EXHIBIT 10.37
POWER PURCHASE AND OPERATING AGREEMENT
BETWEEN
PANDA ENERGY CORPORATION
AND
VIRGINIA ELECTRIC AND POWER COMPANY
Power Purchase and Operating
Agreement
Table of Contents
Article
1 Definitions 4
2 Sale and Purchase of Energy and Capacity 11
3 Notices 12
4 Pre-Operation Period 13
5 Term and Termination 17
6 Representations and Warranties of Operator 20
7 Control and Operation of Facility; Dispatching 25
8 Interconnection 29
9 Metering 32
10 Compensation, Payment, and ▇▇▇▇▇▇▇▇ 34
11 Testing and Capacity Ratings 44
12 Insurance 50
13 Liability, Noncompliance and Guarantees ▇▇
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▇▇ Taxes and Claims for Labor and Materials 61
16 Choice of Law 61
17 Miscellaneous Provisions 62
18 Statutory and Regulatory Changes 63
19 Entirety 65
POWER PURCHASE AND OPERATING AGREEMENT
BETWEEN
PANDA ENERGY CORPORATION
AND
VIRGINIA ELECTRIC AND POWER COMPANY
THIS AGREEMENT, dated as of January 24, 1989 is by and between
PANDA ENERGY CORPORATION, a Texas corporation with its principal
office located in Dallas, Texas ("Operator") and VIRGINIA
ELECTRIC AND POWER COMPANY, a Virginia public service corporation
with its principal office located in Richmond, Virginia ("North
Carolina Power" or "the Company"). Both Operator and North
Carolina Power are herein individually referred to as "Party" and
collectively referred to as "Parties".
R E C I T A L S
WHEREAS, Operator plans to own and operate a new generation
facility located within North Carolina Power's certificated
retail service area in Roanoke Rapids, North Carolina, with a
maximum nameplate rating of 172,000 kW at a power factor of
ninety (90) percent; such facility in all future correspondence
to be identified as "the Panda Facility" (or the "Facility"); and
WHEREAS, the Parties currently anticipate that the
Commercial Operations Date (as defined in this Agreement) will
occur on or about June 14, 1990 (such date hereafter the
"Anticipated Commercial Operations Date"); and
WHEREAS, Operator wishes to sell exclusively to North
Carolina Power all of the Facility's generation made available
for sale, such sale to be pursuant to the terms and conditions
set forth herein; and
WHEREAS, North Carolina Power wishes to purchase energy and
capacity which may be dispatched by North Carolina Power pursuant
to the terms and conditions set forth herein:
NOW, THEREFORE, in consideration of these premises and of
the mutual covenants and agreements hereinafter set forth,
Operator and North Carolina Power agree to the following:
ARTICLE 1: DEFINITIONS
Whenever the following terms appear in this Agreement,
whether in the singular or in the plural, present or past tense,
they shall have the meaning stated below:
1.1 "Business Day" - Monday through Friday excluding
holidays recognized by North Carolina Power. As of the date of
this Agreement, these holidays include New Year's Day, Good
Friday, Memorial Day, Fourth of July, Labor Day, Veteran's Day,
Thanksgiving Day, day after Thanksgiving Day, Christmas Eve and
Christmas Day. Such holidays may be changed by North Carolina
Power upon ten (10) Days written notice to Operator.
1.2 "Calendar Day or Day" - A Calendar Day shall be the 24-
hour period beginning and ending at 12:00 midnight Eastern Time.
The terms Day and Calendar Day may be used interchangeably and
shall have the same definition.
1.3 "Calendar Month or Month" - A Calendar Month shall
begin at 12:00 midnight on the last Day of the preceding month
and end at 12:00 midnight on the last Day of the current Month.
The terms Month and Calendar Month may be used interchangeably
and shall have the same definition.
1.4 "Calendar Quarter or Quarter" - A Calendar Quarter shall
be a 3-Month period beginning 12:00 midnight on December 31,
March 31, June 30, or September 30. The terms Calendar Quarter
and Quarter shall be used interchangeably and shall have the same
definition.
1.5 "Calendar Year or Year" - A Calendar Year shall be the
12-Month period beginning 12:00 midnight on December 31 and
ending at 12:00 midnight on the subsequent December 31. The terms
Year and Calendar Year may be used interchangeably and shall have
the same definition.
1.6 "Capacity Purchase Price" - The price North Carolina
Power will pay Operator for Dependable Capacity in accordance
with Article 10.
1.7 "Capacity Test Period" - One of the periods which either
(i) begins with the Commercial Operations Date and ends on the
next November 30, (ii) begins on December 1 and ends on the next
November 30, or (iii) begins on December 1 and ends with the date
of termination of this Agreement. Definition (i) will apply first
for one period, definition (iii) will apply last for one period,
definition (ii) will apply for all other such periods.
1.8 "Commercial Operations Date" The first Day following
the date Operator requested the test (i.e., Initial Test or
additional) that determines initial Dependable Capacity as set
forth in Sections 11.3 and 11.4.
1.9 "Dependable Capacity" - The amount of capacity
determined by testing pursuant to Article 11 and delivered from
the Facility to North Carolina Power.
1.10 "Design Limits" - When the Facility operates pursuant
to Virginia Power's Dispatch rights in accordance with this
Agreement, it is capable of operation over the continuous range
from 0 MW (the "Minimum Operating Level") through 150 MW (Summer)
and 170 MW (Winter) (the "Maximum Operating Level"), except that
due to the equipment installed the Facility cannot be operated in
the range of zero (0) percent to thirty-five (35) percent of the
Dependable Capacity or fifty (50) percent to seventy-five (75)
percent of the Dependable Capacity except in an Emergency. After
the Facility has been off line due to a Scheduled Outage, a
Forced Outage, or in response to Virginia Power's Dispatch of the
Facility for a period in excess of twelve (12) hours (i.e.: a
cold start), it can it can be resynchronized and brought to its
Minimum Operating Level within twenty (20) minutes and can
achieve its Maximum Operating Level within one hundred eighty
(180) minutes following Virginia Power's notice to start-up the
Facility. Hot and Warm start-up times shall be determined in
accordance with the characteristics of the Facility and Prudent
Utility Practices and incorporated into the operating procedures
developed pursuant to Section 4.4 of this Agreement. Once the
Facility has been synchronized with Virginia Power's system and
brought to its Minimum Operating Level, its output may be
increased at a rate not less than four (4) percent of the
generator nameplate rating per minute. If the Facility is
operating above its Minimum Operating Level, its output may be
reduced at a rate not less than ten (10) percent of the generator
nameplate rating per minute down to the Minimum Operating Level.
1.11 "Dispatch" - The ability of North Carolina Power's
System Operation Center to schedule and control, directly or
indirectly, manually or automatically, the generation of the
Facility in order to increase or decrease the electricity
delivered to the North Carolina Power system in accordance with
the Prudent Utility Practice.
1.12 "Economic Dispatch" - The distribution of total North
Carolina Power energy needs among available sources for optimum
system economy in accordance with the Prudent Utility Practice
with due consideration of incremental generating costs,
incremental power purchase costs, and incremental transmission
losses as determined solely by North Carolina Power.
1.13 "Emergency" - A condition or situation which in the
sole judgment of North Carolina Power affects or will affect
North Carolina Power's ability to meet its obligations to
maintain safe, adequate and continuous electric service to North
Carolina Power's customers and/or the customers of any member
NERC.
1.14 "Energy Purchase Price" - The price per kilowatt hour
North Carolina Power will pay Operator for energy delivered to
North Carolina Power in accordance with Article 10.
1.15 "Estimated Dependable Capacity" - The Dependable
Capacity for both the Summer Period and the Winter Period that
Operator commits to North Carolina Power as designated under the
provisions of Article 11.
1.16 "FERC"- The Federal Energy Regulatory Commission or any
successor thereto.
1.17 "Facility" - Operator's generation facility, including
auxiliary equipment and equipment installed on Operator's side of
the Interconnection Point that are not "Interconnection
Facilities".
1.18 "Financial Closing" - The date on which documents which
provide funding for the construction of the Facility are
executed.
1.19 "Forced Outage" - An interruption of the Facility's
generation that is not (a) the result of a Scheduled Outage or
(b) requested by North Carolina Power in accordance with the
terms of this Agreement.
1.20 "Forced Outage Day" - Each continuous twenty-four (24)
hour period (a) beginning with the start of a -Forced Outage
[regardless of the number of actual outages that may occur during
such twenty-four (24) hour period(s)] or (b) designated by the
Operator as a Forced Outage Day.
1.21 "Force Majeure Day" - A Forced Outage Day that is both
(i) excused under the provisions of Article 14 and (ii) is
designated as a Force Majeure Day by the Operator.
1.22 "Heat Rate" The number of British Thermal Units (Btus)
projected by the Operator to be required to produce one kilowatt-
hour of energy at the Facility. This number will be a constant
for future calculations of the Fuel Compensation Price,
regardless of the Facility's actual heat rate.
1.23 "Initial Synchronization Date"- The first date upon
which (a) energy is generated by the Facility and (b) such energy
is metered by the North Carolina Power-owned metering equipment.
1.24 "Interconnection Facilities" - All the facilities
installed by North Carolina Power to enable North Carolina Power
to receive energy, or energy and Dependable Capacity, from the
Facility, including but not limited to all metering equipment;
transmission and distribution lines and associated equipment;
transformers and associated equipment; relay and switching
equipment; protective devices and safety equipment; and
telemetering equipment, wherever located.
1.25 "Interconnection Point" - The physical point(s) where
the output of the Facility is delivered to the North Carolina
Power system. This point will be on the high side of Operator's
step-up transformer.
1.26 "Interest" - The compensation for the accrual of
monetary obligations under this Agreement computed monthly and
prorated daily from the time each such obligation arises based on
an annual interest rate equal to the Prime Rate plus two (2)
percent. For purposes hereof, Prime Rate shall mean the rate of
interest from time to time publicly announced by The Chase
Manhattan Bank, N.A., at its principal office, presently located
at ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as its
prime commercial lending rate, determined for each obligation to
pay interest, at the time such obligation arises.
1.27 "NERC" - The North American Electric Reliability
Council, including any successor thereto and subdivisions
thereof.
1.28 "Net Electrical Output" - All of the Facility's energy
output made available for sale; such Net Electrical Output shall
be measured by the North Carolina Power-owned metering that would
be located both (a) on the high voltage side of the step-up
transformer and (b) on the North Carolina Power-owned side of the
Interconnection Point.
1.29 "Prudent Electrical Practices" - The practices, methods
and use of equipment required (i) to protect North Carolina
Power's system, employees, agents, and customers from
malfunctions occurring at the Facility; (ii) to protect the
Facility, and Operator's employees and agents at the Facility,
from malfunctions occurring on North Carolina Power's system or
on any other electric utility with which North Carolina Power is
directly or indirectly electrically connected; and (iii) to
adhere to applicable industry codes, standards, and regulations.
1.30 "Prudent Utility Practices" - The practices generally
followed by the electric utility industry, as changed from time
to time, which generally include, but are not limited to,
engineering and operating considerations.
1.31 "PURPA" - The Public Utility Regulatory Policies Act of
1978.
1.32 "Qualifying Facility" - A cogeneration facility or a
small power production facility which is a Qualifying Facility
under Subpart B of Subchapter K, Part 292 of Chapter I, Title 18,
Code of Federal Regulations, promulgated by the FERC. Such a
facility must be "new capacity" pursuant to PURPA, construction
of which began on or after November 9, 1978.
1.33 "Scheduled Outage" - A planned interruption of the
Facility's generation that (a) has been coordinated in advance
with North Carolina Power with a mutually agreed start and
duration pursuant to Article 7 and (b) is required for
inspection, preventive maintenance or corrective maintenance.
