENDIX D.

Transportation; Title to Gas and Risk of Loss

Except as otherwise provided in the Gas Supply Contracts, PEAK must make arrangements for all transportation services required to effect and must bear all costs and expenses of, transportation prior to the delivery of the Daily Quantity at each Delivery Point. Each Project Participant must make all arrangements for all transportation services required to receive its Daily Quantity at the applicable Delivery Point and to ship it from such Delivery Point to its intended destination and must bear all costs of transportation downstream of such Delivery Point.

PEAK warrants the title to all gas sold under the Gas Supply Contracts and delivered by PEAK to the Project Participants. Transfer of custody of the gas and title to such gas sold will pass to and vest in a Project Participant at the applicable Delivery Point. PEAK will have responsibility for and assume any liability with respect to gas prior to its delivery to a Project Participant at the Delivery Point, and a Project Participant will have responsibility for and assume any liability with respect to such gas at after its delivery to such Project Participant at the Delivery Point.

Failure to Perform

Except for reasons of force majeure or the actions or inactions of a Project Participant, for each MMBtu that PEAK is obligated to deliver to a Project Participant but fails to deliver, PEAK must pay to such Project Participant an amount equal to the difference, if any, between the Contract Price per MMBtu which would have been applicable to the undelivered gas and any higher cost per MMBtu which such Project Participant actually incurred to obtain an equivalent quantity of replacement gas, plus an administrative fee per MMBtu.

Except for reasons of force majeure or the actions or inactions of PEAK, in the event that PEAK tenders the Daily Quantity for delivery to a Project Participant and such Project Participant fails to take all or any portion of the Daily Quantity, such Project Participant will remain obligated to pay PEAK an amount equal to the Contract Price for the full amount of the Daily Quantity, minus the actual sales price obtained by PEAK or its designee in the sale of such gas to a third party (net of transportation and other commercially reasonable costs of PEAK relating to the Project Participant’s failure), minus an administrative fee on any quantity not taken as well as other commercially reasonable costs of PEAK. If Buyer provides a timely notice of a request to remarket gas, the following paragraph shall apply in lieu of this paragraph.

Remarketing of Gas

In the event a Project Participant does not require any quantities of gas that it is obligated to purchase under its Gas Supply Contract or as a result of a loss of load on its system, it shall notify PEAK, which may remarket such quantities under the terms of the Gas Purchase Agreement. The Project Participant remains obligated to pay the Contract Price on its full Daily Quantity, and PEAK must credit the proceeds of such remarketing up to the Contract Price less the remarketing fee on each MMBtu remarketed.

Force Majeure

Each party to a Gas Supply Contract is excused from their respective obligations to receive and deliver gas by an event of force majeure, defined generally as any cause not within the reasonable control of the party claiming an excuse to its obligations. This excuse to performance includes such events as natural disasters, curtailment of firm transportation, an event of force majeure under the Gas Purchase Agreement (with respect to a claim of force majeure by PEAK), government actions, and strikes. In the event of a partial force majeure at a Delivery Point, PEAK has agreed to exercise commercially reasonable efforts to deliver affected quantities of gas at a mutually agreeable alternate delivery point.

Default

Failure by a Project Participant to make when due any payment to PEAK under the applicable Gas Supply Contract will constitute a default of such Project Participant. In the event of any such default, PEAK will have the right to recover from such Project Participant any amount in default and to assign to the Surety Policy Provider the right to collect any unpaid amount and shall cease and discontinue providing delivery of all or any portion of the gas otherwise to be delivered to such Project Participant. In the Indenture, PEAK has agreed to enforce its right to suspend deliveries under these circumstances. See “SECURITY FOR THE BONDS – Commodity Swap Reserve Accounts” and “– Debt Service Reserve Accounts” herein.

If PEAK discontinues gas deliveries due to a Project Participant default, such service may only be reinstated, as determined by PEAK, upon payment in full by such Project Participant of all amounts then due and payable under its Gas Supply Contract. Under the Gas Purchase Agreement, MSCG has the right to advance funds to PEAK in respect of a Project Participant’s payment default under its Gas Supply Contract.

In the event of a failure by a Project Participant to make any payments to PEAK when due under its Gas Supply Contract, or in the event that any representation, warranty or consent made by a Project Participant in its Gas Supply Contract shall prove to have been incorrect in any material respect when made or a Project Participant fails to perform any covenant under its Gas Supply Contract, PEAK may designate an Early Termination Date under the Gas Supply Contract. If PEAK suspends deliveries of Gas to Buyer and such suspension continues for a period of 30 days (as a result of a failure by Buyer to remedy the nonpayment giving rise to such suspension), then the following Business Day shall be an Early Termination Date upon provision of notice. In that event, the obligations under the Gas Supply Contract shall end.

In the event of a default by PEAK under any covenant, agreement, or obligation in the Gas Supply Contract, a Project Participant may bring any suit, action, or proceeding at law or in equity to enforce PEAK’s obligations, including without limitation mandamus, injunction, and action for specific performance.

Assignment

Neither PEAK nor the Project Participant party thereto may assign a Gas Supply Contract to another party without the prior written consent of the other party (such consent not to be unreasonably withheld or delayed), and the Project Participant may not assign its rights without the prior written consent of the Surety Policy Provider, except that PEAK may assign its interests to the Trustee under the Indenture and, in the event of a payment default by a Project Participant under its Gas Supply Contract and payment by the Surety Policy Provider of amounts owed by Buyer, PEAK shall assign its rights to collect from Buyer to the Surety Policy Provider.

Carrollton Utilities

Carrollton Utilities will enter into two separate Gas Supply Contracts with PEAK, each containing the terms described under the heading “THE GAS SUPPLY CONTRACTS”, and representing approximately 10.9% (the “Middle Tennessee Contract”) and 8.6%, respectively, of the total volumes acquired by PEAK pursuant to the Gas Purchase Agreement. Carrollton Utilities and Middle Tennessee Natural Gas Utility District (“MTG”) will enter into a Base Contract for Sale and Purchase of Natural Gas (the “NAESB”) pursuant to which Carrollton Utilities has agreed to sell to MTG, and MTG has agreed to purchase from Carrollton Utilities, those volumes of Gas acquired by Carrollton Utilities under the Middle Tennessee Contract. The NAESB requires that MTG make payment to Carrolton Utilities for Gas delivered each Month by the 20th day of the following Month and may be terminated by MTG on 60 days’ prior written notice. In the event MTG terminates the NAESB, Carrollton Utilities will take delivery of all remaining volumes under the Middle Tennessee Contract for use in its own system.

PEAK, Carrollton Utilities and MTG have agreed that, to the extent certain conditions are satisfied, including the transfer of the related AGM insurance policies, Carrollton Utilities will assign the Middle Tennessee Contract to MTG, and MTG will accept such assignment and will assume all obligations as a Project Participant under the Middle Tennessee Contract. The assignment and assumption is expected to occur following the adoption of legislation in the State of MTG’s formation that would enable MTG to accept the assignment under State law. From and after the effective date of the assignment of the Middle Tennessee Contract, MTG would also become the obligor under the related Commodity Swap Reserve Policy and Debt Service Reserve Policy. It is not possible to determine whether legislation that would allow for the assignment of the Middle Tennessee Contract will be adopted, and no assurance of such adoption can be given.

THE SURETY POLICY PROVIDER

Assured Guaranty Municipal Corp. (“AGM”) is a New York domiciled financial guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. (“AGL”), a Bermuda-based holding company whose shares are publicly traded and are listed on the New York Stock Exchange under the symbol “AGO.” AGL, through its operating subsidiaries, provides credit enhancement products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, other than AGM, is obligated to pay any debts of AGM or any claims under any insurance policy issued by AGM.

AGM’s financial strength is rated “AA” (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC (“S&P”), “AA+” (stable outlook) by Kroll Bond Rating Agency, Inc. (“KBRA”) and “A2” (stable outlook) by Moody’s Investors Service, Inc. (“Moody’s”). Each rating of AGM should be evaluated independently. An explanation of the significance of the above ratings may be obtained from the applicable rating agency. The above ratings are not recommendations to buy, sell or hold any security, and such ratings are subject to revision or withdrawal at any time by the

rating agencies, including withdrawal initiated at the request of AGM in its sole discretion. In addition, the rating agencies may at any time change AGM’s long-term rating outlooks or place such ratings on a watch list for possible downgrade in the near term. Any downward revision or withdrawal of any of the above ratings, the assignment of a negative outlook to such ratings or the placement of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed by AGM. AGM only guarantees scheduled principal and scheduled interest payments payable by the issuer of bonds insured by AGM on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised or withdrawn.

Current Financial Strength Ratings

On June 26, 2017, S&P issued a research update report in which it affirmed AGM’s financial strength rating of “AA” (stable outlook). AGM can give no assurance as to any further ratings action that S&P may take.

On December 14, 2016, KBRA issued a financial guaranty surveillance report in which it affirmed AGM’s insurance financial strength rating of “AA+” (stable outlook). AGM can give no assurance as to any further ratings action that KBRA may take.

On August 8, 2016, Moody’s published a credit opinion affirming its existing insurance financial strength rating of “A2” (stable outlook) on AGM. AGM can give no assurance as to any further ratings action that Moody’s may take.

For more information regarding AGM’s financial strength ratings and the risks relating thereto, see AGL’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Capitalization of AGM

At September 30, 2017:

• The policyholders’ surplus of AGM was approximately $2,322 million.

• The contingency reserves of AGM and its indirect subsidiary Municipal Assurance Corp. (“MAC”) (as described below) were approximately $1,371 million. Such amount includes 100% of AGM’s contingency reserve and 60.7% of MAC’s contingency reserve.

• The net unearned premium reserves of AGM and its subsidiaries (as described below) were approximately $1,681 million. Such amount includes (i) 100% of the net unearned premium reserves of AGM and AGM’s wholly owned subsidiaries Assured Guaranty (Europe) plc, Assured Guaranty (UK) plc, CIFG Europe S.A. and Assured Guaranty (London) plc (together, the “AGM European Subsidiaries”) and (ii) 60.7% of the net unearned premium reserve of MAC.

The policyholders’ surplus of AGM and the contingency reserves and net unearned premium reserves of AGM and MAC were determined in accordance with statutory accounting principles. The net unearned premium reserves of the AGM European Subsidiaries were determined in accordance with accounting principles generally accepted in the United States of America.

Incorporation of Certain Documents by Reference

Portions of the following documents filed by AGL with the Securities and Exchange Commission (the “SEC”) that relate to AGM are incorporated by reference into this Official Statement and shall be deemed to be a part hereof:

(i) the Annual Report on Form 10-K for the fiscal year ended December 31, 2016 (filed by AGL with the SEC on February 24, 2017);

(ii) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017 (filed by AGL with the SEC on May 5, 2017);

(iii) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017 (filed by AGL with the SEC on August 3, 2017); and

(iv) the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 (filed by AGL with the SEC on November 3, 2017).

All consolidated financial statements of AGM and all other information relating to AGM included in, or as exhibits to, documents filed by AGL with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof “furnished” under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to above and before the termination of the offering of the Bonds shall be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC’s website at http://www.sec.gov, at AGL’s website at http://www.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 1633 Broadway, New York, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to above, no information available on or through AGL’s website shall be deemed to be part of or incorporated in this Official Statement.

Any information regarding AGM included herein under the caption “THE SURETY POLICY PROVIDER” or included in a document incorporated by reference herein (collectively, the “AGM Information”) shall be modified or superseded to the extent that any subsequently included AGM Information (either directly or through incorporation by reference) modifies or supersedes such previously included AGM Information. Any AGM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.

Miscellaneous Matters

AGM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, AGM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding AGM supplied by AGM and presented under the heading “THE SURETY POLICY PROVIDER.”

The foregoing information regarding the Surety Policy Provider has been obtained from sources PEAK believes to be reliable, but PEAK assumes no responsibility for the content thereof.

CONTINUING DISCLOSURE

PEAK’s Continuing Disclosure Obligations

PEAK will enter into a Continuing Disclosure Undertaking (the “Undertaking”) for the benefit of the beneficial owners of the Bonds to send certain information annually about itself and each of Citizens Gas, Carrollton Utilities, City of Henderson, Metropolitan Utilities District (Omaha) and Patriots Energy Group, and to provide notice of certain events to the Municipal Securities Rulemaking Board (“MSRB”) and its Electronic Municipal Market Access system for municipal securities disclosures (“EMMA”), pursuant to the requirements of Section (b)(5) of Rule 15c2-12 (“Rule 15c2-12”) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. Pursuant to its Gas Supply Contract, each Project Participant has agreed to provide to PEAK, upon its request, annual operating and financial information relating to its operations as required by Rule 15c2-12 to the extent Rule 15c2-12 is applicable to issuance of the Bonds. Failure of a Project Participant to provide such information is not a default under the Gas Supply Contract, but any such failure entitles PEAK and the owner or owners of any of the Bonds to take such actions and to initiate such proceedings as shall be necessary and appropriate to cause such Project Participant to comply with its undertaking as set forth in the Gas Supply Contract, including the remedies of mandamus and specific performance.

A failure by PEAK to comply with the Undertaking will not constitute an event of default under the Indenture or the Bonds and Beneficial Owners of the Bonds shall only be entitled to the remedies for any such failure described in the Undertaking. A failure by PEAK to comply with the Undertaking must be reported in accordance with Rule 15c2-12 and must be considered by any broker, dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their market price.

The Undertaking and commitments of PEAK described under this heading and in APPENDIX D hereto to furnish the above-described documents and information are agreements and commitments solely of PEAK, and the Underwriter has no responsibility to ensure that PEAK complies with any such Undertaking or commitment. In addition, the Underwriter makes no representation that any such documents or information will be furnished, or that any such documents or information so furnished will be accurate or complete, or sufficient for the purposes for which they may be used.

Patriots Energy Group’s Continuing Disclosure Obligations

On more than one occasion in the past five years, PEG failed to timely file its audited financial statements and operating data as required by its existing undertakings. Corrective filings have since been made on EMMA.

Citizens’ Continuing Disclosure Obligations

On more than one occasion in the past five years, Citizens’ has not fully complied with provisions of its existing continuing disclosure undertaking agreements. Corrective filings have since been made on EMMA.

LITIGATION

There are no proceedings or transactions relating to the issuance, sale or delivery of the Bonds which could adversely affect the Gas Project. In addition, there is no litigation pending or, to the knowledge of PEAK, threatened against or affecting PEAK or in any way questioning or in any manner

affecting the validity or enforceability of the Bonds, the Gas Supply Contracts, the Gas Purchase Agreement, the PEAK Commodity Swap, the Commodity Swap Reserve Accounts, the Custodial Agreement, the Indenture, the insurance policies or the pledge of the Trust Estate under the Indenture.

Each of the Project Participants reports that there is no litigation pending or, to its knowledge, threatened against it questioning or in any manner affecting the validity or enforceability of the Gas Supply Contract between it and PEAK.

UNDERWRITING

Morgan Stanley & Co. LLC (the “Underwriter”) has agreed, subject to certain conditions, to purchase the Bonds from PEAK at an aggregate purchase price of $______(representing the principal amount of the Bonds, [plus net original issue premium of $______,] less an underwriter’s discount of $______). The obligation of the Underwriter to purchase the Bonds is subject to certain terms and conditions set forth in the purchase contract entered into between the Underwriter and PEAK relating to the Bonds. The Underwriter is obligated to purchase all the Bonds if any are purchased. The Bonds may be offered and sold to certain dealers and others at prices lower than the initial offering prices, and such initial offering prices may be changed from time to time by the Underwriter.

Morgan Stanley & Co. LLC, an underwriter of the Bonds, has entered into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Bonds.

In the ordinary course of its various business activities, the Underwriter and its affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and may actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for its own accounts and for the accounts of customers. Such investment and trading activities may involve or relate to assets, securities and/or instruments of PEAK (whether directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with PEAK. The Underwriter and its affiliates also may communicate independent investment recommendations, market advice or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and at any time may hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

In the ordinary course of business the Underwriter and its affiliates have engaged and may engage in the future in transactions with PEAK and its affiliates, including the provision of certain commercial and investment banking services, financial advisory services and hedging and other services to PEAK and its affiliates, for which it may have received and may continue to receive customary fees and commissions.

The Underwriter is not acting as financial advisor to PEAK in connection with the offer and sale of the Bonds.

CERTAIN RELATIONSHIPS

MSCG, the Gas Supplier and counterparty under the Gas Supplier Commodity Swap, is a wholly- owned subsidiary of Morgan Stanley. The payment obligations of MSCG under the Gas Purchase Agreement and the Gas Supplier Commodity Swap are unconditionally guaranteed by Morgan Stanley

under the Morgan Stanley Guaranties. The underwriter of the Bonds, MS&Co., is also a wholly-owned subsidiary of Morgan Stanley. Neither MSCG, MS&Co. nor Morgan Stanley has guaranteed or is responsible for the payment of the Bonds. The obligations of MSCG, MS&Co. and, by virtue of the Morgan Stanley Guaranties, Morgan Stanley, are limited to those set forth in the Gas Purchase Agreement and the Gas Supplier Commodity Swap. Neither MS&Co. nor MSCG nor Morgan Stanley takes any responsibility for the information set forth in this Official Statement other than the information set forth under the captions “THE GAS PROJECT—Morgan Stanley Guaranties” and “MSCG, MS&CO. AND MORGAN STANLEY.”

BP Energy Company is the Commodity Swap Counterparty to PEAK. BP Energy Company does not take any responsibility for the information set forth in the Official Statement other than the information set forth under the caption “THE COMMODITY SWAP COUNTERPARTY.”

RATINGS

Moody’s has assigned, as of the date of this Official Statement, a municipal bond rating of “A3” to the Bonds.

PEAK has furnished to Moody’s with respect to PEAK and the Bonds certain information, including information not included in this Official Statement. Generally, rating agencies base their ratings on that information and on independent investigations, studies and assumptions made by each rating agency. A securities rating is not a recommendation to buy, sell or hold securities. There is no assurance that a rating, once obtained, will continue for any given period of time or that it will not be revised downward or withdrawn entirely if, in the opinion of the rating agency, circumstances so warrant. Any such downward revision or withdrawal could have an adverse effect on the marketability or market price of the Bonds. PEAK has not undertaken any responsibility after issuance of the Bonds to assure the maintenance of the ratings applicable thereto or to oppose any revision or withdrawal of such ratings.

FINANCIAL ADVISOR

Municipal Capital Markets Group, Inc. has served PEAK in the capacity of financial advisor relative to the Bonds and as a qualified independent representative relative to the PEAK Commodity Swap.

TAX MATTERS

In the opinion of Orrick, Herrington & Sutcliffe LLP (“Bond Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Code Bond Counsel is of the further opinion that interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum tax. In Bond Counsel’s further opinion, under the existing laws of the Commonwealth of Kentucky, interest on the Bonds is excluded from the gross income of the recipients thereof for Kentucky income tax purposes and such Bonds are exempt from ad valorem taxes by the Commonwealth of Kentucky and all political subdivisions thereof. A complete copy of the proposed form of Opinion of Bond Counsel is set forth in APPENDIX E hereto.

Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross

income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. PEAK has made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the Bonds will not be included in federal gross income.

Inaccuracy of these representations or failure to comply with these covenants may result in interest on the Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. The Opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Bonds may adversely affect the value of, or the tax status of interest on, the Bonds. Accordingly, the Opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters.

Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from Commonwealth of Kentucky personal income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences.

Current and future legislative proposals, if enacted into law, clarification of the Code, or court decisions may cause interest on the Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, or clarification of the Code or court decisions, may also affect, perhaps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.

The Opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of PEAK, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. PEAK has covenanted, however, to comply with the requirements of the Code.

Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend PEAK or the Beneficial Owners regarding the tax-exempt status of the Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the PEAK and its appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because

achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which PEAK legitimately disagrees may not be practicable. Any action of the IRS, including but not limited to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues, may affect the market price for, or the marketability of, the Bonds, and may cause PEAK or the Beneficial Owners to incur significant expense.

APPROVAL OF LEGAL MATTERS

Certain legal matters incident to the authorization, issuance and delivery of the Bonds by PEAK are subject to the approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to PEAK. The approving Opinion of Bond Counsel, in substantially the form set forth as Appendix E to this Official Statement, will be delivered with the Bonds. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement.

Certain legal matters will be passed upon for PEAK by G. Edward James, Esq., Carrollton, Kentucky, general counsel to PEAK. Certain legal matters will be passed upon for the Underwriter by Kutak Rock LLP. Certain legal matters will be passed upon for MSCG by its counsel Haynes and Boone, LLP.

PEAK will receive opinions from counsel to each of the Project Participants, on the date of original delivery of the Bonds, to the effect that the Gas Supply Contract between PEAK and each respective Project Participant has been duly authorized, executed and delivered by such Project Participant and constitutes its legal, valid and binding obligation enforceable in accordance with its terms. Gas Supply Contracts may be limited by or subject to applicable bankruptcy, insolvency, moratorium, reorganization, other laws affecting creditors’ rights generally and principles of equity.

DOCUMENT AVAILABILITY

Certain documents, including the Indenture, the Gas Purchase Agreement, the Gas Supply Contracts, the Gas Supplier Guarantee, the Policies, and the PEAK Commodity Swap, are available upon request by prospective Bond purchasers to the Underwriter prior to the sale of the Bonds at Morgan Stanley & Co. LLC, Hao Liu; telephone: (212) 761-7366. Thereafter, Owners may obtain copies upon request to the Trustee at The Bank of New York Mellon Trust Company, N.A., Attention: Corporate Trust, 505 North 20th Street, Suite 950, Birmingham, AL 35203 (telephone: (205) 214-0223), upon payment of reasonable copying, handling and mailing charges.

MISCELLANEOUS

Any statements in this Official Statement involving matters of opinion, estimates or forecasts, whether or not expressly so stated, are intended as such and not as representations of fact. The Appendices attached hereto are an integral part of this Official Statement and must be read in conjunction with the foregoing material. This Official Statement is not to be construed as a contract or agreement between PEAK and the purchasers or owners of the Bonds.

The delivery of this Official Statement has been duly authorized by the Board of Directors of PEAK.

PUBLIC ENERGY AUTHORITY OF KENTUCKY

By: Gerald L. Ballinger, President

[Rest of page intentionally left blank]

APPENDIX A

CERTAIN INFORMATION REGARDING THE MAJOR PROJECT PARTICIPANTS

This APPENDIX A contains certain information regarding (i) the Project Participants that will enter into Gas Supply Contracts to purchase at least 10% of the Gas Requirement and (ii) the Members of PEAK. The information contained in this APPENDIX A has been provided by the respective Project Participants and other sources believed to be reliable, but no representation is made by PEAK as to the accuracy of any such information.

CARROLLTON UTILITIES (KENTUCKY)

GENERAL

Carrollton Utilities (“CU”) is the operating entity for utility services within the City of Carrollton, Kentucky, and surrounding areas. Carrollton is located in north central Kentucky along the Ohio River, approximately 50 miles northeast of Louisville, Kentucky and 60 miles southwest of Cincinnati, Ohio. CU provides natural gas, water and wastewater services. CU operates under the supervision and control of a four-member Utility Commission, which is appointed at the recommendation of the Mayor and approval of the Carrollton City Council. The General Manager is responsible for day-to-day operations.

CU has operated its natural gas distribution system since 1955. The gas system includes approximately 167 miles of distribution system piping consisting of cathodically protected steel and polyethylene piping in sizes up to 10 inch diameter. Gas supply for CU is delivered under interstate pipeline transportation contracts with Texas Gas Transmission Corporation at two town border stations.

CU provides natural gas service to residential commercial, and industrial customers located in its service territory under rate schedules (tariffs) of general application. The rates charged by CU are not subject to review by a federal or state agency.

CUSTOMERS

The following chart depicts the CU customer count by calendar year ending each June 30.

Calendar Year Residential Commercial Industrial 2014 1,821 421 27 2015 1,872 436 28 2016 1,899 446 28

A-1

GAS SALES

The following chart shows combined Mcf sales of CU for fiscal year ending each June 30.

Fiscal Year Residential Commercial Industrial 2014 144,915 106,496 10,133,671 2015 141,996 107,535 9,804,792 2016 112,438 89,123 9,630,895

FINANCIAL INFORMATION

The following table sets forth selected consolidated financial information of CU Gas Operations for the fiscal year ending each June 30.

2015 2016 20171 Operating Revenues $42,112,944 $28,848,957 $37,342,620 Operating Expenses Costs of Goods Sold 39,622,113 26,508,004 34,944,911 Operation & Maintenance 450,921 499,720 493,062 General & Administrative 910,114 977,754 1,011,670 Non-Operating Expenses 571,228 $598,344 $61,2243 Total Operating Expenses $41,554,376 $28,583,822 $37,061,886 Changes in Net Position 558,568 265,135 280,734 Net Assets – Beginning of Year 18,167,592 18,726,159 19,034,273 Restatement of Beginning Net Position Due to GASB 68 (851,482) - - Net Assets – End of Year $18,726,159 $19,034,274 $19,315,007

1 Unaudited.

A-2

HENDERSON, KENTUCKY

GENERAL

Henderson is located in the western portion of Kentucky, across the Ohio River from Evansville, Indiana. Henderson was founded in 1797 and incorporated as a city in 1867. Henderson has owned and operated a natural gas system since 1864. Henderson Municipal Gas (“HMG”) is the operating entity for natural gas utility service within the City of Henderson, and surrounding areas. HMG is one of eight departments within the city and the General Manager is responsible for the day-to-day operations of the gas utility.

The gas system includes approximately 250 miles of distribution system piping consisting of catholically protected steel and polyethylene piping ranging from 2 to 10 inches. Gas supply for HMG is delivered under interstate pipeline transportation contracts with Texas Gas Transmission Corporation at two town border stations.

HMG serves residential commercial, and industrial customers located in its service territory under rate schedules (tariffs) of general application. The rates charged by HMG are not subject to review by a federal or state agency.

CUSTOMERS

The following chart depicts the HMG customer count by calendar year.

Calendar Year Residential Commercial Industrial 2014 8,246 1,071 48 2015 8,244 1,071 49 2016 8,200 1,110 49

GAS SALES

The following chart shows combined Mcf sales of HMG by calendar year.

Calendar Year Retail Wholesale Transportation 2014 3,394,850 0 0 2015 3,171,971 0 0 2016 3,093,701 0 0

A-3

FINANCIAL INFORMATION

The following table sets forth selected HMG consolidated financial information for the fiscal year ending each June 30.

2015 2016 20171 Operating Revenues $17,832,083 $13,178,911 $15,563,582 Operating Expenses Costs of Goods Sold 14,152,067 10,142,528 12,020,000 Operating Expenses 1,532,125 1,576,564 1,607,617 Other Expenses 212,686 224,257 220,303 Non-Operating Revenue (Expense) 1,362,814 1,328,309 1,380,458 Total Expenses $17,259,692 $13,271,658 $15,228,378 Change in Net Position 572,391 (92,747) 335,204 Net Assets – Beginning of Year 7,008,603 7,580,994 7,488,247 Net Assets – End of Year $7,580,994 $7,488,247 $7,823,451

1 Unaudited.

A-4

PATRIOTS ENERGY GROUP

GENERAL

Patriots Energy Group (“PEG”) is a joint action agency under South Carolina law, organized as a public body and body corporate and politic in 2003 pursuant to the state’s Joint Agency Act (the “ACT”). A six-person Board of Directors governs PEG. The three Members of PEG are natural gas authorities located in the north central region of South Carolina: Chester County Natural Gas Authority, Lancaster County Natural Gas Authority and York County Natural Gas Authority, collectively the Members or Authorities. PEG’s purpose is to manage natural gas supply and scheduling and own and operate certain transmission and distribution facilities for the for the benefit of its Members.

