As Filed with the Securities and Exchange Commission on January 13, 1997
Registration No. 333-14495
333-14495-01
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Panda Funding Corporation
(Exact name of registrant as specified in its charter)
Delaware 4900 75-2660911
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
or incorporation or Classification Code Number) Identification No.)
organization)
Panda Interfunding Corporation
(Exact name of registrant as specified in its charter)
Delaware 4900 75-2660915
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
or incorporation or Classification Code Number) Identification No
organization)
William C. Nordlund William C. Nordlund
Senior Vice President and Senior Vice President and
General Counsel General Counsel
Panda Funding Corporation Panda Interfunding Corporation
4100 Spring Valley Road, Suite 1001 4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244 Dallas, Texas 75244
(972) 980-7159 (972) 980-7159
(Name, address, including zip code, (Name, address, including zip code, and
and telephone number, including area telephone number, including area code,
code of registrant's principal of guarantor's principal executive
offices and agent for service) offices and agent for service)
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. __
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.__
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. __
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.__
The Registrant and the Co-Registrant hereby amend this Registration
Statement on such date or dates as may be necessary to delay its effective
date until the Registrant and the Co-Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a), may
determine.
PANDA FUNDING CORPORATION
PANDA INTERFUNDING CORPORATION
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus
Outside Front Cover Page of
Prospectus; Facing Pages
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed
Charges Prospectus Summary; Risk
Factors; Unaudited Pro Forma
Financial Data; Selected
Financial Data
4. Use of Proceeds Use of Proceeds
5. Determination of Offering
Price *
6. Dilution *
7. Selling Security Holders *
8. Plan of Distribution Outside Front Cover Page of
Prospectus; Prospectus
Summary; The Exchange Offer;
Plan of Distribution
9. Description of Securities to
be Registered Prospectus Summary;
Description of the Exchange
Bonds
10. Interests of Named Experts and
Counsel Legal Matters; Experts
11. Information with Respect to the
Registrant Outside Front Cover Page of
Prospectus; Available Information;
Prospectus Summary; Risk Factors;
The Company, the Issuer and Panda
International; Use of
Proceeds; Capitalization;
Unaudited Pro Forma Financial
Data; Selected Financial
Data; Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; The Exchange
Offer; Certain U.S. Federal
Income Tax Considerations of
the Exchange Offer; Business;
Description of the Projects;
Legal Proceedings; Regulation;
Management; Description of
Outstanding Project-Level Debt;
Description of the Exchange
Bonds; Old Bonds Registration
Rights; Plan of Distribution;
Legal Matters; Experts;
Financial Statements; Defined
Terms; Consolidated Pro Forma
Report; Rosemary Engineering
Report; Rosemary Fuel
Consultant's Report; Brandywine
Pro Forma Report; Brandywine
Engineering Report; Brandywine
Fuel Consultant's Report
12. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities *
* Not applicable
SUBJECT TO COMPLETION, JANUARY 13, 1997
PROSPECTUS
OFFER TO EXCHANGE
11-5/8% Pooled Project Bonds, Series A-1 due 2012
which have been registered under the Securities Act
for any and all outstanding
11-5/8% Pooled Project Bonds, Series A due 2012 [LOGO]
of
PANDA FUNDING CORPORATION
Fully and Unconditionally Guaranteed by
PANDA INTERFUNDING CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _____________, 1997, UNLESS EXTENDED.
Panda Funding Corporation, a Delaware corporation (the "Issuer"), a
special purpose finance subsidiary of Panda Interfunding Corporation, a
Delaware corporation (the "Company"), hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (the "Letter of Transmittal", which
together with this Prospectus constitute the "Exchange Offer"), to
exchange up to $105,525,000 in aggregate principal amount of its 11-5/8%
Pooled Project Bonds, Series A-1 due 2012 (the "Exchange Bonds") for a
like principal amount of its issued and outstanding 11-5/8% Pooled Project
Bonds, Series A due 2012 (the "Old Bonds") that were issued and sold in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act"). The terms of the Exchange Bonds are
substantially identical to the terms of the Old Bonds, except that the
Exchange Bonds (i) will have been registered under the Securities Act, and
(ii) holders of the Exchange Bonds will not be entitled to certain rights
of holders of the Old Bonds under the Registration Rights Agreement (as
defined herein), which rights will terminate upon the consummation of the
Exchange Offer. Such rights will also terminate as to holders of Old
Bonds who are eligible to tender their Old Bonds for exchange in the
Exchange Offer and fail to do so. See "The Exchange Offer - Termination
of Certain Rights." The Exchange Bonds will evidence the same debt as the
Old Bonds which they replace and will be issued under, and be entitled to
the benefits of, the indenture governing the Old Bonds dated July 31, 1996
(the "Indenture"). As of the date of this Prospectus, $105,525,000
principal amount of Old Bonds is outstanding. The Old Bonds and the
Exchange Bonds are sometimes referred to herein collectively as the
"Existing Bonds."
The Exchange Bonds will bear interest from the date of issuance, at
the rate per annum set forth above, payable semiannually in cash in
arrears on February 20 and August 20 of each year, commencing February 20,
1997. Interest on the Old Bonds accepted for exchange will accrue thereon
to, but not including, the date of issuance of the Exchange Bonds and will
be paid together with the first interest payment on the Exchange Bonds
issued in exchange therefor. The principal of the Exchange Bonds is
payable semiannually in installments as described herein commencing
February 20, 1997. The Exchange Bonds will mature on August 20, 2012, and
will be redeemable at the option of the Issuer, in whole or in part, from
time to time on or after August 20, 2001, at the redemption prices set
forth herein, plus accrued and unpaid interest to the redemption date. In
addition, the Issuer is required to redeem the Exchange Bonds, in whole or
in part, upon the occurrence of certain events as set forth herein.
Payment of principal of, and premium, if any, and interest on the Exchange
Bonds is fully and unconditionally guaranteed by the Company (the "Company
Guaranty"). The Exchange Bonds are payable from amounts received by the
Issuer from the repayment of the note issued by the Company (the "Initial
Company Note") to the Issuer in connection with the loan to the Company of
the proceeds from the issuance of the Old Bonds and from payments, if any,
under the Company Guaranty. The payments on the Initial Company Note are
identical to payments of principal of, and premium, if any, and interest
on the Existing Bonds. See "Description of the Exchange Bonds."
Subject to the terms and conditions of the Exchange Offer, the Issuer
will accept for exchange any and all Old Bonds validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on _____________, 1997,
unless extended by the Issuer in its sole discretion (the "Expiration
Date"). Tenders of Old Bonds may be withdrawn at any time prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Bonds being tendered or accepted for
exchange. However, the Exchange Offer is subject to certain customary
conditions. The Old Bonds may be tendered only in integral multiples of
$1,000. See "The Exchange Offer - Conditions of the Exchange Offer."
Prior to the consummation of the Exchange Offer, there has been no
public market for the Exchange Bonds. The Issuer does not intend to
apply for the listing of the Exchange Bonds on any securities exchange or
to seek approval for quotation through any automated quotation system,
and no active public market for the Exchange Bonds is currently
anticipated. There can be no assurance that an active public market for
the Exchange Bonds will develop.
(continued on next page)
See "Risk Factors" beginning on page 27 for a discussion of certain
matters that should be considered in connection with the Exchange Offer
and an investment in the Exchange Bonds offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _______________, 1997.
(cover page continued)
The Issuer and the Company were recently formed by Panda Energy
International, Inc., a Texas corporation and the ultimate parent
entity of the Company ("Panda International"), as vehicles for
financing power project development through the transfer of projects
to the Company and the issuance of Bonds (as defined herein) by the
Issuer. Panda International has initially transferred to a
subsidiary of the Company its 100% indirect equity interests in two
operating electric power generation projects in the United States.
The Exchange Bonds are secured by, among other collateral, pledges
of, or grants of security interests in, (i) all distributions the
Company receives from its subsidiaries that own interests in U.S.
projects, (ii) all capital stock of the Company, the Issuer and such
subsidiaries, (iii) certain Company accounts established to capture
distributions from such subsidiaries and (iv) the Initial Company
Note. The Exchange Bonds are not secured by any direct equity
interests in, or assets of, any projects or by any interest in
distributions from subsidiaries of the Company that may own
interests in non-U.S. projects, if any, or by any accounts
established in respect of such non-U.S. project distributions;
however, such non-U.S. accounts and distributions will be pledged to
the Company to secure loans from the Company to such subsidiaries of
the proceeds of any future series of Bonds issued to finance non-
U.S. projects.
The Old Bonds were originally issued and sold on July 31, 1996
in a transaction not registered under the Securities Act in reliance
upon the exemptions provided in Section 4(2) of the Securities Act
and Rule 144A promulgated under the Securities Act ("Rule 144A").
Accordingly, the Old Bonds may not be offered or sold, except
pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act. Based upon its
view of interpretations provided to third parties by the staff of
the Securities and Exchange Commission (the "Commission"), the
Company believes that the Exchange Bonds issued pursuant to the
Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any holder which is (i)
an "affiliate" of the Company or the Issuer within the meaning of
Rule 405 promulgated under the Securities Act (an "Affiliate"), (ii)
a broker-dealer who acquired Old Bonds directly from the Issuer or
(iii) a broker-dealer who acquired Old Bonds as a result of market
making or other trading activities) without registration under the
Securities Act, provided that such Exchange Bonds are acquired in
the ordinary course of such holders' business and such holders are
not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a
distribution of such Exchange Bonds. Each broker-dealer that
receives Exchange Bonds for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Bonds. The Letter of
Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of
Exchange Bonds received for its own account in exchange for Old
Bonds where such Old Bonds were acquired by such broker-dealer as a
result of market making activities or other trading activities. The
Company and the Issuer have agreed to make available for a period of
up to six months a prospectus meeting the requirements of the
Securities Act to any such broker-dealer for use in connection with
any such resale. A broker-dealer that delivers such a prospectus to
a purchaser in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act
and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification provisions). Any
holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Bonds, and any other
holder that cannot rely upon such interpretations, must comply with
the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. In
addition, to comply with the securities laws of certain
jurisdictions, if applicable, the Exchange Bonds may not be offered
or sold unless they have been registered or qualified for sale in
such jurisdictions or an exemption from registration or
qualification is available and the conditions thereto have been met.
The Issuer expects that the Exchange Bonds issued pursuant to
the Exchange Offer to Qualified Institutional Buyers (as such term
is defined in Rule 144A) will be issued in the form of a fully
registered global bond which will be deposited with, or on behalf
of, The Depository Trust Company ("DTC") and registered in the name
of its nominee. Beneficial interest in the global bond representing
the Exchange Bonds will be shown on, and transfers thereof will be
effected only through, records maintained by DTC and its
participants. After the initial issuance of such global bond,
Exchange Bonds in certificated form will be issued in exchange for
the global bond as set forth in the Indenture. Any Exchange Bonds
issued pursuant to the Exchange Offer to non-Qualified Institutional
Buyers will be issued in registered certificated form. See
"Description of Exchange Bonds - Book Entry; Delivery and Form."
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION AS TO
WHETHER ANY HOLDER OF OLD BONDS SHOULD TENDER OLD BONDS PURSUANT TO
THE EXCHANGE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS OR IN THE LETTER OF TRANSMITTAL. IF
GIVEN OR MADE, SUCH RECOMMENDATIONS, INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUER OR
THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE
AFFAIRS OF THE ISSUER OR THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES COVERED BY
THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SUCH SECURITIES BY ANY PERSON IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL.
DEFINED TERMS
All capitalized terms used in this Prospectus and not otherwise
defined herein have the meanings assigned in Part I of Appendix A
hereto. See also "Certain Technical Terms Commonly Used in the
Utility Industry" set forth in Part II of Appendix A hereto.
PRESENTATION OF FINANCIAL INFORMATION
Included in this Prospectus are certain historical financial
statements and pro forma financial information which reflect the
financial data of the entities that hold interests in the Panda-
Brandywine Partnership and the Panda-Rosemary Partnership, or their
predecessors, during the periods presented. The Company was
incorporated on July 1, 1996 and was not in existence during the
majority of these historical periods. The entities that own the
partnership interests in the Panda-Brandywine Partnership and the
Panda-Rosemary Partnership became wholly-owned subsidiaries of the
Company upon the closing of the sale of the Old Bonds on July 31,
1996. Thus, references in this Prospectus to certain historical and
pro forma financial data of the "Company" are for convenience of
reference, and it should be understood that all such references are
to the historical and pro forma financial information of the
entities that held such interests during the periods presented.
AVAILABLE INFORMATION
The Company and the Issuer have filed with the Commission a
Registration Statement on Form S-1 (the "Registration Statement")
under the Securities Act with respect to the Exchange Bonds offered
hereby and the Company Guaranty. This Prospectus constitutes a part
of the Registration Statement and does not contain all of the
information set forth in the Registration Statement or the exhibits
thereto, certain parts of which have been omitted in accordance with
the rules and regulations of the Commission. For further
information pertaining to the Company, the Issuer, the Exchange
Bonds and the Company Guaranty, reference is made to the
Registration Statement, including the exhibits thereto. Statements
made in this Prospectus concerning the provisions of any documents
to which reference is made are not necessarily complete and, in the
case of documents filed as exhibits to the Registration Statement,
reference is made to the copy of the documents so filed for a more
complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
As a result of this offering, the Company and the Issuer will
be subject to periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Registration Statement and the exhibits
thereto, as well as the periodic reports and other information filed
by the Company and the Issuer with the Commission, may be inspected
and copied at the public reference facility maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may
also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549.