1.34 "Summer Demonstration Period" - The Summer
Demonstration Period shall be the period beginning 12:00 midnight
on June 14 and ending at 12:00 midnight on the following
September 15.
1.35 "Summer Period" - The Summer Period shall be the six
(6) Month period beginning 12:00 midnight on March 31 and ending
at 12:00 midnight on the following September 30.
1.36 "Term" The initial Term of this Agreement as specified
in Section 5.1 plus any renewal Term determined pursuant to
Section 5.2.
1.37 "Winter Demonstration Period" - The Winter
Demonstration Period shall be the period beginning 12:00 midnight
on November 30 and ending at 12:00 midnight on the last Day of
the following February.
1.38 "Winter Period" - The Winter Period shall be the six
(6) Month period beginning 12:00 midnight on September 30 and
ending at 12:00 midnight on the following March 31.
ARTICLE 2: Sale and Purchase of Energy and
Capacity
2.1 Operator agrees to sell and North Carolina Power agrees
to purchase the Net Electrical Output of the Facility but only to
the extent that the Facility is subject to Economic Dispatch by
North Carolina Power and subject to the Terms and Conditions of
this Agreement.
2.2 Except as otherwise provided herein, and subject to
other terms hereof, Operator agrees to sell and North Carolina
Power agrees to purchase Dependable Capacity from the Facility as
determined pursuant to Article 11 - Testing and Capacity Ratings.
2.3 Notwithstanding anything in this Agreement to the
contrary, and without limiting any other obligations of Operator
in this Agreement, North Carolina Power's obligation to purchase
energy and Dependable Capacity from Operator at the rates
specified in Article 10 is contingent upon Operator's submittal
to North Carolina Power of all the following:
a) Documents and other evidence demonstrating that Operator
has the right to operate the Facility and deliver the electricity
for the Term of this Agreement.
(b) Documents and other evidence demonstrating to the
reasonable satisfaction of North Carolina Power that the
Facility, if operated and maintained in accordance with Prudent
Electrical Practices and Prudent Utility Practices, can be
reasonably expected to have a useful life at least equal to the
Term. Evidence required under this subsection may be submitted by
Operator upon the completion of each phase of development (for
example, completion of conceptual engineering design, completion
of specifications of major equipment components, completion of
detailed engineering, completion of as-built drawings and receipt
of manufacturers' guaranteed performance data).
(c) Documents and other evidence demonstrating that the
Facility has been constructed in compliance with the terms of
this Agreement and the information submitted pursuant to Section
2.3(b).
(d) Evidence that the Facility is a Qualifying Facility.
(e) Certificates of insurance coverages or insurance
policies required by Article 12.
(f) Evidence that Operator has obtained all necessary
permits, licenses, approvals and other governmental
authorizations needed to construct and operate the Facility,
including without limitation a Certificate of Public Convenience
and Necessity as granted by the North Carolina Utilities
Commission.
(g) Necessary technical documents and data sufficient for
North Carolina Power to perform its interconnection study and
design, for construction and installation of Interconnection
Facilities.
(h) Evidence to the reasonable satisfaction of North
Carolina Power that Operator has complied with all requirements
of Article 4, to the extent compliance is required before the
Initial Synchronization Date.
(i) Documents and other evidence to the reasonable
satisfaction of North Carolina Power that Operator has complied
with the requirements of Section 8.7.
ARTICLE 3: Notices
3.1 Any notice or communication required to be in writing
hereunder shall be given by any of the following means:
registered, certified, or first class mail, telex, telecopy, or
telegram. Such notice or communication shall be sent to the
respective Parties at the address listed below. Except as
Expressly provided herein, any notice shall be deemed to have
been given when sent. Any notice given by first class mail shall
be considered sent at the time of posting. Communications by
telex, telecopy, or telegram shall be confirmed by depositing a
copy of the same in the post office for transmission by
registered, certified, or first class mail in an envelope
properly addressed as follows:
In the case of Operator to:
Panda Energy Corporation
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In the case of North Carolina Power to:
Virginia Electric and Power Company (if by hand)
Manager - Capacity Acquisition
Richmond Plaza
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▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Virginia Electric and Power Company (if by mail)
Manager - Capacity Acquisition
P. O. ▇▇▇ ▇▇▇▇▇
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3.2 Either Party may, by written notice to the other, change
the representative or the address to which such notices and
communications are to be sent.
ARTICLE 4: Pre-Operation Period
4.1 Operator shall, at its expense, acquire, and maintain in
effect, from the FERC and from any and all other federal, state
and local agencies, commissions and authorities with jurisdiction
over Operator and/or the Facility, all permits, licenses, and
approvals, and complete or have completed all environmental
impact studies necessary (a) for the construction, operation and
maintenance of the Facility and (b) for Operator to perform its
obligations under this Agreement. In addition Operator shall, at
its expense, acquire from the FERC, certification as a Qualifying
Facility and shall operate and maintain the Facility in a manner
consistent with the minimum requirements for such certification
in effect at the Commercial Operations Date: except, however that
if the Operator's steam host should discontinue its purchases of
steam from Operator, Operator shall use its best efforts to
acquire another host which would cause compliance with the
requirements for QF certification. If Operator, for any reason,
loses its QF certification, Operator agrees to obtain approval of
any state or federal agencies needed for this Agreement to
continue in effect if it is deemed a wholesale electric contract
(for example under Section 205 of the Federal Power Act). If such
approval is not obtained within twelve (12) months of the
Facility's loss of QF certification then North Carolina Power may
terminate this Agreement.
4.2 Operator shall submit for North Carolina Power's review
its construction schedule thirty (30) Days prior to starting
Facility construction and a start-up and test schedule for the
Facility thirty (30) Days prior to start-up and testing of new
Facilities. Operator shall submit progress reports in a form
reasonably satisfactory to North Carolina Power on the first Day
of every Month until the Initial Synchronization Date and notify
North Carolina Power of any changes to such schedules in a timely
manner. North Carolina Power shall have the right to monitor the
construction, start-up and testing of the Facility and Operator
shall comply with all reasonable requests of North Carolina Power
resulting therefrom. Operator shall cooperate in such physical
inspections of the Facility as may be reasonably required by
North Carolina Power during and after completion of construction.
North Carolina Power's technical review and inspection of the
Facility shall not be construed as endorsing the design thereof
nor as any warranty of the safety, durability or reliability of
the Facility.
4.3 Operator shall provide North Carolina Power with
generator manufacturer's capability curves, relay types, and
proposed relay settings for review and inspection by North
Carolina Power no later than two hundred and ten (210) Days prior
to the Anticipated Commercial Operations Date. Within sixty (60)
Days of receiving such material, North Carolina Power shall
inform Operator, in writing, if the proposed relay types and
relay settings are acceptable. If these are not found to be
acceptable to North Carolina Power, Operator agrees to comply
with any requests, by North Carolina Power, to provide acceptable
relay types and relay settings. Operator shall also provide North
Carolina Power with Facility design heat balance, flow diagrams
and major equipment list for review. All information must be
submitted in a manner reasonably acceptable to North Carolina
Power, particularly the turbine generator data, which shall be
used for North Carolina Power's inspections and transient
stability analysis. Turbine generator data must be completely
submitted at least two hundred and ten (210) Days prior to the
Anticipated Commercial Operations Date. If any such data
submitted in accordance with this Section 4.3 is estimated,
actual data shall be submitted no later than one hundred twenty
(120) Days prior to the Anticipated Commercial Operations Date.
4.4 Operator and North Carolina Power shall mutually develop
written operating procedures no later than one hundred and twenty
(120) Days prior to the Anticipated Commercial Operations Date.
The operating procedures will be a mutual agreement based on the
design of the Facility and the design of the interconnection to
North Carolina Power's bulk electric system. The operating
procedures will be intended as a guide on how to integrate the
Operator's Facility and output into North Carolina Power's bulk
electric system. Topics covered shall include, but not
necessarily be limited to, method of day-to-day communications:
key personnel list for both Operator and utility operating
centers; clearances and switching practices; outage scheduling;
daily capacity and energy reports; unit operations log; and
reactive power support.
4.5 North Carolina Power shall prepare and submit to
Operator a written voltage schedule no later than thirty (30)
Days prior to the Anticipated Commercial Operations Date. North
Carolina Power may change such voltage schedule upon thirty (30)
Days prior written notice to Operator. Operator shall use such
voltage schedule in the operation of its Facility. This voltage
schedule shall be based on the normally expected operating
conditions for the Facility and the reactive power requirements
of North Carolina Power's system.
4.6 Operator shall notify North Carolina Power of the
Initial Synchronization Date in writing no less than two (2)
weeks prior to that date. North Carolina Power and Operator shall
agree on the Initial Synchronization Date and North Carolina
Power shall have the right to have representatives present at
such time.
4.7 North Carolina Power reserves the right to delay the
Initial Synchronization Date due to problems with the Facility
which could reasonably be expected to adversely affect North
Carolina Power's operations. In such event, North Carolina Power
shall give Operator written notice of such problems and Operator
shall remedy any such problems with facilities or equipment which
Operator installed or maintains.
ARTICLE 5: Term and Termination
5.1 The Term of this Agreement shall begin with the
effective date and shall continue for a period of twenty-five
(25) years from the Commercial Operations Date unless extended
under this Article 5, terminated, or canceled. If the Term is
extended under this Article 5, the word "Term" shall thereafter
be deemed to mean the original Term so extended.
5.2 This Agreement may be extended for periods of up to five
(5) years each, provided that two (2) years prior to the end of
the initial Term, or subsequent extension period(s) as the case
may be, the Parties agree in writing to such extension.
5.3 If either Party materially defaults (hereafter referred
to as "Default") under this Agreement, then the non-defaulting
Party shall give the defaulting Party written notice describing
such Default. The defaulting Party shall be given sixty (60) Days
from the receipt of such notice to cure such Default. However, if
such written notice is given prior to the Commercial Operations
Date, and the Default cannot be cured within sixty (60) Days with
the exercise of reasonable diligence, the non-defaulting Party
shall grant an additional thirty (30) Day period of time in which
to cure such Default. Conversely, if such written notice is given
on or after the Commercial Operations Date, and the Default
cannot be cured within sixty (60) Days with the exercise of
reasonable diligence, the non-defaulting Party shall grant a
reasonable additional period of time in which to cure such
Default. In either case, if the defaulting Party fails to cure
such Default within such prescribed period, then the non-
defaulting Party may, in addition to any other rights or remedies
available at law or in equity, immediately terminate this
Agreement and consider defaulting Party in material breach of its
obligations under this Agreement. Conditions which shall be
considered Defaults by Operator under this Section 5.3 include:
(a) Failure to comply with the requirements of Article 13;
or
(b) Failure to complete Financial Closing by December 31,
1989, failure to commence construction of the Facility by
December 31, 1989, abandonment of construction or operation of
the Facility at any time, failure to arrange for fuel supply
contracts by December 31, 1989, and failure to reach the
Commercial Operations Date by the later of June 14, 1991 or
thirty (30) Days after North Carolina Power advises Operator that
the Interconnection Facilities are sufficient to accept
deliveries up to the Estimated Dependable Capacity .unless
excused by Force Majeure as specified in Article 14; or
(c) Attempts by Operator, its employees, contractors or
subcontractors of any tier, to operate, maintain, or tamper with
the Interconnection Facilities without the prior written consent
of North Carolina Power; any reduction in Operator's energy sales
to North Carolina Power in order to sell to any other entity or
entities; any breach of financial documents associated with the
performance of this Agreement; failure to comply with the
requirements of Section 2.3 and Section 4.1; failure to comply
with the representations and warranties specified in Article 6;
failure to comply with the insurance provisions identified in
Article 12; failure to comply with the requirements of Section
17.1; or
(d) A receiver or liquidator or trustee of Operator or of
any of its property shall be appointed by a court of competent
jurisdiction; or by decree of such a court, a party shall be
adjudicated bankrupt or insolvent or any substantial part of its
property shall have been sequestered; or a petition to declare
bankruptcy or to reorganize a party pursuant to any of the
provisions of the Federal Bankruptcy Code, as now in effect or as
it may hereafter be amended, or pursuant to any other similar
state statute as now or hereafter in effect, shall be filed
against a party and shall not be dismissed within ninety (90)
Days after such filing; or Operator shall file a voluntary
petition in bankruptcy under any provision of any federal or
state bankruptcy law or shall consent to the filing of any
bankruptcy or reorganization petition against it under any
similar law; or without limiting of the generality of the
foregoing, Operator shall file a petition or answer or consent
seeking relief or assisting in seeking relief in a bankruptcy
under any provision of any federal or state bankruptcy law or
shall consent to the filing of any bankruptcy or reorganization
petition against it under any similar law; or without limiting of
the generality of the foregoing, Operator shall file a petition
or answer or consent seeking relief or assisting in seeking
relief in a proceeding under any of the provisions of the Federal
Bankruptcy Code, as now in effect or as it may hereafter be
amended, or pursuant to any other similar state statute as now or
hereafter in effect, or an answer admitting the material
allegations of a petition filed against it in such a proceeding;
or Operator shall make an assignment for the benefit of its
creditors; or Operator shall admit in writing its inability to
pay its debts generally as they become due; or Operator shall
consent to the appointment of a receiver, trustee, or liquidator
of it or of all or any part of its property.
