EXHIBIT 10.1
EXECUTION COPY
TOLLING AGREEMENT
Between
POWER RESOURCES, LTD.
a Texas limited partnership
and
ONEOK ENERGY MARKETING AND TRADING COMPANY, L.P.
a Texas limited partnership
AUGUST 5, 2003
TABLE OF CONTENTS Page
1. DEFINITIONS AND INTERPRETATION.......................................1
1.1 CERTAIN DEFINED TERMS..............................................1
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1.2 INTERPRETATION.....................................................8
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1.3 RULES OF CONDUCT...................................................9
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2. TERM.................................................................9
2.1 TERM...............................................................9
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3 FUEL SUPPLY..........................................................9
3.1 BUYER FUEL SUPPLY REQUIREMENT......................................9
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4. DELIVERY OF ENERGY, CAPACITYAND ANCILLARY SERVICES..................11
4.1 OBLIGATION TO SELL AND PURCHASE...................................11
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4.2 SCHEDULING........................................................11
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4.3 DELIVERY POINT....................................................12
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4.4 ENERGY IMBALANCE..................................................13
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4.5 MEASUREMENT.......................................................13
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4.6 TITLE, RISK OF LOSS, INDEMNITY AND FINES..........................14
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5. PAYMENTS............................................................15
5.1 CAPACITY, BUYER VARIABLE O&M COSTS AND BUYER STARTUP COST PAYMENTS15
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5.2 AVAILABILITY REQUIREMENTS.........................................16
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6. REPRESENTATIONS AND WARRANTIES.....................................17
6.1 REPRESENTATIONS AND WARRANTIES....................................17
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6.2 NO OTHER REPRESENTATIONS AND WARRANTIES...........................18
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7. COVENANTS...........................................................18
7.1 REMAKING OF REPRESENTATIONS AND WARRANTIES........................18
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7.2 PARTIES' OBLIGATIONS..............................................18
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7.3 PROFESSIONAL OPERATIONS...........................................18
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7.4 CONFIDENTIALITY...................................................18
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7.5 PLANNED OUTAGES...................................................18
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7.6 PLANT MODIFICATIONS...............................................19
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8. EVENTS OF DEFAULT AND REMEDIES......................................19
8.1 EVENT OF DEFAULT..................................................19
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8.2 REMEDIES UPON AN EVENT OF DEFAULT.................................20
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8.3 ACKNOWLEDGMENT OF THE PARTIES.....................................21
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8.4 OTHER EVENTS......................................................21
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9. BILLING AND PAYMENT.................................................21
9.1 BILLING AND PAYMENT...............................................22
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9.2 AUDIT.............................................................22
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10. ASSIGNMENT; BINDING EFFECT..........................................22
10.1 ASSIGNMENT........................................................22
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10.2 BINDING EFFECT....................................................23
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11. FORCE MAJEURE AND LIMITATION OF LIABILITY...........................23
11.1 FORCE MAJEURE.....................................................23
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11.2 LIMITATION OF REMEDIES, LIABILITY AND DAMAGES.....................23
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11.3 DUTY TO MITIGATE..................................................24
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12. TAXES; STRANDED COSTS...............................................24
12.1 GENERAL...........................................................24
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12.2 APPLICABLE TAXES AND CHANGE IN LAW................................24
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12.3 STRANDED COSTS....................................................25
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13. THERMAL ENERGY......................................................25
14. INSURANCE...........................................................25
15. MISCELLANEOUS.......................................................26
15.1 NOTICES...........................................................26
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15.2 ENTIRETY..........................................................26
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15.3 GOVERNING LAW.....................................................26
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15.4 NON-WAIVER........................................................26
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15.5 SEVERABILITY......................................................26
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15.6 HEADINGS; EXHIBITS................................................27
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15.7 NO THIRD PARTY BENEFICIARIES......................................27
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15.8 COUNTERPARTS......................................................27
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15.9 FURTHER ASSURANCES................................................27
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15.10 RENEWAL...........................................................27
16 DISPUTE RESOLUTION................................................27
17 FORWARD CONTRACT..................................................28
EXHIBITS
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Exhibit A - Project Description
Exhibit B - Fuel Specifications
Exhibit C - Project Constraints
Exhibit D - Planned Outages
Exhibit E - Addresses
Exhibit F - Anticipated Conversion Heat Rates
Exhibit G - Interconnection Agreement
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TOLLING AGREEMENT
THIS TOLLING AGREEMENT ("Agreement") is entered into as of August 5,
2003 (the "Effective Date"), by and between POWER RESOURCES, LTD., a Texas
limited partnership ("Seller") and ONEOK ENERGY MARKETING AND TRADING COMPANY,
L.P., a Texas limited partnership ("Buyer"). Buyer and Seller may be
individually referred to herein as a "Party" and, collectively, as the
"Parties."
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell and make available to Buyer, all of the fuel conversion capability of the
Project (as defined below), including electric generation capacity, thermal
energy, and electric energy, including all ancillary products and services
marketable in the ERCOT (as defined below) transmission area from the Project
(as defined below), subject to the terms, exceptions and conditions of this
Agreement; and
WHEREAS, the Parties desire to enter into this Agreement to set forth
their respective rights and obligations in connection with the sale of capacity
and energy from Seller to Buyer.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:
1. DEFINITIONS AND INTERPRETATION
1.1 CERTAIN DEFINED TERMS.
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In addition to terms defined in the recitals hereto, the following
terms shall have the meanings set forth below.
"Affiliate" means any Person that directly or indirectly Controls or is
Controlled by or is under common Control with, the Person in question.
"AGC" means the ability to adjust the output of a Unit or Units
automatically to provide load following, load regulation and frequency bias
service and other similar types of services.
"Aggregate Energy" has the meaning set forth in Section 5.2(a).
"Aggregate Energy Demand" means, with respect to any period of time
during the Delivery Term, the total quantity of Energy Scheduled for delivery to
Buyer from the Project during such period of time.
"Ancillary Services" means those services that are necessary to support
the transmission of capacity and Energy from resources to loads while
maintaining reliable operation of the Connecting Utility's transmission system
in accordance with Prudent Industry Practice. Such services typically include,
but are not limited to, regulation reserve, spinning reserve, non-
spinning reserve, voltage support, and black start generating capability.
"Annual Availability Factor" has the meaning set forth in Section
5.2(a).
"Anticipated Conversion Heat Rates" has the meaning set forth in
Exhibit F.
"Applicable Requirements" means any and all applicable laws,
regulations, announcements, codes, directives, judgments, decrees, orders or
interpretations of any Government Agency, and any valid waivers, exemptions,
variances, permits, licenses, authorizations, orders, consents or conditions of
or from, in any such case, any Government Agency.
"Applicable Schedule" means, with respect to any time during the
Delivery Term, the applicable quantities of Energy Scheduled in accordance with
Section 4.2 for each hour of a scheduling period as in effect at such time.
"Business Day" means any Day other than a Day that is a Saturday,
Sunday or legal holiday in the State of Texas.
"Buyer Fuel Supply Requirement" or "Buyer's Fuel Supply Requirement"
means, for any Day, the sum, without duplication, of (i) the Buyer Startup Fuel
Quantity for each Startup (or portion thereof) that occurs during such Day and
(ii) each Buyer Operating Fuel Quantity for each hour of such Day.
"Buyer Operating Fuel Quantity" means, with respect to any hour, the
quantity of Fuel used for the operation of the Project for the generation of
electric energy during such hour.
"Buyer Startup Costs" means, with respect to Startups during each
Contract Year, the greater of (i) $3,643 per turbine per Startup, (ii) $939,986
or (iii) $140 per turbine per hour of operation for such Contract Year.
"Buyer Startup Fuel Quantity" means, with respect to any Startup, the
quantity of Fuel actually required by the Project for such Startup.
"Buyer Variable O&M Costs" means, with respect to any Month the product
of $0.50 multiplied by the quantity of Energy (in MWh) delivered by Seller to
Buyer for such Month.
"Calendar Year" means a calendar year.
"Capacity Payment" means, for any Month, the product of the Contract
Capacity (expressed in kW) and the Fixed Capacity Rate, as such amount may be
adjusted in accordance with Section 5.1.
"Change-in-Law" means, after the Effective Date, the adoption,
imposition, promulgation or modification by a Government Agency of any
Applicable Requirement, or the issuance of an order, judgment, award or decree
of a Government Agency having the effect of the foregoing.
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"Change-in-Law Taxes" means any Taxes (including without limitation
taxes or other assessments on gross receipts, gross revenues or comparable
measures thereof) arising from a Change-in-Law other than any Taxes of the
nature of income taxes, real property taxes, personal property taxes, local,
county and Tribal taxes, and special district assessments (such as taxes and
assessments for the construction and/or improvement of local schools, roads and
sanitation systems) not related to the business of Seller; provided that a
Change-in-Law Tax must result in either a net increase or a net decrease in the
affected Party's Tax due by such Party and shall not include changes in Federal
or state Tax laws that have the effect of substituting a new Tax for an existing
Tax (e.g., eliminating property taxes in favor of tax on energy or gas).
"Claims" means all claims or actions filed by a Person other than a
Party, and whether groundless, false or fraudulent, that directly or indirectly
relate to the subject matter of an indemnity, and the resulting losses, damages,
expenses, attorney's fees and court costs, whether incurred by settlement or
otherwise, and whether such claims or actions are filed prior to or after the
termination of this Agreement.
"Common Facilities" means the equipment of the Project (other than the
Units) necessary for the generation and transmission of Energy from the Units
including, but not limited to, any such necessary control room, machine shops,
warehouse, parking, domestic water supply and waste disposal, switch yards,
electrical bus bars, Interconnection Facilities, and Fuel interconnection
facilities.
"Connecting Utility" means either or both, as the context so requires,
of Oncor and its Affiliates and successors and ERCOT or its successors.
"Contract Capacity" means, for each Month 212,000 kW; however, the
Parties agree that the Project Capacity may exceed the Contract Capacity and
Buyer shall have the right to dispatch the Project up to its Project Capacity
for periods of time reasonably acceptable to Seller, and provided further that
subject to the limitations otherwise provided herein, Buyer shall have full
dispatch rights as to the Contract Capacity.
"Contract Quantity" means, with respect to any Month, all of the Energy
(in MWh), that Seller sells and delivers, or causes to be delivered, to Buyer
pursuant to this Agreement during such Month.
"Contract Term" means the term of this Agreement beginning on the
Effective Date of the Agreement and ending on the Termination Date.
"Contract Year" means a twelve-month period commencing at hour ending
0100 CPT on October 1 and ending at hour ending 2400 CPT on the following
September 30.