The Company's and the Issuer's obligation to file periodic
reports with the Commission pursuant to the Exchange Act may be
suspended if the Exchange Bonds are held of record by fewer than 300
holders at the beginning of any fiscal year of the Company and the
Issuer, other than the fiscal year in which the Registration
Statement becomes effective. Pursuant to the Indenture, the Company
and the Issuer have agreed that, so long as the Company is not
subject to the reporting requirements of either Section 13 or 15(d)
of the Exchange Act, they will furnish to the Trustee copies of
annual, quarterly and current reports that the Company would be
required to file under the Exchange Act if it were subject to such
reporting requirements. In addition, subject to the limitations set
forth in the Indenture, upon the written request of a holder of
Bonds, the Issuer or the Company will provide without charge to such
holder or prospective investor, a copy of such information as is
required by Rule 144A to enable resales of Bonds to be made
pursuant to Rule 144A, unless at the time of such request the
Company or the Issuer is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act. Any such request will be
subject to the confidentiality provisions set forth below. Written
requests for such information should be addressed to Panda Funding
Corporation, c/o Panda Energy International, Inc., 4100 Spring
Valley Road, Suite 1001, Dallas, Texas 75244, Attention: Chief
Financial Officer.
By requesting additional information relating to the offering
of Bonds at a time when neither the Company nor the Issuer is
subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, each holder and prospective investor agrees to keep
confidential the various documents and all written information which
from time to time have been or will be disclosed to it concerning
the Issuer, the Company or any of their affiliates which is not
publicly available, and agrees not to disclose any portion of the
same to any person other than to its own consultants, except as may
be required by applicable law or in a legal proceeding involving the
Company or the Issuer.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of
the Exchange Act. All statements other than statements of historical
fact included in this Prospectus, including, without limitation,
statements regarding financial position, projects under development,
construction or other budgets, information contained in the
Independent Engineers' and the Consultants' Reports and plans and
objectives for future operations, are forward-looking statements.
Although the Issuer and the Company believe that the expectations
reflected in such forward-looking statements are reasonable, they
can give no assurance that such expectations will prove to have been
correct. Important factors that could cause actual results to differ
materially from the Issuer's and the Company's expectations
("Cautionary Statements") are disclosed under "Risk Factors," in the
assumptions made by the Independent Engineers and the Consultants
and contained in their reports, and elsewhere in this Prospectus.
All subsequent written and oral forward-looking statements
attributable to the Issuer, the Company or persons acting on their
behalf are expressly qualified in their entirety by the Cautionary
Statements.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Neither the Issuer, the Company nor any of their representatives
makes any recommendation to any holder of Old Bonds as to whether to
tender or refrain from tendering Old Bonds pursuant to the Exchange
Offer. Neither the Issuer, the Company nor any of their
representatives makes any representation to any offeree of the
Exchange Bonds offered hereby regarding the legality of any
investment by such offeree or purchaser under applicable legal
investment or similar laws. Each holder of Old Bonds should consult
with his or her own advisors as to legal, tax, business, financial
and related aspects of participation in the Exchange Offer and must
make his or her own decision with respect to the Exchange Offer.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and
the Company's financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Investors should carefully
consider the information set forth under "Risk Factors" prior to
making any decision to invest in the Exchange Bonds. For definitions
of certain terms used herein, see the glossary included as Appendix A
to this Prospectus.
The Company, the Issuer and Panda International
General
Panda Interfunding Corporation (the "Company") is an indirect
wholly-owned Delaware subsidiary of Panda Energy International, Inc.,
a Texas corporation ("Panda International"). Panda Funding
Corporation (the "Issuer") is a wholly-owned Delaware subsidiary of
the Company organized for the sole purpose of issuing the Existing
Bonds and additional series of Pooled Project Bonds (the Existing
Bonds and all additional series, if any, are collectively referred to
herein as the "Bonds"). Panda International is an independent (i.e.,
non-utility) power company that is engaged principally in the
development, acquisition, ownership and operation of electric power
generation facilities, both in the United States and internationally.
The Company and the Issuer were formed by Panda International in 1996
as vehicles for financing Project development, including the making
of equity and debt investments in Projects. Panda International has
transferred, and intends to continue to transfer, to subsidiaries of
the Company a portfolio of Projects (the "Project Portfolio")
developed and to be developed by Panda International. Future
transfers will be made at the time that such Projects reach Financial
Closing or achieve Commercial Operations, thereby reducing
development risk to the Company. Distributions (including payments of
principal and interest on loans) received by the Company from its
subsidiaries that own, directly or indirectly, interests in Projects
in the Project Portfolio ("Project Entities") will be used to make
payments on the Existing Bonds and on any additional series of Bonds
issued in connection with the inclusion of additional Projects in the
Project Portfolio.
As of the date of this Prospectus, the Project Portfolio
consists of indirect 100% equity interests in Project Entities that
own (i) a 180 megawatt ("MW") natural gas-fired, combined-cycle
cogeneration facility located in Roanoke Rapids, North Carolina (the
"Panda-Rosemary Facility"), which commenced commercial operations in
December 1990, and (ii) a 230 MW natural gas-fired, combined-cycle
cogeneration facility located in Brandywine, Maryland (the "Panda-
Brandywine Facility"), which commenced commercial operations in
October 1996. The Project Entities that own the Panda-Rosemary
Facility and the Panda-Brandywine Facility were transferred to a
wholly-owned subsidiary of the Company and became part of the Project
Portfolio in July 1996. The transfer to the Company of any additional
Projects in the future, will be made pursuant to an agreement (the
"Additional Projects Contract") among Panda International, its
principal development subsidiary and the Company. See "Additional
Projects Contract" below.
Initial Project Portfolio
Panda-Rosemary Facility
The Panda-Rosemary Facility is owned by Panda-Rosemary, L.P., a
Delaware limited partnership (the "Panda-Rosemary Partnership"). The
only partners of the Panda-Rosemary Partnership are indirect wholly-
owned subsidiaries of the Company. The Panda-Rosemary Facility uses
natural gas as its primary fuel to produce electricity and thermal
energy in the form of steam. The electric capacity of and electric
energy produced by the Panda-Rosemary Facility is sold to Virginia
Electric and Power Company ("VEPCO"). Steam and chilled water
produced by the Panda-Rosemary Facility are sold to The Bibb Company
("Bibb"), which operates a textile mill adjacent to the Panda-
Rosemary Facility. The Panda-Rosemary Partnership has entered into
agreements with Natural Gas Clearinghouse ("NGC") for natural gas
supply and fuel management services, with Transcontinental Gas Pipe
Line Corporation ("Transco"), Texas Gas Transmission Corporation
("Texas Gas") and CNG Transmission Corporation ("CNG") for firm
transportation of natural gas and with certain other parties to
provide pipeline operation, gas balancing and interruptible
transportation services. The Panda-Rosemary Partnership recently
entered into an operations and maintenance agreement with Panda
Global Services, Inc. ("Panda Global Services"), an indirect wholly-
owned subsidiary of Panda International that was recently organized
to provide operations and maintenance services to Projects such as
the Panda-Rosemary Facility. Such agreement is on substantially
similar terms as the Panda-Rosemary Partnership's previous operations
and maintenance agreement with University Technical Services, Inc.
("U-Tech"), a subsidiary of EMCOR Group, Inc., which was obtained
through a competitive bid process and expired in December 1996.
Concurrently with the offering of the Old Bonds (the "Prior
Offering"), Panda-Rosemary Funding Corporation, a wholly-owned
Delaware special purpose finance subsidiary of the Panda-Rosemary
Partnership, consummated the offering and sale of $111.4 million in
aggregate principal amount of its 8-5/8% First Mortgage Bonds due
2016 (the "Rosemary Bonds"). The Rosemary Bonds were issued pursuant
to an indenture among the Panda-Rosemary Partnership, Panda-Rosemary
Funding Corporation and Fleet National Bank, as trustee (the
"Rosemary Indenture"). The Rosemary Indenture contains various
affirmative and negative covenants, including limitations on the
ability of the Panda-Rosemary Partnership to make distributions to
its partners. Subject to certain other conditions, the Panda-Rosemary
Partnership may make distributions to its partners only if: (i)
amounts deposited in certain funds established pursuant to the
Rosemary Indenture are equal to or greater than the amounts required
to be deposited therein, including debt service and debt service
reserve funds; (ii) no default or event of default under the Rosemary
Indenture has occurred and is continuing; (iii) certain gas supply
and transportation contracts that expire in November 2005 and October
2006 have been extended or replaced prior to November 30, 2005; and
(iv) the Panda-Rosemary Facility meets certain historical and
projected debt service coverage requirements. If the Panda-Rosemary
Partnership is unable to make distributions to its partners, the
ability of the Issuer to make payments on the Exchange Bonds would be
materially and adversely affected. See "Risk Factors - Financial
Risks" and "- Project Risks." An unaffiliated third party holds a
cash flow participation in distributions from the Panda-Rosemary
Partnership (which the Company believes is 0.433% and would increase
to 1.732% after 2008 based on projected distributions, but which
percentages are the subject of a dispute). All references in this
Prospectus to distributions from U.S. Projects shall mean
distributions after giving effect to such cash flow participation.
See "Description of the Projects - The Panda-Rosemary Facility - Cash
Flow Participation" and "Legal Proceedings - NNW, Inc. Proceeding."
For more detailed information regarding the Panda-Rosemary
Facility, including the various contracts and financing arrangements
referred to above and regulatory matters affecting the Panda-Rosemary
Facility, see "Description of the Projects - The Panda-Rosemary
Facility," "Regulation" and "Description of Outstanding Project-Level
Debt - The Panda-Rosemary Financing."
Panda-Brandywine Facility
The Panda-Brandywine Facility is leased by Panda-Brandywine,
L.P., a Delaware limited partnership (the "Panda-Brandywine
Partnership"). The Panda-Brandywine Partnership has two partners,
each of which is an indirect wholly-owned subsidiary of the Company.
The Panda-Brandywine Facility utilizes natural gas as its primary
fuel. The electric capacity of and electric energy produced by the
Panda-Brandywine Facility is sold to Potomac Electric Power Company
("PEPCO") pursuant to a power purchase agreement (the "Brandywine
Power Purchase Agreement"). The Panda-Brandywine Facility commenced
commercial operations under the Brandywine Power Purchase Agreement
in October 1996. The thermal energy produced by the Panda-Brandywine
Facility is sold to a distilled water production facility which is
owned by an indirect wholly-owned subsidiary of the Company. The
Panda-Brandywine Partnership purchases firm and interruptible natural
gas supplies from Cogen Development Company, which are transported to
the Panda-Brandywine Facility on either a firm or interruptible basis
through the interstate pipeline facilities of Columbia Gas
Transmission Corporation and Cove Point LNG Limited Partnership and
the local gas distribution facilities of Washington Gas Light
Company. The Panda-Brandywine Partnership has contracted with Ogden
Brandywine Operations, Inc. ("Ogden Brandywine"), a subsidiary of
Ogden Power Corporation, to operate and maintain the Panda-Brandywine
Facility.
Raytheon Engineers and Constructors, Inc. ("Raytheon")
constructed the Panda-Brandywine Facility pursuant to a fixed-price,
turnkey engineering, procurement and construction contract (the
"Brandywine EPC Agreement") with the Panda-Brandywine Partnership.
Raytheon completed the start-up of the Panda-Brandywine Facility and
has met the requirements for commercial operations and substantial
completion under the Brandywine EPC Agreement, although the date on
which commercial operations were achieved and the amount of the early
completion bonus to which Raytheon is entitled under the Brandywine
EPC Agreement are the subject of a dispute between the Panda-
Brandywine Partnership and Raytheon. The Company estimates that the
amount in dispute is less than $1.0 million and believes that the
resolution of this dispute will not have a material adverse effect on
the Panda-Brandywine Facility or the Panda-Brandywine Partnership.
See "Description of the Projects - The Panda-Brandywine Facility -
Construction Contract."
General Electric Capital Corporation ("GE Capital") provided a
$215 million construction loan to finance construction of the Panda-
Brandywine Facility, which construction loan was converted in
December 1996 to long-term financing in the form of a leveraged lease
(together with the construction loan, the "Panda-Brandywine
Financing"). To effect the lease financing, title to the Panda-
Brandywine Facility was transferred to a third party trustee and
leased back to the Panda-Brandywine Partnership. The Brandywine
Facility Lease is a net lease and its initial term is 20 years. The
documents governing the Panda-Brandywine Financing (the "Brandywine
Financing Documents") contain various affirmative and negative
covenants, including limitations on the ability of the Panda-
Brandywine Partnership to make distributions to its partners. Subject
to certain other conditions, the Panda-Brandywine Partnership may
make distributions to its partners only if: (i) all amounts then
required to be deposited in certain reserve accounts established
pursuant to the Brandywine Financing Documents have been deposited,
including rent reserve and operation and maintenance reserve
accounts; (ii) all rent payments then due under the Brandywine
Facility Lease have been paid; (iii) the Panda-Brandywine Facility
meets an operating cash flow to debt service ratio of 1.2:1; and (iv)
at the time of such distribution, and after giving effect thereto, no
default or event of default has occurred and is continuing under the
Brandywine Financing Documents. If the Panda-Brandywine Partnership
is unable to make distributions to its partners, the ability of the
Issuer to make payments on the Exchange Bonds would be materially and
adversely affected. See "Risk Factors - Financial Risks" and "-
Project Risks."
