MASTER RELEASE AGREEMENT AND AMENDMENT TO UNDERTAKINGS

Exhibit 10.2

Execution Version

MASTER RELEASE AGREEMENT

AND AMENDMENT TO UNDERTAKINGS

This MASTER RELEASE AGREEMENT AND AMENDMENT TO UNDERTAKINGS (the “ Agreement ”) is entered into as of January 24, 2005, by and among (i) TECO-PANDA GENERATING COMPANY, L.P., (“ TPGC ”) by its General Partner, TPS GP, Inc.; (ii) TECO ENERGY SOURCE, INC. (“ TES ”); (iii) TECO ENERGY, INC., (“ TECO ”) for itself and its affiliates; (iv) UNION POWER I, LLC; (v) UNION POWER II, LLC; (vi) PANDA GILA RIVER I, LLC; (vii) PANDA GILA RIVER II, LLC; (viii) TRANS-UNION INTERSTATE I, LLC; (ix) TRANS-UNION INTERSTATE II, LLC; (x) UNION POWER PARTNERS, L.P., (“ UPP ”) by its General Partner, Union Power I, LLC; (xi) PANDA GILA RIVER, L.P., (“ PGR ”) by its General Partner, Panda Gila River I, LLC; (xii) TRANS-UNION INTERSTATE PIPELINE, L.P., (“ Trans-Union ”) by its General Partner, Trans-Union Interstate I, LLC; (xiii) UPP FINANCE CO., LLC, (“ Finance Co. ”) by its managing member, UPP; (xiv) CITIBANK, N.A., as administrative agent for the Banks (the “ Administrative Agent ”); and (xv) the financial institutions party hereto.

RECITALS

WHEREAS , UPP, as borrower, Citibank, N.A., as Administrative Agent (the “ UPP Administrative Agent ”), Societe Generale, as LC Bank, and each of the financial institutions party thereto (the “ UPP Banks ”) are parties to that certain Union Power Project Credit Agreement dated May 31, 2001 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof, the “ Union Power Credit Agreement ”), pursuant to which the UPP Banks made loans to UPP from time to time, which loans and other Obligations are secured by first priority liens on, among other things, all or substantially all of the assets of UPP;

WHEREAS , (i) PGR, as borrower, Citibank, N.A., as Administrative Agent (the “ PGR Administrative Agent ” and together with the UPP Administrative Agent, the “ Administrative Agent ”), Societe Generale, as LC Bank, and each of the financial institutions party thereto (the “ PGR Banks ” and together with the UPP Banks, the “ Banks ”) ¹ are parties to that certain Gila River Project Credit Agreement dated May 31, 2001 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof, the “ Gila River Credit Agreement ”, and together with the Union Power Credit Agreement, the “ Original Credit Agreements ”); and (ii) PGR, as borrower, Citibank, N.A., as Administrative Agent, Societe Generale, as LC Bank, and each of the financial institutions party thereto are parties to that certain Gila River Project Senior Project Letter of Credit Agreement, dated as of May 27, 2004 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof, the “ Gila River Project Senior L/C Credit Agreement ”, and together with the Original

Credit Agreements, the “ Credit Agreements ”), pursuant to which the PGR Banks made loans to PGR from time to time, which loans and other Obligations are secured by first priority liens on, among other things, all or substantially all of the assets of PGR;

WHEREAS , TECO, UPP, and Citibank, N.A., as Administrative Agent under the Union Power Credit Agreement, are parties to that certain Amended and Restated Construction Contract Undertaking, dated as of May 14, 2002 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof, the “ Union Power Undertaking ”);

WHEREAS , TECO, PGR, and Citibank, N.A., as Administrative Agent under the Gila River Credit Agreement, are parties to that certain Amended and Restated Construction Contract Undertaking, dated as of May 14, 2002 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof, the “ Gila River Undertaking ”, and together with the Union Power Undertaking, the “ Undertakings ”);

WHEREAS , (i) UPP is the lessee of the Union Power Station; (ii) Trans-Union is the owner of a certain pipeline transporting natural gas to the Union Power Station (the “ Pipeline ” and together with the Union Power Station, the “ Union Project ”); (iii) Finance Co. is the entity formed by UPP to facilitate the Act 9 Bond financing at the Union Project; and (iv) PGR is the owner of the Gila River Power Project (the “ Gila River Project ” and together with the Union Project and Pipeline, the “ Projects ”);