The General Assembly of South Carolina created each of the Authorities in 1954 to provide retail natural gas service to customers within their respective service territories. The Members are political subdivisions of the State of South Carolina and are considered special-purpose districts. The Members do not have the authority to levy taxes and all revenues are derived from the sale and distribution of natural gas and appliances.

PEG is currently participating in five long-term, non-recourse prepayment transactions in which PEG is obligated to pay for these supplies only if gas is delivered, with pricing based at a stated discount from spot-market pricing. In addition, PEG has also acquired a portfolio of producing natural gas reserves through its involvement with Public Gas Partners, Inc.

CUSTOMERS

Each of the Members have experienced significant residential customer growth since the mid- 1980’s. The members are located in South Carolina just south of the growing metropolitan area of Charlotte, North Carolina.

The following chart depicts the combined Member customer count by fiscal year ending each June 30.

Fiscal Year Chester County NGA Lancaster County NGA York County NGA 2014 7,470 23,895 58,694 2015 7,494 24,014 60,715 2016 7,548 24,232 62,512

GAS SALES

The following chart shows combined Dth retail sales of each Member for each December 31.

Fiscal Year Chester County NGA Lancaster County NGA York County NGA 2014 3,581,108 1,978,149 7,793,266 2015 3,625,388 1,841,980 7,444,609 2016 3,681,043 1,930,242 7,210,869

A-5

Heating Degree Days (“HDDs”) occur when the minimum and maximum temperature average for the daily 24-hour period is less than 65 degrees. The average HDDs for the service territory of the Members is 3,162 per year.

FINANCIAL INFORMATION

The following table sets forth selected consolidated financial information for the fiscal years ending each June 30 for PEG and has been derived from consolidated audited financial statements.

2014 2015 2016 Operating Revenues $74,913,477 $70,006,641 $57,815,634 Operating Expenses Gas Operations 68,392,519 62,842,650 50,675,783 General & Administrative $2,667,315 $2,967,129 $3,186,723 Total Operating Expenses 71,059,834 65,809,779 53,862,506 Revenues in Excess of Operating Expenses 3,853,643 4,196,862 3,953,128 Non-operating Income (Expense) $9,477,548 $(4,213,315) $(2,146,592) Changes in Net Assets 13,331,191 (16,453) 1,806,536 Net Assets – Beginning of Year 7,552,308 20,883,499 20,867,046 Net Assets – End of Year $20,883,499 $20,867,046 $22,673,582

A-6

METROPOLITAN UTILITIES DISTRICT (OMAHA, NEBRASKA)

GENERAL

The Metropolitan Utilities District of Omaha, Nebraska (“MUD”) was created by the Nebraska State Legislature on July 17, 1913 as a public service corporation and political subdivision of the State of Nebraska. MUD is empowered to own, manage, and control the natural gas system serving the city of Omaha and the surrounding area, as well as the water system of the City of Omaha. All corporate powers of MUD are vested in a Board of Directors consisting of seven voting members. MUD is rated “Aa2”, “AA” and “AA+” by Moody’s, Standard & Poor’s, and Fitch respectively.

MUD is located in eastern Nebraska, encompassing the City of Omaha and surrounding areas. MUD’s service area is approximately 242 square miles with an estimated population of approximately 633,000, including the City of Omaha with an estimated population of 434,000. MUD serves this area with almost 2,762 miles of gas mains and 10 Town Border Stations. MUD has interstate pipeline capacity on Northern Natural Gas Company.

MUD is currently participating in three long-term, non-recourse prepayment transactions in which MUD is obligated to pay for these supplies only if gas is delivered, with pricing based at a stated discount from spot-market pricing.

CUSTOMERS

The following chart depicts the MUD customer count by fiscal year ending each December 31.

Fiscal Year Retail Electric Generation Transportation 2014 223,075 1 2 2015 224,945 3 2 2016 227,101 3 2

GAS SALES

The following chart shows combined Mcf sales of MUD by fiscal year ending each December 31.

Fiscal Year Retail Electric Generation Transportation 2014 33,389,930 702,986 309,170 2015 29,035,198 750,015 258,158 2016 27,440,242 895,846 214,842

A-7

FINANCIAL INFORMATION

The following table sets forth selected consolidated financial information of MUD Gas Operations for fiscal year ending December 31.

2014 2015 2016 Operating Revenues $274,907,991 $195,979,840 $176,613,598 Operating Expenses Cost of Natural Gas 175,462,030 102,977,022 88,543,519 Other Operating Expenses $70,571,414 $73,128,107 $74,729,471 Total Operating Expenses $246,033,444 $176,105,129 $163,272,990 Non-operating Income (Expense) $(218,857) $(1,331,137) $(253,567) Changes in Net Position 28,655,690 18,543,574 13,087,041 Net Assets – Beginning of Year 298,736,665 305,527,178 324,070,772 Restatement of Ending Net Assets Due to GASB 68 (21,865,177) - - Net Assets – End of Year $327,392,355 $324,070,752 $337,157,813

A-8

CITIZENS GAS

GENERAL

Citizens Gas (“Citizens”) is the trade name in which the Department of Public Utilities of the City of Indianapolis, Indiana (the “Department”), acting by and through is Board of Directors of Utilities functions as a successor trustee of a public charitable trust (the “Energy Trust”) in which capacity it owns a gas utility distribution system (as well as a thermal energy system) servicing the City of Indianapolis. The Department is the governmental entity that owns the Energy Trust assets. Each trust of the Department is not an entity, but rather defines the nature in which the assets are held by the Department and the obligation imposed upon the Department to manage and operate those assets in accordance with the trust purposes which include the obligations to operate the facilities in public trust for the benefit of the inhabitants of Marion County, free from the influences of partisan political control or private interests.

The gas utility system service territory is comprised of the City of Indianapolis and Marion County, Indiana, an area of approximately 400 square miles. The natural gas system includes approximately 245 miles of transmission lines that forms a loop within Marion County and interconnected to approximately 4,100 miles of distribution lines at 20 pressure reduction stations located throughout the county. Citizens provides natural gas service to residential, commercial industrial, and electric generation customers within its service territory.

CUSTOMERS

The following chart depicts the Citizens customer count by calendar year.

Fiscal Year Retail Electric Generation Transportation 2014 261,896 3 3,992 2015 262,771 3 4,179 2016 264,349 3 4,260 GAS SALES

The following chart shows combined MMBtu sales of Citizens by calendar year.

Fiscal Year Retail Electric Generation Transportation 2014 32,786,636 1,711,437 20,783,152 2015 31,081,724 3,365,100 22,778,258 2016 24,730,043 19,070,691 26,744,815

A-9

FINANCIAL INFORMATION

The following table sets forth selected consolidated financial information of Citizens Gas Operations by fiscal year ending each September 30.

2014 2015 2016 Operating Revenues $319,686,000 $294,577,000 $227,427,000 Operating Expenses Cost of Natural Gas 177,827,000 151,815,000 88,175,000 Other Operating Expenses $102,940,000 $105,241,000 $113,742,000 Total Operating Expenses 280,767,000 257,056,000 201,917,000 Operating Income (Loss) $38,919,000 $37,521,000 $25,510,000 Total Other Income (Expense) (737,000) (1,065,000) (531,000) Income (Loss) Before Interest Charges $38,182,000 $36,456,000 $24,979,000 Interest Charges 15,724,000 15,079,000 14,481,000 Income (Loss) From Continuing Operations $22,458,000 $21,377,000 $10,498,000

A-10

APPENDIX B

DEFINITIONS OF CERTAIN TERMS

The following is a summary of certain defined terms used within the Official Statement and its Appendices. This Summary does not purport to be complete or definitive and is qualified in its entirety by reference to the complete terms of the Indenture, the Gas Purchase Agreement, the Gas Supply Contracts, the Commodity Swaps and the Custodial Agreement.

“Account” or “Accounts” means, as the case may be, each or all of the Accounts established under the Indenture.

“Act” means the Natural Gas Acquisition Authority Act of the Commonwealth of Kentucky, Kentucky Revised Statutes §353.400 et seq., as amended and supplemented.

“Additional Termination Payment” means an amount equal to the net present value as of the Early Termination Date of a stream of Monthly payments for each Month that would have remained in the then-current Long Rate Period had such Early Termination Date not occurred, with each such Monthly payment equal to (i) the quantity of Gas that would have been required to deliver during such Month, multiplied by (ii) the difference, if positive, between (A) the then-current Price Reduction Amount, as determined by Morgan Stanley and (B) the Calculated PRA calculated on a Project Participant-by-Project Participant basis for the Remaining Period, as determined by Morgan Stanley. For purposes of the foregoing the net present value shall be calculated (y) assuming each such future Monthly payment would have been paid on the 25th day of the Month after the Month to which it relates and (z) using a discount rate equal to the applicable rate for such 25th day of the Month found on the LIBOR Zero Curve, determined as of such Early Termination Date. If any Monthly payment (whether used in the calculation of net present value in accordance with this paragraph or in the determination of Monthly payments to be made to Buyer in accordance with the Gas Purchase Agreement exceeds $0.20/MMBtu, such Monthly payment shall be deemed to equal $0.20/MMBtu for purposes of such calculation or determination, as applicable.

“Administrative Fee Fund” means the Administrative Fee Fund established under the Indenture.

“AGM” means Assured Guaranty Municipal Corp., a New York stock insurance company, or any successor thereto or assignee thereof, as issuer of the Policies.

“Assignment Payment” means any payment received from the Gas Supplier in connection with an assignment of the Gas Purchase Agreement to a replacement gas supplier.

“Assignment Payment Fund” means the Assignment Payment Fund established under the Indenture.

“Authorized Officer” means the Chair, Vice Chair, Secretary, Treasurer or any other officer or employee of PEAK designated by the Board of Directors of PEAK to perform the act or sign the document in question at the time designated to act on behalf of the Issuer by the most recent written certificate furnished to the Trustee containing the specimen signature of such Person.

“Billing Statement” means the statement delivered to PEAK by MSCG, or its designee, each Month during the Delivery Period (excluding the first Month of the Delivery Period) and the first Month following the end of the Delivery Period, indicating (i) the quantities of Gas delivered at the respective Delivery Points, (ii) the total amount due to PEAK, if any, under the Gas Purchase Agreement with

B-1

respect to the prior Month(s), (iii) any other amounts due to PEAK in connection with the Gas Purchase Agreement with respect to the prior Month(s), and (iv) the net amount due to PEAK or MSCG.

“Bond” or “Bonds” means any of the bonds authorized by the Indenture.

“Bond Counsel” means counsel of nationally recognized standing in matters pertaining to the tax- exempt status of interest on obligations issued by states and their political subdivisions, duly admitted to the practice of law before the highest court of any state of the United States, and selected by PEAK.

“Bondholder” or “Holder of Bonds” or “Holder” or “Owner” means any Person who shall be the registered owner of any Bond or Bonds.

“Bond Payment Date” means each date on which (i) interest on the Bonds is due and payable or (ii) principal of the Bonds is payable at maturity or pursuant to Sinking Fund Installments.

“Bond Purchase Fund” means the Bond Purchase Fund established under the Indenture.

“Bond Remarketing Determination Month” means, with respect to any Long Rate Period, the second to last month of such Long Rate Period. For example, if a Long Rate Period will end on the last day of October, the Bond Remarketing Determination Month will be September.

“Bond Year” means for the Bonds, the twelve-month period beginning on April 1 in any year and ending on March 31 of the following year; provided that the first Bond Year for the Bonds shall commence on their date of issuance, February [___], 2018, and end on March 31, 2019.

“BPNA” means BP Corporation North America Inc. or Commodity Swap Counterparty Guarantor.

“Btu” means the International Btu, which is also called the Btu (IT).

“Business Day” means (i) with respect to payments and general notices required to be given under the Gas Purchase Agreement, any day other than (a) a Saturday or Sunday, (b) a Federal Reserve Bank holiday, (c) any day on which commercial banks located in either New York, New York or the Commonwealth of Kentucky are required or authorized by Law or other governmental action to close, or (d) any other day excluded as a business day pursuant to the Indenture, and (ii) solely with respect to Gas deliveries and notices with respect thereto, any day.

“Buyer” means the Public Energy Authority of Kentucky.

“Calculated PRA” means the amount determined by MSCG and PEAK, in the same manner as the Price Reduction Amount was determined based on the Printout but taking into account the Remaining Period.

“Code” means the Internal Revenue Code of 1986, as amended, and the U.S. Treasury Regulations thereunder.

“Commodity Swap Counterparty” means (i) as of the date of this Indenture, BP Energy Company and (ii) thereafter, either:

(A) BP Energy Company;

B-2

(B) any Person that at the time of entering into a replacement Commodity Swap has (or has a credit support provider that has) credit ratings equal to at least the lower of (I) the credit ratings of the Gas Supplier, or if the Gas Supplier is not rated, the guarantor of the Gas Supplier or (II) the ratings then assigned by each Rating Agency to the Bonds; or

(C) any Person that PEAK determines has provided such collateral and security arrangements as PEAK shall determine to be necessary, which may consist of custodial arrangements for payments consistent with the custodial payment arrangements entered into by BP Energy Company on or about the date of the Indenture.

“Commodity Swap Payments” means, as of each scheduled payment date specified in the Commodity Swap, the amount, if any, payable to the Commodity Swap Counterparty by PEAK pursuant to the Commodity Swap.

“Commodity Swap Receipts” means, as of each scheduled payment date specified in the Commodity Swap, the amount, if any, received by PEAK from the Commodity Swap Counterparty or from the Custodian under the Custodial Agreement.

“Commodity Swap Reserve Account” means, for each Project Participant, the Commodity Swap Reserve Account in the Revenue Fund established under the Indenture.

“Commodity Swap Reserve Policy” means, individually or collectively, as applicable, the financial guaranty insurance policies issued by AGM to the Trustee with respect to each Project Participant insuring certain payments by such Project Participant under its Gas Supply Contract and deposited in the respective Revenue Account of the Revenue Fund pursuant to the Indenture.

“Commodity Swap Reserve Policy Coverage” has the meaning given to such term in each Commodity Swap Reserve Policy, which shall be equal to the Commodity Swap Reserve Requirement.

“Commodity Swap Reserve Requirement” means, for each Project Participant, the amount listed in the Indenture, as that amount may be adjusted in accordance with the Indenture, which may be in the form of cash or a surety bond, or a combination thereof.

“Computation Date” means for the Bonds, the last day of the fifth Bond Year, the last day of every fifth anniversary thereof, and the date on which all principal of and interest on the Bonds are finally paid.

“Contract Charges” means fees, payments or other expenses incurred by PEAK pursuant to the Gas Purchase Agreement (excluding the Prepayment (as defined in the Indenture) or the Gas Supply Contracts, and reimbursement of PEAK to the extent PEAK has expended its own funds for the acquisition of Replacement Gas (as defined in the Gas Purchase Agreement).

“Cost of Acquisition” means all costs of planning, financing, acquiring, transporting, storing and implementing the Gas Project, which shall include, but not be limited to, funds for:

(i) the payment of costs and expenses incurred for or in connection with the acquisition of Gas under the Gas Purchase Agreement, including the payment of the prepayment thereunder;

(ii) the deposit or deposits required to be made under the Indenture from the proceeds of Bonds into any Fund or Account established pursuant to the Indenture or any

B-3

Supplemental Indenture to meet the Debt Service Reserve Requirement for Bonds or the Commodity Swap Reserve Requirement;

(iii) all federal, state and local taxes and payments in lieu of taxes required to be paid other than on an annual basis in connection with the purchase of the Gas Project;

(iv) the costs and expenses incurred in the issuance and sale of bonds, notes or other evidences of indebtedness from time to time issued, the proceeds of which have been or will be required to be applied to one or more purposes for which Bonds could be issued, including, without limitation, legal, accounting, engineering, consulting, financing, technical, fiscal agent and underwriting costs, fees and expenses, bond discount, rating agency fees, premiums and fees in connection with the Policies or any other security facility, and all other costs and expenses incurred in connection with the authorization, sale and issuance of the Bonds and preparation of the Indenture;

(v) all other costs incurred in connection with and properly chargeable to, the acquisition of the Gas Project; and

(vi) the initial allowance for working capital requirements of the Issuer in such amounts as shall be deemed reasonably necessary by PEAK.

“CSRA Shortfall” has that meaning set forth in “Establishment of Funds and Accounts and Application Thereof—Revenue Fund – Project Participant Commodity Swap Reserve Accounts” in APPENDIX C.

“Custodial Agreement” means the Custodial Agreement among the Commodity Swap Counterparty, the Gas Supplier, the Trustee and the Custodian.

“Custodian” means the Bank of New York Mellon Trust Company, N.A. in its capacity as Custodian under the Custodial Agreement.

“Daily Contract Quantity” means, with respect to each Gas Day during the Delivery Period, the total of the daily quantities of Gas (in MMBtu) shown in the Gas Purchase Agreement for all Delivery Points for the Month in which such Gas Day occurs, as may be revised from time to time pursuant to the Gas Purchase Agreement; provided, that where a provision of the Gas Purchase Agreement expressly refers to the Daily Contract Quantity at a Delivery Point, for any Delivery Point or with respect to an applicable Delivery Point, the Daily Contract Quantity shall be that quantity of Gas (in MMBtu) shown in the Gas Purchase Agreement for the Delivery Point in question.

“Debt Service Account” means the Debt Service Account in the Debt Service Fund established under the Indenture.

“Debt Service Fund” means the Debt Service Fund established under the Indenture.

“Debt Service Fund Agreement” means any debt service fund agreement among the Trustee, PEAK and a provider, relating to amounts deposited in the Debt Service Account of the Debt Service Fund, provided that such amounts are invested in Qualified Investments.

“Debt Service Fund Agreement Guaranty” means any unconditional guaranty, in favor of PEAK and the Trustee, guarantying the obligations of the provider under any Debt Service Fund Agreement.

B-4

“Debt Service Fund Agreement Provider” means the provider of any Debt Service Fund Agreement by and between PEAK, the Trustee and any such provider.

“Debt Service Reserve Account” means, for each Project Participant, the Debt Service Reserve Account in the Revenue Fund established under the Indenture.

“Debt Service Reserve Policy” means, individually or collectively, as applicable, the financial guaranty insurance policies issued by AGM to the Trustee with respect to each Project Participant insuring certain payments by such Project Participant under its Gas Supply Contract and deposited in the respective Revenue Account pursuant to the Indenture.

“Debt Service Reserve Requirement” means, for each Project Participant, the amount listed in the Indenture, as that amount may be adjusted in accordance with the Indenture, which may be in the form of cash or a surety bond, or a combination thereof.

“Defeasance Securities” means, unless otherwise provided with respect to the Bonds of a Series in a Supplemental Indenture authorizing such Bonds, (a) Government Obligations and (b) to the extent that such deposits or certificates of deposit are Qualified Investments, deposits in interest-bearing time deposits or certificates of deposit which are not subject to redemption or repayment prior to their maturity or due date other than at the option of the depositor or holder thereof or as to which an irrevocable notice of redemption or repayment, or irrevocable instructions have been given to call for redemption or repayment, of such time deposits or certificates of deposit on a specified redemption or repayment date has been given and such time deposits or certificates of deposit are not otherwise subject to redemption or repayment prior to such specified date other than at the option of the depositor or holder thereof, and which are fully secured by Government Obligations.

“Delivery Period” means the period that begins at the beginning of the Gas Day that commences on April 1, 20181, and continue in effect until the end of the Gas Day that commences on the last day of February, 2048 or earlier upon the Early Termination Date.

“Delivery Point” means the point at which all Gas delivered under the Gas Purchase Agreement shall be delivered and received, as specified in or agreed upon pursuant to the Gas Purchase Agreement.

“Delivery Point Premium” or “DPP” means, with respect to each Delivery Point, (a) for the Initial DPP Period, the amount per MMBtu of Gas set forth in the Gas Purchase Agreement and (b) thereafter such amount as is established for a successive DPP Period pursuant to the Gas Purchase Agreement (or is established with respect to a new Delivery Point pursuant to the Gas Purchase Agreement) and set forth in the Gas Purchase Agreement, including any amendment thereto.

“Depository” means any bank, trust company, national banking association, savings and loan association, savings bank or other banking association selected by PEAK as a depository of moneys and securities held under the provisions of the Indenture, and may include the Trustee.

“Determination Date” means the last Business Day of the month that is two months prior to any Mandatory Purchase Date.

“Disposition Proceeds” means an amount equal to the aggregate net proceeds arising from the sale of Gas acquired under this Gas Purchase Agreement for other than a Qualifying Use.

1 Alternatively, PEAK and the Project Participants may elect to begin gas deliveries on October 1, 2018, in which case the total amount of gas that PEAK would acquire from MSCG pursuant to the Gas Purchase Agreement would be reduced by approximately 1.1%.

B-5

“DPP Period” means the Initial DPP Period and each successive period beginning on the day after the then-current DPP Period and ending on the last day of the next succeeding Bond Remarketing Determination Month.

“DSRF Shortfall” shall have that meaning set forth in “Establishment of Funds and Accounts and Application Thereof— Revenue Fund – Project Participant Debt Service Reserve Accounts” in APPENDIX C.

“DTC” means The Depository Trust Company, New York, New York, and its successors and assigns.

“Early Termination Date” means a date designated or occurring automatically pursuant to the Gas Purchase Agreement on which the Delivery Period will end in full or in part and Buyer’s and the Gas Supplier’s respective obligations to receive and deliver Gas under the Gas Purchase Agreement will terminate in full or in part.

“Early Termination Payment Date” means the last day of the first Month that commences after an Early Termination Date, or if such last day is not a Business Day, the previous Business Day.

“Effective Date” means February [__], 2018.

“Event of Default” means any one or more of the following:

(a) default shall be made in the due and punctual payment of the principal or Redemption Price of any Bond when and as the same shall become due and payable, whether at maturity or by call for redemption, or otherwise;

(b) default shall be made in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable;

(c) a determination by the Trustee on the last Business Day of any Month, after the transfer of amounts pursuant to the Indenture and any transfer of any amount pursuant to the Indenture, that the sum of the amounts on deposit in the Debt Service Account and in the Debt Service Reserve Account (including for purposes of this computation, interest accrued on such deposits and investment income that remains on deposit in such Accounts) is not at least equal to the cumulative Scheduled Debt Service Deposits for such Month as specified in the Indenture;

(d) default shall be made by PEAK in the performance or observance of any other of the covenants, agreements or conditions on its part contained in the Indenture or in the Bonds, and such default shall continue for a period of 60 days after written notice thereof specifying such default and requiring that it shall have been remedied and stating that such notice is a “Notice of Default” under the Indenture is given to PEAK by the Trustee or to PEAK and to the Trustee by the Holders of not less than 25% in principal amount of the Bonds Outstanding;

(e) default shall be made in the due and punctual payment of any Commodity Swap Payments when and as the same shall become due and payable;

(f) PEAK shall commence a voluntary case or similar proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect (provided, however, that such event shall not constitute an Event of Default under the Indenture unless in addition, (i) PEAK is unable to meet its debts with respect to the Gas Project as such debts mature

B-6

or (ii) any plan of adjustment or other action in such proceeding would affect in any way the Revenues or the Gas Project), or shall authorize, apply for or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Gas Project, or any part thereof, and/or the rents, fees, charges or other revenues therefrom, or shall make any general assignment for the benefit of creditors, or shall make a written declaration or admission to the effect that it is unable to meet its debts with respect to the Gas Project as such debts mature, or shall authorize or take any action in furtherance of any of the foregoing;

(g) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of PEAK in an involuntary case or similar proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (provided, however, that such event shall not constitute an Event of Default under the Indenture unless in addition, (i) PEAK is unable to meet its debts with respect to the Gas Project as such debts mature or (ii) any plan of adjustment or other action in such proceeding would affect in any way the Revenues or the Gas Project), or a decree or order appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Gas Project, or any part thereof, and/or the rents, fees, charges or other revenues therefor, or a decree or order for the dissolution, liquidation or winding up of PEAK and its affairs or a decree or order finding or determining that PEAK is unable to meet its debts with respect to the Gas Project as such debts mature, and any such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; and

(h) there shall occur any other Event of Default specified in a Supplemental Indenture.

“Failed Bond Remarketing” means, as of the last Business Day of the Month that is two Months prior to the Mandatory Purchase Date, neither (a) nor (b) is true: (a) both (i) amounts on deposit in the Remarketing Proceeds Account of the Bond Purchase Fund, together with amounts that the Gas Supplier has elected, in its sole discretion, to deposit in the Gas Supplier Purchase Account of the Bond Purchase Fund on or before the Mandatory Purchase Date, are in the aggregate sufficient to pay the Purchase Price of the Bonds to be tendered on the Mandatory Purchase Date in accordance with Section 4.13(d)(iii), and (ii) a new Long Rate Period (and corresponding new Long Rate) that will begin on the same day as any Mandatory Purchase Date has been established pursuant to Section 2.03(b) and Section 2.03(c) or (b) the Gas Supplier is obligated to pay, on or before the Mandatory Purchase Date, an Assignment Payment to the Assignment Payment Fund that is sufficient to redeem all Bonds that will be Outstanding Bonds on the Mandatory Purchase Date (excluding any Bonds that are maturing on such date).

“Fiduciary” or “Fiduciaries” means the Trustee, the Paying Agents, or any or all of them, as may be appropriate.

“Final Maturity Date” means April 1, 2048.

“Financial Guaranty Agreement” means the Financial Guaranty Agreement dated as of the date of issuance of the Bonds between the Issuer and AGM and relating to the Policies.

“Financing Documents” means the Bonds, the Indenture, the Gas Purchase Agreement, the PEAK Commodity Swap, the Policies, any Debt Service Fund Agreements, the Gas Supply Contracts, the Financial Guaranty Agreement, any Remarketing Agreement and all other documents, agreements and instruments associated with any of the foregoing or the transactions thereunder.

B-7

“Force Majeure” means an event that is not within the reasonable control of MSCG or PEAK, as the case may be, or, in the case of third party obligations or facilities related to the performance of MSCG or PEAK under the Gas Purchase Agreement, the third party, claiming suspension, and which by the exercise of due diligence by MSCG or PEAK, as the case may be, or third party, such party is unable to prevent or overcome with respect to the delivery or receipt of Gas. “Force Majeure” shall include, but not be limited to, the following: (i) physical events such as acts of God, landslides, earthquakes, lightning, fires, storms or storm warnings, such as hurricanes, floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or equipment or lines of pipe; (ii) weather related events affecting a broad geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe; (iii) interruption and/or curtailment of firm transportation and/or storage by Transporters; (iv) declarations of force majeure by suppliers of Gas to MSCG; (v) acts of others such as strikes, lockouts or other industrial disturbances, riots, sabotage, insurrections, acts of terrorism or wars; and (vi) governmental actions such as necessity for compliance with any court order, law, statute, ordinance, regulation or policy having the effect of Law promulgated by a Government Agency having jurisdiction (excluding any actions taken by PEAK or any Project Participant unless such actions are taken in response to an event that would otherwise constitute an event of Force Majeure).

