How the Top Gas Recovery Turbine Works

Blast Furnace Gas Electricity Power

A byproduct of the The high pressure of This electricity can be
steelmaking process is the blast furnace gas sold to the steel
produced at vast turns a turbine creating company for use in
quantities and electricity. the plant or to the
pressures at the Blast power grid, where
Furnace in a steel plant. other consumers can
purchase the
electricity.
 TERM SHEET

BORROWER SSC ENERGY DEVELOPMENT

DEVELOPER SAME AS ABOVE

GENERAL CONTRACTOR ZIMMERMAN AND JANSEN, GMBH

OR OTHER

CUSTOMER BETHLEHEM STEEL SPARROWS

POINT

LOAN AMOUNT $12,900,000

USE OF FUNDS EQUIPMENT AND INSTALLATION OF

TOP GAS RECOVERY TURBINE

RATE TO BE DETERMINED

LOAN FEE TO LENDER 1 POINT

CONTRACT OFF-BALANCE SHEET

ANNUAL BENEFIT $3,347,000 SEE ATTACHED

SCHEDULE

ANNUAL BENEFIT TO SSC $716,826-SEE ATTACHED

SCHEDULE

SECURITY
REQUIREMENTS CONTRACT (FIRST
THROUGH THE METER)
SECURITY INTEREST IN
EQUIPMENT
EXECUTIVE SUMMARY

Bethlehem Steel Corporation (BSC) is a well established integrated steel

manufacture that as five mills located throughout the United States. In January 1
998, BSC entered into a partnership with Shared Savings Contracts, Inc. (SSC),
a leading performance-based energy conservation consulting firm. The
partnership started with a pilot project at Bethlehem’s Sparrows Point Division
(SPD) and has since grown to have an SSC Project Team at each of
Bethlehem’s facilities. SSC is paid for its consulting services only when bottom
line energy reductions are achieved for their clients. The initial contract for the
SPD is about to expire, however, a contract extension for additional energy
projects has been executed and a contract for productivity improvements is in its
final stages of approval.

SSC assists its clients, such as BSC, in off-balance sheet financing and
development of capital projects. SSC will develop, finance, own, and sell the
electrical output of a Top Gas Recovery Turbine to SPD. Zimmermann & Jansen,
GMBH, a leading supplier and engineering firm, will be the general contractor for
the Top Gas Recovery Turbine Project.

The “L” Blast Furnace at SPD is a high capacity blast furnace. The furnace’s
world class technology includes hydraulically actuated bleeders, a Paul Wurth
bell-less charging system, a Bishoff gas cleaning system, and Hoogovens
Stoves. The furnace produces high- energy high-pressure byproduct gas. The
mechanical energy of the gas pressure is currently dropped through a pressure
regulating device within the system. The Top Gas Recovery Turbine Project
installs a pressure recovery turbine designed to convert the lost mechanical
energy into marketable electrical energy. The cost to install this project is
$11,200,000. The value of generated electricity is $3,347,000 annually.

SSC will own and contract the turbine’s output to SPD. Features of this loan
proposal include:
• The lender will be granted specific security in the components of the
project that will be isolated from the blanket security interests of BSC
primary lenders and debt instrument holders.
• Zimmermann & Jansen, GMBH has been selected as the general
contractor for this project. This firm has earned a worldwide reputation for
quality engineering with
• the steel industry and has a proven track record with the installation of Top
Gas Recovery Turbines throughout Europe.
• This system provides a 32.5% electrical load reduction from current blast
furnace operation.

This proposal is for a construction loan of $11,200,000 to be made to SSC for the
purpose of financing the cost of design, installation, and related costs of a Top
Gas Recovery Turbine Project.
The following pages contain information about principle participants, project
descriptions, an analysis of the financial benefit, and other supporting technical
and financial information.

Please address any inquires concerning this proposal to:

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

Bethlehem Steel Corporation (BSC) is a well-established integrated steel

manufacture that as five mills located throughout the United States. In January 1
998, BSC entered into a partnership with Shared Savings Contracts, Inc. (SSC),
a leading performance-based energy conservation consulting firm. The
partnership started with a pilot project at Bethlehem’s Sparrows Point Division
(SPD) and has since grown to have an SSC Project Team at each of
Bethlehem’s facilities. SSC is paid for its consulting services only when bottom
line energy reductions are achieved for their clients. The initial contract for the
SPD is about to expire, however, a contract extension for additional energy
projects has been executed and a contract for productivity improvements is in its
final stages of approval.

