Exhibit 10.3.36
LEYTE OPTIMIZATION PROJECT
BOT AGREEMENT
between
PNOC-ENERGY DEVELOPMENT CORPORATION
and
ORMAT
CONTENTS
ARTICLE 1 DEFINITION OF TERMS.................................................2
1.1 DEFINITIONS...............................................................2
1.2 INTERPRETATION............................................................9
ARTICLE 2 PROJECT............................................................10
2.1 POWER FACILITY...........................................................10
2.2 ENERGY CONVERSION........................................................10
2.3 OWNERSHIP................................................................10
2.4 COMMENCEMENT AND PROSECUTION OF THE PROJECT..............................11
ARTICLE 3 GENERAL RESPONSIBILITIES OF THE OPERATOR...........................11
3.1 CONSTRUCTION PERFORMANCE SECURITY........................................11
3.2 RESPONSIBILITY FOR DAMAGE AND LOSSES.....................................12
3.3 ENVIRONMENT AND CHANGE OF LAWS...........................................13
3.4 ORGANIZATION.............................................................14
ARTICLE 4 CONSTRUCTION OF THE POWER PLANT....................................15
4.1 MILESTONE DATES..........................................................15
4.2 TRANSMISSION LINE, INTERCONNECTION AND GEOTHERMAL FLUID..................16
4.3 SITE PROVISION...........................................................16
4.4 INGRESS AND EGRESS RIGHTS OF OPERATOR....................................17
4.5 EQUIPMENT IMPORTATION....................................................17
4.6 PERMITS..................................................................18
4.7 DRAWINGS, DOCUMENTS, DATA & INSTRUCTIONS.................................18
4.7.1 SUBMISSION OF DRAWINGS AND DATA.................................18
4.7.2 MODIFICATION RIGHTS.............................................19
4.7.3 FUTURE MODIFICATION.............................................20
4.7.4 CONSTRUCTION SCHEDULE...........................................20
4.7.5 MONITORING RIGHTS...............................................20
4.7.6 DRAWINGS AND DOCUMENTS TO BE PROVIDED...........................21
4.8 DISCLAIMER...............................................................21
4.9 RESPONSIBILITY FOR UTILITIES.............................................22
4.10 DELAYS..................................................................22
4.11 PENALTY DUE TO DELAYS...................................................23
4.12 LIGHTS AND BARRIERS.....................................................23
ARTICLE 5 TESTING OF THE FACILITY............................................23
5.1 TESTING PROCEDURES.......................................................23
5.2 TEST SCHEDULES...........................................................24
5.3 NOTICE OF TESTS..........................................................24
5.4 TESTS BEFORE COMPLETION..................................................24
5.5 TESTS DURING COOPERATION PERIOD..........................................26
ARTICLE 6 OPERATION OF THE FACILITY..........................................27
6.1 COMPLETION DATE..........................................................27
6.2 POWER RATES FOR INITIAL DELIVERY.........................................27
6.3 DEDICATION OF FACILITY...................................................27
6.4 OPERATING PARAMETERS ....................................................27
6.5 DISPATCH PROCEDURE.......................................................28
6.6 ENGINEERING STANDARDS....................................................28
6.7 ENVIRONMENTAL STANDARDS..................................................28
6.8 PROTECTIVE DEVICES.......................................................28
6.9 INTEGRITY LOSS...........................................................28
6.10 SETTINGS OF PROTECTIVE DEVICES..........................................29
6.11 SERVICE COMMITMENT......................................................29
6.12 MAINTENANCE DURING EMERGENCY............................................29
6.13 ANNUAL CAPACITY NOMINATION..............................................29
6.14 MAINTENANCE SCHEDULE....................................................29
6.15 APPROVAL OF MAINTENANCE SCHEDULE........................................30
6.16 APPROVAL OF OVERHAULS...................................................30
6.17 COMPLIANCE WITH APPROVED MAINTENANCE SCHEDULE...........................30
6.18 UNSCHEDULED OUTAGE .....................................................30
6.19 DAILY OPERATING REPORT..................................................30
6.20 OPERATING RECORDS.......................................................30
6.21 PNOC-EDC ACCESS TO THE POWER PLANT......................................31
ARTICLE 7 GEOTHERMAL FLUIDS..................................................31
7.1 GEOTHERMAL FLUID SUPPLY..................................................31
7.2 NON-CONDENSIBLE GASES & NON-GEOTHERMAL WASTE.............................31
7.3 SURPLUS CONDENSATE.......................................................32
7.4 OTHER GEOTHERMAL WASTE...................................................32
7.5 ENERGY MANAGEMENT........................................................32
ARTICLE 8 DELIVERY OF CAPACITY AND ENERGY....................................32
8.1 OBLIGATIONS OF THE PARTIES...............................................32
8.2 METERING.................................................................33
8.2.1 METER MAINTENANCE AND OWNERSHIP..................................33
8.2.2 PLANT MONITORING EQUIPMENT.......................................33
8.2.3 METER SEALS AND INSPECTION.......................................34
8.2.4 METER TESTS......................................................34
8.2.5 METER ACCURACY...................................................34
8.3 TERMS OF PAYMENT.........................................................34
8.3.1 CAPACITY PAYMENTS................................................34
8.3.2 ENERGY FEE.......................................................36
8.3.3 ESCALATION.......................................................38
8.4 BILLING PROCEDURES.......................................................38
8.5 DISPUTES.................................................................39
8.6 TAXES....................................................................39
8.7 PAYMENT PROCEDURES.......................................................40
ARTICLE 9 BUYOUT..............................................................40
9.1 BUYOUT CONDITIONS........................................................40
9.2 BUYOUT PRICE.............................................................41
9.3 PAYMENT TERMS............................................................42
9.4 TRANSFER PROVISION.......................................................42
ARTICLE 10 REPRESENTATIONS & WARRANTIES OF THE PARTIES........................43
10.1 CORPORATE EXISTENCE.....................................................43
10.2 AUTHORIZATIONS..........................................................43
10.3 WARRANTY AGAINST CORRUPTION.............................................43
10.4 NO SOVEREIGN IMMUNITY...................................................44
10.5 GEOTHERMAL SERVICES CONTRACT............................................44
ARTICLE 11 INDEMNIFICATION....................................................44
11.1 OPERATOR INDEMNIFICATION................................................44
11.2 PNOC-EDC INDEMNIFICATION................................................45
ARTICLE 12 INSURANCE..........................................................45
12.1 APPLICABLE TERMS........................................................45
12.2 INSURANCE DURING CONSTRUCTION...........................................45
12.3 INSURANCE DURING COOPERATION PERIOD.....................................46
12.4 APPROVAL BY PNOC-EDC....................................................46
12.5 EQUITABLE ADJUSTMENT....................................................46
ARTICLE 13 TRANSFER OF OWNERSHIP..............................................47
13.1. TRANSFER OF TITLE......................................................47
13.2. DOCUMENTATION COSTS....................................................47
13.3 TRAINING OF PNOC-EDC STAFF..............................................47
13.4 CONDITION OF POWER PLANT ON TRANSFER....................................48
ARTICLE 14 FORCE MAJEURE......................................................48
14.1 FORCE MAJEURE...........................................................48
14.2 EFFECT OF FORCE MAJEURE.................................................49
14.3 REMEDIES................................................................50
ARTICLE 15 SUSPENSION, TERMINATION AND ABANDONMENT............................51
15.1 TERMINATION PRIOR TO EFFECTIVITY DATE...................................51
15.2 TERMINATION FOR DEFAULT AND SUSPENSION OF DELIVERY......................53
15.3 SUSPENSION OF PAYMENT...................................................54
15.4 ABANDONMENT.............................................................54
15.4.1 ABANDONMENT DURING CONSTRUCTION................................54
15.4.2 ABANDONMENT DURING COOPERATION PERIOD..........................55
ARTICLE 16 SEVERAL OBLIGATIONS................................................56
ARTICLE 17 COMMUNICATIONS AND NOTICES.........................................56
17.1 COORDINATION MEETINGS...................................................56
17.2 COMMUNICATIONS AMONG PARTIES............................................57
17.2 NOTICES.................................................................57
ARTICLE 18 NON-WAIVER.........................................................58
ARTICLE 19 ASSIGNMENT.........................................................58
ARTICLE 20 PRIVATIZATION ASSURANCES ..........................................59
ARTICLE 21 DISPUTE RESOLUTION; JURISDICTION...................................60
ARTICLE 22 ENTIRE AGREEMENT AND SEPARABILITY .................................61
ARTICLE 23 GOVERNING LAW......................................................61
ARTICLE 24 LIMITATION OF LIABILITY............................................61
ARTICLE 25 DURATION OF THE AGREEMENT .........................................62
25.1 TERM....................................................................62
25.2 SURVIVABILITY...........................................................62
ARTICLE 26 EFFECTIVITY........................................................62
26.1 PNOC-EDC CONDITIONS ON THE OPERATOR.....................................62
26.2 OPERATOR CONDITIONS ON PNOC-EDC.........................................62
26.3 OTHER CONDITIONS........................................................64
26.4 FULFILLMENT OR WAIVER...................................................65
LEYTE OPTIMIZATION PROJECT
BOT AGREEMENT
This Agreement made and executed on this 4th day of August, 1995 by and between:
1. PNOC-ENERGY DEVELOPMENT CORPORATION, hereinafter referred to as
PNOC-EDC, a wholly-owned subsidiary of the Philippine National Oil Company,
a corporation created and organized under Presidential Decree No. 334, as
amended, with principal office address at PNPC Complex, ▇▇▇▇▇▇▇ Road, Fort
Bonifacio, Makati, Metro Manila, Philippines, herein represented by its
President ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, who is duly authorized to represent it in
this Agreement.
2. ORMAT INC., hereinafter referred to as the Operator, a private
corporation duly organized and existing under the laws of the State of
Delaware, U. S. A. licensed to do business in the Republic of the
Philippines through its branch office at 8th Fl., Solid Bank Bldg., ▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, represented herein by
its Vice President, ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇, who is duly authorized to represent
it in this Agreement.
WITNESSETH THAT
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ dated July 9, 1990 as amended by RA 7718 (BOT
Law) authorized government infrastructure agencies, including PNOC-EDC, to
enter into contracts with private contractors for the financing,
construction, operation and maintenance of infrastructure projects;
WHEREAS, NAPOCOR and PNOC-EDC have previously executed a Memorandum of
Understanding for the Development of Geothermal Power Plants in PNOC-EDC
Projects, including the geothermal resources of the Leyte Power
Optimization Project Areas, where PNOC-EDC holds an existing Geothermal
Service Contract.
WHEREAS, PNOC-EDC has invited several contractors to submit proposals for
the design, construction, operation and maintenance of geothermal power
plants on a build-operate-transfer (BOT) basis for the Leyte Geothermal
Power Optimization Project Geothermal Service Contract Area, and these
power plants will convert PNOC-EDC's geothermal energy into electricity for
sale to NAPOCOR; and
WHEREAS, the Operator wishes to design, construct, own and operate
geothermal electricity generating plants, utilizing the geothermal
resources of the Leyte Geothermal Power Optimization Project Area and with
a Contracted Capacity of 49.00 MW net and wishes to deliver electricity
exclusively on behalf of PNOC-EDC on such terms and conditions as are set
forth herein.
NOW, THEREFORE, for and in consideration of the foregoing presents and the
mutual covenants hereinafter set forth, the Operator and PNOC-EDC have agreed as
follows:
ARTICLE 1 DEFINITION OF TERMS
1.1 DEFINITIONS
When used in this Agreement, the terms below shall have the following meanings:
ACCESSION UNDERTAKING: The accession undertaking to be executed in accordance
with Subsection 19(c) and in the form of Annex E.
AGREEMENT: This Agreement including attachments, as may be amended from time to
time.
ATMOSPHERIC CONDITIONS: The atmospheric conditions specified in the Interface
Data attached hereto as Annex C.
BILLING PERIOD: The time interval from 10:00 AM on the twenty-fifth (25th) day
of the current month to 10:00 AM on the twenty fifth (25th) day of the following
month where the Operator shall read meters and accumulate data needed for the
purpose of billing capacity and energy delivered to NAPOCOR on behalf of
PNOC-EDC.
BOI: The Board of Investments of the Republic of the Philippines.
BUYOUT DATE: The meaning specified in Section 9.3.
CAPACITY PAYMENT: The total capacity payments made pursuant to Section 8.3.1.
COMMERCIAL OPERATION DATE: The first day of the Billing Period following the
Completion Date of each Plant as defined in Section 4.1(a).
COMMISSIONING PERIOD: The period of three months prior to the scheduled
Completion Date of Plant 4. The period of four months prior to the scheduled
Completion Date of Plants 1, 2 and 3.
COMPLETION DATE: With respect to each Plant, the day upon which the Operator
certifies to PNOC-EDC that such Plant is capable of operating in accordance with
the Operating Parameters
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and has successfully completed testing in accordance with Article 5 or the date
that such Plant is deemed completed in accordance with Section 5.4.
CONSTRUCTION PERFORMANCE SECURITY: The Performance Security described in Section
3.1(a).
CONTRACTED CAPACITY: Thirty-five and sixty-five hundredths (35.65) MW (net) for
the period after the Completion Date for Plants 1, 2 and 3 and before the
Completion Date of Plant 4 and forty-nine (49.00) MW (net) for the period after
the Completion Date of Plant 4 and thereafter for any year during the
Cooperation Period. Contracted Capacity contemplates availability for the
duration of the Cooperation Period and assumes the continuous delivery and
acceptance of Geothermal Fluid by PNOC-EDC as specified in the Geothermal Fluid
Specifications. Said power shall be the aggregate power of all Plants measured
per Plant at (a) the Interconnection Point MP1 for NAPOCOR Power and (b) the
Interconnection Point MP2 for Steamfield Power, each as indicated in Figures C.1
- C.4 in Annex C and Annex C.
CONTRACT CAPACITY PRICE: The basic capacity purchase price per kilowatt (kW) per
month for electric capacity nominated by the Operator consisting of the Contract
Capacity Rate for Capital Costs (CCR), the Contract Capacity Rate for Fixed
Operating Costs (OCR), and the Service Fee Rate to reflect Return on Investments
(SFR).
CONTROL: To establish the electrical output of the Plants through dispatching
procedures including shut-down and start-up.
COOPERATION PERIOD: The period of ten (10) years of commercial operation
starting from the last Commercial Operation Date of Plants 1, 2 and 3 and
continuing until the 10th anniversary of that Commercial Operation Date.
CORRECTION CURVES: The curves, set forth in Annex B, used to adjust the Power
Plant performance for variation in the Geothermal Fluids and Atmospheric
Conditions from those specified in the Geothermal Fluid Specifications and the
Interface Data.
EFFECTIVITY DATE: The date upon which PNOC-EDC and the Operator agree that all
conditions precedent set forth in Article 26 have been either duly fulfilled or
waived to the satisfaction of the relevant Party.
ELECTIVE MODIFICATIONS: Modifications to the Operator's design of the Power
Plant requested by PNOC-EDC that are not solely for the purpose of correcting
design errors made by the Operator in its design of the Power Plant.
EMERGENCY: A condition or situation which in NAPOCOR's sole judgment affects
NAPOCOR's ability to maintain safe, adequate, and continuous electrical service.
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ENERGY DELIVERED: An amount of energy expressed in kilowatt hours (kWh)
generated by the Power Plant which are delivered to NAPOCOR on behalf of
PNOC-EDC at the Point of Interconnection plus those delivered to PNOC-EDC for
its own use (points MP1 and MP2 as indicated in Figures C.1 - C.4 in Annex C).
ENERGY FEE: The fees payable pursuant to Subsection 8.3.2.
FORCE MAJEURE: An event specified in Section 14.1.
GENERATING UNIT: A single turbine generator unit, together with its associated
auxiliaries and ancillary plant required to enable it to generate electricity
and to be connected to and operate in parallel with NAPOCOR's electricity
transmission system.
GEOTHERMAL FLUID: The geothermal steam to be supplied to the Operator by
PNOC-EDC and the condensed steam and low pressure steam to be received from the
Operator by PNOC-EDC.
GEOTHERMAL FLUID SPECIFICATIONS: The design point and other Interface Data
specifications for and quantities of Geothermal Fluid set forth in Annex C
including, without limitation, PNOC-EDC's undertakings to accept low pressure
steam and to accept condensed steam from the Plants for reinjection and/or other
proper disposal.
GOVERNMENT: The government of the Republic of the Philippines including all of
its political subdivisions and the agencies and instrumentalities of the
foregoing.
GUARANTEED COMMERCIAL OPERATION DATE: The dates set forth in Section 4.1 for
each Plant opposite the terms "Guaranteed Commercial Operation Date", as such
dates may be extended pursuant to this Agreement.
GUARANTEED NET PLANT STEAM RATE: With respect to each Plant, the Net Plant Steam
Rate guaranteed by the Operator, which, for any year during the Cooperation
Period, is the amount set forth in Annex I corresponding to such year, as
corrected for variations in Atmospheric Conditions and in the Geothermal Fluid
provided by PNOC-EDC using the Correction Curves.