“Fund” or “Funds” means, as the case may be, each or all of the Funds established under the Indenture.

“Gas” means any mixture of hydrocarbons and noncombustible gases in a gaseous state consisting primarily of methane.

“Gas Day” means a period of twenty-four (24) consecutive hours, beginning and ending at 9:00 a.m. CPT. If through standardization of business practices in the industry or for any other reason, a Transporter or the Federal Energy Regulatory Commission changes the definition of Gas Day, such change shall apply to the definition of Gas Day in the Gas Purchase Agreement with respect to such Transporter or generally, as the case may be.

“Gas Project” means the acquisition by PEAK of Gas supplies from MSCG pursuant to the Gas Purchase Agreement, the financing by PEAK of the cost of acquisition of such Gas supplies, and the execution and performance by PEAK of related Gas Supply Contracts, all to provide Gas supplies necessary to meet the contractual requirements of the Project Participants.

“Gas Project Account” means the Gas Project Account in the Project Fund established pursuant to the Indenture.

“Gas Purchase Agreement” means the Prepaid Gas Purchase and Sale Agreement dated [______], 2018, between PEAK and MSCG, as the same may be amended from time to time, relating to the Gas Project.

“Gas Supplier” means Morgan Stanley Capital Group Inc., a Delaware corporation.

“Gas Supplier Commodity Swap” means the fixed-to-floating commodity price swap agreement between MSCG and the Commodity Swap Counterparty.

“Gas Supplier Guarantee” means a guaranty in the form attached to the Gas Purchase Agreement issued by Morgan Stanley in favor of PEAK.

“Gas Supplier Purchase Account” means the Gas Supplier Purchase Account in the Bond Purchase Fund established under the Indenture.

B-8

“Gas Supply Contract” means individually, and “Gas Supply Contracts” means collectively, with respect to each of the Project Participants, the Gas Supply Contracts to be entered into between PEAK and each such Project Participant, as the same may be amended, modified or supplemented from time to time in accordance with the Gas Purchase Agreement.

“General Fund” means the General Fund established under the Indenture.

“Government Agency” means the United States of America, any state thereof, or any local jurisdiction, or any political subdivision of any of the foregoing including, but not limited to courts, administrative bodies, departments, commissions, boards, bureaus, agencies, municipalities or other instrumentalities.

“Government Obligations” means

(a) Direct obligations of (including obligations issued or held in book-entry form on the books of) the Department of Treasury of the United States of America, obligations unconditionally guaranteed as to principal and interest by the United States of America, and evidences of ownership interests in such direct or unconditionally guaranteed obligations;

(b) Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which: (i) are not callable at the option of the obligor prior to maturity or as to which irrevocable notice has been given by the obligor to call such bonds or obligations on the date specified in the notice; (ii) are rated in the highest Rating Category of S&P and Moody’s; and (iii) are fully secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or obligations described in clause (a) above, which fund may be applied only to the payment of interest when due, principal of and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable notice, as appropriate; and

(c) Any other bonds, notes or obligations of the United States of America or any agency or instrumentality thereof which, if deposited with the Trustee for the purpose of defeasing the Bonds, will result in a rating on the Bonds which are deemed to have been paid pursuant to the Indenture that is in the highest Rating Category of each Rating Agency that is then maintaining a rating on such Bonds.

“GSC Payment Default” means a Project Participant’s failure to pay PEAK timely as required under its Gas Supply Contract.

“GSC Mandatory Gas Remarketing Notice” means the notice of PEAK delivered to MSCG with respect to MSCG’s remarketing of any portion of the Daily Contract Quantity that is affected by any GSC Payment Default or GSC Reset Remarketing.

“GSC Reset Remarketing” means with respect to any Gas Supply Contract, that (a) the relevant Project Participant has delivered a GSC Reset Remarketing Notice, and (b) such notice has become effective.

“Indenture” means the Trust Indenture between PEAK and the Trustee dated as of February 1, 2018, as from time to time amended or supplemented by Supplemental Indentures in accordance with the terms thereof.

B-9

“Initial DPP Period” means the period of time from the beginning of the Delivery Period through and including February 29, 2024.

“Initial Mandatory Purchase Date” means April 1, 2024, which is the day following the last day of the initial Long Rate Period for the Bonds.

“Initial Reset Period” means the period from the date of issuance of the Bonds to March 31, 2024.

“Interest Payment Date” means (i) April 1 and October 1 of each year, commencing April 1, 2018, (ii) the Initial Mandatory Purchase Date, (iii) any other Mandatory Purchase Date and (iv) the Maturity Date of each Bond. If the Interest Payment Date is not a Business Day, interest shall be payable on the next Business Day, provided, however, that the amount paid shall be for the same number of days as if paid on the Interest Payment Date which is not a Business Day.

“Issue Date” means February [___], 2018, the date of initial issuance and delivery of the Bonds.

“Issuer” or “PEAK” means the Public Energy Authority of Kentucky, a Natural Gas Acquisition Authority formed and existing under the Act.

“IURC Event” means that, under the Gas Supply Contract between Citizens Gas and PEAK, either (a) Citizens Gas suspends performance of some or all of its obligations thereunder or (b) PEAK exercises a right to terminate such Gas Supply Contract, in each case as a result of a ruling by the Indiana Utility Regulatory Commission disallowing, in whole or in part, the pass-through of costs under such Gas Supply Contract.

“Law” means any statute, law, rule, regulation, order, or any judicial or administrative interpretation thereof having the effect of the foregoing imposed by a Government Agency whether in effect as of the Effective Date or at any time in the future.

“LIBOR Zero Curve” means the LIBOR zero curve over the Remaining Period, as determined from the prevailing USD LIBOR Interest Rate Swap Curve, with the addition of the spread used to calculate the Gas Supplier’s Discount Curve pursuant to each Project Participant’s Gas Supply Contract.

“Long Rate” means the interest rate for Bonds in a Long Rate Period established in accordance with the Indenture.

“Long Rate Period” means each period during which a particular Long Rate is in effect for the Bonds.

“Mandatory Purchase Date” means (i) with respect to the initial Long Rate Period for the Bonds, the Initial Mandatory Purchase Date, and (ii) with respect to any other Long Rate Period for the Bonds, the date so specified in the related Supplemental Indenture or notice of a new Long Rate Period provided by PEAK pursuant to the Indenture, as applicable, which date shall (A) not be later than the Final Maturity Date and (B) always be a Business Day, unless such date is the Final Maturity Date. If a date (other than the Final Maturity Date) that is not a Business Day is specified as a Mandatory Purchase Date in any Supplemental Indenture, then the Mandatory Purchase Date shall be deemed to be the Business Day following such specified date.

“Maturity Date” means each date upon which principal of Bonds is due, as set forth in the Indenture.

B-10

“MMBtu” means one million (1,000,000) Btu.

“MSCG” means Morgan Stanley Capital Group Inc.

“Month” means (i) with respect to the Gas Purchase Agreement, the period beginning on the first Gas Day of a calendar month and ending immediately prior to the commencement of the first Gas Day of the next calendar month and (ii) for all other purposes means a calendar month.

“Monthly Index” means the IFERC or NGI index specified in the Gas Purchase Agreement corresponding to the respective Delivery Point set forth in the Gas Purchase Agreement.

“Monthly Index Price” means the index price (in $/MMBtu) in the Monthly Index applicable to the appropriate Gas Day and Delivery Point as shown in the Gas Purchase Agreement, or such other Monthly Index Price established pursuant to the Gas Purchase Agreement.

“Morgan Stanley” means Morgan Stanley, a Delaware corporation.

“Morgan Stanley/PEAK Guaranty” means the guarantee by Morgan Stanley of the payment obligations of MSCG under the Gas Purchase Agreement.

“Morgan Stanley/BP Guaranty” means the guarantee by Morgan Stanley of the payment obligations of MSCG under the Gas Supplier Commodity Swap.

“Morgan Stanley Guaranty” means a guaranty in the form attached to the Gas Purchase Agreement issued by Morgan Stanley in favor of PEAK.

“MS&Co.” means Morgan Stanley & Co. LLC.

“Municipal Utility” means any Person that (i) is a “governmental person” as defined in U.S. Treas. Reg. §1.141-1(b), (ii) owns either or both a gas distribution utility or an electric distribution utility (or provides gas or electricity at wholesale to “governmental persons” that own such utilities) and (iii) agrees in writing (x) to use the Gas it acquires from the Gas Project (or to cause such Gas to be used) in a “qualifying use” as defined in U.S. Treas. Reg. §1.148-1(e)(2)(iii), (y) not to allocate directly or indirectly the Gas to the proceeds of any tax exempt financing and (z) to not use the Gas for any “private business use” within the meaning of Section 141 of the Code. A Person providing a Qualifying Use Certificate shall be deemed to have met the requirements under clause (iii). To the extent required or permitted by any change in the Code after the Effective Date, the parties to the Gas Purchase Agreement may from time to time revise the definition of “Municipal Utility” to conform to the applicable provisions of the Code.

“NGI” means, when used with respect to a Monthly Index, “Natural Gas Intelligence Daily Gas Price Index” and “Natural Gas Intelligence Bidweek Survey,” each a publication of Intelligence Press, Inc.

“Operating Expenses” means, (i) PEAK’s expenses for operation of the Gas Project, including all Contract Charges, Rebate Payments, costs, collateral deposits and other amounts (other than Commodity Swap Payments) necessary to maintain any Commodity Swap, and payments required under the Gas Purchase Agreement (which may, under certain circumstances, include imbalance charges and other miscellaneous payments) or required to be incurred under or in connection with the performance of PEAK’s obligations under the Gas Purchase Agreement or the Gas Supply Contracts; (ii) any other current expenses or obligations required to be paid by the Issuer under the provisions of the Indenture

B-11

(other than the principal of or interest on the Bonds) or by law or required to be incurred under or in connection with the performance of PEAK’s obligations under the Gas Purchase Agreement or the Gas Supply Contracts; (iii) Fiduciaries’ fees and expenses; and (iv) administrative costs of PEAK allocable to the Gas Project.

“Operating Expense Account” means the Operating Expense Account in the Operating Fund established under the Indenture.

“Operating Fund” means the Operating Fund established under the Indenture.

“Opinion of Bond Counsel” means a written opinion of Bond Counsel addressed to the Issuer and delivered to the Trustee.

“Opinion of Counsel” means an opinion signed by an attorney or firm of attorneys (who may be counsel to the Issuer) selected by the Issuer.

“Outstanding”, when used with reference to Bonds, means as of any date, Bonds theretofore or thereupon being authenticated and delivered under the Indenture except:

(i) Bonds cancelled (or portions thereof deemed to have been cancelled) by the Trustee at or prior to such date;

(ii) Bonds (or portions of Bonds) for the payment or redemption of which moneys, equal to the principal amount or Redemption Price thereof, as the case may be, with interest to the date of maturity or redemption date, shall be held in trust under the Indenture and set aside for such payment or redemption (whether at or prior to the maturity or redemption date), provided that if such Bonds (or portions of Bonds) are to be redeemed, notice of such redemption shall have been given or provision satisfactory to the Trustee shall have been made for the giving of such notice as provided in the Indenture;

(iii) Bonds in lieu of or in substitution for which other Bonds shall have been authenticated and delivered pursuant to the Indenture; and

(iv) Bonds (or portions thereof) deemed to have been paid as provided in the Indenture.

“Partial Termination” means any partial termination of the Gas Purchase Agreement pursuant to its terms.

“Partial Termination Payment” means the payment to be made by MSCG to PEAK upon a partial termination of the Gas Purchase Agreement, which amount shall be determined pursuant to the Gas Purchase Agreement.

“Paying Agent” means any bank or trust company organized under the laws of any state of the United States of America or any national banking association designated as paying agent for the Bonds of any Series, and its successor or successors hereafter appointed in the manner provided in the Indenture; provided, that initially the Paying Agent shall be the Trustee.

“Payment Shortfall Amount” means for any Month, the amount by which the total amount of any Billing Statement delivered to a Project Participant pursuant to such Project Participant’s Gas Supply Contract exceeds the amount paid by the Project Participant in accordance with such Project Participant’s

B-12

Gas Supply Contract, subject to adjustment on account of such Project Participant having cured such shortfall, in whole or in part, by the time specified in the Indenture; provided that in no event shall amounts payable by the Project Participant pursuant to such Project Participant’s Gas Supply Contract be included in the determination of Payment Shortfall Amount.

“PEAK Commodity Swap” means the floating-to-fixed commodity price swap agreement between PEAK and the Commodity Swap Counterparty.

“Person” means any individual, corporation, partnership, association, joint venture, trust, unincorporated organization or Government Agency.

“Policies” means, collectively, the ten Commodity Swap Reserve Policies and the ten Debt Service Reserve Policies.

“Price Reduction Amount” means, on any date prior to the end of the Initial Reset Period, [___]/MMBtu.

“Principal Installment” means, as of any date of calculation, (a) the principal amount of Bonds due on a certain future date for which no Sinking Fund Installments have been established, or (b) the unsatisfied balance (determined as provided in the Indenture) of any Sinking Fund Installments due on a certain future date in a principal amount equal to said unsatisfied balance of such Sinking Fund Installments.

“Proceeds Subject to Remediation” means Disposition Proceeds, together with any interest and other investment income on such proceeds that are not to be rebated to the United States of America.

“Project Fund” means the Project Fund established under the Indenture.

“Project Participant” means any Person, other than PEAK, who has executed and delivered (or who is a permitted transferee pursuant to) a Gas Supply Contract and is approved in writing by PEAK.

“Project Participant Revenue Account” means the Project Participant Revenue Account of the Revenue Fund established under the Indenture.

“Purchase Price” means an amount equal to the principal amount of such Bond Outstanding on a Mandatory Purchase Date.

“Qualified Investments” means any of the following investments, if and to the extent that the same are at the time legal investments of the Issuer’s funds and are rated (or whose financial obligations to the Issuer receive credit support from an entity rated) at least at the credit rating of the greater of (A) the then-current rating(s) on the Bonds and (B) the Gas Supplier, or if the Gas Supplier is not rated the guarantor of the Gas Supplier (except for (c), (e), (f) and (g) below), to the extent rated by each Rating Agency rating the Bonds:

(a) Direct obligations of the United States government or Ginnie Mae, FHA, U.S. Maritime Administration, Small Business Administration, General Services Administration, Fannie Mae, Freddie Mac, Federal Home Loan Bank, Resolution Funding Corporation (REFCORP), Federal Farm Bank Credits, Farm Credit System Financial Assistance Corporation (Farmer Mac) or Tennessee Valley Authority;

B-13

(b) Obligations guaranteed as to principal and interest by the United States government or Ginnie Mae, FHA, U.S. Maritime Administration, Small Business Administration, General Services Administration, Fannie Mae, Freddie Mac, Federal Home Loan Bank, Resolution Funding Corporation (REFCORP), Federal Farm Bank Credits, Farm Credit System Financial Assistance Corporation (Farmer Mac) or Tennessee Valley Authority;

(c) (i) Certificates of deposit and other evidences of deposit at state and federally chartered banks, savings and loan institutions or savings banks which are insured by the Federal Deposit Insurance Corporation or similar entity or which are deposited and collateralized, to the extent uninsured, as required by law, each having the highest short-term rating by each Rating Agency then rating the Bonds at the time of deposit;

(ii) Uncollateralized certificates of deposit and other evidences of deposit at state and federally chartered banks, savings and loan institutions or savings banks, each having the highest short-term rating by each Rating Agency then rating the Bonds at the time of deposit;

(d) Repurchase agreements entered into with the United States or its agencies or with any bank, broker-dealer or other such entity so long as the obligation of the obligated party is secured by a perfected pledge of obligations; provided, however, that repurchase agreements shall meet the conditions set forth in the preamble to this definition if they do so at the time of investment;

(e) Direct general obligations of a state of the United States, or a political subdivision or instrumentality thereof, having general taxing powers, and rated in one of the three highest categories by a Rating Agency;

(f) Obligations of any state of the United States or a political subdivision or instrumentality thereof, secured solely by revenues received by or on behalf of the state or political subdivision or instrumentality thereof irrevocably pledged to the payment of principal of and interest on such obligations and rated in one of the three highest categories by a Rating Agency;

(g) Money market funds registered under the federal Investment Company Act of 1940, whose shares are registered under the federal Securities Act of 1933, and having a rating in the highest Rating Category by each Rating Agency, including funds for which the Trustee or its affiliates provide investment or other management services, and pursuant to applicable law; or

(h) Any other investments permitted by applicable law for the investment of the funds of the Issuer.

“Qualifying Use” has the meaning ascribed in Treasury Regulation Section 1.148- 1(e)(2)(iii)(A)(2); provided that the use does not give rise to “private business use” within the meaning of Section 141 of the Code; and provided that a Qualifying Use Certificate is provided by any third-party buyer of remarketed Gas delivered under the Gas Purchase Agreement, or under any Gas Supply Contract, or Gas purchased with Proceeds Subject to Remediation upon the sale of such Gas for a Qualifying Use.

B-14

“Qualifying Use Certificate” means either one of the following: (i) a certificate in substantially the form attached to the Gas Purchase Agreement or (ii) a certificate in substantially the form attached to any Gas Supply Contract.

“Rate Stabilization Fund” means the Rate Stabilization Fund established under the Indenture.

“Rating Agency” means Moody’s or S&P, or any other rating agency so designated in a Supplemental Indenture.

“Rating Category” means one or more of the generic rating categories of a Rating Agency, without regard to any refinement or gradation of such rating category or categories by a numerical modifier or otherwise.

“Rating Confirmation” means, to the extent the Bonds are then rated by a Rating Agency, confirmation from each Rating Agency then rating the Bonds that the rating of the Bonds will not be reduced or withdrawn as a result of the proposed change to one or more of the Financing Documents.

“Re-Pricing Agreement” means the Re-Pricing Agreement, dated as of the date of the initial issuance of the Bonds, between the Gas Supplier and PEAK.

“Rebate Account” means the Rebate Account in the Operating Fund established under the Indenture.

“Rebate Analyst” shall mean the entity chosen by PEAK in accordance with the Tax Agreement to determine the amount of required deposits to the Rebate Account.

“Rebate Payments” means that portion of moneys or securities held in the Rebate Account or any other Fund or Account hereunder that are required to be paid to the United States Treasury Department under the requirements of Section 148(f) of the Internal Revenue Code.

“Redemption Account” means the Redemption Account in the Debt Service Fund established under the Indenture.

“Redemption Price” means, with respect to any Bond, the amount payable upon redemption thereof pursuant to such Bond or this Indenture.

“Regular Record Date” means the date which is the 15th day of the Month next preceding an Interest Payment Date.

“Remaining Period” means the period of time between the Early Termination Date and the end of the then-current Long Rate Period.

“Remarketing Agent” means the entity appointed as the remarketing agent for the Bonds pursuant to the related Remarketing Agreement and, if applicable, the related Supplemental Indenture.

“Remarketing Agreement” means the remarketing agreement, entered into between the Issuer and the Remarketing Agent for the Bonds.

“Remarketing Proceeds Account” means the Remarketing Proceeds Account in the Bond Purchase Fund established under the Indenture.

B-15

“Replacement Gas” means Gas purchased by PEAK or a Project Participant to replace any Shortfall Quantity (i) purchased for delivery in the Month such Shortfall Quantity arises or (ii) in the following Month for delivery by PEAK or a Project Participant to a Transporter to cover a shortfall imbalance caused by such Shortfall Quantity. For the avoidance of doubt, purchases include gas withdrawn from PEAK’s or a Project Participant’s storage account(s).

“Reset Period” means each Reset Period under the Re-Pricing Agreement.

“Revenue Account” means, with respect to each Project Participant, the Revenue Account in the Revenue Fund established under the Indenture.

“Revenue Fund” means the Revenue Fund established under the Indenture.

“Revenues” means (i) all revenues, income, rents, user fees or charges, and receipts derived or to be derived by the Issuer from or attributable or relating to the ownership and operation of the Gas Project, including all revenues attributable or relating to the Gas Project or to the payment of the costs thereof received or to be received by or on behalf of PEAK under the Gas Supply Contracts or otherwise payable to it for the sale and/or transportation of Gas or otherwise with respect to the Gas Project (including Commodity Swap Receipts and proceeds of remarketing of Gas), excluding the Bond Purchase Fund, the Administrative Fee Fund, the Rate Stabilization Fund, any Termination Payment, any Additional Termination Payment, amounts paid by a Project Participant under its Gas Supply Contract that are required to be deposited in the Rate Stabilization fund pursuant to the Indenture, and amounts paid by a Project Participant under its Gas Supply Contract which are payable to AGM pursuant to (A) its rights of subrogation and assignment under the Gas Supply Contract and the Financial Guaranty Agreement and (B) its rights of reimbursement under the Gas Supply Contract, and (ii) interest received or to be received on any moneys or securities (other than moneys or securities held in the Gas Project Account in the Project Fund, moneys or securities held in the Redemption Account in the Debt Service Fund, or moneys held in the Rebate Account of the Operating Fund required for Rebate Payments) held pursuant to the Indenture and paid or required to be paid into the Revenue Fund.

“Scheduled Debt Service Deposits” means the required monthly deposits to the Debt Service Account in the Debt Service Fund or the required cumulative deposits in respect of the principal and interest payments coming due on the Bonds, all as set forth in the Indenture.

“Seasonal Remarketing Notice” means the notice of the PEAK delivered to MSCG requesting MSCG to remarket on behalf of PEAK all or specified part of the Daily Contract Quantity for any Delivery Point for the ensuing summer season (the period from April through October) or winter season (the period from November through March) which satisfies the conditions of the Gas Purchase Agreement.

“Securities Depository” means DTC, or its nominee, and its successors and assigns.

“Shortfall Payment Deadline” means the 25th day of any month in which a Project Participant has failed to cure any Payment Shortfall.

“Shortfall Quantity” means that portion of the Daily Contract Quantity MSCG failed to deliver at any Delivery Point pursuant to the terms of the Gas Purchase Agreement which was not due to either (i) the actions or inactions of PEAK, or (ii) Force Majeure.

“Sinking Fund Installment” means with respect to each Series of Bonds, the amount so designated in the Indenture.

B-16

“Supplemental Indenture” means any indenture supplemental to or amendatory of the Indenture executed and delivered by PEAK and the Trustee in accordance with the Indenture.

“Tax Agreement” means the Tax Certificate of PEAK, dated as of the date of issuance and delivery of the Bonds.

“Termination Payment” means, with respect to any Project Participant and any related Early Termination Payment Date, the amount determined for the date upon which such Early Termination Payment Date occurs as provided in the Gas Purchase Agreement (without any set-off or netting of amounts then due from PEAK, except as specified in the next sentence). Such amount shall be netted against the Termination Payment Adjustment Amount, if any, specified for the date upon which such Early Termination Payment Date occurs. If the Early Termination Payment Date affects all Project Participants, the Termination Payment shall be the sum of all Termination Payments in respect of all Project Participants.

“Termination Payment Adjustment Amount” means, with respect to any Project Participant and any related Early Termination Payment Date, the amount specified for the date upon which such Early Termination Payment Date occurs as set forth in the then-current Termination Payment Adjustment Schedule. For the avoidance of doubt, the Termination Payment Adjustment Amount for the period commencing on the Effective Date is zero.

“Transporter(s)” means any Person providing transportation services to the Gas Supplier or PEAK with respect to Gas delivered by the Gas Supplier under the Gas Purchase Agreement.

“Trustee” means The Bank of New York Mellon Trust Company, N.A., and its successor or successors and any other corporation which may at any time be substituted in its place pursuant to the Indenture.

“Trust Estate” means (i) the proceeds of the sale of the Bonds, (ii) all right, title and interest of PEAK in, to and under the Commodity Swap, the Policies, the Gas Purchase Agreement, the Gas Supplier Guarantee and the Gas Supply Contracts, (iii) any Debt Service Fund Agreement and Debt Service Fund Agreement Guaranty, (iv) the Revenues, (v) any Termination Payment or the right to receive such Termination Payment, and (vi) all Funds established by the Indenture (other than the Bond Purchase Fund, the Rebate Account, the Administrative Fee Fund and the Rate Stabilization Fund) including the investment income, if any, thereof subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein; provided that “Trust Estate” shall not include the rights, title and interest of PEAK under the Gas Supply Contracts to which AGM is subrogated under the Gas Supply Contracts and the Financial Guaranty Agreement from time to time.

“Written Certificate of the Issuer,” “Written Direction of the Issuer,” “Written Notice of the Issuer,” “Written Request of the Issuer” and “Written Statement of the Issuer” means an instrument in writing signed on behalf of PEAK by an Authorized Officer thereof. Any such instrument and any supporting opinions or certificates may, but need not, be combined in a single instrument with any other instrument, opinion or certificate, and the two or more so combined shall be read and construed so as to form a single instrument.

B-17

[This page intentionally left blank]

APPENDIX C

SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

The following is a brief summary of certain provisions of the Indenture not otherwise described in the front portion of this Official Statement. The summary is subject to the terms of the complete document.

Definitions and Statutory Authority

Definitions. See Appendix B.

Authority for the Indenture. The Indenture is adopted pursuant to the provisions of the Act.

Authorization and Issuance of the Bonds

Conditions for Issuance of Bonds. All the Bonds shall be executed by the Public Energy Authority of Kentucky (referred to as “PEAK” or the “Issuer” in this Appendix C) and delivered to the Trustee and thereupon shall be authenticated by the Trustee, but only upon the receipt by the Trustee of:

(a) A copy, certified by an Authorized Officer, of a resolution and/or evidence of any other official actions taken by the Issuer which authorize the execution and delivery of the Bonds, together with a Written Request as to the authentication and delivery of the Bonds, signed by an Authorized Officer;

(b) An Opinion or Opinions of Counsel to the effect that (i) the Issuer has the right and power to authorize and enter into the Indenture, the Gas Supply Contracts, the Gas Purchase Agreement, the Commodity Swap and the Custodial Agreement and (ii) the Indenture, the Gas Supply Contracts, the Gas Purchase Agreement, the Commodity Swap and the Custodial Agreement have been duly and lawfully authorized, executed and delivered by the Issuer, are in full force and effect and (assuming due authorization, execution and delivery by and validity against the other parties thereto) are valid and binding upon the Issuer and enforceable in accordance with their respective terms, and no other authorization for the Indenture, the Gas Supply Contracts, the Gas Purchase Agreement, the Commodity Swap or the Custodial Agreement is required; provided, that such Opinion may take exception as to the effect of, or for restrictions or limitations imposed by or resulting from, bankruptcy, insolvency, debt adjustment, moratorium, reorganization or other similar laws affecting creditors’ rights generally and judicial discretion and the valid exercise of the sovereign police powers of the State and of the constitutional power of the United States of America and may state that no opinion is being rendered as to the availability of any particular remedy;

(d) An executed or certified copy of the initial Gas Supply Contracts and the Gas Purchase Agreement;

(e) An opinion of counsel to each initial Project Participant satisfactory to the Issuer and Bond Counsel;

(f) Executed copies of the Policies; and

C-1

(g) A letter from any Rating Agency rating the Bonds at an investment grade level.