In August 1996, the Panda-Brandywine Partnership and PEPCO
commenced discussions concerning commercial operational requirements
of the Panda-Brandywine Facility and conversion of the construction
loan to long-term financing. During these discussions, disagreements
arose between the Panda-Brandywine Partnership and PEPCO with respect
to certain provisions of the Brandywine Power Purchase Agreement, one
of which relates to the determination of the interest rate that is
the basis for reduction in capacity payments thereunder (the "PEPCO
Interest Rate Dispute"). PEPCO and the Panda-Brandywine Partnership
are presently attempting to resolve these disagreements but there are
no assurances that such efforts will be successful. If the PEPCO
Interest Rate Dispute is determined adversely to the Panda-Brandywine
Partnership, the capacity payments paid by PEPCO under the Brandywine
Power Purchase Agreement will be less than originally anticipated,
thereby adversely affecting the revenues realized by the Panda-
Brandywine Partnership, and consequently, reducing the amount of
funds that would be available for distribution to the Company and
ultimately repayment of the Exchange Bonds. In addition, the ability
of the Company to raise debt for Projects in the future would be
impaired. See "Risk Factors - Dependence on Distributions from
Project Entities" and "- Dispute With PEPCO Over Calculation of
Capacity Payments," "Description of the Projects - The Panda-
Brandywine Facility - Dispute With PEPCO Over Calculation of Capacity
Payments," "Offering Circular Summary - Independent Engineers' and
Consultants' Reports - Consolidating Engineer's Pro Forma Report" and
"- Independent Pro Forma Analysis - Brandywine," and "Description of
the Exchange Bonds - Certain Covenants - Limitations on Debt."
For more detailed information regarding the Panda-Brandywine
Facility, including the current disputes with Raytheon and PEPCO, the
various contracts and financing arrangements referred to above and
regulatory matters affecting the Panda-Brandywine Facility, see
"Description of the Projects - The Panda-Brandywine Facility,"
"Regulation" and "Description of Outstanding Project-Level Debt - The
Panda-Brandywine Financing."
Additional Projects Contract
Subject to certain conditions, including those set forth below,
the Additional Projects Contract requires Panda International and its
affiliates to transfer to the Company, or to certain wholly-owned
direct subsidiaries thereof (the "PIC Entities"), their interests in
each Project for which a power purchase agreement is entered into
prior to July 31, 2001 and which has reached Financial Closing or
achieved Commercial Operations prior to July 31, 2006. Panda
International and its affiliates will be required to transfer their
interests in a Project to the Project Portfolio only if the principal
amount of additional series of Bonds that can be issued after giving
effect to the inclusion of the Project in the Project Portfolio
equals or exceeds the amount of Anticipated Additional Debt. For a
description of how the amount of Anticipated Additional Debt is
calculated, see "The Company, the Issuer and Panda International -
The Additional Projects Contract." Interests in a Project will not be
transferred if the Project has not reached Financial Closing or
achieved Commercial Operations. Additionally, except for the Panda-
Kathleen Project described below, which must be transferred to the
Project Portfolio if it reaches Financial Closing, interests in a
Project will not be transferred if: (i) Panda International does not
own a controlling interest in the Project; (ii) the transfer would be
prohibited under any Project-level financing, power purchase or
related agreement; or (iii) after giving effect to the issuance of
the additional series of Bonds in connection with the inclusion of
the Project in the Project Portfolio (a) the rating of previously
issued Bonds is not Reaffirmed by at least two rating agencies at a
rating equal to or higher than that in effect immediately prior to
the issuance of such additional series or (b) the projected Company
Debt Service Coverage Ratio or the projected Consolidated Debt
Service Coverage Ratio (if then applicable) would be less than 1.7:1
or 1.25:1, respectively, for (1) the period beginning with the date
of determination through December 31 of that calendar year, (2) each
period consisting of a calendar year thereafter through the calendar
year immediately prior to the calendar year in which the Final Stated
Maturity occurs and (3) the period thereafter beginning with January
1 and ending with such Final Stated Maturity (each such period, a
"Future Ratio Determination Period"). The Additional Projects
Contract requires Panda International to use commercially reasonable
efforts to cause each Project to meet the conditions for transfer to
the Project Portfolio as of the date a Project reaches Financial
Closing or achieves Commercial Operations, whichever occurs first, or
within a 90-day period thereafter. If, however, the conditions for
such a transfer cannot be satisfied using commercially reasonable
efforts, Panda International will have no further obligation to the
Company in respect of such Project and may retain its interest in
such Project or sell it to third parties.
The Company believes that Panda International will continue to
actively develop Projects; however, Panda International is under no
obligation to do so, or to use any proceeds from the Prior Offering
or future distributions from the Company to fund such future
development. In addition, there can be no assurance that the Projects
currently under development by Panda International will reach
Financial Closing, achieve Commercial Operations or satisfy the other
conditions for transfer to the Project Portfolio pursuant to the
Additional Projects Contract. See "Risk Factors - Financial Risks,"
"- Project Risks" and "- Risks Relating to Future Non-U.S. Projects"
and "The Company, the Issuer and Panda International - The Additional
Projects Contract."
Panda International
Panda International is an independent power company engaged
principally in the development, acquisition, ownership and operation
of electric power generation facilities, both in the United States
and internationally. It also owns a subsidiary engaged in oil and gas
exploration and development. Panda International's principal business
strategy is to use its experience in developing, constructing,
financing and managing electric power generation facilities to
provide low cost electricity and electric generating capacity. Panda
International is seeking to expand its presence in the electric power
industry by implementing this strategy in the United States and
certain other countries. Panda International has placed into
commercial operations facilities with electric generating capacity of
approximately 410 MW. In addition, Panda International has executed
power purchase agreements or entered into other development
arrangements relating to four potential Projects with a combined
electric generating capacity of approximately 750 MW. Panda
International is continually engaged in the evaluation of various
opportunities for the development and acquisition of additional
electric power generation facilities, both in the United States and
internationally. The Company believes that there is and will continue
to be significant demand for new generating capacity worldwide and
that much of this new capacity will be provided by independent power
developers such as Panda International. See "Risk Factors - Project
Risks" and "- Risks Relating to Future Non-U.S. Projects," "The
Company, the Issuer and Panda International" and "Business - The
Independent Power Industry."
Panda International was formed as part of a corporate
reorganization that took place in October 1995 in which all of the
issued and outstanding capital stock of Panda Energy Corporation, a
Texas corporation ("PEC"), was exchanged for shares of capital stock
of Panda International, with the result that PEC became a wholly-
owned subsidiary of Panda International. PEC was organized in 1982 by
Robert and Janice Carter, who are the Chairman of the Board,
President and Chief Executive Officer, and the Executive Vice
President, Treasurer and Secretary, respectively, of Panda
International, PEC, the Company and the Issuer. See "Management."
Robert and Janice Carter and members of their family and family
trusts together own approximately 38.8% of the outstanding shares of
capital stock of Panda International. See "Risk Factors - Control by
Principal Stockholders."
The principal executive offices of the Issuer, the Company, PEC
and Panda International are located at 4100 Spring Valley Road, Suite
1001, Dallas, Texas 75244. The telephone number at such offices is
(972) 980-7159.
Projects under Development by Panda International
The following are Projects that Panda International and its
affiliates are developing. There are substantial risks associated
with the development of Projects, and increased risks associated with
the development of Projects outside the United States. There can be
no assurance that any Project under development will reach Financial
Closing, achieve Commercial Operations or satisfy the other
conditions for transfer to the Project Portfolio pursuant to the
Additional Projects Contract. See "Risk Factors - Project Risks" and
"- Risks Relating to Future Non-U.S. Projects."
Panda-Luannan (China)
The Company expects that, during the first quarter of 1997, a 2
x 50 MW coal-fired cogeneration facility (the "Panda-Luannan
Facility") to be located in Luannan County, Tangshan Municipality,
Hebei Province, People's Republic of China ("PRC" or "China") will
reach Financial Closing and will be eligible for transfer to the
Project Portfolio if the other conditions to such transfer contained
in the Additional Projects Contract can be satisfied. Subject to
output limitations during certain periods, all of the electric output
of the Panda-Luannan Facility will be sold to North China Power Group
Company, the business arm of North China Power Group ("NCPG"), which
is one of the five interprovincial power groups in China under the
supervision of the Ministry of Electric Power of the PRC. The Panda-
Luannan Facility is to be connected to one of the largest power grids
in China, which is operated by NCPG and serves the region which
includes the Beijing-Tianjin-Tangshan area. It is anticipated that
the steam generated will be sold to industrial and possibly to
governmental purchasers.
Panda of Nepal
Panda International has formed a joint venture company with a
major international hydroelectric engineering company and a local
Nepalese party to build a 36 MW hydroelectric facility on the upper
Bhote Koshi River in Nepal. A power purchase agreement with the Nepal
Electricity Authority ("NEA"), and a project agreement with the
Government of Nepal obligating the Government of Nepal to guarantee
NEA's obligations and to provide certain other support and
incentives, were signed in July 1996. An engineering, procurement and
construction contract for the facility was entered into in October
1996 with China Gezhouba Construction Group Corporation for Water
Resources and Hydropower, a Chinese engineering and construction
firm. The construction contract provides that the contractor will
construct the facility on a fixed-price turnkey basis. Panda
International has received commitment letters from two multilateral
agencies to provide debt financing for this Project, subject to their
satisfaction with due diligence reviews and other matters. The
Company expects that this Project will reach Financial Closing during
the first quarter of 1997 and will be eligible for transfer to the
Project Portfolio if the other conditions to such transfer contained
in the Additional Projects Contract can be satisfied.
Panda-Lapanga (India)
In August 1994, Panda International acquired from another
independent power developer a 90% interest in a company that has
executed a power purchase agreement with the Orissa State Electricity
Board for a proposed 500 MW coal-fired electric generating facility
to be located in the State of Orissa, India. Certain of the central
government approvals for this facility have been obtained. Although
Panda International believes this power purchase agreement is valid
and enforceable, the State of Orissa has given a notice of
cancellation of such agreement to Panda International, as well as to
several other third parties with respect to power purchase agreements
relating to their projects. Panda International has objected to such
notice. Development efforts have been delayed pending resolution of
this dispute.
Panda-Kathleen (United States)
Panda International owns an indirect 100% equity interest in
Panda-Kathleen, L.P., a Delaware limited partnership (the "Panda-
Kathleen Partnership"), which in 1991 entered into a power purchase
agreement with Florida Power Corporation ("Florida Power") for the
sale of capacity and all energy made available from a natural gas-
fired, combined-cycle cogeneration facility (the "Panda-Kathleen
Facility"). Construction of the Panda-Kathleen Facility was
originally scheduled to begin in 1995, but has been delayed because
of litigation with Florida Power and may never commence. The
Brandywine Financing Documents require the Panda-Kathleen Project to
be transferred to the Project Portfolio if it reaches Financial
Closing, whether or not the other conditions to transfer contained in
the Additional Projects Contract are satisfied. See "Legal
Proceedings - Florida Power Proceedings."
Guaranty and Collateral; Effective Subordination
The Existing Bonds are, and all additional series of Bonds will
be issued pursuant to an indenture (the "Indenture") among the
Issuer, the Company and Bankers Trust Company, as trustee (the
"Trustee"). The Bonds will be paid from payments by the Company to
the Issuer on promissory notes (including the Initial Company Note,
the "Company Notes") evidencing loans by the Issuer to the Company.
The aggregate outstanding principal amount of the Company Notes will
at all times equal the aggregate outstanding principal amount of the
Bonds. Upon completion of the Exchange Offer, the Existing Bonds will
be the only Bonds issued and outstanding under the Indenture.
The Existing Bonds are, and all additional series of Bonds will
be, fully and unconditionally guaranteed (such guaranty, the "Company
Guaranty") by the Company. In addition, the Existing Bonds are, and
all additional series of Bonds will be, secured by pledges, or grants
of security interests, to the Trustee for the benefit of the holders
of the Bonds: (i) by PEC of and in all of the capital stock of the
Company; (ii) by the Company, of and in all of the capital stock of
the Issuer and the PIC Entities (the "PIC U.S. Entities") that
indirectly own Projects located in the United States and certain
international Projects for which no U.S. tax deferral will be sought
(the "U.S. Projects") and 60% of the capital stock of the PIC
Entities (the "PIC International Entities") that indirectly own
Projects not located in the United States and for which U.S. tax
deferral will be sought (the "Non-U.S. Projects"); (iii) by the
Issuer, of and in the Company Notes; (iv) by the Company, of and in
its interest in the Additional Projects Contract; and (v) by the
Company, of and in its interest in all distributions from the PIC
U.S. Entities and its interest in accounts, established in the
Company's name with the Trustee, into which such distributions are
deposited (all of the foregoing collateral so pledged, the
"Collateral"). The Bonds will not be secured by any direct equity
interest in, or by a mortgage on, or other security interest in the
assets of, any Project nor will the Bonds be directly secured by any
interest in any distributions to PIC International Entities, if any,
or any accounts into which such distributions are deposited. Each PIC
International Entity, however, will be required to pledge to the
Company, as security for the repayment of certain loans by the
Company to such PIC International Entity (the "PIC International
Entity Loans"), such PIC International Entity's interest in all
distributions received by it in respect of Non-U.S. Projects, if any,
and all accounts, established in the name of such PIC International
Entity with the Trustee, acting in its capacity as the International
Collateral Agent for the benefit of the Company (the "International
Collateral Agent"), into which such distributions are deposited. See
"Description of the Exchange Bonds - Collateral for the Exchange
Bonds."