INTERCONNECTION FAILURE: Any event, circumstance or state of facts located
beyond the Power Plant side of the Points of Interconnection which curtails or
eliminates the ability of NAPOCOR or PNOC-EDC to request and utilize power from
the Power Plant including, without limitation, problems in interconnection or
transmission equipment located beyond the Points of Interconnection described in
Annex C.
NAPOCOR: The National Power Corporation.
NAPOCOR ELECTRIC SYSTEM INTEGRITY: Operation of NAPOCOR's electric system in a
manner which minimizes risks of injury to persons and/or property and enables
NAPOCOR to provide
4
adequate and reliable electric service to its customers, all in accordance with
generally and internationally-accepted utility practice.
NAPOCOR POWER: An amount of energy (in kWh) delivered to NAPOCOR on behalf of
PNOC-EDC measured in each one of the Plants at the high voltage side of the
transformer (MP1) at the relevant Point of Interconnection as indicated in
Figures C.1.-C.4 in Annex C.
NET PLANT STEAM RATE: For each Plant, it is the total Geothermal Fluid flow into
the that Plant over a given period of time, expressed in kilograms, divided by
the Energy Delivered over the same period expressed in kWh. Any measurement of
Net Plant Steam Rate shall be corrected for variations in the Atmospheric
Conditions and in the Geothermal Fluid provided by PNOC-EDC during such period
of time from the Geothermal Fluid Specifications using the Correction Curves.
NEWCO: The company organized under the laws of the Republic of the Philippines
which will be a party to this Agreement by and under the terms of the Accession
Undertaking.
NOMINATED CAPACITY: The capacity or amount of power that the Operator guarantees
in accordance with Section 6.13 to deliver to NAPOCOR on behalf of PNOC-EDC for
a period of one year, including the Steamfield Power.
OPERATING PARAMETERS: The operating parameters set forth in Annex B4 attached
hereto.
OPERATING REPRESENTATIVE: Individual(s) appointed by each Party and by NAPOCOR
for the purpose of securing effective cooperation and interchange of information
between the Parties and NAPOCOR in connection with administration and technical
matters related to this Agreement and the Power Purchase Agreement.
OPERATION PERFORMANCE SECURITY: The Performance Security described in Section
3.1(d).
OUTAGE: The inability of the Operator to meet a capacity up to the Nominated
Capacity when requested by NAPOCOR, provided, that no Outage shall occur if:
(a) the capacity adjusted per the Correction Curves which the Operator
makes available to NAPOCOR is at least equal to current Nominated
Capacity less Steamfield Power; or
(b) PNOC-EDC fails to deliver or to accept Geothermal Fluid from any Plant
or the Geothermal Fluid delivered to or accepted from any Plant varies
from the Geothermal Fluid Specifications and such variation is outside
the range of the Correction Curves, except that in as far as
acceptance of Geothermal Fluid from the Operator is concerned,
PNOC-EDC's obligation under the Geothermal Fluid Specifications is
limited to the steam exit pressure only; or
5
(c) an Interconnection Failure has occurred; or
(d) the inability of the Operator is due to Force Majeure; or
(e) the inability of the Operator is due to Scheduled Maintenance provided
that the number of hours in any one year under this clause (e) shall
not be considered an Outage, if it does not exceed the number of
Scheduled Maintenance hours stated for that year; or
(f) the failure by PNOC-EDC or NAPOCOR to request or utilize power from
the Power Plant is due to any dispute between PNOC-EDC and NAPOCOR
(under the Power Purchase Agreement or otherwise) which did not arise
from any default of the Operator under this Agreement, including
termination or expiration of the Power Purchase Agreement,
OUTAGE HOUR: Any hour in which, due to Outage, the Operator
failed, for a continuous period of thirty (30) minutes, to
deliver power adjusted per the Correction Curves at a level of at
least ninety five percent (95%) of the Nominated Capacity. For
the purpose of defining Outage Hour, if NAPOCOR requests dispatch
of capacity in excess of the amount defined in Subsection (a) of
the definition of Outage, failure to deliver such excess amount
shall not constitute an Outage Hour. For purpose of calculating
the Total Outage Hours (TOH) for any given period (including
Billing Period), the following formula shall be used:
n 0.95 x NC - (ACi + NRCi)
TOH = (Sigma) ----------------------------------- x Wi
i=l0.95 x NC
where:
TOH = Total outage hours in any Billing Period.
NC = Nominated Capacity for that Billing Period expressed in kW.
n = The number of hours in that Billing Period.
ACi = The total power delivered during hour i expressed in kW adjusted
per the Correction Curves.
6
NRCi = NC less power requested by NAPOCOR in hour i, expressed in kW.
wi = Variable for hour i defined as follows:
if,
1) (ACi + NRCi) (greater than or equal to) 0.95 x NC; or
2) (ACi + NRCi) (less than) 0.95 x NC for a period shorter than 30 continues
minutes in hour i;
or
3) Any of the events defined in Subsections (a), (b), (c), (d), (e) and (f) of
the definition of Outage occurs during hour i,
then wi = 0
otherwise wi = 1
PARTIES: The contracting parties in this Agreement, referring to the Operator
and PNOC-EDC.
PERFORMANCE SECURITY: The Construction Performance Security required to be
posted by the Operator to guarantee its performance during the construction of
the Power Plant and to be converted into the Operation Performance Security to
guarantee Operator's performance during the Cooperation Period in accordance
with Section 3.1 hereof.
PLANT: Each of the power plants as described in Annex B and Annex C and
identified as follows: Plant 1 is the power plant in Mahanagdong "A" Area; Plant
2 is the power plant in Mahanagdong "B" Area; Plant 3 is the power plant in
▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇; and Plant 4 is the power plant in Malitbog Area.
POINT OF INTERCONNECTION: The point at the interconnection facilities where the
transfer and metering of electrical energy among PNOC-EDC, NAPOCOR and the
Operator takes place, which point shall be the transformer high side terminals
at each Plant.
POLITICAL FM: An event specified in Section 14.1(b).
POWER PLANT: The Operator's generating equipment consisting of four (4) Plants
including all of the step-up transformers and switching facilities, together
with all protective and other associated
7
equipment and improvements, necessary to produce electrical energy at the Point
of Interconnection of each Plant excluding associated land, land rights and
interests in land, which equipment shall include the proposed Generating Units
with a total gross capacity of 49.59 MW, conforming to the technical
specifications set forth in Annex B and Annex C.
POWER PURCHASE AGREEMENT: The contractual agreement dated March 04, 1994 and
addendum agreement dated May 06, 1994 between NAPOCOR and PNOC-EDC for the sale
by PNOC-EDC of electric capacity and energy from the Leyte project including
this Power Plant to NAPOCOR.
PROTECTIVE APPARATUS: The equipment and apparatus installed by the Operator
and/or NAPOCOR pursuant to Sections 6.8 hereof.
SCHEDULED MAINTENANCE: The maintenance referred to in Section 6.14 and approved
in accordance with section 6.15 and 6.16.
SCHEDULED OUTAGE: A planned interruption of the Power Plant's generating
capability that has been scheduled with PNOC-EDC in accordance with Sections
6.14 and 6.15 and is for maintenance, testing, inspection, repair, overhauls,
replacement, improvement or similar activity.
SITE: The land located at the Leyte Power Project Expansion Geothermal
Reservation to be provided by PNOC-EDC for the construction and operation (and
purposes incidental thereto including all other areas reasonably required to
perform the construction and operation) of the Power Plant as more particularly
described in Annex A.
STEAMFIELD POWER: An amount of energy (in kWh) delivered to PNOC-EDC and
measured in each one of the Plants at the relevant Points of Interconnection as
indicated in Figures C.1 - C.4 of Annex C.
T-▇▇▇▇ RATE: The rate per annum, on any day, at which Philippine Treasury Bills
(with terms of thirty (30) days or if no such ▇▇▇▇ with a term of thirty (30)
days is issued such ▇▇▇▇ which is issued having the term nearest to thirty (30)
days) were issued by the Government on the Friday immediately preceding such
day, or, if no such bills were issued on such Friday then the day immediately
preceding such Friday on which such bills were issued.
TERMINATION DATE: The date upon which this Agreement is terminated pursuant to
Article 9 or 15.
TRANSFER DATE: The day following the last day of the Cooperation Period;
provided, however, that in case of termination of this Agreement pursuant to
Article 9, the Transfer Date shall be the date following full payment of the
Buyout Price as defined in Section 9.2.
TRANSMISSION LINE: Has the meaning specified in Section 4.2.
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1.2 INTERPRETATION
In this Agreement:
(a) any reference to an "Article", "Section", or "Clause" is a reference
to an article or section hereof or an annex hereto or a clause or
section in an annex hereto;
(b) the headings and sub-headings appear as a matter of convenience and
shall not affect the construction of this Agreement;
(c) the singular includes the plural and vice versa, and words importing
any gender include the other genders;
(d) a reference to a person includes a reference to a body corporate and
to an unincorporated body of persons; and
(e) references to any Party include the successors and any permitted
assigns of that Party.
1.3 ABBREVIATIONS
In this Agreement:
(a) "$" and "dollar(s)" and "cents" denote lawful currency of the United
States of America;
(b) "Ps" and "peso(s)" denote lawful currency of the Republic of the
Philippines;
(c) "MW" denotes a megawatt;
(d) "MWh" denotes a megawatt hour;
(e) "kW" denotes a kilowatt;
(f) "kwh" denotes a kilowatt hour;
(g) "kV" denotes kilovolt;
(h) "DC" denotes direct current; and
(i) "AC" denotes alternating current.
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ARTICLE 2 PROJECT
2.1 POWER FACILITY
The Operator shall be responsible for the finance, design, supply,
construction, testing operation and maintenance of four (4) Plants with an
aggregate gross capacity of approximately 51.00 MW to be installed on the
Site, whose net generation (exclusive of the Steamfield Power) shall be
delivered to NAPOCOR on behalf of PNOC-EDC during the Cooperation Period.
The Power Plant shall be located on the Site which shall be made available
by PNOC-EDC at no cost to the Operator and subject to the provisions of
Subsection 4.3.
2.2 ENERGY CONVERSION
PNOC-EDC, at no cost to the Operator, shall supply and deliver all
Geothermal Fluid and receive all Geothermal Fluid in conformity to the
Geothermal Fluid Specifications needed by the Operator for each Plant to
generate the electric capacity and energy required by NAPOCOR and PNOC-EDC
for Steamfield Power up to the Nominated Capacity. The Operator shall
convert such Geothermal Fluid and, on behalf of PNOC-EDC, deliver all
electrical capacity and energy generated by the Power Plant to NAPOCOR less
(i) energy required by the Operator for auxiliary purposes; and (ii) the
Steamfield Power. PNOC-EDC shall pay the Operator conversion fees as
provided in Section 5.4 or Article 8, as the case may be. It is the
intention of the Parties, without creating a contractual obligation under
this Agreement, thatPNOC-EDC shall exercise its best effort to increase the
Geothermal Fluid inlet pressure to Plants 1,2 and 3 as per Geothermal Fluid
Specifications to allow, to the extent possible, an increase in the
Contracted Capacity of the Power Plant.
2.3 OWNERSHIP
(a) From the Effectivity Date until the Transfer Date, the Operator shall
own the Power Plant and all the fixtures, fittings, machinery and
equipment on the Site and used in connection with the Power Plant
which have been supplied by it or at its cost, and the Operator shall
operate and manage the Power Plant for the purpose of converting the
Geothermal Fluid delivered by PNOC-EDC in accordance with this
Agreement into electric capacity and energy.
(b) On the Transfer Date, ownership, management and operation of the Power
Plant shall be transferred by the Operator to PNOC-EDC in accordance
with Article 9 or 13 or 15, as applicable.
10
(c) Ownership of the Site shall remain with PNOC-EDC at all times during
the term of this Agreement.
2.4 COMMENCEMENT AND PROSECUTION OF THE PROJECT
The Operator shall develop and construct the Power Plant, with such
resources, construction equipment and temporary facilities as, in the
judgment of the Operator, are sufficient to complete the Power Plant on or
before the corresponding Guaranteed Commercial Operation Date. The capacity
of the construction equipment and temporary facilities, sequence of
operations, method of operations, and resources employed shall be such, in
the judgment of the Operator, as to insure that the Commercial Operation
Date of each Plant occurs on or before the relevant Guaranteed Commercial
Operation Date.
ARTICLE 3 GENERAL RESPONSIBILITIES OF THE OPERATOR
3.1 CONSTRUCTION PERFORMANCE SECURITY
(a) To guarantee the faithful performance by the Operator of its
obligation to completely construct the Power Plant in accordance with
the terms and conditions of this Agreement, within ten (10) days of
the Effectivity Date the Operator shall post and deliver the
Construction Performance Security in a form acceptable to PNOC-EDC in
a sum equivalent to One Hundred Dollars (US$100) per kilowatt (kW) of
total Contracted Capacity for all the Plants or its equivalent in
Philippine Pesos or other currencies. Prior to such delivery, the
Operator shall ensure that the Bid Security required under the bid
documents shall be extended until such time the Construction
Performance Security shall have been posted and delivered; provided
that, in the event that the Effectivity Date does not occur on or
before March 01, 1996, the Parties shall discuss and agree on any
further extension of the Bid Security. PNOC-EDC shall have recourse to
the Construction Performance Security to satisfy the final judgment in
an arbitral proceeding in accordance with Article 21.
(b) The Construction Performance Security shall be in any of the following
forms: (i) cash; (ii) irrevocable letter of credit issued in a form
and by a bank acceptable to PNOC-EDC, provided that if the letter of
credit is issued by a foreign bank it must be confirmed by an
acceptable local bank or offshore banking unit; (iii) a bank draft
guarantee issued by an accredited local bank, or if the issuing bank
is a foreign bank, such guarantee shall be confirmed by a local bank
acceptable to PNOC-EDC; or, (iv) surety bond, callable on demand, from
the Government Service Insurance System (GSIS). All foreign banks
issuing a letter of credit or bank guarantee shall be required to
submit itself to the jurisdiction of Philippine courts.
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(c) This Construction Performance Security shall be valid and in effect
from ten (10) days after the Effectivity Date until the earlier of (i)
the Guaranteed Commercial Operation Date plus six (6) months
thereafter or (ii) such time it is converted into the Operation
Performance Security..
(d) Effective on the Completion Date, the Operator shall either convert
the Construction Performance Security into or post and deliver an
Operation Performance Security which shall be in any of the forms
provided above for the Construction Performance Security in an amount
equivalent to Sixty-Six Dollars ($66) per kilowatt (kW) of Contracted
Capacity, or its equivalent in Philippine pesos or other currencies.
The Operation Performance Security shall guarantee the faithful
performance by the Operator of its obligations during the Cooperation
Period and, in case of abandonment, shall be forfeited in full in
favor of PNOC-EDC.
(e) If any security furnished in connection with this Agreement
subsequently becomes unacceptable to PNOC-EDC in its reasonable
discretion, or if the issuing company fails to furnish reports as to
its financial condition from time to time as requested by PNOC-EDC,
the Operator shall promptly furnish an additional security or a
replacement security as may be required to protect the interests of
PNOC-EDC in the Project.
3.2 RESPONSIBILITY FOR DAMAGE AND LOSSES
(a) The Operator shall be responsible for and shall promptly repair all
damage to property belonging to PNOC-EDC, NAPOCOR, private parties or
the Government caused by the negligent acts or omissions of Operator,
its employees, agents, representatives, contractors and
subcontractors.
(b) Except as set forth herein, any and all losses and damages to the
Power Plant, due to any cause or causes, whatsoever, that are the
responsibility of the Operator, its employees, agents,
representatives, contractors and subcontractors during the prosecution
of the Agreement shall not relieve the Operator from any of its
obligations under this Agreement.
(c) Except as otherwise provided for in this Agreement and except for
causes attributable to PNOC-EDC, PNOC-EDC shall not be responsible for
any damage due to any increased difficulty in the performance of the
obligations under this Agreement on account of any hindrance or delay
due to any cause whatsoever in the progress of the development,
construction, operation or maintenance of the Power Plant. Except as
otherwise set forth herein or to the extent arising from causes
attributable to PNOC-EDC, no adjustment in the prices as set forth in
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Article 8 shall be made on account of any such damage, increased
difficulty, hindrance or delay, but said hindrance or delay may
entitle the Operator to an extension of time for completing the
construction of the Power Plant as herein provided.
3.3 ENVIRONMENT AND CHANGE OF LAWS
(a) Prior to the Effectivity Date, the Operator and PNOC-EDC shall
mutually agree upon which requirements of the Environmental Compliance
Certificate issued in respect of the Power Plant are to be performed
by the Operator, and which requirements are to be performed by
PNOC-EDC. The Operator shall keep the Site in a sanitary condition and
in compliance with the environmental requirements and mitigation
measures to be performed by the Operator pursuant to such
Environmental Compliance Certificate, Authority to Construct, Permit
to Operate, and in accordance with the laws of the Republic of the
Philippines in effect as of the date hereof.