"Control" means the possession, directly or indirectly, through one or
more intermediaries, of either of the following: (a) (i) in the case of a
corporation, 50% or more of the outstanding voting securities thereof; (ii) in
the case of a limited liability company, partnership, limited partnership or
venture, the right to 50% or more of the distributions therefrom (including
liquidating distributions); (iii) in the case of a trust or estate, 50% or more
of the beneficial interest therein; or (iv) in the case of any other entity, 50%
or more of the economic or beneficial
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interest therein; or (b) in the case of any entity, the power or authority,
through the ownership of voting securities, by contract or otherwise, to direct
the management, activities or policies of the entity.
"CPT" means the prevailing time in any hour of any given Day in ▇▇▇▇▇▇
County, Texas.
"Cumulative Undelivered Energy" has the meaning set forth in Section
5.2(a).
"Day" means a calendar day.
"Delivery Point" means (i) the point of direct electrical
interconnection of the Project with the transmission system of Oncor, or (ii)
any other point mutually agreed upon by Buyer and Seller in writing.
"Delivery Term" means the period commencing at the hour ending 0100 CPT
on October 1, 2003 through and including the hour ending 2400 CPT on the
Termination Date.
"Energy" means the electric energy to be delivered by Seller to Buyer
pursuant to this Agreement, and includes, without limitation any energy related
Ancillary Services.
"Energy Imbalance" has the meaning set forth in Section 4.4.
"Energy Imbalance Charges" means the charges assessed by ERCOT as a
result of deviations between energy scheduled and energy delivered or received
or between energy delivered and energy received (however named, including,
without limitation, "energy imbalances," "oversupply imbalances," or
"undersupply imbalances").
"ERCOT" means the Electric Reliability Council of Texas, Inc. or its
successors.
"ERCOT Independent System Operator" means the entity carrying on the
functions of the independent system operator for ERCOT or its successor in
regulatory function as designated from time to time by the Texas Public Utility
Commission.
"ERCOT Operating Guides" means the operating guides for ERCOT as
promulgated by the ERCOT Independent System Operator and approved by the Texas
Public Utility Commission as the same may be amended from time to time.
"ERCOT Protocols" means the operating protocols for electric
reliability system of ERCOT as promulgated by the ERCOT Independent System
Operator and approved by the Texas Public Utility Commission as the same may be
amended from time to time.
"Event of Default" has the meaning set forth in Section 8.1.
"Expected Amount of Fuel" has the meaning set forth in Section 3.1(d).
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"Fixed Capacity Rate" means for each Month during the Delivery Term
$1.75 per kW.
"Force Majeure" means any cause beyond the reasonable control and
without the fault or negligence of the Party relying on such cause to excuse its
performance hereunder (such Party, the "Claiming Party"), whether of the kind
enumerated below or otherwise, including without limitation the following: (i)
any storm, flood, freeze, hurricane, windstorm, lightning, earthquake or other
acts of God, fire, explosion, civil disturbance, strike, lockout, labor dispute,
act of the public enemy, action of a court, regulatory or other governmental
authority (as long as the Claiming Party has not sought, supported, applied for,
or assisted in the application for, such regulatory or governmental action),
failure to obtain or maintain a governmental permit, license or approval (as
long as the applying person has used commercially reasonable efforts to apply
for, obtain and maintain such permit, license or approval), or (ii) any
unavailability or interruption in the supply of Fuel or breakdown of pipelines,
facilities and/or equipment other than as a result of improper maintenance or
the negligence of the Claiming Party; provided, however, that no obligation to
make payments for energy delivered or other services rendered shall be excused
by the occurrence of an event of Force Majeure; and provided, further, that the
following acts, events or causes shall not constitute an event of Force Majeure:
(a) the loss of Buyer's resale markets; (b) Buyer's inability economically to
use or resell energy or capacity purchased hereunder; and (c) any lack of
profitability to Seller of the Project. Any Force Majeure event (other than
labor disputes, strikes, or lockouts) shall be remedied so far as possible with
reasonable dispatch.
"Fuel" means the natural gas or Jet A fuel used in the operation of the
Project for the purpose of generating electric energy or Startup and excludes
any natural gas used by the Project for the production of thermal energy or
extraction steam.
"Fuel Delivery Point(s)" means the Project's receipt points for
transportation of Fuel supplied by Buyer.
"Government Agency" means any federal, state, local, territorial,
tribal or municipal government and any department, commission, board, bureau,
agency, instrumentality, judicial or administrative body thereof having
jurisdiction over the Project, Buyer or Seller, as the case may be, and includes
without limitation, the ERCOT Independent System Operator.
"Heat Rate" has the meaning set forth in Section 3.1(d).
"Hourly Energy" has the meaning set forth in Section 5.2(a).
"Hourly Undelivered Energy" has the meaning set forth in Section
5.2(a).
"Interconnection Facilities" means the interconnection facilities that
connect the Units with the Connecting Utility, as more fully described in the
Oncor Generation Interconnection Agreement.
"Interconnection Point" means the physical points at which the Units
are connected with the Connecting Utility, as more fully described in the Oncor
Generation Interconnection Agreement, or such other point as the Parties may
agree.
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"kW" means kilowatt.
"kWh" means kilowatt-hour.
"Late Payment Rate" means a per annum rate of interest equal to the
Prime Rate plus three percent (3%); provided, the Late Payment Rate shall never
exceed the maximum lawful rate permitted by applicable law.
"Meter" means the "ERCOT Polled Settlement Meter" as such term is
defined by, and construed in accordance with the ERCOT Operating Guides and the
ERCOT Protocols.
"Month" or "Monthly" means a calendar month or a calendar month period.
"MMBtu" means one million British thermal units.
"MW" means a megawatt. One MW is equal to 1,000 kW.
"MWh" means a megawatt-hour. One MWh is equal to 1,000 kWh.
"NERC" means the North American Electric Reliability Council or its
successors.
"Net Margin" has the meaning set forth in Article 13.
"Oncor" means Oncor Electric Delivery Company and its affiliates and
successors.
"Oncor Generation Interconnection Agreement" means an agreement to be
entered into between Seller and Oncor providing for the interconnection of the
Project to the Oncor transmission system, as amended from time to time, and any
replacement agreement, a copy of which, as it exists on the Effective Date, is
attached hereto as Exhibit G.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government authority or agency or political subdivision thereof.
"Planned Outage" means any outage of the Project due to inspection,
testing, maintenance, repair or overhaul, as described in Section 5.2(b) and
scheduled by Seller in accordance with the requirements of Exhibit D.
"Prime Rate" means the prime lending rate as may from time to time be
published in the Wall Street Journal or any successor publication under "Money
Rates" or a successor heading, provided that if more than one prime rate is
published under such heading, the Prime Rate shall be the average of such rates
so published. If the Wall Street Journal ceases to be published or if
publication is suspended, the Parties shall agree on a successor or publication
that reports comparable prime lending rates.
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"Project" means the gas-fired combined cycle electrical generation
facility located in ▇▇▇▇▇▇ County, Texas, which is further described in Exhibit
A.
"Project Capacity" means the capacity actually available from the
Project to supply Energy, which may be greater or less than the Contract
Capacity, as measured at the Delivery Point, and which is otherwise determined
in accordance with the ERCOT Protocols.
"Project Constraints" has the meaning set forth on Exhibit C.
"Prudent Industry Practice" means any of the practices, methods,
techniques, standards and acts required or approved from time to time by a
significant portion of the electric power industry in the geographic region
covered by ERCOT, or any of the practices, methods, techniques, standards, and
acts which, in the exercise of reasonable judgment in light of the facts known
at the time the decision was made, could have been expected to accomplish the
desired result at a reasonable cost consistent with the Applicable Requirements,
good business practices, reliability, safety, environmental protection, and
expedition. "Prudent Industry Practice" is not intended to be limited to the
optimum practice, method or act to the exclusion of all others, but rather to be
practices, methods or acts generally accepted from time to time in the
geographic region covered by ERCOT.
"Representatives" of a Person shall mean any Affiliates of such Person
and directors, officers, employees, agents or Controlling Persons of such Person
or its Affiliates.
"Schedule" or "Scheduled" means the acts of Buyer and Seller pursuant
to Section 4.2 setting forth a written schedule requesting and accepting the
delivery of Energy by Seller to Buyer during the Delivery Term.
"Scheduled Energy" means the Energy requested by Buyer and dispatched
by Seller pursuant to the requirements of Section 4.
"Scheduling Fees" means fees assessed by any Person to schedule the
delivery of the Energy.
"Startup" or "Start-Up" means a firing of either or both of the Units
and the emergency generators used in starting the gas turbines. The period of a
Startup of a Unit begins at the commencement of such firing and ends when the
Unit obtains the desired Aggregate Energy Demand. Startups shall be limited to
one per combustion turbine per day unless otherwise mutually agreed to by the
Parties.
"Stranded Costs" means any charges or costs that are assessed or levied
by any Government Agency in order to recoup the expenses and liabilities
associated with stranded investments including without limitation any stranded
costs assessed or levied pursuant to 18 C.F.R. ss.35.26.
"Taxes" means, with respect to any Person, all taxes, withholdings,
assessments, impositions, duties, governmental fees, governmental charges or
levies imposed directly or
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indirectly by any Government Agency on such Person or its income, profits or
property or measured by the volume or amount of consumption of fuel, the
production of energy or the provision of electric generation capacity, or gross
revenue, gross receipts or comparable measure thereof, and whether characterized
as an ad valorem, sales, gross receipts, BTU, carbon, energy production or other
similar taxes.
"Termination Date" means December 31, 2005, unless extended in
accordance with Section 15.10 or such earlier date as this Agreement may be
terminated as provided for in this Agreement.
"Termination Payment" has the meaning set forth in Section 8.2.
"Total Transmission Services" means all transmission services,
ancillary services, control area services and such other services associated
with the transmission of electric energy from one location to another.
"Transmission Costs" means all costs associated with line losses,
congestion charges, inadvertent energy flows, ERCOT charges, charges assessed by
the applicable Connecting Utility and other applicable system costs or charges
associated with the transmission of electric energy from one location to
another.
"Unit or Units" means one or more of the gas turbine generation units
comprising the Project as more specifically described in Exhibit A.
"Unplanned Outage" means (i) an unplanned component failure or other
condition that requires the Project, or part thereof, to be removed from service
immediately or that can be deferred but requires the Project, or part thereof,
to be removed from service before the next Planned Outage (or that prevents a
Start-Up), (ii) an unplanned deration of the Project that requires an immediate
reduction of capacity or that can be deferred but requires a reduction of
capacity prior to the next Planned Outage or (iii) any other unplanned
interruption or reduction in generation from the Project for any reason.
