AMENDED & RESTATED AGREEMENT FOR CONSTRUCTION OF HOKU ELECTRIC SUBSTATION AND ASSOCIATED FACILITIES
AMENDED
& RESTATED AGREEMENT
FOR
CONSTRUCTION OF HOKU ELECTRIC SUBSTATION
AND
ASSOCIATED FACILITIES
THIS
AMENDED & RESTATED AGREEMENT for the construction of Hoku electric
substation and associated facilities (the “Agreement”) is entered into as of the
__17th_______
day of __September____,
2008 by and between HOKU MATERIALS, INC., ▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇
(“Hoku”) and IDAHO POWER COMPANY, ▇.▇. ▇▇▇ ▇▇, ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (“Idaho Power”
or “IPCO”). Hoku and IPCO may also be referred to hereinafter individually as
“Party” or collectively as the “Parties”.
RECITALS
A. Hoku
is
developing a manufacturing plant to produce polysilicon, a key material used
in
the production of solar cells and integrated circuits. The construction of
an
electric substation and associated transmission facilities is required to
allow
IPCO to supply electric capacity and energy to Hoku’s manufacturing complex
located at One Hoku Way in Pocatello, Idaho (“Hoku Facility”). Hoku has
requested that the substation and associated facilities be sized to allow
IPCO
to provide electric service to the Hoku Facility in an amount up to 82 Megawatts
(“MW”) of demand.
B. Hoku
and
IPCO are parties to that certain Agreement for Construction of Hoku Electric
Substation and Associated Facilities dated December 28, 2007 (the “Prior
Agreement’). This Agreement shall amend and restate in its entirety, the Prior
Agreement.
C. Because
the Hoku Facility will be located in an area where Idaho Power does not have
existing facilities of adequate capacity, delivery of power to the Hoku Facility
site will require the construction of (1) approximately six (6) miles of
138,000
volt overhead transmission line to interconnect with Idaho Power’s existing
transmission system, (2) a new 138,000-13,800 volt electric substation at
the
Hoku Facility to supply up to 82 MWs with two 67 MVA transformers, and (3)
additional equipment and facilities at IPCO’s existing substations. These
facilities are sometimes hereinafter collectively referred to as the “Requested
Facilities” and are described in greater detail in Exhibit 1 to this Agreement.
This Agreement is not subject to or governed by Rule H, Idaho Power’s tariff
governing line installations, including any revisions to that rule, or any
successor rules or schedules.
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1
D. Idaho
Power will construct the Requested Facilities in accordance with the
terms
and
provisions of this Agreement.
E. Pursuant
to the Prior Agreement, HOKU has paid Idaho Power the sum of $7,402,000,
the
receipt of which is hereby acknowledged by Idaho Power. An outstanding balance
of $3,701,000 is presently owed under the prior Agreement and is hereby
acknowledged by Hoku. This outstanding amount is included in the payments
listed
in Section 2.1 below.
NOW,
THEREFORE, in consideration of the mutual obligations and undertakings set
forth
herein, and other good and valuable consideration, the sufficiency of which
is
hereby acknowledged, Hoku and Idaho Power agree as follows:
AGREEMENTS
1. Construction
of Requested Facilities
Without
duplicating any of the work performed pursuant to the Prior Agreement, and
in
furtherance thereof:
1.1
Idaho
Power will construct the Requested Facilities to provide for the delivery
of
power (capacity) at a point generally described as the load side terminals
of
the substation transformer 13.8 kilovolt (“kV”) disconnect switches at the Hoku
Facility (the “Delivery Point”).
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2
1.2
Idaho
Power will use commercially reasonable efforts to provide up to 20 MW of
transmission service from the Alameda Substation by May 18, 2009. Requested
facilities, including the second transmission line from the Don Substation,
will
be constructed and ready to serve up to 43 MW of demand by July 19, 2009.
Idaho
Power will use commercially reasonable efforts to complete final construction
of
the Requested Facilities by August 19, 2009. However, Hoku recognizes that
Idaho
Power’s ability to complete the Requested Facilities on or before that date is
subject to the receipt of the payments and performance under the contract
from
Hoku as described herein, Idaho Power’s ability to obtain required labor,
materials and equipment, timely receipt of satisfactory easements and rights
of
way, and timely receipt of governmental regulatory authorizations.
