UNIT POWER AGREEMENT by and between AEP GENERATING COMPANY and COLUMBUS SOUTHERN POWER COMPANY dated as of March 15, 2007
Exhibit
10(b)(2)
by
and between
AEP
GENERATING COMPANY
and
COLUMBUS
SOUTHERN POWER COMPANY
dated
as of
March
15, 2007
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TABLE
OF CONTENTS
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Page
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ARTICLE
I
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DEFINITIONS
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1
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Section
1.1
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Defined
Terms
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1
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Section
1.2
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Interpretation
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8
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Section
1.3
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Technical
Meanings
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9
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ARTICLE
II
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TERM
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9
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Section
2.1
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Term
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9
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Section
2.2
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Delivery
Period
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9
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Section
2.3
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Extension
Period
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9
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ARTICLE
III
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PURCHASE
AND SALE OBLIGATION
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9
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Section
3.1
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Seller’s
and Buyer’s Obligations
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9
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Section
3.2
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Unit
Contingent
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9
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Section
3.3
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Delivery
Point
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9
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Section
3.4
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Scheduling
and Dispatch
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9
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Section
3.5
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Force
Majeure
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10
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ARTICLE
IV
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FACILITY
OPERATIONS
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10
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Section
4.1
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Operation
and Maintenance
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10
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Section
4.2
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Capital
Improvements
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10
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Section
4.3
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Planned
Outage Schedule
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10
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Section
4.4
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Auxiliary
Power
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10
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ARTICLE
V
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PRICING
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11
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Section
5.1
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Monthly
Payments
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11
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Section
5.2
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Fuel
Payment
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11
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Section
5.3
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O&M
Payment
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11
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Section
5.4
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Depreciation
Payment
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11
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Section
5.5
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Capacity
Payment
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11
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Section
5.5
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Tax
Reimbursement Payment
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12
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ARTICLE
VI
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BILLING
AND PAYMENT
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12
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Section
6.1
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Billing
and Payment
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12
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Section
6.2
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Books
and Records; Audit
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12
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Section
6.3
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Netting
of Payments
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13
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ARTICLE
VII
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LIMITATIONS
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13
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Section
7.1
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Limitation
of Remedies, Liability and Damages
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13
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| ARTICLE VIII | TAXES |
13
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Section
8.1
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Cooperation
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13
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Section
8.2
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Taxes
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13
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Section
8.3
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Change-in-Law
Taxes
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14
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Section
8.4
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Exemptions
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14
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Section
8.5
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Property
Taxes
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14
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ARTICLE
IX
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COMPLIANCE
WITH LAWS
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14
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Section
9.1
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Seller’s
Compliance
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14
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Section
9.2
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Buyer’s
Compliance
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14
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ARTICLE
X
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CONDITIONS
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15
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Section
10.1
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Conditions
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15
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Section
10.2
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Obligations
of Buyer and Seller
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15
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Section
10.3
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Failure
of Conditions Generally
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15
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ARTICLE
XI
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REPRESENTATIONS
AND WARRANTIES
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15
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Section
11.1
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Representations
and Warranties of Both Parties
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15
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ARTICLE
XII
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MISCELLANEOUS
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16
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Section
12.1
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Title
and Risk of Loss
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16
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Section
12.2
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Indemnity
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16
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Section
12.3
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Amendments
and Waivers
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16
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Section
12.4
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Notices
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16
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Section
12.5
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Successors
and Assigns; Assignment
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17
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Section
12.6
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Integration
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17
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Section
12.7
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Acknowledgments
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17
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Section
12.8
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Waiver
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17
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Section
12.9
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Counterparts
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17
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Section
12.10
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Headings
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17
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Section
12.11
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Confidentiality
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17
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Section
12.12
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Governing
Law
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18
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Section
12.13
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Severability
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18
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Section
12.14
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Mobil/Sierra
Doctrine
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18
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SCHEDULE 5.5 - ESTIMATE
OF INITIAL CAPACITY PAYMENT
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SCHEDULE
12.4 - NOTICE INFORMATION
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POWER
PURCHASE AND SALE AGREEMENT
THIS UNIT POWER AGREEMENT
(this “Agreement”), dated as of March
15, 2007, is by and between AEP Generating Company, an Ohio corporation (“Seller”), and COLUMBUS
SOUTHERN POWER COMPANY an Ohio corporation (“Buyer”). Buyer and
Seller are sometimes referred to herein individually as a “Party” and collectively as the
“Parties.”
RECITALS
A. Seller,
a subsidiary of American Electric Power Company, Inc., has agreed to purchase
the Lawrenceburg Generating Station from an affiliate of Public Service
Enterprise Group for approximately $325 million, subject to the satisfaction of
certain conditions precedent, including the receipt of required regulatory
approvals from the Federal Energy Regulatory Commission (FERC) and Indiana
Utility Regulatory Commission.
B. The
Lawrenceburg Generating Station, located in Lawrenceburg, Ind., is a
combined-cycle, natural-gas power plant with a generating capacity of 1,096
megawatts that began commercial operation in June 2004.
C. The
Parties desire to enter into a transaction in which Seller sells and Buyer
purchases all of the capacity, and associated unit contingent energy and
ancillary services, as delivered or made available from the Lawrenceburg
Generating Station, for an initial term of approximately ten (10)
years.
D. The
Parties desire to set forth certain terms and conditions applicable to such
transaction.
In
consideration of mutual covenants and agreements contained herein, the Parties
agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Defined
Terms. Unless otherwise defined herein, the following terms,
when used herein, shall have the meaning set forth below:
“Affected Party” has the
meaning set forth in Section
3.7.
“Affiliate” means, with respect
to any Person, any other Person (other than an individual) that, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person. For this purpose,
“control” means the direct or indirect ownership of fifty percent (50%) or more
of the outstanding capital stock or other equity interests having ordinary
voting power.
