HECO Exhibit 10.8
-----------------
LOW SULFUR FUEL OIL SUPPLY CONTRACT
by and between
CHEVRON PRODUCTS COMPANY,
A DIVISION OF CHEVRON U.S.A. INC
and
HAWAIIAN ELECTRIC COMPANY, INC.
* * * * * * * *
TABLE OF CONTENTS
ARTICLE PAGE
ARTICLE 1: Definitions 1
ARTICLE 2: Term of Contract 3
ARTICLE 3: Purchase Volumes and Delivery Rates 3
Section 3.1: Purchase Volumes 3
Section 3.2: Delivery Rates 4
ARTICLE 4: Quality 5
ARTICLE 5: Price 6
Section 5.1: Price Per Physical Barrel 6
Section 5.2: Flexibility in Supply Source 8
Section 5.3: Fees, Taxes, Assessments, Levies, etc. 8
Section 5.4: Rounding of Index Averages 9
Section 5.5: Successor Publications 9
ARTICLE 6: Indemnity 9
ARTICLE 7: Pipeline Delivery 9
Section 7.1: LSFO Delivery 9
Section 7.2: Determination of Quality 9
Section 7.3: Measurement of Quantity 10
Section 7.4: Disputes of Quality 10
Section 7.5: Independent Inspection 11
ARTICLE 8: Marine Delivery 11
Section 8.1 Notification of Marine Delivery 11
Section 8.2: Notification of Chevron Use of HECO's BPTF 12
Section 8.3: Delivery of Marine Cargo 12
Section 8.4: Title and Risk of Loss for a Marine Delivery 12
Section 8.5: Determination of Quantity and Quality 12
Section 8.6: Disputes of Quality 13
ARTICLE 9: Line Displacement Stock and Blend Stock 13
Section 9.1: Line Displacement Stock 13
Section 9.2: Blend Stock 13
ARTICLE 10: Invoicing and Payment 13
Section 10.1: Invoices 13
Section 10.2: Ratable Invoicing 14
Section 10.3: Payments 14
Section 10.4: Method of Payment 14
ARTICLE 11: Contingencies 15
Section 11.1: Definition of Contingency 15
Section 11.2: Obligations to Sell 15
Section 11.3: Obligations to Purchase 15
Section 11.4: Price Effectiveness 16
Section 11.5: Combustion Specifications 16
Section 11.6: Effective Date 16
Section 11.7: [---] 16
ARTICLE 12: Effect of Suspension or Reduction 17
Section 12.1: Notice of Suspension or Reduction 17
Section 12.2: Option to Terminate 17
Section 12.3: Prompt Notices ▇▇
▇▇▇▇▇▇▇ ▇▇.▇: ▇▇▇▇▇▇ ▇▇▇▇▇▇ Currency 17
Section 12.5: Substitute Suppliers 17
ARTICLE 13: Waiver and Non-Assignability 17
Section 13.1: Waiver 17
ii
Section 13.2: Non-Assignability 17
Section 13.3: Definitions 18
ARTICLE 14: Default 18
ARTICLE 15: Conflicts of Interest 18
ARTICLE 16: Applicable Law 18
ARTICLE 17: Public Utility Commission Approval 19
Section 17.1: Filing Requirements; HECO's Energy Cost Adjustment Clause 19
Section 17.2: Use as a Public Utility 19
ARTICLE 18: Miscellaneous 19
Section 18.1: Headings 19
Section 18.2: Entire Agreement 19
Section 18.3: Contract is Not an Asset 19
Section 18.4: Notices 19
Section 18.5: Unenforceable Terms 20
Section 18.6: Successors and Assigns 20
Section 18.7: Termination of Prior Agreement 20
ADDENDUM No. 1: Illustrative Schedule of Prices 22
ADDENDUM No. 2: Quality Adjustments 33
ADDENDUM No. 3: Recovery of Worldscale Fixed Differential For Oil Pollution Liability Insurance 35
ADDENDUM No. 4: Inter Facility Points of Title/Risk of Loss 37
iii
LOW SULFUR FUEL OIL SUPPLY CONTRACT
-----------------------------------
THIS CONTRACT dated as of Nov. 14, 1997, by and between CHEVRON PRODUCTS
-------------
COMPANY, A DIVISION OF CHEVRON U.S.A. INC. , a Pennsylvania corporation,
("Chevron") and HAWAIIAN ELECTRIC COMPANY, INC., a Hawaii corporation, ("HECO"),
with the purpose for the sale and purchase of LSFO and other petroleum products.
WHEREAS, Chevron is a supplier of petroleum fuels with terminal and Refinery
facilities in Hawaii.
WHEREAS, HECO is a utility engaged in the generation and sale of electricity,
with terminal facilities, in Hawaii.
NOW THEREFORE, the parties agree as follows:
ARTICLE 1: Definitions
Except where otherwise indicated, the following definitions shall apply
throughout this Contract:
1. "API" or "API Gravity" means the American Petroleum Institute's
standard measurement of gravity for petroleum products, including
fuel.
2. "ASTM" means the American Society for Testing and Materials whose
standards are utilized in this Contract with respect to fuel
specifications, quantitative measurements, sampling and testing.
3. "barrel" means 42 American bulk gallons at 60 degrees Fahrenheit.
4. "BPH" means barrels per hour, a unit of measure of the rate of the
physical transfer or movement of fuel.
5. "BPTF" means HECO's Barbers Point Tank Farm, a fuel receiving,
storage and distribution facility located in Barbers Point area of
Oahu, in ▇▇▇▇▇▇▇▇ Estate Industrial Park, Kapolei, Hawaii.
6. "BTU" and "BTU content" means British Thermal Unit and refers to
the standard assessment of fuel's gross heating value or gross heat
content.
7. "Black Oil Pipeline" means Chevron's 8 inch pipeline running from
Barbers Point to Honolulu which is used for transporting LSFO to
the HECO fuel receiving and storage facilities at Waiau and Iwilei
in addition to the transportation of Chevron's other black
petroleum products.
8. "Certificate of Quality" or "Quality Certificate" means the formal
document recording the Chevron laboratory determinations of the
quality and BTU content of a particular sample which represents a
specific Delivery, said laboratory determinations having been
performed in accordance with the standard test methods described in
Article 4.
9. "Contingency" means as per the provisions of Section 11.1
10. "Contract" means this Low Sulfur Fuel Oil Supply Contract, between
Chevron and HECO, the term of which commences January 1, 1998.
11. "Day" or "Days" means a calendar day of 24 hours.
1
12. "Deliver," "Delivery," "Deliveries" or "Delivered" refers to the
transfer of title or physical movement of LSFO sold by Chevron and
purchased by HECO.
13. "Delivery Status Against Ratable" means the calculated figure equal
to cumulative Deliveries of LSFO as of a specific Day in a Month
where said Deliveries for the Month which includes the specified
Day less the cumulative Nominations on a Contract-to-date basis as
of that same specific Day in a Month.
14. "Effective Date" means, for the purposes of this Contract, January
1, 1998.
15. "Extension" means successive 12-Month periods in the term of this
Contract in addition to and after the initial term of this Contract
which is through December 31, 2004, each Extension beginning
January 1.
16. "Facilities And Operating Contract" means that certain separate
agreement by and between Chevron and HECO of even date with this
LSFO Supply Contract by and between the same parties.
17. "G.S.V." means gross standard volume in U.S. barrels at 60 degrees
Fahrenheit.
18. "Independent Inspector" means a qualified third-party petroleum
inspection contractor acceptable to both parties providing
petroleum sampling, measurement and other services before, during
and after a Delivery.
19. "Invoiced Deliveries" means Deliveries which have been invoiced in
accordance with Article 10.
20. "Invoice Date" means the billing or invoice issue date as shown on
the invoice which is after completion of the Delivery in question.
21. "Kahe Pipeline" means HECO's 10 inch pipeline running from Barbers
Point to the Kahe Power Plant which is used for transporting LSFO
to the fuel receiving and storage facilities at HECO's Kahe Power
Plant.
22. "Line Displacement Stock " means, collectively for this purpose,
Chevron Diesel Fuel No. 2, Chevron Industrial Fuel Oil No. 6 or
Chevron Industrial Fuel Oil No. 5 reasonably required for Chevron
to complete the Deliveries of LSFO into HECO's tankage at Kahe,
Waiau and ▇▇▇▇▇▇.
▇▇. "LSFO" means Low Sulfur Fuel Oil of the quality specified in
Article 4.
24. "LSWR" means Low Sulfur Waxy Resid, mixed/cracked quality, a common
grade of low sulfur fuel oil typically sold in Singapore, Indonesia
and elsewhere in the Far East.
25. "Marine Delivery" or "Marine Deliveries" means a Delivery of LSFO
and/or the components thereof, including blend stock, all or part
of which are Delivered by Chevron from a marine vessel to HECO's
receiving and storage tanks.
26. "MM" means million when used in conjunction with a unit of measure
such as BTU, i.e. MM BTU means million BTU.
27. "Month" means a calendar month.