WHEREAS , UPP, PGR, Trans-Union and Finance Co. (each a “ Project Company ,” and collectively, the “ Project Companies ”) are all indirect subsidiaries of TPGC, which in turn is an indirect subsidiary of TECO;

WHEREAS , the partnership interests, or, as applicable, the membership interests, in the Project Companies (collectively, the “ Partnership Interests ”) are also pledged as Collateral for the Obligations;

WHEREAS , certain Events of Default exist and are continuing under each of the Credit Agreements which, in turn, gives the Administrative Agent the right to foreclose on the Collateral as provided under the Credit Agreements;

WHEREAS , TECO is willing to cause the transfer of any and all title to and ownership of the Partnership Interests in the Project Companies to the Banks (or one or more entities designated by the Administrative Agent acting at the direction of the Required Banks);

WHEREAS , the Banks (or one or more entities designated by the Administrative Agent acting at the direction of the Required Banks) are willing to accept title to and ownership of the Partnership Interests in the Project Companies;

WHEREAS , a transaction (the “ Transaction ”) will be consummated pursuant to which title to and ownership of the Partnership Interests in the Project Companies will be transferred to the Banks (or to one or more entities designated by the Administrative Agent acting at the direction of the Required Banks);

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WHEREAS , in preparation for and as conditions precedent to the consummation of the Transaction and the Banks’ willingness to accept title to and ownership of the Partnership Interests in the Project Companies, TECO, the Project Companies, Administrative Agent and Banks, as applicable, have negotiated the Project Companies Release of Banks Agreement, TECO Release of Project Companies Agreement, Master Settlement Agreement, Equity Transfer Agreement, if applicable, Operating Asset Contribution Agreement, and Energy Management Contribution and Option Agreement, each as defined below; and

WHEREAS , by their signature below, at least the Required Banks have entered into this Agreement and approved the execution and delivery hereof by the Administrative Agent acting on behalf of the Banks.

AGREEMENT

NOW, THEREFORE , for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Definitions . Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set forth in, as may be applicable, (i) Exhibit A of the Union Power Credit Agreement; (ii) Exhibit A of the Gila River Credit Agreement; (iii) Article I of the Union Power Undertaking; and (iv) Article I of the Gila River Undertaking. As used in this Agreement, the following capitalized terms shall have the following meanings:

1.1. “ Administrative Agent Undertakings Claims ” shall mean any and all Claims that the Administrative Agent has against TECO in its representative capacity as beneficiary under the Undertakings.

1.2. “ Administrative Agent Releasors ” shall have the meaning set forth in Section 2.4 hereof.

1.3. “ Affiliate ” shall mean, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the Person specified, or who holds or beneficially owns 10% or more of the equity interest in the Person specified or 10% or more of any class of voting securities of the Person specified. When used with respect to any Project Company, “Affiliate” shall include each partner and any affiliate of any partner (other than such Project Company).

1.4. “ Bank Releasors ” shall have the meaning set forth in Section 2.3 hereof.

1.5. “ Bank Releasee(s) ” shall mean, individually or collectively, as applicable, (i) the Administrative Agent, Collateral Agent, LC Bank, Depositary Agent and each of the Banks signatory hereto, (ii) the respective Affiliates of each of the Persons released pursuant to clause (i) above, (iii) all present and former officers, directors, stockholders, partners, employees, attorneys, agents, trustees, consultants and other representatives of each of the Persons released pursuant to any of clauses (i) and (ii) above, and (iv) the respective predecessors, successors, successors-in-interest, assigns, heirs and representatives of each of the Persons released pursuant to any of clauses (i) through (iii) above.

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1.6. “ Claim(s) ” shall mean, individually or collectively, as applicable, any and all actions, causes of action, counterclaims, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, rights, claims, demands, setoffs, recoupments, liabilities, losses and rights to any of the following: reimbursement, subrogation, contribution, indemnification or other payment, costs or expenses, or reasonable attorneys’ fees; in each case, whether arising under contract, in law or in equity or by operation of law, of any nature whatsoever, known or unknown, suspected or unsuspected, fixed or contingent, and whether representing a past, present or future obligation.

1.7. “ Closing Date ” shall mean the second business day after which all the conditions to the Release Effective Date have occurred and been satisfied except the payment of the Release Fee required by clause (iv) of Section 6.2 .