1.2 INTERPRETATION. In this Agreement:
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(a) the table of contents, headings, and Article and Section numbering
are for convenience only and shall be ignored in construing this Agreement;
(b) the singular includes the plural and vice versa;
(c) references to Articles, Sections, Recitals and Exhibits are, unless
the context otherwise requires, references to Articles and Sections of, and
Recitals and Exhibits to, this Agreement;
(d) the Exhibits to this Agreement form a part of this Agreement;
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(e) the words "hereof," "herein," "hereinafter," "hereunder," "hereby,"
"hereto," and similar words refer to this entire Agreement and not to any
particular Article, Section, Recital or Exhibit;
(f) if any payment hereunder is required to be made on a day which is
not a Business Day, such payment shall be made on the next succeeding Business
Day, provided that if such next succeeding Business Day is not in the same Month
as the date required for payment, such payment shall be made on the immediately
preceding Business Day; and
(g) any reference to a time shall be a reference to CPT unless
otherwise specified.
1.3 RULES OF CONDUCT. In this Agreement:
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(a) unless otherwise provided herein, whenever a consent or approval is
required by one Party from the other Party, such consent or approval shall not
be unreasonably withheld or delayed; and
(b) in carrying out their obligations and duties under this Agreement,
each Party shall have an implied obligation of good faith.
2. TERM
2.1 TERM.
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(a) Subject to Article 8 and Article 15.10 hereof, this Agreement
shall be effective for the Contract Term.
(b) On the Termination Date, the Parties will no longer be bound by
this Agreement, except (i) to the extent necessary to enforce any rights or
obligations of the Parties arising under this Agreement before the Termination
Date, (ii) indemnification obligations, which will survive the termination of
this Agreement and will continue for two (2) years following the Termination
Date, and (iii) rights and obligations arising under Section 9.2, which will
survive the termination of this Agreement for a period of two (2) years for the
purpose of statements and payment objections.
3. FUEL SUPPLY
3.1 BUYER FUEL SUPPLY REQUIREMENT.
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(a) Throughout the Delivery Term, Buyer shall, at no cost to Seller,
deliver and make available, or cause to be delivered and made available to
Seller, each Day on which Buyer desires to Schedule Energy, the Buyer Fuel
Supply Requirement in accordance with the following terms:
(i) Buyer shall provide Fuel that meets the quality
specifications as set forth on Exhibit B; however, Buyer has the option
of providing either natural gas or Jet A fuel.
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(ii) Buyer shall deliver the Fuel to the Project at the Fuel
Delivery Point(s).
In connection with the procurement and delivery of Jet A fuel, Buyer shall
provide notice to Seller of Buyer's desire to utilize Jet A fuel in connection
with the tolling services provided hereunder. Buyer shall provide such notice
not less than two (2) hours in advance of the hour on which Buyer desires to
dispatch the Project utilizing Jet A fuel. Upon Buyer's election to utilize Jet
A fuel, Seller shall procure and deliver such fuel to the Project on Buyer's
behalf in amounts necessary to meet the Buyer's requirements for Scheduled
Energy. Seller shall first notify the Buyer of the cost of procuring the Jet A
fuel and Buyer shall promptly instruct Seller whether or not to proceed with
such procurement. Buyer shall reimburse Seller for Seller's actual cost of
procurement on a direct pass through basis. Buyer shall not be obligated to
reimburse Seller for any amounts attributable to the Jet A fuel deliveries in
excess of the actual costs incurred by Seller (including, but not limited to
transportation, storage and any Taxes). Seller shall, upon the request of Buyer,
provide Buyer with all supporting documentation as may be reasonably necessary
for Buyer to verify Seller's actual cost of Jet A fuel.
(b) Buyer shall be responsible for arranging for, and paying the cost
of, any necessary transportation of Buyer's Fuel Supply Requirement to the Fuel
Delivery Point(s) of the Project.
(c) Each Party shall cooperate reasonably with the other Party to
coordinate the supply and transportation of Fuel for the Project with the
operation of the Project (i) by providing the other Party such information as
the first Party shall reasonably request relating to the supply and
transportation of the Fuel to the Project and the consumption of Fuel by the
Project (in each case, on both an historical and estimated future basis) and
(ii) by maintaining personnel available at all times to address scheduling of
Fuel supply and transportation and to timely provide the information
contemplated by clause (i).
(d) Throughout the Delivery Term, it is anticipated that when the
Project is dispatched at certain Scheduling levels by Buyer, the Project will be
capable of converting the Buyer Fuel Supply Requirements to Scheduled Energy at
a conversion rate ("Heat Rate") within one hundred eight percent (108%) of the
applicable Anticipated Conversion Heat Rates. Seller and Buyer agree that the
Heat Rate will be tested not more than four (4) times during the Calendar Year
at such times as may be mutually agreed upon by the Parties. Each such Heat Rate
test shall be performed at one of the selected load points shown on Exhibit F
after the Project has been operated in a steady state condition (output held
constant) for a period of not less than thirty (30) minutes prior to the
beginning of the test. The test shall be considered valid only if it is of a two
(2) hour duration at the steady state condition. The Project's natural gas
metering devices and the Meter will be used for measuring the respective Fuel
and Energy data. Seller shall be responsible for ensuring that such meters are
appropriately calibrated. The test will be deemed successful if the Heat Rate
measurement, as adjusted for actual temperatures, is up to and including one
hundred eight percent (108%) of the Anticipated Conversion Heat Rate. If the
Heat Rate measurement exceeds one hundred eight percent (108%) of the
Anticipated
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Conversion Heat Rate, then the Heat Rate shall be retested not later than
forty-eight (48) hours from the time of the prior test using the same testing
procedure. Should the second test confirm that the Heat Rate measurement exceeds
one hundred eight percent (108%) of the Anticipated Conversion Heat Rate, then
(i) neither the first test nor the second test shall be included in the total of
the four (4) Heat Rate tests to which Buyer is entitled under this Section
3.1(d) and (ii) Buyer will notify Seller that the Heat Rate exceeds one hundred
eight percent (108%) of the Anticipated Conversion Heat Rate and Seller shall
have sixty (60) Days during which Seller may take such action as it may deem
necessary to cause the Project to achieve a Heat Rate that does not exceed one
hundred eight percent (108%) of the Anticipated Conversion Heat Rate. Buyer
shall continue to make Capacity Payments during such sixty (60) Day period. If
Seller is unable to conduct a Heat Rate test that achieves a Heat Rate that does
not exceed one hundred eight percent (108%) of the Anticipated Conversion Heat
Rate within such sixty (60) Day period, then Buyer may, as its sole and
exclusive remedy, terminate this Agreement.
4. DELIVERY OF ENERGY, CAPACITY AND ANCILLARY SERVICES
4.1 OBLIGATION TO SELL AND PURCHASE.
--------------------------------
(a) Subject to the terms and conditions of this Agreement, during the
Delivery Term, Seller shall accept and receive Fuel delivered by Buyer to the
Fuel Delivery Point and deliver a corresponding quantity of Scheduled Energy by
converting Buyer's Fuel Supply Requirement into Energy.
(b) Subject to the terms and conditions of this Agreement, during the
Delivery Term, Seller shall sell and make available, and Buyer shall purchase,
Buyer's Project Capacity.
(c) Subject to the terms and conditions of this Agreement, Seller shall
provide all rights to Ancillary Services to Buyer. Buyer shall be entitled to
receive any Black Start Payments from ERCOT and Seller shall assign the right to
receive such payments to Buyer.
4.2 SCHEDULING.
-----------
(a) Seller shall, by 5:00 a.m. CPT each Day, inform Buyer of (i) the
estimated availability of the Project to supply Energy to Buyer during each hour
of the remaining portion of such Day commencing three (3) hours after such
deadline and (ii) for the Day immediately thereafter subject only to Planned
Outages defined in Exhibit D. Seller shall advise Buyer as soon as possible of
any changes in the estimated availability of the Project for such Days. These
estimates shall not be binding upon Seller and Seller may subsequently revise
its estimates. The foregoing estimates by Seller shall not be construed to
permit Seller to estimate or limit the availability of the Project such that
Buyer is restricted from Scheduling the Contract Capacity unless the Project
Capacity is physically unavailable due to Force Majeure, Planned Outage or
Unplanned Outage, as the case may be.
(b) No later than 3:00 p.m. CPT on each Business Day, Buyer shall
deliver to Seller a written statement (which may be communicated by fax, e-mail
or other electronic medium) setting forth the quantity of Energy that Buyer
requests Seller to deliver during each hour of the immediately following Day at
the Delivery Point. Scheduling shall otherwise be accomplished by Buyer in the
manner contemplated by the ERCOT Independent System Operator, and accordingly,
may be implemented from hour to hour by means of electronic real time
scheduling.
-11-
Buyer's written statement may request the delivery of Energy from the Project
during any or all hours of any Day, subject only to the Project Constraints.
(c) Seller shall be obligated to accept a request for Energy that has
been provided to Seller in accordance with the requirements of Section 4.2(b)
except to the extent (i) such request does not comply with the Project
Constraints or (ii) Seller declares that the Project is not available as a
result of a Planned Outage, an Unplanned Outage or an event of Force Majeure.
Seller shall promptly notify Buyer if Seller determines that it will not accept
a Schedule submitted by Buyer for any of the foregoing reasons. Notwithstanding
the foregoing, Seller shall not be obligated to Startup the Project if doing so
is not within the Project Constraints.
(d) Buyer may request changes to the Applicable Schedule in accordance
with the Applicable Requirements of the ERCOT Independent System Operator as
long as such changes are within the Project Constraints. Seller shall be
obligated to accept a request for a change to the Applicable Schedule for Energy
that has been provided to Seller in accordance with the requirements of Section
4.2(b).
(e) Buyer shall pay all Scheduling Fees charged by any third parties,
if any, associated with the scheduling of Energy for its benefit.
(f) If requested by Seller, Buyer shall cooperate reasonably to attempt
to establish additional scheduling and operating procedures for implementation
of this Agreement.
(g) From time to time during the Delivery Term, Buyer may designate a
third party to act as Buyer's Qualified Scheduling Entity in accordance with the
Applicable Requirements. Buyer may also wish to change the designated entity
acting as Buyer's Qualified Scheduling Entity from time to time. Accordingly,
upon request of Buyer, Seller shall make such arrangements in accordance with
the Applicable Requirements at Buyer's cost as may be reasonably necessary to
facilitate the re-designation of Buyer's Qualified Scheduling Entity.
4.3 DELIVERY POINT.
---------------
(a) All deliveries and receipts of Energy shall be made at the Delivery
Point.
(b) Buyer shall arrange for, provide and be solely responsible for all
Total Transmission Services and pay all Transmission Costs necessary to receive
the Energy at, and deliver the Energy from and after, the Delivery Point. Buyer
shall not be responsible for any transmission services, costs or related charges
arising out of any energy purchased by Seller for utilization in the Project or
that otherwise flows from the primary transmission grid to which the Project is
interconnected.