(e) Any other material breach hereof.
5.4 Termination of this Agreement shall not be construed as
a forfeiture or waiver of any statutory right of a Qualifying
Facility to sell to North Carolina Power nonfirm energy produced
from the Facility.
ARTICLE 6: Representations and Warranties of Operator
6.1 Operator represents and warrants that beginning with
the Commercial Operations Date and at all times thereafter until
the termination of this Agreement that it shall have (i) fuel oil
stored at the Facility site in quantities sufficient to operate
the Facility for thirty-six (36) consecutive hours at the
Dependable Capacity level determined in accordance with Article
11, (ii) fuel oil stored within four (4) miles of the Facility
site at a location owned, leased or otherwise controlled by
Operator in quantities sufficient to operate the Facility for one
hundred and thirty-two (132) consecutive hours at the Dependable
Capacity level determined in accordance with Article 11, and
(iii) a means to transport the fuel oil from the off-site
location to the Facility site, such means to be owned or fully
controlled by Operator. From time to time, as North Carolina
Power may reasonably request, Operator shall provide North
Carolina Power evidence of its compliance with this obligation.
6.2 Operator warrants that the Facility will be operated
and maintained in accordance with (a) operating and maintenance
standards recommended by the Facility's equipment suppliers, (b)
operating procedures developed pursuant to Section 4.4 and (c)
Prudent Utility Practices, including without limitation,
synchronizing, voltage and reactive power control.
6.3 Operator warrants that the Facility will be operated in
such a manner so as not to have an adverse effect on North
Carolina Power's voltage level or voltage waveform.
6.4 Operator warrants that the Facility will be operated at
the voltage levels determined pursuant to Section 4.5 provided
such levels are within the Design Limits of the Facility.
6.5 Operator shall, at all times, conform to all laws,
ordinances, rules and regulations applicable to it. Operator
shall give all required notices, shall procure and maintain all
governmental permits, licenses and inspections necessary for its
performance of this Agreement, and shall pay all charges and fees
in connection therewith.
6.6 Operator agrees to comply with all applicable
provisions of Executive Order 11246, as amended; paragraph 503 of the
Rehabilitation Act of 1973, as amended; paragraph 402 of the Vietnam Era
Veterans Readjustment Assistance Act of 1974, as amended; and
implementing regulations set forth in 41 C.F.R. paragraphs 60.1, 60-250,
and 60-741. Operator agrees that the equal opportunity clause set
forth in 41 C.F.R. paragraph 60-1.4 and the affirmative action clauses
set forth in 41 C.F.R. paragraph 60-250.4 and 41 C.F.R. paragrah 60-741.4
are hereby incorporated by reference and made a part of this
Agreement. Operator certifies that it does not and will not
maintain any facilities it provides for its employees in a
segregated manner and that it does not and will not permit its
employees to perform their services at any location under
Operator's control where segregated facilities are maintained.
Operator further agrees to submit and obtain such certifications
of nonsegregated facilities as are required by 41 C.F.R. paragraph 60-
1.8. The provisions of this section shall apply to Operator only
to the extent that (a) such provisions are required of Operator
under existing law, (b) Operator is not otherwise exempt from
said provisions and (c) compliance with said provisions is
consistent with and not violative of 42 U.S.C. paragraph 2000e et seq.,
42 U.S.C. paragraph 1981 et seq., or other acts of Congress.
6.7 Any fines or other penalties incurred by Operator or its
agents, employees or subcontractors for noncompliance by
Operator, its employees, or subcontractors with laws, rules,
regulations or ordinances shall not be reimbursed by North
Carolina Power but shall be the sole responsibility of Operator.
If fines, penalties or legal costs are assessed against North
Carolina Power by any government agency or court due to
noncompliance by Operator with any of the laws, rules,
regulations or ordinances referred to in Sections 6.5 and 6.6
above or any other laws, rules, regulations or ordinances with
which compliance is required herein, or if the work of Operator
or any part thereof is delayed or stopped by order of any
government agency or court due to Operator's noncompliance with
any such laws, rules, regulations or ordinances, Operator shall
indemnify and hold harmless North Carolina Power against any and
all losses, liabilities, damages, and claims suffered or incurred
because of the failure of Operator to comply therewith. Operator
shall also reimburse North Carolina Power for any and all legal
or other expenses (including attorneys' fees) reasonably incurred
by North Carolina Power in connection with such losses,
liabilities, damages or claims.
6.8 The Operator hereby represents and warrants:
(a) The Operator is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Texas and is or shall no later than the Initial Synchronization
Date be qualified as a foreign corporation in good standing in
the State of North Carolina and in each other jurisdiction where
the failure so to qualify would have a material adverse effect
upon the business or financial condition of the Operator; and the
Operator has all requisite power and authority to conduct its
business, to own its properties, and to execute, to deliver, and
to perform its obligations under this Agreement.
(b) The execution, delivery and performance by the Operator
of this Agreement have been or shall no later than the Initial
Synchronization Date be duly authorized by all necessary
corporate action, and do not and will not (i) require any consent
or approval of the Operator's Board of Directors or shareholders,
other than those which have been or shall no later than the
Initial Synchronization Date be obtained (evidence of which shall
be, if it has not heretofore been, delivered to North Carolina
Power), (ii) violate any provisions of the Operator's corporate
bylaws or other organic documents, any indenture, contract or
agreement to which it is a party or by which it or its properties
may be bound, or any law, rule, regulation, order, writ,
judgement, injunction, decree, determination, or award presently
in effect having applicability to the Operator, or (iii) result
in a breach or constitute a default under the Operator's
corporate bylaws, other organic documents or other material
indentures, contracts, or agreements, and the Operator is not in
default under its corporate bylaws or other organic documents or
other material indentures, contracts, or agreements to which it
is a party or by which it or its property may be bound.
(c) No authorizations or approvals by any governmental or
other official agency are necessary for the due execution and
delivery by the Operator of this Agreement as in effect on the
date hereof. Operator is aware of authorizations and approvals
necessary for its performance of this Agreement and Operator
covenants that all such authorizations and approvals shall be
applied for in a timely manner.
(d) This Agreement is a valid and binding obligation of the
Operator,
(e) There is no threatened pending action or proceeding
affecting the Operator before any court, governmental agency or
arbitrator that could reasonably be expected to affect materially
and adversely the financial condition or operations of the
Operator or the ability of the Operator to perform its
obligations hereunder, or which purports to affect the legality,
validity or enforceability of this Agreement (as in effect on the
date hereof).
6.9 Operator agrees that at no cost to North Carolina
Power, Operator shall cause its counsel to issue an opinion to
North Carolina Power (i) affirming the representations in Section
6.8 and (ii) upon request by North Carolina Power addressing such
further matters as North Carolina Power may reasonably request.
6.10 Operator agrees that, upon request of North Carolina
Power, it shall deliver or cause to be delivered from time to
time to North Carolina Power certifications of its officers,
accountants, engineers, or agents as to such matters as North
Carolina Power may reasonably request.
6.11 Operator, or the general partners of Operator if
Operator is a partnership, agrees to preserve and keep in force
and effect its corporate existence and all franchises, licenses
and permits necessary to the proper conduct of its business,
including without limitation the business of constructing, owning
and operating the Facility.
6.12 Operator will keep proper books of record and account
in which full correct entries will be made of all dealings or
transactions of or in relation to its business and affairs in
accordance with generally accepted accounting principles
consistently applied. Operator shall furnish North Carolina Power
with copies of its annual financial statements and all K-1
Filings as provided to the Securities and Exchange Commission.
ARTICLE 7: Control and Operation of the Facility: Dispatch
7.1 Operator shall inform the North Carolina Power
operations center designated in the interconnection study
performed pursuant to Article 8 as to the daily operating
availability and generation capability of its Facility,
including, without limitation, any Forced Outage.
7.2 Operator shall, at least thirty (30) Days prior to the
Commercial Operations Date, submit a written maintenance schedule
for the first year of the Facility's operations Operator shall
ensure that North Carolina Power receives copies of any
maintenance evaluations or reports to be provided to any third
party with a financial security interest in or lien on the
Facility, including evaluations or reports generated at the
request of such third parties or performed by an engineer
employed by such third party. Thereafter, Operator shall submit
to North Carolina Power, in writing, by September 1 of each Year,
its desired Scheduled Outage periods for the next Year. Such
Scheduled Outages shall not exceed twenty eight (28) Days in each
Year. By October 31 of each Year, North Carolina Power shall
notify Operator in writing whether the requested Scheduled Outage
periods are acceptable. If North Carolina Power cannot accept any
of the requested Scheduled Outage periods, North Carolina Power
shall advise Operator of the time period closest to the requested
period when the outage can be scheduled. Operator shall only
schedule outages during periods approved by North Carolina Power,
and such approval shall not be unreasonably withheld.
Notwithstanding the previous sentence, Operator shall not
schedule a maintenance shutdown of its Facility during the Months
of December, January, February or during the period from June 15
through September 15 of any Year that would decrease the capacity
output of the Facility below the Dependable Capacity without the
prior written consent of North Carolina Power.
7.3 North Carolina Power shall have the right, upon six (6)
months prior written notice, to revise the Months during which
Operator shall not, unless mutually agreed, schedule a
maintenance shutdown.
7.4 Each Party shall keep complete and accurate records and
all other data required by each of them for the purposes of
proper administration of this Agreement.
(a) All such records shall be maintained for a minimum of
five (5) years after the creation of such record or data and for
any additional length of time required by regulatory agencies
with jurisdiction over the Parties; provided, however, that
Operator shall not dispose of or destroy any such records even
after the five (5) years without thirty (30) Days prior notice to
North Carolina Power.
(b) Operator shall maintain an accurate and up-to-date operating
log at the Facility with records of: (i) real and reactive power
production for each clock hour; (ii) changes in operating status,
Scheduled Outages and Forced Outages; and (iii) any unusual
conditions found during inspections.
(c) Either Party shall have the right from time to time, upon
fourteen (14) Days written notice to the other Party, to examine
the records and data of the other Party relating to this
Agreement any time during the period the records are required to
be maintained.