The Exchange Bonds will be exclusively the obligations of the
Issuer and, to the extent of the Company Guaranty, the Company, and
not of any of their affiliates. Because the operations of the Company
are conducted by Project Entities, the Company's cash flow and its
ability to service its debt, including its ability to make payments
on the Company Notes, and consequently the Issuer's ability to make
payments on the Bonds (including the Exchange Bonds), are almost
entirely dependent upon the earnings of the Project Entities and the
distribution of those earnings to the Company. The Project-level
financing arrangements for the Projects generally restrict the
ability of the Project Entities to pay dividends, make distributions
or otherwise transfer funds to equity owners of such Projects,
including the PIC Entities and, indirectly, the Company. These
restrictions generally require that, prior to the payment of
dividends or distributions or the making of other transfers of funds,
the Project Entity proposing to make the dividend, distribution or
transfer must provide for the payment of other obligations of the
Project, including operating expenses and debt service, fund a debt
service reserve and other reserves and meet certain debt service
coverage ratios and other tests. Additionally, the indebtedness
incurred by a Project Entity to finance a Project would generally be
secured by a mortgage on the applicable Project and a security
interest in substantially all of the assets of, and the equity
interests in, the Project Entity.
As a result of the foregoing, the Bonds (including the Exchange
Bonds) and the Company Guaranty will be effectively subordinated,
both in terms of security and in priority of rights to receive
distributions, to creditors of the Project Entities and the PIC
Entities. As of September 30, 1996, the Project Entities had
outstanding $314.6 million of indebtedness and other liabilities,
which are effectively senior to the Existing Bonds and the Company
Guaranty. See "Risk Factors - Financial Risks" and "Description of
the Outstanding Project-Level Debt."
PRIOR OFFERING
On July 31, 1996 (the "Issue Date"), the Issuer issued
$105,525,000 aggregate principal amount of its 11-5/8% Pooled Project
Bonds, Series A due 2012 in a private placement under Section 4(2) of
the Securities Act and Rule 144A. The Old Bonds were sold to
Jefferies & Company, Inc. (the "Initial Purchaser") pursuant to the
Purchase Agreement and were placed by the Initial Purchaser with
Qualified Institutional Buyers and Institutional Accredited Investors
(as defined in Section 501(a) (1), (2), (3) or (7) under the
Securities Act). Pursuant to the Registration Rights Agreement
entered into between the Company, the Issuer and the Initial
Purchaser in connection with the Prior Offering, the Issuer and the
Company agreed to file a shelf registration statement covering the
Old Bonds (a "Shelf Registration Statement") or to effect a
registered exchange offer for the Old Bonds pursuant to which the
holders of the Old Bonds would be offered the opportunity to exchange
their Old Bonds for registered Exchange Bonds. The Registration
Rights Agreement provides that if such an exchange offer registration
statement (an "Exchange Offer Registration Statement") or a Shelf
Registration Statement is not declared effective within 180 days
after the Issue Date, the interest rate on the Old Bonds will
increase by 50 basis points effective on the 181st day following the
Issue Date until such a registration statement is declared effective.
If such a registration statement is not declared effective within two
years following the Issue Date, such increase in interest rate would
become permanent. The Registration Statement with respect to the
Exchange Offer was declared effective by the Commission on
__________, 1997, thereby avoiding the aforementioned interest rate
increase.
THE EXCHANGE OFFER
The Issuer is making the following Exchange Offer to holders of
all Old Bonds presently outstanding:
The Exchange Offer For each $1,000 principal amount of
Old Bonds tendered, a holder will be
entitled to receive $1,000 principal
amount of Exchange Bonds. As of the date
of this Prospectus, $105,525,000 principal
amount of Old Bonds is outstanding. The
terms of the Exchange Bonds are
substantially identical to the terms of
the Old Bonds, except that the Exchange
Bonds (i) will have been registered under
the Securities Act, and (ii) holders of
the Exchange Bonds will not be entitled to
certain rights of holders of the Old Bonds
under the Registration Rights Agreement,
which rights will terminate upon the
consummation of the Exchange Offer. Such
rights will also terminate as to holders
of Old Bonds who are eligible to tender
their Old Bonds for exchange in the
Exchange Offer and fail to do so. See
"The Exchange Offer - Termination of
Certain Rights" and "Old Bonds
Registration Rights."
Expiration Date The Exchange Offer will expire at
5:00 p.m., New York City time, on
____________, 1997, unless extended in the
Issuer's sole discretion. See "The
Exchange Offer - Expiration Date;
Extensions; Termination; Amendments."
Withdrawal of Tenders Tenders of Old Bonds may be withdrawn
at any time prior to the Expiration Date.
Thereafter, such tenders are irrevocable.
See "The Exchange Offer - Withdrawal of
Tenders."
Interest on the Exchange
Bonds and Accrued Interest
on the Old Bonds The Exchange Bonds will
bear interest from the date of their
issuance. Interest on the Old Bonds
accepted for exchange will accrue thereon
to, but not including, the date of
issuance of the Exchange Bonds and will be
paid together with the first interest
payment on the Exchange Bonds issued in
exchange therefor.
Conditions of the Exchange
Offer The Exchange Offer is
subject to certain customary conditions.
The Exchange Offer is not conditioned upon
any minimum aggregate principal amount of
Old Bonds being tendered or accepted for
exchange. Old Bonds may be tendered only
in integral multiples of $1,000. See "The
Exchange Offer - Conditions of the
Exchange Offer."
Procedures for Tendering
Old Bonds Each holder of Old Bonds
wishing to accept the Exchange Offer must,
prior to the Expiration Date, either (i)
complete and sign the Letter of
Transmittal, in accordance with the
instructions contained herein and therein,
and deliver such Letter of Transmittal,
together with any signature guarantees and
any other documents required by the Letter
of Transmittal, to the Exchange Agent at
its address set forth on the back cover
page of this Prospectus and the tendered
Old Bonds must either be (a) physically
delivered to the Exchange Agent or (b)
transferred pursuant to the procedures for
book-entry transfer described herein and a
confirmation of such book-entry transfer
must be received by the Exchange Agent
prior to the Expiration Date, or (ii)
comply with the guaranteed delivery
procedures set forth herein. By executing
the Letter of Transmittal, each holder
will represent that, among other things,
the Exchange Bonds acquired pursuant to
the Exchange Offer are being acquired in
the ordinary course of business of the
person receiving such Exchange Bonds
(whether or not such person is the
registered holder of such Exchange Bonds),
that neither the holder of such Exchange
Bonds nor any such other person has an
arrangement with any person to participate
in the distribution (within the meaning of
the Exchange Act) of such Exchange Bonds
and that neither the holder of such
Exchange Bonds or any such other person is
an Affiliate of the Issuer or the Company,
or if it is an Affiliate, it will comply
with the registration and prospectus
delivery requirements of the Securities
Act to the extent applicable. See "The
Exchange Offer - Procedures for
Tendering."
Special Procedures for
Beneficial Owners Any beneficial owner
whose Old Bonds are registered in the name
of a broker, dealer, commercial bank,
trust company or other nominee and who
wishes to tender Old Bonds in the Exchange
Offer should contact such registered
holder promptly and instruct such
registered holder to tender on such
beneficial owner's behalf. See "The
Exchange Offer - Procedures for
Tendering."
Guaranteed Delivery
Procedures Holders of Old Bonds who wish to
tender their Old Bonds and whose Old Bonds
are not immediately available or who
cannot deliver their Old Bonds, the Letter
of Transmittal or any other documents
required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration
Date, may tender their Old Bonds according
to the guaranteed delivery procedures set
forth in "The Exchange Offer - Guaranteed
Delivery Procedures."
Acceptance of the Old
Bonds and Delivery of
the Exchange Bonds Upon satisfaction or waiver
of the conditions of the Exchange Offer,
the Issuer will accept for exchange any
and all Old Bonds which are properly
tendered and not withdrawn prior to the
Expiration Date. The Exchange Bonds
issued pursuant to the Exchange Offer will
be delivered on the earliest practicable
date following the Expiration Date. See
"The Exchange Offer - Acceptance of Old
Bonds for Exchange; Delivery of Exchange
Bonds."
Certain Federal Income Tax
Considerations Generally, there should not be
federal income tax consequences to holders
as a result of the exchange of the Old
Bonds for the Exchange Bonds pursuant to
the Exchange Offer. If, however, the
exchange of the Old Bonds for the Exchange
Bonds were treated as an "exchange" for
federal income tax purposes, such exchange
should constitute a recapitalization for
federal income tax purposes. Holders
exchanging the Old Bonds pursuant to such
recapitalization should not recognize any
gain or loss upon the exchange. The
foregoing discussion of certain federal
income tax consequences is for general
information only and is not tax advice.
Federal income tax consequences may vary
depending upon individual circumstances.
See "Certain U.S. Federal Income Tax
Considerations of the Exchange Offer."
Effect on Holders of
Old Bonds Holders of the Old Bonds who do
not tender their Old Bonds in the Exchange
Offer will continue to hold such Old Bonds
and will be entitled to all the rights and
benefits, and will be subject to all
limitations applicable thereto, under the
Indenture. All Old Bonds not exchanged in
the Exchange Offer will continue to be
subject to the restrictions on transfer
provided for in the Old Bonds and the
Indenture. To the extent that Old Bonds
are tendered and accepted in the Exchange
Offer, the trading market, if any, for the
Old Bonds not so tendered could be
adversely affected. See "Risk Factors -
Consequences of Failure to Exchange Old
Bonds."
Rights of Dissenting
Holders Holders of Old Bonds do not have
any appraisal or dissenters' rights under
the Delaware General Corporation Law or
the Indenture in connection with the
Exchange Offer.
Exchange Agent Bankers Trust Company. See "The
Exchange Offer - The Exchange Agent."
TERMS OF THE EXCHANGE BONDS
The Exchange Offer applies to $105,525,000 aggregate principal
amount of Old Bonds. The form and terms of the Exchange Bonds are
substantially identical to the terms of the Old Bonds, except that
the Exchange Bonds (i) will have been registered under the Securities
Act, and therefore, will not bear legends restricting their transfer
pursuant to the Securities Act, and (ii) holders of the Exchange
Bonds will not be entitled to certain rights of holders of the Old
Bonds under the Registration Rights Agreement, which rights will
terminate upon the consummation of the Exchange Offer. Such rights
will also terminate as to holders of Old Bonds who are eligible to
tender their Old Bonds for exchange in the Exchange Offer and fail to
do so. See "The Exchange Offer - Termination of Certain Rights."
The Exchange Bonds will evidence the same debt as the Old Bonds which
they replace and will be issued under, and be entitled to the
benefits of, the Indenture. Upon completion of the Exchange Offer,
the Existing Bonds will be the only Bonds issued and outstanding
under the Indenture.
Securities Offered $105,525,000 11-5/8% Pooled Project
Bonds, Series A-1 due 2012.
Final Maturity Date August 20, 2012.
Interest Payment Dates February 20 and August 20,
commencing February 20, 1997.
Ratings In October 1996, the Exchange Bonds
were rated Ba3 by Moody's Investors
Service, Inc. and BB- by Duff & Phelps
Credit Rating Co.
Initial Average Life The initial average life to
maturity of the Exchange Bonds is 11.7
years.
Scheduled Principal Payments Semiannually commencing February 20, 1997,
as follows:
Percentage of
Payment Date Original
Principal
Amount
Payable
February 20, 1997 0.2045%
August 20, 1997 0.0000%
February 20, 1998 0.0000%
August 20, 1998 0.0000%
February 20, 1999 0.0000%
August 20, 1999 0.5933%
February 20, 2000 0.6129%
August 20, 2000 0.0000%
February 20, 2001 0.0000%
August 20, 2001 1.3753%
February 20, 2002 1.4691%
August 20, 2002 2.2184%
February 20, 2003 2.3565%
August 20, 2003 2.9328%
February 20, 2004 3.1031%
August 20, 2004 3.2796%
February 20, 2005 3.4687%
August 20, 2005 3.5977%
February 20, 2006 3.7820%
August 20, 2006 2.8098%
February 20, 2007 3.0076%
August 20, 2007 4.8415%
February 20, 2008 5.1145%
August 20, 2008 5.0057%
February 20, 2009 5.2945%
August 20, 2009 5.5185%
February 20, 2010 5.8300%
August 20, 2010 5.7248%
February 20, 2011 6.0590%
August 20, 2011 6.4800%
February 20, 2012 6.8808%
August 20, 2012 8.4390%
Denominations and Form The Exchange Bonds will be issuable
in denominations of any integral multiple
of $1,000 in exchange for a like
principal amount of Old Bonds. The
Exchange Bonds will be issuable in book-
entry form through the facilities of The
Depository Trust Company ("DTC"), which
will act as depositary for the Exchange
Bonds. One fully-registered certificate
will be issued and will be deposited with
DTC, and interests therein will be shown
on, and transfers will be effected
through, records maintained by DTC and
its participants. Exchange Bonds issued
to Institutional Accredited Investors,
and Exchange Bonds issued in other
limited circumstances described herein,
will be issued in registered certificated
form. See "Description of the Exchange
Bonds - Book Entry; Delivery and Form."