SSC assists its clients, such as BSC, in off-balance sheet financing and
development of capital projects. SSC will develop, finance, own, and sell the
electrical output of a Top Gas Recovery Turbine to SPD. Zimmermann & Jansen,
GMBH, a leading supplier and engineering firm, will be the general contractor for
the Top Gas Recovery Turbine Project.

The “L” Blast Furnace at SPD is a high capacity blast furnace. The furnace’s
world class technology includes hydraulically actuated bleeders, a Paul Wurth
bell-less charging system, a Bishoff gas cleaning system, and Hoogovens
Stoves. The furnace produces high- energy high-pressure byproduct gas. The
mechanical energy of the gas pressure is currently dropped through a pressure-
regulating device within the system. The Top Gas Recovery Turbine Project
installs a pressure recovery turbine designed to convert the lost mechanical
energy into marketable electrical energy. The cost to install this project is
$11,200,000. The value of generated electricity is $3,347,000 annually.

SSC will own and contract the turbine’s output to SPD. Features of this loan
proposal include:
• The lender will be granted specific security in the components of the
project that will be isolated from the blanket security interests of BSC
primary lenders and debt instrument holders.
• Zimmermann & Jansen, GMBH has been selected as the general
contractor for this project. This firm has earned a worldwide reputation for
quality engineering with the steel industry and has a proven track record
with the installation of Top Gas Recovery Turbines throughout Europe.
• This system provides a 32.5% electrical load reduction from current blast
furnace operation.

This proposal is for a construction loan of$1 1,200,000 to be made to SSC for the
purpose of financing the cost of design, installation, and related costs of a Top
Gas Recovery Turbine Project.
The following pages contain information about principle participants, project
description, an analysis of the financial benefit, and other supporting technical
and financial information,

Please address any inquires concerning this proposal to:

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

Shared Savings Contracts, Inc. is proposing to develop and finance the project
and operate the facility in order to sell generated electricity to Bethlehem Steel
Sparrows Point through a “first through the meter” priority purchasing
arrangement.

SSC is an innovative leader in providing energy and productivity savings for its
large industrial manufacturing partners. As a performance based contractor, SSC
is compensated only for achieving bottom-line savings associated with energy
and productivity improvements for its clients. The mission of SSC is to from long-
term partnerships with industrial manufacturers. This approach combines the
valuable resources and expertise of both SSC and its client-partner. The result is
a client who is more competitive and profitable in their respective marketplace.

SSC provides capital and develops equipment improvements to further enhance

savings at no cost to the client. These projects are structured to self amortize
from savings identified as arising. This allows the client-partners to invest their
time and capital into other core productivity concerns. The cumulative effect of
both efforts maximizes cost savings benefits because more projects can be
completed in a shorter period of time with fewer dollars required from the client’s
capital budget. Likewise, this off-balance sheet approach keeps the associated
capital assets off the books and increases bottom-line profitability for its partners.
SSC implements all these strategies and trains the plant employees to monitor
and maintain the improvements to insure continuous success.

Bethlehem Steel Sparrows Point spends $200 million per year on energy
consumption and productivity costs are even greater. Initial cost savings
initiatives have been implemented to date and SSC’s existing lender has
absorbed most upfront risks that may be associated with these projects. More
importantly, SSC has generated about $6,830,000 to date in cash receipts from
the Bethlehem Steel Sparrows Point project, thereby demonstrating the financial
strength of this partnership. The financial upside of this project remains and the
startup risk is gone, resulting in substantial value to the lender in the form of risk
mitigation.