7.5 Operator shall control and operate the Facility consistent
with North Carolina Power's Dispatch of the Facility; provided,
however, that from time to tine North Carolina Power shall not be
obligated to purchase or receive, and may require Operator to
reduce, energy deliveries if:
(a) In North Carolina Power's sole opinion, a condition
exists which presents a physical threat to persons or property,
and such disconnection appears necessary to protect North
Carolina Power's customers, employees, agents or property; or
(b) It is necessary to construct, install, maintain, repair,
replace, remove, investigate, inspect or test any part of the
Facility or the Interconnection Facilities, or any other affected
part of North Carolina Power's system.
North Carolina Power will make a reasonable effort to notify
and coordinate such reductions with Operator. Except that with respect
to Section 7.5(b) above, North Carolina Power shall provide Operator
with at least forty-eight (48) hours prior notice. Any reduction
required of Operator hereunder shall be implemented and completed
as soon as possible consistent with Prudent Utility Practices.
7.6 In addition to North Carolina Power's rights to reduce
energy deliveries under this Agreement, North Carolina Power
shall have the right to Dispatch the Facility within its Design
Limits subject to the following notice provisions:
(a) By 4:00 p.m. on Friday of each week, North Carolina
Power will provide Operator with an estimated schedule of
operations for the following week. The actual schedule will be
determined by the requirements for operation in accordance with
Economic Dispatch or Automatic Generation Control and may be
substantially different than the schedule provided in accordance
with this section.
(b) North Carolina Power will provide Operator with five (5)
minutes notice of changes in operating levels to be achieved by
the Facility, except that when the Facility is operated with
Automatic Generation Control, North Carolina Power shall not be
required to provide such notice.
Operator agrees to comply with the notices received from North
Carolina Power pursuant to (a), (b) and (c) above. Furthermore,
North Carolina Power will Dispatch the Facility in accordance
with Virginia Power's Economic Dispatch (which includes
consideration of Virginia Power's system security and system
requirements) and without regard to Facility ownership.
7.7 Operator shall employ qualified personnel for
monitoring the Facility and for coordinating operations of the
Facility with North Carolina Power's system. Operator shall
ensure that such personnel are on duty at all times, twenty-four
(24) hours a Day and seven (7) Days a week.
7.8 The Parties recognize that North Carolina Power is a
member of NERC and that, to ensure continuous and reliable
electric service, North Carolina Power operates its system in
accordance with the operating criteria and guidelines of NERC. If
an Emergency is declared, North Carolina Power's operations
center will notify Operator's personnel and, if requested by
North Carolina Power, Operator's personnel shall place the Net
Electrical Output within the exclusive control of North Carolina
Power's operations center for the duration of such Emergency.
Without limiting the generality of the foregoing, North Carolina
Power's operations center may require Operator's personnel to
raise or lower production of energy generated by the Facility to
maintain safe and reliable load levels and voltages on North
Carolina Power's transmission and/or distribution system;
provided, however, any changes in the level of the Net Electrical
Output required of Operator hereunder shall be implemented in a
manner consistent with safe operating procedures and within the
Facility's Design Limits.
7.9 Operator shall cooperate with North Carolina Power in
establishing Emergency plans, including without limitation,
recovery from a local or widespread electrical blackout; voltage
reduction in order to effect load curtailment; and other plans
which may arise. The Operator shall make technical references
available concerning start-up times, black-start capabilities and
minimum load-carrying ability.
7.10 Operator shall, during an Emergency, supply such power
as the Facility is able to generate and North Carolina Power is
able to receive. If Operator has a Scheduled Outage, and such
Scheduled Outage occurs or would occur coincident with an
Emergency, Operator shall make all good faith efforts to
reschedule the outage or, if the outage has begun, to expedite
the completion thereof.
7.11 Operator shall operate the Facility with its Automatic
Generation Control (AGC) equipment, speed governors, and voltage
regulators in-service whenever the Facility is connected to or
operated in parallel with the North Carolina Power system at the
sole discretion of North Carolina Power.
ARTICLE 8: Interconnection
8.1 Subject to the provisions of Section 8.8 below, North
Carolina Power shall have the Interconnection Facilities
completed within the time frame determined in the interconnection
study performed in accordance with Section 8.6, however, unless
North Carolina Power agrees, in no event shall North Carolina
Power be obligated to have the Interconnection Facilities capable
of transmitting electricity earlier than sixty (60) Days prior to
the Anticipated Commercial Operations Date. North Carolina
Power's obligation is expressly conditioned on Operator's
submission of data supportive of the Interconnection in a timely
manner as required under this Agreement and in form and substance
meeting reasonable standards and expectations of North Carolina
Power.
8.2 Operator shall be responsible for the design,
construction, installation, maintenance and ownership of the
Facility (which as defined herein includes without limitation
auxiliaries and interconnection equipment on Operator's side of
the Interconnection Point).
8.3 If it is determined in the interconnection study
performed by North Carolina Power pursuant to Sections 8.6 and
8.7 below that the North Carolina Power-owned metering facilities
(which may include current ant potential transformers and
telemetering equipment) should be installed on Operator's
property, Operator shall be responsible for the installation of
such metering facilities which would be provided to Operator by
North Carolina Power. The installation of any North Carolina
Power-owned metering facilities on Operator's side of the
Interconnection Point shall be subject to North Carolina Power's
approval, which approval shall not be unreasonably withheld.
8.4 North Carolina Power shall be responsible for the
design, construction, installation, maintenance and ownership of
the Interconnection Facilities.
8.5 Within sixty (60) Days of the execution of this
Agreement, Operator shall provide to North Carolina Power data
required in Exhibit A attached hereto.
8.6 North Carolina Power shall perform an interconnection
study within one hundred and twenty (120) Days of Operator's
completion of the requirements of Section 8.5 above under
conditions agreed upon by the Parties. The interconnection study
shall, at a minimum, (a) determine the Interconnection Point and
the time required to complete the Interconnection Facilities and
(b) designate the North Carolina Power operations center that
will coordinate the operation of the Facility. The
Interconnection Facilities shall be designed consistent with
Prudent Utility Practices considering the functional one-line
diagram and site plan provided to North Carolina Power pursuant
to Section 8.5.
8.7 Within thirty (30) Days of receipt of the
interconnection study, Operator agrees to grant to North Carolina
Power all necessary rights of way and easements, including
adequate and continuing access rights on property of Operator, to
install, operate, maintain, replace and/or remove the
Interconnection Facilities located on property of Operator.
Within thirty (30) Days of receipt of the interconnection study,
Operator agrees to execute any documents as North Carolina Power
may require to record such rights of way and easements.
Consideration for such grants, deeds or documents shall be the
execution of this Agreement and no other consideration shall be
required. Operator agrees that rights of way and easements shall
survive termination or expiration of this Agreement.
8.8 When Operator has completed the requirements of Section
8.7 above, North Carolina Power shall construct the
Interconnection Facilities in accordance with the design
determined in the interconnection study performed pursuant to
Section 8.6. Failure by North Carolina Power to complete the
Interconnection Facilities within the time frame specified in the
interconnection study performed pursuant to Section 8.6 shall not
be considered a breach of this Agreement if such failure can
reasonably be attributed to any of the following:
(a) Events beyond North Carolina Power's reasonable control,
including without limitation, time delays incident to the NCUC's
granting of any required certificate(s) of convenience and
necessity, time constraints associated with the procurement of
necessary equipment and other events of force majeure set forth
in Article 14: Force Majeure.
(b) The failure of Operator to execute in time sufficient
for North Carolina Power to complete the Interconnection
Facilities grants, deeds, or documents as North Carolina Power
may require to record rights of way, easements, or other grants
in accordance with Section 8.7.
(c) Failure of Operator to provide by the required dates
technical data necessary for North Carolina Power to perform
Interconnection.
8.9 North Carolina Power reserves the right to modify or
expand its requirements for protective devices in conformance
with Prudent Electrical Practices.
8.10 Each Party shall notify the other in advance of any
changes to its system that will affect the proper coordination of
protective devices on the two systems.
ARTICLE 9: Metering
9.1 North Carolina Power shall own and maintain all meters
and metering devices (including remote terminal units) used to
measure the delivery and receipt of energy, or energy and
Dependable Capacity, for payment purposes. Nothing in this
Agreement shall prevent Operator from installing meters and
metering devices for backup purposes.
9.2 Operator shall provide at its expense:
(a) For the purpose of telemetering, a telecommunication
circuit to the operations center designated by North Carolina
Power.
(b) A voice telephone extension for the purpose of accessing
North Carolina Power's dial-up metering equipment and for
communicating with the designated North Carolina Power operations
center.
(c) An extension of North Carolina Power's System Operations
Center's PBX system in the control room of the Facility.
(d) Equipment to transmit and receive telecopies for
purposes of generation scheduling and coordination of switching.
Items provided by Operator in accordance with this Section 9.2
shall be subject to the approval of North Carolina Power, which
approval shall not unreasonably
be withheld.
9.3 All meters and metering equipment used to determine the
electric energy, or energy and Dependable Capacity, delivered to
North Carolina Power shall be sealed, and the seals broken only
by North Carolina Power personnel when the meters are to be
inspected, tested, or adjusted; North Carolina Power shall give
Operator two (2) weeks prior written notice thereof and Operator
shall have the right to be present.
9.4 At least every twelve (12) months and, in addition, upon
two (2) weeks prior written notice by Operator, North Carolina
Power will test the meter(s) in accordance with the provisions
for meter testing in North Carolina Power's approved Terms and
Conditions for Supplying Electricity as filed with the North
Carolina Utilities Commission at the time the test is performed.
Operator may have a representative present during any metering
inspection, test, or adjustment. When, as a result of such a
test, a meter is found to be no more than two (2) percent fast or
slow because of incorrect calibration or tampering, no adjustment
will be made in the amount paid to Operator for energy, or energy
and Dependable Capacity, delivered to North Carolina Power. If
the meter is found to be more than two (2) percent fast or slow,
North Carolina Power will calculate the correct amount delivered
to North Carolina Power for the actual period during which
inaccurate measurements were made or, if the actual period cannot
be determined to the mutual satisfaction of the Parties, for a
period equal to one-half of the time elapsed since the most
recent test, but in no case for a period in excess of twelve (12)
months. The previous payments by North Carolina Power for this
period shall be subtracted from the amount of payments that are
calculated to have been owed under this Agreement. The difference
shall be offset against or added to the next payment to either
Party as appropriate under this or other Agreements between the
Parties. The percentage registration of a meter will be
calculated by the weighted average of light load and full load,
which is calculated by giving a value of one (1) to the light
load and a value of four (4) to the full load.
9.5 Whenever it is found that, for any reason other than
incorrect calibration or tampering, the metering apparatus has
not registered the true amount of electricity which has been
delivered by Operator to North Carolina Power, the electricity
delivered during the entire period of incorrect registration
shall be estimated utilizing the best information available
including but not limited to any metering installed by Operator,
and the amount of electricity so estimated will be used in
calculating the corrected amounts to be paid to Operator. The
adjusted amount will be for the actual period during which
inaccurate measurements were made or, if the actual period cannot
be determined to the mutual satisfaction of the Parties, for a
period equal to one half of the time elapsed since the most
recent test of the metering apparatus, but in no case for a
period in excess of twelve (12) months. Any overpayment or
underpayment by North Carolina Power for energy, or energy and
capacity, delivered by Operator to North Carolina Power shall be
corrected in the manner described in Section 9.4.
ARTICLE 10: Compensation, Payment, and ▇▇▇▇▇▇▇▇
10.1 The Operator shall be compensated for the Net
Electrical Output of the Facility on a per kWh basis at a rate
equal to the Energy Purchase Price. The Energy Purchase Price is
composed of the Fuel Compensation Price, specified in Sections
10.2 - 10.13 below, and the O&M Price specified in Section 10.14.