“Agreement” means this Unit
Power Agreement.
“Allowances” means emission
allowances, emission credits, and any similar rights related to emissions of
NOx,
SO2,
CO2,
mercury, particulates or any other substance under any relevant federal, state
or local law or recognized by any Governmental Authority or other entity, and
all other environmental attributes.
“Ancillary Services” means
regulation and frequency response services; energy imbalance services; automatic
generating control services; spinning, non-spinning, supplemental and
replacement reserve services, reactive power and voltage support services, black
start services and all other services or products ancillary to the operation of
the Facility that are defined as ancillary services in the Transmission
Operator’s relevant transmission tariff or are commonly sold or saleable, to the
extent that the assets comprising the Facility are technically capable of
providing those services or products.
“Approvals” means all
approvals, permits, licenses, consents, waivers or other authorizations from,
notifications to, or filings or registrations with, third parties, including
without limitation, Governmental Approvals.
“Business Day” means any day
except a Saturday, Sunday, or a United States Federal Reserve Bank
holiday. A Business Day shall open at 8:00 a.m. and close at
5:00 p.m. local time at the relevant Party’s principal place of
business. The relevant Party, in each instance unless otherwise
specified, shall be the Party from whom the notice, payment or delivery is being
sent and by whom the notice or payment or delivery is to be
received.
“Buyer” has the meaning set
forth in the preamble hereto.
“Buyer’s Contractual Capacity”
means all of the Capacity of the Facility, which entitlement is approximately
1,096 MW as of the date set forth in the preamble to this
Agreement.
“Capacity” means the output
level, expressed in MW, that the Facility, or the components of equipment
thereof, is capable, as of a given moment, of continuously producing and making
available at the Delivery Point, taking into account the operating condition of
the equipment at that time, the auxiliary loads and other relevant
factors.
“Capital Improvements Work”
shall mean the modeling, studying, engineering, design, procurement, purchasing,
construction, inspection, start-up and testing of capital improvements,
replacements, repairs or additions to the Facility.
“Capacity Payment” has the
meaning set forth in Section
5.5.
“Change-in-Law” means, after
the date set forth in the preamble to this Agreement, the adoption, imposition,
promulgation, change in interpretation or modification by a Governmental
Authority of any law, regulation or Governmental Approval, or the issuance of a
final and non-appealable order, judgment, award or decree of a Governmental
Authority having the effect of the foregoing.
“Change-in-Law Taxes” means,
after the date set forth in the preamble to this Agreement, any change (increase
or decrease) in Taxes imposed on Seller on (a) the sale or use of fuel for
generation of electricity, (b) the sale of Capacity or (c) the production or
sale of Energy or Ancillary Services, in any case, resulting from a
Change-in-Law.
“Claims” means all claims or
actions, threatened or filed and, whether groundless, false, fraudulent or
otherwise, that directly or indirectly relate to the subject matter of an
indemnity, and the resulting losses, damages, expenses (including reasonable
attorneys’ fees and disbursements) and court costs, whether incurred by
settlement or otherwise, and whether such claims or actions are threatened or
filed prior to or after the termination of this Agreement.
“Closing” and “Closing Date” have the
meanings set forth in Section 3.1 of the Facility Purchase
Agreement.
“Contract Price” means the
price to be paid by Buyer to Seller for the purchase of the Buyer’s Contractual
Capacity and associated Energy and Ancillary Services, as determined in
accordance with the provisions of Article
V.
“Contract Year” means the
period beginning at 12:01 a.m. EPT on the Start Date and ending on December
31st
of the same year, and each succeeding calendar year thereafter during the
Delivery Period. If the first or last Contract Year consists of a
shorter period than a full calendar year, including by reason of the termination
of this Agreement prior to the expiration of the Delivery Period, then that
Contract Year may consist of a shorter period than a full calendar year, in
which case with respect to that Contract Year, all terms and provisions of this
Agreement that refer to or are based on a Contract Year shall be adjusted
ratably downward to reflect such shorter period.
“EPT” or “Eastern Prevailing Time” means the
local time at the geographical location of the Delivery Point.
“Delivery Period” has the
meaning set forth in Section
2.2.
“Delivery Point” has the
meaning set forth in Section
3.3.
“Depreciation Payment” has the
meaning set forth in Section
5.4.
“Dispatch” means the actions of
Buyer and/or its designated agents or representatives in controlling and
designating the quantity of Energy and Ancillary Services to be produced by the
Facility.
“Effective Date” means the date
on which all of the conditions precedent set forth in Section 10.1 have been
satisfied or waived, which date shall not be earlier than the Closing
Date.
“End Date” has the meaning set
forth in Section
2.2.
“Energy” means three-phase,
60-cycle alternating current electric energy, expressed in MWh.
“Equitable Defenses” means any
bankruptcy, insolvency, reorganization and other laws affecting creditors’
rights generally, and with regard to equitable remedies, the discretion of the
court before which proceedings to obtain same may be pending.
“Facility” means the
combined-cycle, natural-gas power plant with a nameplate generating capacity of
1,096 megawatts located in or near Lawrenceburg, Indiana, that began commercial
operation in June 2004, commonly known as the Lawrenceburg Generating
Station.
“Facility LMP Point” means the
location recognized by the PJM’s scheduling and settlement systems as the point
at which the 345 kV double circuit lines from the Facility’s 345 kV station
terminate at the Tanners Creek 345 kV Station.
“Facility Purchase Agreement”
means the Purchase and Sale Agreement, dated as of December 29, 2006, by and
between PSEG Lawrenceburg Energy Company LLC, a Delaware limited liability
company, and Seller, pertaining to the acquisition by Seller of the Purchased
Assets, as defined therein, including the Facility.