Mandatory Redemption The Existing Bonds and all
additional series of Bonds, if any, then
outstanding will be subject to mandatory
redemption, in whole or in part, to the
extent that, at any time (after giving
effect to transfers required to be made
to other Accounts and Funds on such
date), the aggregate amount of monies on
deposit in the U.S. and International
Mandatory Redemption Accounts is in
excess of $2.0 million. In the event of a
sale or other disposition of any
Collateral or any interest in a Project
or any event of casualty, loss or
condemnation with respect to a Project
(each, a "Mandatory Redemption Event"),
all proceeds of any distributions
resulting from such Mandatory Redemption
Event in excess of $2.0 million in the
aggregate in any calendar year that may
be legally distributed or paid to the
Company or any PIC Entity without
contravention of any Project debt
agreement shall be deposited into the
appropriate Mandatory Redemption Account,
unless (i) the Company provides a
certificate to the Trustee (supported by
a certificate to the Trustee from the
Consolidating Engineer) stating that such
Mandatory Redemption Event would not
result in either the projected Company
Debt Service Coverage Ratio being less
than 1.7:1 or the projected Consolidated
Debt Service Coverage Ratio (if then
applicable) being less than 1.25:1, for
each Future Ratio Determination Period;
and (ii) the rating of the Bonds is
Reaffirmed by at least two rating
agencies at a rating equal to or higher
than that in effect immediately prior to
such Mandatory Redemption Event.
Mandatory redemptions will be made at a
redemption price equal to 100% of the
principal amount of the Bonds to be
redeemed plus interest thereon accrued to
the date of such redemption, plus a
premium, if any, provided in the
supplemental indenture for each series of
Bonds to be redeemed. For the Exchange
Bonds, such premium is equal to that
payable were the Exchange Bonds to be
redeemed at the Issuer's option on such
date to the extent that the mandatory
redemption results from a sale or other
voluntary disposition of any Collateral
or any interest in a Project (or if no
optional redemption is then available, a
premium determined as the excess, if any,
of the present value of the remaining
payments due on the Exchange Bonds,
discounted at a rate which is equal to
the Applicable Treasury Rate plus one-
half of one percent over the par value of
such Exchange Bonds). Notwithstanding the
foregoing, the amount of Bonds required
to be redeemed shall not exceed the
amount necessary to cause (after giving
effect to such redemption) the coverage
ratio requirements set forth above to be
met and to achieve a Reaffirmation of the
rating on the Bonds by at least two
rating agencies. See "Description of the
Exchange Bonds - Redemption - Mandatory
Redemption."
The applicable Consolidated Debt Service
Coverage Ratio, for purposes of
determining whether amounts are to be
deposited in the Mandatory Redemption
Accounts or for any other purposes under
the Indenture, need not be satisfied on
and after the time that more than four
Projects have been transferred to the
Project Portfolio.
There can be no assurance that the Issuer
will have available funds sufficient to
fund the redemption of Bonds upon the
occurrence of a Mandatory Redemption
Event. In the event a Mandatory
Redemption Event occurs at a time when
the Issuer does not have available funds
sufficient to redeem all of the Bonds
subject to such redemption, an Event of
Default would occur under the Indenture.
See "Risk Factors - Mandatory Redemption
and Repurchase of Bonds Upon a Change in
Control."
Optional Redemption The Exchange Bonds will be subject
to redemption, in whole or in part, at
the option of the Issuer at any time on
or after August 20, 2001, at the
following redemption prices (expressed as
a percentage of principal amount) plus
interest accrued to the date of
redemption, if redeemed during the 12-
month period commencing on or after
August 20 of the year set forth below:
Year Redemption
Price
2001 105.8125%
2002 104.3594%
2003 102.9063%
2004 101.4532%
2005 100.0000%
and thereafter
The Exchange Bonds are also subject to
redemption, in whole or in part, at the
option of the Issuer at a redemption
price equal to 100% of the principal
amount of the Bonds to be redeemed plus
interest thereon accrued to the date of
such redemption if an Extraordinary
Financial Distribution in excess of $2.0
million is applied to prepay the Company
Notes. "Extraordinary Financial
Distributions" are distributions and
other amounts received by the Company or
any PIC Entity without contravention of
any Project debt agreement in respect of
settlements, judgments and other payments
received in respect of a Project in
connection with legal proceedings, monies
released from certain escrows relating to
Projects, buy-outs or settlements of
Project contracts and certain other
transactions resulting in the receipt of
cash or other property upon the sale,
transfer or other disposition of
contractual rights relating to a Project
(in each case, other than in respect of a
Mandatory Redemption Event). See
"Description of the Exchange Bonds -
Redemption - Optional Redemption."
Change of Control Upon the occurrence of a Change of
Control, each holder of Existing Bonds
and all additional series of Bonds, if
any, will have the right to require the
Issuer to purchase all or a portion of
such holder's Bonds at a price equal to
101% of the aggregate principal amount
thereof, together with accrued and unpaid
interest to the date of purchase. See
"Description of the Exchange Bonds -
Certain Covenants - Change of Control."
There can be no assurance that the Issuer
will have available funds sufficient to
fund the purchase of the Bonds upon a
Change of Control. In the event a Change
of Control occurs at a time when the
Issuer does not have available funds
sufficient to pay for all of the Bonds
delivered by holders seeking to accept
the Issuer's repurchase offer, an Event
of Default would occur under the
Indenture. See "Risk Factors - Mandatory
Redemption and Repurchase of Bonds Upon a
Change in Control."
Certain Covenants The Indenture contains affirmative
and negative covenants that restrict the
activities of the Issuer, the Company and
the PIC Entities, including limitations
on: (i) distributions to the Company and
the PIC International Entities out of the
Accounts and Funds described below under
"Flow of Funds"; (ii) the ability of
Project Entities to incur new debt or
amend Project agreements if such actions
could reasonably be expected to reduce
Cash Available for Distribution by 10%
for any Future Ratio Determination
Period; (iii) how the proceeds of the
Prior Offering may be used; (iv) the
incurrence of indebtedness or lease
obligations, or the provision of
guaranties (see "Additional Debt" below);
(v) the payment of dividends on and
redemptions of capital stock; (vi) the
use of proceeds from the sale of assets
and certain other events; (vii)
transactions with affiliates and (viii)
the creation of liens. The Indenture will
also (a) require the Company to maintain
at least a 50% (direct or indirect)
ownership interest in each Project, or a
25% (direct or indirect) ownership
interest in each Project and controlling
influence over the management and
policies with respect to such Project,
provided that no other entity has greater
control than the Company over such
management and policies (except in
certain circumstances, including the sale
by the Company of its entire interest in
a Project), (b) restrict the ability of
the Company, the Issuer and the PIC
Entities to consolidate with or merge
into, or to transfer all or substantially
all of their respective assets to,
another person, (c) require the Issuer to
pledge additional collateral in certain
instances and (d) require the Issuer to
offer to redeem the Bonds upon the
occurrence of a Change of Control. See
"Description of the Exchange Bonds -
Certain Covenants."
Noncompliance with the covenants
contained in the Indenture would
constitute an Event of Default under the
Indenture after any applicable time
periods or notice and cure periods. If
an Event of Default due to the
bankruptcy, insolvency or reorganization
of the Company, the Issuer or any PIC
Entity occurs, all unpaid principal,
premium, if any, and interest under all
Existing Bonds and all additional series
of Bonds, if any, then outstanding will
immediately become due and payable. In
other cases of an Event of Default, the
Trustee may, and upon the request of the
holders of at least one-third or one-half
(depending on the circumstances) in
aggregate principal amount of all
Existing Bonds and all additional series
of Bonds, if any, then outstanding shall,
declare all unpaid principal, premium, if
any, and interest thereunder to
immediately become due and payable. If
any Event of Default is not cured or
waived, the Trustee may, and upon the
request of a majority in aggregate
principal amount of the Existing Bonds
and all additional series of Bonds, if
any, then outstanding, and the offering
to it of any indemnity required under the
Indenture shall (unless the Trustee in
good faith shall determine that such
exercise would involve it in personal
liability or expense), enforce every
right available to it under the Indenture
and under the Security Documents. See
"Description of the Exchange Bonds -
Defaults and Remedies."
Additional Debt The Indenture permits the Issuer to
incur additional debt only in the form of
additional series of Bonds for the
purpose of loaning the proceeds thereof
to the Company, which the Company may use
either to make investments in Projects in
connection with their transfer to the
Project Portfolio or for distribution or
loan to Panda International and its
affiliates. Panda International and its
affiliates may, but are under no
obligation to, use such funds for future
project development. Additional series of
Bonds may be issued only if, at the time
of such issuance, (i) the Company
provides a certificate to the Trustee
(supported by a certificate to the
Trustee from the Consolidating Engineer)
stating that, after giving effect to the
issuance of such additional series of
Bonds and the application of the proceeds
therefrom, the projected Company Debt
Service Coverage Ratio and the projected
Consolidated Debt Service Coverage Ratio
(if then applicable) equal or exceed
1.7:1 and 1.25:1, respectively, for each
Future Ratio Determination Period and
(ii) the rating of the Bonds is
Reaffirmed by at least two rating
agencies at a rating equal to or higher
than that in effect immediately prior to
the issuance of such additional series;
provided, however, that such
Reaffirmation of the rating shall not be
required if (a) neither the Company nor
any PIC Entity has, since the last date
upon which the Bonds were rated or a
Reaffirmation of rating was given in
respect thereof, acquired (or is
acquiring in connection with the issuance
of such additional series), sold or
otherwise disposed of direct or indirect
interests in one or more Projects in an
aggregate amount in excess of the lesser
of the amounts set forth in subclauses
(1) and (2) of clause (b) below and (b)
the principal amount of such additional
series to be issued is less than the
lesser of (1) $50 million and (2) 25% of
the aggregate principal amount of all
series of Bonds then outstanding. The
Company and the PIC Entities will be
prohibited from incurring any debt, other
than (i) in the case of the Company, the
Company Guaranty and the Company Notes,
(ii) in the case of the PIC International
Entities, the PIC International Entity
Notes, certain subordinated debt
(including Other International Notes)
payable to the Company or any PIC Entity,
(iii) in the case of the PIC U.S.
Entities, the PIC Entity Guaranties and
certain subordinated debt payable to the
Company or any PIC Entity and (iv) in the
case of Project Entities, Project debt
and certain guaranties. See "Description
of the Exchange Bonds - Certain
Covenants."
Guaranty and Ranking The
Exchange Bonds will rank pari passu with
all other series of Bonds (including the
Old Bonds). The Existing Bonds are, and
all other series of Bonds will be, fully
and unconditionally guaranteed by the
Company Guaranty. The Existing Bonds
are, and all other series of Bonds will
be, secured indebtedness of the Issuer;
however, payments on the Bonds, and
payments under the Company Guaranty, will
be effectively subordinated to all
liabilities of the Project Entities
incurred in respect of the Projects,
including Project-level debt financing
and trade payables. As of September 30,
1996, the Project Entities had
outstanding $314.6 million of
indebtedness and other liabilities, which
are effectively senior to the Existing
Bonds and the Company Guaranty. See
"Risk Factors - Financial Risks,"
"Description of the Outstanding Project-
Level Debt" and "Description of the
Exchange Bonds - Ranking."
Flow of Funds All
distributions in respect of U.S. Projects
received by or on behalf of the Company
or any PIC U.S. Entity (other than
Extraordinary Financial Distributions and
distributions received as a result of
Mandatory Redemption Events that are
required to be deposited in the U.S.
Mandatory Redemption Account), all
regularly scheduled interest and
principal payments on the PIC
International Entity Notes and any
payments resulting from the redemption or
partial redemption of any Other
International Notes shall be deposited
directly into the U.S. Project Account.
All distributions in respect of Non-U.S.
Projects received by or on behalf of any
PIC International Entity (other than
Extraordinary Financial Distributions and
distributions received as a result of
Mandatory Redemption Events that are
required to be deposited in the
International Mandatory Redemption
Account) shall be deposited directly into
the International Project Account.
The Trustee shall, on the first Business
Day of each month (a "Monthly
Distribution Date"), transfer amounts on
deposit in the U.S. Project Account in
the following order of priority:
(i)to the Debt Service Fund (for
application to payments on the
Bonds), an amount equal to the
excess, if any, of (a) the
aggregate amount of interest (less
any amount on deposit in the
Capitalized Interest Fund in
respect of such payment) and, if
applicable, principal, in each case
due and payable on the Company
Notes (including any past due
amounts) on the Payment Date for
each series of Bonds then
outstanding next following the day
immediately preceding such Monthly
Distribution Date (other than in
connection with a call for
redemption) over (b) the amount
then on deposit in the Debt Service
Fund;
(ii) to the Capitalized Interest
Fund, an amount equal to the
excess, if any, of the Capitalized
Interest Requirement over the
amount then on deposit in the
Capitalized Interest Fund;
(iii) to the Debt Service Reserve Fund,
an amount equal to the excess, if any,
of the Debt Service Reserve Requirement
over the sum of (a) the amount then on
deposit in the Debt Service Reserve Fund
plus (b) the aggregate amount, if any,
available to be drawn under a
Letter of Credit;
(iv) to the Company Expense Fund,
an amount equal to the excess, if
any, of (a) the sum of (1) the
Company Expenses Amount for the
applicable calendar year plus (2)
the Annual Letter of Credit Fee
over (b) the aggregate amount
deposited to the Company Expense
Fund since the beginning of such
calendar year; and
(v) to the U.S. Distribution Suspense
Fund, the remaining balance, if
any, on deposit in the U.S. Project
Account.