28. "Nominated" or "Nomination" means the amount of LSFO specified by
HECO to be sold and Delivered by Chevron and purchased and received
by HECO for a specified Month.
2
29. "Pipeline Delivery" or "Pipeline Deliveries" means a Delivery of
LSFO from Chevron's Hawaii Refinery to HECO's petroleum receiving
and storage tanks at BPTF via Chevron's Refinery pipelines, or to
HECO's fuel storage at Kahe, Waiau, or Iwilei via HECO's Kahe
pipeline or Chevron's Black Oil Pipeline, respectively.
30. "Refinery" means Chevron's oil refining and related facilities
located in the Barbers Point area of Oahu, in ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. "Year" means a calendar Year.
ARTICLE 2: Term of Contract
The term of this Contract shall be from January 1, 1998 through December 31,
2004, and shall continue thereafter for Extensions beginning each successive
January 1, unless HECO or Chevron gives written notice of termination at least
120 Days before the beginning of an Extension.
ARTICLE 3: Purchase Volumes and Delivery Rates
Section 3.1: Purchase Volumes
During each Year that this Contract is in effect, Chevron shall sell and Deliver
to HECO and HECO shall purchase and receive from Chevron, LSFO at a reasonably
uniform rate during each Month. This Monthly volume shall equate to an average
daily rate in physical barrels per Day which is no less than the [---] nor more
than [---] as set out below:
Annual Average Daily Rate in Physical Barrels Per Day
[---] [---] [---] [---]
Year Minimum Maximum Minimum Maximum
---- ------- ------- ------- -------
1998-1999 [---] [---] [---] [---]
2000-2004 [---] [---] [---] [---]
The minimum and maximum annual volume of LSFO to be Delivered and sold by
Chevron and to be Nominated, purchased and received by HECO during each of the
Years are as follows:
Annual Volume In Thousands Of Barrels
Year Minimum Maximum
---- ------- -------
1998 [---] [---]
1999 [---] [---]
2000 [---] [---]
2001 [---] [---]
2002 [---] [---]
2003 [---] [---]
2004 [---] [---]
Pursuant to Section 5.1, the [---] Maximum Annual Average Daily Rate
in physical barrels per Day, when multiplied by the number of Days in
each Month, designates the maximum purchase volume during that Month
which shall occur at [---]
3
The minimum and maximum annual volumes to be sold by Chevron and purchased by
HECO during each Year of any extension shall be determined by multiplying the
Days of that Year by the average daily minimum and maximum rates indicated for
Year 2004, unless mutually agreed otherwise. Subject to availability, Chevron
will sell and Deliver and HECO shall purchase and receive such additional
volumes as are mutually agreed.
Section 3.2: Delivery Rates
(a) HECO shall advise Chevron of its Nominated rate of Delivery for
each Month [---] prior to the beginning of that Month. HECO shall
provide Chevron written notice of the amount of LSFO to be sold and
Delivered.
No later than 10 Days prior to the beginning of each Month, Chevron
will provide HECO a proposed schedule of Pipeline Deliveries and
Marine Deliveries ("Delivery Schedule") to be made for the following
three Months. The proposed Delivery Schedule shall specify the type
of Delivery, Pipeline Delivery or Marine Delivery, approximate
quantity and the approximate date. The Deliveries are to be made at
reasonably regular intervals. HECO shall notify Chevron of its
acceptance or rejection of the proposed Delivery Schedule within three
(3) business days of receipt. Should HECO fail to provide notice to
Chevron of its acceptance, conditional acceptance or rejection of the
Delivery Schedule prior to the end of said three (3)-business-day
period, HECO shall be deemed to have accepted the Delivery Schedule.
If HECO rejects the proposed Delivery Schedule because the date or
volume of an individual Delivery is unacceptable, HECO shall advise
Chevron as soon as possible thereafter of a satisfactory alternate
Delivery date or alternate Delivery quantity.
Chevron shall notify HECO of any change in the accepted Delivery
Schedule due to any of the following causes with respect to each
individual Delivery as soon as practicable after it shall become known
to Chevron:
1. A change in the volume of an individual Pipeline Delivery, if
such change is in excess of 10,000 barrels of the previously
advised Delivery volume or a change in the volume of an
individual Marine Delivery, if such change is in excess of 25,000
barrels of the previously advised Delivery volume; or
2. A change in the date of an individual Delivery, if such change is
greater than 2 Days from the previously advised date.
(b) HECO shall not be required to take Delivery of more than [---] of
a Month's Nominated volume in any [---] Day consecutive period; and
Chevron shall not be required to make Delivery of more than [---] of a
Month's Nominated volume in any [---] Day consecutive period. Chevron
will make reasonable good faith efforts to plan its Pipeline
Deliveries and Marine Deliveries such that it shall have a Delivery
Status Against Ratable of approximately zero at Month-end for the
third Month of the accepted Delivery Schedule. Scheduled Marine
Deliveries can be made plus or minus [---] Days from the date shown on
the accepted Delivery Schedule.
(c) Chevron and HECO shall make best efforts to coordinate their
separate marine and pipeline shipments into and out of HECO's BPTF to
minimize operational difficulties and costs, including but not limited
to tankage availability and vessel demurrage.
(d) Unless waived by HECO and subject to tank availability, the
physical volume of Chevron's Marine Deliveries of LSFO shall be
limited to [---] barrels, during any [---] Day period and any Month,
except during Months when Chevron's LSFO production facilities at
Barbers Point
4
are not operating or when HECO's Nominated rate of Delivery for the
Month of the Marine Delivery is in excess of the [---] Maximum
quantity specified in Section 3.1.
(e) If due to reasons other than a Contingency as defined in Article 11,
Chevron's anticipated Pipeline Deliveries and Marine Deliveries of
LSFO shall reasonably indicate that the cumulative quantity of its
Deliveries to HECO during a period of this Contract will result in a
Delivery Status Against Ratable in excess of [---] barrels for a
period in excess of [---] consecutive Days, Chevron shall be deemed to
be in a "Supply Deficit Position" and shall give prompt notice of same
to HECO.
In the event that Chevron gives notice that it is in a Supply Deficit
Position, Chevron and HECO shall thereafter immediately confer in good
faith on the steps to be taken to minimize the impact of any Supply
Deficit Position on HECO. Within three (3) business days of its
tendering notice of Supply Deficit Position to HECO, Chevron shall
propose a detailed plan ("Supply Plan") whereby it may make Deliveries
of LSFO to HECO to address the Supply Deficit Position.
In the event Chevron has other term contract buyers for LSFO in
Hawaii, Chevron shall ratably allocate its sale of LSFO to all such
buyers on the basis of actual sales to each such buyer over the prior
Year.
(f) If due to reasons other than a Contingency as defined in Article 11,
HECO's anticipated demand for LSFO should reasonably indicate that its
Monthly Delivery requirements from Chevron during a period of this
Contract are less than the minimum Monthly or annual volume of LSFO to
be purchased and received by HECO as set forth in Section 3.1, HECO
shall be deemed to be in a "Purchase Deficit Position" and shall give
prompt written notice to Chevron.
In the event that HECO gives notice that it is in a Purchase Deficit
Position, Chevron and HECO shall thereafter immediately confer in good
faith on the steps to be taken to minimize the impact of any Purchase
Deficit Position on Chevron. [---]
In such circumstances, purchases of LSFO shall be ratably allocated
among all sellers including Chevron on the basis of actual sales from
each seller over the prior Year.
ARTICLE 4: Quality
The LSFO Delivered thereunder shall comply with the following specification
limits:
LSFO ASTM Test Specification
Specification Method Units Limits
------------- ------ ----- ------
API Gravity D4052 Deg 12 min
24 max
Sulfur D4292 Wt % 0.50 max
Flash Point D93 Deg F 150 min
Pour Point D97 Deg F 125 max
5
Viscosity D445 SSU at l00 min
210 Deg F 450 ▇▇▇
▇▇▇ D482 Wt % 0.05 max
BTU content D240 MM BTU/Bbl 6.000 min
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Wt % 0.50 max
Water & Sediment D1796 Wt % 0.50 max
CHEVRON MAKES NO WARRANTY, EXPRESSED OR IMPLIED IN FACT OR BY LAW, AS TO THE
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE CONCERNING THE LSFO OTHER
THAN IT SHALL COMPLY WITH THE QUALITY HEREIN SPECIFIED, AND THAT IT SHALL BE
SUITABLE FOR USE AS A BOILER FUEL.
ARTICLE 5: Price
Section 5.1: Price Per Physical Barrel
For the Monthly cumulative volume which is at or below the [---] maximum limit
of Section 3.1 multiplied by the number of Days in the Month, the price of LSFO
Delivered to meet the Nominated commitment of a Month shall be determined as
follows:
[---]
For the Monthly cumulative volume which exceeds the Tier 1 maximum limit of
Section 3.1 multiplied by the number of Days in the Month, the price of LSFO
Delivered to meet the Nominated commitment of a Month shall be determined as
follows:
[---]
where:
P1 = Billing price per physical barrel of LSFO Delivered to meet that
portion of the Nominated commitment of a Month that is equal to or
below the [---] maximum regardless of the actual Month Delivered, in
U. S. dollars.
P2 = Billing price per physical barrel of LSFO Delivered to meet that
portion of the Nominated commitment of a Month that exceeds the [---]
maximum, regardless of the actual Month Delivered , in U.S. dollars.