“FERC” means the Federal Energy
Regulatory Commission or any successor entity with similar
jurisdiction.
“Force Majeure” means an event
or circumstance which prevents one Party from performing its obligations under
this Agreement, which event or circumstance was not reasonably anticipated as of
the date set forth in the preamble to this Agreement, which is not within the
reasonable control of, or the result of the negligence of, the Affected Party,
and which, by the exercise of due diligence, the Affected Party is, by using
reasonable efforts, unable to overcome or avoid or cause to be
avoided.
“Fuel Costs” means all fixed or
variable costs, expenses, losses, liabilities, claims and charges related to the
acquisition, storage, inventory, balancing and transportation and delivery of
fuel for the Facility, including related costs of credit.
“Fuel Payment” has the meaning
set forth in Section
5.2.
“Governmental Approval” means
any permit, authorization, registration, consent, action, waiver, exception,
variance, order, judgment, decree, license, exemption, publication, filing,
notice to, or declaration of or with, or required by any Governmental Authority
or applicable law.
“Governmental Authority” means
any federal, state, tribal, local, or municipal government body; and any
governmental, regulatory, or administrative agency, commission, body, agency,
instrumentality, or other authority exercising or entitled to exercise any
executive, judicial, legislative, administrative, regulatory, or taxing
authority or power, including any court or other tribunal.
“Imbalance Charges” means any
penalties, fees or charges assessed by a Transmission Operator or Transmission
Provider for failure to satisfy requirements for balancing of electric energy
receipts and deliveries or loads and generation, or payable to any other Person
in connection with the delivery of electrical energy in an amount(s) different
from the amount(s) scheduled.
“Income Tax” means any Tax
imposed by any Taxing Authority (i) based upon, measured by or calculated with
respect to gross or net income, profits or receipts (including municipal gross
receipt Taxes, capital gains Taxes and minimum Taxes) or (ii) based upon,
measured by or calculated with respect to multiple bases (including corporate
franchise Taxes) if one or more of such bases is described in clause (i), in
each case together with any interest, penalties or additions attributable to
such Tax.
“Indemnified Parties” has the
meaning set forth in Section
12.2.
“kW” means
kilowatt.
“Mobile-Sierra Doctrine” has
the meaning set forth in Section
12.14.
“Monthly Payment” has the
meaning set forth in Section
5.1.
“MW” means
megawatt.
“MWh” means
megawatt-hour.
“▇▇▇▇▇’▇” means ▇▇▇▇▇'▇
Investors Services, Inc. or its successor.
“O&M Payment” has the
meaning set forth in Section
5.3.
“Operation and Maintenance
Costs” means all fixed or variable costs, expenses, losses, liabilities,
claims, charges and associated credits incurred directly or indirectly in the
performance of Operating Work, but not including Fuel Costs.
“Operating Work” means the
operation, maintenance, use, repair or retirement of the Facility on or after
the Start Date, including but not limited to labor; parts; supplies; insurance;
permits; related taxes; community relations; procurement of ancillary services,
fuel and other consumables; fuel acquisition, transportation balancing and
storage; waste handling and disposal; filing, defense and settlement of claims,
suits and causes of action; procurement (or sale) of Allowances and settlement
of all other environmental charges (or credits) pertaining to the operation of
the Facility; but excluding any Capital Improvements Work.
“Outage” shall mean any
unavailability, in whole or in part, of the Facility whereby it is not capable
of fully operating at its rated capability due to (i) a Forced Derating, Forced
Outage Maintenance Derating, Maintenance Outage, Planned Derating, Planned
Outage, (all as defined in the NERC Generating Unit Availability Data System
(“GADS”) Data Reporting
Instructions); (ii) the actual or anticipated failure of component(s); (iii)
external restrictions; (iv) testing; (v) work being performed; (vi) maintenance;
(vii) construction, or (viii) any other condition or circumstance that reduces
electrical generating output from time to time from the Facility so as to
prevent Seller from performing its obligations in whole or in part.
“Party” has the meaning set
forth on the preamble hereto.
“Person” means any individual,
corporation, partnership, limited liability company, other business organization
of any kind, association, trust, or governmental entity, agency or
instrumentality.
“PJM” means the PJM
Interconnection, LLC or any successor entity with similar
responsibilities.
“Property Tax” means any Tax
resulting from and relating to the assessment of real or personal property by
any Taxing Authority.
“Schedule” or “Scheduling” means the actions
of Buyer and/or its designated agents or representatives, including the
Transmission Operator, if applicable, in notifying, requesting and confirming to
each other the quantity and type of Energy or Ancillary Services associated with
the Facility to be delivered on any given day or days (or in any given hour or
hours, or portion thereof) during the Delivery Period at the Delivery
Point.
“Seller” has the meaning set
forth in the preamble hereto.
“Seller’s Debt Percentage” or
“DP” means the
percentage of Seller’s capital allocable to the Facility that is composed of
long-term debt as reflected on Seller’s books and records as of the relevant
determination date.
“Seller’s Equity Percentage” or
“EP” means the
percentage of Seller’s capital allocable to the Facility that is composed of
equity as reflected on Seller’s books and records as of the relevant
determination date.
“Seller’s Facility Net Book
Value” or “FNBV”
has the meaning set forth in Section
5.5.
“Seller’s Long Term Debt Rate”
or “LTDR” means Seller’s
average annual cost of long-term debt (i.e., debt having maturities of greater
than twelve calendar months) allocable to the Facility as reflected on Seller’s
books and records as of the relevant determination date.
“Seller’s Preferred Stock
Percentage” or “PSP” means the percentage of
Seller’s capital allocable to the Facility that is composed of preferred stock
as reflected on Seller’s books and records as of the relevant determination
date.