1.8. “ Contingent Equity Contribution Guaranty ” shall mean that certain Contingent Equity Contribution Guaranty dated as of May 31, 2001 by and among TECO and Citibank, N.A., as Administrative Agent under the Gila River Credit Agreement, with respect to the Gila River Project (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof).

1.9. “ Depositary Agreement ” shall mean that certain Depositary Agreement dated as of May 31, 2001 by and among PGR, UPP, Finance Co. and Citibank, N.A., as Administrative Agent under the Credit Agreements (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof).

1.10. “ Effective Date ” shall have the meaning set forth in Section 6.1 hereof.

1.11. “ Energy Management Contribution and Option Agreement ” shall mean that certain Energy Management Contribution and Option Agreement dated as of October 13, 2004 by and among Citibank, N.A., as Administrative Agent under the Credit Agreements, TECO, TES, TWG Merchant, Inc., PGR, UPP, Trans-Union, and Gila River Energy Management Transition AssetCo., LLC.

1.12. “ Equity Contribution Guaranties ” shall mean (i) that certain Equity Contribution Guaranty dated as of May 31, 2001 by and between TECO and Citibank, N.A., as Administrative Agent under the Union Power Credit Agreement, with respect to the Union Project (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof), and (ii) that certain Equity Contribution Guaranty dated as of May 31, 2001 by and between TECO and Citibank, N.A., as Administrative Agent under the Gila River Credit Agreement, with respect to the Gila River Project (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof).

1.13. “ Equity Transfer Agreement ” shall mean that certain Equity Transfer Agreement dated as of [                      ] , 2005 by and among Entegra Power Group LLC, Union Power LLC, Gila River Power LLC, Trans-Union Pipeline LLC, UPP, PGR, Trans-Union, Union Power I, LLC, Union Power II, LLC, Panda Gila River I, LLC, Panda Gila River II, LLC, Trans-Union Interstate I, LLC, Trans Union Interstate II, LLC, and TECO.

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1.14. “ Excluded Claims ” shall mean the Excluded Operating Claims and Excluded Undertaking Claims.

1.15. “ Excluded Operating Claims ” shall mean those Claims against any TECO Entity arising or existing prior to the Closing Date and related to or arising in connection with (x) those certain notices of violation dated as of August 18, 2004 issued by Maricopa County, Arizona attached hereto as Exhibit A (or any amendment, supplement, replacement, alteration or other modification of such notices), or (y) any other violation of environmental laws at the Projects that breaches the O&M Agreements.

1.16. “ Excluded Undertakings Claims ” shall mean those Claims against TECO under the Undertakings that are not being released hereunder, which shall consist of and are expressly limited to Claims arising with respect to or in connection with (i) warranty items arising under either NEPCO Construction Contract, (ii) unpaid construction taxes owed to Gila Bend, Arizona, (iii) any privileges tax or so-called speculative builder tax owed in connection with the Transaction; (iv) any fines and/or penalties owed to government entities and related defense costs and expenses, including attorneys fees, related to or arising in connection with (x) those certain notices of violation dated as of August 18, 2004 issued by Maricopa County, Arizona attached hereto as Exhibit A (or any amendment, supplement, replacement, alteration or other modification of such notices), or (y) any other violations of environmental laws at Gila River that are covered by or included within the Undertakings and occur prior to the Closing Date; and (v) any indemnity or Damages (as defined in the NEPCO Construction Contracts) provided, included or described in section 16.01 of either NEPCO Construction Contract.

1.17. “ February LOI ” shall mean that certain Non-Binding Letter Of Intent and Binding Litigation Settlement dated as of February 5, 2004 by and among TECO, TPGC, UPP, PGR, Citibank, N.A., as Administrative Agent under the Credit Agreements, and the financial institutions party thereto, which includes the Non-Binding Letter of Intent in Part A and the Binding Litigation Settlement in Part B.

1.18. “ Governmental Body ” shall mean any foreign, federal, state, municipal or other government, or other department, commission, board, bureau, agency, public authority or instrumentality thereof or any other court or arbitrator.

1.19. “ Indemnitees ” shall have the meaning set forth in Section 2.8 hereof.