(c) Seller shall enter into, on or before the Delivery Term, a
Generation Interconnection Agreement with Oncor, in a form that is substantially
similar to that shown in Exhibit G. Seller shall maintain the Generation
Interconnection Agreement in effect throughout the Delivery Term. If Seller has
not executed a Generation Interconnection Agreement substantially in the form of
Exhibit G prior to the commencement of the Delivery Term, then
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Buyer shall have the unilateral right to terminate this Agreement. Upon such
termination, neither Seller nor Buyer shall have any further rights, duties or
obligations under this Agreement.
4.4 ENERGY IMBALANCE.
-----------------
If either Buyer or Seller becomes aware that actual hourly deliveries
or receipts of Energy hereunder are greater or less than the hourly quantity of
Scheduled Energy (any such discrepancy, an "Energy Imbalance"), the Party on
notice shall immediately notify the other Party so that appropriate arrangements
regarding the Energy Imbalance can be made with the ERCOT Independent System
Operator. If actual deliveries of Energy are greater or less than the Scheduled
Energy, the Parties shall work together to perform corrective action as soon as
reasonably possible to eliminate (i) the then current Energy Imbalance and (ii)
the cumulative Energy Imbalance. Seller shall pay all Energy Imbalance Charges
resulting from Seller's failure to deliver Scheduled Energy for any hour in
which Buyer has Scheduled Energy in accordance with Section 4. Seller shall not
be responsible for any Energy Imbalance Charges due to a Force Majeure event.
Buyer shall also pay all other Energy Imbalance Charges including Energy
Imbalance Charges resulting from the failure of Buyer to provide Fuel as
required hereunder, the failure by Buyer to schedule the transmission of Energy
on the Connecting Utility in a manner that conforms to the Energy Scheduled
hereunder, the failure of Buyer to receive Energy in a manner that conforms to
the Energy Scheduled hereunder, the failure of any other Persons to take the
Energy from Buyer in a manner that conforms to the Energy Scheduled by Buyer
hereunder or the failure of Buyer or of any customer of Buyer to receive Energy
from the Connecting Utility in a manner that conforms to the Energy Scheduled
hereunder.
4.5 MEASUREMENT.
------------
(a) All Energy delivered by Seller to Buyer from the Project shall be
metered at, and by the Meter. For purposes of determining the Scheduled Energy
delivered by Seller to Buyer hereunder, measurement of all Energy delivered by
Seller from the Project shall be based on readings of the Meter. Scheduled
Energy shall be deemed to be sold and delivered by Seller hereunder to Buyer if
provided by Seller at the Delivery Point whether or not Buyer takes such Energy
at the Delivery Point.
(b) Seller shall request each Connecting Utility to maintain,
calibrate, test and read the Meters in a manner consistent with the Oncor
Generation Interconnection Agreement. Seller and Buyer may agree on other
metering procedures consistent with the Oncor Generation Interconnection
Agreement and ERCOT.
(c) If for any reason the Meter is out of service as determined in
accordance with the ERCOT Protocols, or out of repair so that the amount of
Energy delivered cannot be ascertained or computed from readings thereof by the
ERCOT Independent System Operator, the Energy delivered during the period of
such outage shall be estimated by Seller upon the basis of the best data
available and such estimate shall be binding on Buyer as if it were based on
actual data from the Meter.
(d) Buyer may, at its expense, construct, install, own and maintain
communications
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equipment to allow real-time measurement of the Project's operating parameters
and transmission of such information to Buyer's operation center(s).
(e) Seller shall, at Seller's expense, have the Meter calibrated prior
to the Effective Date and shall supply Buyer with confirmation of the results of
such calibration. Thereafter, Seller shall perform or shall cause to be
performed the inspection, testing, calibration and adjustment of all of Seller's
metering devices at its own expense on an annual basis at a time mutually
convenient to Buyer and Seller. Seller shall provide Buyer with reasonable
advance notice of, and permit a representative of Buyer to witness and verify,
such inspections, tests and adjustments. In addition to the foregoing, upon two
(2) weeks' prior written notice by Buyer, but not more than twice during any
calendar year, Seller shall perform additional inspections or tests of the Meter
and any of Seller's metering devices and Seller's back-up metering devices.
Seller shall conduct any such requests in accordance with the ERCOT Protocols
and the requirements of the ERCOT Independent System Operator. Seller and Buyer
shall agree on a mutually convenient time for such inspections or tests, and
Seller shall permit a qualified representative of Buyer to inspect or witness
such testing of any of Seller's metering devices and Seller's back-up metering
devices. The actual expense of any such requested additional inspection or
testing shall be borne by Buyer unless, upon such inspection or testing, the
Meter is found to register inaccurately in comparison to the applicable
tolerances required by the ERCOT Independent System Operator, Oncor, or the
manufacturer's recommendations, whichever is more conservative. If any of
Seller's metering devices or Seller's back-up metering devices are found to be
defective or inaccurate as described above, the Meter shall promptly be
adjusted, repaired, replaced and/or re-calibrated at the sole expense of Seller.
(f) If the Meter fails to register, or if the measurements made by
the Meter are found upon testing to be inaccurate, an adjustment to previous
▇▇▇▇▇▇▇▇ shall be made correcting all measurements by the inaccurate or
defective metering device for billing purposes, for both the amount of the
inaccuracy and the period of the inaccuracy. If the period of inaccuracy cannot
be determined, then any such adjustment shall be limited to the most recent
previous billing, or shall otherwise be resolved in accordance with the
directives of the ERCOT Independent System Operator. Any such adjustments shall
be made in a manner consistent with the ERCOT Protocols and the requirements and
recommendations of the ERCOT Independent System Operator.
4.6 TITLE, RISK OF LOSS, INDEMNITY AND FINES.
----------------------------------------
(a) As between the Parties, Seller shall be deemed to be in exclusive
control of the Energy prior to delivery to the Delivery Point and Buyer shall be
deemed to be in exclusive control of the Energy at and after the Delivery Point.
Each Party shall indemnify, defend and hold harmless (to the extent permitted by
law) the other Party from any Claims arising from any destruction of property or
personal injury caused by the Energy under its control. Seller warrants that the
Scheduled Energy delivered by Seller shall be free and clear of all liens,
claims and encumbrances arising prior to the Delivery Point. Title to and risk
of loss related to the Scheduled Energy shall transfer from Seller to Buyer upon
delivery of the Scheduled Energy at the Delivery Point.
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(b) Any fines, penalties or other costs incurred by either Party or
such Party's agents, employees or subcontractors for non-compliance by such
Party, its agents, employees or subcontractors with any Applicable Requirements
shall not be reimbursed by the other Party but shall be the sole responsibility
of such non-complying Party. If such fines, penalties or other costs are
assessed against Buyer by any Government Agency or court of competent
jurisdiction due to the non-compliance by Seller with any Applicable
Requirements, Seller shall indemnify and hold harmless Buyer against any and all
Claims suffered or incurred because of the failure of Seller to comply
therewith. Seller shall also reimburse Buyer for any and all legal or other
expenses (including attorneys' fees) reasonably incurred by Buyer in connection
with such Claims. If such fines, penalties or other costs are assessed against
Seller by any Government Agency or court of competent jurisdiction due to the
non-compliance by Buyer with any Applicable Requirements, Buyer shall indemnify
and hold harmless Seller against any and all Claims suffered or incurred because
of the failure of Buyer to comply therewith. Buyer shall also reimburse Seller
for any and all legal or other expenses (including attorneys' fees) reasonably
incurred by Seller in connection with such Claims.
5. PAYMENTS
5.1 CAPACITY, BUYER VARIABLE O&M COSTS AND BUYER STARTUP COST PAYMENTS .
-------------------------------------------------------------------
(a) Buyer shall pay the Capacity Payment to Seller for each Month
during the Delivery Term. The Capacity Payment shall be due monthly in arrears
throughout the Delivery Term whether or not Buyer actually takes any Energy
under this Agreement, except for the Capacity Payment due in any Month during
which a Planned Outage occurs in which event, the Capacity Payment shall be
reduced to reflect the actual Project Capacity available during such Month if
such Project Capacity is less than the Contract Capacity. The Capacity Payment
shall not be increased for periods in which the Project Capacity is greater than
the Contract Capacity, and any previous reductions in the Capacity Payment as
described above, may not be subsequently recovered due to an increase in the
Project Capacity to amounts greater than the Contract Capacity.
(b) Buyer shall pay the Buyer Variable O&M Costs to Seller for each
Month during the Delivery Term. Payment for the Buyer Variable O&M Costs shall
also be due monthly in arrears throughout the Delivery Term.
(c) Buyer shall pay to Seller the Buyer Startup Costs over the course
of each Calendar Year. For purposes of administering the payment of Buyer
Startup Costs, Buyer shall pay to Seller for each Month during the Delivery Term
an amount equal to $78,333 per Month. If at the end of a Calendar Year (or
partial Calendar Year at the end of the Delivery Term) it is determined that
Seller is owed more than the amount paid by Buyer for Buyer Startup Costs in
comparison to the monthly payments described above, Buyer shall pay the actual
Buyer Startup Costs within thirty (30) Days of the end of such Calendar Year.
For purposes of determining such Calendar Year adjustment, the amounts paid by
Buyer shall be compared to the greater of (i) $3,643 per turbine per Startup
during the Calendar Year, (ii) $939,986 or (iii) $140 per turbine per hour of
operation for such Calendar Year. In addition to the foregoing, Buyer shall
reimburse Seller for the incremental TDSP Charges (as defined in Oncor's Tariff
for Retail
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Delivery Service dated September 1, 2002, as amended), and related energy
associated with the dispatch of one of the Units where such Unit is dispatched
in response to any instruction by Buyer to dispatch the Units simultaneously to
the levels contemplated in Paragraph 3 of Exhibit C. The foregoing reimbursement
shall not apply to any TDSP Charges or energy associated with the auxiliary
power requirements of the Project. The expected energy demand that results from
such a dispatch instruction is one (1) MW. The expected energy consumption that
results from such a dispatch instruction is 250 kWh.
(d) Buyer shall pay all pass through Jet A fuel costs to Seller on a
monthly basis.
5.2 AVAILABILITY REQUIREMENTS.
--------------------------
(a) For each Contract Year during the Delivery Term, Seller shall
maintain an Annual Availability Factor of at least ninety-six percent (96%) in
accordance with this Section 5.2(a). The Annual Availability Factor shall be
determined, for each Contract Year, by dividing (i) the difference between the
Aggregate Energy less the Cumulative Undelivered Energy by (ii) the Aggregate
Energy. The Annual Availability Factor shall be expressed as a percentage, which
shall be deemed in no event to exceed one hundred percent (100%).
WHERE;
"Aggregate Energy" means, for any Contract Year, the sum of the Hourly
Energy for each hour of such Contract Year.
"Hourly Energy" means, for any hour, the product of the Contract
Capacity for such hour multiplied by one (1) hour.