“Seller’s Preferred Stock Rate”
or “PSR” means
Seller’s average annual cost of preferred stock allocable to the Facility as
reflected on Seller’s books and records as of the relevant determination
date.
“Seller’s Return on Equity” or
“▇▇▇” means Seller’s
post-tax rate of return on equity, which amount will equal, for each Contract
Year, the average of the daily ▇▇▇▇▇’▇ Long-Term Baa Corporate Bond Index for
the month of December of the preceding calendar year, and adding 560 basis
points (5.60 percentage points).
“Seller’s Facility Net Book
Value” or “FNBV”
means the net book value of the Facility as reflected on the books and records
of Seller immediately prior the Contract Year, and including all construction
work in progress (“CWIP”) and working capital
reflected on Seller’s books and records allocable to the Facility.
“Seller’s Weighted Average Cost of
Capital” or “WACOC” has the meaning set
forth in Section
5.5.
“Start Date” has the meaning
set forth in Section
2.2.
“Straddle Period” means, as
appropriate, either any Tax Period beginning before the beginning of the first
Contract Year and ending either during or as of the end of the first Contract
Year or any Tax Period that is longer than one month. For example,
pursuant to Section
8.5, the Tax Period for Property Taxes is each calendar
year. Hence, the Tax Period for Property Taxes is a Straddle
Period.
“Tax” or “Taxes” means any federal,
state, local, or foreign income, gross receipts, value added, windfall or other
profits, alternative or add-on minimum, estimated, franchise, profits, sales,
use, real property, personal property, ad valorem, vehicle, airplane, boat,
license, payroll, employment, workers’ compensation, unemployment compensation,
withholding, social security, disability, excise, severance, stamp, occupation,
premium, environmental (including taxes under Code section 59A), customs duties,
import fees, capital stock transfer, title, documentary, or registration, or
other tax, duty, or impost of any kind whatsoever, whether disputed or
not. “Taxes” includes (i) any liability for the payment of any
amounts described in the preceding sentence as a result of being a member of an
affiliated, consolidated, combined, or unitary group for any taxable period,
(ii) any liability for the payment of any amount described in clause (i) above
as a result of being a Person required to withhold or collect Taxes imposed on
another Person, (iii) any liability for the payment of any amount described in
the preceding sentence or in clause (i) or (ii) of this sentence as a result of
being a transferee of, or successor in interest to, any Person or as a result of
an express or implied obligation to indemnify any Person, and (iv) any and all
interest, penalties, additions to tax, or additional amounts imposed in
connection with or with respect to any amount described above in this
definition.
“Taxing Authority” shall mean,
with respect to any Tax, the governmental entity (national, local, municipal or
otherwise) or political subdivision thereof that imposes such Tax, the agency
(if any) charged with the collection of such Taxes for such entity or
subdivision, including any governmental or quasi-governmental entity, a council
(if any) or agency that imposes, grants or monitors Taxes or the abatements
thereof, or is charged with collecting social security or similar charges or
premiums.
“Tax Period” means the time
period for which or during which a Tax is imposed by any Taxing
Authority.
“Tax Reimbursement Payment” has
the meaning set forth in Section
5.6.
“Term” has the meaning set
forth in Section
2.1.
“Transmission Operator” means
PJM or any Transmission Provider, independent system operator, regional
transmission operator or other transmission operator from time to time having
authority to control the transmission control area to which the Facility is
interconnected.
“Transmission Provider” means
any Person or Persons that owns, operates or controls facilities used for the
transmission of electrical energy in interstate commerce.
“Unit Contingent” or reference
to “Unit Contingency”
means, with respect to Energy or Ancillary Services associated with Buyer’s
Contractual Capacity, that such Energy or Ancillary Services is intended to be
supplied from the Facility and Seller’s failure to deliver such Energy or
Ancillary Services is excused to the extent the Facility (including all
facilities on Seller’s side of the Delivery Point) is unavailable as a result of
(i) an Outage, (ii) Force Majeure or (iii) Buyer’s failure to
perform.
1.2 Interpretation. Unless
the context otherwise requires:
(a) Words
singular and plural in number will be deemed to include the other and pronouns
having masculine or feminine gender will be deemed to include the
other.
(b) Any
reference herein to any Person includes its successors and permitted assigns
and, in the case of any Government Authority or Taxing Authority, any Person
succeeding to its functions and capacities.
(c) Any
reference herein to any Article, Section, clause, Exhibit or Schedule means and
refers to the appropriate Article, Section or clause in this Agreement or
Exhibit or Schedule to this Agreement.
(d) Other
grammatical forms of defined words or phrases have corresponding
meanings.
(e) The term
“including” when used in this Agreement means “including without
limitation.”
(f) Unless
otherwise specified, a reference to a specific time for the performance of an
obligation is a reference to that time in the place where that obligation is to
be performed.
(g) A
reference to a document or agreement, including this Agreement, includes all
appendices, schedules and exhibits thereto.
(h) A
reference to a document or agreement, including this Agreement, includes a
reference to that document or agreement as amended, supplemented, amended and
restated or otherwise modified from time to time.
(i) If any
payment, act, matter or thing hereunder would occur on a day that is not a
Business Day, then such payment, act, matter or thing shall, unless otherwise
expressly provided for herein, occur on the next succeeding Business
Day.
(j) The words
“hereof,” “hereunder,” “herein,” “herewith,” and “hereto,” and similar words
refer to this Agreement as a whole and not to any particular Article, Section or
clause in this Agreement.
1.3 Technical
Meanings. Words not otherwise defined herein that have
well-known and generally accepted technical or trade meanings are used herein in
accordance with such recognized meanings, as of the date set forth in the
preamble to this Agreement.
ARTICLE
II
TERM
2.1 Term. The
term of this Agreement (“Term”) shall commence on the
date set forth in the preamble to this Agreement and shall continue, unless
earlier terminated in accordance with the provisions of this Agreement, until
the End Date.