10.2 The Base Fuel Compensation Price, BFCP, for energy
received from the Facility shall be 2.49 cents/kWh, effective
January 1, 1988. The Base Fuel Compensation Price was calculated
using an assumed Heat Rate of 8900 Btu/kWh ("contract Heat Rate")
and a base delivered fuel cost of $2.798/million Btu. The Base
Fuel Compensation Price shall be subject to adjustment only as
specified herein. For the purpose of determining various prices
and indices in this Article 10, the following conversion factors
shall be used to express the price of different fuels in
$/million Btu:
(a) Natural gas expressed in $/1000 cubic feet shall be
multiplied by .9709 thousand cubic feet/million Btu.
(b) One percent sulfur No. 6 oil expressed in $/barrel shall
be multiplied by 0.1580 barrels/million Btu.
(c) No. 2 oil expressed in $/gallon shall be multiplied by
7.143 gallons/million Btu.
10.3 For the purpose of this Section, the following terms,
whether in the singular or in the plural, shall have the meaning
stated below:
(a) Base Gas Index (BGI) - The average of the Composite Gas
Index for the three (3) Months of April, May, and June of 1987.
Using the definitions herein,
CGI(4,1987) + CGI(5,1987) + CGI(6,1987)
BGI = -----------------------------------------
3
The Base Gas Index is equal to $2.018/million Btu as of the
execution of this Agreement.
(b) Composite Gas Index - The index used to adjust the Fuel
Compensation Price as indicated herein, designated by CGI(m,y)
where m is the Calendar Month and y is the Year. It is a
composite of the Utility Gas Index [UTIL(m,y)], the No. 6 Oil
Index [N60(m,y)], and the Spot Gas Index [SPOT(m,y)] as defined
herein and is calculated as follows:
UTIL(m-2,y) + N60(m,y) + 2 X SPOT(m,y)
CGI(m,y) = ------------------------------------
4
(c) No. 6 Oil Index - The low Estimated New York Spot Cargo
Price for 1% maximum sulfur No. 6 oil and, designated N60(m,y),
averaged for the Month (m) and Year (y) in question.
(d) Spot Gas Index - The average of (i) the Louisiana Gulf
Coast Offshore Interstate Wellhead Spot Natural Gas Price as
published in Natural Gas Week, (ii) the Natural Gas Clearinghouse
spot price for natural gas received in onshore laterals of
Columbia Gulf and (iii) the midpoint of the range of Louisiana
Wellhead spot prices for natural gas published in Natural Gas
Intelligence. All weekly price quotations shall be averaged for
the Month (m) and Year (y) in question. The Spot Gas Index shall
be designated SPOT(m,y) averaged for the Month (m) and Year (y)
in question.
(e) Utility Gas Index - The national average natural gas
price paid by electric utilities as published in the Energy
Information Administration's Natural Gas Monthly and designated
UTIL(m,y) for the Month (m) and Year (y) in question.
10.4 At least two (2) weeks prior to the Initial
Synchronization Date and at least two (2) weeks prior to the
beginning of each subsequent Calendar Quarter thereafter, the
Fuel Compensation Price effective during that next subsequent
Calendar Quarter shall be calculated as follows:
CGI(m-2,y)
Fuel Compensation Price----------------- X BFCP
BGI
Thus, if the Fuel Compensation Price were being calculated for
the first Calendar Quarter 1990, with m-1 corresponding to the
first month of that Calendar Quarter, the numerator of the above
equation would be CGI(11,1989).
10.5 If any index included in the Composite Gas Index is
discontinued, an index specified by an appropriate U.S.
Government agency, if available, shall be substituted for such
discontinued index. If no such replacement government index is
made available, a new index shall be determined by mutual
agreement of the Parties. If any of the indices specified herein
are determined by both Parties to no longer represent market
conditions, or if the basis of calculation of those published
indices is substantially modified, the indices may be replaced by
mutual agreement of the Parties, except, however, that changes in
the base year(s) reporting basis, minor changes in weighting and
minor changes in benchmarks shall not be construed as substantial
modifications of the indices and the affected values shall be
reestablished in accordance with the instructions of the
appropriate Government agency.
10.6 Operator may, with at least two (2) weeks prior written
notice, specify, revise, or revoke a discount to the Fuel
Compensation Price to be used in the following Calendar Month.
This discount shall then be applied against the Fuel Compensation
Price as calculated herein, and the resultant price will be used
in lieu of the Fuel Compensation Price for the purposes of
payments and Economic Dispatch, whereas the non-discounted Fuel
Compensation Price shall continue to be calculated in accordance
with this Article 10. This discount will be effective, in the
form specified in the Operator's notice, until Operator provides
further notice as specified in this Section 10.6, except,
however, that such discount shall be effective for at least one
Calendar Month. The resultant discounted Fuel Compensation Price
shall not exceed the non-discounted Fuel Compensation Price
calculated in accordance with this Article 10.
10.7 Opportunities to redetermine the Base Gas Index, the
Composite Gas Index, and/or the fuel component of the Base Fuel
Compensation Price shall begin on the third July 1 after the
Commercial Operations Date, and every third July 1, thereafter.
Such date shall hereafter be the "Redetermination Date". Either
Party must submit written notice to the other Party requesting
such redetermination no less than four (4) Calendar Months prior
to the Redetermination Date. Such written notice shall include
any proposed change(s)and the basis for such change(s). The
Parties shall then enter into good faith negotiations for the
purpose of revising the Base Gas Index, the Composite Gas Index,
and/or the Base Fuel Compensation Price to reflect more
accurately the prices then prevailing in the market for prudent
purchases of natural gas. If such redetermination is not complete
within thirty (30) Days after the Redetermination Date, such
matter may be submitted to binding arbitration as discussed in
Section 10.8, below.
10.8 The location of arbitration shall be in Richmond,
Virginia, unless mutually agreed. The method of arbitration shall
be:
(a) The Parties shall agree upon a single arbitrator with
knowledge of and experience in the matter of natural gas, or, if
the Parties cannot agree;
(b) Each Party shall designate one arbitrator and the
individuals so designated shall jointly select a third
arbitrator, or, if this arbitrator selection process fails;
(c) Either Party may request the American Arbitration
Association to appoint the arbitrator(s), who shall be a
specialist(s) in the matter of natural gas.
10.9 Either Party may submit a written statement of its
position to the arbitrator(s) within thirty (30) Days of
appointment. The other Party shall then have no more than twenty
(20) Days to provide the arbitrator(s) a written response to such
statement. These statements shall be the sole subject of the
arbitration, except, however that the matters subject to
arbitration shall be limited to:
(a) A determination of a new Base Fuel Compensation Price
based on the fair market price(s) which a prudent purchaser would
pay for fuel to be delivered and used during the Month of the
Redetermination Date:
(b) A determination of appropriate indices to adjust the
Base Fuel Compensation Price in the future so as to track the
fair market price(s) in the future for natural gas in such a
facility following the Redetermination Date.
10.10 The redetermination of the Base Fuel Compensation
Price shall consider the following:
(a) A fair market price for fuel during the Month of the
Redetermination Date using both price quotes referenced in fuel
contracts and prices received on either a contract or spot basis
during the twelve (12) Month period preceding the Redetermination
Date.
(b) Prices referenced pursuant to Section 10.10 (a) above
shall only be considered when such prices apply for volumes in
excess of 5,000 million Btu per Day per supplier for use in a
fully dispatchable facility with a generating capacity of no less
than 100 MW and located within the Company's service territory.
(c) The term of commitment for transportation options,
including any and all interstate and intrastate transportation
for inclusion in this price.
(d) Prices specified for gas for which either Party has an
economic interest shall not be considered in the determination of
the revised Base Fuel Compensation Price, but may be considered
in the consideration of the revised indices.
Once the fair market price for fuel, designated "FMP", is
determined, the Base Fuel Compensation Price shall be
recalculated as follows:
Contract Heat Rate
Revised BFCP = ---------------------------------- X FMP
1,000,000
10.11 In the redetermination of indices to govern future
price adjustments, the arbitrator(s) shall consider the following:
(a) Such revised indices should be similar in operation and
intent to the indices specified herein reflecting increases and
decreases in average fuel prices, and which rely on objective,
average price data for those fuels.
(b) Such revised indices should also take into account the
delivered cost to fully dispatchable natural gas fired electric
generating facilities with capacity ratings of at least 100 MW
located in the Company's service territory;
(c) These indices should use data that is both independently
verifiable and published and updated regularly by appropriate
governmental agencies or by nongovernmental publications
recognized and accepted as authoritative.
10.12 The decisions of the arbitrator(s) on the matters
presented shall be rendered within thirty (30) Days following the
submissions, if any, of the Parties. The Base Fuel Compensation
Price and/or the associated indices established in accordance
with this Article 10 shall be binding on the Parties, and shall
be invoked before any court of competent Jurisdiction and, upon
application to such court, shall be enforced by an appropriate
Judicial order. Any joint expenses of the arbitration hearing
shall be shared equally by the Parties.
10.13 Following the decision of the arbitrator(s), the Base
Fuel Compensation Price, the Base Gas Index, and the Composite
Gas Index as defined herein shall be replaced in accordance with
those decisions, and adjustments to the Fuel Compensation Price
shall thereafter be performed as if such decisions had been
included in this Agreement. The effective date of changes
determined by such redeterminations shall be one week after the
completion of such redetermination.
10.14 North Carolina Power shall also pay Operator, on a per
kWh basis, a variable operation and maintenance adjustment. This
O&M Price shall be 0.300 cents/kWh in 1988 dollars and shall be
increased or decreased, as appropriate, on April 1, 1989 and on
each April 1 thereafter by the change in the Gross National
Product Implicit Price Deflator for the previous Calendar Year as
specified by ▇▇▇▇▇▇▇ Econometrics, or such other organization as
the Parties may mutually agree.
10.15 (a) Commencing with the Commercial Operations Date and
continuing until the fourth anniversary of such date, the
Capacity Purchase Price shall be $13.321/kW per month. Commencing
with the Day after the fourth anniversary of the Commercial
Operations Date and continuing until the sixth anniversary of
such date, the Capacity Purchase Price shall be $12.488/kW per
month. Commencing with the Day after the sixth anniversary of the
Commercial Operations Date and continuing until the eighth
anniversary of such date, the Capacity Purchase Price shall be
$11.654/kW per month. Commencing with the Day after the eighth
anniversary of the Commercial Operations Date and continuing
until the fifteenth anniversary of such date, the Capacity
Purchase Price shall be $10.821/kW per month. Commencing with the
Day after the fifteenth anniversary of the Commercial Operations
Date and continuing until the termination of this Agreement, the
Capacity Purchase Price shall be $8.321/kW per month.
(b) If a Forced Outage is excused under the provisions of
Article I4 and Operator designates such Forced Outage Days as
Force Majeure Days, then beginning the Day after Operator makes
such designation, the payments for Dependable Capacity specified
in Section 10.15(a), above, shall be suspended, prorated daily,
until the non-performing Party notifies the other Party that the
condition of Force Majeure has been overcome in accordance with
Section 14.1(d).
(c) Within sixty (60) Days after the end of each Capacity
Test Period, Operator shall refund to North Carolina Power an
amount equal to the difference between payments made for
Dependable Capacity in such period and the payments for
Dependable Capacity that should have been made during such period
at the Low Availability Capacity Purchase Price together with
Interest as if such overpayment had become due and payable at the
time such overpayment was made. Such Low Availability Capacity
Purchase Price shall be the Capacity Purchase Price during such
period less four (4) percent of such Capacity Purchase Price for
each Forced Outage Day that occurred or was designated by
Operator during that period that was not both (i) excused under
the provisions of Article 14 and (ii) designated to be a Force
Majeure Day by Operator and that was in excess of the greater of
(i) twenty-five (25) Days per year prorated for the number of
Days in such period or (ii) 10% of the number of Days in such
period that the Facility operated pursuant to North Carolina
Power's dispatch orders, except that the Low Availability
Capacity Purchase Price shall not be less than $0 per kW per
Month.