The costs for compliance with the environmental requirements shall be
charged to the account of the Operator except that (i) with respect to
H2S emissions, if any control of such emissions will be required from
Operator, then Operator will charge all costs related to the
installation of necessary equipment and facilities for such control as
well as all additional costs of operation and maintenance, to PNOC-EDC
who agrees to pay Operator all such additional costs and PNOC-EDC
shall have the right to approve the manner, method and associated
proposed costs of compliance with such requirements and (ii) the
Operator will comply with any environmental or non-environmental laws,
rules and regulations (and official interpretations thereof) affecting
the construction, operation or maintenance of the Power Plant or the
Operator's costs that are adopted or changed after the date of this
Agreement; provided that if such compliance would:
(i) result in the Plants being unable to operate at the Guaranteed
Net Plant Steam Rate in accordance with the Operating
Parameters, or otherwise in accordance with the specifications
set forth in this Agreement; or
(ii) result in the interest of the Operator in the Power Plant
and/or the Operator's expectation of its economic return (net
of tax or other imposition) on its investment being reduced or
otherwise adversely affected; or
(iii) result in the scheduled Completion Date being delayed;
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PNOC-EDC shall pay to the Operator the additional capital costs and
expenses necessary to comply with such new requirements and PNOC-EDC
shall have the right to approve the manner, method and associated
proposed costs of compliance with such requirements. With respect to
any disagreement or to other impacts resulting therefrom the Parties
shall meet and endeavor to agree on amendments to this Agreement and
if after sixty (60) days no such approval or agreement has been
reached, then the provisions of Article 9 shall apply.
(b) If it is necessary, in the development, construction, operation or
maintenance of the Power Plant, to interrupt or obstruct the natural
flow of rivers or streams, the drainage of the surface, or the flow of
artificial drains, the Operator shall provide adequate measures to
prevent damage to either public or private properties. The Operator
shall be liable for all damages caused by its negligence or willful
misconduct with respect to such interruption or obstruction.
(c) Subject to Section 3.3 (a) and except for any liability which may
arise from emissions of H2S prior to the installation of any H2S
abatement system, the Operator shall assume responsibility for any
costs and liabilities arising from any adverse environmental damage or
health impacts that are caused by the Operator's negligence or willful
misconduct in the construction, operation, and maintenance of the
Plants and their related facilities.
3.4 ORGANIZATION
(a) The Operator shall maintain at the Site an efficient and capable
organization with an adequate capacity and amount of construction,
operating and maintenance equipment and facilities to satisfactorily
develop, construct, operate or maintain the Power Plant in a safe,
efficient, environmentally sound and professional manner.
(b) The Operator shall assign to the Site English-speaking foreign
personnel. Any interpreters required shall be provided by the Operator
at its expense.
(c) The Operator shall employ an engineer(s) appropriately licensed to
practice in the Philippines who shall participate in the supervision
of the development, construction, operation or maintenance of the
Power Plant.
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ARTICLE 4 CONSTRUCTION OF THE POWER PLANT
4.1 MILESTONE DATES
(a) The Operator shall in good faith use all reasonable efforts to
construct the Power Plant in accordance with the following schedule:
Activity Date
Target Effectivity Date March 1, 1996
Ordering of long lead items the later of (i) July 1, 1996
(turbogenerators) or (ii) 120 days after the
Effectivity Date
Start of Commissioning Period of May 1, 1997
Plants 1, 2, and 3.
Start of Commissioning Period of October 1, 1997
Plant 4
Scheduled Completion Date for September 1, 1997
Plants l, 2, and 3
Scheduled Completion Date for January 1, 1998
Plant 4
Guaranteed Commercial Operation Date September 25, 1997
for Plants 1, 2 and 3
Guaranteed Commercial Operation Date January 25, 1998
for Plant 4
If the Commercial Operation Date of any Power Plant does
not occur on or before the relevant Guaranteed Commercial
Operation Date, the Operator shall be subject to the
penalty provisions set forth in Section 4.11.
(b) Each of the dates set forth in Section 4.1(a) shall be extended by the
duration of any event of Force Majeure or any breach by PNOC-EDC of
any of its obligations under this Agreement or any delays as a result
of requirements upon the Operator by PNOC-EDC or by any relevant
Government authority to install an H28 abatement system. In addition,
if the date for ordering the long-lead items is after July 1, 1996 as
provided in clause (a) above, each of the dates set
15
forth in Section 4.1(a) shall be extended day for day for the period
between July 1, 1996 and such date.
4.2 TRANSMISSION LINE, INTERCONNECTION AND GEOTHERMAL FLUID
(a) PNOC-EDC shall ensure that on or before each of the dates specified in
Section 4.1(a), for the Start of Commissioning of each Plant as such
dates may be extended pursuant to Section 4.1(b) for reason of Force
Majeure, a 230 kV transmission line, including all interconnection
facilities up to and including the Point of Interconnection for such
Plant on the side of the transmission line (collectively, the
"Transmission Line"), is installed and is capable of being connected
to the Plants and receiving all power generated by those Plants which
are about to be commissioned, plus any Plants already in operation.
(b) PNOC-EDC shall likewise ensure that on each of the dates specified in
Subsection 4.1(a) for the Start of Commissioning Period for each Plant
Geothermal Fluid and the acceptance of the down stream Geothermal
Fluid from the Plants complying with the Geothermal Fluid
Specifications are made available to the Operator.
(c) The Operator shall construct and maintain all interconnection
facilities on the Plants' side of the Point of Interconnection.
4.3 SITE PROVISION
(a) PNOC-EDC shall make the Site available exclusively to the Operator for
the purpose of building and operating the Power Plant, free and clear
of liens and encumbrances that could interfere with the Operator's
construction or operation of the Plants and at no cost to the
Operator, and the Operator shall have the right to possess, use and
enjoy the Site for the period from the Effectivity Date until the
Transfer Date. The inability of PNOC-EDC to comply with its
obligations under this Section 4.3 shall constitute a Political Force
Majeure. Ownership and administration of the Site shall remain with
PNOC-EDC throughout the effectivity of this Agreement. PNOC-EDC shall
be responsible for, and hold the Operator and its successors and
assigns harmless from, all claims by third parties relating to the
land provided for the Site, including, without limitation, claims
under colour of ownership of any interest in such land, real estate
and other taxes or other claims that might give rise to any lien on
the land or any improvements to it (other than those claims arising
out of the Operator's construction, operation or maintenance of the
Power Plant). If PNOC-EDC fails to duly satisfy such claims on a
timely basis, the Operator
16
may do so (at his sole discretion and upon prior consultation with
PNOC-EDC) and PNOC-EDC shall promptly reimburse such expenses.
(b) The Operator shall not obstruct any existing road or drainage or
disturb existing structures and facilities on the land so furnished
for construction purposes unless and until given written permission by
appropriate authorities. Unreasonable withholding or delay of such
permission shall constitute Force Majeure.
(c) PNOC-EDC shall make available to the Operator, free and clear of liens
and encumbrances that could interfere with the Operator's construction
or operation of the Plants and at no cost to the Operator, all other
lands, easements, and rights-of-way for developing, constructing,
operating, or maintaining the Plants (including areas and temporary
access for the disposal of spoils) or such other purposes which the
Parties agree are necessary in the implementation of this Agreement
for the period from the Effectivity Date until the Transfer Date.
4.4 INGRESS AND EGRESS RIGHTS OF OPERATOR
PNOC-EDC shall ensure that all necessary access to and from the Site is
made available to the Operator, its employees, contractors, subcontractors
and advisers, at no cost to the Operator, for the period from the date of
this Agreement until the Transfer Date.
4.5 EQUIPMENT IMPORTATION
(a) The Operator shall be responsible for the importation and
transportation to the Site of all equipment for development and
operation of the Power Plant, and construction of the Power Plant. It
is the responsibility of the Operator to secure from the Government,
its agencies and instrumentalities, the necessary permits, licenses,
and other documents for the importation of the Operator-owned
construction or maintenance equipment that it may decide to bring into
the country for use in connection with this Agreement. PNOC-EDC shall
use its best efforts in assisting the Operator to obtain all such
licenses and documents.
(b) PNOC-EDC shall use its best efforts to cause the Government to grant
the Operator exemptions from all custom duties or other importation or
exportation tax in respect of all items of plant, machinery and
ancillary items, including consumables and spare parts, required for
the construction, operation, maintenance and repair of the Power
Plant, provided however that if such exemptions are not obtained, the
provisions of Section 8.6 shall apply.
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(c) Any delays caused by meeting customs procedures for material equipment
and supplies or in obtaining necessary permits, licenses, and other
documents caused by an event of Force Majeure and to the extent that
they affect the Operator's ability to undertake its performance under
this Agreement shall extend the project milestone dates set forth in
Subsection 4.1(a) equivalent to the period of the delay in obtaining
such permits, licenses and other documents. The Operator or PNOC-EDC
shall promptly notify the other Party of each such delay, and the
Parties shall cooperate to promptly satisfy the relevant authority and
remove the cause of the delay. Any delay in excess of sixty (60) days
after notification by the Operator to PNOC-EDC shall cause Article 9
to apply. The Operator shall not be subject to delay penalties as a
result of such a delay.
4.6 PERMITS
Following the Effectivity Date, the Operator, at no cost to PNOC-EDC, shall
be responsible for securing from the Government all requisite
authorizations, licenses and permits not previously provided under the
provisions of Article 26 for the construction and operation of the Plants,
their associated facilities, and related waste management facilities,
except the Environmental Compliance Certificate, which shall be obtained by
PNOC-EDC. PNOC-EDC shall cooperate with and use its best efforts to assist
the Operator in obtaining such authorization, licenses and permits.
Any delays, caused by an event of Force Majeure and to the extent that they
materially affect the Operator's ability to undertake its performance under
this Agreement, caused in obtaining requisite authorizations, licenses and
permits shall extend the Completion Date and other benchmark dates day for
day. The Operator or PNOC-EDC shall promptly notify the other Party of each
such delay, and the Parties shall cooperate to promptly satisfy the
relevant Authority and remove the cause of delay. Any delay in excess of
sixty (60) days after notification shall cause Article 9 to apply. The
Operator shall not be subject to delay penalties as a result of such a
delay.
4.7 DRAWINGS, DOCUMENTS, DATA & INSTRUCTIONS
The Operator shall comply with the following on matters of drawings and
other documentary information, and PNOC-EDC rights thereto:
4.7.1 SUBMISSION OF DRAWINGS AND DATA
The Operator shall submit to PNOC-EDC copies of all drawings, plans,
calculations, operating and maintenance instructions and, in general,
copies of all material documents related to the Power Plant reasonably
requested for reference and information. Prior to the start of
construction,
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within thirty (30) working days following receipt thereof, PNOC-EDC
shall describe to the Operator in writing any flaws perceived by
PNOC-EDC in the designs. Failure by PNOC-EDC to describe any flaws in
such designs within such thirty (30) day period shall be deemed
PNOC-EDC's waiver of its right to describe such flaws.
The Operator shall also advise PNOC-EDC of the names of potential
suppliers of material components or material services who have been
shortlisted by the Operator. Within thirty (30) working days following
receipt of such advice, PNOC-EDC shall advise the Operator of any such
potential suppliers to which PNOC-EDC objects, together with the
reasons for objection and may request the Operator to exclude such
suppliers from the shortlist. The Operator shall comply with such
requests by PNOC-EDC as it shall deem reasonable.
Following the start of construction by the Operator on the Site, and
in any case not earlier than 120 days after the Effectivity Date, the
above-mentioned thirty (30) working days periods shall be reduced to
fifteen (15) working days.
4.7.2 MODIFICATION RIGHTS
During the same thirty (30) or fifteen (15) working day period
following the receipt of the documents or list of such suppliers under
Section 4.7.1, PNOC-EDC shall have the right to require modifications
to the design as it deems necessary within the scope of work set forth
in Annex B and Annex C for proper and safe operation of the Power
Plant as it affects the operation of the PNOC-EDC geothermal fluid
collection and disposal system and the NAPOCOR power system. In the
event PNOC-EDC requests any Elective Modifications, then the Parties
shall negotiate in good faith (i) to adjust the Contract Capacity
Price to maintain the Operator's economic return on its investment as
if no such Elective Modifications were performed and (ii) adjust the
dates set forth in Section 4.1 to reflect any delays in designing such
Elective Modifications and any additional time required by the
Operator to complete such Elective Modifications; provided that the
Operator shall not be required to make such Elective Modifications if
such Elective Modifications would likely impair the Operator's ability
to perform its obligations hereunder. In the event the Parties are
unable to reach agreement on such adjustments within sixty (60) days
following PNOC-EDC's request, PNOC-EDC may withdraw such request.
Thereafter, if such request is not withdrawn, the Operator shall
either comply with such request or terminate this
19
Agreement by giving written notice of termination to the PNOC-EDC;
provided, however, that if the Operator gives such a written notice of
termination to PNOC-EDC, PNOC-EDC shall have five (5) working days
following delivery of such notice of termination to again withdraw its
request. If such request is withdrawn by PNOC-EDC such written notice
of termination will be of no effect. Upon such termination, the
provisions of Article 9 shall apply. If, following the process as
described in this Subsection 4.7.2, in the Operator's reasonable
judgment a delay has been caused to its construction schedule, and
such a delay is not due to a flaw in the Operator's drawings, the
dates set forth in Subsection 4.1(a) shall be extended and adjusted
proportionally to such a delay.
4.7.3 FUTURE MODIFICATION
All changes to the design of the Power Plant desired by the Operator
shall be subject to the review and approval of PNOC-EDC and such
approval shall not be unreasonably withheld. Except as set forth in
Section 4.7.2 and this section, neither Party shall have the right to
make or require any changes in the design of the Power Plant without
the prior written consent of the other Party.
4.7.4 CONSTRUCTION SCHEDULE
The Operator shall submit to PNOC-EDC a detailed construction schedule
of the Power Plant within three (3) months following the Effectivity
Date. This schedule shall contain, in particular, dates for the
submission of all drawings, documents and data, acceptance thereof,
witnessing of tests and the overall procurement schedule. PNOC-EDC
shall have the right to review and approve, which approval shall not
be unreasonably withheld, the construction schedule of the Power
Plant. Failure to disapprove such schedule within thirty (30) days
following receipt of the same shall be deemed PNOC-EDC's approval of
the same.
4.7.5 MONITORING RIGHTS
PNOC-EDC shall be entitled at its own cost to monitor the progress and
quality of the construction and installation work. For this purpose,
the Operator shall:
(a) submit to PNOC-EDC a monthly progress report in such detail and format
as may be reasonably requested by PNOC-EDC;
20
(b) ensure that PNOC-EDC and any experts appointed by PNOC-EDC in
connection with the Power Plant are afforded reasonable access to the
Site at times to be agreed with PNOC-EDC provided that such access
does not materially interfere with the development, construction,
operation or maintenance of the Power Plant or expose any person on
the Site to any danger; and
(c) make available for inspection at the Site copies of all plans and
designs.
4.7.6 DRAWINGS AND DOCUMENTS TO BE PROVIDED
The Operator shall furnish PNOC-EDC drawings and technical details
that are prepared by or on behalf of the Operator such as, but not
limited to, the following:
(a) arrangement plans for the general layout of machinery and equipment;
(b) general and detailed drawings and specifications for electromechanical
works;
(c) general and detailed drawings and specifications for civil and
architectural works; and
(d) operation and maintenance manuals
in accordance with the construction schedule as submitted and approved
in accordance with Section 4.7.4.
Within six (6) months following the Commercial Operation Date of the
last Plant, the Operator shall supply PNOC-EDC with three (3) copies
of all "as built" plans, drawings, and design calculations related to
construction and the performance of the Power Plant as well as quality
assurance records, one of which copies shall be reproducible.
4.8 DISCLAIMER
The following disclaimer shall be recognized in this Agreement:
(a) Any engineering review by PNOC-EDC of the Power Plant is solely for
its information. By making such review PNOC-EDC makes no
representation as to the engineering soundness of the Power Plant.
(b) The Operator shall in no way represent to any third party the
engineering soundness of the Power Plant as a result of the review
made by PNOC-EDC.
21
(c) Subject to the other provisions of this Agreement, the Operator is
solely responsible for the economic and technical feasibility,
operational capability and reliability of the Power Plant.
(d) PNOC-EDC shall not be liable to the Operator for, and the Operator
shall defend, hold harmless, and indemnify PNOC-EDC from, any claim,
cost, loss, damage, or liability arising from any contrary
representation made by the Operator concerning the effect of
PNOC-EDC's engineering review of the Power Plant.