2.2 Delivery Period. The
period during which the Parties will be obligated to purchase and sell Capacity,
Energy and Ancillary Services as set forth in this Agreement (“Delivery Period”) will
commence on the Effective Date, or such later date as may be jointly specified
by the Parties (“Start
Date”), and end on December 31st of the
year in which the tenth (10th)
anniversary of the Start Date occurs (“End Date”).
2.3 Extension
Period. Buyer may extend the Delivery Period for an additional
two (2) years by providing six (6) months advance written notice to
Seller. If extended, the “End Date” of the Delivery
Period will be the last day of the two-year extension period.
ARTICLE
III
PURCHASE
AND SALE OBLIGATION
3.1 Seller’s and Buyer’s
Obligations. Subject to, and in accordance with, the terms and
conditions of this Agreement, Seller agrees to sell and deliver, and Buyer
agrees to purchase, receive, and pay for, Buyer’s Contractual Capacity and the
Energy and Ancillary Services associated with Buyer’s Contractual Capacity
delivered by Seller to the Delivery Point during each hour of the Delivery
Period.
3.2 Unit
Contingent. All Energy and Ancillary Services associated with
Buyer’s Contractual Capacity and all of Seller’s obligations to sell and deliver
the Energy and Ancillary Services associated with the Buyer’s Contractual
Capacity are Unit Contingent.
3.3 Delivery
Point. The Delivery Point for Energy and Ancillary Services
associated with Buyer’s Contractual Capacity will be the border between the
States of Indiana and Ohio on the transmission system of Indiana Michigan Power
Company or its successor .
3.4 Scheduling and
Dispatch. Buyer or its agent will Schedule and Dispatch the
Energy and Ancillary Services associated with Buyer’s Contractual Capacity in
accordance with this Agreement and within the operating parameters of the
Facility, as determined by Seller from time to time. Seller will
Schedule and Dispatch, or will cause to be Scheduled and Dispatched, the
Facility in the manner requested by Buyer or its agent pursuant to this
Agreement. Buyer will be allocated any excess (or deficit) in the
amount of Energy or Ancillary Services made available by Seller at the Delivery
Point over (or under) the amount of Energy or Ancillary Services Scheduled and
Dispatched by Buyer. Buyer will be responsible for all Imbalance
Charges associated with the Energy and Ancillary Services made available to it
by Seller at the Delivery Point. The Energy and Ancillary Services
associated with Buyer’s Contractual Capacity will be recorded by the Parties in
the PJM’s scheduling and settlement systems at the Facility LMP
Point.
3.5 Force
Majeure. To the extent either Party is prevented by Force
Majeure from carrying out, in whole or part, its obligations under this
Agreement (other than an obligation to pay money), and such Party (the “Affected Party”) gives notice
and details of the Force Majeure to the other Party as soon as practicable (but
not later than thirty (30) days thereafter to the extent such details are then
available) then the Affected Party shall be excused from the performance of its
obligations under this Agreement (other than the obligation to make payments) so
long as the Affected Party shall be using all reasonable efforts to overcome the
Force Majeure and resume performance as soon as possible. The
non-Affected Party shall not be required to perform or resume performance of its
obligations (excluding payment obligations) to the Affected Party corresponding
to the obligations of the Affected Party excused by Force Majeure, until such
time and to the extent the Affected Party resumes its performance.
ARTICLE
IV
FACILITY
OPERATIONS
4.1 Operation and
Maintenance. At all times during the Delivery Period, Seller
shall perform the Operating Work, or cause the Operating Work to be performed,
in accordance with good commercial practice consistent with the procedures
employed by Seller and its Affiliates that are regulated utilities at similar
generating stations. Subject to reimbursement as set forth in Article V, Seller
shall be responsible for all costs, expenses, losses, liabilities and charges
incurred by it, or on its behalf, in the performance of Operating Work,
including the procurement of ancillary services sufficient to satisfy ancillary
service obligations to the Transmission Operator related to the
Facility.
4.2 Capital
Improvements. From time to time during the Term, as deemed
necessary by Seller, Seller shall perform, or cause to be performed, Capital
Improvements Work related to the Facility. Subject to
reimbursement as set forth in Article V, Seller
shall be responsible for all costs, expenses, losses, liabilities and charges
incurred by it, or on its behalf, in the performance of Capital Improvements
Work.
4.3 Planned Outage
Schedule. Seller will develop and implement, or cause to be
developed and implemented, a planned outage and maintenance schedule for the
Project that is reasonably acceptable to Buyer.
4.4 Auxiliary
Power. During any hour that the Facility is out of service,
Seller will procure the energy used by Facility auxiliaries during that hour or,
if requested by Seller and not prohibited by law or the rules of the
Transmission Operator, Buyer shall provide in-kind the Energy used by Facility
auxiliaries during that hour.
ARTICLE
V
PRICING
5.1 Monthly
Payments. For each calendar month during the Delivery Period,
Buyer shall pay Seller an amount (the “Monthly Payment”) equal to the sum of
(i) a Fuel Payment, (ii) an O&M Payment, (iii) a Depreciation Payment, (iv)
a Capacity Payment and (v) a Tax Reimbursement Payment. The Monthly
Payment will be Seller’s sole compensation for Seller’s sale and delivery to
Buyer of Buyer’s Contractual Capacity and the Energy and Ancillary Services
associated with Buyer’s Contractual Capacity.
5.2 Fuel
Payment. For each calendar month during each Contract Year,
Buyer shall pay Seller an amount (the “Fuel Payment”) equal to the
Fuel Costs incurred by Seller for that month.
5.3 O&M
Payment. For each calendar month during each Contract Year,
Buyer shall pay Seller an amount (the “O&M Payment”) equal to the
Operation and Maintenance Costs of the Facility for that month, less any charges
that are capitalized by Seller.