SSC has invested approximately $4 million dollars in equity to date in Bethlehem

Steel Sparrows Point.
Bethlehem Steel — Sparrows Point

Encompassing more than 2,000 acres, the operations at Sparrows Point have
access to the Atlantic Ocean with their location on the Chesapeake Bay near
Baltimore, Maryland. The principal products of these operations are hot-rolled
and cold-rolled sheets, tin mill products, galvanized sheet and Galvalume®
sheet.
Principal facilities include a sintering plant, a large blast furnace, two basic
oxygen furnaces with an annual raw steel production capability of approximately
4 million tons, a two-strand continuous slab caster with a present annual
production capability of approximately 3.6 million tons, a 68-inch hot-strip mill,
two cold-reducing mills (56-inch and 48-inch), continuous and batch annealing
facilities, a galvanizing line, two Galvalume® lines, a 48-inch hot-dip galvanizing
line and tin mill facilities. Sparrows Point obtains coke from various commercial
sources. Sparrows Point continuously casts essentially 100 percent of its total
production volume. Nearly every production unit set records in 1997, while
improving quality and on-time deliveries for customers.

Raw Materials Handling

The two-berth ore pier, 1 ,020 feet long by 83 feet wide, and two stacking-
reclaiming machines have an unloading capacity of 1,000 tons per hour. The
reclaiming rate is 4,500 tons per hour.

Sinter Plant

A single-strand machiner has a capacity of4 million tons per year of sinter and
includes blending and screening areas.

Blast Furnace

“L” blast furnace, which holds many of the iron production records in the United
States, averages 9,700 tons per day of molten metal. The furnace received a
$100 million dollar re-line during the summer of 1999, enabling an almost
continuous (94.75%) furnace campaign through 2011. In September of2000,
Sparrows Point commissioned a $60 million dollar pulverized coal injection (PCI)
facility built, owned an operated by a subsidiary of Detroit Edison Energy
Services to provide an alternative, high BTU fuel for the furnace.

Basic Oxygen Furnaces

The BOF’s two vessels each have a capacity of 290 tons and produce a heat of
steel in about 40 minutes. The shop’s annual capacity is 4 million tons. During
summer of 1999, steelmaking completed $60 million dollars in upgrades to the
BOF. With the re-lining of #2 vessel, the BOF is targeting over 3 Y2 years of
continuous two vessel operation.
Continuous Slab Caster

The facility has two single stand casting machines. Number one caster has
recently been replaced with a 104” wide state-of-the-art line. The caster facility
now has a 4 million ton annual capacity.

Hot Strip Mill

The 68-inch hot strip mill is a series of individual mill stands that reduce slabs
into thin strip steel before being coiled. The mill also has offline skin pass and
slitting/trimming units.

Cold Sheet Mills

The new cold mill will produce cold rolled sheets primarily for the metal
construction and appliance industries. Sparrows Point has long been a leading
supplier to the metal construction industry, beginning with its pioneering
production and patenting of the zinc/aluminum coated Galvalume (TM).
Material in the thin-to-mid range of gauge will be used in prepainted roofing
panels and metal siding, steel studs, exposed lighting fixtures and metal
furniture. Material in the heaviest range is being marketed for access flooring
systems, air conditioning ductwork and large vehicles like buses.
The mill is capable of pickling 1 .7 million tons annually, with annual cold rolled
capacity of about 1 .5 million. About one million tons of annual output will be
coated before shipment to the customer. About 850,000 tons annually will be
coated at Sparrows Point’s Galvalume(TM) or galvanized coating lines installed
in 1993.

The new mill employs about 300 people who were extensively trained during the
past year to operate the highly sophisticated mill.

Tin Mills

Sparrows Point has Behtlehem’s sole production facility for tin mill products, and
it is one of the division’s most stable and valued markets, with shipments of
about 600,000 tons annually. Its products include tinplate, chrome plate, black
plate and tin-coated sheets. The most intensive and difficult to make of the
division’s products, tin and chrome plate required the greatest number of
production steps.

The multi-step process involves a pickling line, cold reduction on the 48-inch
tancem mill, a washing line, continuous or batch annealing, a skin mill, a double
reduction mill, two halogen tin-coating lines, a chrome line, and an automated
packaging line.
ZIMMERMANN & JANSEN, GMBH

Zimmermann & Jansen, GMI3H (Z&J) has over 125 years experience in
manufacturing large gas valves for high temperature applications in the Iron and
Steel, Chemical, Power Generating and Glass industries. The specialty valves
include Hot Blast, Control and Swing Goggle, Angle, Butterfly, 4-Way Ball and
Check Valves. In the integrated steel industry Z&J is the standard by which other
manufacturers are measured.