(d) For each instance where Operator fails, after oral
notification from North Carolina Power, to meet the operating
level specified by North Carolina Power, pursuant to Section
7.6(c), by more than +/- 5% and the operating level specified by
Virginia Power as adjusted for ambient weather conditions is no
greater than the Dependable Capacity then either (i) Operator
shall, by the end of the next Business Day, designate the Day of
such failure a Forced Outage Day, or if Operator makes no such
designation then (ii) North Carolina Power shall decrease the
payments for Dependable Capacity to be made in that Billing
Period by ten percent (10%) per occurrence.
(e) To the extent that the initial Dependable Capacity
determined upon the Commercial Operations Date is set below the
original Estimated Dependable Capacity as specified in Section
11.1, Operator shall pay to North Carolina Power $30 per kW for
the difference as liquidated damages for the detrimental impact
upon North Carolina Power's generation planning.
(f) If, as a result of testing done pursuant to Article 11,
the Facility's Dependable Capacity is set at less than ninety
(90) percent of the Facility's initial Dependable Capacity as
determined pursuant to Article 11 for the appropriate Period
(i.e., either Summer or Winter), then Operator shall pay to North
Carolina Power an amount equal to $21.60 per kW, in 1987 dollars
as escalated by the Gross National Product Implicit Price
Deflator on April l, 1988, and on each succeeding April 1, for
the difference between ninety (90) percent of such initial
Dependable Capacity and the Dependable Capacity determined
pursuant to such testing as liquidated damages for the
detrimental impact of such lower Dependable Capacity on North
Carolina Power's generation planning.
10.16 Operator shall pay North Carolina Power an amount
reflecting all reasonable costs incurred by North Carolina Power
for meter reading and billing. The monthly meter reading and
billing charge per meter shall equal the basic customer charge in
Schedule 6 - Large General Service.
10.17 Meters shall be read, and bills rendered, according to
the meter reading and billing schedule established by North
Carolina Power except that not more than forty-five (45) Days
shall pass between readings. Payment for the energy, or energy
and Dependable Capacity, delivered to North Carolina Power during
the billing period shall be made within twenty-eight (28) Days of
the billing date. Interest shall accrue on the outstanding
payments due Operator commencing on the twenty-ninth (29) Day
after the billing date. However, any amounts due North Carolina
Power, including amounts arising from cases where Operator, at
the same site, sells to and purchases from North Carolina Power,
or other amounts due North Carolina Power arising out of this
Agreement, may at the sole option of North Carolina Power be
offset against the amounts due to Operator and, in such event,
the net result shall be paid to the appropriate Party within
twenty-eight (28) days of the billing date. Payment to North
Carolina Power shall be made by check to the following address:
North Carolina Power
P. ▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Payment to Operator shall be made by check to the following
address:
Panda Energy Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Either Party may, by written notice to the other, change the
address to which such payments are to be sent.
10.18 The-Parties agree that North Carolina Power will be
substantially damaged in amounts that will be difficult or
impossible to determine if the Facility (a) is not in-service by
the date required, (b) is not capable of achieving the original
Estimated Dependable Capacity set forth in Section 11.1, or (c)
cannot maintain Dependable Capacity of at least ninety (90)
percent of the initial Dependable Capacity as determined pursuant
to Article 11. Therefore, to the limited extent set forth in the
Agreement, the Parties have agreed on sums which the Parties
agree are reasonable as liquidated damages for such occurrences.
It is further understood and agreed that the payment of the
liquidated damages is in lieu of actual damages for such
occurrences. Operator hereby waives any defense as to the
validity of any liquidated damages stated in this Agreement as
they may appear on the grounds that such liquidated damages are
void as penalties.
ARTICLE 11: Testing and Capacity Ratings
11.1 Operator's original Estimated Dependable Capacity is
145 MW for the Summer Period and 160 MW for the Winter Period.
11.2 The initial Dependable Capacity for the Summer Period
and the initial Dependable Capacity for the Winter Period shall
be determined by testing as described in Sections 11.2-11.6 and
the Dependable Capacity shall be subject to change in accordance
with the testing provisions in Sections 11.7-11.8. Operator shall
notify North Carolina Power when the Facility is ready for the
first such test (hereafter the Initial Test). Operator shall
perform and North Carolina Power shall monitor the Initial Test
within fourteen (14) Days of North Carolina Power's receipt of
such notice.
11.3 If the Initial Test is completed successfully to the
satisfaction of the Parties, Operator may set the Dependable
Capacity at any level up to the tested capacity, except that the
Operator may not set the Dependable Capacity at any level in
excess of one hundred and ten (110) percent of the original
Estimated Dependable Capacity as specified in Section 11.1 for
the applicable season.
11.4 The Operator may request additional tests described
herein if Operator is not satisfied with the Initial Test. Upon
completion of such additional test(s), if any, Operator shall set
the initial Dependable Capacity at any level up to the tested
capacity, except that the Operator may not set such Dependable
Capacity at any level in excess of one hundred and ten (110)
percent of the original Estimated Dependable Capacity as
specified in Section 11.1.
11.5 The Commercial Operations Date shall be the first Day
following the date Operator requested the test (i.e., either
Initial Test or additional) that determines the initial
Dependable Capacity as set forth in Sections 11.3 and 11.4 above.
11.6 Upon completion of the first period (i.e., either
Summer Period or Winter Period) after the Commercial Operations
Date, the Facility shall be rerated by testing as described in
this Article 11. At least fourteen (14) Days prior to completion
of that first period, Operator shall designate a new Estimated
Dependable Capacity and any payments for Dependable Capacity
shall be made based on this new Estimated Dependable Capacity.
This new Estimated Dependable Capacity shall not exceed one
hundred and ten (110) percent of the original Estimated
Dependable Capacity specified in Section 11.1. Within the first
fourteen (14) Days of the applicable Summer or Winter
Demonstration Period, North Carolina Power shall monitor a test
of the Dependable Capacity. Operator may, at its sole discretion,
request one additional test if Operator is not satisfied with the
results of that first test. The number of Days that pass between
the date of that first test and the date Operator notifies North
Carolina Power that the Facility is ready for an additional test
shall be counted as Forced Outage Days. Upon successful
completion of such test, Operator may set the season's initial
Dependable Capacity rating at any level up to the tested
capacity, except that the Operator may not set such Dependable
Capacity at any level in excess of one hundred and ten (110)
percent of the original Estimated Dependable Capacity as
specified in Section 11.1. If the Dependable Capacity is set
above the new Estimated Dependable Capacity as designated
pursuant to this section, payments for Dependable Capacity shall
be increased accordingly, effective the Day testing is complete.
If the Dependable Capacity is set below the new Estimated
Dependable Capacity as designated pursuant to this section,
payments for Dependable Capacity shall be decreased accordingly,
retroactive to the first Day of the applicable Summer or Winter
Period, and any overpayment shall be refunded to North Carolina
Power with Interest as if such overpayment had become due and
payable on the Day such overpayment was made.
11.7 Not less than fourteen (14) Days prior to the start of each
Summer and Winter Period thereafter throughout the Term of this
Agreement, Operator may designate a new Estimated Dependable
Capacity for such Period, and payments for Dependable Capacity
shall be made based on such new Estimated Dependable Capacity.
This new Estimated Dependable Capacity shall not exceed one
hundred and ten (110) percent of the original Estimated
Dependable Capacity specified in Section 11.1. If Operator does
not elect to change the Dependable Capacity, pursuant to this
Section, then the Dependable Capacity rating in effect at the
conclusion of the same Period (i.e., Summer or Winter) which
began in the previous year shall become effective. If Operator
does elect to change the Dependable Capacity in this manner, then
North Carolina Power may monitor a test of the Dependable
Capacity as described herein at any time within the first
fourteen (14) Days of the Demonstration Period for such Period.
Operator may, at its sole discretion, request one additional test
if Operator is not satisfied with the results of that first test.
The number of Days that pass between the date of that first test
and the date Operator notifies North Carolina Power that the
Facility is ready for an additional test shall be counted as
Forced Outage Days. Operator may set the Dependable Capacity
rating at any level up to the tested capacity, except that the
Operator may not set the Dependable Capacity at any level in
excess of one hundred and ten (110) percent of the original
Estimated Dependable Capacity as specified in Section 11.1. If
the Dependable Capacity is set above the new Estimated
Dependable Capacity as designated pursuant to this section,
payments for Dependable Capacity shall be increased accordingly,
effective the Day such testing is completed. If the Dependable
Capacity is set below the new Estimated Dependable Capacity as
designated pursuant to this section, payments for Dependable
Capacity shall be decreased accordingly, retroactive to the start
of such Period, and any overpayment shall be refunded to North
Carolina Power with Interest as if such overpayment had become
due and payable on the Day such overpayment was made.
11.8 In addition, North Carolina Power may require new tests
of the Dependable Capacity.
(a) Once per Demonstration Period at North Carolina Power's
sole discretion, and
(b) At any time Operator fails two (2) consecutive times to
meet the operating level prescribed by North Carolina Power,
pursuant to Section 7.6(c), by +/- 5%.
In either event, Operator may, at its sole discretion, request
one additional test if Operator is not satisfied with the results of
that first test. The number of Days that pass between the date of that
first test and the date Operator notifies North Carolina Power that the
Facility is ready for an additional test shall be counted as Forced
Outage Days. Upon completion of such test, Operator may set Dependable
Capacity at any level up to the tested capacity, except that the Operator
may not set the Dependable Capacity at any level in excess of one
hundred and ten (110) percent of the original Estimated Dependable
Capacity as specified in Section 11.1. If the Dependable Capacity
is set above the Dependable Capacity in effect prior to such test
for the applicable Period, payments for Dependable Capacity shall
be increased accordingly, effective the day such testing is
completed. If the Dependable Capacity is set below the Dependable
Capacity in effect prior to such test for the applicable Period,
payments for Dependable Capacity shall be decreased accordingly,
retroactive to the start of such period, and any overpayment
shall be refunded to North Carolina Power with Interest as if
such overpayment had become due and payable on the day such
overpayment was made.
11.9 Testing of the Dependable Capacity shall be in accordance
with the following provisions:
(a) Summer Period testing shall last for twelve (12) Hours
from the time North Carolina Power initiates such testing.
(b) Winter Period testing shall last for six (6) Hours from
the time North Carolina Power initiates such testing.
(c) The tested capacity shall be determined in the testing
period for the appropriate season as specified in Section 11.9
(a) and (b) above by converting each half-hour integrated kW
demand reading from the North Carolina Power-owned meters to the
design Day parameters of the appropriate summer or winter season
as specified in Section 11.9 (h) below and taking the lowest of
such converted readings.
(d) Two (2) or more units in the Facility whose capacity is
limited by common elements shall have Dependable Capacity
determined from simultaneous demonstrations. Common elements
include without limitation:
(1) Steam headers
(2) Stacks and other boiler auxiliaries
(3) Condenser cooling equipment (spray modules, pumps,
screens, inlets, discharge canals, cooling towers)
(4) Common river flowage or watershed.
(e) Normal station service use of unit auxiliaries,
including without limitation spray modules and cooling towers
required by regulatory or governmental authority, is required
during the period when capacity tests are conducted.
(f) Atmospheric and water temperatures at the time of a
capacity test shall be used without adjustment to a predetermined
standard.
(g) Capacity tests shall be based on the elevation above sea
level at the site on which the unit is installed.
(h) Capacity tests shall be based on an ambient temperature
of 90 degrees F summer and 20 degrees F winter.
(i) Additional data that may be required by North Carolina
Power to complete the capacity test shall include without
limitation:
(1) Hourly ambient temperature during demonstration.
(2) Rating curve or graph reflecting a full range (100 degrees
- 0 degrees.