5.4 Depreciation
Payment. For each calendar month during each Contract Year,
Buyer shall pay Seller an amount (the “Depreciation Payment”) equal
to the depreciation expenses incurred by Seller at the rate established in this
Section 5.4
during the relevant month and directly related to its ownership interest in the
Facility. Seller’s depreciation rate as of the date set forth in the
preamble to this Agreement is 3.02% per annum, which rate and payment amount
will be updated effective each January 1st during
the Term of this Agreement to reflect the actual depreciation rate set forth on
its books and records as of that date.
5.5 Capacity
Payment. For each calendar month during each Contract Year,
Buyer shall pay Seller an amount (the “Capacity Payment”) equal to
the following:
Capacity Payment = FNBV x
WACOC
12
where,
FNBV = Seller’s
Facility Net Book Value
WACOC = 
LTDR = Seller’s
Long Term Debt Rate
PSR
= Seller’s
Preferred Stock Rate
▇▇▇ = Seller’s
Return on Equity
DP
= Seller’s Debt
Percentage
PSP
= Seller’s
Preferred Stock Percentage
EP
= Seller’s
Equity Percentage
A
calculation of the Capacity Payment as of the date set forth in the preamble to
this Agreement is set forth in Schedule
5.5. Each component of the Capacity Payment will be updated as
of January 1st of each
calendar year during the Term of this Agreement, or at more frequent intervals
as elected by Seller.
5.6 Tax Reimbursement
Payment. For each calendar month during each Contract Year,
Buyer shall pay Seller an amount (the “Tax Reimbursement Payment”)
equal to all Taxes (other than taxes included in Sections 5.2 through 5.5,
above, such that there will be no duplication of Tax reimbursement to Seller)
for that month applicable to Buyer’s Contractual Capacity and the Energy and
Ancillary Services associated with Buyer’s Contractual Capacity, as more fully
set forth in Article
VIII. Any Tax based upon income, gross receipts or any similar
Tax for which the inclusion of such Tax in the Monthly Payment would increase
Seller’s liability for any Tax shall be grossed-up so as to make the receipt of
any such Tax neutral to the Seller. Any Tax for any Straddle Period
shall be included in the Monthly Payment based upon the ratio of the days in the
month for the Monthly Payment over the total number of days in the Tax
Period. Taxes included in the Monthly Payment may be estimated by
Seller. The difference between estimated Taxes and the actual Taxes
for which Buyer is responsible will be billed or credited to Buyer, as
appropriate, in one or more installments following the end of the relevant Tax
Period. For purposes of Taxes subject to the provisions of this
Section 5.6, all Taxes shall be based upon the amount accrued for the relevant
calendar month billing period, including any deferred tax amount.
ARTICLE
VI
BILLING
AND PAYMENT
6.1 Billing and
Payment. The calendar month shall be the standard period for
all payments under this Agreement. As soon as practicable after the
end of each month, Seller will render to Buyer an invoice for the payment
obligations incurred during the preceding month. Each component of
the invoice will be described in reasonable detail. All invoices
under this Agreement shall be due and payable on or before the twentieth
(20th) day of
each month. Buyer will make payments by electronic funds transfer to
the account designated by Seller, or by other mutually agreeable method(s).
6.2 Books and Records;
Audit. Seller shall keep, or shall cause to be kept, all
necessary books of record, books of account, and memoranda of all transactions
involving the Facility, in conformance, where required, with the FERC’s
Uniform System of Accounts. Seller shall make, or shall
cause to be made, all computations relating the Facility and all allocations of
the costs and expenses of the Facility. Buyer has the right to
examine the records of Seller to the extent reasonably necessary to verify the
accuracy of any statement, charge or computation made pursuant to this
Agreement. If requested, Seller shall provide to Buyer statements
evidencing the quantities delivered to Buyer at the Delivery
Point. If any such examination reveals any inaccuracy in any
statement, the necessary adjustments in such statement and the payments thereof
will be made promptly, provided, however, that any
claim by a Party for overpayment or underpayment with respect to an invoice is
waived unless the other Party is notified of the claim within twelve (12) months
after the invoice is rendered or any specific adjustment to the invoice is
made. If an invoice is not rendered within twelve (12) months after
the close of the month during which performance occurred, the right to payment
for such performance is waived.
6.3 Netting of
Payments. The Parties hereby agree that they shall discharge
mutual debts and payment obligations due and owing to each other under this
Agreement through netting, in which case all amounts owed by each Party to the
other Party under this Agreement, including any related damages, interest, and
payments or credits, shall be netted so that only the excess amount remaining
due shall be paid by the Party who owes it.
ARTICLE
VII
LIMITATIONS
7.1 Limitation of Remedies,
Liability and Damages. EXCEPT AS SET FORTH HEREIN, THERE IS NO
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL
IMPLIED WARRANTIES ARE DISCLAIMED. FOR BREACH OF ANY PROVISION OF
THIS AGREEMENT, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT DAMAGES ONLY,
SUCH DIRECT DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER
REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. NEITHER PARTY
SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT
DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN
TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS
THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND
THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO,
INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT, OR ACTIVE OR PASSIVE.
ARTICLE
VIII
TAXES
8.1 Cooperation. Each
Party shall use reasonable efforts to implement the provisions of and to
administer this Agreement in accordance with the intent of the parties to
minimize all Taxes, so long as neither Party is materially adversely affected by
such efforts.