On each Monthly Distribution Date, the
International Collateral Agent shall
transfer monies from the International
Project Account (i) first to the payment
of interest then due on any PIC
International Entity Note and (ii) then
to the International Distribution
Suspense Fund, the remaining balance, if
any, on deposit in the International
Project Account. Extraordinary Financial
Distributions will be initially deposited
in the appropriate Extraordinary
Distribution Account (U.S. or
International) and, if required pursuant
to the Indenture, proceeds received by
the Company or any PIC Entity as a result
of Mandatory Redemption Events will be
initially deposited in the appropriate
Mandatory Redemption Account (U.S. or
International). All amounts held in the
foregoing Accounts and Funds (other than
the International Accounts and Funds)
will be in the sole control of the
Trustee, acting in its capacity as agent
for the Collateral Agent, and will be
pledged to secure the obligations of the
Issuer under the Bonds. The International
Accounts and Funds will be in the sole
control of the International Collateral
Agent, acting in its capacity as agent
for the PIC International Entities, and
will be pledged to the Company to secure
the PIC International Entity Notes and
the Other International Notes. In
addition to the foregoing Accounts and
Funds, a U.S. Distribution Fund and an
International Distribution Fund will be
established in the name and be in the
control of the Company and the PIC
International Entities, respectively. See
"Description of the Exchange Bonds - The
Accounts and Funds."
Debt Service Fund Amounts on deposit in the Debt
Service Fund shall be used to pay
interest and principal, if applicable,
due and payable on the Company Notes, as
and when provided in the Company Notes.
Payments on the Company Notes shall be
applied by the Trustee to the payment of
interest and principal on the Bonds. If,
on any Payment Date the amounts on
deposit in the Debt Service Fund, after
giving effect to all transfers to the
Debt Service Fund on such date, are
insufficient for the payment in full of
the interest and, if applicable,
principal on the Company Notes then due
and payable, including any past due
amounts (such deficiency hereinafter
referred to as a "Debt Service
Deficiency"), an amount equal to such
Debt Service Deficiency shall be
withdrawn and transferred to the Debt
Service Fund, first from the U.S.
Distribution Suspense Fund, then from the
U.S. Extraordinary Distribution Account
(using Available Amounts only), then from
the Company Expense Fund, then from the
Debt Service Reserve Fund, then from the
Capitalized Interest Fund and then from
the U.S. Mandatory Redemption Account
(using Available Amounts only); provided,
however, that if there are not sufficient
funds in the U.S. Accounts and Funds to
eliminate a Debt Service Deficiency,
monies will be transferred from the
International Accounts and Funds by the
International Collateral Agent to effect
a redemption of the Other International
Notes in an amount equal to the lesser of
(a) the amounts on deposit in the
International Accounts and Funds, (b) the
outstanding principal amount of the Other
International Notes and (c) the amount of
such Debt Service Deficiency. The amounts
realized from the redemption of any Other
International Notes for purposes of
eliminating a Debt Service Deficiency
will be transferred to the U.S. Project
Account and then from the U.S. Project
Account to the Debt Service Reserve Fund.
PEC has agreed to cause the Company (and,
if necessary, to make capital
contributions to the Company) to loan
$6.4 million to a PIC International
Entity evidenced by an Other
International Note, on or prior to the
earlier of (A) the first date on which
Commercial Operations have been achieved
by any Non-U.S. Project in the Project
Portfolio and (B) the date of transfer to
the Project Portfolio of any Non-U.S.
Project that has already achieved
Commercial Operations. The Company may,
but is under no obligation to, lend
additional amounts to the PIC
International Entities to create
additional Other International Notes.
Capitalized Interest Fund Upon the issuance of the Old Bonds,
the Company deposited approximately
$9,834,000 into the Capitalized Interest
Fund out of the loan by the Issuer to the
Company of the proceeds from the issuance
of the Old Bonds. Monies held on deposit
in the Capitalized Interest Fund shall be
transferred to the Debt Service Fund on
the Interest Payment Dates on February
20, 1997, August 20, 1997, February 20,
1998, August 20, 1998, February 20, 1999,
August 20, 2000, and February 20, 2001 in
the amounts of approximately $618,000,
$1,188,000, $1,233,000, $3,385,000,
$3,304,000, $71,000 and $35,000
respectively. See "Description of the
Exchange Bonds - The Accounts and Funds -
Capitalized Interest Fund."
Debt Service Reserve Fund Upon the issuance of the Old Bonds,
the Company deposited into the Debt
Service Reserve Fund $6.4 million, which
is equal to the amount of interest due on
the Existing Bonds on the first Payment
Date less the amount deposited upon the
issuance of the Old Bonds in the
Capitalized Interest Fund in respect of
such interest payment. The Company funded
this deposit with a portion of the loan
by the Issuer to the Company of the
proceeds from the issuance of the Old
Bonds. Except as may be provided in any
Series Supplemental Indenture with
respect to any particular series of
Bonds, until the amount on deposit in the
Debt Service Reserve Fund on any Monthly
Distribution Date equals the amount of
principal and interest payments on all
Bonds outstanding due for the immediately
succeeding 12 months (less the amount on
deposit in the Capitalized Interest Fund
in respect of interest payments scheduled
to be made during such 12-month period),
all funds deposited in the U.S. Project
Account not required to be transferred
into the Debt Service Fund or the
Capitalized Interest Fund shall be
deposited into the Debt Service Reserve
Fund. Thereafter, so long as any Bonds
remain outstanding, the Company will be
required (unless otherwise provided in a
Series Supplemental Indenture with
respect to a particular series of Bonds)
to maintain in the Debt Service Reserve
Fund an amount equal to the amount of
debt service due in respect of all Bonds
then outstanding for the next 12-month
period, except that, if less than 12
months remain before the Final Stated
Maturity for any series of Bonds, then an
amount equal to the scheduled principal
and interest payments for such series for
such period will constitute the amount
required to be on deposit in the Debt
Service Reserve Fund with respect to such
series of Bonds. The Debt Service
Reserve Fund may be drawn upon to pay the
principal of, and premium, if any, and
interest on all series of the Bonds, to
the extent of funds allocated within the
Debt Service Reserve Fund to each series
of Bonds, if funds otherwise available to
the Trustee for such payments are
insufficient. At any time when the
Capitalized Interest Requirement for any
series of the Bonds equals zero, Panda
International or PEC may arrange for a
Letter of Credit to be provided in lieu
of cash for all or a part of the amount
in respect of such series required to be
maintained in the Debt Service Reserve
Fund. See "Description of the Exchange
Bonds - The Accounts and Funds - Debt
Service Reserve Fund."
Distributions Subject to certain limited
exceptions, distributions may be made to
the Company and the PIC International
Entities only from, and to the extent of,
monies then on deposit in the U.S.
Distribution Fund and the International
Distribution Fund, respectively.
Transfers into the Distribution Funds may
be made on any Monthly Distribution Date
subject to the prior satisfaction of the
following conditions: (i) the amount on
deposit in the Debt Service Fund is equal
to or greater than the amount of interest
(less amounts on deposit in the
Capitalized Interest Fund in respect of
such interest payment) and, if
applicable, principal due on all series
of the Bonds (including all past due
amounts) on the Payment Date for each
series of Bonds outstanding next
following the day immediately preceding
such Monthly Distribution Date (other
than in connection with a call for
redemption); (ii) the amount on deposit
in each of the Capitalized Interest Fund,
the Debt Service Reserve Fund (together
with the aggregate amount of any Letters
of Credit provided in respect of the Debt
Service Reserve Requirement), the Company
Expense Fund, the Mandatory Redemption
Accounts and the Extraordinary
Distribution Accounts is equal to or
greater than the amount then required to
be deposited therein under the Indenture;
(iii) no Default or Event of Default
under the Indenture shall have occurred
and be continuing; and (iv) with certain
exceptions, the Company can certify that
(a) the historical Company Debt Service
Coverage Ratio is equal to or greater
than 1.4:1 for the 12 months immediately
preceding the month in which such Monthly
Distribution Date is to occur (or for
such shorter period as the Bonds have
been outstanding) and (b) the projected
Company Debt Service Coverage Ratio is
equal to or greater than 1.4:1 for the 12
months immediately succeeding the month
in which such Monthly Distribution Date
is to occur (or for such shorter period
as the series of Bonds with the latest
Final Stated Maturity is scheduled to be
outstanding). See "Description of the
Exchange Bonds - Certain Covenants -
Limitations on Distributions."
Registration Rights This Exchange Offer is intended to
satisfy certain rights under the
Registration Rights Agreement, which
rights terminate upon the consummation of
the Exchange Offer. Therefore, the
holders of Exchange Bonds are not
entitled to any exchange or registration
rights with respect to the Exchange
Bonds. In addition, such exchange and
registration rights will terminate as to
holders of Old Bonds who are eligible to
tender their Old Bonds for exchange in
the Exchange Offer and fail to do so.
See "The Exchange Offer - Termination of
Certain Rights" and "Old Bonds
Registration Rights."
Transfer of Exchange Bonds Based upon its view of
interpretations provided to third parties
by the staff of the Commission, the
Company believes that the Exchange Bonds
issued pursuant to the Exchange Offer may
be offered for resale, resold and
otherwise transferred by holders thereof
(other than any holder which is (i) an
Affiliate of the Company or the Issuer,
(ii) a broker-dealer who acquired Old
Bonds directly from the Issuer or (iii) a
broker-dealer who acquired Old Bonds as a
result of market making or other trading
activities) without registration under
the Securities Act, provided that such
Exchange Bonds are acquired in the
ordinary course of such holders' business
and such holders are not engaged in, and
do not intend to engage in, and have no
arrangement or understanding with any
person to participate in, a distribution
(within the meaning of the Securities
Act) of such Exchange Bonds. Each broker-
dealer that receives Exchange Bonds for
its own account pursuant to the Exchange
Offer must acknowledge that it will
deliver a prospectus in connection with
any resale of such Exchange Bonds. The
Letter of Transmittal states that by so
acknowledging and by delivering a
prospectus, a broker-dealer will not be
deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it
may be amended or supplemented from time
to time, may be used by a broker-dealer
in connection with resales of Exchange
Bonds received in exchange for Old Bonds
where such Old Bonds were acquired by
such broker-dealer as a result of market
making activities or other trading
activities. The Company and the Issuer
have agreed, for a period of 180 days
after the consummation of the Exchange
Offer, to make available a prospectus
meeting the requirements of the
Securities Act to any such broker-dealer
for use in connection with any such
resale. A broker-dealer that delivers
such a prospectus to a purchaser in
connection with such resales will be
subject to certain of the civil liability
provisions under the Securities Act and
will be bound by the provisions of the
Registration Rights Agreement (including
certain indemnification provisions). Any
holder who tenders in the Exchange Offer
for the purpose of participating in a
distribution of the Exchange Bonds and
any other holder that cannot rely upon
such interpretations must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with a secondary resale
transaction. In addition, to comply with
the securities laws of certain
jurisdictions, if applicable, the
Exchange Bonds may not be offered or sold
unless they have been registered or
qualified for sale in such jurisdictions
or an exemption from registration or
qualification is available and the
conditions thereto have been met. See
"The Exchange Offer - Purpose and Effects
of the Exchange Offer" and "Plan of
Distribution."
Use of Proceeds There will be no cash proceeds to
the Issuer or the Company from the
exchange of Exchange Bonds for Old Bonds
pursuant to the Exchange Offer.
Risk Factors
Investment in the Exchange Bonds involves substantial risks. See "Risk Factors."
Summary Historical and Pro Forma Financial Data
Presented below is summary historical financial data for the
Company as of and for each of the years in the three-year period
ended December 31, 1995 and as of and for the nine months ended
September 30, 1995 and 1996, which have been derived from the
Company's financial statements and pro forma financial data for the
year ended December 31, 1995 and the nine months ended September 30,
1996. The pro forma financial data give effect to (i) the issuance of
$111.4 million in the aggregate principal amount of Rosemary Bonds
and the application of the net proceeds thereof to refinance Panda-
Rosemary Project debt and to fund a portion of the acquisition of
Ford Credit's limited partner interest in the Panda-Rosemary
Partnership, (ii) the issuance of the Existing Bonds and the
application of the net proceeds thereof (a) to fund the Capitalized
Interest Fund, the Debt Service Reserve Fund and the Company Expense
Fund, (b) to fund the remaining portion of the acquisition of Ford
Credit's limited partner interest in the Panda-Rosemary Partnership
and (c) to make a distribution to the Company's parent. Pro forma
balance sheet data as of September 30,1996 are not required because
the transactions are reflected in the historical balance sheet data
as of September 30, 1996. The pro forma statement of operations data
reflect such adjustments as if the transactions had occurred as of
January 1, 1995. As required by the Securities and Exchange
Commission, the pro forma statement of operations data do not reflect
the extraordinary loss on early extinguishment of debt. Such
extraordinary loss is reflected in the historical statement of
operations data for the nine months ended September 30, 1996. The
unaudited pro forma financial data do not purport to be indicative of
the results of operations which would actually have occurred if the
transactions described had occurred as presented in such statements
or which may be obtained in the future. Results for the nine months
ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the full fiscal year. The
information in this table should be read in conjunction with the
information contained under the captions "Capitalization," "Unaudited
Pro Forma Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and with the
financial statements of the Company, including the notes thereto,
included elsewhere herein.