Zimmermann & Jansen also provide engineering solutions to problems identified

by the industries they support. One such solution is energy recovery plants for
the Iron and Steel Industry. Today, Z&J is the leading designer and developer of
turnkey Blast Furnace Top Gas Recovery Turbine Plants. The plants were
developed to recovery high-pressure energy that had historically been reduced
by regulating systems. These plants designed and installed by Z&J have over 20
years of operation in Blast Furnaces worldwide.
 ANNUAL PRO FORMA CASH
FLOW AT DIFFERENT SELLING
PRICES
PROPOSED FINANCIAL MODEL
BETWEEN LENDER AND
BORROWER
RE: Financial structure for Top Gas Recovery Turbine Project

Bethlehem Sparrows Point, MD

Borrower: A special purpose entity to be formed

by majority shareholder SSC Inc. to
own the assets of he project.
Lender:
Purpose: Funding for the construction of a 13.5
MW Top Gas Recovery Turbine at
Bethlehem Sparrows Point, MD steel
production facility (the “Project”).
Term: The term of the loan will begin upon
financial closing, which is expected to
coincide with the commencement of
construction of the Project.

The loan will terminate on the earlier of:

(A) {120} months from Financial
closing, and (B) the date on which all
principal and interest and any
additional amounts due under the
terms and conditions of the loan have
been paid.
Loan Amount: Requested loan amount is 11,200,000.
Upon opening the construction loan,
the project Special Purpose Entity will
draw $500,000 in partial repayment of
marketing, development and
engineering costs incurred for this
project. (SSC has invested more than
$4.5M in hard costs to date at
Sparrows Point).
Amortization : A percentage of all monthly “Net
Revenue” associated with the Project
will be applied to principal and interest.
Net revenue is equal to the total power
sales revenue and all other revenue
derived from the Project, minus all
direct operating costs and any
authorized revenues for major
maintenance. The amortization sweep
percentage will be 75% of net
revenues.
Interest Rate: The note will accrue interest at a
floating rate equal to Prime plus (four
percent (4%)). Interest on any funds
committed but not drawn during the
construction period shall be at an
annual equal to (two percent (2%)).
The rate is capped at 13%.
Bethlehem Bethlehem will purchase power from
Savings: the project at a discount from
the lower of:

(a) The monthly average of the actual

PJM hourly power price for power
purchased from the project.

(b) Bethlehem’s monthly average cost

of energy commodity power purchased
from the grid.

The discount to be applied is

established on a sliding scale from 5%
up to a cost described above of $30.00
per MKWH, to 10% at a cost described
above of $40.00 per MKWH. This is a
straight-line scale at 1/2% discount per
dollar increase in cost. The 10% rate
will apply to costs above $40.00, up to
a maximum, discounted cost to
Bethlehem of $40.00 per MKWH.
Marketing Rights: Borrower or Lender at it’s option shall
have the right to purchase all power
produced from the Project at a price
equal to the PJM hourly price for the
term of the loan agreement.
Security: Lender will receive a first priority
security interest in all assets of the
Project, including any and all contract
rights.
Continuing Following the term of the loan
Interest: agreement, Lender (or an of Lender)
shall receive a (1 0%) preferred
distribution from the Net Revenue of
the Project for a period of five (5) years
following the termination of the loan.
Expenses: Legal, title, and Project due diligence
expenses shall be paid for by the
Borrower. The Borrower requests that
these costs and construction interest
be added to the loan amount.
Commodity Price: Lender or borrower shall have the
option to hedge the power prices for all
power produced from the project.
Other Standard Other standard elements for
Terms: transactions of this type would be
included, including but not limited to
representations and warranties,
affirmative covenants, financial
covenants, negative covenants,
reporting requirements, events of
default, cash management
requirements and conditions precedent
to closing having to do with due
diligence.
Key Assumptions Assumptions about the terms of the
Bethlehem agreement with Bethlehem:
Contract:
Bethlehem commitment to supply all of
the blast furnace Gas from furnace “L”
to the Project.

Bethlehem commitment to purchase

the power output of the Project as the
first power through the meter for the
Bethlehem Sparrows Point, MD plant.

In the event Bethlehem fails to provide

such credit support, the Project would
have the right to sell power directly to
the PJM Power grid.
 Appropriate rights granted to the
Project for the use of the land and any
common facilities necessary for the
construction and operation of the
Project.
Key Assumptions In preparing this Letter of Interest,
Regarding the Aquila made certain assumptions about
EPC Contract: the terms of the agreement with EPC
contractor.