8.2 Taxes. Subject
to reimbursement by Buyer as set forth in Article V, Seller
shall pay or cause to be paid all Taxes imposed on or with respect to the
Buyer’s Contractual Capacity and associated Energy and Ancillary Services
arising prior to the Delivery Point. Buyer shall pay the Tax
Reimbursement Payment and pay or cause to be paid all Taxes on or with respect
to the Buyer’s Contractual Capacity and associated Energy and Ancillary Services
at and from the Delivery Point. In the event Seller is required by
law or regulation to remit or pay Taxes which are Buyer’s responsibility
hereunder, Buyer shall promptly reimburse Seller for such Taxes as set forth in
Article
V. If Buyer is required by law or regulation to remit or pay
Taxes which are Seller’s responsibility hereunder, Buyer may deduct the amount
of any such Taxes from the sums due to Seller under Article V of this
Agreement. Nothing shall obligate or cause a Party to pay or be
liable to pay any Taxes for which it is exempt under the law.
8.3 Change-in-Law
Taxes. Buyer shall be responsible for (or receive the benefit
of) all Change-in-Law Taxes.
8.4 Exemptions. Either
Party, upon written request of the other, shall provide a certificate of
exemption or other reasonably satisfactory evidence of exemption if either Party
is exempt from any Taxes and shall use all reasonable efforts to obtain or
maintain, or to enable the other Party to obtain or maintain, any exemption from
or reduction of any Taxes, whether currently available or becoming available in
the future. Without limiting the generality of the foregoing, the
Parties agree that, if beneficial to the efforts of either Party to obtain or
maintain any exemption from or reduction of any Taxes, whether currently
available or becoming available in the future, the Parties will cooperate to
restructure the transactions contemplated by this Agreement so as to enable
either Party to obtain or maintain such exemption or reduction, as the case may
be; provided,
however, that
any such restructuring shall not affect adversely the economic consequences of
this Agreement to either Party or subject either Party to any regulatory
jurisdiction other than that to which it is subject on the date set forth in the
preamble to this Agreement.
ARTICLE
IX
COMPLIANCE
WITH LAWS
9.1 Seller’s
Compliance. Seller shall, at its expense, comply with all
applicable laws and obtain and maintain all Governmental Approvals applicable to
Seller and/or the Facility, or necessary for
Seller’s performance of its obligations hereunder. Notwithstanding
the foregoing, Seller shall not be deemed in default of this obligation if it is
contesting the application, interpretation, order, or other legal direction or
Governmental Approval of any Governmental Authority in good faith and with due
diligence through appropriate proceedings and if such non-compliance does not
have a material adverse effect on Seller’s performance of this
Agreement.
9.2 Buyer’s
Compliance. Buyer shall at its expense, at all times, comply
with all applicable laws and obtain and maintain all Governmental Approvals
applicable to Buyer or necessary for Buyer’s performance of its obligations
hereunder. Notwithstanding the foregoing, Buyer shall not be deemed
in default of this obligation if Buyer is contesting the application,
interpretation, order, or other legal direction or Governmental Approval of any
Governmental Authority in good faith and with due diligence through appropriate
proceedings and if such non-compliance does not have a material adverse effect
on Buyer’s performance of this Agreement.
ARTICLE
X
CONDITIONS
10.1 Conditions. Subject
to Section
10.2 and except to the
extent waived in writing by the Parties in their sole and absolute discretion,
the obligation of the Parties to consummate the transactions contemplated
hereunder shall be subject to fulfillment of the following
conditions:
(i) The
occurrence of the Closing.
(ii) Seller
shall have filed with the FERC and received acceptance of this Agreement that is
satisfactory to Seller and Buyer in their sole judgment and discretion, without
any limitation thereto whatsoever.
(iii) The
Parties shall each have obtained any and all other Approvals required with
respect to the performance of their respective obligations hereunder and such
Approvals shall be in form and substance satisfactory to Seller and Buyer in
their sole and absolute discretion.
10.2 Obligations of Buyer and
Seller. Commencing on the date set forth in the preamble to
this Agreement, on the terms and subject to the conditions of this Agreement,
each Party shall use its commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and do, or cause to be done, and assist and
cooperate with the other Party in taking or doing, all things necessary, proper
or advisable to consummate the transactions contemplated hereby, including,
without limitation the satisfaction of the conditions set forth in Section 10.1.
10.3 Failure of Conditions
Generally. This Agreement may be terminated by either Party in
the event that the conditions set forth in Section 10.1 are not
satisfied or waived by the Parties in accordance with such Section.
ARTICLE
XI
REPRESENTATIONS
AND WARRANTIES
11.1 Representations and
Warranties of Both Parties. On the date set forth in the
preamble to this Agreement each Party represents and warrants to the other Party
that:
(i) it
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation;
(ii) subject
to the fulfillment of the conditions set forth in Section 10.1, it has
all Governmental Approvals necessary for it legally to perform its obligations
under this Agreement;
(iii) the
execution, delivery and performance of this Agreement are within its powers,
have been duly authorized by all necessary action and do not violate any of the
terms and conditions in its governing documents, any contracts to which it is a
party or any law, rule, regulation, order or the like applicable to
it;
(iv) this
Agreement constitutes a legally valid and binding obligation enforceable against
it in accordance with its terms; subject to any Equitable Defenses;
(v) it
is not bankrupt, however evidenced, and there are no proceedings pending or
being contemplated by it or, to its knowledge, threatened against it which would
result in it being or becoming bankrupt;
(vi) there
is not pending or, to its knowledge, threatened against it any legal proceedings
that could materially adversely affect its ability to perform its obligations
under this Agreement;
(vii) no
material breach of this Agreement with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement;
and
(viii) it
has entered into this Agreement in connection with the conduct of its business
and it has the capacity or ability to make or take delivery of the Buyer’s
Contractual Capacity and associated Energy and Ancillary Services.