"Hourly Undelivered Energy" means, for any hour, the sum, without
duplication, of (i) the Energy in MWh Scheduled by Buyer in accordance with
Section 4.2 and not delivered by Seller during such hour and (ii) any Energy in
MWh not Scheduled by Buyer to the extent Seller has declared such Energy to be
unavailable during such hour in accordance with clause (ii) of the first
sentence of Section 4.2(a). For the avoidance of doubt, any Energy not delivered
by Seller because of a breach by Buyer of its obligations under this Agreement
shall not be counted in determining the foregoing sum.
"Cumulative Undelivered Energy" means, for any Contract Year, the sum
of the Hourly Undelivered Energy for each hour of such Contract Year.
Notwithstanding the foregoing, there shall be excluded for purposes of
calculating the Annual Availability Factor, each hour in which Planned Outages
occur (except to the extent described in Exhibit D) and each hour that satisfies
both of the following requirements for which (i) events of Force Majeure ,except
as limited in Section 5.2(c) or (ii) scheduled maintenance:
(x) adversely affected the Project's production or delivery of
Scheduled Energy during such hour; or
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(y) resulted in Seller declaring any Energy to be unavailable in
accordance with clause (ii) of the first sentence of Section 4.2(a).
At the end of the Contract Year, Seller shall pay to Buyer, as Buyer's
sole and exclusive remedy for any failure of Seller to maintain an Annual
Availability Factor of at least ninety six percent (96%) during such Contract
Year, a rebate in an amount equal to the product of (i) one hundred (100)
multiplied by the quantity (ninety-six percent (96%) less the Annual
Availability Factor) and (ii) $100,000; provided, however, that Seller's maximum
payment shall not exceed $400,000 for the term of the Contract Year. If the
Annual Availability Factor exceeds ninety-six percent (96%), during any Contract
Year, Buyer at the end of such Contract Year, shall pay to Seller a bonus in an
amount equal to the product of (i) one hundred (100) multiplied by the quantity
(the Annual Availability Factor less ninety-six percent (96%)) and (ii)
$100,000. For calculation of the penalty/bonus provision, Hourly Energy will not
exceed 212 MWs per hour. For any period less than a Contract Year, the
penalty/bonus shall be prorated by multiplying $100,000 by a fraction the
numerator of which is the number of Months during such period and the
denominator is twelve (12).
(b) Planned Outages for a Combustion Inspection, Hot Gas Path
Inspections, Steam Turbine/Generator Maintenance and Major Maintenance Overhauls
as referred to in Exhibit D will be excluded from Annual Availability Factor
calculations.
(c) Force Majeure events having a duration of twelve (12) hours or less
and aggregating up to and including seventy-two (72) hours during a Contract
Year shall be included in the Annual Availability Factor calculation and shall
be considered the same as Unplanned Outage hours.
6. REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES.
-------------------------------
As a material inducement to entering into this Agreement, each Party
with respect to itself, hereby represents and warrants to the other Party as
follows:
(a) it is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation and is qualified to conduct its
business in those jurisdictions necessary to perform this Agreement;
(b) the execution, delivery and performance of this Agreement are
within its partnership, corporate or limited liability company powers and have
been duly authorized by all necessary partnership, corporate or limited
liability company action;
(c) this Agreement constitutes a legal, valid and binding obligation of
such Party enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and other laws affecting creditor's
rights generally, and the application of equitable principles regardless of
whether enforcement is sought in a proceeding at law or in equity; and
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(d) there are no bankruptcy, insolvency, reorganization, receivership
or other similar proceedings pending or being contemplated by it, or to its
knowledge threatened against it.
6.2 NO OTHER REPRESENTATIONS AND WARRANTIES.
----------------------------------------
Each Party acknowledges that it has not entered into this Agreement
based upon any representations and warranties, express or implied, other than
the express representations and warranties set forth in this Agreement.
7. COVENANTS
7.1 REMAKING OF REPRESENTATIONS AND WARRANTIES.
-------------------------------------------
Each Party covenants that it will cause its respective representations
and warranties in Section 6.1(a) through (c) to remain true and correct
throughout the Contract Term.
7.2 PARTIES' OBLIGATIONS.
---------------------
(a) Seller shall operate and maintain or cause the operation and
maintenance of the Units and Common Facilities in accordance with Prudent
Industry Practices and otherwise in accordance with this Agreement. Seller shall
during the Delivery Term, acquire and maintain in effect all licenses, permits
and governmental approvals as required at the Effective Date for the operation
and dispatch of the Project at levels equal to the Contract Capacity.
(b) Buyer shall be the exclusive purchaser of the Contract Capacity,
Energy, and Ancillary Services from the Project during the Contract Term and,
subject to the provisions of Sections 9.1 and 8.2, shall pay when due all
amounts required to be paid under this Agreement..
7.3 PROFESSIONAL OPERATIONS.
------------------------
Each Party shall employ, either directly or indirectly, professional
personnel who are fully capable of performing the tasks of such Party on a
24-hour per Day, 7-Day per week basis.
7.4 CONFIDENTIALITY.
----------------
The existence of this Agreement and all of the terms and conditions set
forth in this Agreement shall be governed by the terms of that certain
Confidentiality Agreement executed by the Parties dated June 30, 2003.
7.5 PLANNED OUTAGES.
----------------
Seller shall schedule Planned Outages in accordance with Exhibit D.
Planned Outages for a Combustion Inspection, Hot Gas Path Inspections, Steam
Turbine/Generator Maintenance and Major Maintenance Overhauls will not be
scheduled during the Months of June, July, August and September.
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7.6 PLANT MODIFICATIONS.
--------------------
(a) Seller agrees that it will use commercially reasonable efforts to
refurbish its Jet A fuel system at the Project prior to the first day of the
Delivery Term. Buyer agrees to contribute up to $50,000 toward such
refurbishment and shall reimburse Seller for such amount upon completion of the
refurbishment. Seller shall, at its own expense, perform or cause to be
performed periodic maintenance on such system during the Delivery Term.
(b) Seller agrees to install an AGC system at the Project prior to the
first day of the Delivery Term. Buyer agrees to contribute up to $250,000 toward
the installation of the AGC and shall reimburse Seller for such amount upon
completion of the installation. At the end of the Delivery Term, if Buyer and
Seller do not agree to renew the Agreement, Seller shall refund to Buyer
one-half of Buyer's contribution toward the cost of installation of the AGC.
8. EVENTS OF DEFAULT AND REMEDIES
8.1 EVENT OF DEFAULT. An "Event of Default" shall mean:
----------------
(a) the failure of the defaulting Party to make, when due, any payment
required under this Agreement if such failure is not remedied within five (5)
Business Days after written notice of such failure is given to the defaulting
Party by the other Party; or
(b) any material representation or warranty made by the defaulting
Party in this Agreement shall prove to have been false or misleading in any
material respect when made; or
(c) the material breach by the defaulting Party of any covenant set
forth in this Agreement (other than any event that is otherwise specifically
covered in this Section 8.1 as a separate Event of Default), and such failure is
not cured within thirty (30) Days after written notice thereof to the defaulting
Party or, if the breach or default is not of the type that can be reasonably
cured within thirty (30) Days, within a reasonable period of time, so long as
the defaulting Party has commenced to cure the breach or default within such
thirty (30) Day period and thereafter diligently pursues such cure to completion
within one hundred eighty (180) days; or
(d) the defaulting Party shall:
(i) make an assignment or any general arrangement for the
benefit of creditors;
(ii) file a petition or otherwise commence, authorize or
acquiesce in the commencement of a proceeding or cause of action under
any bankruptcy or similar law for the protection of creditors, or have
such petition filed against it and in the case of such petition filed
against it is not withdrawn or dismissed within sixty (60) Days after
such filing;
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(iii) otherwise become bankrupt or insolvent (however
evidenced); or
(iv) be unable to pay its debts as they fall due.
8.2 REMEDIES UPON AN EVENT OF DEFAULT.
----------------------------------
(a) If an Event of Default occurs with respect to a defaulting
Party at any time during the Contract Term, the non-defaulting Party
may, for so long as the Event of Default is continuing, (i) deliver a
written notice that establishes a date (which date, in the case of the
Events of Default described in Section 8.1(a) through (c) shall be a
date that is no earlier than thirty (30) Days after the non-defaulting
Party delivers notice, and which, in the case of the Event of Default
described in Section 8.1(d) may be immediate) on which this Agreement
will be terminated, (ii) withhold any payment due in respect of this
Agreement and (iii) pursue any other remedies available at law or in
equity, except to the extent such remedies are expressly limited by
this Agreement.
(b) In the event Seller, its partners, employees, agents,
representatives or subcontractors knowingly, intentionally or
willfully fail to deliver Energy to Buyer, which Energy should have
otherwise been delivered to Buyer under the terms of this Agreement,
or Buyer, its partners, employees, agents, representatives or
subcontractors knowingly, intentionally or willfully fail to make any
payments required under the terms of this Agreement, in each case when
such failure is not due to Force Majeure, a Planned Outage or an
Unplanned Outage, then the non-defaulting Party may elect to terminate
the Agreement in accordance Section 8.2(a), in which case the
defaulting Party shall pay to the non-defaulting Party, a Termination
Payment. The "Termination Payment" payable by the defaulting Party to
the non-defaulting Party shall equal: (1) the non-defaulting Party's
Loss as calculated under paragraph (i) below and discounted to present
value as set forth below; plus (2) the non-defaulting Party's Cost as
calculated under paragraph (ii) below; minus (3) any set-offs to which
the non-defaulting Party is entitled as set forth under paragraph
(iii) below. The Parties intend that the non-defaulting Party's "Loss"
shall be the economic loss (exclusive of Costs), if any, resulting
from the termination ---- of the Agreement, determined in a
commercially reasonable manner as calculated in accordance with this
Section 8.2(b). The Loss, if any, suffered by the non-defaulting Party
shall be determined by comparing the value of the remaining Contract
Term (including all market based value components) to one hundred
percent (100%) of the Contract Capacity under the Agreement had it not
been terminated to the equivalent quantity and relevant market price
for the remaining Contract Term either quoted by a bona fide
third-party offer or which are reasonably expected to be available in
the market under a replacement contract for the Agreement. To
ascertain the market price of a replacement agreement (including all
market based value components), the non-defaulting Party may consider,
among other valuations, quotations from leading dealers in tolling and
energy and commodity contracts, and other bona fide third party
offers, all adjusted for the length of the remaining Contract Term and
differences in transmission. It is expressly agreed that the
non-defaulting Party shall not be required to enter into replacement
transactions in order to determine the Termination Payment.
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(i) The Loss calculated under paragraph (b) shall be
discounted to present value using the net present value at a rate
equal to the rate of interest paid on a one-year United States
Treasury obligation as reported in the Wall Street Journal as of
the time of termination (to take into account the period between
the time notice of termination was effective and when such amount
would have otherwise been due pursuant to this Agreement).