LSWR INDEX = A market index for low sulfur fuel oil, defined as the
average of [---], defined as follows:
[---], a variable market price component which is a discount or
premium to the [---] which shall be calculated by a simple averaging
of the daily high and low or bid and ask of the "Premia to the
Pertamina Formula" price for Singapore or Singapore/Indonesia cracked,
mixed/cracked or equivalent LSWR as assessed and published in [---] in
the date range specified below for [---].
6
[---]
(a) [---] for LSWR Mixed/Cracked sold in Singapore, during the period
beginning the 21st of the second Month immediately preceding the
Nominated Month of Delivery and ending the 20th Day of the Month
immediately preceding the Nominated Month of Delivery.
(b) [---] --- Similarly, the average of the high and low prices per barrel
published by [---] for every date of publication within the date range
of [---] above.
(c) [---] ---- Similarly, the average of the bid and asked prices per
barrel published by [---] for every date of publication within the
date range of [---] above.
(d) [---] ---- Similarly, the average of the prices per barrel published
by [---] for every date of publication within the date range of [---]
above.
FREIGHT = a market index for freight, defined for each calendar
quarter as the multiplication product of (a) and (b) below, plus the fixed
rate differential described in (c) below:
(a) The simple average of the Average Freight Rate Assessment ("AFRA")
Worldscale Points for the average of Large Range 1 vessels, as
published Monthly by London Tanker Brokers Panel Limited for the three
Monthly publications in the calendar quarter immediately preceding the
calendar quarter of the Nominated Month of Delivery. Monthly
publications show rates of vessel voyages which occurred during the
last half of the second Month immediately preceding that publication
and the first half of the Month immediately preceding that
publication, and
(b) The Worldscale 100 rate for voyages between Singapore and Barbers
Point, Hawaii, applicable to the Year of the quarter defined in (a)
above; expressed in New Worldscale rates, as published by Worldscale
Associates (London Limited) in its New Worldwide Nominal Freight Scale
(Worldscale); plus,
(c) There shall be added to the multiplication product of (a) and (b)
above, a fixed rate differential for segregated ballast tank
configured oil tankers, "SBT Tankers," if and as provided by
Worldscale, with respect to the Additional Insurance Premiums for
Basic ($500 Million) and Excess ($200 Million) coverage of Oil
Pollution Liability Insurance on vessels carrying persistent oils to
and from the U.S.A., consistent with a typical vessel as derived in
Addendum No. 3 attached to this Contract.
The FREIGHT rate will be expressed in U.S. dollars per barrel, using a
conversion factor of 6.75 barrels per metric ton.
▇▇ ▇▇▇▇▇▇ = A market index for industrial fuel oil, defined as the
simple average of the high and low prices for Los Angeles Bunker C fuel
as reported by the ▇▇▇▇▇'▇ Oilgram Bunkerwire ("▇▇▇▇▇'▇ Bunkerwire") for
all dates of publication during the period beginning the 21st of the second
Month immediately preceding the Nominated Month of Delivery and ending the
20th Day of the Month immediately preceding the Nominated Month of
Delivery. The ▇▇ ▇▇▇▇▇▇ market index will be expressed in U.S. dollars per
barrel, using a conversion factor of 6.368 barrels per metric ton.
7
[---] volumes sold and purchased in each Year of the indicated period as
follows:
1998-1999: [---] per barrel
2000-2004/Extension: [---] per barrel
[---] volumes sold and purchased in each Year of the indicated period as
follows:
1998-1999: [---] per barrel
2000-2004/Extension: [---] per barrel
The per barrel premium applicable for 2004 shall also apply to sales and
purchases of LSFO during each Year of any Extension, unless otherwise
mutually agreed.
BTU = The actual BTU content of each LSFO Delivery, pursuant to Section
7.2, expressed in MM BTU's per barrel and rounded to three decimal places.
T = the [---], the Hawaii General Excise Tax, the Hawaii Environmental
Response Tax, [---] and any other tax properly imposed on the sale of LSFO
pursuant to Section 5.3 herein.
The price for LSFO Delivered shall be based on the price for the Month Delivered
to meet the Nominated commitment of a Month regardless of the actual Month
during which physical Delivery occurs.
Addendum No. 1 hereto contains an illustrative schedule of prices calculated
pursuant to this Section 5.1, including a copy of the Monthly London Tanker
Brokers Panel Limited publication.
Section 5.2: Flexibility in Supply Source
To provide the flexibility needed by Chevron to meet its obligations to HECO,
the source and type of crude oil and other raw material, the place of
manufacture, and the manufacturer of LSFO for Delivery to HECO hereunder shall
be determined solely by Chevron. The price of all LSFO Delivered by Chevron to
HECO hereunder shall be determined in accordance with the terms of this Contract
regardless of where, how and by whom such LSFO is manufactured and regardless of
the type or source of crude oil or other raw materials used in its manufacture.
Section 5.3: Fees, Taxes, Assessments, Levies, etc.
In addition to all other amounts payable by HECO under this Contract, HECO shall
reimburse Chevron for all taxes, assessments, levies and imposts of whatsoever
kind or nature imposed on Chevron by any governmental or quasi-governmental
body, as adjusted, modified or revised from time to time, including without
limitation the Hawaii General Excise Tax, the [---], the Hawaii Environmental
Response Tax and [---]s with respect to the [---] sale of LSFO and its
components under this Contract or the receipt by Chevron of payments hereunder.
Notwithstanding the foregoing and any illustrative schedule of prices herein,
HECO shall not be required to reimburse Chevron under this Section 5.3 for any
tax measured by or based on the net income of Chevron or for real property taxes
or to duplicate any item of expense of Chevron which is recovered by Chevron
under the billing price under Section 5.1 or for any item expressly mentioned by
[---] or ▇▇▇▇▇'▇ Bunkerwire, or confirmed by [---] or ▇▇▇▇▇'▇ Bunkerwire in
writing upon inquiry by either Chevron or HECO, as being included in a price
used to compute the billing price under Section 5.1.
[---]
8
[---]
As of the effective date of this Contract, the governmental fees, etc. which are
currently in effect are the [---], the Hawaii General Excise Tax (4.166%) the
[---] and the Hawaii Environmental Response Tax ($0.05 per barrel). The Hawaii
General Excise Tax and the Hawaii Environmental Response Tax will be added to
the invoiced price. The Hawaii Environmental Response Tax is not subject to
Hawaii General Excise Tax.
Section 5.4: Rounding of Index Averages
All prices, index averages, adjustments thereto and other sums payable hereunder
shall be stated in the nearest thousandth of a dollar.
Section 5.5: Successor Publications
[---] and ▇▇▇▇▇'▇ Bunkerwire shall include any successor publication(s) and, in
the event of either the discontinuance of any of these publications, the
publications referenced in the derivation of the market index for freight or of
assessments of Singapore/Indonesia mixed/cracked or equivalent quality LSWR,
[---] or Los Angeles Bunker C Fuel Oil, respectively, the parties shall agree
upon an alternate price reporting services and publications or market price
assessments and any modification of the per barrel premiums for LSWR, price
formula components A1 and A2, as applicable, as may be reasonable under the
circumstances.
ARTICLE 6: Indemnity
Each party agrees to defend, indemnify and hold harmless the other party in
accordance with the provisions of Article 17 of the Facilities And Operating
Contract the terms and conditions of which are hereby incorporated herein and
made a part of this Contract by reference hereto.
The provisions of this Article 6 shall survive the termination of the Contract.
ARTICLE 7: Pipeline Delivery
Section 7.1: LSFO Delivery
Pipeline Delivery of LSFO from Chevron's Hawaii Refinery shall be made by one of
the following methods:
(a) Chevron may Deliver LSFO by pipeline from the Refinery into HECO's
BPTF. Title and risk of loss of LSFO so Delivered shall pass to HECO
where Refinery pipelines interconnect with HECO's BPTF pipelines at
the point where the pipelines intersect the boundary line between the
Refinery property and HECO's BPTF property at either point A,
depending on whether Chevron Delivers LSFO through the "Front Door
Line" or "Back Door Line" as shown in Addendum No. 4.
(b) Pursuant to the Facilities and Operating Agreement between Chevron and
HECO, Chevron may Deliver LSFO by pipeline from the Refinery into
HECO's receiving and storage tanks at Kahe, Waiau and Iwilei. With
respect to such Deliveries to HECO's receiving and storage tanks at
Kahe, title and risk of loss of LSFO Delivered from the Refinery shall
pass to HECO where the
9
Refinery pipelines interconnect with HECO's Kahe Pipeline at either
point B shown in Addendum No. 4. With respect to such Deliveries to
HECO's receiving and storage tanks at Waiau and Iwilei, title and risk
of loss of LSFO Delivered from the Refinery shall pass to HECO where
the Refinery pipelines interconnect with Chevron's Black Oil Pipeline
at either point C as shown in Addendum No. 4.