4.9 RESPONSIBILITY FOR UTILITIES
The Operator and PNOC-EDC shall be each responsible for the provision of
needed utilities, such as electric service, water, communications and the
like, necessary during the construction and operation of the Power Plant
according to the requirements of Annex B2.3 and Annex B3 respectively.
4.10 DELAYS
Should the Operator be obstructed or delayed at any time in the progress of
the construction work due to any of the following causes:
(i) Failure of the Operator to obtain the necessary access to the
Site, or failure of PNQC-EDC to deliver and accept geothermal
fluid meeting the Geothermal Fluid Specifications; or the
failure of PNOC-EDC to fulfill any of its other obligations
that at Operator's reasonable judgment will cause a delay in
the scheduled Completion Date; or the failure of the Operator,
for reasons not attributable to the Operator, to obtain the
Authorization to Construct and Permit to Operate; or
(ii) Any delay described in Sections 4.5 and 4.6, or any delay
caused by a PNOC-EDC directed modification in accordance with
Subsection 4.7.2 other than a modification which is
necessitated by a flaw in the Operator's drawings or any delays
as a resultof requirements upon the Operator by PNOC-EDC or by
any relevant Government authority to install an H2S abatement
system; or
(iii) Delays due to Force Majeure conditions:
the Operator shall promptly notify PNOC-EDC of such delay, including
details and supporting documents reasonably calculated to describe the
problem, steps taken to resolve it and any proposed cooperative solution.
Any delay under the terms of this
22
Section 4,10 shall extend day for day, unless otherwise agreed between the
Parties, the Guaranteed Commercial Operation Date and all other related
target dates directly related to the delay and within the responsibility of
Operator.
4.11 PENALTY DUE TO DELAYS
(a) In the event the Commercial Operation Date of any individual Plant
does not occur on or before the relevant Guaranteed Commercial
Operation Date (as the same may be extended pursuant to this Agreement
or by mutual agreement), the Operator shall pay PNOC-EDC an amount as
defined in Annex 13. If the Operator fails to pay such amount within
five (5) working days after due, PNOC-EDC shall have the right to draw
on the Construction Performance Security to the extent of the amount
defined in Annex E. In no event shall the aggregate amount of
penalties for delay exceed the sum of $5,700,000.
(b) In the event that the Commercial Operation Date of any Plant does not
occur within one hundred fifty (150) calendar days following the
Guaranteed Commercial Operation Date for that Plant (as the same may
be extended pursuant to this Agreement or by mutual agreement) then
Section 15.4.1 shall apply.
4.12 LIGHTS AND BARRIERS
During construction, the Operator shall put up and maintain at the Site
such danger lights and barriers as the Operator deems reasonably necessary
to prevent all accidents in consequence of the development or construction
of the Power Plant. If work is done at night, the Operator shall maintain
from sunset to sunrise during the performance of such work such adequate
lighting on or about the Site and on the work area as the Operator deems
necessary for the safety of the construction forces and for the proper
observance and inspection of the construction and erection activities.
ARTICLE 5 TESTING OF THE FACILITY
5.1 TESTING PROCEDURES
The procedures for the testing of the Power Plant set forth in Annex F
shall be followed by the Operator.
5.2 TEST SCHEDULES
(a) The Operator and PNOC-EDC shall agree on test schedules and schedules
of Geothermal Fluid requirements for the tests for the Power Plants.
The schedules shall take into consideration the operational
requirements of PNOC-
23
EDC and NAPOCOR, provided, however, that the Operator shall not be
delayed by more than 7 calendar days in his proposed test schedules.
(b) In so far as Plants 1,2 and 3 are concerned, the Operator agrees to
accept Geothermal fluid for a total period of three (3) months during
the commissioning period. Over these three (3) months the Operator, at
Operator's request, shall be entitled to two (2) months of Geothermal
Fluid supply for plant 3 and two (2) months of Geothermal Fluid supply
for Plants 1 and 2.
5.3 NOTICE OF TESTS
The Operator shall notify PNOC-EDC at least fifteen (15) calendar days
prior to carrying out any tests on the Power Plant and prior to:
(a) the initial parallel operation of each of the Operator's Plants; and
(b) all testing of the Protective Apparatus.
5.4 TESTS BEFORE COMPLETION
(a) PNOC-EDC reserves the right to witness all tests, including equipment
testing at the Operator's or other subcontractor's or equipment
supplier's premises during the course of this Agreement. NAPOCOR shall
have the right to have a representative present at all tests of the
Protective Apparatus.
(b) The representatives of PNOC-EDC shall have the right to be present
during any test activity done by the Operator on the Power Plant.
Tests conducted without the presence of PNOC-EDC's representative
shall not be valid for the purposes of this Agreement; provided that
if the Operator has complied with the notice provisions of Section 5.3
and PNOC-EDC representative fails to be available for such tests at
the scheduled time, the Operator may conduct such tests and such tests
shall be valid for the purpose of this Agreement and the Operator
shall have the right to issue, without need of PNOC-EDC's concurrence,
the certificates required by Section 5.4(c).
(c) Upon completion of any test, the Operator and PNOC-EDC shall jointly
issue a certificate that testing has been done on each Plant and that
agreed testing procedures shown in Annex F had been followed.
(d) The Operator shall use best efforts to demonstrate the Power Plant's
ability to provide to NAPOCOR on behalf of PNOC-EDC the Contracted
Capacity. If, pursuant to the tests performed pursuant to this Article
5, any Plant is unable to demonstrate a capacity equal to its
proportional portion of the Contracted
24
Capacity, then the Operator shall perform the tests required by this
Article 5 at such other capacity as the Operator elects. Upon
completion of such tests, the Parties shall certify the Completion
Date for the relevant Plant.
(e) No later than seven (7) calendar days after the Completion Date of
each Plant, the Operator shall notify PNOC-EDC of the adjusted
Nominated Capacity of the Power Plant for the first year of operation.
The total Nominated Capacity of the Power Plant for the first year of
operation shall be adjusted upon the Completion Date of each Plant in
order to include the proportional portion of the Nominated Capacity
related to that completed Plant.
(f) All costs, excluding Geothermal Fluid, incurred during the testing of
the Power Plant shall be borne by the Operator.
(g) Energy generated during testing shall be delivered to NAPOCOR on
behalf of PNOC-EDC and paid for by PNOC-EDC at fifty percent (50%) of
the rate actually paid by NAPOCOR to PNOC-EDC. The Operator shall ▇▇▇▇
PNOC-EDC for such energy in accordance with Section 8.4.
(h) Notwithstanding anything to the contrary in this Agreement, in the
event that, from and after the date set forth in Section 4.1 for the
start of commissioning of a Plant, that Plant is capable of being
tested, but performance tests required under Section 5.4(d) cannot be
performed because of:
(i) an Interconnection Failure; or
(ii) PNOC-EDC's failure to deliver or accept Geothermal Fluid as
specified in the Geothermal Fluid Specifications; or
(iii) the Operator's failure to receive all permits, licenses, other
governmental approvals and utilities required for operation of
the Power Plant, notwithstanding its reasonable efforts to
obtain the same, and assuming the Operator has complied with
the scope of work set forth in Annex B; or
(iv) PNOC-EDC or NAPOCOR's failure to provide any personnel or
resource necessary to witness and approve such testing; or
(v) any dispute between PNOC-EDC and NAPOCOR (under the Power
Purchase Agreement or otherwise) which did not arise from any
default of the Operator under this Agreement, including the
termination or expiration of the Power Purchase Agreement,
then, in any such events, the Completion Date for such Plant(s)
shall be deemed to have occurred and
25
PNOC-EDC shall be obligated to commence payments of the
Capacity Payments and the Energy Fee to the Operator on and
from the Completion Date provided, however, that Completion
Date for such payments shall not occur prior to August 1, 1997.
The capacity for purposes of calculating the Capacity Payments
payable under this Subsection shall be deemed to be delivery of
Nominated Capacity equal to the Contracted Capacity of such
Plant(s).
At such time when all events described in subparagraphs (i), (ii), (iii),
(iv) and (v), above have been cured and no longer exist regarding the
affected Plant, the Operator shall perform the performance tests required
under Section 5.4(d) and advise PNOC-EDC of the adjusted Nominated Capacity
of the Power Plant and thereafter shall receive Capacity Payments based on
the adjusted Nominated Capacity.
In the event that the Operator is unable to pass all of the Plant's
performance tests as set forth herein and provided that such tests are
conducted within six (6) months from the Completion date of the affected
Plant, the Operator will be obligated to refund or credit against future
capacity made available and actually delivered to PNOC-EDC that amount of
Capacity Payment actually received by the Operator prior to and during such
tests which exceeds the amount of Capacity Payment which the Operator would
have been paid at the lower capacity rating actually demonstrated in
testing the Plant.
In the event there is a difference of opinion about test results before or
during the Cooperation Period, which cannot be resolved by the Parties
within seven (7) days, the controversy shall be resolved by a reputable
engineering firm chosen in advance as provided herein after. The Operator
shall propose the engineering firm, acceptable to PNOC-EDC which acceptance
shall not be unreasonably withheld, and the Parties will agree on such
engineering firm not later than six (6) months prior to the estimated start
of the Commissioning Period for the first Plant. The Parties shall equally
share any costs associated with this procedure.
5.5 TESTS DURING COOPERATION PERIOD
The net plant capacity and the Net Plant Steam Rate shall be tested every
year in the presence of PNOC-EDC personnel following the procedures set
forth in Annex F. This test shall be performed at the Operator's election
within six (6) months after completion of the annual maintenance on each
individual Plant and shall form the basis for determining the Nominated
Capacity for the following year under Section 6.13. The Operator shall be
entitled to repeat any of the aforesaid tests. If any of the events
described in Subsection 5.4(h) affect the results of any such tests, the
provisions of Subsection 5.4(h) shall apply for purposes of determining
Nominated Capacity for such year.
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ARTICLE 6 OPERATION OF THE FACILITY
6.1 COMPLETION DATE
(a) Upon the substantial completion of the Power Plant and subject to
confirmation by PNOC-EDC (which confirmation shall not be unreasonably
withheld), the Operator may certify that the Completion Date of the
Power Plant has occurred notwithstanding that the Power Plant is
unable to produce the Contracted Capacity adjusted per the Correction
Curves or to achieve the Guaranteed Net Plant Steam Rate, but in that
event adjustments shall be made to the Capacity Payments in accordance
with the penalty provisions of Subsection 8.3.1; provided, however,
that such certification may not be made if the Power Plant is unable
to produce at least seventy percent (70%) of the Contracted Capacity,
after application of the Correction Curves.
(b) On the Completion Date of the Power Plant, the Operator shall commence
the delivery of electric capacity and energy to NAPOCOR on behalf of
PNOC-EDC and shall be paid for such delivery in accordance with the
provisions of Section 8.3. All other related provisions on the
operation of the Power Plant and the tariffs, discounts, bonuses, and
penalties on the regular sale of electric capacity and energy shall
also take effect on this date.
6.2 POWER RATES FOR INITIAL DELIVERY
In the event that the Completion Date of any Plant falls on a date other
than the Commercial Operation Date, PNOC-EDC shall pay the Contract
Capacity Price for the Power Plant to the Operator on a prorated basis
based on the number of days elapsed from the Completion Date.
6.3 DEDICATION OF FACILITY
The Operator shall operate and dedicate all energy and capacity of the
Power Plant (net of Operator's and PNOC-EDC's usage allowed hereunder) to
NAPOCOR.
6.4 OPERATING PARAMETERS
The Operator shall operate the Power Plant following the Operating
Parameters as stipulated in Annex B(4).
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6.5 DISPATCH PROCEDURE
It is the expectation of the Parties that the Plant(s) will be operated as
base-load plant(s). However, the Operator shall Control and operate the
Plant(s) consistent with NAPOCOR's dispatch requirements and the Plant(s)
shall be so capable.
6.6 ENGINEERING STANDARDS
The Power Plant shall be designed, operated and maintained by the Operator
in accordance with prudent industry standards and good engineering
practices.
6.7 ENVIRONMENTAL STANDARDS
Subject to the provisions of Section 3.3(a), the Power Plant shall be
designed, constructed, operated and maintained by the Operator in
accordance with R.A. 6969 and DENR Administrative Orders 14, 34 and 35, and
other applicable environmental standards and regulations, and in particular
with the requirements of the Environmental Compliance Certificate, the
Authority to Construct, and the Permit to Operate issued in respect of the
Power Plant. In case of any changes in law or official interpretation of
law, Section 3.3 shall apply.
6.8 PROTECTIVE DEVICES
The Operator shall install Protective Apparatus in accordance with general
specifications for such equipment and as approved by PNOC-EDC, NAPOCOR and
the Operator conforming to the specifications set forth in Annex B and
Annex C, to ensure the NAPOCOR Electrical System Integrity. The Power Plant
shall be operated by the Operator with all of the Protective Apparatus in
service whenever it is connected to or is operated in parallel with the
NAPOCOR electric system.
6.9 INTEGRITY LOSS
If, at any time, NAPOCOR reasonably doubts the integrity of any of the
Operator's Protective Apparatus and reasonably suspects that such loss of
integrity would be hazardous to the NAPOCOR Electric System integrity, the
Operator shall demonstrate, to NAPOCOR's and PNOC-EDC's reasonable
satisfaction, the correct calibration and operation of the equipment in
question. If not so reasonably satisfied, NAPOCOR shall have the right to
disconnect the Operator and refuse to receive the energy delivered by the
Power Plant and, for the duration of such disconnection, the Power Plant
shall be deemed to have suffered an Outage for billing purposes. The
inability of the Operator to meet capacity by reason of any demonstration
made by the Operator under this
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Section 6.9 shall not be an Outage if the Operator is able to show correct
calibration and operation of Protective Apparatus.
6.10 SETTINGS OF PROTECTIVE DEVICES
All settings of all Protective Apparatus shall be subject to the reasonable
approval of NAPOCOR. Tests and calibration of this Protective Apparatus
shall be at the expense of the Operator.
6.11 SERVICE COMMITMENT
At NAPOCOR's request, the Operator shall make all reasonable efforts on
behalf of PNOC-EDC to deliver energy during periods of Emergency.
6.12 MAINTENANCE DURING EMERGENCY
In the event that the Scheduled Maintenance coincides with an Emergency,
the Operator shall make all reasonable efforts to reschedule such Scheduled
Maintenance.
6.13 ANNUAL CAPACITY NOMINATION
(a) The Nominated Capacity of the Power Plant shall be specified by the
Operator for the second year and each subsequent year of the
Cooperation Period no later than thirty (30) calendar days prior to
the anniversary of the first Commercial Operation Date of the Power
Plant.
(b) If, for a particular year, the Operator fails to specify a Nominated
Capacity, then the lower of the Contracted Capacity, the last
Nominated Capacity or the last capacity demonstrated in testing in
accordance with Section 5.5 adjusted per Correction Curves shall be
the Nominated Capacity for that particular year.
6.14 MAINTENANCE SCHEDULE
The Operator shall submit a written maintenance schedule for the necessary
overhaul, maintenance, inspection and repair of the Power Plant no later
than one hundred (100) calendar days prior to the start of each calendar
year following the Commercial Operation Date of the Power Plant setting
forth the Operator's proposed Scheduled Maintenance for such year provided,
however, that each Plant shall not be scheduled for Scheduled Maintenance
for more than twenty-one (21) days per year in which a major overhaul of
that Plant occurs, and seven (7) days per year in which no major overhaul
occurs, and the interval between major overhauls of each Plant shall not be
less than a cycle of two years.
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6.15 APPROVAL OF MAINTENANCE SCHEDULE
PNOC-EDC shall notify the Operator, within forty-five (45) calendar days
after receipt of each maintenance schedule from the Operator, whether the
requested maintenance schedule is approved, which approval shall not be
unreasonably withheld. If not approved, the Parties shall promptly and in
good faith negotiate an alternative mutually-agreeable maintenance
schedule.
6.16 APPROVAL OF OVERHAULS
The Operator shall not schedule major overhauls without the prior approval
of PNOC-EDC and such approval shall not be unreasonably withheld or
delayed.
6.17 COMPLIANCE WITH APPROVED MAINTENANCE SCHEDULE
The Operator shall perform Scheduled Maintenance on the Power Plant during
the periods set forth in the maintenance schedule approved pursuant to
Section 6.15, unless such other times are approved by PNOC-EDC, and such
approval shall not be unreasonably withheld.
6.18 UNSCHEDULED OUTAGE
The Operator shall immediately notify PNOC-EDC, and NAPOCOR on behalf of
PNOC-EDC, of any unscheduled Outage and the estimated duration of such
Outage.
6.19 DAILY OPERATING REPORT
For record purposes, the Operator shall keep PNOC-EDC and NAPOCOR's power
management center regularly informed as to the daily results of operation
and generation capability of the Power Plant, including, without
limitation, any Outages.
6.20 OPERATING RECORDS
The Operator shall maintain an operating log for each Plant with records
of:
(a) real and reactive power production,
(b) changes in operating status,
(c) Outages,
(d) Protective Apparatus operations, and
30
(e) any unusual conditions found during inspections.