(ii) The non-defaulting Party's "Costs" shall be calculated
as the sum of the brokerage fees, commissions and other similar
transaction costs and expenses reasonably incurred in terminating
and replacing the Agreement, including, reasonable transmission
and ancillary service costs associated with the Agreement, and
reasonable attorneys' fees, if any, incurred in connection with
the non-defaulting Party enforcing its rights with regard to the
Agreement. The non-defaulting Party shall use reasonable efforts
to mitigate or eliminate Costs.
(iii) The non-defaulting Party shall set-off any or all
other amounts owing between the Parties under this Agreement
against the Termination Payment so that all such amounts are
aggregated and/or netted to a single amount. The net amount due
shall be paid within thirty (30) Days following the effective
date of termination. If the Parties disagree regarding the
calculation of the Termination Payment, then such dispute shall
be resolved in accordance with Article 16.
(c) Notwithstanding any other provision of this Agreement, a
Party's damages shall not include any Stranded Costs.
8.3 ACKNOWLEDGMENT OF THE PARTIES.
------------------------------
(a) Each Party hereby stipulates that the payment obligations set forth
in Section 5.2 are reasonable in light of the anticipated harm and the
difficulty of estimation or calculation of actual damages and each Party hereby
waives the right to contest such payments as an unreasonable penalty. The remedy
set forth in Section 5.2(a) shall be the sole and exclusive remedy of the Buyer
under Section 5.2.
(b) In the event either Party fails to pay amounts in accordance with
the terms of this Agreement when due, the aggrieved Party (a) shall have the
right to suspend performance until such amounts plus interest at the Late
Payment Rate have been paid, and (b) shall be entitled to interest at the Late
Payment Rate from the date due until the date paid.
8.4 OTHER EVENTS.
------------
In the event that Buyer is regulated by a federal, state or local
regulatory body, and such body shall disallow recovery of all or any portion of
any costs incurred or yet to be incurred by Buyer under any provision of this
Agreement, such action shall not operate to excuse Buyer from performance of any
obligation nor shall such action give rise to any right of Buyer to any refund
or retroactive adjustment of the amounts owed under the Agreement.
9. BILLING AND PAYMENT
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9.1 BILLING AND PAYMENT.
--------------------
Seller shall render to Buyer (by regular mail, facsimile or other
acceptable means pursuant to Section 15.1) for each Month during the Delivery
Term a statement setting forth the Capacity Payment, the payment for Buyer
Variable O&M Costs and the payment for Buyer Startup Costs for such Month and
any other charges due to Seller, including payments or credits between the
Parties pursuant to Sections 4.4 and 5.2 during the preceding Month, and the
amounts due to Seller from Buyer therefor. If Seller is missing any relevant
information at the ▇▇▇▇ ▇▇▇▇▇▇ prepares a regular monthly invoice, then Seller
may separately invoice Buyer for any affected payment or amount in a
supplemental invoice or subsequent regular invoice upon receipt of the relevant
information. On or before twenty (20) Days after receipt of Seller's statement,
or if such Day is not a Business Day, on the Day provided in Section 1.2(f),
Buyer shall render, by wire transfer, the amount set forth on such statement to
the payment address provided in Exhibit E hereto. If either Party disputes the
accuracy of a statement, the Parties shall use their best efforts to resolve the
dispute in accordance with Section 16. Any adjustments which the Parties may
subsequently agree to make with respect to any such billing dispute shall be
made by a credit or additional charge on the next statement rendered. If the
Parties are unable to resolve the dispute in this manner, any amounts remaining
in dispute that are disputed in good faith as of the due date for such billing
period may be withheld pending final resolution of the dispute in accordance
with Section 16, provided that any undisputed amount shall be promptly paid; and
provided, further, that amounts paid as a result of the settlement or other
resolution of a dispute shall be paid with interest thereon from the original
due date until paid at the Late Payment Rate. Overdue payments shall accrue
interest from, and including, the due date to, but excluding, the date of
payment at the Late Payment Rate.
9.2 AUDIT.
-----
Each Party (and its Representatives) has the right, at its sole expense
and during normal working hours and upon five (5) business days, to examine the
records of the other Party to the extent reasonably necessary to verify the
accuracy of any statement, charge or computation made pursuant to this
Agreement. If requested, a Party shall provide to the other Party statements
evidencing the quantities of Energy delivered 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 promptly made and shall bear
interest calculated at the Late Payment Rate from the date the overpayment or
underpayment was made until paid; provided, however, that no adjustment for any
statement or payment will be made unless objection to the accuracy thereof was
made prior to the lapse of two (2) years from the rendition thereof.
10. ASSIGNMENT; BINDING EFFECT
10.1 ASSIGNMENT.
-----------
Neither Party shall assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other Party,
which consent shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, either Party may, without the need for
-22-
consent from the other Party (and without relieving itself of its obligations
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; or (ii) transfer or assign this Agreement to any person
or entity succeeding to all or substantially all of the assets of such Party;
provided, however, that in each such case other than clause (i), (x) the
assignee shall make representations to the other Party identical to those under
Section 6.1, and (y) the assignee shall agree in writing to be bound by the
terms and conditions of this Agreement.
10.2 BINDING EFFECT.
---------------
This Agreement shall inure to the benefit of and be binding upon the
Parties and their respective successors and permitted assigns. No assignment or
transfer permitted hereunder shall relieve Seller or Buyer of any of their
respective obligations under this Agreement.
11. FORCE MAJEURE AND LIMITATION OF LIABILITY
11.1 FORCE MAJEURE.
---------------
If either Party is rendered unable by Force Majeure to carry out, in
whole or in part, its obligations under this Agreement and such Party gives
notice and full details of the event to the other Party as soon as practicable
after the occurrence of the event (but in no event later than ten (10) Days
following the occurrence), the obligations of the Party affected by the event
shall be suspended to the extent so affected. The Party affected by the Force
Majeure shall use commercially reasonable efforts to continue to perform its
obligations under this Agreement and remedy its inability to perform; provided,
however, that this provision shall not require Seller to deliver, or Buyer to
receive, Energy at points other than the Delivery Point. The delay in
performance during an event of Force Majeure shall be of no greater scope and of
no longer duration than is caused by the event of Force Majeure. The Party whose
performance is impaired by Force Majeure shall provide regular written progress
reports to the other Party during the period that performance is delayed or
prevented describing the actions taken and to be taken to remedy the
consequences of the event of Force Majeure, the schedule for such actions and
the expected date by which performance will no longer be affected by the event
of Force Majeure. When performance of the Party claiming the event of Force
Majeure is no longer being delayed or prevented, that Party shall provide the
other Party with written notice to that effect. If the remedy of such an event
shall exceed twenty-one (21) Days from the date of occurrence of such event,
then following such twenty-one (21) Day period, Buyer may suspend further
payment of the Capacity Payment without recourse or remedy by Seller until such
remedy occurs. If the remedy of such event shall exceed sixty (60) days from the
date of occurrence of such event, then following such sixty (60) day period,
either Party shall, upon ten (10) Days' prior written notice, have the option to
terminate this Agreement.
11.2 LIMITATION OF REMEDIES, LIABILITY AND DAMAGES.
----------------------------------------------
THE PARTIES CONFIRM THAT EXCEPT AS OTHERWISE SET FORTH HEREIN SECTION
5.2(a) PROVIDES THE SOLE AND EXCLUSIVE REMEDY AND MEASURE OF DAMAGES UNDER THIS
AGREEMENT AND THE OBLIGOR'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH
PROVISION
-23-
AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS
EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, BY STATUTE,
IN TORT OR CONTRACT, UNDER 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,
WITHOUT LIMITATION, THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE
SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE.
11.3 DUTY TO MITIGATE.
-----------------
Each Party agrees that it has a duty to mitigate damages and covenants
that it will use commercially reasonable efforts to minimize any damages it may
incur as a result of the other Party's performance or non-performance of this
Agreement.
12. TAXES; STRANDED COSTS
12.1 GENERAL.
---------
Buyer and Seller shall each use reasonable efforts to implement the
provisions of and to administer this Agreement in accordance with their intent
to minimize Taxes, so long as neither Party is materially adversely affected by
such efforts. 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 Taxes, and shall use reasonable efforts to obtain
and cooperate with obtaining any exemption from or reduction of Tax. Either
Party with knowledge of a Tax on the purchase or sale of energy that may be
applicable to the Energy sold hereunder shall notify the other Party, in
advance, of the applicability of such Tax and shall also notify the other Party
of any proposal to implement a new Tax or apply an existing Tax to the purchase,
sale, delivery, or receipt of Energy hereunder.
12.2 APPLICABLE TAXES AND CHANGE IN LAW.
-----------------------------------
(a) Seller shall be responsible for all Taxes (including, but not
limited to Change-in-Law Taxes) on or with respect to the Energy or Ancillary
Services sold and delivered hereunder prior to the Delivery Point. Buyer shall
be responsible for all Taxes imposed on the Energy or Ancillary Services from
and after the Delivery Point. If Seller is required to collect or pay any Tax
levied at and after the Delivery Point on behalf of Buyer as a result of the
sales transaction contemplated in this Agreement Buyer shall reimburse that Tax
to Seller. Neither Party shall be required to pay, or cause to be paid, any
Taxes measured by the income of the other Party. Each Party shall indemnify (to
the extent permitted by law), release, defend and hold harmless the other Party
from and against any and all liability for (i) Taxes measured by the income of
the indemnifying Party and (ii) Taxes imposed or assessed by any taxing
authority with respect to the Energy sold, delivered and received hereunder that
are the responsibility of the Party pursuant to this Section 12.2. Seller will
be responsible for the payment of Taxes imposed on Seller and its property, and
the Capacity Payments, energy payments and other amounts payable by Buyer to
Seller hereunder will not be subject to adjustment for Taxes imposed on Seller
and
-24-
its property. Buyer will be responsible for the payment of Taxes imposed on
Buyer and its property, and no amount payable by Seller to Buyer will be subject
to adjustment for Taxes imposed on Buyer and its property.
(b) If the capital or variable costs of the design, construction,
testing, commissioning, operation or maintenance of the Project changes or will
change as a result of a Change-in-Law notwithstanding the choice or alternatives
Seller makes to comply with the Change-in-Law (which choice will be Seller's in
its sole discretion), the Capacity Payment, the energy payments and/or any other
amounts payable hereunder will not, under such circumstances be adjusted to
reflect the cost of such change. If a Change-in-Law results in Seller having to
make material changes to the Project in order to comply with such Change-in-Law,
then Seller, as its sole and exclusive remedy for such circumstances, may
terminate this Agreement upon thirty (30) Days' notice to Buyer.