F) of ambient temperatures versus MW output.
ARTICLE 12: Insurance
12.1 Operator shall obtain and maintain the following
policies of insurance during the term of this Agreement:
(a) Worker's Compensation insurance which complies with the
laws of the State of North Carolina and Employers' Liability
Insurance with limits of at least $1,000,000; and
(b) Comprehensive or Commercial General Liability insurance
with bodily injury and property damage combined single limits of
at least $5,000,000 per occurrence. Such insurance shall include,
but not necessarily be limited to, specific coverage for
contractual liability encompassing the indemnification provisions
in Article 13, broad form property damage liability, personal
injury liability, explosion and collapse hazard coverage,
products/completed operations liability, and, where applicable,
watercraft protection and indemnity liability; and
(c) Comprehensive Automobile Liability insurance with bodily
injury and property damage combined single limits of at least
$5,000,000 per occurrence covering vehicles owned, hired or non-
owned: and
(d) Excess Umbrella Liability Insurance with a single limit
of at least $5,000,000 per occurrence in excess of the limits of
insurance provided in subparagraphs (a), (b), and (c) above.
12.2 The amounts of insurance required in Section 12.1 above
may be satisfied by the Operator purchasing primary coverage in
the amounts specified or by buying a separate excess Umbrella
Liability policy together with lower limit primary underlying
coverage. The structure of the coverage is the Operator's option,
so long as the total amount of insurance meets North Carolina
Power's requirements.
12.3 The coverages requested in Section 12.1(b) above and
any Umbrella or Excess coverage should be "occurrence" form
policies. In the event Operator has "claims-made" form coverage,
Operator must obtain prior approval of all "claims-made" policies
from North Carolina Power.
12.4 Operator shall cause its insurers to amend its
Comprehensive or Commercial General Liability and, if applicable,
Umbrella or Excess Liability policies with the following
endorsement items (a) through (e); and to amend Operator's
Workers' Compensation and Auto Liability policies with
endorsement item (e):
(a) North Carolina Power, its directors, officers, and
employees are additional Insureds under this Policy; and
(b) This insurance is primary with respect to the interest
of North Carolina Power, its directors, officers, and employees
and any other insurance maintained by them is excess and not
contributory with this insurance; and
(c) The following Cross Liability clause is made a part of
the policy: "In the event of claims being made by reason of (i)
personal and/or bodily injuries suffered by any employee or
employees of one insured hereunder for which another insured
hereunder is or may be liable, or (ii) damage to property
belonging to any insured hereunder for which another insured is
or may be liable, then this policy shall cover such insured
against whom a claim is made or may be made in the same manner as
if separate policies have been issued to each insured hereunder,
except with respect to the limits of insurance"; and
(d) Insurer hereby waives all rights of subrogation against
North Carolina Power, its officers, directors and employees; and
(e) Notwithstanding any provision of the policy, this policy
may not be cancelled, non-renewed or materially changed by the
insurer without giving thirty (30) Days prior written notice to
North Carolina Power. All other terms and conditions of the
policy remain unchanged.
12.5 Operator shall cause its insurers or agents to provide
North Carolina Power with certificates of insurance evidencing
the policies and endorsements listed above. Failure of North
Carolina Power to obtain certificates of insurance does not
relieve Operator of the insurance requirements set forth herein.
Failure to obtain the insurance coverage required by this Article
12 shall in no way relieve or limit Operator's obligations and
liabilities under other provisions of this Agreement.
ARTICLE 13: Liability. Noncompliance and Guarantees
13.1 Neither Party shall hold the other Party (including its
corporate affiliates, parent, subsidiaries, directors, officers,
employees and agents) liable for any claims, losses, costs and
expenses of any kind or character (including, without limitation,
loss of earnings and attorneys' fees) for damage to property of
North Carolina Power or Operator in any way occurring incident
to, arising out of, or in connection with a Party's performance
under this Agreement, except as provided in Section 13.2 below.
13.2 Operator and North Carolina Power agree to indemnify
and hold each other harmless from and against all claims,
demands, losses, liabilities and expenses (including reasonable
attorneys' fees) for personal injury or death to persons and
damage to each other's property or facilities or the property of
any other person or corporation to the extent arising out of,
resulting from or caused by their negligent or intentional acts,
errors, or omissions.
13.3 No later than March 31, 1989, Operator shall provide
North Carolina Power with an unconditional and irrevocable direct
pay letter of credit issued by a bank acceptable to North
Carolina Power in a form and with substance acceptable to North
Carolina Power in an amount equal to S30.00 per kW of original
Estimated Dependable Capacity to ensure completion of the
Facility by the Anticipated Commercial Operations Date.
Commencing two (2) months after the Anticipated Commercial
Operations Date and continuing each month for ten (10) months or
until the Commercial Operations Date, North Carolina Power may
draw ten (10) percent of the value of the letter of credit per
Month as liquidated damages for the detrimental impact of such
delayed availability of Dependable Capacity on North Carolina
Power's generation planning. If after twelve (12) Months from the
Anticipated Commercial Operations Date, the Commercial Operations
Date has not occurred, then North Carolina Power may terminate
this Agreement as specified in Section 5.3. If the Commercial
Operations Date occurs less than twelve (12) months after the
Anticipated Commercial Operations Date, North Carolina Power
shall return the letter of credit to Operator. In the event that
North Carolina Power terminates this Agreement for Operator
default in accordance with Article 5, North Carolina Power may
draw down the entire amount of the letter of credit to offset
damages North Carolina Power incurs or reasonably expects to
incur as a result of Operator's default.
13.4 Commencing with the Commercial Operations Date,
Operator shall provide and maintain, at Operator's sole expense,
security for Operator's performance under this Agreement as
described in Section 13.5 below, in an amount equal to $30.00 per
kW of Estimated Dependable Capacity pursuant to Section 11.1 to
ensure continued availability of the Facility. Such security
shall be maintained throughout the term of this Agreement.
13.5 At North Carolina Power's option, Security for
compliance with Section 13.4 above shall consist of one or more
of the following:
(a) An unconditional, and irrevocable direct pay letter of
credit issued by a bank acceptable to North Carolina Power in a
form and with substance acceptable to North Carolina Power;
(b) A payment or performance bond issued by a company
acceptable to North Carolina Power for payment to North Carolina
Power in the event of a material breach by Operator in a form and
with substance acceptable to North Carolina Power;
(c) A corporate guarantee which North Carolina Power, at its
discretion, deems to be equivalent in quality to the security
detailed in (a) and (b) above in a form and with substance
acceptable to North Carolina Power.
13.6 (a) North Carolina Power shall have an exclusive right
of first refusal to purchase any Transfer Interest (as
hereinafter defined) on the terms and conditions set forth
herein; provided, however, and subject to North Carolina Power's
prior written consent, which may be withheld in North Carolina
Power's sole, absolute discretion, Operator may grant the steam
buyer a right of first refusal to purchase any Transfer Interest,
which right shall be prior to North Carolina Power's right of
first refusal. Any such right of first refusal granted to the
steam buyer shall be in form and substance satisfactory to North
Carolina Power and shall require the steam buyer to continue
operating the Facility in accordance with the provisions of this
Agreement.
(b) If Operator or any of its subsidiaries, affiliates or
other related entities ever desires to dispose of its or their
right, title, or interest in the Facility, or any part thereof
(hereinafter referred to as a "Transfer Interest"), other than by
the sale and leaseback of the Facility to provide financing for
the Facility, or if Operator receives a bona fide offer to
purchase or lease the Facility, or any part thereof (hereinafter
also referred to as a "Transfer Interest"), which offer Operator
is prepared to accept, it shall give notice thereof in writing to
North Carolina Power (the "Notice"). The Notice shall (i) specify
the terms under which Operator is prepared to dispose of the
Transfer Interest, including the purchase price of the Transfer
Interest, and (ii) include a copy of the acceptable offer, if
any, received by Operator, as the case may be.
(c) If the steam buyer has been granted a right of first
refusal as set forth above, the Operator shall offer the Transfer
Interest to the steam buyer in accordance with the terms of the
steam buyer's right of first refusal. If the steam buyer waives
its right with respect to the Transfer Interest or the steam
buyer does not have a right of first refusal, Operator shall
offer such Transfer Interest to North Carolina Power on the terms
set forth in the Notice.
(d) For a period of one hundred twenty (120) Days after
receipt by North Carolina Power of the Notice, or ninety (90)
Days after North Carolina Power receives notice from the Operator
that the steam buyer has waived its right of first refusal,
whichever is longer, North Carolina Power shall have the right to
exercise its right of first refusal with respect to the Transfer
Interest by giving written notice thereof to Operator.
(e) In the event North Carolina Power elects not to exercise
its right of first refusal pursuant to the foregoing provisions
then for a period of one year from the date North Carolina Power
notifies Operator of such election, Operator shall be free to
transfer such Transfer Interest to others at a price no lower
than and on terms not more favorable to the Transferee than those
offered in the Notice. Operator shall ensure that by the terms of
such transfer, Transferee agrees that North Carolina Power's
right of first refusal to purchase or lease the Facility, or any
part thereof, shall continue on the terms and conditions
contained herein. With respect to any such Transferee's
transfers, any sale of any Transfer Interest shall not extinguish
North Carolina power's right of first refusal with respect to any
portion of the Facility or the Operator, as the case may be, not
transferred pursuant to such sale. Any lease of any Transfer
Interest shall not extinguish North Carolina Power's right of
first refusal with respect to any extensions of such lease or
with respect to any other leases, sales or other dispositions of
any Transfer Interest. Operator agrees that it will ensure that
the terms of any transfer (other than a transfer to North
Carolina Power) of all or a portion of its interest in the
Facility provides for the continued operation of the Facility in
accordance with and under the terms of this Agreement. Any
transfer (other than a transfer to North Carolina Power) which
results in a transfer of management control over the operation of
the Facility shall require the transferee's acceptance of an
assignment of the transferor's obligations under this Agreement
with respect to the operation of the Facility pursuant to Section
17.1 of this Agreement.
(f) If North Carolina Power elects to exercise its right of
first refusal with respect to the Transfer Interest, the Parties
shall endeavor to fully consummate the transfer of the Transfer
Interest within one hundred twenty (120) Days after North
Carolina Power exercises its right of first refusal.
(g) North Carolina Power's right of first refusal shall
apply to any transfer or sale of any interest in the Operator to
any entity other than an entity which is, directly or indirectly,
controlled by, or in control of, the Operator (hereinafter also
referred to as a "Transfer Interest"). Notwithstanding the
foregoing, in the event of an involuntary transfer of any
interest in Operator, North Carolina Power agrees not to exercise
its right of first refusal if, but only if, (i) North Carolina
Power's ownership of such interest in Operator or the Facility
would cause the loss of the Facility's status as a Qualifying
Facility, and (ii) the transfer of such interest shall be made to
a party reasonably acceptable to, and approved by, North Carolina
Power.
(h) Operator will not consolidate with or be a Party to a
merger with any other corporation; provided, however, that:
(1) Any subsidiary of Operator may merge or consolidate
with or into Operator any wholly-owned subsidiary of Operator so
long as, in any such merger or consolidation, Operator shall be
the surviving or continuing corporation;
(2) Operator may consolidate or merge with any other
corporation if (i) the successor formed by or resulting from such
consolidation or merger shall be a solvent corporation organized
under the laws of the United States of America or a state thereof
or the District of Columbia, (ii) after giving effect to such
merger or consolidation, no default under this Agreement shall
exist, (iii) such successor or transferee corporation shall
expressly assume in writing the due and punctual performance and
observance of all the terms, covenants, agreements and conditions
of this Agreement and shall furnish North Carolina Power an
opinion of independent counsel to the surviving corporation to
the effect that each of the corporations participating in such
consolidation or merger or transfer of assets was, at the time
thereof, duly created, validly existing, in good standing and
otherwise in compliance with the applicable provisions of the
corporation laws of its respective state of incorporation, that
the surviving corporation is duly incorporated, validly existing
and in good standing, that the surviving corporation has all
requisite power and authority to assume and perform this
Agreement, that such assumption and performance have been duly
authorized by all necessary corporate action on the part of the
surviving corporation and that compliance by the surviving
corporation with the terms of this Agreement will not conflict
with, or result in any breach of any of the provisions of, or
constitute a default under, or result in the creation or
imposition of a lien upon, any agreement to which it is a party
of the property of the surviving corporation.