Changes in the setting of Protective Apparatus shall also be logged. In
addition, the Operator shall maintain customary records applicable to the
Power Plant, including maintenance and overhaul records, the electrical
characteristics of the generator and settings or adjustments of the
generator control equipment and Protective Apparatus. At the end of the
Cooperation Period, such records shall be turned over to PNOC-EDC at no
cost.
6.21 PNOC-EDC ACCESS TO THE POWER PLANT
Upon at least twenty four (24) hours advance notice under normal
circumstances, PNOC-EDC shall have rights of access to the Power Plant at
mutually agreed upon times for the purpose of monitoring the Operator's
operation and maintenance of the Power Plant, subject only to any
reasonable restrictions that the Operator may impose for reasons of
personnel and equipment safety and to avoid any impairment to the
operations or maintenance of the Power Plant. However, in the event of an
emergency, no advance notice shall be required provided that PNOC-EDC
representative shall be accompanied by the Operator's representative. The
Operator shall make the necessary arrangements to allow free access at any
time to PNOC-EDC equipment.
ARTICLE 7 GEOTHERMAL FLUIDS
7.1 GEOTHERMAL FLUID SUPPLY
(a) PNOC-EDC shall supply and accept at no cost to the Operator the total
Geothermal Fluid requirements and output of the Power Plant. Such
Geothermal Fluid shall conform to the Geothermal Fluid Specifications.
(b) If neither Party shall have reason to believe that any Geothermal
Fluid delivered to or accepted from the Site do not comply with the
Geothermal Fluid Specifications, that Party shall promptly notify the
other Party. Such notice shall be reasonably detailed and focused on
possible solutions to the problem.
7.2 NON-CONDENSIBLE GASES & NON-GEOTHERMAL WASTE
Except as provided for in Sections 3.3 and 11.2, the Operator shall be
responsible for disposal of non-condensible gases resulting from the
operation of Plant 4 and all non-Geothermal Fluid related waste arising
from the Operator's construction, operation or maintenance of the Power
Plant. If requested by the Operator, PNOC-EDC shall dispose of such waste
at the Operator's cost, such disposal to be in accordance with applicable
law. The disposal activities of PNOC-EDC on behalf of Operator shall be
subjected to a
31
separate Waste Disposal Agreement between PNOC-EDC and the Operator. This
disposal shall be in accordance with the requirements of the Environmental
Compliance Certificate issued in respect of the Power Plant and attached
hereto as Annex L.
7.3 SURPLUS CONDENSATE
The Operator shall deliver to PNOC-EDC and PNOC-EDC shall accept for
disposal at no cost to the Operator all surplus condensed geothermal steam,
including cooling tower blowdown; provided, however, such surplus
condensate complies with the specifications set forth in Annex C.
7.4 OTHER GEOTHERMAL WASTE
Except as set forth in Section 7.2, PNOC-EDC shall be responsible at no
cost to the Operator for the disposal of all waste products related to the
Geothermal Fluid and/or steam supplied by PNOC-EDC for the operation or
testing of the Power Plant. This disposal shall be in accordance with the
requirements of the Environmental Compliance Certificate issued in respect
of the Power Plant and attached hereto as Annex L.
7.5 ENERGY MANAGEMENT
The Operator shall use its reasonable efforts to optimize steam and
electricity use and shall exercise due diligence in the operation and
management of main and auxiliary machinery so as to minimize energy
consumption and waste.
ARTICLE 8 DELIVERY OF CAPACITY AND ENERGY
8.1 OBLIGATIONS OF THE PARTIES
(a) The Operator hereby agrees to convert PNOC-EDC's Geothermal Fluid into
electric energy and PNOC-EDC hereby agrees to sell to NAPOCOR, at the
Point of interconnection, the Nominated Capacity and energy delivered
by the Operator to NAPOCOR on behalf of PNOC-EDC during the
Cooperation Period less any Steamfield Power. PNOC-EDC agrees to pay
the Operator for the Nominated Capacity and energy delivered by the
Operator at the Points of Interconnection for NAPOCOR Power and
Steamfield Power.
(b) During the testing prior to the Completion Date of each Plant, the
Operator shall not receive any payments for Contracted Capacity or
Nominated Capacity for that Plant but shall receive payments for
energy as set forth in Section 5.4(g).
(c) From and after the Completion Date of each Plant, the Operator shall
make available electric capacity of that Plant and shall deliver
energy in accordance with
32
this Agreement and receive the Capacity Payments and receive or make
the Energy Fee described in Section 8.3.2.
8.2 METERING
8.2.1 METER MAINTENANCE AND OWNERSHIP
(a) PNOC-EDC shall supply, own and maintain as part of the interconnection
facilities at the Point of Interconnection and at the point of supply
of the Steamfield Power, meters and related equipment reasonably
satisfactory to the Operator for the measurement of electricity.
Billing under this Agreement shall use the readings of these meters.
(b) NAPOCOR may also supply, own and maintain as part of the
interconnection facilities at the Point of Interconnection, meters and
related equipment for the measurement of electric power and energy.
(c) PNOC-EDC shall supply, own and maintain meters and related equipment
reasonably satisfactory to the Operator for the measurement of
Geothermal Fluid flow. These meters and equipment shall be located in
the Geothermal Fluid piping upstream of the interface point of
Geothermal Fluid supply from PNOC-EDC to the Operator. Billing under
this Agreement shall use the readings of these meters
(d) The Operator shall supply, own and maintain equipment for the
measurement, calculation and recording of those parameters required
for the application of the Correction Curves. The equipment used for
measuring Atmospheric Conditions shall be located close to the air
intake of the cooling tower of Plant 4, in accordance with the Cooling
Tower Institute (CTI) Standards.
8.2.2 PLANT MONITORING EQUIPMENT
For the purpose of monitoring the Power Plant's operation, the
Operator shall make reasonable provisions for the installation of
other metering and telemetering devices at the generation side of the
step-up transformers at the Point of Interconnection as part of the
PNOC-EDC Supervisory Control and Data Acquisition (SCADA) system.
8.2.3 METER SEALS AND INSPECTION
PNOC-EDC's meters shall be sealed and the seals shall be broken only
when the meters are to be inspected or tested by PNOC-EDC. The
Operator shall be given reasonable notice of such occasions and shall
have the right to have a representative present at such tests.
33
8.2.4 METER TESTS
(a) PNOC-EDC's electricity meters, installed in pursuance to this
Agreement, shall be tested by PNOC-EDC at its own expense every six
months. Other tests may be conducted at any reasonable time upon
request by either Party, at the requesting Party's expense (subject to
the next sentence). If the Operator makes such request, the Operator
shall reimburse said expense to PNOC-EDC within thirty (30) days after
presentation of a ▇▇▇▇ therefore, unless such tests demonstrate that
such meters are not 100% accurate plus or minus one percent (1%), in
which case PNOC-EDC shall bear the expense for such tests.
(b) The Operator's equipment for the calculation and recording of
theoretical Geothermal Fluid consumption shall be tested by the
Operator at its own expense, in the presence of PNOC-EDC, every six
months.
8.2.5 METER ACCURACY
Electric metering equipment found to be inaccurate pursuant to Section
8.2.4 or otherwise shall be repaired, adjusted, or replaced by
PNOC-EDC such that the accuracy of said equipment shall be within 100%
plus or minus one percent (1%). Should the inaccuracy exceed plus or
minus one percent (1%), the correct amount of energy delivered during
the current and previous Billing Periods shall be estimated by
PNOC-EDC subject to agreement by the Parties. Adjustments for meter
inaccuracy shall be made only for the current Billing Period and the
Billing Period immediately preceding it except when such meter
inaccuracy is due to fraud.
8.3. TERMS OF PAYMENT
8.3.1 CAPACITY PAYMENTS
The total Capacity Payments shall be the sum of the Capital Cost
Recovery Fee, the Fixed Operating Cost Recovery Fee, and the Service
Fee to reflect Return on Investment. The Capacity Payments shall be
computed on the basis of the following formulae:
(a) Capital Cost Recovery Fee (A) to be paid in Dollars.
A = [(CCR x NC)(l - TOH/Nh)] - [(y x O.2)(CCR)(CC - NC)]
(b) Fixed Operating Cost Recovery Fee (B) to be paid in Philippine Peso
and Dollars.
B = [(OCR x NC)(1 - TOH/Nh)] - [(y x 0.2)(OCR)(CC - NC)]
34
(c) Service Fee for Return on Investment (C) stated in Dollars and
payable, at the option of PNOC-EDC, either in Dollars or in equivalent
Philippine Pesos using the same day telegraphic transfer selling rate
for Dollars of the Philippine National Bank at the time of payment. In
no case shall the Service Fee be lower than 8% of the sum of the
Capital Cost Recovery Fee and the Fixed Operating Cost Recovery Fee.
C = {[(SFR x NC) (1 - TOH/Nh)] - [(y x 0.2)(SFR)(CC-NC)]}
where,
A = Capacity Payment to recover capital cost for the Billing
Period.
B = Capacity Payment to recover fixed operating cost for the
Billing Period.
C = Capacity Payment to reflect return on investment of the
Operator for the Billing Period
CCR = $10.42 per kW per month.
OCR = Ps28.90 per kW per month and $l.97 per kW per month.
SFR = $6.42 per kW per month.
CC = Contracted Capacity, in kW.
TOH = Total Outage Hours in the Billing Period.
Nh = Total number of hours in the Billing Period.
NC = Nominated Capacity for the year, in kW.
y = variable, defined as follows:
if 0.95 x CC (less than) NC (less than) 1.05 x CC, then y = 0
otherwise y = 1
8.3.2 ENERGY FEE
Energy Fee (D) shall be computed on the basis of the following formula
and be paid in Philippine Pesos. (Energy Fee will be paid by PNOC-EDC
35
to the Operator in case D is positive and by the Operator to PNOC-EDC
in case D is negative.)
4
D = (Sigma) Ui (Vgi - Vti) x Zi
i=l
where:
D = Energy Fee for the Billing Period.
Ui = Steam Price for Plant as set forth in Annex I.
Vgi = Cumulative theoretical steam consumption of Plant i
during Relevant Hours for the Billing Period in metric
tons computed on the basis of the Guaranteed Net Plant
Steam Rate for each hour (SRg), using the formula:
n
Vgi = O (Sigma)EDij x SRgij
j=1
where:
j = Any Relevant Hours during the Billing
Period.
n = Number of Relevant Hours hours in the
Billing Period.
EDij = Energy Delivered during the Billing Period
from Plant i in hour j expressed in kilowatt
hours (kWh).
Srgij = Guaranteed Net Plant Steam Rate of Plant i
for each hour j adjusted for variations from
Geothermal Fluid Specifications, Atmospheric
Conditions and load change using the
formula:
Guaranteed Net Plant Steam Rate
36
Srgij= ___________________________________
F1ij x F2ij x F3ij x Faij x Fgij
where:
F1ij = Steam pressure correction factor per
Correction Curves for Plant i in hour j.
F2ij = Partial load correction factor per
Correction Curves for Plant i in hour j.
F3ij = Steam flow correction factor per Correction
Curves for Plant i in hour j.
Faij = Ambient wet bulb temperature correction
factor per Correction Curves for Plant 4 in
hour j.
Faij = 1 for Plants 1, 2, and 3.
Fgij = NCG content in steam flow correction factor
per Correction Curves for Plant i in hour j.
Vti = Measured steam consumption of Plant i for the Billing
Period in metric tons minus steam consumed by Plant i
during Non Relevant Hour in metric tons.
Non Relevant Hour = (a) Any hour in which, for Plants 1, 2 and 3
only, the Plant is in partial load
operation mode (75% of that Plant's
portion of the Contracted Capacity or
less, when the load reduction is
achieved by throttling the supply of
steam to one or more of the Generating
Units which are then delivering
electricity) due to dispatch and: (i)
the steam inlet pressure is different
from the Geothermal Fluid Specifications
by 2% or more; or (ii) the steam outlet
pressure is different from the
Geothermal Fluid Specifications by 3% or
more; or
(b) Any hour in which an event described in
sub-paragraph (b) of the definition of
Outage Hour occurs.
Relevant Hour = Any hour other than Non Relevant Hour.
37
Zi = Variable for Plant i, defined as follows:
if 0.95 x Vgi (less than) Vti (less than) 1.05 x Vgi
then Zi = 0
otherwise Zi = 1
8.3.3 ESCALATION
In the Billing Periods commencing January 25th and July 25th of each
year (using the indices for the prior months of December and June,
respectively), the amount of :
(i) Fixed Operating Cost Recovery Fee (OCR); and
(ii) Service Fee for Return on Investment (SFR)
shall be increased proportionately by the increase in the index
applicable to each component, as specified in Annex K as appropriate,
as from the levels of such indices prevailing in January 1995.
8.4 BILLING PROCEDURES
The Operator shall ▇▇▇▇ PNOC-EDC for the delivery of electric power and
energy as adjusted on a monthly basis until the termination of this
Agreement.
Operator shall arrange its billing schedule in accordance with the billing
system of PNOC-EDC. The Billing Period shall cover the period from 10:00 AM
on the twenty-fifth (25) day of the current month to 10:00 AM of the
twenty-fifth (25th) day of the following month. Any changes in the billing
system of PNOC-EDC shall be followed by the Operator in billing PNOC-EDC.
The Operator shall send PNOC-EDC its bills within five (5) days reckoned
from the last day of the Billing Period. PNOC-EDC shall be required to
settle its monthly bills to the Operator within thirty (30) days from
receipt of billing to avoid penalties.
8.5 DISPUTES
If PNOC-EDC disputes the amount specified in any invoice it shall so inform
the Operator within seven (7) days following receipt of such invoice. If
the dispute is not resolved by the due date PNOC-EDC shall pay the
undisputed amount on or before such date and the disputed amount shall be
resolved as soon as is reasonably practicable following the due date for
such invoice.
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8.6 TAXES
(a) All payments made to the Operator pursuant to this Agreement shall be
paid together with all taxes, duties, fees, levies and other
assessments to be paid by the Operator in respect of such payments,
the Power Plant or this Agreement, including "value added taxes" and
all other taxes but excluding national income taxes assessed after the
expiration of the tax holiday that would be applicable to the Operator
if it were granted pioneer enterprise status under the Omnibus
Investments Code of 1987 (whether or not the Operator is granted such
pioneer enterprise status) and excluding Philippine withholding taxes
imposed on the Operator not in excess of fifteen percent (15%) (which
shall be separately stated in all invoices) in dollars in respect of
the dollar portion and in pesos in respect of the peso portion and
each sum payable shall be increased so as to ensure that after
PNOC-EDC has deducted therefrom any and all taxes or charges required
to be deducted therefrom by PNOC-EDC there remains a sum equal to the
amount that would have been payable to the Operator had there been no
requirement to deduct or withhold such taxes or other charges.
(b) PNOC-EDC shall promptly reimburse the Operator upon demand for all
custom duties, national internal revenue taxes, value added taxes and
other taxes actually paid by the Operator with respect to the
importation of capital equipment, or spare parts related to the Power
Plant, provided that the Operator shall avail of the applicable import
incentives granted to it by the Board Of Investment.
(c) PNOC-EDC shall be responsible for the payment of all taxes imposed by
the Government on the Operator or the Power Plant during the period of
construction and Cooperation Period including without limitation,
value added taxes, real estate taxes in respect of the Site and the
buildings and other improvements thereon, including the Power Plant,
but except as set forth in Sections 8.6(a) and (e) or elsewhere in
this Agreement not (i) corporate 4.7 or 14.3 (or any other applicable
provisions of this Agreement) make Article 9 applicable or, in the
reasonable opinion of PNOC-EDC or the income tax on the Operator, (ii)
taxes on dividends or prof its remitted from the Philippines by the
Operator, and (iii) reasonable construction and permit fees and
charges not exceeding $50,000, and (iv) any and all taxes, fees,
documentary stamps and charges, as well as all costs and expenses,
incurred and paid by the Operator in connection with or arising from
any loan or financing agreement, mortgages and security interests. The
Capacity Payments do not include custom duties, national internal
revenue taxes, value added taxes and other taxes with respect to the
importation of capital equipment or spare parts related to the Power
Plant by the Operator.
39
(d) PNOC-EDC will be responsible for covering any new or increased taxes
due to changes in the Omnibus Investments Code of 1987, the BOI rules
and future regulations, or due to new or amended laws, rules and
regulations.
(e) The Operator shall apply for and shall use good-faith efforts to
obtain all exemptions from any such taxes available to the Operator.
8.7 PAYMENT PROCEDURES
All payments to be made to the Operator under this Agreement shall be paid
in the applicable currency as specified in this Agreement without any
deductions for set-off or counterclaims and shall be wire transferred in
immediately available same Day funds not later than 11:00 AM on the due
date to the account(s) within or outside the Republic of the Philippines as
designated by the Operator from time to time by notice given in accordance
with Subsection 17.3. Without limiting any other rights of the Operator,
any payments not paid by PNOC-EDC to the Operator when due under this
Agreement shall bear interest at the rate equal to "one month Libor" for
Dollar + 3%, determined and compounded daily, from the date due until the
date paid.