Provisions Regarding the Commodity Swap. The following shall apply to the initial Commodity Swap and any replacement Commodity Swap:

(i) Commodity Swap Payments shall be made by the Trustee out of the Commodity Swap Account of the Operating Fund, including, if needed, amounts drawn on the Commodity Swap Reserve Policy or withdrawn from the Commodity Swap Reserve Account) (See “Establishment of Funds and Accounts and Application Thereof” in this Appendix C); and

(ii) Commodity Swap Receipts received by the Trustee shall be deposited directly into the Debt Service Account of the Debt Service Fund. See “Establishment of Funds and Accounts and Application Thereof—Payments into Certain Funds and Accounts” in this Appendix C.

The following shall apply with respect to restrictions on replacement and termination of the Commodity Swap:

(i) Except with respect to mandatory termination of the Commodity Swap and the Gas Purchase Agreement as described below, the Issuer agrees that it will not exercise any right to declare an early termination date under the Commodity Swap unless either (A) the Issuer has entered into a replacement Commodity Swap in accordance with clause (ii) below, and such replacement Commodity Swap will be effective as of such early termination date and cover price exposure from and after such early termination date, (B) the Issuer is required to do so pursuant to the terms of the Gas Purchase Agreement, or (C) the Issuer causes or permits the termination of the Gas Purchase Agreement on or prior to such early termination date.

(ii) The Issuer may replace the Commodity Swap (and any related guaranty of the Commodity Swap Counterparty’s obligations thereunder) with a similar agreement upon delivery to the Trustee, a reasonable time prior to the effective date of the proposed replacement Commodity Swap (subject, however, to applicable Gas Purchase Agreement), of either (i) confirmation from each Rating Agency then rating the Bonds that the rating of the Bonds will not be reduced or withdrawn as a result of such replacement or (ii) a Written Certificate of the Issuer to the effect that (A) the Commodity Swap Counterparty for the proposed replacement Commodity Swap meets the requirements set forth in the definition of “Commodity Swap Counterparty” and (B) the proposed replacement Commodity Swap is similar to the then-existing Commodity Swap that is to be replaced by the proposed replacement Commodity Swap; provided, however, that in no circumstance shall a replacement occur without the prior written consent of the Gas Supplier.

The following shall apply with respect to the mandatory termination of the Commodity Swap and the Gas Purchase Agreement:

(i) If the Commodity Swap is subject to termination by the Issuer pursuant to Part 1(h)(ii) (failure to pay after cure period) of the Schedule to the Commodity Swap, the Issuer shall (A) notify the Gas Supplier of such event pursuant to the Gas Purchase Agreement, and (B) in accordance with the Gas Purchase Agreement, use its good faith efforts to replace the Commodity Swap with an alternate Commodity Swap, subject to the conditions described above, during the period, if any, during which the Trustee, as custodian under the Custodial Agreement, is making payments, provided that such period shall end on the earlier of the date on which the Trustee, as

C-2

custodian, ceases making payments under the Custodial Agreement and the date of the sixth consecutive monthly payment.

(ii) If the Issuer is unable to enter into an alternate Commodity Swap as described above during the applicable replacement period, the Issuer shall designate an early termination date for the Commodity Swap with such early termination date occurring immediately at the end of such replacement period and designate an Early Termination Date for the Gas Purchase Agreement in accordance with the Gas Purchase Agreement that will occur on the date that the Commodity Swap terminates.

General Terms and Provisions of Bonds

Medium of Payment. The Bonds shall be payable, with respect to interest, principal and Redemption Price, in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts.

Form. The Bonds may be issued only in the form of fully registered Bonds without coupons, in Authorized Denominations.

Execution and Authentication. The Bonds shall be executed in the name of the Issuer by the manual or facsimile signature of its Chairperson or its President, and attested by the manual or facsimile signature of its Secretary or its Treasurer and its seal (or a facsimile thereof), if any, shall be impressed, imprinted, engraved or otherwise reproduced thereon and attested by the manual or facsimile signature of its Secretary or any Assistant Secretary of the Issuer, or in such other manner as may be required or permitted by law. In case any one or more of the officers who shall have signed or sealed any of the Bonds shall cease to be such officer before the Bonds so signed and sealed shall have been authenticated and delivered by the Trustee, such Bonds may, nevertheless, be authenticated and delivered as provided in the Indenture, and may be issued as if the Persons who signed or sealed such Bonds had not ceased to hold such offices. Any Bond of a Series may be signed and sealed on behalf of the Issuer by such Persons as at the time of the execution of such Bonds shall be duly authorized or hold the proper office in the Issuer, although at the date borne by the Bonds of such Series such Persons may not have been so authorized or have held such office.

The Bonds shall bear thereon a certificate of authentication executed manually by the Trustee. Only such Bonds as shall bear thereon such certificate of authentication shall be entitled to any right or benefit under this Indenture, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee. Such certificate of the Trustee upon any Bond executed on behalf of the Issuer shall be conclusive evidence that the Bond so authenticated has been duly authenticated and delivered under the Indenture and that the Holder thereof is entitled to the benefits of the Indenture.

Bonds Mutilated, Destroyed, Stolen or Lost. If any Bond becomes mutilated or is lost, stolen or destroyed, the Issuer may execute and the Trustee shall authenticate and deliver a new Bond of like date of issue, maturity date, principal amount and interest rate per annum as the Bond so mutilated, lost, stolen or destroyed, provided that (a) in the case of such mutilated Bond, such Bond is first surrendered to the Issuer, (b) in the case of any such lost, stolen or destroyed Bond, there is first furnished evidence of such loss, theft or destruction satisfactory to the Trustee together with indemnity satisfactory to the Trustee, (c) all other reasonable requirements of the Issuer and the Trustee are complied with, and (d) expenses in connection with such transaction are paid by the Holder. Any Bond surrendered for registration of transfer shall be cancelled. Any such new Bonds issued pursuant to the Indenture in substitution for Bonds alleged to be destroyed, stolen or lost shall constitute original additional contractual obligations on

C-3

the part of the Issuer, whether or not the Bonds so alleged to be destroyed, stolen or lost be at any time enforceable by anyone, and shall be equally secured by and entitled to equal and proportionate benefits with all other Bonds issued under the Indenture, in any moneys or securities held by the Issuer or any Fiduciary for the benefit of the Bondholders.

Book Entry System; Appointment of Securities Depository. All Bonds shall be registered in the name of Cede & Co., as nominee for DTC, as Securities Depository, and held in the custody or for the account of the Securities Depository. A single certificate shall be issued and delivered to the Securities Depository for each maturity of each Series of Bonds, and the Beneficial Owners shall not receive physical delivery of Bond certificates except as provided in the Indenture. For so long as the Securities Depository shall continue to serve as securities depository for the Bonds as provided in the Indenture, all transfers of beneficial ownership interests shall be made by book-entry only, and no investor or other party purchasing, selling or otherwise transferring beneficial ownership of Bonds is to receive, hold or deliver any Bond certificate.

The Issuer may, with notice to the Trustee but without the consent of any Bondholders, appoint a successor Securities Depository and enter into an agreement with the successor Securities Depository, to establish procedures with respect to a Book-Entry System for the Bonds not inconsistent with the provisions of the Indenture. Any successor Securities Depository shall be a “clearing agency” registered under Section 17A of the Securities Exchange Act of 1934, as amended.

The Indenture contains provisions relating to withdrawal of Bonds from DTC, replacement of DTC or Cede & Co., and circumstances under which DTC is not the sole registered Owner of Bonds. See “THE BONDS—Book-Entry System” in the Official Statement.

Redemption, Tender and Remarketing of Bonds

Extraordinary Redemption.

(a) Redemption Upon Early Termination. The Bonds shall be subject to mandatory redemption prior to maturity in whole or in part (in Authorized Denominations), on the first day that follows the Early Termination Payment Date (as such term is defined in the Gas Purchase Agreement), which will be on a Mandatory Purchase Date if a Failed Bond Remarketing occurs, as the case may be, at a Redemption Price equal to the Amortized Value thereof.

(b) Redemption for Remediation. The Bonds shall be subject to mandatory redemption prior to maturity in whole or in part on any date, at a Redemption Price equal to the Amortized Value thereof, plus accrued interest, if required pursuant to the Tax Agreement in connection with a Ledger Limit Event under and as defined in the Gas Purchase Agreement. The Issuer shall provide the Trustee with Written Notice of the requirement for any such redemption, and, if in part, of the Bonds to be so redeemed, not more than five days after determining that such redemption will be required.

Optional Redemption. The Bonds are subject to redemption at the option of the Issuer, in whole, on January 2, 2024, (which is the first calendar day that is ninety days prior to the Initial Mandatory Purchase Date (unless such day is not a Business Day, in which case on the preceding Business Day) and thereafter on the fifteenth calendar day or last calendar day of any month (unless such day is not a Business Day in which case on the preceding Business Day) at a Redemption Price equal to the Amortized Value thereof, plus accrued and unpaid interest to the date of redemption. Following the Initial Mandatory Purchase Date, Bonds will be subject to redemption at the option of the Issuer as set forth in the applicable Supplemental Indenture for the remarketed Bonds.

C-4

Notice of Redemption. When the Trustee receives notice from the Issuer of its election or direction to redeem Bonds pursuant to the Indenture or, when by the terms of the Indenture the Trustee is required or authorized to redeem Bonds otherwise than at the election or direction of the Issuer, the Trustee shall give notice, in the name of the Issuer, of the redemption of such Bonds by first-class mail, postage prepaid, not less than 20 days and not more than 45 days prior to the redemption date to the registered owner of each Bond being redeemed, at its address as it appears on the bond registration books of the Trustee or at such address as such owner may have filed with the Trustee for that purpose, as of the Regular Record Date. The notice shall identify the Bonds to be redeemed and shall state (i) the redemption date, (ii) the Redemption Price, (iii) that the Bonds called for redemption must be surrendered to collect the Redemption Price, (iv) the address at which the Bonds must be surrendered, (v) in the case of an optional redemption, such redemption shall be conditioned upon the Trustee having received on or before the date of redemption sufficient funds to pay the Redemption Price and (vi) that interest on the Bonds called for redemption shall cease to accrue on the redemption date. With respect to any notice of optional redemption of Bonds and extraordinary redemption of Bonds pursuant to the Indenture unless upon the giving of such notice such Bonds shall be deemed to have been defeased, such notice shall state that such redemption shall be conditioned upon the receipt by the Trustee on or prior to the date fixed for such redemption of money sufficient to pay the Redemption Price of and interest on the Bonds to be redeemed, and that if such money shall not have been so received said notice shall be of no force and effect, and the Issuer shall not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and such money is not so received, the redemption shall not be made and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such money was not so received and that such redemption was not made. Failure of the registered owner of any Bonds which are to be redeemed to receive any such notice or any defect in such notice shall not affect the validity of the proceedings for the redemption of any other Bonds as to which proper notice was given as provided in the Indenture.

Bonds Redeemed in Part. Upon surrender of a Bond redeemed in part, the Issuer shall execute and the Trustee shall authenticate and deliver to the Holder thereof a new Bond or Bonds in Authorized Denominations equal in principal amount to the unredeemed portion of the Bond surrendered. Notwithstanding anything in the Indenture to the contrary, so long as the Bonds are held in the Book- Entry System the Bonds shall not be delivered; rather transfers of Beneficial Ownership of such Bonds to the Person indicated above shall be affected on the registration books of the Securities Depository pursuant to its rules and procedures.

Selection of Bonds to be Redeemed. If less than all of the Bonds of like maturity of any series shall be called for redemption, the particular Bonds or portions of Bonds of such Series to be redeemed shall be selected at random by the Trustee in such manner as the Trustee in its discretion may deem fair and appropriate, from Bonds not previously called for redemption; provided, however, that the portion of any Bond of a denomination of more than a minimum Authorized Denomination to be redeemed shall be in the principal amount of such minimum Authorized Denomination or a whole multiple thereof, and that, in selecting portions of such Bonds for redemption, the Trustee shall treat each such Bond as representing that number of Bonds of a minimum Authorized Denomination which is obtained by dividing the principal amount of such Bond to be redeemed in part by such minimum Authorized Denomination.

Payment of Redeemed Bonds. Notice having been given in the manner provided in the Indenture, the Bonds or portions thereof so called for redemption shall become due and payable on the redemption date at the Redemption Price, and upon presentation and surrender thereof at the office specified in such notice, such Bonds, or portions thereof, shall be paid at the Redemption Price. If there shall be designated for redemption less than all of a Bond, the Issuer shall execute and the Trustee shall authenticate and the Paying Agent shall deliver, upon the surrender of such Bond, without charge to the owner thereof, for the unredeemed balance of the principal amount of the Bonds so surrendered, Bonds of like Series and

C-5

maturity in any of the Authorized Denominations. If, on the redemption date, moneys for the redemption of all the Bonds or portions thereof of any like Series and maturity to be redeemed, together with interest to the redemption date, shall be held by the Paying Agents so as to be available therefor on said date and if notice of redemption shall have been given as aforesaid, then, from and after the redemption date interest on the Bonds or portions thereof of such Series and maturity so called for redemption shall cease to accrue and become payable. If said moneys shall not be so available on the redemption date, such Bonds or portions thereof shall continue to bear interest until paid at the same rate as they would have borne had they not been called for redemption. Upon the payment of the Redemption Price of and any accrued interest on the Bonds being redeemed, each check or other transfer of funds issued for such purpose shall bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.

Mandatory Tender for Purchase on the Mandatory Purchase Date. On a Mandatory Purchase Date for the Bonds, so long as no Failed Bond Remarketing has occurred, that would require a mandatory redemption of the Bonds, the Bonds shall be purchased from the Owners thereof at the Purchase Price, payable in immediately available funds, provided the Bonds are delivered to the Trustee on or prior to 10:00 a.m., New York City time, on such day, or if delivered after 10:00 a.m., New York City time, on the next succeeding Business Day; provided, however, that in any event interest shall cease to accrue after the last day of such Long Rate Period, subject to certain provisions of the Indenture relating to the determination of the Long Rate. The Purchase Price of any Bond so purchased shall be payable from the Bond Purchase Fund only upon surrender of such Bond to the Trustee at its Principal Office, accompanied by an instrument of transfer thereof, in form satisfactory to the Trustee, executed in blank by the Owner thereof or by the Owner’s duly-authorized attorney. The Bonds shall be subject to mandatory tender on the Initial Mandatory Purchase Date or any other Mandatory Purchase Date.

General Provisions Relating to Tenders.

(a) Bond Purchase Fund.

(i) The Bond Purchase Fund shall be held in trust only for the benefit of the Owners of tendered Bonds who shall thereafter be restricted exclusively to the moneys held in such fund for the satisfaction of any claim for the Purchase Price of such tendered Bonds. The Issuer shall have no right, title or interest in any of the funds held on deposit in the Remarketing Proceeds Account or any remarketing proceeds held for any period of time by the Remarketing Agent.

(ii) Moneys paid to the Trustee for the purchase of tendered or deemed tendered Bonds received from (A) the Remarketing Agent shall be deposited in the Remarketing Proceeds Account in accordance with the provisions of the Indenture and (B) the Gas Supplier shall be deposited in the Gas Supplier Purchase Account in accordance with the provisions of the Indenture.

(iii) Moneys in the Remarketing Proceeds Account and the Gas Supplier Purchase Account with respect to the Bonds shall not be commingled with other funds held by the Trustee and shall remain uninvested.

(b) Deposit of Bonds. The Trustee agrees to hold all Bonds delivered to it for purchase in trust for the benefit of the respective Owners which shall have so delivered such Bonds until moneys representing the Purchase Price of such Bonds have been delivered to such Owner in accordance with the provisions of the Indenture and until such Bonds shall have been delivered by the Trustee in accordance with the Indenture.

C-6

Remarketing of Bonds; Notice of Interest Rates.

(a) Upon the Written Direction of the Issuer, the Remarketing Agent shall offer for sale and use its best efforts to sell the Bonds at par or a premium subject to conditions in the Remarketing Agreement and the Indenture. The remarketed Bonds will be sold no later than the last business day of the second month preceding the next Mandatory Purchase Date and delivered to the purchasers thereof on the Mandatory Purchase Date. The Remarketing Agent agrees that it shall not sell any Bonds tendered and purchased pursuant to the Issuer or a Project Participant, or to any Person who controls, is controlled by, or is under common control with the Issuer or a Project Participant.

(b) The Remarketing Agent shall determine the Long Rate to be borne by the Bonds, all as provided in the Indenture, and shall furnish to the Trustee and to the Issuer upon request, in a timely fashion by telephone, telecopy, or electronic means, promptly confirmed in writing, each Long Rate so determined.

(c) Anything in the Indenture to the contrary notwithstanding, if there shall have occurred and is continuing an Event of Default any time in the 90 days preceding a Mandatory Purchase Date, the Bonds shall not be remarketed and the Bonds shall be subject to extraordinary redemption pursuant to the Indenture.

(d) Deposits of Funds.

(i) The Remarketing Agent shall, by 12:30 p.m., New York City time, on the last Business Day of the Month that is two Months prior to the Mandatory Purchase Date, deliver all amounts received in connection with the remarketing of the Bonds to the Trustee and the Trustee shall promptly deposit the same into the Remarketing Proceeds Account.

(ii) The Gas Supplier may, no later than 12:45 p.m., New York City time on the last Business Day of the Month that is two Months prior to the Mandatory Purchase Date elect, in its sole discretion, to pay to the Trustee in immediately available funds the amount equal to the difference, if any, between the total Purchase Price of Bonds to be purchased on the Mandatory Purchase Date and the amount of money deposited above (the “Additional Liquidity Drawing Amount”) (for the avoidance of doubt, Bonds to be purchased on the Mandatory Purchase Date exclude bonds that either (a) mature on such date or (b) are to redeemed on such date from a Termination Payment to be applied in accordance with the Indenture). The Trustee shall deposit any Additional Liquidity Drawing Amounts into the Gas Supplier Purchase Account for the Bonds.

(iii) If, following the deposit of all sums received from the Remarketing Agent, (a) the aggregate amount held by the Trustee in the Bond Purchase Fund, plus (b) the amount the Gas Supplier has elected to pay pursuant to the paragraph above, is less than the Purchase Price to be paid on all Bonds subject to tender on the Mandatory Purchase Date, then (x) a Failed Bond Remarketing shall have occurred and the Bonds shall be subject to extraordinary redemption pursuant to the Indenture on the Mandatory Purchase Date, and (y) amounts held in the Bond Purchase Fund shall be returned to the Remarketing Agent and/or the Gas Supplier, as the case may be.

(iv) The Trustee shall hold all proceeds received from the Remarketing Agent and the Gas Supplier in trust for the tendering Owners. In holding such proceeds and

C-7

moneys, the Trustee will be acting on behalf of such Owners by facilitating purchase of the Bonds and not on behalf of the Issuer or the Gas Supplier and will not be subject to the control of either of them. Subject to the provisions described below, following the discharge of the pledge created by the Indenture or after payment in full of the Bonds, the Trustee shall pay any moneys remaining in any Account of the Bond Purchase Fund directly to the Persons for whom such money is held upon presentation of evidence reasonably satisfactory to the Trustee that such Person is rightfully entitled to such money and the Trustee shall not pay such amounts to any other Person.

(e) Disbursements; Payment of Purchase Price. Moneys delivered to the Trustee by the last Business Day of the Month that is two Months prior to the Mandatory Purchase Date shall be applied at or before 1:00 p.m., New York City time, on such Mandatory Purchase Date to pay the Purchase Price of tendered Bonds in immediately available funds as follows in the indicated order of application and, to the extent not so applied on such date, shall be held in the separate and segregated Accounts of the Bond Purchase Fund for the benefit of the Owners of the Bonds which were to have been purchased:

FIRST: Moneys deposited in the Remarketing Proceeds Account; and

SECOND: Moneys deposited in the Gas Supplier Purchase Account.

The Owners of tendered Bonds who have not yet claimed money in respect of the Purchase Price of such Bonds shall thereafter be entitled to look only to the Trustee, to the extent it shall hold moneys on deposit in the Bond Purchase Fund or the Issuer to the extent moneys have been transferred in accordance with the Indenture. The Trustee shall have no obligation to advance its own funds to fund the Bond Purchase Fund or otherwise pay the Purchase Price on any Bonds.

(f) Delivery of Remarketed Bonds.

(i) The Remarketing Agent shall give telephonic or telegraphic notice, promptly confirmed by a written notice, to the Trustee on each date on which Bonds shall have been purchased pursuant to the Indenture, specifying the principal amount of such Bonds, if any, sold by it and a list of such purchasers showing the names and Authorized Denominations in which such Bonds shall be registered, and the addresses and social security or taxpayer identification numbers of such purchasers. By 12:30 p.m., New York City time, on the Mandatory Purchase Date, a principal amount of Bonds equal to the amount of tendered Bonds purchased with moneys from the Remarketing Proceeds Account shall be made available by the Trustee to the Remarketing Agent. The Trustee shall prepare each Bond to be so delivered in such names as directed by the Remarketing Agent.

(ii) A principal amount of Bonds equal to a portion or the total of the amount of tendered Bonds purchased from moneys on deposit in the Gas Supplier Purchase Account may be held by the Gas Supplier, upon its election, on the Mandatory Purchase Date. If such election is not made by the Gas Supplier, or the election is not for the total amount of tendered Bonds purchased from moneys on deposit in the Gas Supplier Purchase Account, a principal amount of Bonds equal to the remaining portion or the total of the amount of tendered Bonds purchased from moneys on deposit in the Gas Supplier Purchase Account shall be redeemed by the Trustee, at the direction of the Issuer, pursuant to the Indenture.

C-8

The Remarketing Agent.

(a) The Remarketing Agent shall be authorized by law to perform all the duties imposed upon it pursuant to the Remarketing Agreement. The Remarketing Agent or any successor shall signify its acceptance of the duties and obligations imposed upon it pursuant to the Remarketing Agreement by an agreement under which the Remarketing Agent will agree to:

(i) determine the Long Rates applicable to the Bonds and give notice to the Trustee of such rates and periods in accordance with the Indenture;

(ii) keep such books and records as shall be consistent with prudent industry practice; and

(iii) use its best efforts to remarket Bonds in accordance with the Remarketing Agreement.

(b) The Trustee shall hold all amounts received by it in accordance with any remarketing of Bonds in trust only for the benefit of the Owners of tendered Bonds and shall not commingle such amounts with any other moneys.

(i) As soon as practicable, but in no event later than 10:15 a.m., New York City time, on the Business Day preceding a Mandatory Purchase Date, the Remarketing Agent shall inform the Trustee by telephone, promptly confirmed in writing, of the principal amount of Bonds to be purchased on such date, the name, address and taxpayer identification number of each such purchaser, and the Authorized Denominations in which such Bonds are to be delivered. Upon receipt from the Remarketing Agent of such information, and in no event later than 12:30 p.m., New York City time, on the Mandatory Purchase Date, the Trustee shall prepare Bonds in accordance with such information received from the Remarketing Agent for the registration of transfer and redelivery to the Remarketing Agent pursuant to the Indenture.

Notice of Mandatory Tender for Purchase. In connection with any mandatory tender for purchase of Bonds in accordance with the Indenture, the Trustee shall give notice stating: (a) that the Purchase Price of any Bond so subject to mandatory tender for purchase shall be payable only upon surrender of such Bond to the Trustee at its Principal Office, accompanied by an instrument of transfer thereof, in form satisfactory to the Trustee, executed in blank by the Owner thereof or by the Owner’s duly-authorized attorney; (b) that all Bonds so subject to mandatory tender for purchase shall be purchased on the Mandatory Purchase Date which shall be explicitly stated; and (c) that in the event that any Owner of a Bond so subject to mandatory tender shall not surrender such Bond to the Trustee on such Mandatory Purchase Date, then such Bond shall be deemed to be an Undelivered Bond under the Indenture. Any such notice of a mandatory tender of Bonds pursuant to the Indenture shall be given no less than twenty (20) days prior to the applicable Mandatory Purchase Date.

Establishment of Funds and Accounts and Application Thereof

Pledge Effected by the Indenture. The Bonds shall be special obligations of the Issuer payable solely from and secured as to the payment of the principal and Redemption Price thereof, and interest thereon, in accordance with their terms and the provisions of the Indenture solely by the Trust Estate. The Trust Estate is pledged and assigned for the payment of the principal and Redemption Price of and interest on the Bonds in accordance with their terms, and any other senior, parity and subordinate obligations of the Issuer secured by the lien of the Indenture, subject only to the provisions of the

C-9

Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture. The Trust Estate pledged and assigned under the Indenture shall immediately be subject to the lien of such pledge without any further physical delivery thereof or other further act, and the lien of such pledge shall be a first lien and shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the Issuer, irrespective of whether such parties have notice thereof.

The Bonds do not constitute general debts, obligations or indebtedness of the Issuer within the meaning of the Constitution or statutes of the State, but are special, limited obligations solely of the Issuer payable solely from and secured by a lien on the Trust Estate, in the manner and to the extent provided for in the Indenture. No registered owner of the Bonds shall ever have the right to require or compel the exercise of the ad valorem taxing power of any Project Participant or the taxation in any form on any real or personal property to pay the principal or Redemption Price of or interest on the Bonds. Neither the full faith and credit nor the taxing power of the State or any Project Participant is pledged to the payment of the principal of, redemption premium, if any, or interest on the Bonds.

Nothing contained in the Indenture shall be construed to prevent the Issuer from acquiring, constructing or financing through the issuance of its bonds, notes or other evidences of indebtedness any facilities or supplies of gas other than the Gas Project; provided that such bonds, notes or other evidences of indebtedness shall not be payable out of or secured by the Trust Estate and neither the cost of such facilities or supplies of gas nor any expenditure in connection therewith or with the financing thereof shall be payable from the Trust Estate.

Establishment of Funds and Accounts.

(a) The following Funds and Accounts are established under the Indenture:

(i) Project Fund, to be held by the Trustee, including a Gas Project Account,

(ii) Revenue Fund, to be held by the Trustee, and within the Revenue Fund, with respect to each Project Participant, a Revenue Account, Commodity Swap Reserve Account and a Debt Service Reserve Account.

(iii) Operating Fund, to be held by the Trustee, including a Commodity Swap Payment Account, an Operating Expense Account and a Rebate Account;

(iv) Debt Service Fund, to be held by the Trustee, which shall consist of a Debt Service Account (and within such Account, a Capitalized Interest Subaccount) and a Redemption Account;

(v) General Fund, to be held by the Trustee;

(vi) Bond Purchase Fund, to be held by the Trustee, as tender agent, which shall consist of a Remarketing Proceeds Account and a Gas Supplier Purchase Account;

(vii) Assignment Payment Fund, to be held by the Trustee;

(viii) Administrative Fee Fund, to be held by PEAK;

(ix) Rate Stabilization Fund, to be held by PEAK, which shall consist of an Initial Period Deposit Account and an Excess Gas Remarketing Proceeds Account.