<TABLE>
<CAPTION>
--------- Year Ended December 31,-------- Nine Months Ended September 30,
Pro forma Pro forma
1993 1994 1995 1995 1995 1996 1996
(in thousands, except ratios)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Electric capacity and energy sales $29,856 $30,664 $29,859 $29,859 $22,139 $21,496 $21,496
Steam and chilled water sales 618 650 473 473 376 388 388
Interest income 365 603 895 895 696 611 611
Total revenue 30,839 31,917 31,227 31,227 23,211 22,495 22,495
Plant operating expenses 7,676 8,940 9,348 9,348 6,751 7,814 7,814
Development and administrative expenses 2,278 1,376 1,821 1,821 1,183 1,261 1,261
Interest expense 11,066 11,018 11,716 21,875 8,525 11,096 16,406
Depreciation 4,282 4,208 4,210 4,020 3,157 3,159 3,016
Amortization - Debt issue costs 502 600 554 312 409 395 251
Amortization-Partnership formation costs 533 533 533 533 400 400 400
Total expenses 26,337 26,675 28,182 37,909 20,425 24,125 29,148
Income (loss) before minority interest 4,502 5,242 3,045 (6,682) 2,786 (1,630) (6,653)
Minority interest (5,474) (5,700) (5,048) -- (3,736) (2,405) --
Net loss before extraordinary item (972) (458) (2,003) $(6,682) (950) (4,035) $(6,653)
Extraordinary loss on early
extinguishment of debt - - - - (21,336)
Net loss $ (972) $ (458) $(2,003) $ (950) $(25,371)
Other Data:
Ratio of earnings to fixed charges (1) 1.39 1.36 (1) (1) (1) (1) (1)
<CAPTION>
-------December 31,-------- ----September 30,-----
1993 1994 1995 1995 1996
(in thousands) (in thousands)
Balance Sheet Data:
Cash and other current assets $14,084 $15,538 $11,333 $20,928 $17,125
Power plant and equipment (net) 93,815 94,893 216,794 190,572 263,995
Reserves and escrow deposits,
and other assets 14,901 14,728 14,722 14,378 36,109
Total assets $122,800 $125,159 $242,849 $225,878 $317,229
Current liabilities $ 11,252 $ 12,531 $ 18,457 $ 15,590 $ 16,589
Long-term debt, less current portion 98,454 106,343 234,608 208,111 404,950
Minority interest 34,479 35,588 36,836 36,316 -
Shareholder's deficit (21,385) (29,303) (47,052) (34,139) (104,310)
Total liabilities and shareholder's
deficit $122,800 $125,159 $242,849 $225,878 $317,229
</TABLE>
_______________________
Note (in thousands):
(1) For purposes of computing the ratio of earnings to fixed
charges, earnings represent income (loss) before minority interest,
taxes and extraordinary items, plus fixed charges. Fixed charges
consist of interest expense, capitalized interest and amortization
of debt issuance costs. Earnings were insufficient to cover fixed
charges in 1995 by $2,748, in pro forma 1995 by $12,475, in the
nine months ended September 30, 1995 by $472, in the nine months
ended September 30, 1996 by $11,309 and in the pro forma nine
months ended September 30, 1996 by $16,332. In 1994 and 1995 and
for the nine months ended September 30, 1995 and 1996, fixed
charges included capitalized interest of $803, $5,793, $3,258 and
$9,679, respectively, related to the Panda-Brandywine Facility.
This capitalized interest is funded by additional borrowings under
the Brandywine Construction Loan Facility.
Independent Engineers' and Consultants' Reports
The Independent Engineers' and Consultants' Reports, and the
following summaries thereof, contained in this Prospectus contain
forward-looking statements, including projections, that involve risks
and uncertainties. Actual results may differ materially from those
discussed in the forward-looking statements. In providing its
conclusions set forth in the Independent Engineers' or Consultants'
Reports, each Independent Engineer or Consultant made certain
assumptions. Although the author of each Report believes that the use
of these assumptions in its Report is reasonable, assumptions are
inherently subject to significant uncertainties and, if actual
conditions differ from those assumed, actual results will differ from
those projected, perhaps materially. Accordingly, the conclusions and
projections contained in the Independent Engineers' and Consultants'
Reports may not be indicative of future events. Therefore, no
representations are made, nor should any be inferred, with respect to
the likely existence of any particular future set of facts or
circumstances. If actual results are less favorable than the
conclusions presented in the Independent Engineers' or Consultants'
Reports or if the assumptions used in formulating the conclusions
presented prove to be incorrect, the ability of a Project Entity to
make distributions to its equity holders and thus ultimately to the
Company, the Company's ability to make payments on the Company Notes
and consequently the Issuer's ability to make payments on the
Exchange Bonds, may be materially and adversely affected. See "Risk
Factors - Reliance upon Projections and Underlying Assumptions
Contained in Independent Engineers' and Consultants' Reports."
Any projections of future operations and economic results
thereof contained in the Independent Engineers' and Consultants'
Reports have not been prepared in accordance with published
guidelines of the Commission, the American Institute of Certified
Public Accountants, any regulatory or professional agency or body or
generally accepted accounting principles. Deloitte & Touche LLP, the
Company's independent accountants, has neither examined nor compiled
the projections and, accordingly, does not express an opinion or any
other form of assurance with respect thereto. See "Risk Factors -
Reliance upon Projections and Underlying Assumptions Contained in
Independent Engineers' and Consultants' Reports."
Consolidating Engineer's Pro Forma Report
ICF Resources, Incorporated ("ICF") has prepared a report dated
January 10, 1997 (the "Consolidated Pro Forma Report") that contains
a summary consolidation of the pro forma financial projections (the
"Consolidated Pro Forma") for the Panda-Brandywine Facility and the
Panda-Rosemary Facility contained in the Rosemary Engineering Report
and the Panda-Brandywine Pro Forma Report, both summarized below. The
Consolidated Pro Forma Report summarizes and describes the
Consolidated Pro Forma and explains how it was derived, and discusses
the methodology used in its preparation. The Consolidated Pro Forma
Report is attached hereto as Appendix B and should be read in its
entirety by all prospective investors.
In preparing the Consolidated Pro Forma, ICF relied on the pro
forma financial projections (the "Rosemary Pro Forma") prepared by
Burns & McDonnell Engineering Company, Inc. ("Burns & McDonnell"),
which are contained in the Rosemary Engineering Report, and the pro
forma financial projections (the "Brandywine Pro Forma") that ICF
prepared for the Panda-Brandywine Facility, which are contained in
the Brandywine Pro Forma Report. The Rosemary Engineering Report and
the Brandywine Pro Forma Report contain the primary assumptions
underlying, and the conclusions drawn from, the Rosemary Pro Forma
and the Brandywine Pro Forma, respectively. In its capacity as
Consolidating Engineer, ICF reviewed the Rosemary Engineering Report
and the Brandywine Pro Forma Report only to the extent necessary to
incorporate the results of the Rosemary Pro Forma and the Brandywine
Pro Forma in the Consolidated Pro Forma and made no independent
investigation of the Rosemary Pro Forma or the Brandywine Pro Forma,
their accuracy, or the assumptions made in the preparation thereof.
The Rosemary Engineering Report and the Brandywine Pro Forma Report
are attached hereto as Appendix C and Appendix E, respectively, and
should be read in their entirety by all prospective investors.
The Consolidated Pro Forma Report presents two measures of debt
service coverage for the Company. The first, the "Company Coverage
Ratio," reflects the relationship between the total cash flow
available for Company debt service (i.e., cash flow from the Panda-
Rosemary Facility and the Panda-Brandywine Facility after paying
Project-level operating expenses and debt service, making additions
to Project-level reserves, providing distributions to third-party
equity interest-holders and providing for certain Company-level
items) and Company debt service (i.e., the debt service on the
Existing Bonds). The second, the "Consolidated Coverage Ratio,"
reflects the relationship between the total consolidated operating
cash flow of the Panda-Rosemary Facility and the Panda-Brandywine
Facility (i.e., cash flow from the Panda-Rosemary Facility and the
Panda-Brandywine Facility before paying Project-level debt service
and Company-level debt service and after making additions to Project-
level reserves and providing for certain Company-level items) and the
sum of the consolidated debt service for such facilities plus the
debt service on the Existing Bonds. The Company Coverage Ratio and
the Consolidated Coverage Ratio have been prepared under two
scenarios. Under one scenario, it has been assumed that the PEPCO
Interest Rate Dispute relating to the determination of the interest
rate that is the basis for reduction in capacity payments under the
Brandywine Power Purchase Agreement, as described under the caption
"Description of the Projects - The Panda-Brandywine Facility -
Dispute With PEPCO Over Calculation of Capacity Payments," is
resolved in a manner consistent with the Panda-Brandywine
Partnership's current position (the "Brandywine Scenario"). Under
the other scenario, it has been assumed that the PEPCO Interest Rate
Dispute is resolved in a manner consistent with PEPCO's current
position (the "PEPCO Scenario"). Over the 16-year term of the
Existing Bonds, under the Brandywine Scenario, the Company Coverage
Ratio is projected to be at least 1.3:1 and on average is 2.0:1 and,
under the PEPCO Scenario, the Company Coverage Ratio is projected to
be at least 1.3:1 (except for 1997 in which it is projected to be
0.8:1) and on average is 1.6:1. Under the Brandywine Scenario, the
Consolidated Coverage Ratio is projected to be at least 1.09:1 and on
average is 1.27:1. The Consolidated Coverage Ratio under the PEPCO
Scenario is projected to be at least 1.1:1 (except for 1997 in which
it is projected to be 0.96:1) and on average is 1.17:1.
Under the PEPCO Scenario, distributions the Company expects to
receive from its Project Entities that own the Panda-Brandywine
Partnership and the Panda-Rosemary Partnership would be sufficient to
service the Existing Bonds (except in 1997); however, such
distributions would not be sufficient to enable the Company to meet
the minimum Company Debt Service Coverage Ratio of 1.7:1 and the
minimum Consolidated Debt Service Coverage Ratio (if then applicable)
of 1.25:1 required under the Indenture to permit the Company to incur
additional debt. Accordingly, the ability of the Company to raise
debt for Projects in the future would be impaired. In addition, the
projected coverage ratios under the PEPCO Scenario indicate that
distributions the Company expects to receive from its Project
Entities would be insufficient to service the Existing Bonds in 1997.
In such case, monies held in the Accounts and Funds, if any, may be
applied toward any debt service deficiency as set forth in the
Indenture. The current balances in the Accounts and Funds are as
follows: U.S. Project Account, $7.0 million; Capitalized Interest
Fund, $9.8 million; Debt Service Reserve Fund, $6.4 million; Company
Expense Fund, $247,000. See "Risk Factors - Dispute With PEPCO Over
Calculation of Capacity Payments," "Description of the Projects - The
Panda-Brandywine Facility - Dispute With PEPCO Over Calculation of
Capacity Payments" and "Description of the Exchange Bonds - The
Accounts and Funds" and "- Certain Covenants - Limitations on Debt."
Another dispute with PEPCO exists concerning the determination
of PEPCO's system peak load under a provision in the Brandywine Power
Purchase Agreement that provides for reduction of capacity payments
commencing in 2006 if such peak load is less than 5,697 MW during
certain periods. The Consolidated Pro Forma and the Brandywine Pro
Forma are prepared under the assumption that PEPCO's system peak load
exceeds 5,697 MW during the relevant period, and accordingly, there
is no reduction in capacity payments under this provision. ICF
believes that such assumption is reasonable in light of recent peak
day demand on PEPCO's system and is not dependent upon the outcome of
the dispute between Panda-Brandywine Partnership and PEPCO. See "-
Independent Pro Forma Analysis - Brandywine" below and "Description
of the Projects - The Panda-Brandywine Facility - Dispute With PEPCO
Over Calculation of Capacity Payments."
Independent Engineer's Report - Rosemary
Burns & McDonnell has prepared a report, dated July 26, 1996,
and an update report, dated January 10, 1997 (as updated, the
"Rosemary Engineering Report"), concerning certain technical,
environmental and economic aspects of the Panda-Rosemary Facility.
The update report discusses certain recent developments, including
the hurricane damage sustained by the Panda-Rosemary Facility in
September 1996, an approximate 14% reduction in the level of dispatch
projected in the July 26, 1996 report and changes in anticipated fuel
costs and operation and maintenance expenses. The Rosemary
Engineering Report is attached hereto as Appendix C and should be
read in its entirety by all prospective investors. Burns & McDonnell
provides a variety of professional and technical services in the
fields of engineering, architecture, planning, economics and
environmental sciences. Burns & McDonnell's project work includes
studies, design, planning and construction management for electric
power generation and transmission facilities, as well as for waste
management, water treatment, airport and other transportation
infrastructure facilities. Burns & McDonnell has been involved with
the Panda-Rosemary Facility since 1989. The Rosemary Engineering
Report includes, among other things, a review and assessment of the
Panda-Rosemary Facility's equipment and operating condition, a review
of its operating history, a review of the significant Project
agreements and projections of revenues, expenses and debt service
coverage for the facility during the period that the Rosemary Bonds
are scheduled to be outstanding (i.e., through 2016).
Burns & McDonnell has relied upon projections of the Panda-
Rosemary Facility's dispatch profile and fuel costs over the term of
the Rosemary Power Purchase Agreement prepared by ICF. Based on ICF's
experience in undertaking similar analyses, Burns & McDonnell
believes that the use of ICF's dispatch profile and fuel cost
projections is reasonable for the purposes of the Rosemary
Engineering Report. Burns & McDonnell also has relied upon certain
other information provided to it by sources it believes to be
reliable. Burns & McDonnell believes that the use of such information
is reasonable for the purposes of the Rosemary Engineering Report.
In preparing the Rosemary Engineering Report, Burns and
McDonnell made various assumptions regarding the validity and
performance of contracts, the operation and maintenance of the Panda-
Rosemary Facility, the effectiveness of permits and the benefits to
be derived from a recent conversion of a firm gas transportation
arrangement. Some of the other principal assumptions made by Burns &
McDonnell in developing the pro forma operating projections contained
in the Rosemary Engineering Report are as follows:
(i) Fuel costs will be as set forth in the updated projections
by ICF (which projections have been determined by Benjamin
Schlesinger and Associates, Inc., the independent fuel
consultant for the Panda-Rosemary Facility, to employ
reasonably conservative assumptions).