The use of facilities for Delivery of LSFO pursuant to Section 7.1.(b) of this
Contract, including but not limited to HECO's obligation to pay a per barrel
pipeline pumping fee for the LSFO Delivered under Section 7.1 (b), the
measurement of the pumped quantities and the terms of sale and Delivery by
Chevron and purchase and receipt by HECO of Line Displacement Stock related to
the Delivery of LSFO, other than the specific provisions set forth in Article 9
herein, shall be governed by the Facilities And Operating Contract.
Section 7.2: Determination of Quality
The quality and BTU content of the LSFO Delivered by Pipeline Delivery to HECO
shall be determined on the basis of a volumetric weighted average composite of
samples drawn from Chevron's issuing tank(s) at the Refinery in such a manner as
to be representative of each individual Pipeline Delivery ("Tank Final Sample").
The Tank Final Sample shall be divided into a minimum of three (3) parts as
follows:
(1) One part shall be provided to Chevron's Refinery laboratory for
analysis to determine BTU content per barrel and quality
determination.
(2) One part shall be provided to HECO's laboratory for analysis to
determine BTU content per barrel and for the purpose of verifying
Chevron's determinations.
(3) At least one part shall be sealed and retained by the Independent
Inspector for a period of not less than three (3) Months.
Chevron agrees to provide HECO and the Independent Inspector with a copy of
Chevron's Certificate of Quality representing the Tank Final Sample and will
make best efforts to provide such quality documentation no later than [---] of
the Pipeline Delivery. If the completed Certificate of Quality is not available
the Day of the completion of the Pipeline Delivery, Chevron will advise HECO and
the Independent Inspector, by the Day of the completion of the Pipeline
Delivery, the final determination of API gravity, flash point, sulfur content
and sediment and water representing the Tank Final Sample.
The official BTU content determination shall be based upon an average of
Chevron's and HECO's laboratory analyses, provided that such analyses fall
within the ASTM reproducibility standard (currently 0.4 MJ/kg which the parties
shall deem to be equivalent to a fixed standard of 60,000 BTU per barrel) for
Test D-240. Chevron and HECO will make best efforts to evaluate the BTU content
of the Tank Final Sample and exchange results within [---] Days. In the
event the difference between HECO's and Chevron's laboratory determination of
BTU content falls outside said reproducibility standard, the sealed part of the
Tank Final Sample in the possession of the Independent Inspector shall be
provided to an independent testing laboratory for an official determination,
which shall be final. In cases of disagreement or excessive delays in HECO's
determination of BTU content, Chevron shall have the right to invoice the sale
using a provisional BTU content of 6.2 MM BTU per barrel, with any required
adjustments made after final determination is made. Chevron and HECO shall
share equally the cost of independent tests and determinations.
Section 7.3: Measurement of Quantity
Quantities of LSFO and Line Displacement Stock Delivered by Pipeline Delivery
hereunder shall be determined at the time of the Pipeline Delivery by gauging
Chevron's tanks before and after pumping under the supervision of the
Independent Inspector. Quantities sold and Delivered by Chevron and purchased
and received by HECO hereunder shall be calculated in accordance with the
current measurement standards adopted by industry, ASTM,
10
API and other recognized standard-setting bodies as are applicable in the
opinion of the Independent Inspector and shall be expressed in G.S.V., U.S.
barrels @ 60 degrees F.
Both HECO and Chevron agree that if measurement of Chevron's tanks is, in the
opinion of the Independent Inspector, considered to have been rendered
inaccurate for any reason including, but not limited to operational constraints,
physical loss of LSFO or Line Displacement Stock or inadvertent transfer of LSFO
or Line Displacement Stock within Chevron's facilities, then the quantity of
LSFO or Line Displacement Stock may be determined by gauging HECO's tanks before
and after pumping under the supervision of the Independent Inspector.
Section 7.4: Disputes of Quality
If Chevron or HECO has reason to believe that the quality of LSFO or Line
Displacement Stock stated for a particular Pipeline Delivery or Marine Delivery
per Article 7 or Article 8 is incorrect, that party shall within sixty (60) Days
after the issuance date of the complete Certificate of Quality, present the
other party with documents supporting such dispute and the parties will confer,
in good faith, on the causes for the discrepancy and shall proceed to correct
such causes and adjust the quality, if justified, for the Pipeline Delivery or
Marine Delivery in question. In the event of an unresolvable difference between
Chevron and HECO, the sealed part of the relevant sample in the possession of
the Independent Inspector shall be provided to an independent testing laboratory
for an official determination, which shall be final. Chevron and HECO shall
share equally the cost for such independent laboratory determination.
If the quality of the LSFO received by HECO from Chevron fails to conform to
specifications in Article 4 of this Contract, both Chevron and HECO shall
minimize, if possible, the impact of any quality problem on HECO by
specification waiver if the use of the LSFO will not cause harm to HECO, or by
Chevron delivering higher quality LSFO in a timely manner to produce a
specification quality blend in HECO's receiving and storage tank(s) containing
the non-specification LSFO. If all such, and similar, efforts fail to resolve
the quality problem, then HECO may return non-specification LSFO to Chevron, in
which case Chevron shall replace the non-specification LSFO in a timely manner.
All costs and expenses, including HECO's handling costs incurred in returning
and replacing non-specification LSFO, shall be paid by Chevron.
Section 7.5: Independent Inspection
Chevron and HECO will make best efforts to ensure that all measurements taken
and determinations made with respect to the provisions of this Contract shall be
under the supervision of an Independent Inspector, and the costs thereof, shall
be shared equally by Chevron and HECO. If, due to a need for timeliness,
Chevron personnel rather than the Independent Inspector take measurements, such
measuring shall be performed in accordance with accepted industry standards
approved by an Independent Inspector.
ARTICLE 8: Marine Delivery
Section 8.1: Notification of Marine Delivery
Chevron shall provide HECO with updates on the anticipated arrival date of its
vessel and expected date for commencing the Marine Delivery and otherwise comply
with the notice provisions of Section 3.2(a) herein..
Section 8.2: Notification of Chevron Use of HECO's BPTF
Chevron shall provide HECO at least [---] Days advanced notice of its planned
use of a specified volume of more than [---] barrels, and no more than [---]
barrels, of HECO's petroleum storage capacity at BPTF for Chevron's use in
making a Marine Delivery to HECO. [---]
11
[---]
Section 8.3: Delivery of Marine Cargo
Chevron may Deliver LSFO or LSFO blend stock from Chevron's vessel into BPTF.
The volume of Chevron's Marine Delivery shall conform to the provisions of
Section 3.2(a) herein unless it has received prior written approval from HECO.
Section 8.4: Title and Risk of Loss for a Marine Delivery
Title to the LSFO and the risk of loss of the LSFO and components Delivered from
Chevron's vessel or from the Refinery in conjunction with a Marine Delivery
shall pass from Chevron to HECO at the BPTF as soon as the [---]
Section 8.5: Determination of Quantity and Quality
The quantity and quality of LSFO Delivered by marine vessel shall be determined
in the manner specified in Sections 7.2, 7.3 and 7.4 of this Contract, except as
follows:
(a) Chevron agrees to advise the Independent Inspector, prior to
commencing a Marine Delivery of LSFO or any component thereof from
Chevron's vessel, the API gravity and flash point in degrees F. shown
the port of loading Quality Certificate representing the quality of
said LSFO or component thereof.
(b) In order to reduce the likelihood of Chevron's Marine Delivery
resulting in quality problems occurring in HECO's receiving tank(s),
Chevron agrees to test a volumetric weighted average composite of
samples representative of the LSFO or component thereof to be shipped
to HECO's receiving tanks ("Precautionary Sample"). The Precautionary
Sample shall be drawn after the arrival of the vessel in Hawaiian
waters, but prior to the commencement of the Marine Delivery, and
shall be tested by Chevron's Refinery laboratory. Chevron agrees that
should a pre-discharge computer blend simulation representing the
quality of a volumetric weighted average mixture of the Precautionary
Sample, components of the Marine Delivery in questions previously
shipped to HECO's receiving tanks and other LSFO components available
to be shipped from Chevron's Refinery reasonably indicate the Marine
Delivery in question will not conform to the quality specified in
Article 4, Chevron will instruct the vessel operator not to commence
Delivery of its cargo to HECO's receiving tanks without HECO's express
permission.
(c) The quality and BTU content of the LSFO Delivered shall be determined
on the basis of a volumetric weighted average composite of samples
drawn from HECO's receiving tank(s) in such manner as to be
representative of the entire Marine Delivery (also "Tank Final
Sample"). The Tank Final Sample shall be divided and otherwise handled
in accordance with the provisions of Section 7.2.