12.3 STRANDED COSTS.
---------------
Notwithstanding any other provision in this Agreement to the contrary,
in performance of this Agreement neither Party shall be required to bear,
directly or indirectly, any Stranded Costs (including, without limitation, any
transmission surcharges, Taxes, etc.) incurred by the other Party or any
customer or supplier of the other Party or any other Person, or that are
assessed or levied by any Person against the other Party.
13. THERMAL ENERGY. Seller has represented to Buyer and hereby does represent to
Buyer that Seller is in the process of negotiating a steam supply agreement with
a third party. Such negotiations may result in the execution of a steam purchase
or other similar agreement whereby the third party achieves ownership and
control of the thermal output of the Project. Accordingly, prior to the
execution of any steam agreement or other similar agreement committing the
thermal output of the Project to any third party, Seller shall periodically
advise Buyer on the status of negotiation of such agreement and shall, at the
reasonable request of Buyer, provide Buyer with copies of the agreement that is
under negotiation with third parties. If Seller enters into a steam sales
agreement with a third party purchaser, and the thermal energy produced by the
Project is sold to such third party, then the Parties agree that the Net Margin
from any thermal energy sold from the Project to such third party during the
Contract Term shall be shared equally between the Parties. Buyer in its sole
discretion shall decide whether or not to make sales from the Project to third
parties and Seller shall not make any such sales to third parties without
Buyer's consent. For purposes of this Article 13, the term "Net Margin" shall
mean the Monthly gross revenues derived from the sale of the thermal energy less
(a) the Monthly actual costs of the water and natural gas inputs used to produce
the thermal energy and (b) any maintenance costs associated with the steam
supply system. Amounts owed to Buyer shall be credited monthly by Seller on the
statement to be delivered by Seller to Buyer in accordance with Section 9.1.
14. INSURANCE.
Seller shall carry and maintain or cause to be carried and maintained
during the Contract Term insurance that is usual and customary to insurance
carried by similar companies engaged in similar businesses and owning similar
properties, including property damage, liability,
-25-
automobile and statutory workers' compensation. Upon Buyer's request, Seller
shall provide to Buyer a certificate showing Seller has obtained such insurance.
15. MISCELLANEOUS.
15.1 NOTICES.
--------
Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be in writing (unless otherwise
provided herein) and shall be deemed to have been duly given and received (i) at
the time of service if served personally, (ii) one half hour after the time of
confirmation of transmission if sent via facsimile transmission and written
confirmation is received, (iii) on the day after delivery to a courier for
overnight delivery, with delivery fees prepaid, or (iv) on the fifth day after
mailing when deposited in the United States Mail (registered or certified
receipt requested) postage prepaid by first class mail, in each case to the
addresses or facsimile numbers, as applicable, specified in Exhibit E. Notices
permitted to be delivered via telephone under this Agreement shall be deemed to
be received at the time the phone conversation takes place using the phone
numbers specified in Exhibit E. The Party delivering notice via telephone shall
provide the other Party with a written statement regarding the subject matter of
such telephone notice on the Business Day following the date such telephonic
notice was provided.
15.2 ENTIRETY.
---------
This Agreement and the Exhibits hereto constitute the entire agreement
between the Parties related to the subject matter hereof and supercedes all
prior agreements covering such subject. There are no prior or contemporaneous
agreements or representations affecting the same subject matter other than those
herein expressed. Except for any matters which, in accordance with the express
provisions of this Agreement, may be resolved by verbal agreement between the
Parties, no amendment, modification or change herein shall be enforceable unless
reduced to writing and executed by both Parties. For the avoidance of doubt,
this Agreement does not supercede the Oncor Generation Interconnection Agreement
or any agreements for the transmission of energy, all of which remain in full
force and effect.
15.3 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 TEXAS, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.
15.4 NON-WAIVER.
-----------
No waiver by any Party hereto of any one or more defaults by the other
Party in the performance of any of the provisions of this Agreement shall be
construed as a waiver of any other default or defaults whether of a like kind or
different nature.
15.5 SEVERABILITY.
-------------
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Except as otherwise stated herein, any provision or article declared or
rendered unlawful by a court of law or regulatory agency or jurisdiction over
the Parties, or deemed unlawful because of a statutory change, will not
otherwise affect the lawful obligations that arise under this Agreement. In such
circumstances, the Parties agree to negotiate in good faith to restore the
agreement as near as possible to the original intent and effect.
15.6 HEADINGS; EXHIBITS.
-------------------
The headings used for the sections and articles herein are for
convenience and reference purposes only and shall in no way affect the meaning
or interpretation of the provisions of this Agreement. Any and all Exhibits
referred to in this Agreement are, by such reference, incorporated herein and
made a part hereof for all purposes.
15.7 NO THIRD PARTY BENEFICIARIES.
-----------------------------
Nothing in this Agreement shall provide any benefit to any third party
or entitle any third party to any claim, cause of action, remedy or right of any
kind, it being the intent of the Parties that this Agreement shall not be
construed as a third party beneficiary contract.
15.8 COUNTERPARTS.
-------------
This Agreement may be executed in several counterparts, each of which
is an original and all of which constitute one and the same instrument.
15.9 FURTHER ASSURANCES.
-------------------
The Parties shall execute such additional documents, and shall cause
such additional action to be taken as may be required or, in the reasonable
judgment of any Party, may be necessary or desirable, to effect or evidence the
provisions of this Agreement and the transactions contemplated hereby.
15.10 RENEWAL.
--------
The Parties may renew this Agreement for successive one-year periods
commencing January 1, 2006. A Party desiring to renew this Agreement shall give
written notice thereof to the other Party not later than June 30 of the year
preceding the then applicable Termination Date. Both Parties must agree to renew
this Agreement and any such agreement between the Parties shall be in writing.
16. DISPUTE RESOLUTION.
(a) Each of Seller and Buyer will designate in writing to the other
Party a representative who will be authorized to resolve any dispute arising
under this Agreement in an equitable manner and, unless otherwise expressly
provided herein, to exercise the authority of such Party to make decisions by
mutual agreement. If such designated representatives are unable
-27-
to resolve a dispute under this Agreement, such dispute will be referred by each
Party's representatives, respectively, to a senior officer designated by Seller
and a senior officer designated by Buyer for resolution upon five (5) Days'
written notice from either Party. The Parties hereto agree (i) to attempt to
resolve all disputes arising hereunder promptly, equitably and in a good faith
manner and (ii) to provide each other with reasonable access during normal
business hours to any and all non-privileged records, information and data
pertaining to any such dispute.
(b) All disputes arising under, out of, or in relation to any provision
of this Agreement that are not resolved by the Parties' representatives as
described above, within thirty (30) Days after either Party's receipt of notice
referring the dispute to the senior officers of Seller and Buyer (and in any
event within the time which legal or equitable proceedings based on such claim,
dispute, or controversy would not be barred by the applicable statute of
limitations) will be submitted upon written request of either Party to binding
arbitration. Each Party will have the right to designate an independent
arbitrator of its choice, who need not be from the American Arbitration
Association ("AAA") panel of arbitrators but who (a) will be experienced in the
independent power electric generation field and (b) will not be and will not
have been previously an employee or agent of or consultant or counsel to either
Party and will not have a direct or indirect interest in either Party or the
subject matter of the arbitration. Such designation will be made by notice to
the other Party and to the AAA within ten (10) Days or, in the case of payment
disputes, five (5) Days after the date of the giving of notice of the demand for
arbitration. The arbitrators designated by the Parties will designate a third
independent arbitrator, who will be a retired federal or state judge or
practicing trial attorney (and who will act as chairman), within ten (10) Days
or, in the case of payment disputes, five (5) Days after the date of the
designation of the last of the arbitrators to be designated by the Parties, and
the arbitration will be decided by the three (3) arbitrators. If the two (2)
arbitrators cannot or do not select a third independent arbitrator within such
period, either Party may apply to the AAA for the purpose of appointing any
person listed with the AAA as the third independent arbitrator under the
expedited rules of the AAA. Such arbitration will be held in alternating
locations of the home offices of the Parties, commencing with Buyer's home
office, or in any other mutually agreed upon location. The rules of the AAA will
apply to the extent not inconsistent with the rules herein specified. Each Party
will bear its own expenses (including attorneys' fees) with respect to the
arbitration, unless the arbitrator decides on a different allocation of
expenses. The arbitrators will designate the Party to bear the expenses of the
arbitrators or the respective amounts of such expense to be borne by each Party.
The decision of the arbitrators shall be confined to the selection of either the
position offered by Buyer or the position offered by Seller and the arbitrators
shall not be permitted to independently develop or fashion a remedy separate and
apart by one of the remedies proposed by the Parties.
(c) Each Party understands that this Agreement contains an agreement to
arbitrate with respect to specified disputes. After signing this Agreement, each
Party understands that it will not be able to bring a lawsuit concerning any
dispute that may arise that is covered by this arbitration provision. Any award
of the arbitration panel may be enforced by the Party in whose favor such award
is made in any court of competent jurisdiction.
17. FORWARD CONTRACT. The Parties acknowledge and agree that this contract
constitutes a "forward contract" within the meaning of the United States
Bankruptcy Code.
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IN WITNESS WHEREOF, each of Buyer and Seller has caused this Agreement
to be duly executed on its behalf as of the date first above written.
POWER RESOURCES, LTD.,
a Texas limited partnership
By its General Partner
CE TEXAS RESOURCES, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
ONEOK ENERGY MARKETING AND
TRADING COMPANY, L.P., a Texas limited
partnership
By its General Partner
ONEOK ENERGY MARKETING AND
TRADING COMPANY, II
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
[SIGNATURE PAGE TO TOLLING AGREEMENT]
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EXHIBIT A
PROJECT DESCRIPTION
The Project is located in ▇▇▇▇▇▇ County, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. The Project is a gas-fired, combined cycle plant containing
two combustion turbines; two heat recovery steam generators, and a steam
turbine-generator. The Project design includes the following major components:
A. Combustion Turbines - Two GE Frame 7EA combustion turbines with
natural gas firing, and inlet air cooling.
B. Heat Recovery Steam Generators (HRSG's) - Two Deltak HRSG's with
Supplemental duct firing. Each HRSG is designed to supply
high-pressure steam to the steam turbine at 1200 psig / 940(Degree) F.
The Project design includes Steam Injection to limit NOX emissions
from the project.
C. Steam Turbine - The Hitachi steam turbine is a condensing turbine of
approximately 75 MW (gross) with its own lube and control oil systems.
The Project design provides that the steam turbine receives its steam
from the HRSGs.
D. Generator - Gas turbine generator design, totally enclosed hydrogen
cooled, 3600 rpm, 90,875 KVA rating, three phase, 60 Hz design. Steam
turbine generator design, totally enclosed water to air cooled, 3600
rpm, 89,000 KVA rating, three phase, 60 Hz design.