1.3
If
Idaho
Power fails to meet the completion deadline described above, and such failure
is
not excused as provided in Section 1.2, the Parties agree that Hoku may submit
the matter to the Idaho Public Utilities Commission (“Commission”) for
appropriate relief, and pending final resolution, Hoku’s obligation to make
further payments pursuant to the terms of this Agreement shall be
suspended.
2. Project
Cost
2.1
Excluding
amounts previously paid for design and engineering expenses, and including
the
amounts paid pursuant to the Prior Agreement, the total cost for the
construction of the Requested Facilities is estimated to be $16,542,000.
Hoku’s
payments to IPCO constitute a Contribution In Aid of Construction (“CIAC”) and
include a tax gross-up of thirty-one percent (31%) to cover IPCO’s resulting
income tax liability. Hoku shall pay IPCO in the amounts and at the times
specified below:
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3
|
September
30, 2008
|
$
|
3,000,000
|
||
|
October
15, 2008
|
$
|
2,000,000
|
||
|
November
15, 2008
|
$
|
2,000,000
|
||
|
December
15, 2008
|
$
|
2,140,000
|
At
the
completion of the project, Idaho Power will provide a true-up of the actual
work
order costs to the $16,542,000 estimate. Idaho Power will provide Hoku a
report
that will reflect actual dollars charged to the project by labor, materials,
purchased services, overheads, and other expenses. Idaho Power will refund
to
Hoku any over collected amounts; any amounts under collected will be invoiced
to
Hoku with the refund or payment to be made to Idaho Power within 30 days
from
the true-up date. In the event of significant scheduling changes, the payment
milestones will be delayed or accelerated accordingly. The total estimated
cost
of the Requested Facilities does not include costs associated with use of
any
temporary substations, transmission or distribution facilities that may be
necessary to provide Hoku with temporary demonstration power prior to the
expected August 19, 2009, completion date. The
cost
of such temporary facilities will be invoiced to and paid by Hoku separately
from this Agreement and has no impact on the performance of either party
under
this Agreement.
2.2
If
Hoku
fails to pay an amount due on or before the payment milestone date specified
in
Section 2.1, any obligation of Idaho Power to further perform under this
Agreement will be suspended pending receipt of such payment. If, after Idaho
Power’s delivery to Hoku of notice that such payment has not been received, Hoku
fails to make such payment within ten (10) days of Idaho Power sending such
notice, Idaho Power may, in its sole discretion, terminate this Agreement.
Hoku
acknowledges that any delay in payment is likely to result in a schedule
delay
pursuant to Section 1.2 of this Agreement. If this Agreement is terminated
by
Idaho Power pursuant to this Section 2.2, Idaho Power shall refund to Hoku
any
portion of Hoku’s previous payments that Idaho Power has not encumbered,
including any amounts that may be refunded to Idaho Power upon cancellation
by
Idaho Power of its third party contracts, for work orders for design, labor,
materials and supplies, permitting costs and other expenditures for the
Requested Facilities, and IPCO shall use reasonable efforts to avoid or mitigate
such costs.
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4
2.3
Hoku’s
payments under this Agreement shall not provide or give Hoku any ownership
rights or interest in the Requested Facilities. Ownership of the Requested
Facilities and new Hoku Substation shall remain with IPCO.
3. Capacity
Entitlement
3.1
Once
construction of the Requested Facilities is complete, Idaho Power will have
installed facilities and equipment sufficient to provide Hoku with 82 MW
of
electrical capacity measured at the Delivery Point to serve loads at the
Hoku
Facility. For five (5) years following the completion of construction, Idaho
Power agrees not to serve additional customers from the two (2) substation
transformers installed or utilize the two (2) vacant transformer spaces pursuant
to this Agreement without the prior written consent of Hoku. However, if
at the
conclusion of the five (5)-year period following the completion of construction,
total loads at the Hoku Facility are less than 82 MW, Hoku’s entitlement to
capacity at the Delivery Point will be limited to the amount of contract
demand
established in the Electric Service Agreement referenced in Section 6 that
is
currently being negotiated between the Parties. Relinquishment of any portion
of
Hoku’s capacity entitlement, as discussed above, does not entitle Hoku to any
refund of the CIAC or any other payments specified in Section 2.1. Idaho
Power
will send a letter to Hoku specifying the date when construction of the
Requested Facilities has been completed and notifying Hoku that the five
(5)-year time period described above has commenced.