ARTICLE 9 BUYOUT
9.1 BUYOUT CONDITIONS
If,
(a) during the Cooperation Period in the reasonable opinion of PNOC-EDC or
the Operator, changes in or adoption of new policies, laws and
regulations, including taxes, or any interpretations thereof of the
Government adversely affect the operation or maintenance of the Power
Plant or the after tax cash flow of the Operator, or
(b) prior to the Cooperation Period, the provisions of Subsections 3.3(a),
4.5, 4.6, 4.7 or 14.3 (or any other applicable provisions of this
Agreement) make this Article 9 applicable or, in the reasonable
opinion of PNOC-EDC or the Operator, changes in or adoption of new
policies, laws and regulations, including taxes, or any
interpretations thereof of the Government adversely affect the
construction of the Power Plant or the after tax cash flow of the
Operator; or
(c) PNOC-EDC fails to make any payments when due to the Operator under
this Agreement including without limitation the Capacity Payments and
the Energy Fees; or
40
(d) at any time during the effectivity of this Agreement, PNOC-EDC or
NAPOCOR is privatized in whole or in part or reorganized, or the
events defined in Article 20 shall occur,
then PNOC-EDC or the Operator as the case may be shall notify the other
Party of the occurrence of any of the foregoing events and the Parties
shall promptly meet and endeavor to make amendments to the Agreement and
agree to such amendments. If, after ninety (90) calendar days or sixty (60)
calendar days in case of Section 9.1(c), since the occurrence of such
events, no such agreement has been reached, either party may require a
buyout of the Operator's Power Plant by PNOC-EDC. If either Party
determines that such an impasse has been reached, that Party may deliver
written notice to the other Party requiring a buyout under this Article 9
provided that for purposes of Section 9.1(a) above an adverse effect on the
Operator's after-tax cash flow (after taxes) for any taxable year, as
confirmed by an independent auditor agreeable to both Parties and provided
that in case of Section 9.1(c) above, only the Operator shall have the
right to require a buyout. If the Parties cannot promptly reach a
definitive, written agreement embodying the terms of a buyout (notably the
Buyout Price and payment terms Article 21 shall apply.
9.2 BUYOUT PRICE
The purchase price (Buyout Price), payable in Dollars, of the Power Plant
as a result of the buyout shall be
(a) If the provisions of Sections 9.1 or 15.4.1 apply prior to the
Commercial Operation Date of the last Plant, the purchase price
payable, in United States dollars, shall be an amount equal to the
aggregate of all the costs and expenses (including without limitation
accrued interest and other costs incurred in financing the development
of the Power Plants) incurred by the Operator in connection with the
performance of its obligations under this Agreement as estimated by an
independent accountant jointly appointed by the Parties plus an amount
equal to ten percent (10%) of such aggregate costs.
(b) During the Cooperation Period the net present value of the remaining
stream of payments for the Capacity Payments less Fixed Operating Cost
Recovery fees for the rest of the Cooperation Period on the basis of
the last Nominated Capacity, and using an annual discount rate equal
to the last published Commercial Interest Reference Rate (CIRR) having
the shortest maturity term for United States dollars published by the
Organization for Economic Cooperation and Development (OECD) provided
however that such discount rate shall not exceed nine point two six
percent (9.26%) per annum.
41
In calculating aggregate costs in accordance with clause (a), amounts disbursed
by lenders shall be prima facie evidence of actual disbursements of costs and
interest accrued (whether or not paid) shall be deemed actual disbursements. The
actual rates of interest payable to lenders shall be the interest rate
attributable to that portion of the Buyout Price.
9.3 PAYMENT TERMS
(a) Completion of a buyout pursuant to Sections 9.1 or 15.4.1 shall take
place on the date that is sixty (60) days following delivery of the
notice specified in this Agreement (the "Buyout Date") at which time
(i) PNOC-EDC will pay to the Operator the purchase price calculated in
accordance with Section 9.2 and payable in United States dollars and
return all security held by PNOC-EDC in connection with this
Agreement, including any bid securities, the Performance Security,
letters of credit and bank guarantees, and (ii) the Operator shall
transfer to PNOC-EDC all of the Operator's rights, title and interest
in the Power Plant and shall warrant that upon such buyout the Power
Plant shall be free from any lien or encumbrance created by the
Operator.
(b) In the event that the provisions of Sections 9.1 or 15.4.1 apply as a
result of Section 14.3(c), then there shall be deducted from the sum
payable pursuant to Section 9.2 an amount equal to the value, if any,
of any insurance proceeds received by the Operator in respect of such
event of Force Majeure, but only to the extent that such insurance
proceeds were not used by the Operator in an attempt to correct the
damage caused by such event of Force Majeure.
9.4 TRANSFER PROVISION
In respect of any transfer of ownership of the Power Plant pursuant to the
conditions stated above, the provisions on transfer of ownership in Article
13 hereof shall apply thereto.
ARTICLE 10 REPRESENTATIONS & WARRANTIES OF THE PARTIES
10.1 CORPORATE EXISTENCE
(a) The Operator represents for itself that it is a corporation duly
organized and existing under and by virtue of the laws of the state of
Delaware, U.S.A. licensed to do business in the Philippines through
its branch office and that it has the corporate power and authority to
execute, deliver and carry out the terms and conditions of this
Agreement.
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(b) PNOC-EDC represents that it is a wholly-owned subsidiary of the
Philippine National Oil Company, a corporation created and organized
under Presidential Decree No. 334, as amended, and that it has the
power and authority to execute, deliver and carry out the terms and
conditions of this Agreement.
10.2 AUTHORIZATIONS
(a) The Operator represents and warrants for itself that it has taken all
necessary corporate action to enter into this Agreement and to perform
its obligations hereunder with the exception that it has not obtained
final approval of the terms of this Agreement from its Board of
Directors prior to signing the Agreement. The Operator represents that
it will use its best efforts to obtain such approval in the shortest
possible time following signature.
(b) PNOC-EDC represents and warrants for itself that it has taken all
necessary corporate action to enter into this Agreement and to perform
its obligations hereunder.
10.3 WARRANTY AGAINST CORRUPTION
The Operator hereby warrants for itself that it or its representative
acting on behalf of it has not given or promised to give any money or gift
to any employee or official of PNOC-EDC to influence the decision regarding
the awarding of this Agreement, nor has it and/or its representatives
acting on behalf of it exerted or utilized any unlawful influence to
solicit or secure this Agreement through any agreement to pay a commission,
percentage, brokerage or contingent fee. The Operator agrees that breach of
this warranty shall be sufficient ground for the Philippine National Oil
Company or its affiliate to deduct, at its discretion, such commission,
percentage, brokerage or contingent fees from the contract price without
prejudice to it or any person's civil or criminal liability under the
Anti-Graft Law and other applicable laws.
10.4 NO SOVEREIGN IMMUNITY
PNOC-EDC acknowledges and agrees that this Agreement, the Accession
Undertaking and the consent of PNOC-EDC specified in the last sentence of
Section 19(a) and the transactions contemplated thereby and hereby
constitute commercial activities of PNOC-EDC in respect of which PNOC-EDC
is subject to set-off, suit, judgment and execution. PNOC-EDC acknowledges
and agrees that it does not have, nor is it entitled to, any immunity,
whether characterized as sovereign immunity or otherwise, from any legal
proceedings, whether in the United States of America or elsewhere, to
enforce or collect upon such agreements (including without limitation
immunity from service of process, immunity from jurisdiction of any court
or tribunal, and immunity of any of its property
43
from attachment prior to entry of judgment and from attachment in aid of
execution, or from execution upon a judgment) in respect of itself or its
property.
10.5 GEOTHERMAL SERVICES CONTRACT
PNOC-EDC represents and warrants that it is a party to the Geothermal
Services Contract, dated May 14, 1981, between PNOC-EDC and the Republic of
the Philippines, which sets forth the rights of the parties thereto to the
Site. PNOC-EDC agrees to take any and all actions necessary to ensure that
the Operator's right to use the Site (and the interests of any secured
parties or the Operator in the Site) are not adversely affected by the
rights and obligations of PNOC-EDC under the Geothermal Services Contract,
as amended from time to time.
ARTICLE 11 INDEMNIFICATION
11.1 OPERATOR INDEMNIFICATION
(a) The Operator shall hold free and harmless and defend PNOC-EDC its
officers, contractors, and employees from any and all claims,
liabilities and suits for losses and damages to properties of third
parties arising from the negligence of the Operator in the prosecution
of the Agreement, except to the extent caused by the negligence, gross
negligence or willful misconduct of PNOC-EDC.
(b) The Operator shall hold free and harmless and defend PNOC-EDC, its
officers, contractors and employees from liabilities, damages or
obligations of any nature or kind, including costs and expenses, on
account of any copyrighted or uncopyrighted composition, secret
process, patented or unpatented invention, article, method or
appliance manufactured or used by the Operator in the performance of
the Agreement.
(c) Any fines or other penalties incurred by the Operator or its officers,
employees or contractors for non-compliance by the Operator, its
officers, its employees, or contractors with the laws, rules,
regulations or ordinances of the Republic of the Philippines shall be
the exclusive responsibility of the Operator.
11.2 PNOC-EDC INDEMNIFICATION
PNOC-EDC shall hold free and harmless and defend the Operator, its
officers, employees and contractors harmless against any claims of any
person who directly or indirectly suffers or is injured by the performance
by the Operator or its officers, employees or contractors of the
obligations under this Agreement, including damage or injury as a result of
an interruption of electricity supply or Geothermal Fluid delivery or
acceptance
44
or any other disruption or surge of electricity supply or Geothermal Fluid
delivery or acceptance (including without limitation interruptions or
disruptions related to plants operating upstream or downstream from the
Power Plant) or emissions of H2S prior to the installation of any H2S
abatement system in accordance with Section 3.3(a), and the Operator's, its
officers', employees' or contractors' actions or omissions in connection
therewith, except to the extent caused by the negligence, gross negligence
or willful misconduct of the Operator.
ARTICLE 12 INSURANCE
12.1 APPLICABLE TERMS
The Operator shall, at its own expense, obtain and maintain in force
insurances as specified in Sections 12.2 and 12.3. The Operator shall
provide to PNOC-EDC evidence of these insurances. In particular, evidence
of the insurance specified to be held during the Cooperation Period shall
be furnished prior to commencing initial testing of the Power Plant.
12.2 INSURANCE DURING CONSTRUCTION
From the applicable date that the exposure to the subject risk being
insured under such coverage arises until the commissioning of the Power
Plant, the Operator shall, at own expense, obtain and maintain in force the
following insurances:
(a) All Risks Marine Insurance for the full value of each plant and
equipment to be imported into the Philippines;
(b) All Risks "Builder's Risk Insurance" to cover the full value of the
entire works from any and all kinds of damages customarily covered;
and, covering at least the Contractor's All Risk (CAR) Insurance for
civil works, electro mechanical works and transformer installations.
(c) "Third Party Liability Insurance" to cover injury to or death of
persons including those of PNOC-EDC or physical damage to tangible
property including those of PNOC-EDC caused by the works or by the
Operator's vehicles, tools and/or equipment or personnel including its
subcontractors.
Such insurance shall provide for at least the following recoveries:
a) Bodily Injury Ps 250,000 per person
Ps 250,000 per incident
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b) Property Damage Ps 1,000,000 per property
Ps 1,000,000 per incident
12.3 INSURANCE DURING COOPERATION PERIOD
From the completion of the Power Plant, the Operator, at its own expense,
shall keep the Power Plant insured against accidental damage from all
normal risks and to a level normal for prudent operators of facilities
similar to the Power Plant. In addition, the Operator shall secure adequate
insurance cover for its employees as may be required by law.
The insurance coverages that the Operator shall secure and maintain should
at least include an All-Risks Insurance (All Natural Perils including
Fire), and Comprehensive General Liability and a Machinery Breakdown
Coverage during the last year of the Cooperation Period.
12.4 APPROVAL BY PNOC-EDC
Certified true copies of insurance policy certificates for all the above
coverages and official receipts of premium payments on the above shall be
filed with PNOC-EDC within fifteen (15) working days from the issuance of
the policies or of the receipts of premium payments and shall be subject to
PNOC-EDC's approval as to the enumeration of items covered under Sections
12.2 and 12.3.
12.5 EQUITABLE ADJUSTMENT
PNOC-EDC agrees that it shall not unreasonably withhold its consent to any
amendments to this Agreement which are proposed by the Operator in order to
make equitable adjustments to this Agreement in the event that as a result
of the application of insurance proceeds (including without limitation such
application pursuant to a security assignment by the Operator contemplated
by the last sentence of Section 19(a)) such proceeds are not made available
to the Operator to repair or restore the Power Plant.
ARTICLE 13 TRANSFER OF OWNERSHIP
13.1. TRANSFER OF TITLE
Title to the Power Plant shall automatically vest to PNOC-EDC on the
Transfer Date provided that PNOC-EDC has made (i) a payment equivalent to
the net present value of the remaining Capacity Payments less Fixed
Operating Cost Recovery Fees for Plant 4 for the period commencing on the
Transfer Date until the date which is one hundred twenty (120) months from
the Commercial Operation Date for Plant 4 on the basis of the last
Nominated Capacity of Plant 4, and using an annual discount rate equal to
the last
46
published Commercial Interest Reference Rate (CIRR) having the shortest
maturity term for United States dollars published by the OECD, provided,
however, that such discount rate shall not exceed nine point two six
percent (9.26%) per annum, and (ii)all other payments required to be made
by it pursuant to this Agreement, and returned to the Operator all security
held by PNOC-EDC in connection with this Agreement, including any bid
securities, the Performance Security, letters of credit and bank
guarantees. The Operator shall execute such documents as may be necessary
to effect the transfer of the title to PNOC-EDC, including, without
limitation, assignments of all contract rights, claims and other rights
related to the Power Plant that are being assigned by the Operator to
PNOC-EDC.
13.2. DOCUMENTATION COSTS
The Parties shall pay their own costs and expenses, including but not
limited to documentation, fees and taxes, incurred in connection with the
transfer referred to in Section 13.1 hereof. In no event shall the Operator
be obligated to pay more than $50,000 under this Section 13.2.
13.3 TRAINING OF PNOC-EDC STAFF
(a) During a minimum period of twelve (12) months prior to the Transfer
Date, the Operator shall provide training in operation and maintenance
of the Power Plant for PNOC-EDC's staff. This training shall be
provided in accordance with a program to be agreed between PNOC-EDC
and the Operator and shall be provided at no cost to PNOC-EDC.
(b) PNOC-EDC shall endeavor to offer to the Operator that PNOC-EDC take
over the employment of such of the Operator's operating and
maintenance staff employed on the Power Plant at the end of the
Cooperation Period as PNOC-EDC may, at its sole discretion, consider
suitable for employment with PNOC-EDC and under such terms and
conditions of employment as PNOC-EDC shall consider acceptable.
13.4 CONDITION OF POWER PLANT ON TRANSFER
(a) Within a period of six (6) months prior to the Transfer Date, the
Operator shall undertake performance and efficiency testing of the
Power Plant as specified in Annex F to demonstrate the condition of
the Power Plant at the Transfer Date.
(b) Notwithstanding any testing performed pursuant to Section 13.4(a), the
Power Plant and all other equipment transferred pursuant to this
Agreement shall be transferred on an "as is" basis and any warranties
which would otherwise be
47
implied by statute or otherwise, including, without limitation,
warranties as to its fitness for the purpose, the absence of patent or
inherent defects, description or otherwise of whatsoever nature will
be excluded; provided, however, that upon transfer the Operator shall
warrant that, on the Transfer Date, the Power Plant will be free from
all liens and encumbrances created by the Operator. After the Transfer
Date, the Operator shall be under no liability whatsoever to PNOC-EDC
the respect of the operation or otherwise of the Power Plant by
PNOC-EDC or a person designated by PNOC-EDC and PNOC-EDC shall
indemnify and keep indemnified the Operator against any liability to
any person or damage to any property arising from the use or operation
of the Power Plant after the Transfer Date, provided, however, that
the Operator shall subrogate or assign to PNOC-EDC any and all rights
and benefits which it is able to subrogate or assign of any unexpired
warranties in respect of the building, plant and equipment of the
Power Plant under applicable laws or otherwise.