ARTICLE
XII
MISCELLANEOUS
12.1 Title and Risk of
Loss. Title to and risk of loss related to the Capacity and
associated Energy and Ancillary Services shall transfer from Seller to Buyer at
the Delivery Point. Seller warrants that it will deliver to Buyer the
Capacity and associated Energy and Ancillary Services free and clear of all
liens, security interests, claims and encumbrances or any interest therein or
thereto by any Person arising prior to the Delivery Point.
12.2
Indemnity. Each
Party shall indemnify, defend and hold harmless the other Party and such Party’s
partners, directors, officers, employees, agents and representatives (the “Indemnified Parties”) from and
against any Claims arising from or out of any event, circumstance, act or
incident first occurring or existing during the period when control of,
risk of loss related to, and title to the Capacity and associated Energy and
Ancillary Services is vested in such Party as provided in Section 12.1, except
to the extent, as to any Indemnified Party, such Claims are attributable to the
gross negligence or willful misconduct of such Indemnified
Party. Each Party shall indemnify, defend and hold harmless the other
Party against any Taxes for which such Party is responsible under Article
VIII. The foregoing indemnities shall forever survive the
termination of the Agreement.
12.3 Amendments and
Waivers. Neither this Agreement nor any provisions hereof may
be waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by both Parties.
12.4 Notices. All
notices, requests, statements or payments shall be made as specified in Schedule
12.4. Notices, other than notices regarding availability,
Scheduling and Dispatch of the Facility shall, unless otherwise specified
herein, be in writing and shall be deemed to be given or made if delivered by
(a) hand delivery, electronic mail or other electronic transmission device
capable of written record or facsimile, in each case, effective at the close of
business on the day actually received, if received during business hours on a
Business Day, otherwise shall be effective at the close of business on the next
Business Day, or (b) United States mail or overnight courier service, in each
case, effective on the next Business Day after it was sent. Notices
regarding the availability, Scheduling and Dispatch of the Facility may be made
(x) telephonically, effective when made, or (y) by electronic mail or other
electronic device capable of written record, effective when
received. A Party may change its notice details by providing a notice
of same to the other Party in accordance herewith.
12.5 Successors and Assigns;
Assignment. The provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties and the Parties’ successors and
assigns permitted hereby and no other Person shall acquire or have any rights
under or by virtue of this Agreement. Neither Party shall assign this
Agreement or its rights hereunder without the prior written consent of the other
Party, which consent may be withheld in the exercise of its sole discretion;
provided, however, that either
Party may, without the consent of the other Party (and without relieving itself
from liability hereunder) (i) transfer, sell, pledge, encumber or assign this
Agreement or the accounts, revenues or proceeds hereof in connection with any
financing or other financial arrangements, (ii) transfer or assign this
Agreement to an Affiliate which shall agree in writing to be bound by the terms
and conditions of this Agreement.
12.6 Integration. This
Agreement constitutes the entire agreement between the Parties relating to the
subject matter hereof and supersedes any and all previous and understandings,
oral or written, between the Parties relating to the subject matter
hereof.
12.7 Acknowledgments. This
Agreement shall be considered for all purposes as prepared through the joint
efforts of the Parties and shall not be construed against one Party or the other
as a result of the preparation, substitution, submission or other event of
negotiation, drafting or execution hereof.
12.8 Waiver. No
failure to exercise and no delay in exercising by a Party any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of
any right, remedy power or privilege.
12.9 Counterparts. This
Agreement may be executed by the Parties in any number of counterparts, which,
taken together, shall constitute one and the same legal binding
instrument. Delivery of an executed counterpart of a signature page
of this Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Agreement.
12.10 Headings. The
headings used herein are for convenience and reference purposes
only.
12.12 Governing
Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
12.13 Severability. Should
any provision of this Agreement be held to be invalid or unenforceable, such
provision shall be invalid or unenforceable only to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
any other provision hereof.
12.14 Mobile/Sierra
Doctrine. Absent the agreement of all Parties to the proposed
change, the standard of review for changes to any rate, charge, classification,
term or condition of this Agreement, whether proposed by a Party, a non-party or
FERC acting sua
sponte, shall
be the “public interest” standard of review set forth in United Gas Pipe Line Co. v.
Mobile Gas Service Corp., ▇▇▇ ▇.▇. ▇▇▇ (1956) and Federal Power Commission v.
Sierra Pacific Power Co., ▇▇▇ ▇.▇. ▇▇▇ (1956) (the “Mobile-Sierra Doctrine”), or
such other standard of review permissible to preserve the intent of the parties
pursuant to this Section to uphold the sanctity of contracts without
modification.
[signatures
appear on next page]
IN WITNESS WHEREOF, the
Parties hereto have caused this Agreement to be executed and delivered by their
duly authorized representatives as of the date set forth in the preamble to this
Agreement.
|
AEP
GENERATING COMPANY
By: American
Electric Power Service Corporation
Its: Agent
|
|
By: ____________________________
Name:
Title:
|
|
COLUMBUS
SOUTHERN POWER COMPANY
By: American
Electric Power Service Corporation
Its: Agent
|
|
By: ____________________________
Name:
Title:
|
SCHEDULE
5.5
INITIAL
CAPACITY PAYMENT
The
Capacity Charge as of the date set forth in the preamble to this Agreement is
$2,255,500 per month:
Capacity Payment = FNBV x
WACOC
12
where,
FNBV = $325,000,000
WACOC =
LTDR = 6.0%
PSR
= 0%
▇▇▇ = 11.82%
DP
= 60%
PSP
= 0%
EP
= 40%
SCHEDULE
12.4
NOTICE
INFORMATION
If to
Seller:
AEP
Generating Company
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇
Attention: President
with
a copy to:
AEP
Generating Company
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇
Attention: Secretary, AEP
Generating Company
If to
Buyer:
Columbus
Southern Power Company
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇
Attention: President
with
a copy to:
Columbus
Southern Power Company
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇
Attention: Secretary,
Columbus Southern Power Company