1.20. [Intentionally omitted]

1.21. “ Master Settlement Agreement ” shall mean that certain Master Settlement Agreement and Restructuring Support Agreement dated as of January 24, 2005, by and among TPGC, TES, TECO, Union Power I, LLC, Union Power II, LLC, Panda Gila River I, LLC, Panda Gila River II, LLC, Trans-Union Interstate I, LLC, Trans-Union Interstate II, LLC, UPP, PGR, Trans-Union, Finance Co., Citibank, N.A., as Administrative Agent under the Credit Agreements, and the financial institutions party thereto.

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1.22. “ NEPCO Construction Contracts ” shall mean (i) that certain Amended and Restated Turnkey Engineering, Procurement and Construction Agreement for Combined-Cycle Generation Facility dated as of March 27, 2001 by and between UPP and National Energy Production Corporation (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof); and (ii) that certain Amended and Restated Turnkey Engineering, Procurement and Construction Agreement for Combined-Cycle Generation Facility dated as of April 30, 2001 by and between PGR and National Energy Production Corporation (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof).

1.23. “ O&M Agreements ” shall mean (i) that certain Amended and Restated Operation and Maintenance Agreement between PGR and TPS Arizona Operations Company dated as of May 25, 2001 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof), and (ii) that certain Amended and Restated Operation and Maintenance Agreement between UPP and TPS Arkansas Operations Company dated as of February 8, 2001 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof).

1.24. “ Operating Asset Contribution Agreement ” shall mean that certain Operating Asset Contribution Agreement dated as of October 13, 2004 by and among Citibank, N.A., as Administrative Agent under the Credit Agreements, UPP, Trans-Union, PGR, Gila River Transition AssetCo, LLC, TWG Merchant, Inc., and TECO.

1.25. “ Outer Date ” shall mean January 24, 2005, as such date may be extended from time to time by TECO.

1.26. “ Owners ” shall mean the direct owners of the Partnership Interests and refers to, individually or collectively, as applicable, Union Power I, LLC, Union Power II, LLC, Panda Gila River I, LLC, Panda Gila River II, LLC, Trans-Union Interstate I, LLC, and Trans-Union Interstate II, LLC.

1.27. “ Partnership Interests ” shall mean the partnership or other ownership interests in any or all of the Project Companies.

1.28. “ Person ” shall mean any individual, firm, corporation, business enterprise, trust, association, joint venture, partnership, limited partnership, limited liability partnership, limited liability company, any Governmental Body or any other entity, whether acting in an individual, fiduciary or other capacity.

1.29. “ Pledge Agreements ” shall mean (i) that certain Partnership Interest Pledge and Security Agreement dated as of May 31, 2001 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof) by and among Union Power I, LLC, UPP and Citibank, N.A., as Collateral Agent; (ii) that certain Partnership Interest Pledge and Security Agreement dated as of May 31, 2001 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof) by and among Union Power II, LLC, UPP and Citibank, N.A., as Collateral Agent; (iii) that certain Partnership Interest Pledge and Security Agreement dated as of May 31, 2001 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof) by and among Panda Gila River I, LLC, PGR and Citibank, N.A., as Collateral Agent; (iv) that certain Partnership Interest Pledge and Security Agreement dated as of May 31, 2001 (as amended, restated,

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supplemented and otherwise modified from time to time prior to the date hereof) by and among Panda Gila River II, LLC, PGR and Citibank, N.A., as Collateral Agent; (v) that certain Partnership Interest Pledge and Security Agreement dated as of May 31, 2001 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof) by and among Trans-Union Interstate I, LLC, Trans-Union and Citibank, N.A., as Collateral Agent; (vi) that certain Partnership Interest Pledge and Security Agreement dated as of May 31, 2001 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof) by and among Trans-Union Interstate II, LLC, Trans-Union and Citibank, N.A., as Collateral Agent; and (vii) that certain LLC Membership Interest Pledge and Security Agreement dated as of May 31, 2001 (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof) by and among UPP, Finance Co. and Citibank, N.A., as Collateral Agent.

1.30. “ Project Company Entities ” shall mean, individually or collectively, as applicable, (i) each of the Project Companies, (ii) any Subsidiary of either a Project Company or an Owner.

1.31. “ Project Companies Release of Banks Agreement ” shall mean that certain release of the Administrative Agent and Banks dated as of [                      ] , 2005 by and among UPP, PGR, Trans-Union, and Finance Co.