ARTICLE 14 FORCE MAJEURE
14.1 FORCE MAJEURE
(a) Force Majeure" means any event or circumstance beyond the reasonable
control of a Party which affects the performance by such Party of its
obligations hereunder including but not limited to any war, declared
or not, or hostilities, or belligerence, blockade, revolution,
insurrection, riot, public disorder, expropriation, requisition,
confiscation or nationalization, export or import restrictions by any
governmental authorities, closing of harbors, docks, canals, or other
assistances to or adjuncts of shipping or navigation of or within any
place, rationing or allocation, whether imposed by law, decree or
regulation by, or with the compliance of industry at the insistence of
any governmental authority, or fire, unusual flood, earthquake,
volcanic activity, storm, typhoons, lightning, tide (other than normal
tides), tsunamis, perils of the sea, accidents of navigation or
breakdown or injury of vessels, accidents to harbors, docks, canals,
or other assistances to or adjuncts of shipping or navigation,
epidemic, quarantine, strikes or combination of workmen, lockouts or
other labor disturbances, or any other event, matter or thing,
wherever occurring, which shall not be within the reasonable control
of the Party affected thereby.
(b) "Political FM" means any event of Force Majeure to the extent such
event satisfies the following requirements: war, declared or not, or
hostilities occurring in or involving the Republic of the Philippines,
or belligerence, blockade, revolution, insurrection, riot, public
disorder, expropriation, requisition, confiscation or nationalization
by or involving and occurring in the Republic of the Philippines,
export or import restrictions by any governmental authorities,
48
regional or municipal authorities of or within the Republic of the
Philippines, closing of harbors, docks, canals, or other assistances
to or adjuncts of shipping or navigation of or within the Republic of
the Philippines, rationing or allocation, whether imposed by law,
decree or regulation by, or with the compliance of industry at the
insistence of any governmental authority of or within the Republic of
the Philippines, or any other event, matter or thing, wherever
occurring, which shall be within the reasonable control of PNOC-EDC or
the Government.
14.2 EFFECT OF FORCE MAJEURE
(a) Neither Party shall be responsible nor liable for nor deemed in breach
or default hereof or give rise to any claim by any Party against any
other Party (including without limitation any claims to pay damages or
penalties for delays) because of their respective failure or omission
to perform or delay in the performance of their respective obligations
hereunder due to Force Majeure provided that:
(i) The non-performing Party gives the other Party within
forty-eight (48) hours or as soon thereafter as reasonably
practicable a written notice describing the particulars of the
occurrence;
(ii) The suspension of performance and the extension of scheduled
and guaranteed dates are of no greater scope and of no longer
duration than is required by the Force Majeure;
(iii) The affected Party uses reasonable efforts to remedy its
inability to perform; and
(iv) When the affected Party is able to resume performance of its
obligations under this Agreement, that Party shall give the
other Party written notice to that effect.
(b) Notwithstanding anything to the contrary in Section 14.2(a), PNOC-EDC
shall not be excused from any of its obligations under this Agreement
including its obligation to make the Capacity Payments, the Energy Fee
and any other payments to the Operator under this Agreement by the
occurrence of any Political FM, an Interconnection Failure or any
condition or event that affects the ability of PNOC-EDC to deliver or
accept Geothermal Fluid from any Plant as provided under this
Agreement, including any dispute between PNOC-EDC and NAPOCOR (under
the Power Purchase Agreement or otherwise) which did not arise from
any default of the Operator under this Agreement, including
termination or expiration of the Power Purchase Agreement.
49
(c) Notwithstanding Section 8.3.1, and subject to Sections 14.2(b) and
14.3(c), PNOC-EDC shall be relieved of its obligations to make
Capacity Payments in respect of any Power Plant which is unable to
deliver energy due to a Force Majeure affecting that Power Plant for
the duration of such Force Majeure; provided, however, that in such an
event the Cooperation Period shall be extended by the same number of
days as the duration of such Force Majeure.
14.3 REMEDIES
(a) Except as otherwise provided, in no event shall any condition of Force
Majeure extend this Agreement beyond its stated term.
(b) The Parties shall consult with each other and take all reasonable
steps to minimize the losses of or delays incurred by either Party
resulting from Force Majeure.
(c) If any one or more conditions of Force Majeure delay a Party's
performance for a time period that is: (i) if before the Completion
Date, greater than ninety (90) days in the aggregate in any twelve
(12) consecutive months, or (ii) if after the Completion Date, greater
than (x) ninety (90) consecutive days, or (y) one hundred twenty (120)
days in the aggregate during any twelve (12) consecutive months where
the interval between the occurrence of any two (2) consecutive events
of Force Majeure conditions is not more than six (6) months, either
Party may, after such period, either (a) suspend this Agreement by
giving written notice of suspension to the other Party or (b) upon
thirty (30) days written notice, terminate this Agreement and the
provisions of Article 9 shall apply. Except that in case of such delay
as a result of conditions of Force Majeure after the Completion Date,
the parties agree that during the required thirty (30) day notice
period as provided for under this Subsection 14.3(c) (ii) (b), each
party has the right to initiate a consultation between the Parties, to
take place during such thirty (30) day notice period, in order to try
and agree on conditions for eventual waiving of the recourse to the
provisions of Article 9 and provided that if an agreement can not be
reached during same thirty (30) day notice period, the provisions of
Article 9 shall apply at the end of such 30 day notice period. (The
period set forth above for termination shall satisfy the ninety (90)
day period specified in the second sentence of Section 9.1.
ARTICLE 15 SUSPENSION, TERMINATION AND ABANDONMENT
15.1 TERMINATION PRIOR TO EFFECTIVITY DATE
(a) Each Party shall use good-faith efforts to cause the conditions set
forth in Article 26 to be satisfied as promptly as practicable after
the date of this Agreement and
50
each Party will exercise reasonable discretion in electing to
terminate this Agreement pursuant to this Section 15.1.
(b) If the Effectivity Date has not occurred by March 1, 1996, or within
such longer period as the Parties may agree to, due to a failure of
the conditions set forth in Section 26.1 to have been satisfied prior
to such date, if such conditions have not been waived in writing by
PNOC-EDC, the Parties shall consult with each other in good faith with
the view to achieving the Effectivity Date. If a mutually acceptable
arrangement is not reached and implemented within fifteen (15) days
thereafter, either Party shall have the right to terminate this
Agreement by giving written notice to the other Party. Upon such
termination, PNOC-EDC shall return to the Operator all security held
by PNOC-EDC in connection with this Agreement, including any bid
securities, letters of credit and bank guarantees, the Operator shall
reimburse PNOC-EDC for all costs and expenses incurred by PNOC-EDC as
of the date of and in connection with this Agreement except those of
PNOC-EDC related to the preparation of the request for proposals and
the bid evaluation until such termination, and thereafter, neither
Party shall have any further liability to the other and this Agreement
shall immediately and automatically become null and void.
Notwithstanding anything to the contrary in this Agreement, this
provision shall become effective upon execution of this Agreement and
shall remain effective until the Effectivity Date.
(c) If the Effectivity Date has not occurred by March 1, 1996, or within
such longer period as the Parties may agree to, due to a failure of
the conditions set forth in Section 26.2 to have been satisfied prior
to such date, if such conditions have not been waived in writing by
the Operator, the Parties shall consult with each other in good faith
with the view to achieving the Effectivity Date. If a mutually
acceptable arrangement is not reached and implemented within fifteen
(15) days thereafter, either Party shall have the right to terminate
this Agreement by giving written notice to the other Party. Upon such
termination, PNOC-EDC shall return to the Operator all security held
by PNOC-EDC in connection with this Agreement, including any bid
securities, letters of credit and bank guarantees, PNOC-EDC shall
reimburse the Operator for all costs and expenses incurred by the
Operator as of the date of and in connection with this Agreement, and
thereafter, neither Party shall have any further liability to the
other and this Agreement shall immediately and automatically become
null and void. Notwithstanding anything to the contrary in this
Agreement, this provision shall become effective upon execution of
this Agreement and shall remain effective until the Effectivity Date.
(d) If the Effectivity Date has not occurred by March 1, 1996, or within
such longer period as the Parties may agree to, due to a failure of
the conditions set forth in
51
Section 26.3 to have been satisfied prior to such date, if such
conditions have not been waived in writing by both Parties, the
Parties shall consult with each other in good faith with the view to
achieving the Effectivity Date. If a mutually acceptable arrangement
is not reached and implemented within fifteen (15) days thereafter,
each Party shall bear its own costs and expenses. In the event,
however, of the failure of the condition in Section 26.3 (a) (ii)
other than for reasons due to adverse economic or political conditions
in the Philippines, and the Parties do not waive the fulfillment of
this condition, either Party may terminate this Agreement by giving
written notice to the other Party, and the Operator shall reimburse
PNOC-EDC for all costs and expenses incurred by PNOC-EDC as of the
date of and in connection with this Agreement except those of PNOC-EDC
related to the preparation of the request for proposals and the bid
evaluation until such termination. Neither Party shall have any
further liability to the other and this Agreement shall immediately
and automatically become null and void. Notwithstanding anything to
the contrary in this Agreement, this provision shall become effective
upon execution of this Agreement and shall remain effective until the
Effectivity Date.
(e) Costs and expenses referred to in this Section 15.1 shall not include
any consequential or special damages (including without limitation
lost profits, lost revenues, increased operating costs or loss of
revenues from the Power Plant), whether such liability arises in
contract, warranty, tort (including negligence) or otherwise.
(f) The amount of costs and expenses to be reimbursed by either Party to
the other Party under this Section 15.1 shall be estimated by an
independent accountant jointly appointed by the Parties and the costs
associated with such estimation shall be paid by the Party making the
reimbursement.
15.2 TERMINATION FOR DEFAULT AND SUSPENSION OF DELIVERY
(a) PNOC-EDC may temporarily suspend receipt of electricity from the
Operator for:
(i) Tampering with meters by the Operator; or
(ii) A condition on the Operator's side of the Point of
Interconnection, dangerous to life or property.
Such condition shall be subject to confirmation by an
independent third party expert satisfactory to both Parties. If
so confirmed, PNOC-EDC shall be excused payment of capacity and
energy charges for the duration
52
of such suspension and such suspension shall cease on
rectification of the initiating condition.
(b) Subject to the Operator's cure rights set forth in paragraph (c)
below, upon the material breach by the Operator of any of its
obligations hereunder, PNOC-EDC may, as its sole remedy, terminate
this Agreement. Upon such termination, (i) if termination occurs prior
to the Commercial Operation Date, the entire proceeds of the
Construction Performance Security shall be forfeited in favor of
PNOC-EDC and the Operator shall transfer, at no cost, all of the
Operators right, title and interest in the Power Plants to PNOC-EDC
and (ii) if termination occurs after the Commercial Operation Date of
the Power Plant, the Operator shall transfer, at no cost all of the
Operator's right, title and interest in the Power Plants to PNOC-EDC.
Upon such termination and forfeiture and/or transfer, as the case may
be, the Operator shall have no further liability hereunder.
(c) No such termination shall be made by PNOC-EDC without thirty (30) days
(or longer pursuant to this paragraph) prior written notice to the
Operator. Such notice shall be delivered, personally or by registered
mail, stating in particular the provision of this Agreement which has
been violated. If the Operator fails to correct any default within the
thirty (30) day period from its receipt of the notice, or such period
exceeding thirty (30) days as reasonably necessary to accomplish such
cure provided the Operator has commenced curing such default within
such thirty (30) day period and continues to diligently proceed to
cure such default until cured, PNOC-EDC may terminate this Agreement;
provided, however, that any dispute by the Operator in good faith as
to the correctness of any ▇▇▇▇ from PNOC-EDC shall not be a cause to
terminate this Agreement. Any suspension of the deliveries of
electricity to NAPOCOR on behalf of PNOC-EDC or termination of this
Agreement upon any authorized grounds shall in no way relieve the
Operator of its liability to compensate PNOC-EDC for any amounts owed
by the Operator to PNOC-EDC under this Agreement less any amounts owed
by PNOC-EDC to Operator under this Agreement.
15.3 SUSPENSION OF PAYMENT
Subject to the provisions of Section 14, payments under this Agreement,
upon written request of the Operator, and for a period reasonably required
to replace or repair the Power Plant, may be suspended if the Operator is
temporarily unable to produce the electric capacity or energy contracted
for due to physical destruction of or damage to the Power Plant.
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15.4 ABANDONMENT
15.4.1 ABANDONMENT DURING CONSTRUCTION
The construction of any or all of the Plants shall be deemed abandoned to
the extent set forth below under any of the following circumstances:
(a) If the Operator, through a written notice to PNOC-EDC, terminates
construction of the Plants other than by reason of Force Majeure or
for reasons not attributable to the Operator with the intent that such
termination be permanent;
(b) If the Operator fails (other than by reason of Force Majeure or for
reasons not attributable to the Operator) to place a confirmed order
for the long lead items in turbo-generators) within one hundred twenty
(120) days period following the Effectivity Date;
(c) If the Operator fails (other than by reason of Force Majeure or for
reasons not attributable to the Operator) to resume work (i) within
one hundred twenty (120) calendar days following receipt of insurance
proceeds relating to, and in amounts sufficient to cover loss or
damage arising from, a Force Majeure situation affecting one or more
of the Plants provided, however, that in case of release to the
Operator of partial insurance proceeds, the Operator shall resume work
to the extent of the amounts so collected, or (ii) in case no material
damage to such Plants has occurred, within one hundred twenty (120)
calendar days following the termination or cessation of such Force
Majeure situation, provided that a notice of such termination or
cessation was given by PNOC-EDC to the Operator; or
(d) Subject to the provisions of Section 14 and except for reasons not
attributable to the Operator, if the Commercial Operation Date of any
Plant does not occur within one hundred fifty (150) calendar days
following the relevant Guaranteed Commercial Operations Date (as the
same may be adjusted in accordance with this Agreement or by mutual
agreement).
If construction of one or more Plants is deemed abandoned as set forth
above, PNOC-EDC may terminate this Agreement by giving the Operator not
less than fifteen (15) days prior written notice of its intention to so
terminate this Agreement. If the Operator has not commenced work under
clause (b) or (c), as the case may be, of this Section 15.4.1 before the
expiration of such fifteen (15) day period, this Agreement shall
immediately and automatically terminate. Upon such termination, the
Operator shall forfeit the portion of the Construction Performance Security
relating to such abandoned Plants to PNOC-EDC and transfer, upon payment by
PNOC-EDC of a purchase price calculated pursuant to Section 9.2 for the
Plants not so abandoned, all of the Operator's right, title
54
and interest in the Power Plant to PNOC-EDC. Upon such termination,
forfeiture and transfer, the Operator shall have no further liability
hereunder.
15.4.2 ABANDONMENT DURING COOPERATION PERIOD
The Power Plant shall be deemed abandoned during the Cooperation Period
under the following circumstances:
(a) If the Operator, through a written notice to PNOC-EDC terminates
operation of the Power Plant with the intent that the termination be
permanent except for (i) Force Majeure or (ii) reasons not
attributable to the Operator;
(b) If the Operator fails to deliver energy to NAPOCOR on behalf of
PNOC-EDC for a period of one hundred twenty (120) consecutive calendar
days other than as a result of an Outage, without written notice of
temporary suspension, except for (i) Force Majeure or (ii) reasons not
attributable to the Operator; or
(c) Subject to the provisions of Section 14 and except for reasons not
attributable to the Operator, if within one hundred twenty (120)
calendar days following receipt of insurance proceeds relating to, and
in an amount sufficient to cover loss or damage arising from, a Force
Majeure situation, the Operator fails to resume reconstruction of the
damaged Plants provided, however, that in case of release to the
Operator of partial insurance proceeds, the Operator shall resume work
to the extent of the amounts so collected, or, in case no material
damage to the Plants has occurred; within one hundred twenty (120)
days following the termination or cessation of a Force Majeure
situation, the Operator fails to resume delivery of energy to NAPOCOR
on behalf of PNOC-EDC, provided that a notice of such termination or
cessation shall have been given by PNOC-EDC to the Operator.
If the Plants are deemed abandoned during the Cooperation Period as set
forth above, PNOC-EDC may terminate this Agreement by giving the Operator
not less than fifteen (15) days prior written notice of its intention to so
terminate this Agreement. If the Operator has not commenced work under
clause (b) or (c), as the case may be, of this Section 15.4.2 before the
expiration of such fifteen (15) day period, this Agreement shall
immediately and automatically terminate. Upon such termination, the
Operator shall transfer, at no cost to PNOC-EDC, all of the Operator's
right, title and interest in the Power Plant to PNOC-EDC. Upon such
termination and transfer, the Operator shall have no further liability
hereunder.
55
ARTICLE 16 SEVERAL OBLIGATIONS
Except where specifically stated in this Agreement to be otherwise, the
duties, obligations, and liabilities of the Parties are intended to be
several and not joint or collective. Nothing contained in this Agreement
shall ever be construed to create an association, trust, partnership, or
joint venture among the Parties. Each Party shall be liable individually
and severally for its own obligations under this Agreement.
ARTICLE 17 COMMUNICATIONS AND NOTICES
17.1 COORDINATION MEETINGS
(a) Coordination meetings between the Operator, PNOC-EDC and NAPOCOR
personnel shall be conducted for purposes of clarifying problems that
may arise during the prosecution of the construction work and
throughout the Cooperation Period.