(d) Quantity of the LSFO Delivered via a Marine Delivery shall be
determined at the time of each Marine Delivery by gauging HECO's
tank(s) before and after pumping. Quantities sold and Delivered
pursuant to this Section 8.5 shall be calculated in accordance with
the current measurement standards adopted by industry, ASTM, API and
other recognized standard-setting bodies as are applicable in the
opinion of the Independent Inspector and shall be expressed in G.S.V.,
U.S. barrels @ 60 degrees F.
12
Section 8.6: Disputes of Quality
If Chevron or HECO has reason to believe that the quality of LSFO stated for an
individual Marine Delivery is not in conformance with the qualities described in
Article 4 , Chevron and HECO shall attempt to resolve the quality problem
pursuant to the provisions of Section 7.4.
ARTICLE 9: Line Displacement Stock and Blend Stock
Section 9.l: Line Displacement Stock
HECO shall purchase and Chevron shall supply whatever volume of Line
Displacement Stock is reasonably required for Chevron to complete the Deliveries
of LSFO that is received into HECO's tankage at Kahe, Waiau and Iwilei. The
price of No. 2 diesel fuel or No. 6 fuel oil used as Line Displacement Stock
shall be the then-current pricing for the fuel comprising the Line Displacement
Stock in that certain separate agreement between Chevron and HECO and its
affiliated companies of even date herewith, known as the Inter-Island Industrial
Fuel Oil and Diesel Fuel Contract ("Inter-Island Supply Contract"), if such a
supply contract is in effect; otherwise its price shall be the then-current
Honolulu posted price for such fuel, less normally available discounts, if any,
at the time of purchase. The price of No. 5 fuel oil used as Line Displacement
Stock shall be the [---] in the Inter-Island Supply Contract, if such a supply
contract is in effect; otherwise its price shall be the then-current Honolulu
posted price for No. 5 fuel oil, less normally available discounts, if any, at
the time of purchase. HECO's minimum purchase obligation and Chevron's maximum
purchase obligation set forth in Article 3 shall be reduced by each physical
barrel of Line Displacement Stock sold.
Section 9.2: Blend Stock
In the event HECO desires to adjust the quality of its LSWR in its BPTF
receiving and storage tanks to meet the specifications of Article 4, Chevron
shall supply the necessary blend stock pursuant to Addendum No. 2 given
reasonable notice.
ARTICLE 10: Invoicing and Payment
Section 10.1: Invoices
Invoices, which will show the price per physical barrel of LSFO, blend stock and
Line Displacement Stock sold will be prepared and dated following Delivery shall
be rendered from time to time each Month. Original invoices shall include full
documentation, as approved by both parties including Certificate of Quality,
report of the Independent Inspector, and price calculation; such documentation
may, however, be provided by Chevron to HECO separately. The invoices shall
also show as a separate item the estimated amounts of any reimbursements to
which Chevron is entitled pursuant to Section 5.3.
If an invoice incorporating an item other than a BTU content adjustment in
error, or has been sent to HECO, then HECO shall have the option to hold said
invoice without penalty until such error or dispute is resolved and HECO shall
have received a corrected invoice, debit or credit. HECO shall make payment for
such corrected invoice or debit in accordance with this Section 10.3. If a
disputed item has not been resolved in 30 Days from the Invoice Date, HECO shall
pay the undisputed amount.
If Chevron's or HECO's final laboratory result for BTU content is unavailable or
if Chevron's laboratory result is disputed by HECO, Chevron may issue a
provisional invoice pursuant to Section 7.2. HECO shall in such case make
payment for such provisional invoice in accordance with the provisions of
Section 10.3.
13
Section 10.2: [---]
[---]
Section 10.3: Payments
Payments of such invoices shall be made in U.S. dollars. Subject to Section
10.1, Section 10.2, Section 7.4 and Section 8.6 herein, the timing of payments
for sales and Deliveries received shall be based upon the invoice issue date
which shall be the Invoice Date or postmarked mailing date of the invoice,
whichever is later, as follows:
(a) Payment for a received invoice dated from the 1st through the 10th of
a Month is due on the 20th of the same Month.
(b) Payment for a received invoice dated from the 11th through the 20th of
a Month is due by the last Day of the same Month.
(c) Payment for a received invoice dated from the 21st through the last
Day of the Month is due on the 10th Day of the following Month.
Due dates are the dates payments are to reach Chevron. If the due date falls on
a Saturday, the payment shall be received on the preceding business Day. If
such date falls on a Sunday or a holiday, payment shall be received the
following business Day.
Section 10.4: Method of Payment
Payments shall be by bank wire transfer of immediately available funds to:
Chevron Products Company, a division of Chevron U.S.A. Inc.
Account Number 59-51755
First National Bank of Chicago, Chicago, IL
ABA Ref. No. ▇▇▇▇▇▇▇▇▇
For identification purposes, all wires must clearly indicate that payment is
being made by order of HECO and provide the invoice reference number. In
addition, written documentation evidencing specific invoices being paid shall be
immediately forwarded to:
Utility Fuel Receivables/Room 3338
Chevron Products Company, a division of Chevron U.S.A. Inc
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
ARTICLE 11: Contingencies
Section 11.1: Definition of Contingency
As used in this Article 11, the term "Contingency" means:
(a) any event reasonably beyond the control of the party affected;
14
(b) compliance, voluntary or involuntary, with a direction or request of
any government or person purporting to act with governmental
authority; excluding, however, any such direction or request
restricting or otherwise regulating combustion of the LSFO to be
purchased by HECO hereunder, the effect of which restrictions or
regulation upon the parties' performance shall be governed by Section
11.5 of this Contract;
(c) total or partial expropriation, nationalization, confiscation,
requisitioning or abrogation or breach of government contract or
concession;
(d) closing of, or restriction on the use of, a port or pipeline;
(e) maritime peril (including but not limited to, negligence in navigation
or management of vessel, collision, stranding, destruction, or loss of
vessel), storm, earthquake, flood;
(f) accident, fire, explosion;
(g) hostilities or war (declared or undeclared), embargo, blockage, riot,
civil unrest, sabotage, revolution, insurrection;
(h) strike or other labor difficulty (whomever's employees are involved),
even though the strike or other labor difficulty could be settled by
acceding to the demands of a labor group; or
(i) loss or shortage of supply, production, manufacturing, distribution,
refining, transportation, Delivery facilities, receiving facilities,
equipment, labor, material, power generation or power distribution
caused by circumstances which the affected party is not able to
overcome by the exercise of reasonable diligence or which the affected
party is able to overcome only at substantial additional expense in
relation to the expected revenue, benefits or rights related directly
to this Contract.
Section 11.2: Obligations to Sell
Chevron shall not be obligated to sell or Deliver LSFO to the extent that
performance of this Contract is prevented, restricted or delayed by a
Contingency which significantly affects Chevron's ability to supply, manufacture
or transport LSFO to HECO under this Contract from Chevron's U.S. West Coast (to
the extent Chevron's U.S. West Coast refineries are producing LSFO at the time
of the Contingency) and Refinery. In such circumstances, Deliveries of LSFO to
HECO may be reduced on a basis as equitable to HECO as to Chevron's and its
Affiliates' other customers of crude and petroleum products, and Chevron shall
not be obligated to acquire additional crude or LSFO but to the extent that it
does acquire additional crude or LSFO, HECO shall be entitled to an equitable
share of the LSFO acquired or derived from the crude acquired, at a price to be
agreed from time-to-time.
Section 11.3: Obligations to Purchase
HECO shall not be obligated to purchase, receive or use LSFO to the extent that
performance of this Contract in the customary manner is prevented, restricted or
delayed by a Contingency. In such circumstances, purchases from Chevron may be
reduced on any basis as equitable to Chevron as to HECO's other suppliers of
LSFO.
Section 11.4: Price Effectiveness
If at any time any price determined under this Contract cannot be given effect
because to do so would violate a direction or request of any government or
person purporting to act with governmental authority, HECO and Chevron shall
attempt to agree on an alternate course of action, but failing agreement within
ten (10) Days the party adversely affected may suspend performance with respect
to the quantity of LSFO affected by the direction or request.
15
Section 11.5: Combustion Specifications
To the extent that any governmental regulation requires combustion of LSFO
meeting more stringent specifications or permits combustion of LSFO meeting less
stringent specifications than those in Article 4, HECO and Chevron shall
negotiate in good faith to agree on an alternative course of action that will
reasonably allow HECO to comply with such regulation while fulfilling its
minimum annual purchase volume commitment under Article 3, at a price and on
other terms and conditions that are fair to both parties. Chevron shall have no
obligation to Deliver LSFO meeting new specifications if it is not available for
purchase from third parties and Chevron cannot manufacture such LSFO in existing
facilities without substantial new capital investment. If HECO and Chevron do
not agree on such an alternate course of action, then [---]
To the extent HECO is unable to utilize fuel to be supplied by Chevron under
this Contract, but [---], then purchases from Chevron may be reduced on any
basis as equitable to Chevron as to HECO's other suppliers of similar fuel oil.