C-10

(b) Upon Written Direction of the Issuer, the Trustee shall establish additional accounts or subaccounts.

(c) The Trustee may establish one or more clearing accounts or subaccounts as the Trustee may deem appropriate from time to time to facilitate administration of funds and making of required payments, without a Written Directive of the Issuer.

Project Fund.

There shall be paid into the Gas Project Account of the Project Fund proceeds of the Bonds in the amount specified by Written Request of the Issuer, and there may be paid into the Project Fund, at the option of the Issuer, any moneys received for or in connection with the Gas Project by the Issuer from any other source, unless required to be otherwise applied as provided by the Indenture. Except as otherwise provided in the Indenture, amounts in the Gas Project Account shall be applied by the Issuer to the Cost of Acquisition.

Before any payment is made by the Trustee from the Project Fund (except for transfers into the Debt Service Account to pay interest on the Bonds as directed by the Issuer), the Issuer shall file with the Trustee a Written Request of the Issuer, showing with respect to each payment to be made, the name of the Person to whom payment is due and the amount to be paid, and stating that the obligation to be paid was incurred and is a proper charge against the Project Fund (or the Gas Project Account therein). To the extent that the Written Request includes amounts to be paid pursuant to the Gas Purchase Agreement, copies of the invoices or requests for direct payments submitted under the Gas Purchase Agreement shall be attached to the Written Request. Each such Written Request shall be sufficient evidence to the Trustee: (i) that obligations in the stated amounts have been incurred by the Issuer and that each item thereof is a proper charge against the Project Fund or the Gas Project Account therein; and (ii) that there has not been filed with or served upon the Issuer notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys payable to any of the Persons named in such Written Request which has not been released or will not be released simultaneously with the payment of such obligation other than materialmen’s or mechanics’ liens accruing by mere operation of law.

Upon receipt of each such Written Request, the Trustee shall pay the amounts set forth therein as directed by the terms thereof.

Notwithstanding the provisions described above, to the extent that other moneys are not available therefor, amounts in the Gas Project Account shall be applied to the payment of principal of and interest on Bonds when due.

Revenues and Revenue Fund. Subject to the Written Direction of the Issuer with respect to deposits made into the Rate Stabilization Fund, all Revenues shall be deposited promptly by the Issuer upon receipt thereof into the Revenue Fund. Revenues received from, or with respect to, each Project Participant shall be deposited into the corresponding Project Participant Revenue Account subject to the prior repayment of any draw under a Policy relating to such Project Participant.

Payments into Certain Funds and Accounts.

(a) In each Month during which there is a deposit of Revenues into the Revenue Fund (but in no case later than the respective dates set forth below), the Trustee shall credit to, or shall transfer to the following Funds and Accounts in the following order the amounts set forth

C-11

below (such application to be made in such a manner so as to assure good funds in the respective Funds and Accounts on the respective dates set forth below):

(i) From each Project Participant Revenue Account to the Administrative Fee Fund, monthly administrative fees in an amount not to exceed for any Month and any Gas Supply Contract the quantity of Gas required to be delivered under such Gas Supply Contract during such Month multiplied by $0.03 per MMBtu;

(ii) From each Project Participant Revenue Account to the Operating Fund, not later than the 25th day of such Month, for credit to the Commodity Swap Payment Account, the amount necessary to pay the portion, if any, of the Commodity Swap Payments coming due for such Month allocable to such Project Participant, as directed in a Written Direction of the Issuer;

(iii) From each Project Participant Revenue Account to the Debt Service Fund for credit to the Debt Service Account, not later than the 25th day of such Month and following deposit of Commodity Swap Receipts into the respective Project Participant Revenue Accounts, an amount equal to the greater of (1) the amount necessary so that the Scheduled Debt Service Deposit for such Project Participant for such Month, as set forth in the Indenture, is on deposit therein, or (2) the amount necessary to cause the cumulative Scheduled Debt Service Deposits for such Project Participant, as set forth in the Indenture, to be on deposit therein; notwithstanding the foregoing, if on the Business Day prior to an Interest Payment Date the amount in the Debt Service Fund is not sufficient to make the Debt Service payments on the Bonds, then from each Project Participant Revenue Account into the Debt Service Account such amounts so that the amounts on deposit therein are sufficient to make such payments;

(iv) To the Rebate Account of the Operating Fund, the amount indicated by the Rebate Analyst;

(v) From each Project Participant Revenue Account to the Operating Expense Account of the Operating Fund, not later than the 25th day of such Month, the amount, if any, required so that the balance credited to the Operating Fund shall equal the amount necessary for the payment of the Contract Charges and other Operating Expenses coming due for the following Month, as prescribed in a Written Direction of the Issuer;

(vi) If one or more Project Participant Debt Service Reserve Accounts is funded in whole or in part by cash, and the Trustee has applied some or all of such cash to a DSRF Shortfall, from the applicable Project Participant Revenue Account, to such Project Participant Debt Service Reserve Account, not later than the 25th day of such Month, the amount, if any, required so that the balance in the Debt Service Reserve Account, taking into account the undrawn amount under the Debt Service Reserve Policy, shall equal the Debt Service Reserve Requirement relating to such Project Participant as of the last day of the then current Month; and

(vii) If one or more Project Participant Commodity Swap Reserve Accounts is funded in whole or in part by cash, and the Trustee has applied some or all of such cash to a CSRA Shortfall, from the applicable Project Participant Revenue Account to such Project Participant Commodity Swap Reserve Account, not later than the 25th day of such Month, the amount, if any, required so that the balance in the Commodity Swap Reserve Account, taking into account the undrawn amount under the Commodity Swap

C-12

Reserve Policy, shall equal the Commodity Swap Reserve Requirement relating to such Project Participant as of the last day of the then current Month.

(b) Following each Principal Installment payment date, after making such transfers, credits and deposits as required by paragraph (a) above, the Trustee shall credit to the General Fund the remaining balance in the Revenue Fund.

(c) So long as there shall be held in the Debt Service Fund an amount sufficient to pay in full all Outstanding Bonds in accordance with their terms (including principal or applicable sinking fund Redemption Price and interest thereon), no transfers shall be required to be made to the Debt Service Fund.

Operating Fund. Amounts credited to the Operating Fund shall be applied from time to time to the payment of Operating Expenses and Commodity Swap Payments.

Commodity Swap Payment Account. Amounts credited to the Commodity Swap Payment Account shall be applied from time to time by the Trustee solely to the payment of Commodity Swap Payments; provided that any amounts remaining on deposit in the Commodity Swap Payment Account on the final date for payment of the principal of the Bonds, whether upon maturity or redemption, shall be applied to make such principal payment to the extent necessary.

Operating Expense Account. Upon written direction of the Issuer, the Trustee shall deposit proceeds of the Bonds into the Operating Expense Account. There shall be deposited in the Operating Expense Account monthly deposits described above and, if applicable, deposits from the General Fund. Amounts credited to the Operating Expense Account shall be applied from time to time by the Trustee at the Written Direction of the Issuer solely to the payment of Operating Expenses; provided that any amounts remaining on deposit in the Operating Expense Account on the final date for payment of the principal of the Bonds, whether upon maturity or redemption, shall be applied to make such principal payment to the extent necessary.

Amounts in the Operating Expenses Account shall be applied first to pay Contract Charges, second to the accrual or payment of fees of the Fiduciaries, and third, to any other Operating Expense.

Amounts credited to the Operating Fund which the Issuer at any time determines to be in excess of the requirements of such Fund may be applied at the direction of the Issuer to make up any deficiencies first in the Commodity Swap Payment Account and then to Debt Service Account on any Bond Payment Date. Any balance of such excess not required to be so applied shall be transferred to the Revenue Fund. Upon Written Direction of the Issuer to the Trustee, the Trustee shall transfer amounts from the General Fund to the Operating Expense Account to pay Operating Expenses or credit to the Operating Fund for application to the purposes of that Fund.

Rebate Account. On or before the thirtieth (30th) day following each Computation Date, the Issuer shall pay an amount for deposit in Rebate Account equal to all rebatable arbitrage due to the United States with respect to the Computation Date (unless the Issuer shall deliver evidence that the Issuer has calculated the rebatable arbitrage due and paid the same to the United States in compliance with Section 148(f) of the Code), but with credit being given against such payments for any amounts transferred from any fund or account held by the Trustee in accordance with the Indenture to the Rebate Account for such purpose.

C-13

If on the thirtieth (30th) day following any Computation Date for the Bonds, the Trustee has not received from the Issuer written evidence from a Rebate Analyst as to the amount, if any, of rebatable arbitrage required to be paid to the United States in connection with such Computation Date and the Bonds (the “Rebate Report”), the Trustee, at the expense of the Issuer shall engage a Rebate Analyst to prepare a Rebate Report, notifying the Issuer of such engagement and promptly providing to the Issuer a copy of the Rebate Report after its delivery to the Trustee, and making demand on the Issuer to pay any amount of rebate required to be paid to the United States as set forth in the Rebate Report.

If the Issuer shall fail to remit to the Trustee the amount of rebate owing to the United States in accordance with the Rebate Report within five days after Issuer’s receipt of such report, thereafter, notwithstanding any other provisions of the Indenture, the Trustee shall transfer the amount required to be paid to the United States to the Rebate Account first, from the General Fund and second, from the Operating Expense Account. To the extent of amounts in the Rebate Account, the Trustee shall make available to the Issuer the amount of rebatable arbitrage due upon the Trustee’s receipt of an executed form 8038T, or copy thereof satisfactory to the Trustee (or such other form as shall be appropriate for reporting the rebate due) duly completed with respect to the Bonds and representations by the Issuer that it will apply such amounts to the payment of rebate due.

All terms used in “Operating Fund – Rebate Account” shall have the meanings provided in Section 148 of the Code and regulations thereunder. Notwithstanding any other provisions of the Indenture, if the Issuer shall provide to the Trustee an Opinion of Bond Counsel that any specified action required under “Operating Fund – Rebate Account” is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on the Bonds, the Issuer and the Trustee may conclusively rely on such opinion in complying with the requirements described in “Operating Fund – Rebate Account” and of the Tax Agreement, and the covenants under the Indenture shall be deemed to be modified to that extent.

Debt Service Fund—Debt Service Account. The amounts deposited into the Debt Service Account shall be held in such Account, including the Capitalized Interest Subaccount, and applied by the Trustee on each Bond Payment Date to the payment (pro rata, without priority or preference) of Debt Service payable on such Bond Payment Date. Amounts in the Capitalized Interest Subaccount shall be applied to Debt Service prior to other monies held within the Debt Service Account. The Trustee shall transfer amounts from the General Fund to the Debt Service Account in accordance with the Indenture.

The Trustee shall pay out of the Debt Service Account to the Paying Agent: (i) on or before each Interest Payment Date, the amount required for the interest payable on such date; (ii) on or before each Bond Payment Date on which a Principal Installment is due, the amount required for the Principal Installment payable on such date (unless paid from the Bond Purchase Fund); and (iii) on or before any redemption date, the amount required for the payment of the Redemption Price of and accrued interest on such Bonds then to be redeemed. Such amounts shall be applied by the Paying Agent on and after the due dates thereof. The Trustee shall also pay out of Debt Service Account the accrued interest included in the purchase price of Bonds purchased for retirement.

Amounts accumulated in the Debt Service Account with respect to any Sinking Fund Installment (together with amounts accumulated therein with respect to interest on the Bonds for which such Sinking Fund Installment was established) shall, if so directed by the Issuer in a Written Request delivered not less than 30 days before the due date of such Sinking Fund Installment, be applied by the Trustee to (i) the purchase of Bonds of the maturity for which such Sinking Fund Installment was established, (ii) the redemption at the applicable sinking fund Redemption Price of such Bonds, if then redeemable by their

C-14

terms, or (iii) any combination of (i) and (ii). All purchases of any Bonds shall be made at prices not exceeding the applicable sinking fund Redemption Price of such Bonds plus accrued interest, and such purchases shall be made in such manner as the Issuer shall direct the Trustee. The applicable sinking fund Redemption Price (or principal amount of maturing Bonds) of any Bonds so purchased or redeemed shall be deemed to constitute part of the Debt Service Account until such Sinking Fund Installment date, for the purpose of calculating the amount of such Account. At least 30 days preceding the due date of any such Sinking Fund Installment, the Trustee shall proceed to call for redemption on such due date, by giving notice as required by the Indenture, Bonds of maturity for which such Sinking Fund Installment was established (except in the case of Bonds maturing on a Sinking Fund Installment date) in such amount as shall be necessary to complete the retirement of the unsatisfied balance of such Sinking Fund Installment after making allowance for any Bonds purchased or redeemed pursuant to the Indenture which the Issuer has directed the Trustee to apply as a credit against such Sinking Fund Installment. The Trustee shall pay out of the Debt Service Account to the Paying Agent, on or before such redemption date (or maturity date), the amount required for the redemption of the Bonds so called for redemption (or for the payment of such Bonds then maturing), and such amount shall be applied by such Paying Agents to such redemption (or payment), as the Issuer shall direct the Trustee. All expenses in connection with the purchase or redemption of Bonds shall be paid from the Operating Fund.

If at any time Bonds of any series or maturity for which Sinking Fund Installments shall have been established are (i) purchased or redeemed other than pursuant to the applicable Sinking Fund Installment provisions of the Indenture or (ii) defeased and, with respect to such Bonds which have been defeased, irrevocable instructions have been given to the Trustee to redeem or purchase the same on or prior to the due date of the Sinking Fund Installment to be credited, the Issuer may from time to time and at any time by Written Direction of the Issuer to the Trustee specify the portion, if any, of such Bonds so purchased, redeemed or deemed to have been paid and not previously applied as a credit against any Sinking Fund Installment which are to be credited against future Sinking Fund Installments. Such direction shall specify the amounts of such Bonds to be applied as a credit against each Sinking Fund Installment or Installments and the particular Sinking Fund Installment or Installments against which such Bonds are to be applied as a credit; provided, however, that none of such Bonds may be applied as a credit against a Sinking Fund Installment to become due less than 45 days after such notice is delivered to the Trustee. All such Bonds to be applied as a credit shall be surrendered to the Trustee for cancellation on or prior to the due date of the Sinking Fund Installment against which they are being applied as a credit. The portion of any such Sinking Fund Installment remaining after the deduction of any such amounts credited toward the same (or the original amount of any such Sinking Fund Installment if no such amounts shall have been credited toward the same) shall constitute the unsatisfied balance of such Sinking Fund Installment for the purpose of calculation of Sinking Fund Installments due on a future date.

All Bonds paid or redeemed, either at or before maturity, shall be delivered to the Trustee when such payment or redemption is made, and such Bonds, together with all Bonds purchased or redeemed, which have been delivered to the Trustee for application as a credit against Sinking Fund Installments and all Bonds purchased by the Trustee, shall thereupon be promptly cancelled (or deemed to have been cancelled).

Amounts accumulated in the Debt Service Account with respect to any principal amount of Bonds due on a certain future date for which no Sinking Fund Installments have been established (together with amounts accumulated therein with respect to interest on such Bonds) shall be applied by the Trustee, upon the Written Direction of the Issuer, on or prior to the due date thereof, to (i) the purchase of such Bonds or (ii) the redemption at the principal amount of such Bonds, if then redeemable by their terms. All purchases of any Bonds shall be made at prices not exceeding the principal amount of such Bonds plus accrued interest, and such purchases and redemptions shall be made in such manner as the Issuer shall determine. The principal amount of any Bonds so purchased or redeemed shall be deemed

C-15

to constitute part of the Debt Service Account until such due date, for the purpose of calculating the amount of such Account.

In the event of the defeasance of any Bonds, the Trustee shall, if directed by the Issuer in writing, withdraw from the Debt Service Account all, or any portion of, the amounts accumulated therein with respect to Debt Service on the Bonds being defeased and deposit such amounts with the Trustee to be held for the payment of the principal or Redemption Price, if applicable, and interest on the Bonds being defeased; provided that such withdrawal shall not be made unless immediately thereafter Bonds being defeased shall be deemed to have been paid pursuant to the Indenture. In the event of such defeasance, the Issuer may direct the Trustee to withdraw from the Debt Service Account all, or any portion of, the amounts accumulated therein with respect to Debt Service on the Bonds being defeased and deposit such amounts in any Fund or Account hereunder; provided, however, that such withdrawal shall not be made unless the Bonds being defeased shall be deemed to have been paid pursuant to the Indenture and provided, further, that, at the time of such withdrawal, there shall exist no deficiency in any Fund or Account held under the Indenture.

Any amount remaining the Debt Service Account after a date for payment of a Principal Installment shall, to the extent not required to be retained therein and upon the Written Direction of the Issuer to the Trustee, be deposited in the Revenue Fund.

Debt Service Fund – Redemption Account. In the event of a partial or complete early termination of the Gas Purchase Agreement, the Issuer shall direct the Gas Supplier to pay the Termination Payment directly to the Trustee for the account of the Issuer. The Trustee shall deposit the Termination Payment into the Redemption Account and shall apply such moneys to the redemption of Outstanding Bonds pursuant to the Indenture.

Any amounts remaining on deposit in the Redemption Account following the redemption and payment of a portion of Outstanding Bonds, shall, upon Written Direction of the Issuer to the Trustee, be transferred to the Revenue Fund.

Revenue Fund – Project Participant Commodity Swap Reserve Accounts. Each Commodity Swap Reserve Account may be funded by cash, a Commodity Swap Reserve Policy or a combination thereof. Initially, each Commodity Swap Reserve Account shall be funded with a Commodity Swap Reserve Policy in an amount not less than the corresponding Commodity Swap Reserve Requirement.

If a Payment Shortfall Amount shall occur with respect to a Project Participant in any Month, then the Trustee shall give notice to the Issuer and AGM of the identity of the Project Participant and the amount of the CSRA Shortfall (as defined below) no later than close of business on the 20th day of such Month (or the next Business Day if such day is not a Business Day). Provided the Project Participant has not cured the nonpayment by 5:00 p.m. Central Prevailing Time (as defined in the Gas Supply Contracts) on the Business Day that is two Business Days preceding the 25th day of the current Month (or if the 25th of such Month is not a Business Day two (2) Business Days prior to the Business Day next succeeding the 25th of such Month), the Trustee shall deliver a Notice of Claim (as defined in the Commodity Swap Reserve Policy) to AGM in an amount equal to the lesser of (i) the amount to be transferred such Month from the related Project Participant Revenue Account to the related Commodity Swap Payment Account in accordance with the terms of the Indenture, net of amounts otherwise available for such month in the Project Participant Revenue Account (the “CSRA Shortfall), or (ii) the available Commodity Swap Reserve Policy Coverage, no later than 7:00 p.m. Central Prevailing Time on such Business Day in accordance with the terms and conditions of the corresponding Commodity Swap Reserve Policy for payment by AGM on the 25th day of the current Month (or the next Business Day if the 25th day is not a Business Day) (the “Shortfall Payment Deadline”). If, by 2:00 p.m. Central Prevailing Time on the

C-16

Business Day immediately preceding the Shortfall Payment Deadline, the Trustee has received from the defaulting Project Participant the full CSRA Shortfall, the Trustee shall immediately withdraw the Notice of Claim and shall deposit such payment into the related Project Participant Revenue Account prior to transferring amounts to the Commodity Swap Payment Account. If the Trustee has not received payment in full of the CSRA Shortfall by the Shortfall Payment Deadline, the Trustee shall on that day, after giving credit for partial payments, if any, toward the CSRA Shortfall received from the Project Participant, deposit the proceeds of the draw on the Commodity Swap Reserve Policy into the related Project Participant Revenue Account, prior to transferring amounts into the Commodity Swap Payment Account. See “Establishment of Funds and Accounts and Application Thereof—Payments into Certain Funds and Accounts” in this Appendix C.

If a Notice of Claim is delivered by the Trustee to AGM as described in the preceding paragraph, the Trustee shall, on the same date, cause a GSC Mandatory Gas Remarketing Notice (as defined in the Gas Purchase Agreement), for the following Month, to be delivered to the Gas Supplier. If the related Project Participant has not cured its nonpayment by 5:00 p.m. Central Prevailing Time on the 25th day of the current Month, its gas will be suspended as prescribed by the related Gas Supply Contract. If the Trustee has received from the defaulting Project Participant the full Payment Shortfall Amount by 5:00 p.m. Central Prevailing Time on the 25th day of the current Month, the GSC Mandatory Gas Remarketing Notice is to be withdrawn.

If a Project Participant Commodity Swap Reserve Account is funded in whole or in part by cash, in the event a CSRA Shortfall occurs, the Trustee shall reduce the amount of the draw on the Commodity Swap Reserve Policy by the amount of such available cash and apply such cash in the same manner as the proceeds of the draw on the Commodity Swap Reserve Policy as described above.

Revenue Fund – Project Participant Debt Service Reserve Accounts. Each Debt Service Reserve Account may be funded by cash, a Debt Service Reserve Policy or a combination thereof. Initially, each Debt Service Reserve Account shall be funded with the Debt Service Reserve Policy in the amount not less than the corresponding Debt Service Reserve Requirement

Amounts on deposit in a Debt Service Reserve Account (including amounts drawn under the related Debt Service Reserve Policy) shall be applied only to make transfers to the related Project Participant Revenue Account after payments have been made from the Project Participant Revenue Account to the Commodity Swap Payment Account (and treating the Commodity Swap Payment Account as if it were fully funded). See “Establishment of Funds and Accounts and Application Thereof— Payments into Certain Funds and Accounts” in this Appendix C. If a Payment Shortfall Amount occurs in any Month and the related Payment Shortfall Amount exceeds the amount drawn on the related Commodity Swap Reserve Policy, provided the Project Participant has not cured the nonpayment by 5:00 p.m. Central Prevailing Time (as defined in the Gas Supply Contracts) on the Business Day that is two Business Days preceding the 25th day of the current Month (or if the 25th of such Month is not a Business Day two (2) Business Days prior to the Business Day next succeeding the 25th of such Month), the Trustee shall deliver a Notice of Claim (as defined in the Debt Service Reserve Policy) to AGM in an amount equal to the lesser of (i) the amount required to be transferred such Month from the Project Participant Revenue Account to the Debt Service Fund, net of any other amounts that are otherwise available to fund such transfer (the “DSRF Shortfall”), or (ii) the amount available under the Debt Service Reserve Policy, no later than 7:00 p.m. Central Prevailing Time on such Business Day in accordance with the terms and conditions of the corresponding Debt Service Reserve Policy for payment by AGM on the 25th day of the current Month (or the next Business Day if the 25th day is not a Business Day). If, by 2:00 p.m. Central Prevailing Time on the Business Day immediately preceding the Shortfall Payment Deadline, the Trustee has received from the defaulting Project Participant the full DSRF Shortfall, the Trustee shall immediately withdraw the Notice of Claim and shall deposit such payment

C-17

into the related Project Participant Revenue Account prior to transferring amounts to the Debt Service Account. If the Trustee has not received payment in full of the DSRF Shortfall by the Shortfall Payment Deadline, the Trustee shall on that day, after giving credit for any partial payments (such credit being first applied against the draw under the Commodity Swap Reserve Policy), if any, toward the DSRF Shortfall received from the Project Participant, deposit the proceeds of the draw on the Debt Service Reserve Policy into the related Project Participant Revenue Account (but not for later transfer into the Operating Fund for payments to the Commodity Swap Payment Account), after transferring amounts into the Commodity Swap Payment Account and treating the Commodity Swap Payment Account as if it were fully funded, but prior to transferring amounts from such Project Participant Revenue Account into the Debt Service Account. See “Establishment of Funds and Accounts and Application Thereof—Payments into Certain Funds and Accounts” in this Appendix C.

If a Project Participant’s Debt Service Reserve Account is funded in whole or in part by cash, if a DSRF Shortfall shall occur in any Month, the Trustee shall reduce the amount of any draw on the related Debt Service Reserve Policy by the amount of such available cash and apply such cash in the same manner as the proceeds of the draw on the Debt Service Reserve Policy as described above.

No Commodity Swap Counterparty shall have any claim upon the amounts on deposit in the Debt Service Reserve Account and no Commodity Swap Payments shall be made from the Debt Service Reserve Account.

Whenever the amounts on deposit in the Debt Service Reserve Account (whether cash, securities, the Debt Service Reserve Policies, or a combination thereof) shall exceed the Debt Service Reserve Requirement, such excess amount shall, upon Written Direction from the Issuer, be transferred by the Trustee for deposit in the Revenue Fund.

Whenever the aggregate amount in the Debt Service Reserve Accounts, together with the amounts in the Debt Service Account (not including undrawn portions of the Debt Service Reserve Policies), are sufficient to pay in full the Outstanding Bonds in accordance with their terms (including the maximum amount of principal or applicable sinking fund Redemption Price and interest which could become payable thereon), the funds on deposit in the Debt Service Reserve Accounts shall be transferred to the Debt Service Account and no further deposits shall be required to be made into the Debt Service Reserve Accounts.

In the event of the refunding or defeasance of any Bonds, the Trustee, if the Issuer so directs in writing, may withdraw from the Debt Service Reserve Accounts all or any portion of the amounts accumulated therein in the form of cash or securities and deposit such amounts with itself as Trustee for the Bonds being refunded or defeased to be held for the payment of the principal or Redemption Price, if applicable, and interest on the Bonds being refunded or defeased; provided that such withdrawal shall not be made unless (i) immediately thereafter the Bonds being refunded or defeased shall be deemed to have been paid pursuant to the Indenture, and (ii) the amount remaining in the Debt Service Reserve Accounts, after giving effect to the issuance of any obligations being issued to refund any Bonds being refunded and

C-18

the disposition of the proceeds thereof, shall not be less than the Debt Service Reserve Requirements for each Project Participant relating to the Outstanding Bonds. In the event of such refunding or defeasance, the Issuer may also direct the Trustee to withdraw from the Debt Service Reserve Accounts all or any portion of the cash or securities accumulated therein and deposit such amounts in any Fund or Account hereunder; provided that such withdrawal shall not be made unless items (i) and (ii) referred to hereinabove have been satisfied; and provided further, that, at the time of such withdrawal, there shall exist no deficiency in any Fund or Account held thereunder.

Surety Policy Provider Reimbursement. Anything in the Indenture to the contrary notwithstanding, if the Issuer or any Project Participant pays to or deposits with the Trustee any amount, the right or claim to which AGM is subrogated or otherwise entitled to reimbursement pursuant to the provisions of the Financial Guaranty Agreement or the related Gas Supply Contract, such amount will not be subject to the pledge and lien of the Trust Estate, and the Trustee will hold such amount for the express trust of AGM and promptly remit such amount to AGM.

Anything in the Indenture to the contrary notwithstanding, amounts received from a Project Participant following a draw on the related Project Participant Commodity Swap Reserve Policy or Debt Service Reserve Policy shall be applied first to reimburse AGM for all amounts due and owing to AGM on account of the draw on the Commodity Swap Reserve Policy and then to reimburse AGM for all amounts due and owing to AGM on account of the draw on the Debt Service Reserve Policy. Amounts received from such Project Participant remaining after such reimbursements shall be deposited into the Project Participant’s Revenue Account.