1.32. “ Project Company Releasors ” shall have the meaning set forth in Section 2.2 hereof.

1.33. “ Qualified Bank Releasor ” shall have the meaning set forth in Section 6.3 hereof.

1.34. “ Reimbursement and Assignment Agreements ” shall mean (i) that certain Reimbursement and Assignment Agreement dated as of January 16, 2002 by and between UPP and TECO (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof), and (ii) that certain Reimbursement and Assignment Agreement dated as of January 16, 2002 by and between PGR and TECO (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof).

1.35. “ Release Effective Date ” shall have the meaning set forth in Section 6.2 hereof.

1.36. “ Release Fee ” shall have the meaning set forth in Section 6.2 hereof.

1.37. “ Released Claims ” shall mean, with respect to any Releasor, any Claim which is released by such Releasor pursuant to any of the provisions of Section 2 hereof.

1.38. “ Released Documents ” shall mean, individually or collectively, as applicable, (i) the Credit Agreements, (ii) the Undertakings, (iii) the Reimbursement and

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Assignment Agreements, (iv) the Pledge Agreements, (v) the Subordination Agreement, (vi) the Equity Contribution Guaranties, (vii) the Contingent Equity Contribution Guaranty, (viii) the Depositary Agreement, and (ix) any other Operative Documents.

1.39. “ Releasees ” shall mean the TECO Releasees and Bank Releasees.

1.40. “ Releasors ” shall mean the Project Company Releasors, TECO Releasors, Administrative Agent Releasors and Bank Releasors.

1.41. “ Subsidiary ” shall mean, with respect to any Person, any corporation, business enterprise, trust, association, joint venture, partnership, limited partnership, limited liability partnership, limited liability company or other business entity of which more than fifty percent (50%) of the total voting power of shares of stock (or equivalent ownership or controlling interest) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof.

1.42. “ Subordination Agreement ” shall mean (i) that certain Subordination Agreement dated as of January 16, 2002 by and between TECO and Citibank, N.A., as Administrative Agent under the Union Power Credit Agreement, with respect to the Union Power Project (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof), and (ii) that certain Subordination Agreement dated as of January 16, 2002 by and between TECO and Citibank, N.A., as Administrative Agent under the Gila River Credit Agreement, with respect to the Gila River Project (as amended, restated, supplemented and otherwise modified from time to time prior to the date hereof).

1.43. “ TECO Claims ” shall mean any and all Claims that are connected with, arise out of, relate to or are otherwise based in whole or in part on any acts, omissions, facts, matters, transactions or occurrences arising or existing prior to the Effective Date and directly or indirectly relating to any or all of (i) the ownership, operation, management, financing, assets, properties, affairs or any other aspect of any of the Projects or Project Companies, (ii) the Released Documents, or any of the transactions contemplated therein; and (iii) any aspect of any of the dealings or relationships between or among any or all of the Project Company Entities, on the one hand, and the TECO Entities, on the other hand. Without limiting the foregoing and for the avoidance of doubt, the TECO Claims include, and there are released pursuant to Section 2 of this Agreement, any and all such Claims arising by reason of subrogation, whether by law or in equity, to the right of any other Person, including, without limitation, subrogation to the rights of the Administrative Agent, Collateral Agent and/or Banks under the Operative Documents.

1.44. “ TECO Entities ” shall mean, individually or collectively, as applicable, TECO and its Affiliates; provided however that the term “ TECO Entities ” shall not include any Project Company Entity.

1.45. “ TECO Release of Project Companies Agreement ” shall mean that certain release and indemnity agreement dated as of [                      ] , 2005 by and among TPGC, TES,

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TECO, Union Power I, LLC, Union Power II, LLC, Panda Gila River I, LLC, Panda Gila River II, LLC, Trans-Union Interstate I, LLC, Trans-Union Interstate II, LLC, UPP, PGR, Trans-Union, and Finance Co.

1.46. “ TECO Releasors ” shall have the meaning set forth in Section 2.1 hereof.

1.47. “ TECO Releasee(s) ” shall mean, individually or collectively, as applicable, (i) the TECO Entities, (ii) all present and former officers, directors, managers, stockholders, partners, employees, attorneys, agents, trustees, consultants and other representatives of the TECO Entities or Project Companies, and (iii) the respective predecessors, successors, successors-in-interest, assigns, heirs and representatives of each of the Persons release