Any adjustments in price pursuant to this Section 11.5 shall be governed by
Section 11.6, except that the adjustments shall apply to all LSFO Delivered
which meets the [---].
Section 11.6: Effective Date
In the event of retroactive adjustments hereunder, the charge or credit to HECO
shall be computed and billed to HECO as soon as practical after the adjustment
is known. In the event of retroactive changes which cause adjustments hereunder
after termination of this Contract, payment shall be made within fifteen (15)
Days after receipt of written demand therefor by the other party.
Section 11.7: [---]
[---]
ARTICLE 12: Effect of Suspension or Reduction
Section 12.1: Notice of Suspension or Reduction
In the event of any suspension or reduction of sales and Deliveries under
Article 11, Chevron shall not be obligated to sell and HECO shall not be
obligated to buy, after the period of suspension or reduction, the undelivered
quantity of LSFO which normally would have been sold and Delivered hereunder
during the period of suspension or reduction.
16
Section 12.2: Option to Terminate
If sales and Deliveries are suspended under Article 11 for more than 180 Days,
Chevron or HECO shall have the option while such suspension continues to
terminate its obligations to the other party under this Contract on thirty (30)
Days written notice to the other party.
Section 12.3: Prompt Notices
Any party which relies upon Article 11 shall give the other party prompt notice
thereof specifying the anticipated amount and duration of any suspension or
reduction of Deliveries. It shall also give prompt notice when it no longer
expects to rely on Article 11 and Deliveries shall be reinstated subject to all
conditions of this Contract, unless this Contract has been terminated previously
under Section 12.2.
Section 12.4: United States Currency
Nothing in Article 11 shall relieve HECO of the obligation to pay in full in
United States currency for the LSFO sold and Delivered hereunder and for other
amounts due by HECO to Chevron under this Contract.
Section 12.5: Substitute Suppliers
While Deliveries are suspended or reduced by Chevron pursuant to Article 11, it
shall not be a breach of this Contract for HECO to buy from a supplier other
than Chevron the quantities of LSFO which Chevron does not Deliver. During this
period of time there will be no minimum volume requirements. After any
suspension or reduction has ended, minimum and maximum volume requirements of
Article 3 for the annual period in which the suspension or reduction occurred
will be reduced in proportion to the ratio of the number of Days within the
annual period during which no suspension or reduction was in effect, to the
number of Days within the annual period.
ARTICLE 13: Waiver and Non-Assignability
Section 13.1: Waiver
Waiver by one party of the other's breach of any provision of this Contract
shall not be deemed a waiver of any subsequent or continuing breach of such
provisions or of the breach of any other provision or provisions hereof.
Section 13.2: Non-Assignability
This Contract shall not be assignable by either party without the written
consent of the other, which shall not be unreasonably withheld, except that
either party may assign this Contract to any Affiliate, provided that any such
assignment shall not release that party from any of its obligations hereunder,
and except that HECO may assign this Contract to the Trustee under its First
Mortgage Bond Indentures. Chevron does not, by agreement to such an assignment,
waive any right it may have to terminate this Contract for any breach hereof
occurring at any time before or after any such assignment or release HECO of any
obligations arising under this Contract after any such assignment. Following
any such assignment, no further assignment may be made without the consent of
Chevron.
Section 13.3: Definitions
In this Article 13 and Sections 11.2 and 11.7, "Affiliate" shall mean any
corporation controlling, controlled by or under common control, with either
Chevron or HECO. "Control" of a corporation shall mean ownership, directly or
indirectly, or at least 50% of the voting shares of such corporation.
17
ARTICLE 14: Default
If HECO or Chevron considers the other party to be in default of any obligation
under this Contract, such party shall give the other party notice thereof. Such
other party shall then have thirty (30) Days in which to remedy such default.
If the default is not remedied, the other party may, without prejudice to any
other right or remedy of such party in respect of such breach, terminate its
obligations under this Contract, except for HECO's obligation to pay in full in
United States currency for the LSFO sold and Delivered hereunder and for other
amounts due by HECO to Chevron under this Contract, by forty-five (45) Days
written notice to the party in breach. Any termination shall be without
prejudice to accrued rights. All rights and remedies hereunder are independent
of each other and election of one remedy shall not exclude another.
In no event shall either party be liable for any indirect, consequential,
special or incidental damages of any kind whether based in contract, tort
(including without limitation negligence or strict liability), warranty or
otherwise.
ARTICLE 15: Conflicts of Interest
Conflicts of interest related to this Contract are strictly prohibited. Except
as otherwise expressly provided herein, neither party nor any director, employee
or agent of a party shall give to or receive from any director, employee or
agent of the other party any gift, entertainment or other favor of significant
value, or any commission, fee or rebate. Likewise, neither party nor any
director, employee or agent of a party shall enter into any business arrangement
with any director, employee or agent of the other party (or any affiliate),
unless such person is acting for and on behalf of the other party, without
prior written notification thereof to the other party.
In the event of any violation of this Article 15, including any violation
occurring prior to the date of this Contract which resulted directly or
indirectly in one party's consent to enter into this Contract with the other
party, such party may, at its sole option, terminate this Contract at any time
and, except for obligations to pay in full in United States currency for the
outstanding payment obligations hereunder, shall be relieved of any further
obligation under this Contract.
Both parties agree to immediately notify the other of any known violation of
this Article.
ARTICLE 16: Applicable Law
This Contract shall be construed in accordance with, and all disputes arising
hereunder shall be determined in accordance with, the local law of the State of
Hawaii, U.S.A.
ARTICLE 17: Public Utility Commission Approval
Section 17.1: Filing Requirements; HECO's Energy Cost Adjustment Clause
This Contract is required to be filed with the Hawaii Public Utilities
Commission ("PUC") for approval. If in the proceedings initiated as a result of
the filing of this Contract, the PUC disapproves or fails to authorize the full
recovery of the fuel costs incurred under this Contract through HECO's "Energy
Cost Adjustment Clause", HECO may terminate this Contract by giving sixty (60)
Days written notice to Chevron.
Section 17.2: Use as a Public Utility.
No use of the pipelines, facilities or equipment owned by Chevron and used in
connection with this Contract shall be construed as having been dedicated by
Chevron to a public use and it is hereby acknowledged by the parties that
Chevron retains the exclusive right to determine who other than the parties to
this Contract shall use said pipelines, facilities, and equipment.
18
ARTICLE 18: Miscellaneous
Section 18.1: Headings
Headings of the Articles and Sections are for convenient reference only and are
not to be considered part of this Contract.
Section 18.2: Entire Agreement
This document contains the entire agreement between the parties covering the
subject matter and cancels, as of the effective date hereof, all prior
agreements of any kind between the parties covering such subject matter and any
amendments thereto. There are no other agreements which constitute any part of
the consideration for, or any condition to, either party's compliance with its
obligations under this Contract.
Section 18.3: Contract is Not an Asset
This Contract shall not be deemed to be an asset in, and, at the option of a
party, shall terminate in the event of any voluntary or involuntary
receivership, bankruptcy or insolvency proceedings affecting the other party.
Section 18.4: Notices
Except as otherwise expressly provided herein, all notices shall be given in
writing, by letter, facsimile or electronic mail to the following addresses, or
such other address as the parties may designate by notice, and shall be deemed
given upon receipt.
Seller:
Manager, Petroleum Coke, Heavy Fuels & Sulfur
Chevron Products Company,
A Division of Chevron U.S.A. Inc
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
19
Buyer:
Manager,
Power Supply Services Department
Hawaiian Electric Company, Inc.
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 18.5: Unenforceable Terms
If any term or provision, or any part of any term or provision, of this Contract
is held by any court or other competent authority to be illegal or
unenforceable, the remaining terms, provisions, rights and obligations shall not
be affected.
Section 18.6: Successors and Assigns
This Contract shall inure to the benefit of and be binding upon the parties
hereto, their successors and permitted assigns.
Section 18.7: Termination of Prior Agreement
Effective as of the Effective Date of the Term hereunder, this Contract hereby
supersedes that certain Low Sulfur Fuel Oil Supply Contract between the parties
dated November 20, 1995, and all amendments thereto.
20
IN WITNESS WHEREOF, the parties hereto have executed this Low Sulfur
Fuel Oil Supply Contract as of the Day and Year first herein above written.
CHEVRON PRODUCTS COMPANY, HAWAIIAN ELECTRIC
A DIVISION OF CHEVRON U.S.A. INC. COMPANY, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------- -----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
(Printed or Typed Name)
Its Manager, Petroleum Coke Its Vice President, Regulatory Affairs
Heavy Fuels & Sulfur ----------------------------------
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
(Printed or Typed Name)
Its Assistant Treasurer
-------------------
21
ADDENDUM NO. 1
ILLUSTRATIVE SCHEDULE OF PRICES
-------------------------------
(Illustrative Product Price Calculation for September 1997)
For the Monthly cumulative volume which is at or below the [---] maximum limit
of Section 3.1 multiplied by the number of Days in the Month, the price of LSFO
Delivered to meet the Nominated commitment of a Month shall be determined as
follows:
[---]
Where P1 is equal to the billing price per physical barrel of LSFO Delivered to
meet that portion of the Nominated commitment of a Month that is equal to or
below the [---] maximum regardless of the actual Month Delivered, in U. S.
dollars.