Gas Supplier. Anything in the Indenture to the contrary notwithstanding, if the Gas Supplier advances funds to the Issuer in respect of a GSC Payment Default (as defined in the Gas Purchase Agreement), the right or claim against the applicable Project Participant to which the Gas Supplier is subrogated or otherwise entitled to reimbursement pursuant to the provisions of the Gas Purchase Agreement will not be subject to the pledge and lien of the Trust Estate. Any such funds advanced by the Gas Supplier shall be deposited into the Commodity Swap Payment Account and withdrawn to make the Commodity Swap Payment coming due for the applicable Month allocable to the defaulting Project Participant.

Anything in the Indenture to the contrary notwithstanding, amounts received from a defaulting Project Participant following an advance of funds by the Gas Supplier in respect of a GSC Payment Default (as defined in the Gas Purchase Agreement) by such Project Participant shall be applied first to reimburse the Gas Supplier for all outstanding advances made by the Gas Supplier in respect of such GSC Payment Default. Amounts received from such Project Participant remaining after such reimbursements shall be deposited into the Project Participant’s Revenue Account.

Depositories of Moneys, Security for Deposits and Investment of Funds

Depositories. All moneys held by the Trustee and the Issuer under the provisions of the Indenture shall constitute trust funds and the Trustee and the Issuer may deposit such moneys with one or more Depositories in trust for said parties. All moneys deposited under the provisions of the Indenture with the Trustee, the Issuer or any Depository shall be held in trust and applied only in accordance with the provisions of the Indenture. The Funds provided therein to be held by the Issuer shall be held in the custody of the Issuer (or a Depository designated by the chief financial officer of the Issuer) who shall act as trustee of such Funds for purposes of the Indenture, and such Funds, other than the Bond Purchase Fund, the Administrative Fee Fund and the Rate Stabilization Fund, shall constitute part of the Trust Estate subject to a lien and charge in favor of the Holders.

C-19

Each Depository shall be a bank or trust company organized under the laws of any state of the United States or a national banking association having capital stock, surplus and undivided earnings of $50,000,000 or more, willing and able to accept the office on reasonable and customary terms and authorized by law to act in accordance with the provisions of the Indenture, and having the highest short- term rating by each Rating Agency then rating the Bonds at the time of deposit.

Deposits. All Revenues and moneys held by any Depository under the Indenture may be placed on demand or time deposit, if and as directed by the Issuer, provided that such deposits shall permit the moneys so held to be available for use at the time when needed. Any such deposit may be made in the commercial banking department of any Fiduciary which may honor checks and drafts on such deposit with the same force and effect as if it were not such Fiduciary. All moneys held by any Fiduciary, as such, may be deposited by such Fiduciary in its banking department on demand or, if and to the extent directed by the Issuer and acceptable to such Fiduciary, on time deposit, provided that such moneys on deposit be available for use at the time when needed. Such Fiduciary shall allow and credit on such moneys such interest, if any, as it customarily allows upon similar funds of similar size and under similar conditions or as required by law.

All moneys held under the Indenture by the Trustee, the Issuer or any Depository shall be held in such manner as may then be required by applicable Federal or State laws and regulations and applicable state laws and regulations of the state in which such Depository is located, regarding security for, or granting a preference in the case of, the deposit of public or trust funds or, in the absence of such laws and regulations, shall be either (i) continuously or fully insured by the Federal Deposit Insurance Corporation, or (ii) continuously and fully secured, to the extent not insured by the Federal Deposit Insurance Corporation, by lodging with the Trustee or the Issuer, as custodian, as collateral security, Qualified Investments having a market value (exclusive of accrued interest) not less than the amount of such moneys (or portion thereof not insured by the Federal Deposit Insurance Corporation); provided, however, that, to the extent permitted by law, it shall not be necessary for the Fiduciaries to give security under this subsection (b) for the deposit of any moneys with them held in trust and set aside by them for the payment of the principal or Redemption Price of or interest on any Bonds, or for the Trustee, the Issuer or any Depository to give security for any moneys which shall be represented by obligations or certificates of deposit purchased as an investment of such moneys.

All moneys deposited with the Trustee and each Depository shall be credited to the particular Fund or Account to which such moneys belong and, except as provided with respect to the investment of moneys in Qualified Investments, the moneys credited to each particular Fund or Account shall be kept separate and apart from, and not commingled with, any moneys credited to any other Fund or Account or any other moneys deposited with the Trustee, the Issuer and each Depository.

Investment of Certain Funds. Moneys held in the Debt Service Account and the Debt Service Reserve Account shall be invested and reinvested by the Trustee at the Written Direction of the Issuer to the fullest extent practicable in Qualified Investments which mature or are payable not later than the lesser of sixty (60) days or such times as shall be necessary to provide moneys when needed for payments to be made from such Accounts. Moneys held in the Revenue Fund, the Operating Fund and the Project Fund may be invested and reinvested in Qualified Investments which mature or are payable not later than such times as shall be necessary to provide moneys when needed for payments to be made from such Funds. Moneys in the Bond Purchase Fund, Rate Stabilization Fund and the General Fund may be invested in Qualified Investments. In any case, Qualified Investments in Funds or in Accounts therein shall mature not later than such times as shall be necessary to provide moneys when needed to provide payments from such Funds or Accounts. The Trustee shall make all such investments of moneys held by it in accordance with Written Directions received from any Authorized Officer of the Issuer. In making any investment in any Qualified Investments with moneys in any Fund or Account established under the

C-20

Indenture, the Issuer may instruct the Trustee to combine such moneys with moneys in any other Fund or Account, but solely for purposes of making such investment in such Qualified Investments. The Trustee shall have no responsibility to monitor the ratings of Qualified Investments after the initial purchase of such Qualified Investments.

The Trustee is authorized, if directed by the Issuer, to execute and deliver a Debt Service Fund Agreement, provided that amounts are invested in Qualified Investments. The Issuer and Trustee acknowledge and agree that no shortfalls in the Debt Service Account. The Issuer and Trustee acknowledge and agree that no shortfalls in a Debt Service Account resulting from investment in the Debt Service Fund Agreement shall be covered under any Debt Service Reserve Policy.

Interest (net of that which represents a return of accrued interest paid in connection with the purchase of any investment and, at the discretion of the Issuer, net of any amount thereof required to be rebated to the United States of America which, at the Written Direction of the Issuer shall be transferred to the Operating Fund to pay Rebate Payments) earned on any moneys or investments in such Funds and Accounts, other than any moneys or investments in the Redemption Account in the Debt Service Fund, the Operating Fund relating to Rebate Payments, the Debt Service Reserve Account and the Rate Stabilization Fund, shall be paid into the Revenue Fund. Interest earned on any moneys or investments in the Redemption Account in the Debt Service Fund, the Operating Fund relating to Rebate Payments and the Rate Stabilization Fund, shall be held in such respective Fund or Account for the purposes thereof. Whenever the Debt Service Reserve Account is in its full required amount, net income earned on any moneys or investments therein shall be transferred to the Revenue Fund.

Nothing in the Indenture shall prevent any Qualified Investments acquired as investments of or security for Funds held under the Indenture from being issued or held in book-entry form on the books of the Department of the Treasury of the United States.

Nothing in the Indenture shall preclude the Trustee from the acquisition or disposition of investments it holds in the Funds and Accounts established pursuant to the Indenture through its bond department as principal or agent; provided, however, that the Issuer may, in its discretion, direct that such moneys be invested or reinvested in a manner other than through such bond department.

To the extent any Qualified Investment is insured, guaranteed or otherwise supported by any secondary facility, the Trustee shall make a claim under such facility at such time as shall be required to receive payment thereunder not later than the date required to make any necessary deposit pursuant to the Indenture.

The Issuer agrees that broker confirmations of investments in connection with the Bonds are not required to be issued by the Trustee for each month in which a monthly statement is rendered by the Trustee.

Particular Covenants of the Issuer

Payment of Bonds. The Issuer covenants in the Indenture to duly and punctually pay or cause to be paid, but solely from the Trust Estate, the principal or Redemption Price, if any, of every Bond and the interest thereon, at the dates and places and in the manner provided in the Bonds, according to the true intent and meaning thereof.

Offices for Servicing Bonds. The Issuer covenants in the Indenture that it shall at all times maintain one or more agencies where Bonds may be presented for payment. The Issuer has appointed the Trustee as Bond Registrar and Paying Agent and the Trustee has accepted such appointments. The

C-21

Trustee shall at all times maintain one or more agencies where Bonds may be presented for registration or transfer and where notices, demands and other documents may be served upon the Issuer in respect of the Bonds or of the Indenture, and the Trustee shall continuously maintain or make arrangements to provide such services.

Further Assurance. The Issuer covenants in the Indenture that, at any and all times, the Issuer shall, as far as it may be authorized by law, comply with any reasonable request of the Trustee to pass, make, do, execute, acknowledge and deliver all and every such further resolutions, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary or desirable for the better assuring, conveying, granting, pledging, assigning and confirming all and singular the rights, Revenues and other moneys, securities and funds hereby pledged, or intended so to be, or which the Issuer may become bound to pledge.

Power to Issue Bonds and Pledge the Trust Estate. The Issuer represents in the Indenture that it is duly authorized under all applicable laws to create and issue the Bonds and to execute and deliver the Indenture and to pledge the Trust Estate, in the manner and to the extent provided in the Indenture. Except to the extent otherwise provided in the Indenture, the Trust Estate shall be free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto that is prior to, or of equal rank with, the security interest, the pledge and assignment created by the Indenture, and all action on the part of the Issuer to that end has been and will be duly and validly taken. The Issuer represents in the Indenture that the Bonds and the provisions of the Indenture are and will be the valid and legally enforceable special, limited obligations of the Issuer in accordance with their terms and the terms of the Indenture. The Issuer covenants in the Indenture that the Issuer shall at all times, to the extent permitted by law, defend, preserve and protect the pledge of the Revenues and other moneys, securities and funds pledged under the Indenture and all the rights of the Bondholders under the Indenture against all claims and demands of all Persons whomsoever.

Power to Fix and Collect Fees and Charges for the Sale of Gas. The Issuer represents and warrants in the Indenture that the Issuer has, and, to the extent permitted by law, shall have as long as any Bonds are Outstanding, good right and lawful power to fix, establish, maintain and collect fees and charges for the sale and transportation of Gas or otherwise with respect to the Gas Project, subject to the terms of the Gas Purchase Agreement and the Gas Supply Contracts.

Creation of Liens. The Issuer covenants in the Indenture that it shall not issue any bonds, notes, debentures or other evidences of indebtedness of similar nature, other than the Bonds, payable out of or secured by a security interest in or pledge or assignment of the Trust Estate and shall not create or cause to be created any other lien or charge on the Trust Estate; provided, however, that nothing contained in the Indenture shall prevent the Issuer from entering into a replacement Commodity Swap upon the terms and conditions set forth in the Indenture.

Fees and Charges. The Issuer covenants in the Indenture that it shall at all times fix, establish, maintain and collect fees and charges, as and to the extent permitted under the provisions of the Gas Purchase Agreement and the Gas Supply Contracts for the sale and transportation of Gas or otherwise with respect to the Gas Project which shall be sufficient to provide Revenues in each fiscal year of PEAK which, together with the other amounts available therefor, shall be equal to the sum of:

The amount estimated by the Issuer to be required to be paid during such fiscal year into the Operating Fund;

The amounts, if any, required to be paid during such fiscal year into the Debt Service Fund other than any such amounts which the Issuer anticipates shall be transferred from other Funds;

C-22

The amounts, if any, to be paid during such fiscal year into any other Fund established under the Indenture; and

All other charges whatsoever payable out of Revenues during such fiscal year.

Project Documents; Enforcement and Amendment. The Issuer covenants in the Indenture that it shall cause to be deposited in the Revenue Fund all amounts payable to it pursuant to the Commodity Swap, the Gas Supply Contracts, the Gas Purchase Agreement (except for any Additional Termination Payment) or otherwise payable to it with respect to the Gas Project or any part thereof. The Issuer covenants in the Indenture that it shall enforce the provisions of the Gas Supply Contracts, the Gas Supplier Guarantee, any Debt Service Fund Agreement Guaranty and all other contract or contracts entered into relating to the Gas Project, and duly perform its covenants and agreements thereunder. The Issuer covenants in the Indenture that it shall not consent or agree to or permit any termination or rescission of or amendment to or otherwise take any action under or in connection with any Gas Supply Contract or the Gas Purchase Agreement which will impair the ability of the Issuer to comply during the current or any future year with the provisions of the Indenture; provided that this covenant shall not prevent the Issuer from otherwise taking any action under or in connection with the Gas Supply Contracts which is expressly permitted pursuant to the provisions thereof. A copy of each Gas Supply Contract shall be filed with the Trustee, and a copy of any such amendment of the Issuer shall be filed with the Trustee.

The Issuer covenants in the Indenture that if funds have been drawn under the Commodity Swap Reserve Policies pursuant or under the Debt Service Reserve Policies pursuant to the Indenture in respect of a Payment Shortfall Amount (as defined therein), the Trustee shall immediately notify the Issuer of such drawing and the identity of the non-paying Project Participant(s) and the Issuer (or the Trustee, if the Issuer fails to do so) shall (i) provide notice of Suspension Status (as defined and provided for in the applicable Gas Supply Contract) and suspend all deliveries of all quantities of Gas to such Project Participant under such Gas Supply Contract, (ii) (A) notify such Project Participant that such Project Participant’s Gas Supply Contract may terminate as of the 20th day of the month following the Month payment was originally due, or (B) where the defaulting Project Participant’s Gas Supply Contract provides for termination thereof upon the third occurrence of Suspension Status during the Delivery Period, and such notice of Suspension Status described in clause (i) preceding constitutes such third occurrence of Suspension Status, notify such Project Participant that such Project Participant’s Gas Supply Contract shall be terminated as of the 20th day of the month following the Month payment was originally due, in accordance with the provisions of such Gas Supply Contract, and (iii) give a GSC Mandatory Gas Remarketing Notice on the 23rd day of the current Month, to be applicable for the next Month.

The Trustee shall apply any payments received from a nonpaying Project Participant following a Shortfall Payment Deadline under the Indenture as follows and in the following order: (x) to AGM until the related Commodity Swap Reserve Policy has been fully reinstated; (y) to AGM until the related Debt Service Reserve Policy has been fully reinstated; and (z) to the credit of the Revenue Fund. If, other than in the case described in clause (ii)(B) in the preceding paragraph, by the 20th day of the month following the Month payment was originally due, any draw of funds on a Commodity Swap Reserve Policy or a Debt Service Reserve Policy has not been fully repaid and the Trustee has not received notice of reinstatement of the related Commodity Swap Reserve Surety Policy and/or the related Debt Service Reserve Policy in the amount of such drawing(s) from AGM, plus any amounts necessary to satisfy any deficiencies in any of the Funds and Accounts established pursuant to the Indenture, the Issuer shall terminate or cause to be terminated such Gas Supply Contract as provided for therein. In the case described in clause (ii)(B) in the preceding paragraph, the Trustee shall terminate or cause to be terminated such Gas Supply Contract as provided for therein.

C-23

The Issuer covenants in the Indenture that it shall enforce the provisions of the Gas Purchase Agreement and duly perform its covenants and agreements thereunder and shall enforce the provisions of the Gas Supplier Guarantee. The Issuer shall promptly notify the Trustee in writing of any change in the Delivery Point Premium for purposes of (and any such term is defined in) the Gas Purchase Agreement and the Gas Supply Contracts, including the amount thereof and the commencement and ending dates therefor. The Issuer shall promptly notify the Trustee of any payment default that has occurred and is continuing on the part of the Gas Supplier under the Gas Purchase Agreement. The Issuer shall not consent or agree to or permit any assignment or rescission of or amendment to or otherwise take any action under or in connection with the Gas Purchase Agreement which will in any manner materially impair or materially adversely affect the rights of the Issuer thereunder or the rights or security of the Bondholders under the Indenture, except in connection with the issuance of refunding bonds. A copy of the Gas Purchase Agreement certified by an Authorized Officer of the Issuer shall be filed with the Trustee, and a copy of any such amendment certified by an Authorized Officer shall be filed with the Trustee.

In case of a Partial Termination, upon defeasance or redemption of Bonds in accordance with the Indenture the Issuer shall cause the amounts of any Debt Service Fund Agreement, the Commodity Swap, the related Commodity Swap Reserve Policy and the related Debt Service Reserve Policy to be reduced or cancelled, as applicable, in respect of the respective Gas Supply Contracts, and the Issuer and the Trustee shall enter into a Supplemental Indenture which shall effect concomitant reductions in the Commodity Swap Reserve Requirement and the Debt Service Reserve Requirement. In case of partial redemption (or defeasance) of Bonds in accordance with the Indenture, the Trustee shall proceed in the same manner as set forth in the preceding sentence, provided that the Trustee shall affect reductions in the respective investment agreements and swap agreements only if the Trustee shall have been provided with funds sufficient to pay to any counterparty all required breakage or termination fees arising from any required mark-to-market in connection with such reductions.

The Indenture expressly directs the Trustee, at certain times or following certain events, to issue certain notices and to take certain other actions that the Issuer is otherwise required or permitted to take under (i) the Gas Supply Contracts (including the suspension of Gas deliveries and termination of the applicable Gas Supply Contract upon the default of a Project Participant), (ii) the Gas Purchase Agreement (including notices to direct the remarketing of Gas and notice designating an “Early Termination Date” thereunder), (iii) the Financing Documents, in the case of a Partial Termination, and (iv) the Gas Supplier Guarantee (including requesting funds under such Gas Supplier Guarantee immediately upon an uncured failure by the Gas Supplier to pay). The Issuer has irrevocably appointed and directed the Trustee as its agent to issue such notices and to take such other actions at the times or upon the occurrence of the events described in the Indenture. The Trustee in exercising this agency power shall act pursuant to and in accordance with such standing, general or specific Written Directions of the Issuer as the Issuer may provide to the Trustee, and the Trustee shall have the authority to take any such actions as it deems necessary under the Gas Supply Contracts, the Gas Purchase Agreement, the Financing Documents and the Gas Supplier Guarantee to comply with such Written Directions. Notwithstanding the grant of agency power, the Issuer shall retain the right to exercise any rights for which it has appointed the Trustee as its agent in accordance with the foregoing; provided however, if an Event of Default has occurred, the Trustee shall have the right to notify the Issuer to cease exercising such rights and, upon receipt of such notice with a copy provided to the Project Participants under the Gas Supply Contracts, the Gas Supplier under the Gas Purchase Agreement, the respective counterparties, providers or other parties with respect to the Financing Documents and the guarantor under the Gas Supplier Guarantee, the Trustee shall have exclusive authority to exercise such rights, and to collect and apply all amounts payable thereunder, until such time as the Trustee issues a subsequent notice otherwise.

C-24

The Issuer covenants in the Indenture that it shall cause to be deposited in the Debt Service Account of the Debt Service Fund all Commodity Swap Receipts or other amounts payable to it pursuant to the Commodity Swap. The Issuer shall enforce the provisions of the Commodity Swap and duly perform its covenants and agreements thereunder. Except to the extent required to terminate a Commodity Swap pursuant to the terms of the Gas Purchase Agreement, the Issuer shall not consent or agree to or permit any termination or rescission of or amendment to or otherwise take any action under or in connection with any Commodity Swap which will impair the ability of the Issuer to comply with the provisions hereof during the current or any future year. In the event that any Commodity Swap is terminated by the Issuer pursuant to its terms and is not replaced as provided in the Indenture, the Issuer covenants and agrees that it will exercise its right to terminate the Gas Purchase Agreement in accordance with its terms. A copy of the Commodity Swap certified by an Authorized Officer shall be filed with the Trustee, and a copy of any such amendment certified by an Authorized Officer of the Issuer shall be filed with the Trustee.

In case of termination of a Gas Supply Contract as described in subsection (b) above which has not resulted in a Partial Termination (such terminated Gas Supply Contract for purposes of this subsection a “Terminated GSC”), the Issuer covenants and agrees that the Issuer shall not approve a new Project Participant as party to, or as transferee of, a Gas Supply Contract any portion of the Gas under which consists of any amount of the Daily Contract Quantity covered under the Terminated GSC, unless prior to or at the time of execution or assignment of such Gas Supply Contract such prospective Project Participant or the Issuer has caused the amounts held under the related Commodity Swap Reserve Account or the related Debt Service Reserve Account to be replenished (by the deposit of cash or a replacement Commodity Swap Reserve Policy and Debt Service Reserve Policy) so that the balances in such accounts are not less that the related Commodity Swap Reserve Requirement and the Debt Service Reserve Requirement, as applicable..

Accounts and Reports. The Issuer covenants in the Indenture that it shall keep or cause to be kept with respect to the Gas Project proper books of record and account (separate from all other records and accounts) in accordance with generally accepted accounting principles, as such may be modified by the provisions of the Indenture, in which complete and correct entries shall be made of its transactions relating to the Gas Project, the amount of Revenues and the application thereof and each Fund and Account established under the Indenture and relating to its costs and charges under the Gas Supply Contracts and any other contracts for the sale or purchase of Gas, and which, together with the Gas Purchase Agreement and all contracts and all other books and papers of the Issuer, including insurance policies, relating to the Gas Project, shall, subject to the terms thereof, at all times during regular business hours be subject to the inspection of the Trustee, AGM and the Holders of an aggregate of not less than 5% in principal amount of the Bonds then Outstanding or their representatives duly authorized in writing.

The Trustee shall advise the Issuer promptly after the end of each Month of the respective transactions during such Month relating to each Fund and Account held by it under the Indenture.

The Issuer has covenanted in the Indenture that it shall file with the Trustee (i) forthwith upon becoming aware of any Event of Default or default in the performance by the Issuer of any covenant, agreement or condition contained in the Indenture, a Written Certificate of the Issuer and specifying such Event of Default or default and (ii) within 180 days after the end of each fiscal year of the Issuer, commencing with the first fiscal year ending following the issuance of the first Series of Bonds to be issued hereunder, a Written Certificate of the Issuer signed by an appropriate Authorized Officer stating whether, to the best of such Officer’s knowledge and belief, the Issuer has kept, observed, performed and fulfilled its covenants and obligations contained in the Indenture and that there does not exist at the date of such certificate any default by the Issuer under the Indenture or any Event of Default or other event which, with the lapse of time specified in the Indenture, would become an Event of Default, or, if any

C-25

such default or Event of Default or other event shall so exist, specifying the same and the nature and status thereof.

The reports, statements and other documents required to be furnished to the Trustee pursuant to any provisions of the Indenture shall be available for the inspection of Bondholders at the office of the Trustee and shall be mailed to each Bondholder who shall file a written request therefor with the Issuer. The Issuer may charge each Bondholder requesting such reports, statements and other documents a reasonable fee to cover reproduction, handling and postage.

Payment of Taxes and Charges. The Issuer covenants in the Indenture that it shall from time to time duly pay and discharge, or cause to be paid and discharged, all taxes, assessments and other governmental charges, or required payments in lieu thereof, lawfully imposed upon the properties of the Issuer or upon the rights, revenues, income, receipts, and other moneys, securities and funds of the Issuer when the same shall become due (including all rights, moneys and other property transferred, assigned or pledged under the Indenture), and all lawful claims for labor and material and supplies, except those taxes, assessments, charges or claims which the Issuer shall in good faith contest by proper legal proceedings if the Issuer shall in all such cases have set aside on its books reserves deemed adequate by the Issuer with respect thereto.

Tax Covenants. The Issuer covenants in the Indenture that it shall not take any action, or fail to take any action, or permit any action to be taken on its behalf or cause or permit any circumstance within its control to arise or continue, if any such action or inaction would adversely affect the exclusion from gross income for federal income tax purposes of the interest on any of the Bonds under Section 103 of the Internal Revenue Code and the applicable Treasury Regulations promulgated thereunder. Without limiting the generality of the foregoing, the Issuer covenants that it will comply with the instructions and requirements of the Tax Agreement. This covenant shall survive payment in full or defeasance of the Bonds.

In the event that at any time the Issuer is of the opinion that it is necessary or helpful to restrict or limit the yield on the investment of any moneys held by the Trustee under the Indenture, the Issuer shall so instruct the Trustee in writing as to the specific actions to be taken, and the Trustee shall take such action as specified in such instructions.

The Issuer will immediately remit to the Trustee, at such time as required by the Trustee for deposit in the Rebate Account, any amount required to be rebated to the Internal Revenue Service pursuant to the provisions of Section 148 of the Code and the Indenture.

Notwithstanding any other provisions of the Indenture, if the Issuer shall provide to the Trustee an Opinion of Bond Counsel that any specified action required under Indenture is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on the Bonds, the Issuer and the Trustee may conclusively rely on such opinion in complying with the requirements of the Indenture and of the Tax Agreement, and the covenants thereunder shall be deemed to be modified to that extent.

General Covenants. The Issuer covenants in the Indenture that:

(a) the Issuer shall at all times maintain its existence and shall do and perform or cause to be done and performed all acts and things required to be done or performed by or on behalf of the Issuer under the provisions of the Act and the Indenture;

C-26

(b) the Issuer shall not consolidate or amalgamate with, or merge with or into, or transfer all or substantially all its assets to, or reorganize, reincorporate or reconstitute into or as, another entity unless, (i) prior to such event, the Issuer receives confirmation from the Commodity Swap Counterparty that such event does not trigger a termination event under the Commodity Swap and (ii) at the time of such consolidation, amalgamation, merger, transfer, reorganization, reincorporation or reconstitution, the resulting, surviving or transferee entity assumes all the obligations of the Issuer hereunder and under the Commodity Swap as described in of the Commodity Swap, the Bonds, the Gas Purchase Agreement, the Gas Supply Contracts and the Financial Guaranty Agreement;

(c) the Issuer shall not take any action, or fail to take any action, or permit any action to be taken on its behalf or cause or permit any circumstance within its control to arise or continue, if any such action or inaction would adversely affect the ratings on the Bonds; and

(d) upon the date of authentication and delivery of any of the Bonds, all conditions, acts and things required by law and the Indenture to exist, to have happened and to have been performed precedent to and in the issuance of such Bonds shall exist, have happened and have been performed, and the issue of such Bonds, together with all other obligations of the Issuer, shall comply in all respects with the applicable laws of the State.

