"Team China II - Yiyang Power Company, LLC", is the California corporation which entered into a joint venture agreement with the County of Yiyang, located in Henan Province to build China's currently largest clean air, environmentally friendly power plant. The Project demonstrates China's commitment to cleaning the environment by using the newest technologies available.

The Joint Venture partners include Team China/California, Andrews International and Sceptre International. The Chinese partnerships includes the Cheng Cheng Power Co., managed by Mr. Liu Wo Cheng. The USA ownership team includes Dr. Jay Roland, Andy Lin, Annie Chan and Patrick D. Mulcahy, all of Southern California.

Environment. The project will design, engineer and construct a 2 X 55 MW (110 MW) power plant using the modern circulating fluidized bed ("CFB") boiler technology. This type of boiler extracts most of the pollutants generally associated with an electric power project using coal. The combination of the new boiler technology with electrostatic precipitator pollution control devices results in a 99.7% reduction in the particulate emissions. The CFB boilers have a desulfurization efficiency of more than 85%. The power plant uses low quality waste coal which is very abundant in the local area, bringing value to this local resource, which is a positive for the local economy. The power plant will also use the most advanced waste water treatment processes. Ash will be recycled for road building and other uses.

Approvals. The Project received approval from the Henan Provincial Planning Commission in August of 1996. The most significant approval came from the State Planning Development Commission (SDPC) (Beijing) in December of 1997, and the Project was the sole joint venture in energy to be approved that year. In April 1998, the revised Feasibility Report was prepared by the North China Electric Power Design Institute and approved by Henan Province in May and the SPDC in July.

The Project received the original SDPC final approval under an exception category of the China State Power Corporation for environmentally friendly, clean air power projects. The Project conforms to Chinese laws regarding Sino-foreign joint ventures to build, own, operate, and transfer infrastructure projects (BOOT). At the end of 20 years, the ownership of the Project will be transferred to the Chinese government.

Power Purchase Contract. The Power Purchase Contract (PPC) was signed between Team China II and the Henan Electric Power Corporation (HEPC) on September 7th, 2000, with a contract term of 20 years. The HEPC has agreed to a take or pay commitment to annually purchase a base amount of 4,500 hours of the net electrical output that is generated by the Project for a period of 12 years after the start of commercial operation. After this period and for the remaining contract term, the minimum take obligation will be fixed according to the average load of power plants, which are similar in size and environmental standards in the Province. During the term of the contract, as an incentive for the HEPC to take energy in excess of the minimum take, the HEPC will share the net profit for this excess energy on a 50/50 basis. Due to the environmental nature of the Project, the HEPC will provide all remuneration and benefits associated with preferential policies, existing now and in the future. The combination of these effects should cause an appreciable additional purchase of energy over and beyond the minimum take obligation. The minimum take provision guarantees that sufficient revenue will be generated to retire the bank debt with interest and ensure the equity investors of a reasonable return on their investment.

Tariff. The Tariff will be based on the minimum take and calculated using a cost plus profit formula. The pricing formula allows for a tariff that includes the pass through of operational expenses, fuel costs, debt service, depreciation, plus a reasonable profit to foreign equity capital. The formula also allows for an annual adjustment resulting from changes in Chinese taxes, currency exchange rates, fuel cost, labor cost, inflation and changes affecting any of the price formula components.

Equity. The targeted total capital cost of the Project is approximately US $83.6-million, which is divided one-third (1/3rd) equity investment and two-third's (2/3rd) long-term bank debt. The equity investment (Registered Capital) is approximately US $ 25-million. The Luoyang Chengcheng Power Co., Ltd., the Chinese partners of Team China II will provide approximately US $4-million, which is 15% of the Registered Capital. The remaining 85% will be placed by the foreign sponsor.. This funding will be in an amount up to the approved foreign Registered Capital of the Cooperative Joint Venture Agreement. The amount of foreign equity Registered Capital is approximately US $ 23.6-million.

Bank Debt. The request for debt from the Chinese bank is approximately US $55.7-million which will be repaid over a term of 10 years. The gross revenue of the project (approx. US $20-million annually) provides a strong Debt Coverage Ratio (over 1.74). The revenues stated in the Project Pro Forma are the minimum take obligation of the HEPC. The owners anticipate a higher annual purchase of electricity over the minimum take. The Power Purchase Contract guarantees that enough revenue will be secured to retire the bank debt with interest and ensure the equity investors of a reasonable return on their investment.

Project Financial Structure.

Construction - Engineering/Procurement/Construction (EPC). Contract will be entered into with CMEC (China Machinery & Construction Co./Beijing) one of China's most experienced power plant construction companies to design, procure the equipment and construct the Project. The Instrumentation and Controls system will be made in the USA and exported to China. The CFB boiler and the turbines will be made in China with USA technology. The technology for the boilers, while more expensive, is the most advanced system available to reduce emissions and efficiently burn waste coal.

Completion. Construction and testing of both 55MW units (110MW total) will be completed within 24 months after financial closing. The electricity produced by the Plant will be dispatched to the Henan Provincial Power Bureau grid and to the Central China Power Group grid via transmission lines. CMEC, under terms of their turnkey construction agreement, will guarantee the timely completion of the project, and will guarantee with offshore liquidated damages insurance, the output for one year after operation of both boilers.

Profile. The Project received State Development & Planning Commission (Beijing) approval under an exception category of the China State Power Corporation for smaller size plants, utilizing CFB boilers to reduce environmental impact. Specifically, plants whose source of energy utilizes more than 50% waste fuel. The Project is designed to use the abundant local waste coal (less than 3,000 kcal/kg quality) and is located in the heart of coal resources which allows operation as a "mine-mouth" facility. The advanced CFB boiler technology assures that the Plant will meet or exceed China's updated environmental requirements.

Relationships. Strong political and personal relationships have been developed between Team China II and the local partners in Yiyang County, Zhengzhou and Beijing. The Project has received all of the appropriate County, Province and State approvals and consents. A number of American, German and Chinese based technical, legal, and financial advisors have been associated with Team China II to contribute towards the overall development work.

The Yiyang Sunshine project was featured at the "China Energy 2000" Conference in Beijing and Shanghai in June of this year, sponsored by the California Energy Commission, the U.S. Department of Energy, China Energy Conservation Assoc. (Beijing), the Shanghai Energy Conservation Saving Centre and the Shanghai Economic Commission. Team China II representatives presented the numerous environmental, political and socio-economic advantages of the new clean air technology for this power plant.

In June 2001, The Yiyang Sunshine Project received a funding grant from the International Energy Fund from the California Energy Commission. This government endorsement of the Project is another important economic and political benchmark for this important clean-air, environmentally friendly power project in China.