I. LSWR INDEX = A market index for low sulfur fuel oil, defined as the [--],
defined as follows:
[---]
[---]
[---] (Price in USD per barrel)
Date Low High Average
---- --- ---- -------
[---] [---] [---] [---]
22
[---] (Price in USD per barrel)
Date Low High Average
---- --- ---- -------
[---] [---] [---] [---]
[---]
Average of the two assessments,
[---]
[---] = [---]
[---] The value of the [---] shall be [---] under this Contract [---].
[---]
23
[---]
(a) [---] ---- The average of [---] for all [---], during the period [---].
Date Low High Average
---- --- ---- -------
[---] [---] [---] [---]
AVERAGE PRICE [---]
(b) [---] --- Similarly, the average of [---] for [---].
Date Low High Average
---- --- ---- -------
[---] [---] [---] [---]
24
[---]
AVERAGE PRICE [---]
(c) [---] ---- Similarly, the average of the [---].
Date Low High Average
---- --- ---- -------
[---] [---] [---] [---]
AVERAGE PRICE [---]
(d) [---] ---- Similarly, the average of the [---] for [---].
Date Average
---- -------
[---] [---]
25
[---]
AVERAGE PRICE [---]
Average of the [---],
[---]
[---] = [---]
[---]
[---] = [---]
II. [---] = [---]:
(a) [---]
26
AFRA Worldscale Large Range 1 average New Worldscale Large Range 1
Publication Date Points
April 1997 131.10
May 1997 141.30
June 1997 139.90
------
Average 137.43
(b) The Worldscale 100 rate for voyages between Singapore and Barbers Point,
Hawaii, applicable to the Year of the quarter defined in (a) above;
expressed in New Worldscale rates, as published by Worldscale Associates
(London Limited) in its New Worldwide Nominal Freight Scale (Worldscale);
plus,
New Worldscale 100 Rate between Singapore and Barbers Point effective
January 1, 1997
= $10.11 PER METRIC TON
(c) There shall be added to the multiplication product of (a) and (b) above, a
fixed rate differential for SBT Tankers, if and as provided by Worldscale,
with respect to the Additional Insurance Premiums for Basic ($500 Million)
and Excess ($200 Million) coverage of Oil Pollution Liability Insurance on
vessels carrying persistent oils to and from the U.S.A., consistent with a
typical vessel as derived in Addendum No. 3 attached to this Contract.
New Worldscale fixed rate differential for Additional Insurance
Premiums for Oil Pollution Liability Insurance for SBT Tankers
effective February 20, 1997
= $0.023 PER BARREL
The FREIGHT rate will be expressed in U.S. dollars per barrel, using a
conversion factor of 6.75 barrels ("bbls") per metric ton ("MT").
FREIGHT = {[(137.43 * $10.11/MT) / 100] / 6.75 bbls/MT} + ($0.023/bbl)
= $ 2.081/BBL
iii. ▇▇ ▇▇▇▇▇▇ = A market index for industrial fuel oil, defined as the simple
average of the high and low prices for Los Angeles Bunker C fuel as
reported by the ▇▇▇▇▇'▇ Oilgram Bunkerwire ("▇▇▇▇▇'▇ Bunkerwire") for all
dates of publication during the period beginning the 21st of the second
Month immediately preceding the Nominated Month of Delivery and ending the
20th Day of the Month immediately preceding the Nominated Month of
Delivery.
Date Low High Average
---- --- ---- -------
07/21/97 $100.00 $104.00 $102.00 per Metric Ton
07/22/97 $ 95.00 $101.00 $98.00 per Metric Ton
07/23/97 $ 97.00 $100.00 $98.50 per Metric Ton
07/24/97 $ 97.00 $103.50 $100.25 per Metric Ton
07/25/97 $100.00 $104.00 $102.00 per Metric Ton
07/28/97 $100.00 $105.00 $102.50 per Metric Ton
07/29/97 $100.00 $105.00 $102.50 per Metric Ton
07/30/97 $101.00 $105.00 $103.00 per Metric Ton
07/31/97 $104.00 $108.00 $106.00 per Metric Ton
27
08/01/97 $103.00 $107.00 $105.00 per Metric Ton
08/04/97 $103.00 $107.00 $105.00 per Metric Ton
08/05/97 $103.00 $107.00 $105.00 per Metric Ton
08/06/97 $101.00 $104.00 $102.50 per Metric Ton
08/07/97 $101.00 $104.00 $102.50 per Metric Ton
08/08/97 $102.00 $105.00 $103.50 per Metric Ton
08/11/97 $ 97.00 $102.00 $99.50 per Metric Ton
08/12/97 $ 98.00 $102.00 $100.00 per Metric Ton
08/13/97 $ 93.00 $100.00 $96.50 per Metric Ton
08/14/97 $ 95.00 $100.00 $97.50 per Metric Ton
08/15/97 $ 97.00 $101.00 $99.00 per Metric Ton
08/18/97 $ 96.00 $ 99.00 $97.50 per Metric Ton
08/19/97 $ 93.00 $101.00 $97.00 per Metric Ton
08/20/97 $ 93.00 $ 98.00 $95.50 per Metric Ton
AVERAGE $100.902 PER METRIC TON
The ▇▇ ▇▇▇▇▇▇ market index will be expressed in U.S. dollars per barrel, using a
conversion factor of 6.368 barrels per metric ton.
= ($100.902/MT)/(6.368 bbls/MT)
▇▇ ▇▇▇▇▇▇ = $15.845/BBL
iv. [---] = [---]
v. BTU = The actual BTU content of each LSFO Delivery, pursuant to Section 7.2,
expressed in MM BTU's per barrel and rounded to three decimal places.
T = [---], the Hawaii General Excise Tax, the Hawaii Environmental Response Tax,
[---] and any other tax properly imposed on the sale of LSFO pursuant to
Section 5.3 herein.
[---]
[---]
HGET = 4.166% of pre-HGET price
Hawaii Environmental Response Tax applied after HGET and Hawaii Use
Tax = $0.05 per barrel
28
A. PRODUCT PRICE COMPUTATION FOR [---] DELIVERY WITH STANDARD BTU CONTENT OF 6.2
MM BTU PER BARREL
[---] = [---]
= [---]
= [---]
= [---]
where T = sum of
[---] = [---]
HGET = 4.166% of LSWR Index + [---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.0500/bbl
-----------
[---]
[---] = [---]
= [---] PER BARREL
B. PRODUCT PRICE COMPUTATION FOR [---] DELIVERY WITH BTU CONTENT OTHER THAN
STANDARD 6.2 MM BTU PER BARREL
[---] = [---]
IF BTU IS 6.275 MM BTU PER BARREL, THEN COMPUTATION IS AS FOLLOWS:
= [---]
= [---]
= [---]
= [---]
where T = sum of
[---] = [---]
HGET = 4.166% of LSWR Index + [---] = [---]
[---]) = [---]
Hawaii Environmental Response Tax = $0.0500/bbl
-----------
[---]
29
[---] = [---]
= [---] PER BARREL
For the Monthly cumulative volume which exceeds the [---] maximum limit of
Section 3.1 multiplied by the number of Days in the Month, the price of LSFO
Delivered to meet the Nominated commitment of a Month shall be determined as
follows:
[---]
Where P2 equals the billing price per physical barrel of LSFO Delivered to meet
that portion of the Nominated commitment of a Month that exceeds the [---]
maximum, regardless of the actual Month Delivered , in U.S. dollars.
iv. [---]
[---]
C. PRODUCT PRICE COMPUTATION FOR [---] DELIVERY WITH STANDARD BTU CONTENT OF 6.2
MM BTU PER BARREL
[---] = [---]
= [---]
= [---]
= [---]
where T = sum of
[---] = [---]
HGET = 4.166% of LSWR Index + [---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.0500/bbl
-----------
[---]
[---] = [---]
= [---] PER BARREL
D. PRODUCT PRICE COMPUTATION FOR [---] DELIVERY WITH BTU CONTENT OTHER THAN
STANDARD 6.2 MM BTU PER BARREL
[---] = [---]
30
IF BTU IS 6.275 MM BTU PER BARREL, THEN COMPUTATION IS AS FOLLOWS:
= [---]
= [---]
= [---]
where T = sum of
[---] = [---]
HGET = 4.166% of LSWR Index +[---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.0500/bbl
-----------
[---]
[---] = [---]
= [---] PER BARREL
Note on items as they appear on invoices
----------------------------------------
Actual invoices for sales and Deliveries of LSFO may include additional charges
for pipeline throughput and pipeline displacement stock incurred under the
Facilities and Operating Contract by and between the same parties and for which
certain taxes, such as the HGET and [---], are consolidated with the
corresponding tax charged on the sale of LSFO.