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5
4. Ownership
Operation and Maintenance
4.1
Idaho
Power will own, operate and maintain the Requested Facilities constructed
pursuant to this Agreement. Hoku recognizes that the Requested Facilities
will
become part of Idaho Power’s integrated electrical transmission and distribution
system and will be used by Idaho Power to provide electric service to other
existing, and future, customers.
5. Rights
of Way and/or Easements
5.1
Hoku
and
IPCO agree to work in good faith to acquire the rights to access and use
the
real property determined by IPCO to be reasonably required for locating,
constructing, operating and maintaining the Requested Facilities. Idaho Power
recognizes that Hoku does not own the land on which the Hoku facility will
be
located (the “Land”), but holds a long-term ground lease under which the City of
Pocatello is the lessor. In the event IPCO purchases or otherwise acquires
additional real property rights it deems necessary consistent with prudent
utility practices to access and use the Requested Facilities, Hoku shall
fully
reimburse IPCO for amounts spent by IPCO to purchase or otherwise acquire
such
necessary real property interest. All such easements and rights of way will
be
in a form reasonably acceptable to Idaho Power. Idaho Power will be responsible
for obtaining any and all other permits, rights-of-way, and/or regulatory
approvals required by public agencies for performance of this Agreement and
for
payment of any and all permit fees and/or taxes required for or associated
with
such permits, rights-of-way, and regulatory approvals.
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6
5.2
IPCO
will
make a good faith effort to coordinate construction, operation and maintenance
schedules with Hoku so that such activities will not unreasonably interfere
with
Hoku’s access, ingress and egress to the Hoku manufacturing
complex.
6. Refunds.
6.1
The
Parties are concurrently negotiating an ELECTRIC SERVICE AGREEMENT (“ESA”) to
govern the rates and terms of IPCO’s provision of electric service to Hoku. The
ESA shall be subject to the approval of the Commission and the respective
rights
and obligations of the Parties hereunder shall be subject to the continuing
jurisdiction and regulatory authority of said Commission. In the event an
ESA
cannot be reached that is satisfactory to the Parties and receives regulatory
approval from the Commission, or if Hoku notifies IPCO that it no longer
wishes
to proceed with the construction of the Requested Facilities for any other
reason, IPCO will refund only the amounts received that exceed the cost of
constructing the Requested Facilities then completed or committed to date
as
described in Section 2.2, and IPCO shall use reasonable efforts to avoid
or
mitigate such costs.
7. Additional
Provisions
7.1
Liability.
Each
Party will indemnify and hold harmless the other Party from and against loss,
damage or liability, exclusive of costs and attorney’s fees, resulting from
claims asserted by third persons against either or both Parties to this
Agreement on account of injury or death to persons or damage or destruction
of
property occurring on such (indemnifying) Party’s side of the aforesaid Delivery
Point, unless such injury or damage shall have resulted from the sole negligence
of the other Party; provided, however, that each Party shall be solely
responsible for claims of and payment to its employees for injuries occurring
in
connection with their employment or arising out of any worker’s compensation
laws.
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7
7.2
Limitation
on Liability.
NEITHER
PARTY SHALL, IN ANY EVENT, BE LIABLE TO THE OTHER FOR ANY SPECIAL, INCIDENTAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES SUCH AS, BUT NOT LIMITED TO,
LOST
PROFITS, REVENUE OR GOOD WILL, OR INTEREST, WHETHER SUCH LOSS IS BASED ON
CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE.
7.3
Waivers.
Any
waiver at any time by either Party of any right with respect to any matter
arising under this Agreement, or any failure to give notice provided hereunder,
shall not be deemed to be a waiver with respect to any subsequent matter,
nor as
the establishment of or consent to any practice under this Agreement or an
interpretation of any term or provision hereof.
7.4
Regulatory
Authority.
This
Agreement is subject to valid laws and to the regulatory authority and orders,
rules and regulations of the Commission and such other administrative bodies
having jurisdiction, as well as Idaho Power Company’s Rules and Regulations as
now or may be hereafter modified and approved by the Commission.
7.5
Choice
of Law and Venue.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of Idaho, and venue for any court proceeding arising out of this Agreement
shall be in Boise, Idaho.
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8
7.6
Dispute
Resolution.