(i) The Operator covenants and agrees to sign, execute and
deliver, or cause to be signed, executed and delivered, and to do
or make, or cause to be done or made, upon the written request of
North Carolina Power, any and all agreements, instruments,
papers, deeds, acts or things, supplemental, confirmatory or
otherwise, as may reasonably be required by North Carolina Power
for the purpose of or in connection with the right of first
refusal established hereby.
13.7 Neither Party shall be liable to the other Party for
indirect, incidental, or consequential damages arising out of its
failure to deliver or purchase Dependable Capacity or energy
hereunder or failure to complete Interconnection Facilities by
the date specified in Section 8.1, irrespective of the causes
thereof, including fault or negligence. Except as otherwise
limited by the terms hereof and notwithstanding the above waiver
of indirect, incidental or consequential damages, each Party to
this Agreement shall be liable for damages to the other Party
caused by its negligent or intentional acts, errors or omissions
in connection with or arising out of this Agreement, and for any
other obligations to pay damages to, or to reimburse or indemnify
the other Party as expressly set forth in this Agreement.
ARTICLE 14: Force Majeure
14.1 Neither Party shall be responsible or liable for or
deemed in breach hereof because of any delay in the performance
of their respective obligations hereunder to the extent that such
delay is due to circumstances beyond the reasonable control of
the Party experiencing such delay, including but not limited to
acts of God; unusually severe weather conditions; strikes or
other labor difficulties; war; riots; requirements, actions or
failures to act on the part of governmental authorities
preventing performance; inability despite due diligence to obtain
required licenses; accident; fire; damage to or breakdown of
necessary facilities; or transportation delays or accidents (such
causes hereinafter called "Force Majeure"); provided that:
(a) The suspension of performance is of no greater scope and
of no longer duration than is required by the Force Majeure; and
(b) The non-performing Party uses its best efforts to remedy
its inability to perform; and
(c) When the non-performing Party is able to resume
performance of its obligations under this Agreement, that Party
shall give the other Party written notice to that effect; and
(d) The Force Majeure shall not apply to the extent caused
by any negligent or intentional acts, errors, or omissions, or
failure to comply with any law, rule, regulation, order or
ordinance or for any breach or default of this Agreement.
14.2 The term Force Majeure does not include changes in
market conditions or governmental action that affect the cost or
availability of Operator's supply of fuel or any alternate
supplies of fuel or the demand for Operator's products. In
addition, Force Majeure does not include unavailability of
equipment, following the Commercial Operations Date, or failure
or unavailability of transmission or distribution capability,
unless same is caused by an occurrence which would fit the
definition of Force Majeure in this Article 14.
14.3 Unless a Forced Outage is excused under this Article
14, a Forced Outage does not relieve Operator of any of its
obligations under this Agreement. Notwithstanding the above, each
Day of a Forced Outage excused under this Article 14 shall be
considered a Forced Outage Day unless the Operator appropriately
designates such Day as a Force Majeure Day.
14.4 The non-performing Party shall give the other Party
written notice within a reasonable time after the discovery of
the Force Majeure describing the particulars of the occurrence.
14.5 Except as otherwise provided, in no event will any
condition of Force Majeure extend this Agreement beyond its
stated Term. If any condition of Force Majeure delays a Party's
performance for a time period greater than one hundred eighty
(180) Days, the Party not delayed by such Force Majeure may: i)
upon sixty (60) Day prior written notice to the other Party,
terminate this Agreement, without further obligation; or ii)
grant a reasonable additional period of time in which to overcome
such Force Majeure. If said condition is corrected within said
notice period, the notice of termination will be withdrawn.
ARTICLE 15: Taxes and Claims for Labor and Materials
15.1 All present or future federal, state, municipal or
other lawful taxes applicable by reason of the sale of energy or
Dependable Capacity shall be paid by Operator.
15.2 Operator will promptly pay and discharge all lawful
taxes, assessments and governmental charges or levies imposed
upon it or upon or in respect of all or any part of its property
or business, all trade accounts payable in accordance with usual
and customary business terms, and all claims for work, labor or
materials which, if unpaid, might become a lien or charge upon
any of its property; provided, however, that Operator shall not
be required to pay any such tax, assessment, charge, levy,
account payable or claim if (a) the validity, applicability or
amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale
of any property of Operator or any material interference with the
use thereof by Operator and (b) shall set aside on its books
reserves deemed by it to be adequate with respect thereto.
ARTICLE 16: Choice of Law
16.1 This Agreement shall be interpreted, Construed and
governed by the laws of the Commonwealth of Virginia. The Parties
hereby submit to the jurisdiction of courts located in, and venue
is hereby stipulated to be in Richmond, Virginia.
ARTICLE 17: Miscellaneous Provisions
17.1 Neither Party shall assign this Agreement or any
portion thereof without the prior written consent of other Party
which consent shall not be unreasonably withheld; provided,,
however, such consent shall not be required prior to an
assignment to a parent, subsidiary or affiliated corporation; but
provided, further that: (i) any assignee shall expressly assume
assignor's obligations hereunder; (ii) no such assignment shall
impair any security given by Operator hereunder; and (iii) unless
expressly agreed by the other Party, no assignment, whether or
not consented to, shall relieve the assignor of its obligations
hereunder in the event its assignee fails to perform. North
Carolina Power shall consent to the assignment by Operator of its
rights herein as security for financing obtained for the Facility
and shall execute documents reasonably satisfactory to North
Carolina Power requested by Operator to evidence such consent and
to coordinate the assignee's foreclosure rights with North
Carolina Power's rights under Section 13.6.
17.2 This Agreement, including the appendices thereto, can
be amended only by agreement between the Parties in writing.
17.3 The failure of either Party to insist in any one or
more instances upon strict performance of any provisions of this
Agreement, or to take advantage of any of its rights hereunder,
shall not be construed as a waiver of any such provisions or the
relinquishment of any such right or any other right hereunder,
which shall remain in full force and effect.
17.4 The headings contained in this Agreement are used
solely for convenience and do not constitute a part of the
Agreement between the Parties hereto, nor should they be used to
aid in any manner in the construction of this Agreement.
17.5 This Agreement is intended solely for the benefit of
the Parties hereto. Nothing in this Agreement shall be construed
to create any duty to, or standard of care with reference to, or
any liability to, any person not a Party to this Agreement.
17.6 This Agreement shall not be interpreted or construed to
create an association, joint venture, or partnership between the
Parties or to impose any partnership obligation or liability upon
either Party. Neither Party shall have any right, power or
authority to enter into any Agreement or undertaking for, or act
on behalf of, or to act as or be an agent or representative of,
or to otherwise bind, the other Party.
17.7 Cancellation, expiration or earlier termination of this
Agreement shall not relieve the Parties of obligations that by
their nature should survive such cancellation, expiration or
termination, including without limitation warranties, remedies,
promises of indemnity and confidentiality.
ARTICLE 18: Statutory and Regulatory Changes
18.1 The Parties recognize and hereby agree that if any
federal, state or municipal government or regulatory authority
should for any reason enter an order, modify its rules, or take
any action whatsoever, having the effect of disallowing North
Carolina Power the recovery from its customers of all or any
portion of the payments for Dependable Capacity hereunder in
excess of $5.62 per kW per month in 1987 dollars as escalated by
the Gross National Product Implicit Price Deflator beginning
April l, 1988, and continuing each April 1 until the termination
of this Agreement, hereinafter referred to as the Disallowance
(except where such disallowance is due to North Carolina Power's
failure to seek recovery or comply with procedural requirements
governing recovery of such costs), then:
(a) If the Disallowance occurs before the twelfth
anniversary of the Commercial Operations Date, North Carolina
Power shall continue to pay for Dependable Capacity at the
Capacity Purchase Price set forth in Article 10 through the
twelfth anniversary of the Commercial Operations Date. Payments
for Dependable Capacity beginning on the twelfth anniversary of
the Commercial Operations Date shall not exceed the amount
unaffected by the Disallowance. Further, North Carolina Power
may, at its option, beginning on the twelfth anniversary of the
Commercial Operations Date withhold up to seventy-five (75)
percent of the payments for Dependable Capacity until the sooner
of (i) the fifteenth anniversary of the Commercial Operations
Date or (ii) the entire amount of the Disallowance is repaid with
Interest from the date each part of the Disallowance was paid to
Operator. In the event that such withholding does not fully repay
the Disallowance and accrued Interest by the fifteenth
anniversary of the Commercial Operations Date, the Operator shall
pay the remainder to North Carolina Power within twenty eight
(28) Days after the fifteenth anniversary of the Commercial
Operations Date in a lump sum;
(b) If the Disallowance occurs after the twelfth anniversary
of the Commercial Operations Date, all future payments for
Dependable Capacity shall not exceed the amount unaffected by the
Disallowance. Further, the Operator shall repay the full amount
of the Disallowance with Interest by the later of (i) one year
from the date of such Disallowance or (ii) the fifteenth
anniversary of the Commercial Operations Date.
(c) The Parties agree that neither Party shall file a petition to
initiate a Disallowance and the Parties obligate themselves to
all good faith efforts to establish, if practicable, an appeal
and overruling of any Disallowance or a superseding order,
approval of modified rules or tariffs, or other action so as to
allow timely resumption of full, or failing that, adjusted
payments hereunder.
ARTICLE 19: Entirety
19.1 This Agreement is intended by the Parties as the final
expression of their Agreement and is intended also as a complete
and exclusive statement of the terms of their Agreement with
respect to the energy and Dependable Capacity sold and purchased
hereunder. All prior written or oral understandings, offers or
other communications of every kind pertaining to the sale of
energy and Dependable Capacity hereunder to North Carolina Power
by Operator are hereby
abrogated and withdrawn.
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed the 24th day of January, 1989.
VIRGINIA ELECTRIC AND POWER COMPANY PANDA ENERGY CORPORATION
By: By: ▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President Title: President
EXHIBIT A
DATA REQUIRED TO PERFORM INTERCONNECTION STUDY
1. Electrical one-line of the Facility.
2. Explanation of proposed equipment protection and control
scheme (may be shown functionally on the one-line).
3. Site plan showing plant layout, property lines, access roads
and switchyard boundaries.
4. Preliminary equipment layout and arrangement for switchyard
and generator step-up transformer (GSU).
5. Estimated GSU impedance +/- 20 percent.
6. GSU connection and winding.
7. Estimated generator reactances +/- 20 percent.
8. Estimated generator kilowatt rating +/- 10 percent.
9. Estimated generator kilovar rating +/- 10 percent.
10. Explanation of proposed excitation system.
11. Estimated station auxiliary load +/- 20 percent.
12. Requirements for construction and start-up power.
13. Project schedule (I-J or bar chart format) including but not
limited to the following milestones:
- QF status obtained
- Engineering 30% complete
- One-line approved
- Financial Closing
- Major licenses/permits
- Major material procurement
- Start construction
- Engineering 70% complete
- Utility technical submittals complete
- Operating procedures finalized
- Start test and start-up
- Roll turbine
- Initial synchronizing date
- Capacity test complete
- Commercial operation
Data submitted in a preliminary or estimated form shall be
updated within 30 days after final equipment arrangements and
specifications are established.