Events of Default and Remedies

Events of Default. Any one or more of the following shall constitute an Event of Default under the Indenture:

(b) default shall be made in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable;

(c) a determination by the Trustee on the last Business Day of any Month, after the scheduled transfer of amounts to the Debt Service Account of the Debt Service Fund pursuant the Indenture (See “Establishment of Funds and Accounts and Application Thereof—Payments into Certain Funds and Accounts” in this Appendix C), including the transfer of any amount representing a draw on a Policy or a transfer of cash from a Debt Service Reserve Account, that the sum of the amounts on deposit in the Debt Service Account (including for purposes of this computation, interest accrued on such deposits and investment income that remains on deposit in such Account) is not at least equal to the cumulative Scheduled Debt Service Deposits for such Month as specified on Schedule B-II of Exhibit B of the Indenture;

(d) default shall be made by the Issuer in the performance or observance of any other of the covenants, agreements or conditions on its part contained in the Indenture or in the Bonds, and such default shall continue for a period of 60 days after written notice thereof specifying such default and requiring that it shall have been remedied and stating that such notice is a “Notice of Default” hereunder is given to the Issuer by the Trustee or to the Issuer and to the Trustee by the Holders of not less than 25% in principal amount of the Bonds Outstanding;

(e) default shall be made in the due and punctual payment of any Commodity Swap Payments when and as the same shall become due and payable;

C-27

(f) the Issuer shall commence a voluntary case or similar proceeding under any applicable bankruptcy, insolvency or other similar law now or in effect after the issuance of the Bonds (provided, however, that such event shall not constitute an Event of Default under the Indenture unless in addition, (i) the Issuer is unable to meet its debts with respect to the Gas Project as such debts mature or (ii) any plan of adjustment or other action in such proceeding would affect in any way the Revenues or the Gas Project), or shall authorize, apply for or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Gas Project, or any part thereof, and/or the rents, fees, charges or other revenues therefrom, or shall make any general assignment for the benefit of creditors, or shall make a written declaration or admission to the effect that it is unable to meet its debts with respect to the Gas Project as such debts mature, or shall authorize or take any action in furtherance of any of the foregoing;

(g) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Issuer in an involuntary case or similar proceeding under any applicable bankruptcy, insolvency or other similar law now or in effect after the issuance of the Bonds, (provided, however, that such event shall not constitute an Event of Default under the Indenture unless in addition, (i) the Issuer is unable to meet its debts with respect to the Gas Project as such debts mature or (ii) any plan of adjustment or other action in such proceeding would affect in any way the Revenues or the Gas Project), or a decree or order appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Gas Project, or any part thereof, and/or the rents, fees, charges or other revenues therefor, or a decree or order for the dissolution, liquidation or winding up of the Issuer and its affairs or a decree or order finding or determining that the Issuer is unable to meet its debts with respect to the Gas Project as such debts mature, and any such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; and

(h) there shall occur any other Event of Default specified in a Supplemental Indenture.

Accounting and Examination of Records after Default. The Issuer covenants in the Indenture that if an Event of Default shall have happened and shall not have been remedied, the books of record and accounts of the Issuer and all other records relating to the Gas Project shall at all times during regular business hours be subject to the inspection and use of the Trustee and of its agents and attorneys.

The Issuer also covenants in the Indenture that if an Event of Default shall have happened and shall not have been remedied, the Issuer, upon demand of the Trustee, shall account, as if it were the trustee of an express trust, for all Revenues and other moneys, securities and funds pledged or held under the Indenture for such period as shall be stated in such demand.

Application of Moneys after Default; Enforcement of Agreements(s). In the Indenture, the Issuer irrevocably appoints the Trustee as its agent to issue notices (including notices to direct the remarketing of Gas) and to take any other actions that the Issuer is required or permitted to take under the Gas Purchase Agreement, the Gas Supply Contracts and the Commodity Swap following an Event of Default under the Indenture. In exercising this agency power, the Trustee shall have the authority to take any such actions as it deems necessary under the Gas Purchase Agreement, the Gas Supply Contracts and the Commodity Swap. Notwithstanding the grant of agency power, the Issuer shall retain, in the absence of any conflicting action by the Trustee, the right to exercise any rights for which it has appointed the Trustee as its agent in accordance with the foregoing; provided however, if an Event of Default has occurred, the Trustee shall have the right to notify the Issuer to cease exercising such rights and, upon receipt of such notice with a copy provided to the Gas Supplier under the Gas Purchase Agreement, the

C-28

Project Participants under the Gas Supply Contracts or the Commodity Swap Counterparty under the Commodity Swap, the Trustee shall have exclusive authority to exercise such rights until such time as the Trustee issues a subsequent notice otherwise.

During the continuance of an Event of Default, the Trustee shall apply all moneys, securities, funds and Revenues received by the Trustee pursuant to any right given or action taken under the Events of Default provisions of the Indenture as follows and in the following order, provided that (I) moneys held in the Debt Service Account or the Debt Service Reserve Account shall not be used for purposes other than payment of the interest and principal or Redemption Price then due on the Bonds in accordance with clause (iii) below, and (II) moneys in the Commodity Swap Payment Account shall be used first to pay any Commodity Swap Payments then due:

(i) Expenses of Fiduciaries — to the payment of the reasonable fees, charges, expenses and liabilities of the Fiduciaries;

(ii) Operating Expenses — to the payment of the amounts required for Commodity Swap Payments, Operating Expenses and for the payment of such other amounts related to the Gas Project as are necessary in the judgment of the Trustee to prevent loss of Revenues. For this purpose the books of record and accounts of the Issuer relating to the Gas Project shall at all times during regular business hours be subject to the inspection of the Trustee and its representatives and agents during the continuance of such Event of Default; and

(iii) Principal or Redemption Price and Interest — to the payment of the principal and interest then due and unpaid upon the Bonds without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the Persons entitled thereto without any discrimination or preference except as to any difference in the respective rates of interest specified in the Bonds.

If and whenever all overdue installments of interest on all Bonds, together with the reasonable charges, expenses and liabilities of the Trustee, and all other sums payable or secured by the Issuer under the Indenture, including the principal and Redemption Price of and accrued unpaid interest on all Bonds which shall then be payable by declaration or otherwise, shall either be paid by or for the account of the Issuer, or provisions satisfactory to the Trustee shall be made for such payment, and all defaults under the Indenture or the Bonds shall be made good or secured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall be made therefor, the Issuer and the Trustee shall be restored, respectively, to their former positions and rights under the Indenture. No such restoration of the Issuer and the Trustee to their former positions and rights shall extend to or affect any subsequent default under the Indenture or impair any right consequent thereon.

Appointment of Receiver. The Trustee shall have the right, upon the happening of an Event of Default, to apply in an appropriate proceeding for the appointment of a receiver of the Gas Project.

Proceedings Brought by Trustee. If an Event of Default shall occur and shall not have been remedied, then and in every such case, the Trustee, by its agents and attorneys, may proceed, and upon written request of the Holders of not less than 25% in principal amount of the Bonds then Outstanding shall proceed, to protect and enforce its rights and the rights of the Holders of the Bonds under the Indenture forthwith by a suit or suits in equity or at law, whether for the specific performance of any covenant contained in the Indenture, or in aid of the execution of any power granted in the Indenture, or for an accounting against the Issuer as if the Issuer were the trustee of an express trust, or in the

C-29

enforcement of any other legal or equitable right as the Trustee, being advised by counsel, shall deem most effectual to enforce any of its rights or to perform any of its duties under the Indenture.

All rights of action under the Indenture may be enforced by the Trustee without the possession of any of the Bonds or the production thereof at the trial or other proceedings, and any such suit or proceedings instituted by the Trustee shall be brought in its name.

The Holders of not less than a majority in principal amount of the Bonds at the time Outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, provided that the Trustee shall have the right to decline to follow any such direction if the Trustee shall be advised by counsel that the action or proceeding so directed may not lawfully be taken, or if the Trustee in good faith shall determine that the action or proceeding so directed would involve the Trustee in personal liability or be unjustly prejudicial to the Bondholders not parties to such direction.

Upon commencing a suit in equity or upon other commencement of judicial proceedings by the Trustee to enforce any right under the Indenture, the Trustee shall be entitled to exercise any and all rights and powers conferred in the Indenture and provided to be exercised by the Trustee upon the occurrence of any Event of Default.

Regardless of the happening of an Event of Default, the Trustee shall have power to, but unless requested in writing by the Holders of a majority in principal amount of the Bonds then Outstanding and furnished with reasonable security and indemnity, shall be under no obligation to, institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient to prevent any impairment of the security under the Indenture by any acts which may be unlawful or in violation of the Indenture, and such suits and proceedings as the Trustee may be advised shall be necessary or expedient to preserve or protect its interests and the interests of the Bondholders.

Restriction on Bondholder’s Action. No Holder of any Bond shall have any right to institute any suit, action or proceeding at law or in equity for the enforcement of any provision of the Indenture or the execution of any trust under the Indenture or for any remedy under the Indenture, unless such Holder (i) shall have previously given to the Trustee written notice of the happening of an Event of Default, as provided in the Indenture, and the Holders of at least 25% in principal amount of the Bonds then Outstanding shall have filed a written request with the Trustee, (ii) shall have offered it reasonable opportunity, either to exercise the powers granted in the Indenture or by the Act or by the laws of the State or to institute such action, suit or proceeding in its own name, and (iii) shall have offered to the Trustee adequate security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused to comply with such request for a period of 60 days after receipt by it of such notice, request and offer of indemnity, it being understood and intended that no one or more Holders of Bonds shall have any right in any manner whatever by its or their action to affect, disturb or prejudice the pledge created by the Indenture, or to enforce any right under the Indenture, except in the manner therein provided; and that all proceedings at law or in equity to enforce any provision of the Indenture shall be instituted, had and maintained in the manner provided in the Indenture and for the equal benefit of all Holders of the Outstanding Bonds, subject only to the provisions of the Indenture regarding offices for servicing Bonds.

Nothing in the Indenture or in the Bonds contained shall affect or impair the obligation of the Issuer, which is absolute and unconditional, to pay, in accordance with the terms of the Indenture, at the respective dates of maturity and places therein expressed the principal of (and premium, if any) and interest on the Bonds to the respective Holders thereof, or affect or impair the right of action, which is also absolute and unconditional, of any Holder to enforce such payment of its Bond.

C-30

Remedies Not Exclusive. No remedy by the terms of the Indenture conferred upon or reserved to the Trustee or the Bondholders is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Indenture or existing at law or in equity or by statute on or after the date of execution and delivery of the Indenture.

Effect of Waiver and Other Circumstances. No delay or omission of the Trustee or any Bondholder to exercise any right or power arising upon the happening of an Event of Default shall impair any right or power or shall be construed to be a waiver of any such Event of Default or be an acquiescence therein; and every power and remedy given by the Indenture to the Trustee or to the Bondholders may be exercised from time to time and as often as may be deemed expedient by the Trustee or by the Bondholders.

The Holders of not less than a majority in principal amount of the Bonds at the time Outstanding, or their attorneys-in-fact duly authorized, may on behalf of the Holders of all of the Bonds waive any past default under the Indenture and its consequences, except a default in the payment of interest on or principal of or premium (if any) on any of the Bonds. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

Notice of Default. The Trustee shall promptly mail written notice of the occurrence of any Event of Default to each registered owner of Bonds then Outstanding at its address, if any, appearing upon the registry books of the Issuer.

Concerning the Fiduciaries

Trustee: Appointment and Acceptance of Duties. The Bank of New York Mellon Trust Company, N.A., is appointed as Trustee under the Indenture. The Trustee will be deemed to have accepted the duties and obligations imposed upon it by the Indenture and the trusts thereby created, but only upon the terms and conditions set forth in the Indenture.

Paying Agents: Qualifications, Appointment and Acceptance of Duties. The Issuer shall appoint one or more Paying Agents for the Bonds, and may at any time or from time to time appoint one or more other Paying Agents. All Paying Agents appointed shall be a bank or trust company organized under the laws of any state of the United States of America or a national banking association, having capital stock, surplus and undivided earnings aggregating at least $50,000,000, and authorized to exercise corporate trust powers and willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by the Indenture. The Trustee is appointed as initial Paying Agent under the Indenture.

Each Paying Agent shall signify its acceptance of the duties and obligations imposed upon it by the Indenture by executing and delivering to the Issuer and to the Trustee a written acceptance thereof.

Unless otherwise provided, the principal corporate trust offices of the Paying Agents are designated as the respective offices or agencies of the Issuer for the payment of the interest on and principal or Redemption Price of the Bonds.

Responsibilities of Fiduciaries. The recitals of fact in the Indenture and in the Bonds shall be taken as the statements of the Issuer and no Fiduciary will assume any responsibility for the correctness of the same. No Fiduciary makes any representations as to the validity or sufficiency of the Indenture or of any Bonds issued thereunder or as to the security afforded by the Indenture, and no Fiduciary shall incur any liability in respect thereof. The Trustee shall, however, be responsible for its representation contained in its certificate of authentication on the Bonds. No Fiduciary shall be under any responsibility or duty

C-31

with respect to the application of any moneys paid by such Fiduciary in accordance with the provisions of the Indenture to the Issuer or to any other Fiduciary. No Fiduciary shall be under any obligation or duty to perform any act which would involve it in expense or liability or to institute or defend any suit in respect thereof, or to advance any of its own moneys, unless properly indemnified. Subject to the provisions of the paragraph below, no Fiduciary shall be liable in connection with the performance of its duties under the Indenture except for its own negligence, or willful misconduct.

The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in the Indenture. In case an Event of Default has occurred (which has not been cured) the Trustee shall exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. Any provision of the Indenture relating to action taken or to be taken by the Trustee or to evidence upon which the Trustee may rely shall be subject to these provisions.

The Trustee shall not be considered in breach of or in default in its obligations under the Indenture or progress in respect thereto in the event of enforced delay (“unavoidable delay”) in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the project, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee.

The Trustee shall not be deemed to have knowledge of any Event of Default other than (i) failure to pay principal or interest on the Bonds when and as due, and (ii) failure to have at least the required amount in the Debt Service Account of the Debt Service Fund on the last day of any month (See “Events of Default and Remedies—Events of Default” in this Appendix C), until it shall have actual notice thereof at its office charged with the administration of its duties under the Indenture.

Evidence on Which Fiduciaries May Act. Each Fiduciary, upon receipt of any notice, direction, resolution, request, consent, order, certificate, report, opinion, bond, statement, facsimile transmission, electronic mail or other paper or document furnished to it pursuant to any provision of the Indenture, shall examine such instrument to determine whether it conforms to the requirements of the Indenture and shall be protected in acting upon any such instrument believed by it to be genuine and to have been signed or presented by the proper party or parties. Each Fiduciary may consult with counsel, who may or may not be counsel to the Issuer, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it under the Indenture in good faith and in accordance therewith.

Whenever any Fiduciary shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Indenture, such matter (unless other evidence in respect thereof be therein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate of the Issuer, and such certificate shall be full warrant for any action taken or suffered in good faith under the provisions of the Indenture upon the faith thereof; but in its discretion the Fiduciary may in lieu thereof accept other evidence of such fact or matter or may require such further or additional evidence as it may deem reasonable. Without limiting the generality of the

C-32

foregoing, the Trustee may at any time and for any matter request Written Direction from the Issuer; the Trustee shall have no obligation to act on such matter pending receipt of such Written Direction; and the Trustee shall have no liability to Holders of the Bonds or any other party for declining to act pending receipt of such Written Direction. Neither the Trustee, the Bond Registrar nor the Paying Agent shall be bound to recognize any Person as a Bondholder or to take any action at its request unless its Bond shall be deposited with such entity or satisfactory evidence of the ownership of such Bond shall be furnished to such entity.

The Trustee agrees to accept and act upon facsimile transmission of written instructions and/or directions pursuant to the Indenture provided, however, that: (a) subsequent to such facsimile transmission of written instructions and/or directions the Trustee shall forthwith receive the originally executed instructions and/or directions, (b) such originally executed instructions and/or directions shall be signed by a person as may be designated and authorized to sign for the party signing such instructions and/or directions, and (c) the Trustee shall have received a current incumbency certificate containing the specimen signature of such designated person.

Compensation. The Issuer shall pay to each Fiduciary from time to time reasonable compensation for all services rendered under the Indenture, and also all reasonable expenses, charges, legal fees and other disbursements, including those of its attorneys, agents and employees, incurred in and about the performance of their powers and duties under the Indenture, in accordance with the agreements made from time to time between the Issuer and the Fiduciary. The Issuer further agrees, to the extent permitted by applicable law, to indemnify and save each Fiduciary harmless against any liabilities which it may incur in the exercise and performance of its powers and duties under the Indenture and which are not due to such Fiduciary’s negligence or willful misconduct.

Certain Permitted Acts. Any Fiduciary, individually or otherwise, may become the owner of any Bonds, with the same rights it would have if it were not a Fiduciary. To the extent permitted by law, any Fiduciary may act as depository for, and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bondholders or to effect or aid in any reorganization growing out of the enforcement of the Bonds or the Indenture, whether or not any such committee shall represent the Holders of a majority in principal amount of the Bonds then Outstanding.

Resignation of Trustee. The Trustee may at any time resign and be discharged of the duties created by the Indenture by giving not less than 60 days’ written notice to the Issuer and mailing notice thereof to the Holders of Bonds then Outstanding, specifying the date when such resignation shall take effect, and such resignation shall take effect upon the day specified in such notice unless (a) previously a successor shall have been appointed by the Issuer or the Bondholders as provided in the Indenture, in which event such resignation shall take effect immediately on the appointment of such successor, or (b) a successor shall not have been appointed by the Issuer or the Bondholders as provided in the Indenture on such date, in which event such resignation shall not take effect until a successor is appointed.

Removal of the Trustee. The Trustee may be removed with or without cause by giving notice at least 30 days prior to the removal date and by an instrument or concurrent instruments in writing, filed with the Trustee, and signed by the Holders of a majority in principal amount of the Bonds then Outstanding or their attorneys-in-fact duly authorized, excluding any Bonds held by or for the account of the Issuer. So long as no Event of Default, or an event which, with notice or passage of time, or both, would become an Event of Default, shall have occurred and be continuing, the Trustee may be removed, with or without cause, by giving notice at least 30 days prior to the removal date and by a resolution of the Issuer filed with the Trustee and delivery of a Written Certificate of the Issuer to the Trustee with

C-33

respect to the foregoing. Notwithstanding the foregoing, any such removal of the Trustee shall not be effective until a successor Trustee has been appointed pursuant to the Indenture.

Appointment of Successor Trustee. In case at any time the Trustee shall resign or shall be removed or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee, or of its property, shall be appointed, or if any public officer shall take charge or control of the Trustee, or of its property or affairs, a successor Trustee may be appointed by the Issuer by a duly executed written instrument signed by an Authorized Officer, but if the Issuer does not appoint a successor Trustee within 60 days then by the Holders of a majority in principal amount of the Bonds then Outstanding, excluding any Bonds held by or for the account of the Issuer, by an instrument or concurrent instruments in writing signed and acknowledged by such Bondholders or by their attorneys-in-fact duly authorized and delivered to such successor Trustee, notification thereof being given to the Issuer and the predecessor Trustee. After such appointment of a successor Trustee, the Issuer shall mail notice of any such appointment by it or the Bondholders to the registered owners of the Bonds then Outstanding.

If no appointment of a successor Trustee shall be made pursuant to the foregoing paragraph within 60 days after the Trustee shall have given to the Issuer written notice as provided in the Indenture or after a vacancy in the office of the Trustee shall have occurred by reason of its inability to act, removal, or for any other reason whatsoever, the Trustee or the Holder of any Bond (in any case) may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Trustee.

Any Trustee appointed under the provisions of the Indenture in succession to the Trustee shall be a bank with trust powers, or a trust company organized under the laws of any state, or a national banking association with trust powers, and shall have capital stock, surplus and undivided earnings aggregating at least $50,000,000 if there be such a bank or trust company or national banking association willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by the Indenture.

Resignation or Removal of Paying Agent and Appointment of Successor. Any Paying Agent may at any time resign and be discharged of the duties and obligations created by the Indenture by giving at least 60 days’ written notice to the Issuer, the Trustee and the other Paying Agents. Any Paying Agent may be removed by giving notice at least 30 days prior to the removal date and by an instrument filed with such Paying Agent and the Trustee and signed by an Authorized Officer. Any successor Paying Agent shall be appointed by the Issuer and shall be a bank or trust company organized under the laws of any state of the United States of America or a national banking association, having capital stock, surplus and undivided earnings aggregating at least $50,000,000, and authorized to exercise corporate trust powers and willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by the Indenture.

In the event of the resignation or removal of any Paying Agent, such Paying Agent shall pay over, assign and deliver any moneys held by it as Paying Agent to its successor, or if there be no successor, to the Trustee. In the event that for any reason there shall be a vacancy in the office of any Paying Agent, the Trustee shall act as such Paying Agent.

Trustee’s Reliance. In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of the Indenture.

C-34

Trustee’s Liability. The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the provisions of the Indenture, in accordance with the direction of the Holders of the applicable percentage of Holders in principal amount of the Outstanding Bonds specified therein, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under the Indenture with respect to the Bonds. Provided, however, no provision of the Indenture shall be construed to relieve the Trustee from liability for its breach of trust, own negligence or willful misconduct.

Supplemental Indentures

Supplemental Indentures Not Requiring Consent of Bondholders. The Issuer and the Trustee may from time to time enter into a Supplemental Indenture or Indentures for any one or more of the following purposes:

• To cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in the Indenture;

• To insert such provisions clarifying matters or questions arising under the Indenture as are necessary or desirable and are not contrary to or inconsistent with the Indenture as theretofore in effect;

• To make any other modification or amendment of the Indenture which the Trustee shall in its sole discretion determine will not have a material adverse effect on the Bondholders and which does not otherwise require the consent of the Commodity Swap Counterparty;

• To add to the covenants and agreements of the Issuer in the Indenture, other covenants and agreements to be observed by the Issuer which are not contrary to or inconsistent with the Indenture as theretofore in effect;

• To add to the limitations and restrictions in the Indenture, other limitations and restrictions to be observed by the Issuer which are not contrary to or inconsistent with the Indenture as theretofore in effect;

• To authorize, in compliance with all applicable law, Bonds to be issued in the form of coupon Bonds registrable as to principal only and, in connection therewith, specify and determine the matters and things relative to the issuance of such coupon Bonds, including provisions relating to the timing and manner of provision of any notice required to be given under the Indenture to the Holders of such coupon Bonds, which are not contrary to or inconsistent with the Indenture as theretofore in effect, or to amend, modify or rescind any such authorization, specification or determination at any time prior to the first authentication and delivery of such coupon Bonds;

• To provide for the execution of a Commodity Swap in accordance with the provisions of the Indenture;

• To confirm, as further assurance, any security interest, pledge or assignment under, and the subjection to any security interest, pledge or assignment created or to be created by, the Indenture of the Revenues or of any other moneys, securities or funds;

• To modify any of the provisions of the Indenture in any other respect whatever, provided that (i) such modification shall be, and be expressed to be, effective only after all Bonds

C-35

Outstanding at the date of such Supplemental Indenture shall cease to be Outstanding, and (ii) such Supplemental Indenture shall be specifically referred to in the text of all Bonds authenticated and delivered after the date of such Supplemental Indenture and of Bonds issued in exchange therefor or in place thereof;

• To add to the Events of Default in the Indenture additional Events of Default;

• To add to the Indenture any provisions relating to the application of interest earnings on any Fund or Account under the Indenture required by law to preserve the exclusion of interest on Bonds issued from gross income for federal income tax purposes;

• To evidence the appointment of a successor Trustee;

• If the Bonds affected by such change are rated by a Rating Agency, to make any change upon receipt of confirmation from each Rating Agency then rating the Bonds that the rating of the Bonds will not be reduced or withdrawn as a result of such change; or

• To provide for the issuance of refunding bonds.

Supplemental Indentures Effective With Consent of Bondholders. At any time or from time to time, a Supplemental Indenture may be entered into by the Issuer and the Trustee subject to notice to and consent by Bondholders in accordance with and subject to the provisions of the Indenture, which Supplemental Indenture, upon compliance with the provisions of the Indenture, shall become fully effective in accordance with its terms.

General Provisions. The Indenture is not to be modified or amended in any respect except in accordance with provisions of the Indenture summarized under “Supplemental Indentures” (this section) and “Amendments” below.

No Supplemental Indenture is to be effective until the Issuer delivers to the Trustee an Opinion of Counsel stating that the Supplemental Indenture has been duly and lawfully delivered in accordance with the provisions of the Indenture, is authorized or permitted by the Indenture, and is valid and binding upon the Issuer and enforceable in accordance with its terms. The Trustee is to be fully protected in relying on an Opinion of Counsel that the supplemental Indenture is authorized or permitted by the provisions of the Indenture.

No Supplemental Indenture (or other amendment to the Indenture) shall change or modify (i) the priority of deposits to the Commodity Swap Account, (ii) the Commodity Swap Reserve Requirement, or the purposes to which amounts on deposit in the Commodity Swap Account may be applied, except as otherwise permitted in the Indenture, (iii) the priority of the application of funds following an Event of Default or (iv) the definition of Operating Expenses, unless in any case the prior written consent of the Commodity Swap Counterparty has been obtained. The Commodity Swap Counterparty shall have full right to enforce this provision.

Amendments

Powers of Amendment. In addition to amendments permitted by provisions of the Indenture summarized under “Supplemental Indentures” above, any modification or amendment of the Indenture and of the rights and obligations of the Issuer and of the Holders of the Bonds thereunder, in any particular manner, may be made by a Supplemental Indenture, with the written consent (given as provided in provisions of the Indenture summarized in this section under “Consent of Bondholders”, below),

C-36

(a) of the Holders of not less than a majority in principal amount of the Bonds then Outstanding, and

(b) in case the modification or amendment changes the terms of any Sinking Fund Installment, of the Holders of not less than a majority in principal amount of Outstanding Bonds of the particular maturity entitled to such Sinking Fund Installment.

If such modification or amendment will, by its terms, not take effect so long as any Bonds of any specified like maturity remain Outstanding (or are subject to mandatory purchase) the consent of the Holders of such Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of any calculation of Outstanding Bonds.

If such modification or amendment would adversely affect the priority or security for the Issuer’s obligation to make payments to any Commodity Swap Counterparty, such modification or amendment will be subject to the prior written consent of each affected Commodity Swap Counterparty.

No such modification or amendment is to permit a change in the terms of redemption or maturity of the principal of any Outstanding Bond or of any installment of interest thereon or a reduction in the principal amount or the Redemption Price thereof or in the rate of interest thereon without the consent of the Holder of such Bond, or is to reduce the percentages or otherwise affect the requirements for consent or change or modify any of the rights or obligations of any Fiduciary, the Gas Supplier or any Commodity Swap Counterparty without its written assent thereto. The Trustee may in its discretion determine whether or not in accordance with the foregoing powers of amendment Bonds would be materially affected by any modification or amendment of the Indenture and any such determination shall be binding and conclusive on the Issuer and all Holders of Bonds. The Holders of any Bonds may include the initial Holders thereof, regardless of whether such Bonds are being held for resale.

Consent of Bondholders. The Issuer is permitted to enter into a Supplemental Indenture making a modification or amendment permitted by the provisions summarized in this section under “Powers of Amendment,” above, to take effect when and as provided in provisions of the Indenture summarized in this subsection. A copy of such Supplemental Indenture (or brief summary thereof or reference thereto in form approved by the Trustee), together with a request to Bondholders for their consent thereto in form satisfactory to the Trustee, shall be mailed by the Issuer to Bondholders (but failure to mail such copy and request shall not affect the validity of the Supplemental Indenture when consented to as otherwise provided in the Indenture). Such Supplemental Indenture shall not be effective unless and until there shall have been filed with the Trustee:

(a) the written consents of Holders of the percentages of Outstanding Bonds specified in Powers of Amendment, above, and

(b) an Opinion of Counsel stating that such Supplemental Indenture has been duly and lawfully executed by the Issuer in accordance with the provisions of the Indenture, is authorized or permitted by the Indenture, and is valid and binding upon the Issuer and enforceable in accordance with its terms, subject to any applicable bankruptcy, insolvency or other laws affecting creditors’ rights generally and may state that no opinion is being rendered as to the availability of any particular remedy.