Prior
to commencement of any suit, claim or other cause of action in any court
proceeding, Hoku and IPCO agree to undertake good faith efforts to resolve
such
differences through negotiations between senior business representatives
of each
company. In the event of a dispute arising under this Agreement that cannot
be
resolved through negotiation, the prevailing party shall be entitled to
reimbursement from the non-prevailing party for all reasonable costs and
expenses, including reasonable attorney’s fees incurred by the prevailing party
in the formal resolution of the dispute.
7.7
Modifications
and Counterparts.
This
Agreement sets forth the entire understanding and agreement of Hoku and IPCO
with regard to the construction of the Requested Facilities. This Agreement
may
only be amended or modified by a writing signed by the duly authorized
representatives of both parties. This Agreement may be executed in counterparts,
each of which, taken together, shall constitute one and the same
Agreement.
7.8
Notices.
All
notices, requests, demands and other communications which are required or
may be
given under this Agreement shall be in writing and shall be given to the
intended recipient at the address specified below:
If
to
IPCO, to:
▇▇▇
▇▇▇▇▇
Senior
Vice President, Delivery
Idaho
Power Company
▇.▇.
▇▇▇
▇▇
▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
With
a
copy to:
▇▇▇▇▇▇
▇▇▇▇▇▇
General
Counsel
Idaho
Power Company
▇.▇.
▇▇▇
▇▇
▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
and
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9
If
to
Hoku, to: ▇▇▇▇
▇▇▇▇
CTO
Hoku
Materials, Inc.
▇▇▇
▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
With
a
copy to:
▇▇▇▇▇▇
▇▇▇▇▇▇
CEO
Hoku
Scientific, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
8. Commission
Approval.
This
Agreement and the respective rights and obligations of the Parties hereunder
shall be subject to the continuing jurisdiction and regulatory authority
of the
Commission.
IN
WITNESS WHEREOF, the Parties have entered into this Agreement effective as
of
the day and year first above written.
| HOKU MATERIALS, INC. | ||
| |
|
|
| By: |
/s/ ▇▇▇▇▇▇
▇.
▇▇▇▇▇▇
|
|
| Title: | CEO | |
|
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||
|
IDAHO
POWER COMPANY
|
||
| |
|
|
| By: |
/s/ ▇▇▇▇▇▇
▇.
▇▇▇▇▇
|
|
| Title: | Senior Vice President, Delivery | |
|
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||
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EXHIBIT
1
HOKU
REQUESTED FACILITIES
New
138-13.8 kV Substation to be located at Hoku Facility
|
•
|
2 - 138kV Line Terminals with relay protection |
|
•
|
2 - 36/67MVA, 138-13.8kV, LTC substation power transformers |
|
•
|
4
-
138kV circuit breakers and diagonal ring bus configuration rated
for
service up to 150 MWs and space for two additional
transformers
|
|
•
|
2 - 13.8kV 3000 amp metered bus points of delivery |
|
•
|
Control enclosure for equipment protective relays and station battery |
|
•
|
Approx 1+ acre yard size (site and access provided by Hoku) |
Don
Substation
|
•
|
Install
1 new 138kV Transmission Line Terminal with circuit breaker and
protective
relays with 1272 bus conductor for the transmission line to the
new
substation located at the Hoku
Facility.
|
Alameda
Substation
|
•
|
Install
1 new 138kV Transmission Line Terminal with protective relays with
795 bus
conductor for the transmission line to the new substation located
at the
Hoku Facility.
|
|
•
|
Add
1 - 138kV circuit breaker and line relay protection to existing
Alameda
Tap Transmission Line.
|
Transmission
Lines
|
•
|
Construct
approx 3-mile 138kV single pole transmission line with 1272 aluminum
conductor from Don Substation to new substation located at the
Hoku
Facility.
|
|
•
|
Construct
approx 3-mile 138kV single pole transmission line with 795 aluminum
conductor from Alameda Substation to new substation located at
the Hoku
Facility.
|
Kinport
Substation
|
•
|
Install
protective relay for redundant Kinport-Alameda-Hoku 138kV transmission
source.
|
▇▇▇▇▇
Substation
|
•
|
Install
protective relay for redundant Terry-Alameda-Hoku 138kV transmission
source.
|
Pocatello
Service Building
|
•
|
Install
protective relay communications equipment for redundant
Kinport¬Alameda-Terry 138kV transmission
source.
|
EXHIBIT
1