Guaranteed fixed price contract with

EPC contractor, with Applicable surety
bond to ensure project completion.

Satisfactory liquidated damages for

failure to meet project
Schedule and key performance criteria.

Demonstration of financial strength for

EPC contractor.
Total Project Cost Breakdown

Cost of Equipment $6,770,000

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

Installation $4,430,000

New TGRT Building

Electrical
Mechanical & Piping
Construction Engineering
Start-up & Training
Contingency (15%)
Total Project Revenue Breakdown

Annual Power Production

Megawatt / Hour 13.5
Operating Time 91.3 %
Annual Megawatts 107,967

Revenue
Unit Price $31.00
Total Value $3,347,000
Bethlehem Benefit (9.5%) $ 317,965
SSC Income $3,029,035

Expenses
Debt Service $1,912,209
Maintenance $ 150,000
Engineer $ 150,000
Insurance $ 100,000

Total $2,312,209

Net Benefit to SSC

Annual $ 716,826
PROJECT DESCRIPTION

PROJECT TITLE: TOP GAS RECOVERY TURBINE

A. Current Conditions:

The blast furnace produces a combustible byproduct gas during operation. The
Blast Furnace Gas (BEG) is produced at approximately 3 1 psia and is projected
to have an average flowrate of325,000 SCFM with Pulverized Coal Injection fully
functioning. The BFG is cleaned using a Bishoff Scrubber. The cleaning process
uses 1.5psi of BFG pressure. Pennwood Power Station is designed to utilize the
BFG at 1 .5-psia. Piping losses between the Blast Furnace and Pennwood Power
Station account for another 1.0- psi of pressure drop.

The remaining 27-psia must be dropped since the piping between the Blast
Furnace and Pennwood cannot support the high-pressure gas. Currently the
pressure is dropped across the RS elements of the Bishoff Scrubber. This
pressure drop is a significant energy loss.

The lost energy will be recovered with the installation of a 13.5 MKWH Top Gas
Recovery Turbine. The turbine converts high-pressure BFG into mechanical
energy, which rotates a generator to make electrical power. The low-pressure
outlet of the turbine is supplied to Pennwood and BF Stoves for combustion.
Bethlehem Steel first investigated the installation of a Top Gas Recovery Turbine
in 1982. Due to contractual limitations with the local Power Company and high
capital costs, this project has only reached the Engineering Proposal level.
Recent changes in the electrical contract have created opportunity for new
generation capability at Sparrows Point. Additionally, the turnkey cost of the Top
Gas Recovery Turbine is 60% of the original costs.

B. Project Scope:

The turbine will be installed in a building to be erected southeast of the “L” Blast
Furnace. The installation of the Turbine will not require any additional Blast
Furnace outages. This area has been allocated for such an installation. BFG
main tap connections, after the Bishoff scrubber, were installed during the
1980’s, to facilitate this project. The rated turbine output is sized for the new
Pulverized Coal Injection (PCI) operation. The electrical connections will be
provided through the existing Steel Side Substation.

The operation of the turbine including start-up and shutdown does not impact
Blast Furnace operations. A Programmable Logic Controller signals the transition
of the BFG Main By-pass through these sequences. Additionally, the required
auxiliary services (industrial water, nitrogen, sewer connection, and etc.) are
available and within system limits.
C. Benefit Analysis:

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

Total Generation — 115 MKWH

Blast Furnace and Turbine Availability —91.3%

Total MKWH = Generation * Availability * Hours/Year

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

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

Additional benefits of the Top Gas Recovery Turbine include:

Improved Control of Blast Furnace Top Pressure

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

These are collateral benefits that provide significant improvement to “L” Blast
Furnace efficiency and performance. These benefits are not included in the
financial calculations of this project.

D. Implementation Time Frame

Zimmermann & Jansen utilizing a complete turnkey approach will provide turbine
installation. A Build — Operate — Transfer (BOT) method will utilize the following
timeline:
Build — 18 months to complete the turnkey installation
Operate — 8-10 years of SSC controlled operation
Transfer — Options
o Bethlehem Purchase Turbine
o SSC Continue to Operate Turbine
o Third Party Purchase and Operate Turbine

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