E. Auxiliaries - Auxiliary equipment and facilities to support the
operation of the Project including a cooling tower, water treatment
equipment and discharge line, fire protection, back-up power
equipment, control and communications systems and HVAC systems.
F. Transmission Interconnection - The Project is interconnected at 345 kV
to the Oncor transmission system at the site of the Project.
G. Gas Interconnection - The Project connects to the Oneok Westex Gas
distribution system.
H. Site - The Project design leaves room at the site for the installation
of additional units and related facilities. For purposes of this
Agreement, any such additional units and related facilities are not
part of the Project.
I. Capacity - The Project is designed to have a Project Capacity of at
least 212,000 kW.
EXHIBIT B
FUEL SPECIFICATIONS
Natural gas meeting the natural gas quality requirements in effect from
time to time to transport such natural gas under the tariff of Oneok Westex Gas
Transmission Company.
Jet A meeting the quality requirements of the turbine manufacturer.
EXHIBIT C
PROJECT CONSTRAINTS
The Project Constraints are the actual operational constraints of the
Project while being operated in accordance with Prudent Industry Practice and
Applicable Requirements including, without limitation, minimum load levels,
maximum capacity, maximum ramp rates (up or down), minimum time required for
start-up and the constraints on the ability to obtain and to change fuel supply
and transportation as set forth in the fuel supply and transportation agreements
for the Project.
Set forth below is a description of the Project Constraints based upon
the operating characteristics of the Project. Seller shall use reasonable
efforts to cause the actual Project Constraints to be no more restrictive than
those set forth on this Exhibit C.
1. MINIMUM LOAD REQUIREMENTS. As used herein, the "Minimum Load
Requirement" for any gas turbine unit is the greater of the minimum
level necessary to operate in compliance with the Project's air permit
and the minimum load requirement imposed by the reasonable
capabilities of the Project equipment or other Project Constraints
which is 45 megawatts capacity on each gas turbine unit.
2. RAMP RATES. The estimated maximum ramp rate of each gas turbine unit
is 8-10 MW per minute, assuming a warm (less than 8 hour shutdown)
steam turbine/HRSG. Ramp rates without the steam turbine warm may also
be limited by the Start-up constraints described in Section 3 below.
3. START-UP TIMES. The estimated time periods from commencement of
Startup to the maximum output level achievable within 30 minutes of a
dispatch notice and full load operation of the Project are related to
the off line periods, as follows:
Prior off line
period: Less Than 8 Hours 8 to 48 Hours Greater than 48 Hours
----------------- ------------- ---------------------
Time to 80 MW 30 Minutes 30 Minutes 30 Minutes
Time to Project Capacity 2 Hours 4 Hours 6 Hours
4. EMISSIONS CONSTRAINTS AND LIMITATIONS. Buyer may schedule energy from
the Project only in a manner that will allow Seller to comply with all
state and federal environmental laws and regulations in effect from
time to time. It is currently estimated that compliance with Section 1
above will be sufficient to satisfy the requirements of Section 4.
Seller will provide Buyer with copies of all federal and state
environmental permits relating to the Project upon the reasonable
request of Buyer. Environmental permit limits for liquid fuel (Jet A)
firing are 1,440 hours per turbine per year.
5. FUEL SUPPLY AND TRANSPORTATION CONSTRAINTS. The transportation of the
necessary Buyer's Fuel Supply Requirement from the Fuel Delivery
Point(s) to the Project is permitted in accordance with the terms of
the tariff of Oneok Westex Gas Transmission Company.
6. REACTIVE POWER SUPPORT. Reactive Power will not be supplied outside of
the protective limits of each Project generators.
7. MAXIMUM QUANTITY. Where the Project Capacity is greater than the
Contract Capacity, Buyer may dispatch the Project up to such Project
Capacity for periods of time only as are reasonably acceptable to
Seller. The foregoing shall not affect Buyer's ability to dispatch the
Project at the Contract Capacity.
8. PERIODIC JET A (LIQUID FUEL) PURGING. Buyer will be responsible for
the fuel required to periodically test and purge the liquid fuel
system, to maintain operability. Testing is expected to be 5 to 10
minutes per turbine on a bi-weekly basis.
9. START UP FUEL. The only Fuel for start up of the gas turbines shall be
natural gas.
EXHIBIT D
PLANNED OUTAGES
No later than December 15 of each Calendar Year, and commencing with
December 15, 2003, Seller shall deliver to Buyer a written schedule for Planned
Outages during the next succeeding Calendar Year. In preparing this schedule:
(i) Seller shall use reasonable efforts to establish a
schedule that is in accordance with Prudent Industry Practice; and
(ii) Seller shall consult with Buyer regarding Seller's
proposed schedule and shall use reasonable efforts to accommodate
Buyer's requests to adjust schedule in accordance with Buyer's
suggestions; provided that Seller shall not be required to so adjust
the schedule if Seller reasonably determines that such adjustment would
have an adverse effect on the Project, Seller or the Project operator
or be inconsistent with Prudent Industry Practice.
Following the delivery of the schedule for a Calendar Year, as
described above, if Seller determines that it is necessary to modify the
schedule, Seller shall promptly notify Buyer in writing. If Buyer requests
adjustments to such modified schedule, Seller shall use reasonable efforts to
accommodate Buyer's requests to adjust the schedule for Planned Outages in
accordance with Buyer's suggestions, provided that Seller shall not be required
to so adjust the schedule if Seller reasonably determines that such adjustment
would have an adverse effect on the Project, Seller or Project operator or be
inconsistent with Prudent Industry Practice. Notwithstanding anything to the
contrary, no Planned Outages shall be scheduled or performed during the period
of June 1 through September 30 of each Calendar Year without the prior consent
of Buyer, which Buyer may withhold in Buyer's sole discretion.
The Parties recognize that the expected duration of a Planned Outage
may be subject to change based upon circumstances that occur or are discovered
during the course of the Planned Outage. Seller shall keep Buyer periodically
informed as to the status and expected duration of any Planned Outage
Seller shall provide such information as Buyer may reasonably request
from time to time as to the then current schedule and expected duration of
Planned Outages.
The hours attributable to Planned Outages for a Combustion Inspection,
Hot Gas Path Inspections, Steam Turbine/ Generator Maintenance and Major
Maintenance Overhauls will be excluded from availability calculations. As used
above, the terms "Combustion Inspection", "Hot Gas Path Inspection", "Steam
Turbine/ Generator Maintenance" and "Major Maintenance Overhaul" refer to the
Planned Outages of those types specified by the manufacturer of the combustion
turbine/generators and steam turbine/generators for the Project. Seller shall
not be permitted to declare a Planned Outage and operate the Project during the
period in which Seller claimed a Planned Outage without the consent of Buyer
except in connection with testing of the Project in accordance with Prudent
Industry Practices.
EXHIBIT E
ADDRESSES
If to Seller:
Power Resources Ltd.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
Facsimile: 402.231.1658
Operational Notices:
Power Resources, Ltd.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
P. O. Box 2700 Big Spring, Texas 79721
Attn: General Manager
Phone: (▇▇▇)▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Billing Information:
Power Resources, Ltd.
P. ▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Payment Information:
Name on account: Power Resources, Ltd.
Name of bank: US Bank
Address of bank: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Account number: 1 508 9032 8571
ABA number: ▇▇▇▇▇▇▇▇▇
If to Buyer:
ONEOK Energy Marketing and Trading Company, L.P.
Mailing Address: Street Address:
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▇.▇. ▇▇▇ ▇▇▇▇ 100 West Fifth Street, 16th Floor
Tulsa, OK 74102-2405 ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CONTACT INFORMATION: PAYMENT INFORMATION:
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Notices and Confirmations: Wire Transfer or ACH Nos.:
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Attn.: ▇▇▇▇ ▇▇▇▇▇▇, Vice President Bank of America
Phone: (▇▇▇) ▇▇▇-▇▇▇▇ Tulsa, OK
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ ABA # ▇▇▇▇▇▇▇▇▇
Acct. # 032026103162
Payables and Receivables:
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Attn.: Accounting Department By Mail:
Phone: (▇▇▇) ▇▇▇-▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
EXHIBIT F
ANTICIPATED CONVERSION HEAT RATE
The following tables illustrate the Anticipated Conversion Heat Rates
for natural gas at the corresponding scheduling levels as shown below and at the
ambient conditions indicated. The temperature correction for the heat rate test
will be performed by interpolation between two representative points given
below. The representative points will be those points which are closest to the
temperature measured on the calibrated plant dry bulb instrument.
80MW LOAD
ANTICIPATED
HEAT RATE
DRY BULB W/ STEAM
TEMP CONVERSION
MONTH (DEGREES F) (BTU/KWH)
----- ----------- -----------
1 January 43.7 9,366
2 February 45.9 9,404
3 March 59.0 9,473
4 April 68.0 9,336
5 May 76.1 9,402
6 June 79.4 9,407
7 July ▇▇ ▇▇
▇ ▇▇▇▇▇▇ ▇▇ ▇▇
▇ September 75.7 9,382
10 October 63.5 9,339
11 November 49.0 9,453
12 December 42.8 9,367
AVERAGE 9,393
-----
* The Anticipated Conversion Heat Rate for 80MW load is 9,407 Btu/kWh up to a
temperature of 90 degrees F.
120MW LOAD
ANTICIPATED
HEAT RATE
DRY BULB W/ STEAM
TEMP CONVERSION
MONTH (DEGREES F) (BTU/KWH)
----- ----------- -----------
1 January 44.2 9,659
2 February NA NA
3 March 51.0 9,595
4 April 66.8 9,457
5 May 72.8 9,445
6 June 82.0 9,394
7 July 80.8 9,444
8 August 84.7 9,361
9 September 75.5 9,457
10 October 63.0 9,561
11 November 49.7 9,645
12 December 44.4 9,740
AVERAGE 9,523
------- -----
* The Anticipated Conversion Heat Rate for 120MW load is 9,361 Btu/kWh up to a
temperature of 85 degrees F.
200MW LOAD
ANTICIPATED
HEAT RATE
DRY BULB W/ STEAM
TEMP CONVERSION
MONTH (DEGREES F) (BTU/KWH)
----- ----------- ----------
1 January 44.0 8,675
2 February 47.2 8,642
3 March 55.0 8,605
4 April 67.8 8,558
5 May 75.9 8,561
6 June 80.6 8,532
7 July 83.1 8,515
8 August 86.3 8,532
9 September 75.6 8,546
10 October 61.7 8,606
11 November 49.5 8,681
12 December 43.7 8,683
AVERAGE 8,595
------- -----
* The Anticipated Conversion Heat Rate for 200MW load is 8,515 Btu/kWh up to a
temperature of 95 degrees F.
EXHIBIT G
INTERCONNECTION AGREEMENT
(ATTACHED)