(b) The site of such meetings shall be mutually agreed upon by all
Parties. All expenses to be incurred by any Party shall be at such
Party's own account.
17.2 COMMUNICATIONS AMONG PARTIES
All orders and formal communications shall be made in writing.
17.3 NOTICES
Any notice or communication required to be in writing hereunder shall be
given by: registered mail, telex, telefax, courier or personal delivery.
Such notice or communication shall be sent to the respective Parties at the
address listed below. Any notice given by registered mail shall be
considered sent upon posting and the same shall be considered received upon
its acknowledgment.
In the case of Operator to:
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
Resident Manager
Ormat Inc. Manila Branch
Solid Bank Building, 8th Floor
777 Paseo de Roxas
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Telefax No. (▇▇▇) ▇▇▇-▇▇▇▇
56
with a copy to:
Ormat Inc.
Attn: ▇▇. ▇. ▇▇▇▇▇▇▇▇ President (or such other officer of Operator as may
be authorized by her in writing and notified to PNOC-EDC)
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
U.S.A.
Telefax No. (▇▇▇) ▇▇▇.▇▇▇▇
In the case of PNOC-EDC to:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President (or such other officer of PNOC-EDC as may be authorized by him in
writing and notified to the Operator)
PNOC-Energy Development Corporation
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
The Philippines
Telex No. 22666 EDC PH
Telefax No. (▇▇▇)▇▇▇-▇▇▇▇
Either Party may, by written notice to the other, change the representative
or the address to which such notices and communications are to be sent.
ARTICLE 18 NON-WAIVER
None of the provisions of this Agreement shall be considered waived by
either Party except when such waiver is given in writing. The failure of
either Party to insist, in any one or more instances, upon strict
performance of any of the provisions of this Agreement or to take advantage
of any of its rights hereunder shall not be construed as a waiver of any
such provisions or the relinquishment of any such rights for the future,
but the same shall continue and remain in full force and effect.
ARTICLE 19 ASSIGNMENT
(a) Except as set forth in paragraphs (b) or (c) below, the Operator shall
not assign or transfer any or all of its rights and obligations under
this Agreement without the written consent of PNOC-EDC. Any such
assignment or
57
transfer made without such written consent shall be null and void.
Consent for such assignment or transfer shall not be unreasonably
withheld, provided that, in the opinion of PNOC-EDC, the assignee or
transferee possesses all the legal, financial and technical
qualifications required to operate and maintain the Power Plant.
(b) Notwithstanding the foregoing, the Operator may assign or create a
security interest over its rights and interests in this Agreement for
the purpose of financing the design, construction, ownership and
operation of the Power Plant. PNOC-EDC agrees to execute such consents
to or acknowledgements of such assignments as the Operator or its
lenders reasonably require and under such terms and conditions
acceptable to PNOC-EDC. In addition, PNOC-EDC agrees to reasonably
cooperate with the Operator's proposed lenders and agrees to amend
this Agreement as reasonably required by such lenders provided such
amendments do not materially increase PNOC-EDC's obligations or
materially decrease PNOC-EDC's rights hereunder.
(c) All obligations under this Agreement which the Operator agrees to be
responsible for hereunder shall be assumed by NEWCO which shall
undertake to perform the Operator's obligations to perform such work
and in consideration of which shall be paid all fees payable to the
Operator under this Agreement. NEWCO, in carrying out such work and
receiving the fees payable to the Operator under this Agreement, shall
act on its own behalf and for its own benefit, and not as an agent or
representative of the Operator. For such purpose, PNOC-EDC, the
Operator and NEWCO shall execute and deliver the Accession
Undertaking, upon the effectiveness of which NEWCO shall become a
party hereto without the need of any further action on the part of the
Operator and the rights and obligations of PNOC-EDC and the Operator
under this Agreement shall be transferred and amended in accordance
with the terms of the Accession Undertaking, as fully as if NEWCO had
executed this Agreement as amended by the terms of the Accession
Undertaking.
(d) Without limiting the generality of Subsection 19(b), PNOC-EDC shall in
the consent of PNOC-EDC specified in the Subsection 19(b) acknowledge
and agree that (i) it has been informed of and consents to the
execution, delivery and performance of the assignment and security
agreements between the Operator and the lenders, and the terms thereof
including any provisions relating to the assignment and application of
the proceeds of insurance policies described in the Agreement and (ii)
to give the lenders notice of any default under or breach by the
Operator of any provision of this Agreement or the Accession
Undertaking and of any abandonment under Article 15 of this Agreement
and agree to not terminate this Agreement or the Accession Undertaking
on the basis of such breach, default or abandonment without providing
the lenders designated in such consent with at least ninety (90) days
within which to cure such breach, default or abandonment,
58
which period will commence on the later of (x) the lenders' receipt of
the aforesaid notice and (y) expiration of the period provided in this
Agreement for the cure of such breach, default or abandonment by the
Operator.
ARTICLE 20 PRIVATIZATION ASSURANCES
In the event that either of the common stock or other equity interests in
PNOC-EDC, or NAPOCOR, or any other portion of their assets or business
activities are sold or otherwise transferred or announced to be sold or
otherwise transferred, or any merger or other corporate reorganization (or
a series of any of the above):
(i) results in a real or purported assignment of rights or
assumption of obligation under this Agreement; or
(ii) substantially and adversely changes the net assets, projected
profits, projected net cash flow from operations, or otherwise
would prompt a reasonable person to conclude that the ability
if the relevant entity to duly perform its obligations
hereunder on timely basis had been materially and adversely
affected;
then the Operator shall have the right to request reasonable assurances
from PNOC-EDC, NAPOCOR and the Government that the Operator's rights and
net economic returns under this Agreement are preserved and that PNOC-EDC's
ability to fully and satisfactorily comply with its obligations under this
Agreement is not impaired. If no mutually agreed, written resolution of the
issues is reached within ninety (90) days, then the provisions of Article 9
shall apply. Without limiting PNOC-EDC's obligation to make such buyout if
the ability of PNOC-EDC to fund any resulting buyout is in question,
PNOC-EDC shall exercise any rights it may have to cause NAPOCOR or other
third-party to assume PNOC-EDC's rights and obligations under this
Agreement, paying the proceeds directly to the Operator.
ARTICLE 21 DISPUTE RESOLUTION; JURISDICTION
(a) As much as possible, all disputes shall be settled amicably between
the Parties. The Parties each hereby elect binding arbitration as
their sole and exclusive remedy for any claim arising under this
Agreement or in any way related to the Project.
(b) The Parties agree that in the event that there is any dispute or
difference between them arising out of this Agreement or in the
interpretation of any of the provisions hereof, they shall endeavor to
meet together in an effort to resolve such dispute by discussion
between them. But failing such resolution, the Chief executives of
59
PNOC-EDC and the Operator shall meet to resolve such dispute or
difference, and the joint decision of such Chief Executives shall be
binding upon the parties hereto. In the event that a settlement of any
such dispute or difference is not reached pursuant to this subclause,
then arbitration under the next following subclause shall apply.
(c) Where any dispute is not resolved as provided for in the preceding
subclause, then the Parties shall enter into binding arbitration
procedures under the rules of conciliation and arbitration of the
International Chamber of Commerce. Such arbitration shall take place
in Paris, France before a tribunal of three arbitrators, one to be
chosen by each of the Operator and PNOC-EDC, and the third to be
chosen by the two first selected. The arbitration proceedings shall be
conducted in the English language.
(d) To the extent that in any jurisdiction of (i) PNOC-EDC may claim for
itself or its assets or revenues immunity from suit, execution,
attachment or other legal process or (ii) there may be attributed to
PNOC-EDC or its assets or revenues such immunity (whether or not
claimed), PNOC-EDC agrees not to claim and unconditionally and
irrevocably waives such immunity to the full extent permitted by the
laws of such jurisdiction. PNOC-EDC consents generally in respect of
the enforcement of any judgment against it in any such proceedings in
any jurisdiction to the giving of any relief or the issue of any
process in connection with such proceedings (including, without
limitation, the making, enforcement or execution against any property
of PNOC-EDC).
ARTICLE 22 ENTIRE AGREEMENT AND SEPARABILITY
This Agreement constitutes the entire agreement between the Parties hereto
and supersedes all prior negotiations and agreements, whether written or
oral. If any part or parts of this Agreement shall be declared invalid by
competent courts, the other parts hereof shall not thereby be affected or
impaired.
ARTICLE 23 GOVERNING LAW
This Agreement shall be governed and construed in accordance with
Philippine Law.
ARTICLE 24 LIMITATION LIABILITY
Except for the penalty provisions in respect of Capacity Payments and
Energy Fee, any claim under the Bid Security, the Construction Performance
security and the Operation Performance Security pursuant to this Agreement
and the penalty described in Annex E, the Operator and its contractors and
subcontractors shall not be liable for any
60
consequential or special damages (including without limitation lost
profits, lost revenue, increased operating costs or loss revenues from the
Power Plant), whether such liability arises in contract, warranty, tort
(including negligence) or otherwise. Further, except as expressly set forth
in this Agreement, the Operator make no warranties or guarantees, express
or implied, with regard to the Power Plant and PNOC-EDC hereby waives any
and all implied warranties imposed under applicable Law.
ARTICLE 25 DURATION OF THE AGREEMENT
25.1 TERM
Except as set forth in Section 15.1, this Agreement shall be effective from
the Effectivity Date up to the Transfer Date or Termination Date, whichever
comes first.
25.2 SURVIVABILITY
Notwithstanding anything to the contrary contained in this Agreement, (i)
the rights and obligations of the Parties set out in Articles 9, 11, 13,
15, 21, and 24, shall survive the termination of this Agreement, and (ii)
the rights and obligations set out in Section 8.3 shall survive the
termination of this Agreement until all amounts to be paid by PNOC-EDC
and/or the Operator pursuant to this Agreement have been paid.
ARTICLE 26 EFFECTIVITY
26.1 PNOC-EDC CONDITIONS ON THE OPERATOR
It shall be a condition precedent to the effectivity of this Agreement that
the following are submitted by or on behalf of the Operator to PNOC-EDC
(except for such documents the submission of which is waived by PNOC-EDC).
(a) a copy of the license to do business in the Philippines issued to the
Operator by the Securities and Exchange Commission, as certified by an
authorized officer of the Operator in a manner satisfactory to
PNOC-EDC.
(b) a copy of the certificate of registration of NEWCO with the Board of
Investments, as certified by an authorized officer of the Operator in
a manner satisfactory to PNOC-EDC.
(c) a copy of the Articles of Incorporation of NEWCO as registered with
the Securities and Exchange Commission, certified by the corporate
secretary of NEWCO in a manner satisfactory to PNOC-EDC.
61
26.2 OPERATOR CONDITIONS ON PNOC-EDC
It shall be a condition precedent to the effectivity of this Agreement that
the following are submitted by or on behalf of PNOC-EDC to the Operator
(except for such documents the submission of which is waived by the
Operator):
(a) copies of the Articles of Incorporation and By-Laws of PNOC-EDC, and
of resolutions of its Board of Directors authorizing the execution,
delivery and performance by PNOC-EDC of this Agreement and the
Accession Undertaking, each certified by the corporate secretary of
PNOC-EDC in a manner satisfactory to the Operator;
(b) a certificate of the corporate secretary of PNOC-EDC confirming that
all necessary corporate and other approvals and action have been duly
obtained and taken for the execution, delivery and performance by
PNOC-EDC of this Agreement and the Accession Undertaking;
(c) a true copy of the Power Purchase Agreement executed between PNOC-EDC
and NAPOCOR, less such sections that PNOC-EDC deems to be of a
confidential nature and do not relate or pertain to the rights of the
Operator under this Agreement;
(d) copies of resolutions of the Board of Directors of each of PNOC-EDC
and NAPOCOR authorizing the execution, delivery and performance by
each of PNOC-EDC and NAPOCOR of the Power Purchase Agreement;
(e) confirmation that PNOC-EDC has ownership of or the right to use the
Site and that the Operator has the right to use the Site from the
Effectivity Date to the Transfer Date;
(f) copies of such consents, licenses, permits, approvals and registration
by or with the Government may be necessary to ensure the validity and
enforceability of this Agreement and to permit PNOC-EDC to perform its
obligations of this Agreement, including
(i) a Performance Undertaking executed on behalf of the Republic of
the Philippines by the Secretary or any of the Undersecretaries
of Finance named in the President of the Republic of the
Philippines' Full Powers Authorization, to guarantee the
performance by PNOC-EDC of its obligations under this
Agreement, such Performance Undertaking to be substantially in
the form of Annex K and acceptable to the Operator;
62
(ii) an opinion by the Department of Justice confirming the
validity, enforceability and binding effect of the Performance
Undertaking;
(iii) Registration of this Agreement and the Power Plant project with
the Bangko Sentral ng Pilipinas ("Central Bank");
(iv) the Environmental Compliance Certificate issued by the
Department of Environment and Natural Resources for the Leyte
project covering the Power Plant;
(v) registration of PNOC-EDC as a Block Power Production Facility
under Executive Order No. 215;
(vi) an opinion by the National Electrification Administration and
the Energy Regulatory Board confirming that the operation by
the Operator of the Power Plant will not constitute a public
utility so as to require a franchise, certificate of public
convenience and other similar license;
(vii) National Economic Development Authority certification that the
project is a high priority economic project for power
development which is financed by or through foreign funds;
(viii) an endorsement by the City or Regional Development Council for
the City or Region of the Power Plant project and endorsement
of the Power Plant project by the relevant local government
unit.
26.3 OTHER CONDITIONS
It shall be a condition precedent to the effectivity of this Agreement that
the following is obtained or delivered by:
(a) The Operator:
(i) Board of Investments registration of NEWCO as a pioneer
enterprise, approval for the incentives set forth in Annex J
and endorsement to by the Department of Justice for foreign
nationals to be employed in supervisory, technical and advisory
positions in the Power Plant.
(ii) confirmation by the Operator of the availability of financing
or funding, at terms and conditions acceptable to the Operator,
such as written commitments or letters of intent, in accordance
with the practice of each lender and of insurance for the
Operator's equity investments.
63
(iii) Central Bank approval for the Operator to establish offshore
dollar accounts for the purpose of receiving payments under
this Agreement and for any foreign currency loans to be made by
financial institutions for the purpose of repaying any bridge
loans extended to the Operator and for meeting the capital
requirements of the Power Plant project.
(b) by PNOC-EDC:
(i) NEDA Board/Investment Coordinating Committee approval of this
Agreement.
26.4 FULFILLMENT OR WAIVER
(a) Upon the fulfillment or waiver of each individual condition precedent
enumerated in Sections 26.1, 26.2 and 26.3, each of PNOC-EDC and the
Operator shall certify in writing within seven (7) days the
fulfillment or waiver of such a condition precedent.
(b) Upon the fulfillment or waiver of all the conditions precedent
enumerated in Sections 26.1, 26.2, and 26.3, each of PNOC-EDC and the
Operator shall certify in writing that all the conditions enumerated
in Section 26.1 (in the case of PNOC-EDC) and Sections 26.2 and 26.3
(in the case of the Operator) have been fulfilled or waived.
(c) In the event that the BOI denies NEWCO/Operator's registration as a
pioneer enterprise, including its availment of tax incentives under
the Omnibus Investments Code of 1987, for causes not attributable to
the Operator, and the Parties agree to waive such condition under
Section 26.3, PNOC-EDC shall pay all national income taxes of the
Operator for a period of six (6) years from the Commercial Operation
Date.
IN WITNESS WHEREOF, the parties hereto have set their hands this 4th day of
August, 1995 at Makati, Metro Manila, Philippines.
ORMAT INC. PNOC-Energy Development Corporation
(Operator) (PNOC-EDC)
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------- -----------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇ By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: Vice President Its: President
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Signed in the Presence of
---------------------------------- ----------------------------------
▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ of the Philippines
BEFORE ME this 4th day of August 1995, in Makati, M.M., Philippines
personally appeared ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ with Res. Cert. No. 9598088 issued on
March 8, 1995 at Mandaluyong, M.M.; and ▇▇▇▇▇ ▇▇▇▇▇▇▇ WITH Passport No. 404937
issued on 28.9.93 at Belgigue representing their respective companies; known to
me to be the same persons who executed the foregoing agreement and they
acknowledged to me that the same is their free corporate act and deed.
This instrument, consisting of 314 pages, including all annexes and page on
which this acknowledgment is written has been signed above their respective
names on page 66 by the parties and their witnesses and initialed on the left
hand margin of the other pages.
IN WITNESS WHEREOF, I have hereunto set my hand, the day, year and place
above written.
NOTARY PUBLIC
My commission ends on Dec. 31, 199_
Doc. No.
Page No.
Book No.
Series of 1995
----------------------------
▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Notary Public
until Dec. 31, 1995
PTR No. 2491927
issued at Makati, Metro Manila
on January 3, 1995
66