Actual invoices for sales and Deliveries of LSFO may also contain comments which
reference the measured BTU content of the invoiced Delivery, calculated LSFO
price per unit before BTU content adjustment and per unit amount of pipeline
throughput charge, if any.
31
[ LONDON TANKER BROKERS' PANEL LIMITED letterhead ]
1st June 1997
Hawaiian Electric Company Inc
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇
Hawaii
Attn: ▇▇. ▇.▇. ▇▇▇▇▇▇ Dir. Fuel Resource
Dear Sirs
AFRA
The results of the monthly average freight rate assessments made
over the period 16th April 1997/15th May 1997 are as follows:
MEDIUM RANGE ( 25,000/ 44,999 (LONG) TONS) WORLDSCALE 175.8
LARGE RANGE 1 ( 45,000/ 79,999 (LONG) TONS) WORLDSCALE 139.9
LARGE RANGE 2 ( 80,000/159,999 (LONG) TONS) WORLDSCALE 100.8
VLCC (160,000/319,999 (LONG) TONS) WORLDSCALE 57.9
ULCC (320,000/549,999 (LONG) TONS) WORLDSCALE 49.4
We would remind you that, in accordance with the agreement
between us, these assessments are provided to you on the
condition they will not be reproduced, supplied or disclosed to
any other person.
Your faithfully
LONDON TANKER BROKERS' PANEL LIMITED
/s/ ▇.▇. ▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇
Managing Director
32
ADDENDUM NO. 2
QUALITY ADJUSTMENTS
Section 1: Adjustments to Quality of HECO's Oil
In the event HECO desires to adjust the quality of its LSWR in its BPTF tanks to
meet the specifications of Article 4 and provided that the LSWR meets the
qualities of Section 2(a), Chevron shall supply the necessary blend stock,
quality analysis and other services necessary to complete the adjustment. HECO
will provide LSWR of the quality generally available in the Singapore market.
Section 2: Quality and Quantity Determination
(a) HECO shall give Chevron 70 Days advance notice of the quantity and
quality of any LSWR for which it desires an adjustment. The LSWR shall
meet the following viscosity-sulfur relationship:
LSWR Viscosity - cst at 122F
----------------------------------------------
Maximum For Pipeline Delivery
LSWR Sulfur ------------------------------------
Wt % Minimum To Waiau/Iwilei To Kahe
----------- ------- --------------- -------
[---] [---] [---] [---]
(b) The specific quality and quantity of the LSWR in HECO's tankage
before adjustment shall be determined in accordance with Sections 7.2,
7.3 and 7.4, except that the samples shall be taken and gauging shall
be done on HECO tanks at BPTF prior to Chevron's adjustment of
quality.
(c) The specific quality and quantity of the LSWR in HECO's tankage
after adjustment shall be determined in accordance with Sections 7.2,
7.3 and 7.4, except that the samples shall be taken and gauging shall
be done on HECO tanks at BPTF after Chevron has completed the
adjustment of quality.
Section 3: Compensation
(a) HECO shall purchase from Chevron whatever blend stock that is required
for Chevron to complete the adjustment. The price of the oil used for
adjustment shall be the [---]; otherwise, [---].
(b) HECO shall [---] and each[---], provided however that [---].
33
Section 4: Invoices
Invoices for the above will be submitted by Chevron and paid by HECO in
accordance with Article l0 of this Contract.
Section 5: Illustrative Schedule of Prices and Fees
(a) Price of Blend Stock, [---].
Basis: 1) [---] = [---]
2) [---] = [---]
3) TF = Taxes currently in effect is the Hawaii General
Excise Tax of 4.166% of pre-tax
price, [---], Hawaii Environmental Response
Tax of $0.05 per barrel, applied after the
HGET and [---].
PRICE OF BLEND STOCK = [---]
= [---]
= [---]
where T = sum of
HGET = 4.166% of [---] = 0.04166*[---] = [---]
[---] = [---]
Hawaii Environmental Response Tax = $0.0500/bbl
-----------
[---] [---]
(b) [---]
Basis: 1) HECO provides 250,000 barrels of LSWR
2) Chevron provides 25,000 barrels of Blend Stock
3) [---]
4) Tax currently in effect is the Hawaii General
Excise Tax of 4.166% of pre-tax price.
[---] = [---]
= [---]
34
= [---]
where T = sum of
HGET = 4.166% of Pre-HGET[---] = 0.04166*[---] = [---]
[---]
35
ADDENDUM NO. 3
RECOVERY OF WORLDSCALE FIXED DIFFERENTIAL FOR OIL POLLUTION LIABILITY INSURANCE
The price formula for LSFO in Section 5.1 of the Contract includes the component
"FREIGHT" that refers to a Worldscale 100 rate published in the current edition
of Worldscale which incorporates a Fixed Rate Differential to reflect the cost
of additional premiums for Oil Spill Liability Insurance on vessels carrying
Persistent Oils applicable to voyages having a destination in the U.S.A..
Chevron acknowledges that any vessel used to transport LSFO that is sold and
purchased under the Contract, including its components and the crude oil from
which the LSFO is derived, shall be required to possess oil spill liability
insurance coverage in the amount of $700 million.
The price formula component "FREIGHT" refers to an AFRA rate applicable to a
vessel size classification of LR-1, or Large Range 1. This vessel
classification references tanker vessels ranging in size from 45,000 Long Tons
Deadweight to 79,999 Long tons Deadweight. In order to derive an approximation
of the relationship between Deadweight and Gross Registered Tons for a nominal
vessel consistent with the mathematical average of this vessel size
classification, the average of two vessels that have transported LSFO or its
components to Hawaii in the recent past that are approximately equal to the
midpoint of the LR-1 range were referenced. These vessels are described as
follows:
Name Deadweight Tons (DWT) Gross Registered Tons (GRT)
---- --------------------- ---------------------------
M/T London Spirit 62,097 36,865
M/T London Victory 62,156 36,865
------ ------
Average 62,127 36,865
The Worldscale 100 rate that is to be included in the computation of FREIGHT is
to be derived in the same manner as the following illustrative example
calculations:
1. The Worldscale 100 rate in effect from February 20, 1997, shall include a
Fixed Rate Differential for SBT Tankers which shall be the sum of a. and
b. and shall be computed as follows:
a. Fixed Rate Differential with respect to the additional
insurance premiums For Basic $500 million coverage of Oil Pollution
Liability Insurance on vessels carrying Persistent Oils to and from
the U.S.A.
Fixed Rate Differential = $0.16/GRT X 36,865 GRT
----------------------
62,127
= $0.095 per Metric Ton
For illustrative purposes, this rate may be expressed in
U.S. dollars per barrel as follows:
= $0.095/Metric Ton
-----------------
6.75 barrels/Metric Ton
= $0.014/barrel
b. Fixed Rate Differential with respect to the additional insurance
premiums for Excess $200 million coverage of Oil Pollution Liability
Insurance on vessels carrying Persistent Oils to and from the U.S.A.
36
Fixed Rate Differential = .875 X $0.1205/GRT X 36,865 GRT
-------------------------------
62,127
= $0.063 per Metric Ton
For illustrative purposes, this rate may be expressed in U.S. dollars per
barrel as follows:
= $0.063/Metric Ton
-----------------
6.75 barrels/Metric Ton
= $0.009/barrel
The sum of which shall equal $0.158 per Metric Ton, or $0.023 expressed in U.S.
dollars per barrel.
2. The AFRA Worldscale Points and their related Worldscale 100 rate
applicable for each calendar quarter are based upon an average of the three
Monthly AFRA publications in the calendar quarter immediately preceding the
calendar quarter of the Nominated Month of Delivery. Therefore the relevant
Fixed Rate Differentials computed above should be applied (to a Year of 365
Days) as follows:
A. With respect to volumes of LSFO Nominated during the three (3) Months
of the quarter following a change in the published rate (typically February of
each Year), the relevant Fixed Rate Differential to be included in the
computation of the price component "FREIGHT" shall be the sum of:
50/90 multiplied by the Fixed Rate Differential computed prior to the
rate change:
and 40/90 multiplied by the Fixed Rate Differential computed using
the revised rate:
B. With respect to volumes of LSFO Nominated for subsequent Months, and
continuing for so long as the Fixed Rate Differentials as set forth
in Worldscale Circular shall be applicable, the relevant Fixed Rate
Differential to be included in the computation of the price component
"FREIGHT" shall be as derived in part 1 above.
37
ADDENDUM NO. 4 LSFO CONTRACT
Page 1 of 3
TRANSITION FROM REFINERY TO HECO BPTF LSFO TITLE TRANSFER POINT A (diagram)
▇▇▇▇▇▇▇▇ ▇▇. ▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
Page 2 of 3
TRANSITION FROM REFINERY TO KAHE PIPELINE LSFO TITLE TRANSFER POINT B (diagram)
▇▇▇▇▇▇▇▇ ▇▇. ▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
Page 3 of 3
TRANSITION FROM REFINERY TO BLACK OIL PIPELINE LSFO TITLE TRANSFER POINTS
(diagram)