For purposes of clause (a) of the preceding sentence, the Bondholder consent shall be effective only if accompanied by proof ownership. See “Miscellaneous—Evidence of Signatures of Bondholders and Ownership of Bonds” in this Appendix C. Any such consent shall be irrevocable and shall be binding upon the Holder of the Bonds giving such consent and upon any subsequent Holder of such Bonds and of

C-37

any Bonds issued in exchange therefor (whether or not such subsequent Holder thereof has notice of such consent). A certificate or certificates executed by the Trustee is to be conclusive that the requisite consents have been given.

Exclusion of Bonds. Bonds owned or held by or for the account of the Issuer are not to be deemed Outstanding for the purpose of consent or other action or any calculation of Outstanding Bonds.

Enforcement of Gas Supply Contracts; Gas Purchase Agreement. Anything in the Indenture to the contrary notwithstanding, the Issuer shall not consent or agree to, or permit, any rescission of or amendment to or otherwise take any action under or in connection with any of the Gas Supply Contracts that will reduce the payments required thereunder (other than to terminate such Gas Supply Contract in accordance with its terms) or that will in any manner impair or adversely affect the rights of the Issuer thereunder or the rights or security of AGM, the Commodity Swap Counterparty or the Holders of the Bonds under the Indenture. Additionally, the Issuer shall not consent or agree to, or permit, any rescission of or amendment to or otherwise take any action under or in connection with the Gas Purchase Agreement or the Commodity Swap that will in any manner impair or adversely affect the rights, interests or security of AGM, the Commodity Swap Counterparty or the Holders of the Bonds under the Indenture, provided that the Gas Purchase Agreement may be amended without Bondholder consent upon receipt of a Rating Confirmation with respect to such amendment.

Miscellaneous

Defeasance. If the Issuer shall pay or cause to be paid, or there shall otherwise be paid, to the Holders of all Bonds the principal or Redemption Price, if applicable, and interest due or to become due thereon, at the times and in the manner stipulated in the Bonds and in the Indenture, then the pledge of all covenants, agreements and other obligations of the Issuer to the Bondholders, shall thereupon cease, terminate and be discharged and satisfied; provided, however, that the Indenture shall not be discharged until the Issuer shall have paid and satisfied all claims, charges and expenses that constitute Operating Expenses. In such event, the Trustee shall execute and deliver to the Issuer all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiduciaries shall pay over or deliver to the Issuer all moneys or securities held by them pursuant to the Indenture which are not required for the payment of principal or Redemption Price, if applicable, on Bonds not theretofore surrendered for such payment or redemption. If the Issuer shall pay or cause to be paid, or there shall otherwise be paid, to the Holders of any Outstanding Bonds the principal or Redemption Price, if applicable, and interest due or to become due thereon, at the times and in the manner stipulated therein and in the Indenture, such Bonds shall cease to be entitled to any lien, benefit or security under the Indenture, and all covenants, agreements and obligations of the Issuer to the Holders of such Bonds shall thereupon cease, terminate and be discharged and satisfied except for remaining rights of registration of transfer and exchange of Bonds.

Bonds for which moneys shall have been set aside and shall be held in trust by the Paying Agents (through deposit by the Issuer of funds for such payment or redemption or otherwise) for interest installments and for the payment or redemption of which at the maturity or redemption date thereof shall be deemed to have been paid within the meaning and with the effect expressed in the prior paragraph. In addition, any Outstanding Bonds shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed in the paragraph above upon compliance with the provisions of the paragraph below.

Any Outstanding Bonds shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect expressed this section if; (i) in case any of said Bonds are to be redeemed on any date prior to their maturity, the Issuer shall have given to the Trustee

C-38

irrevocable instructions accepted in writing by the Trustee to provide notice of redemption of such Bonds on said date (See “Redemption of Bonds—Notice of Redemption” in this Appendix C), (ii) there shall have been deposited with the Trustee either moneys in an amount which shall be sufficient, or Defeasance Securities the principal of and the interest on which when due will provide moneys which, together with the moneys, if any, deposited with the Trustee at the same time, shall be sufficient, to pay when due the principal or Redemption Price, if applicable, and interest due and to become due on said Bonds on or prior to the redemption date or maturity date thereof, and (iii) in the event said Bonds are not by their terms subject to redemption within the next succeeding 60 days, the Issuer shall have given the Trustee in form satisfactory to it irrevocable instructions to mail, as soon as practicable, a notice to the Holders of such Bonds. The Trustee shall, if so directed by the Issuer, apply moneys deposited with the Trustee in respect of such Bonds and redeem or sell Defeasance Securities so deposited with the Trustee and apply the proceeds thereof to the purchase of such Bonds and, the Trustee shall immediately thereafter cancel all such Bonds so purchased.

At or immediately prior to the time provision for payment shall be made in accordance with Indenture, there shall be delivered to the Trustee (i) a verification report of an independent certified public accountant, verification agent or similar expert to the effect that such securities or cash, together with investment earnings thereon, will be sufficient to pay principal, interest, and premium, if applicable, on the Bonds to redemption or maturity and (ii) an Opinion of Counsel stating that all conditions precedent to the satisfaction and discharge of the Indenture have been complied with.

Anything in the Indenture to the contrary notwithstanding, any moneys held by a Fiduciary in trust for the payment and discharge of any of the Bonds which remain unclaimed for six years after the date when such Bonds have become due and payable, either at their stated maturity dates or by call for earlier redemption, if such moneys were held by the Fiduciary at such date, or for six years after the date of deposit of such moneys if deposited with the Fiduciary after the said date when such Bonds became due and payable, shall, at the Written Request of the Issuer, be repaid by the Fiduciary to the Issuer, as its absolute property and free from trust and the Bondholders shall look only to the Issuer for the payment of such Bonds.

Evidence of Signatures of Bondholders and Ownership of Bonds. Any instrument to be signed by Bondholders under the Indenture may be in one or more similar instruments. Those instruments are to be signed by the Bondholders in person or by their attorneys appointed in writing. So long as DTC is the Holder of record of the Bonds, the instruments are to be signed by DTC. See “THE BONDS—Book- Entry System” in the Official Statement. Proof of (1) the execution of any such instrument, or of an instrument appointing any such attorney, or (2) the holding by any Person of the Bonds shall be sufficient for any purpose of the Indenture if made in the following manner, or in any other manner satisfactory to the Trustee:

(a) the fact and date of the execution by any Bondholder or its attorney of such instruments may be proved by a guarantee of the signature thereon by a bank or trust company or by the certificate of any notary public or other officer authorized to take acknowledgments of deeds, that the Person signing such request or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such signature, guarantee, certificate or affidavit shall also constitute sufficient proof of its authority; and

(b) The amount of Bonds transferable by delivery held by any Person executing any instrument as a Bondholder, the date of holding such Bonds, and the numbers and other

C-39

identification thereof, may be proved by a certificate, which need not be acknowledged or verified, in form satisfactory to the Trustee, executed by the Trustee or by a member of a financial firm or by an officer of a bank, trust company, insurance company, or financial corporation or other depository wherever situated, showing at the date therein mentioned that such Person exhibited to such member or officer or had on deposit with such depository the Bonds described in such certificate. Such certificate may be given by a member of a financial firm or by an officer of any bank, trust company, insurance company or financial corporation or depository with respect to Bonds owned by it, if acceptable to the Trustee. In addition to the foregoing provisions, the Trustee may from time to time make such reasonable regulations as it may deem advisable permitting other proof of holding of Bonds transferable by delivery.

The ownership of Bonds, and the amount, numbers and other identification, and date of owning the Bonds, is to be proved by the registry books.

Parties Interested in the Indenture. Nothing in the Indenture expressed or implied is intended or shall be construed to confer upon, or to give to, any Person or corporation, other than the Issuer, the Fiduciaries, the Holders of the Bonds, the Commodity Swap Counterparty as it relates to the Commodity Swap Account, AGM as it relates to the Policies, and any Depository, any right, remedy or claim under or by reason of the Indenture or any covenant, condition or stipulation thereof; and all the covenants, stipulations, promises and agreements in the Indenture contained by and on behalf of the Issuer shall be for the sole and exclusive benefit of the Issuer, the Fiduciaries, the Holders of the Bonds, the Commodity Swap Counterparty as it relates to the Commodity Swap Account, AGM as it relates to the Policies and any Depository. AGM is hereby explicitly recognized as a third party beneficiary of the Indenture.

Notwithstanding the foregoing of the prior paragraph, if at any time the Commodity Swap terminates and the PEAK Payments Period (as defined in the custodial agreement among the Issuer, the Commodity Swap Counterparty, the Trustee and The Bank of New York Mellon Trust Company, N.A. in its capacity as custodian under such agreement) applies, then during such PEAK Payments Period, (i) the Gas Supplier shall have the rights of the Commodity Swap Counterparty under the Indenture, including but not limited to such rights in respect of (A) application of amounts on deposit in the Commodity Swap Account pursuant to the Indenture and (B) the priority of the application of funds following an Event of Default as set forth in the Indenture, and (ii) for purposes of making payments out of the Commodity Swap Account, the Trustee and the Issuer agree to rely on calculations delivered by the Gas Supplier consistent with the calculations that the Gas Supplier would have made as calculation agent under the Commodity Swap if such Commodity Swap remained in effect.

No Recourse on the Bonds. No recourse shall be had for the payment of the principal of or interest on the Bonds or for any claim based thereon or on the Indenture against any member, director or officer of the Issuer or any member, director or officer of any Person executing the Bonds.

C-40

APPENDIX D

FORM OF CONTINUING DISCLOSURE UNDERTAKING

CONTINUING DISCLOSURE UNDERTAKING FOR THE PURPOSE OF PROVIDING CONTINUING DISCLOSURE INFORMATION UNDER SECTION (B)(5) OF RULE15c2-12

This Continuing Disclosure Undertaking (the “Agreement”) is executed and delivered by the Public Energy Authority of Kentucky (the “PEAK”) as of February 1, 2018 in connection with the issuance of its $825,000,000* Gas Supply Revenue Bonds, 2018 Series A (the “Bonds”). The Bonds are being issued pursuant to a Trust Indenture, dated as of February 1, 2018 (the “Indenture”), between PEAK and The Bank of New York Mellon Trust Company, N.A., as trustee.

In consideration of the issuance of the Bonds by PEAK and the purchase of such Bonds by the beneficial owners thereof, PEAK covenants and agrees as follows:

1. PURPOSE. This Agreement is executed and delivered by PEAK as of the date set forth below, for the benefit of the beneficial owners of the Bonds and in order to assist the Underwriter in complying with the requirements of the Rule (as defined below). PEAK represents that PEAK, Citizens Gas, Carrollton Utilities, City of Henderson, Metropolitan Utilities District (Omaha) and Patriots Energy Group (each, a “Material Participant” and, together with PEAK, the “Material Participants”), together with Jackson Energy Authority, Las Cruces, New Mexico, The Southeast Alabama Gas District and Clarke Mobile Counties Gas District, will be the only “obligated persons” within the meaning of the Rule with respect to the Bonds at the time the Bonds are delivered to the Underwriter. In the event that PEAK enters into a Gas Supply Contract (as defined in the Indenture) with any other person in accordance with the provisions of the Indenture, such person shall be an “Material Participant” (and referred to herein as an “Additional Material Participant”) for purposes of this Agreement if at the end of any fiscal year such Additional Material Participant accounts for more than 10% of the gas volumes that PEAK acquired and sold under the Gas Purchase Agreement (as defined in the Indenture).

2. DEFINITIONS. The terms set forth below shall have the following meanings in this Agreement, unless the context clearly otherwise requires.

“Annual Financial Information” means the financial information and operating data described in Exhibit I.

“Annual Financial Information Disclosure” means the dissemination of disclosure concerning Annual Financial Information and the dissemination of the Audited Financial Statements as set forth in Section 4.

“Audited Financial Statements” means the audited financial statements of PEAK and the other Material Participant prepared pursuant to the standards and as described in Exhibit I.

“Commission” means the Securities and Exchange Commission.

* Preliminary, subject to change.

D-1

“Dissemination Agent” means any agent designated as such in writing by PEAK and which has filed with PEAK a written acceptance of such designation, and such agent’s successors and assigns.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Final Official Statement” means the Final Official Statement dated [______], 2018, relating to the Bonds.

“Material Event” means the occurrence of any of the Events with respect to the Bonds set forth in Exhibit II that is material, as materiality is interpreted under the Exchange Act.

“Material Events Disclosure” means dissemination of a notice of a Material Event as set forth in Section 5.

“MSRB” means the Municipal Securities Rulemaking Board.

“Rule” means Rule 15c2-12 adopted by the Commission under the Exchange Act, as the same may be amended from time to time.

“Undertaking” means the obligations of PEAK pursuant to Sections 4 and 5.

“Underwriter” means each broker, dealer or municipal securities dealer acting as an underwriter in the primary offering of the Bonds.

3. CUSIP NUMBERS. The CUSIP Numbers of the Bonds are as follows:

DUE PRINCIPAL INTEREST April 1 AMOUNT RATE YIELD CUSIP

4. ANNUAL FINANCIAL, INFORMATION DISCLOSURE. Subject to Section 8 of this Agreement, PEAK hereby covenants that it will disseminate or cause to be disseminated on its behalf with respect to PEAK and each other Material Participant the Annual Financial Information and the Audited Financial Statements (in the form and by the dates set forth in Exhibit I) to the MSRB through its Electronic Municipal Market Access system. PEAK is required to deliver such information in such manner and by such time so that such entities receive the information by the dates specified.

If any part of the Annual Financial Information can no longer be generated because the operations to which it is related have been materially changed or discontinued, PEAK will disseminate a statement to such effect as part of the Annual Financial Information for the year in which such event first occurs.

If any amendment or waiver is made to this Agreement, the Annual Financial Information for the year in which such amendment is made (or in any notice or supplement provided to the MSRB) shall contain a narrative description of the reasons for such amendment and its impact on the type of information being provided.

5. MATERIAL EVENTS DISCLOSURE. Subject to Section 8 of this Agreement, PEAK hereby covenants that it will disseminate in a timely manner any Material Events Disclosure to the MSRB.

D-2

Notwithstanding the foregoing, notice of optional or unscheduled redemption of any Bonds or defeasance of any Bonds need not be given under this Agreement any earlier than notice (if any) of such redemption or defeasance is given to the owners of the Bonds pursuant to the Indenture.

6. CONSEQUENCES OF FAILURE OF PEAK TO PROVIDE INFORMATION. PEAK shall give notice in a timely manner to the MSRB of any failure to provide Annual Financial Information Disclosure when the same is due hereunder.

In the event of a failure of PEAK to comply with any provision of this Agreement, the beneficial owner of any Bond may seek mandamus or specific performance by court order, to cause PEAK to comply with its obligations under this Agreement. A default under this Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Agreement in the event of any failure of PEAK to comply with this Agreement shall be an action to compel performance.

7. AMENDMENTS; WAIVER. Notwithstanding any other provision of this Agreement, PEAK, by resolution authorizing such amendment or waiver, may amend this Agreement and any provision of this Agreement may be waived if:

(a) The amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of PEAK, or type of business conducted;

(b) This Agreement, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment or waiver does not materially impair the interests of the beneficial owners of the Bonds, as determined either by parties unaffiliated with PEAK (such as the Trustee), or by approving vote of Bondholders pursuant to the terms of the Indenture at the time of the amendment.

8. TERMINATION OF UNDERTAKING.

(a) The Undertaking of PEAK shall be terminated hereunder if PEAK shall no longer have any legal liability for any obligation on or relating to repayment of the Bonds under the Indenture.

(b) PEAK shall give notice in a timely manner to the MSRB if this Section is applicable.

9. DISSEMINATION AGENT. PEAK may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.

10. ADDITIONAL INFORMATION. Nothing in this Agreement shall be deemed to prevent PEAK from disseminating any other information, using the means of dissemination set forth in this Agreement or any other means of communication, or including any other information in any Annual Financial Information Disclosure or notice of occurrence of a Material Event, in addition to that which is required by this Agreement. If PEAK chooses to include any information from any document or notice of occurrence of a Material Event in addition to that which is specifically required by this Agreement, PEAK

D-3

shall have no obligation under this Agreement to update such information or include it in any future disclosure or notice of occurrence of a Material Event.

11. BENEFICIARIES. This Agreement has been executed in order to assist the Underwriter in complying with the Rule; however, this Agreement shall inure solely to the benefit of PEAK, the Dissemination Agent, if any, and the beneficial owners of the Bonds, and shall create no rights in any other person or entity.

12. RECORDKEEPING. PEAK shall maintain records of all Annual Financial Information Disclosure and Material Events Disclosure, including the content of such disclosure, the names of the entities with whom such disclosure was filed and the date of filing such disclosure.

13. ASSIGNMENT. PEAK shall not transfer its obligations under the Indenture unless the transferee agrees to assume all obligations of PEAK under this Agreement or to execute an Undertaking under the Rule.

14. GOVERNING LAW. This Agreement shall be governed by the laws of the Commonwealth of Kentucky.

PUBLIC ENERGY AUTHORITY OF KENTUCKY

By:______Name: Gerald L. Ballinger Title: President

D-4

EXHIBIT I

ANNUAL FINANCIAL INFORMATION AND TIMING AND AUDITED FINANCIAL STATEMENTS

“Annual Financial Information” means, (a) with respect to PEAK, financial information and operating data with respect to the operations of PEAK in connection with the acquisition and sale of the gas acquired by PEAK pursuant to the Gas Purchase Agreement (as defined in the Indenture) including: (i) the revenues, expenses, net revenues and debt service costs with respect to such gas; (ii) the total quantity of gas sold by PEAK, whether to Material Participants or others; and (iii) such other information and data as PEAK may deem necessary in order to comply with the requirements of the Rule, and (b) with respect to the Material Participants, an update to the information contained in the Official Statement in “APPENDIX A—CERTAIN INFORMATION REGARDING THE MAJOR PROJECT PARTICIPANTS.”

“Audited Financial Statements” means (a) PEAK’s audited financial statements for its most recent fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time (or such other accounting principles as may be applicable to PEAK in the future pursuant to applicable law); and (b) the Material Participants’ audited financial statements for their respective most recent fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time (or such other accounting principles as may be applicable to each of the Material Participants in the future pursuant to applicable law).

All or a portion of the Annual Financial Information and the Audited Financial Statements set forth above may be included by reference to other documents which have been submitted to the MSRB or filed with the Commission. If the information included by reference is contained in a final official statement, the final official statement must be available from the MSRB and PEAK shall clearly identify each such item of information included by reference.

Annual Financial Information exclusive of Audited Financial Statements will be provided to the MSRB by 270 days after the end of PEAK’s fiscal year (PEAK’s current fiscal year end is June 30) and 270 days following the end of each Fiscal Year of each of the Material Participants (which Fiscal Years end on June 30, with respect to Carrollton Utilities, City of Henderson and Patriots Energy Group, September 30 with regard to Citizens Gas, and December 31 with respect to Metropolitan Utilities District).

Audited Financial Statements as described above should be filed at the same time as the Annual Financial Information. If Audited Financial Statements are not available when such Annual Financial Information is filed, unaudited financial statements shall be included. Audited Financial Statements will be provided to the MSRB no later than 30 days after their availability to PEAK.

If any change is made to the Annual Financial Information as permitted by Section 4 of the Agreement, PEAK will disseminate a notice of such change as required by Section 4.

D-5

EXHIBIT II

EVENTS WITH RESPECT TO THE BONDS FOR WHICH MATERIAL EVENTS DISCLOSURE IS REQUIRED

Not later than 10 business days after the occurrence of such event:

(1) principal and interest payment delinquencies;

(2) non-payment related defaults, if material;

(3) unscheduled draws on debt service reserves reflecting financial difficulties;

(4) unscheduled draws on credit enhancements reflecting financial difficulties;

(5) substitution of credit or liquidity providers, or their failure to perform;

(6) adverse tax opinions, the issuance by the IRS of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds;

(7) modifications to the rights of holders of the Bonds, if material;

(8) bond calls, if material, and tender offers;

(9) defeasances;

(10) release, substitution, or sale of property securing repayment of the Bonds, if material;

(11) rating changes;

(12) bankruptcy, insolvency, receivership or similar event of the obligated person or similar event;

(13) consummation of a merger, consolidation or acquisition involving an obligated person or sale of all or substantially all of the assets of an obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such action or the termination of a definitive agreement relating to such actions, other than pursuant to its terms, if material;

(14) appointment of a successor or additional trustee or the change of name of a trustee, if material; and

(15) addition of an additional Material Participant that is also an “Obligated Person” under the terms of the Agreement.

D-6

APPENDIX E

PROPOSED FORM OF OPINION OF BOND COUNSEL

______, 2018

Public Energy Authority of Kentucky Carrollton, Kentucky

Public Energy Authority of Kentucky Gas Supply Revenue Bonds, 2018 Series A (Final Opinion)

Ladies and Gentlemen:

We have acted as bond counsel to Public Energy Authority of Kentucky (the “Issuer”), a Natural Gas Acquisition Authority formed under the Natural Gas Acquisition Authority Act of the Commonwealth of Kentucky (KRS §353.400 et seq.) (the “Act”) in connection with issuance of $______aggregate principal amount of Public Energy Authority of Kentucky Gas Supply Revenue Bonds, 2018 Series A (the “Bonds”), issued pursuant to the Act and the Trust Indenture, dated as of February 1, 2018 (the “Indenture”), between the Issuer and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”). The Indenture provides that the Bonds are issued for the purpose of financing the Cost of Acquisition of the Gas Project. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture.

In such connection, we have reviewed the Indenture, the Gas Purchase Agreement, the Gas Supply Contracts, the Commodity Swap, the Seller Swap (as defined in the Gas Purchase Agreement), the Tax Agreement, opinions of counsel to the Issuer, the Gas Supplier and the Trustee, certificates of the Issuer, the Gas Supplier, the Trustee and others, and such other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.

The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or any other matters come to our attention after the date hereof. Accordingly, this letter speaks only as of its date and is not intended to, and may not, be

E-1

relied upon or otherwise used in connection with any such actions, events or matters. Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Issuer. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents and of the legal conclusions contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the Indenture, the Gas Purchase Agreement, the Gas Supply Contracts, the Tax Agreement, including (without limitation) covenants and agreements compliance with which is necessary to assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal income tax purposes. We call attention to the fact that the rights and obligations under the Bonds, the Indenture, the Gas Purchase Agreement, the Gas Supply Contracts, the Tax Agreement and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases. We express no opinion with respect to any indemnification, contribution, liquidated damages, penalty (including any remedy deemed to constitute a penalty), right of set-off, arbitration, choice of law, choice of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained in the foregoing documents, nor do we express any opinion with respect to the state or quality of title to or interest in any of the assets described in or as subject to the lien of the Indenture or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such assets. Our services did not include financial or other non-legal advice. Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds and express no opinion with respect thereto.

Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:

1. The Bonds constitute the valid and binding limited obligations of the Issuer.

2. The Indenture has been duly executed and delivered by, and constitutes the valid and binding obligation of, the Issuer. The Indenture creates a valid pledge, to secure the payment of the principal of and interest on the Bonds, of the Revenues and any other amounts held by the Trustee in any fund or account established pursuant to the Indenture, except for the Rebate Account held in the Operating Fund, the Bond Purchase Fund, the Administrative Fee Fund and the Rate Stabilization Fund, subject to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture.

3. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986. Interest on the Bonds is not a specific preference item for purposes of the federal alternative minimum tax. Under the existing laws of the Commonwealth of Kentucky, interest on the Bonds is excluded from the gross income of the recipients thereof for Kentucky income tax purposes and such Bonds are exempt from ad valorem taxes by the Commonwealth of Kentucky and all political subdivisions thereof. We

E-2

express no opinion regarding other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Bonds.

Faithfully yours,

ORRICK, HERRINGTON & SUTCLIFFE LLP

E-3

[This page intentionally left blank]

APPENDIX F

BOOK–ENTRY SYSTEM

Introduction

Unless otherwise noted, the information contained under the caption “General” below has been provided by DTC. Neither the Issuer nor the Underwriter makes any representation as to the accuracy or the completeness of such information. The Beneficial Owners of the Bonds should confirm the following information with DTC.

NONE OF THE ISSUER, THE PROJECT PARTICIPANTS OR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (A) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC OR DTC PARTICIPANT; (B) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO THE OWNERS OF THE BONDS UNDER THE INDENTURE, (C) THE SELECTION BY DTC OR ANY DTC PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; (D) THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR INTEREST DUE TO THE OWNER OF THE BONDS; (E) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE OWNERS OF BONDS; OR (F) ANY OTHER MATTER REGARDING DTC.

General

The Bonds will be delivered in book-entry only form. DTC will act as Securities Depository for the Bonds. The Bonds will be issued as fully registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Bond certificate will be issued for each Maturity Date of the Bonds, each in the aggregate principal amount maturing on such date, and will be deposited with DTC.

DTC is a limited-purpose trust company organized under New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants,” and together with Direct Participants, the “DTC Participants”). DTC has Standard and Poor’s Ratings Services’ rating of AA+. The rules applicable to DTC and the DTC Participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org. The Issuer does not undertake any responsibility for and makes no

F-1

representations as to the accuracy or the completeness of the content of such material contained on DTC’s website as described in the preceding sentence, including, but not limited to, updates of such information or links to other Internet sites accessed through the aforementioned websites.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the DTC Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of DTC Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by DTC Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co, or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct Participants and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

While the Bonds are in the book-entry-only system, redemption notices will be sent to DTC. If less than all of the Bonds of a Series are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such Series to be redeemed.

Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC’s procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Trustee on the payable date in accordance with their respective holdings shown on DTC’s records. Payments by DTC Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such DTC Participant and not of DTC or the Trustee, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Trustee, disbursement of such payments to

F-2

Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of DTC Participants.

DTC may discontinue providing its services as Securities Depository with respect to the Bonds at any time by giving reasonable notice to the Issuer. Under such circumstances, in the event that a successor is not obtained, Bond certificates are required to be printed and delivered.

The Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor). In that event, Bond certificates will be printed and delivered.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer undertakes no responsibility for the accuracy thereof.

BENEFICIAL OWNERS WILL NOT RECEIVE PHYSICAL DELIVERY OF BONDS AND WILL NOT BE RECOGNIZED BY THE TRUSTEE AS OWNERS THEREOF, AND BENEFICIAL OWNERS WILL BE PERMITTED TO EXERCISE THE RIGHTS OF OWNERS ONLY INDIRECTLY THROUGH DTC AND THE DTC PARTICIPANTS.

F-3

[This page intentionally left blank]

APPENDIX G

AMORTIZED VALUE SCHEDULE OF THE BONDS

[This page intentionally left blank]

APPENDIX H

SCHEDULE OF TERMINATION PAYMENT

[This page intentionally left blank]

Public Energy Authority of Kentucky • Gas Supply Revenue Bonds, 2018 Series A