(ii) The Panda-Rosemary Facility will be dispatched as set
forth in the updated projections by ICF, except that ICF's
dispatch projections have been increased by 400 hours per
year in 1996 and 1997, 500 hours per year in 1998 through
2002 and 600 hours per year in 2003 through 2015 to reflect
hours that the Panda-Rosemary Facility will be dispatched
using gas supplied by VEPCO, which increases ICF has
determined to be reasonable.
(iii) Thermal energy in the form of steam and chilled water
will be exported from the Panda-Rosemary Facility, operating
in the cogeneration mode, to Bibb's facility such that the
production and sale of useful thermal energy, as defined
under the Public Utility Regulatory Policies Act of 1978, as
amended ("PURPA"), and the regulations promulgated
thereunder, will be sufficient to maintain the Panda-
Rosemary Facility's QF status. The Panda-Rosemary
Partnership will continue to absorb an annual operating loss
on the sale of steam and chilled water over the life of the
Panda-Rosemary Facility.
(iv) Steam and chilled water sales to Bibb will remain
constant at 50,000 pounds per hour for 7,800 hours per year
and 1,010 tons per hour for 4,000 hours per year,
respectively.
(v) Operating costs, including fuel transportation, operating
and maintenance and other administrative costs, will equal
those estimated by the Panda-Rosemary Partnership, most of
which are assumed to increase at a rate of 3% per year.
(vi) The debt service reserve fund maintained pursuant to
the Rosemary Indenture will be maintained at adequate levels
throughout the Rosemary Bonds' repayment period, and such
fund will earn interest at a rate of 5.0% per year.
As previously mentioned, these assumptions and the other
assumptions contained in the Rosemary Engineering Report are
inherently subject to significant uncertainties and, if actual
conditions differ from those assumed, actual results will differ from
those projected, perhaps materially.
Subject to the studies, analyses and investigations of the Panda-
Rosemary Facility they performed and the assumptions made in the
Rosemary Engineering Report, Burns & McDonnell offered the following
conclusions:
(i) The technology incorporated in the Panda-Rosemary Facility
is a sound, proven method of generating electric and thermal
energy and incorporates commercially proven technology. The
design, operation and maintenance of the Panda-Rosemary
Facility implemented by the Panda-Rosemary Partnership and U-
Tech were developed and have been implemented in accordance
with good engineering practices and generally accepted
industry practices and have taken into consideration
existing and proposed environmental and permit requirements
applicable to the Panda-Rosemary Facility. Panda Global
Services currently provides operations and maintenance
services to the Panda-Rosemary Facility on substantially the
same basis as previously provided by U-Tech pursuant to an
agreement that was obtained through a competitive bid
process. Burns & McDonnell knows of no significant technical
problems relating to the Panda-Rosemary Facility that should
be of concern to potential investors.
(ii) The Panda-Rosemary Facility is in good condition and
its long-term maintenance program is consistent with the
manufacturers' recommendations and generally accepted
practices within the electric power generation industry.
(iii) The Panda-Rosemary Facility will have an expected
operating service life well beyond the term of the Rosemary
Power Purchase Agreement if properly operated and maintained
consistent with current practices.
(iv) The Panda-Rosemary Partnership has obtained and
maintained in full force and effect the key environmental
permits and approvals required from the various federal,
state and local agencies that are currently necessary to
operate the Panda-Rosemary Facility.
(v) The basis for the Panda-Rosemary Partnership's estimates of
the cost of operating and maintaining the Panda-Rosemary
Facility is reasonable. The expense projections prepared by
the Panda-Rosemary Partnership and based on projected levels
of dispatch appear adequate to account for the variable
operation and maintenance expenses of the Panda-Rosemary
Facility.
(vi) Projected revenues from the sale of electric generating
capacity, electricity and thermal energy and other income
are adequate to pay annual operation and maintenance
expenses (including provisions for major maintenance), fuel
costs and other operating expenses and provide a minimum
annual debt service coverage on the Rosemary Bonds of
1.38:1, as shown on Table C in the update report.
These conclusions are confirmed or contained in the update
report, dated January 10, 1997. In addition, the update report
contains updated dispatch projections, fuel cost assumptions,
projected debt coverage ratios and financial forecasts that differ
from those contained in the July 26, 1996 report.
Fuel Consultant's Report - Rosemary
Benjamin Schlesinger and Associates, Inc. ("Schlesinger") has
prepared a report, dated September 20, 1996, and an update
certificate, dated January 10, 1997 (as updated, the "Rosemary Fuel
Consultant's Report"), concerning the sufficiency of the fuel supply
and transportation arrangements entered into by the Panda-Rosemary
Partnership with respect to the Panda-Rosemary Facility. The
Rosemary Fuel Consultant's Report is attached hereto as Appendix D
and should be read in its entirety by all prospective investors.
Schlesinger is a Bethesda, Maryland-based management consulting firm
that specializes in the natural gas industry, including economic and
regulatory analysis, market research, energy supply and demand
forecasting, gas rate development and related economic, technical and
environmental analyses. The Rosemary Fuel Consultant's Report
includes among other things a review and assessment of the fuel
supply and delivery arrangements for the Panda-Rosemary Facility,
with respect to both natural gas and fuel oil, focusing on the
appropriateness of the existing fuel arrangements and the historic
reliability of fuel supplies to the Panda-Rosemary Facility.
Schlesinger has used and relied upon certain information provided to
it by sources it believes to be reliable. Schlesinger believes that
the use of such information is reasonable for the purposes of the
Rosemary Fuel Consultant's Report.
In providing its conclusions set forth in the Rosemary Fuel
Consultant's Report, Schlesinger made certain assumptions. Although
Schlesinger believes that the use of these assumptions in the
Rosemary Fuel Consultant's Report is reasonable, assumptions are
inherently subject to significant uncertainties and, if actual
conditions differ from those assumed, actual results will differ from
those projected, perhaps materially.
Subject to the information contained and the assumptions made in
the Rosemary Fuel Consultant's Report, Schlesinger offered the
following conclusions:
(i) The Panda-Rosemary Partnership's existing gas supply and
delivery arrangements provide the Panda-Rosemary Partnership
with an appropriate degree of gas reliability for a summer
peaking facility. Additionally, the Panda-Rosemary
Facility's on-site fuel oil storage, ready access to oil
terminals at four locations and fuel oil resupply procedures
with NGC have provided an appropriate degree of back-up fuel
oil supply. However, the Panda-Rosemary Facility may not be
able to sustain a 90% gas reliability level in the future if
significantly higher levels of dispatch were to occur in
November, December, or March and the Panda-Rosemary
Partnership should continue to monitor its dispatch and fuel
prices in those months.
(ii) While the energy price in the Rosemary Power Purchase
Agreement closely parallels the actual seasonal availability
to the Panda-Rosemary Facility of gas and fuel oil, the
calculation of the energy price is not directly linked to
the Panda-Rosemary Facility's actual fuel costs. Therefore,
the Panda-Rosemary Facility is subject to the risk that the
fuel compensation component of the energy price under the
Rosemary Power Purchase Agreement will not match the Panda-
Rosemary Facility's fuel costs to produce the electricity.
This risk is greatest in the months of November, December
and March, when the energy price under the Rosemary Power
Purchase Agreement is based upon an index of spot gas prices
but when the Panda-Rosemary Facility may be required to burn
more expensive fuel oil upon dispatch due to potential
curtailment in gas supply and transportation during winter
months. This risk, however, is largely mitigated by a start-
up fee VEPCO pays the Panda-Rosemary Partnership for each
start-up in such months. See "Risk Factors - Project Risks -
Fuel-Related Pricing" and "- Fuel Supply Risks."
(iii) The Panda-Rosemary Partnership's overall fuel supply
plan is reasonable and appropriate given the Panda-Rosemary
Facility's operating history and energy payment structure.
Thus, so long as VEPCO continues to dispatch the Panda-
Rosemary Facility principally as a summer peaking facility,
the additional fixed costs that the Panda-Rosemary
Partnership would be required to incur to increase gas
supply or delivery reliability, and further mitigate the
risk discussed in clause (ii) above, are not warranted from
an economic or fuel reliability standpoint.
(iv) The projections developed by Burns & McDonnell in the
Rosemary Engineering Report (including the update report)
employ reasonably conservative assumptions with respect to
the Panda-Rosemary Partnership's fixed gas transportation
costs and the relationship of the Panda-Rosemary
Partnership's variable fuel costs to the energy price under
the Rosemary Power Purchase Agreement, and the Rosemary
Engineering Report contains reasonable assumptions
concerning the revenue that the Panda-Rosemary Partnership
may receive by reselling transportation capacity that is
excess to the Panda-Rosemary Facility's average daily
capacity utilization and/or reselling gas using its excess
transportation capacity.
(v) The Panda-Rosemary Partnership recently converted its firm
gas transportation service to a type of transportation
service that enhances the Panda-Rosemary Facility's
operational flexibility by permitting it to switch receipt
and delivery points for the gas and to resell its capacity
to third parties when it is not needed.
(vi) The Panda-Rosemary Partnership should have little
difficulty extending its existing fuel supply and
transportation contracts or, if necessary, replacing the
current fuel arrangements with alternative service
agreements that offer comparable price, credit supply and
reliability provisions as necessary to match the contractual
duration of its fuel supply arrangements with the maturity
date of the Rosemary Bonds.
Independent Pro Forma Analysis - Brandywine
ICF has prepared a report, dated July 26, 1996, and an update
report dated January 10, 1997 (as updated, the "Brandywine Pro Forma
Report"), presenting its independent pro forma operating projections
(the "Brandywine Pro Forma") for the Panda-Brandywine Facility under
both the Brandywine Scenario and the PEPCO Scenario. The Brandywine
Pro Forma Report is attached hereto as Appendix E and should be read
in its entirety by all prospective investors. In developing its
projections, ICF reviewed the Panda-Brandywine Facility's fuel supply
and transportation contracts and the Brandywine Power Purchase
Agreement, as well as the Brandywine Engineering Report and the
Brandywine Fuel Consultant's Report. Based on the experience of
Pacific Energy Systems, Inc. ("PES") and C.C. Pace Resources, Inc.
("C.C. Pace") in undertaking similar analyses, ICF believes that the
use of the Brandywine Engineering Report and the Brandywine Fuel
Consultant's Report is reasonable for the purposes of the Brandywine
Pro Forma. In preparing the Brandywine Pro Forma, ICF used and relied
on certain other information provided to it by sources it believes to
be reliable, including a report by ICF providing its dispatch
projections for the Panda-Brandywine Facility. ICF believes that the
use of such information is reasonable for the purposes of the
Brandywine Pro Forma.
In preparing the Brandywine Pro Forma and the conclusions
contained therein, ICF made assumptions with respect to the validity
and performance of contracts, the operation and maintenance of the
Panda-Brandywine Facility, the effectiveness of permits and the
maintenance of QF status. Other principal assumptions made by ICF in
developing the Brandywine Pro Forma include the following:
(i) Raytheon has constructed and Ogden Brandywine will operate
the Panda-Brandywine Facility as required under their
respective contracts with the Panda-Brandywine Partnership,
which contracts have been reviewed by PES. ICF further
assumes that PES's conclusions as to those agreements are
accurate.
(ii) The Panda-Brandywine Facility's design will enable it
to perform at a level consistent with that anticipated in
the Brandywine Pro Forma.
(iii) The fuel supply arrangements entered into by the Panda-
Brandywine Partnership fulfill the contractual requirements
of the Brandywine Power Purchase Agreement, and variable
fuel-related costs will be less than the energy payments to
be received from PEPCO, as confirmed by C.C. Pace in the
Brandywine Fuel Consultant's Report.
(iv) Commercial operations under the Brandywine EPC
Agreement occurred on September 30, 1996.
(v) PEPCO's system peak load will exceed 5,697 MW during 1997.
Although ICF believes that the use of these assumptions and the
others contained in the Brandywine Pro Forma Report in developing the
Brandywine Pro Forma is reasonable, assumptions are inherently
subject to significant uncertainties and, if actual conditions differ
from those assumed, actual results will differ from those projected,
perhaps materially. ICF has made certain assumptions as set forth
above concerning the level of PEPCO's system peak load which ICF
believes are reasonable in light of recent peak day demand on PEPCO's
system and are not dependent upon the outcome of the current dispute
between Panda-Brandywine Partnership and PEPCO regarding the basis
for the determination of PEPCO's system peak load. In addition, ICF
has made certain assumptions as set forth above concerning the
commercial operations date under the Brandywine EPC Agreement, which
is the subject of a dispute between the Panda-Brandywine Partnership
and Raytheon. Under the assumptions made by ICF, Raytheon would not
be entitled to the entire early completion bonus that it claims. See
"Description of the Projects - The Panda-Brandywine Facility -
Dispute With PEPCO Over Calculation of Capacity Payments" and "-
Construction Contract."
Subject to the studies, analyses and investigations of the Panda-
Brandywine Facility performed by ICF, and the assumptions made in the
Brandywine Pro Forma, ICF offered the following conclusions:
(i) The financial projections in the Brandywine Pro Forma
provide a reasonable reflection of the Panda-Brandywine
Facility's expected costs, revenues and cash flows.
(ii) The energy and capacity revenue calculations contained
in the Brandywine Pro Forma are appropriate and consistent
with the Brandywine Power Purchase Agreement, and are not
dependent upon the outcome of the current dispute between
the Panda-Brandywine Partnership and PEPCO regarding the
basis for the determination of PEPCO's system peak load.
(iii) Under the Brandywine Scenario, the Panda-Brandywine
Facility's net cash flow will average approximately $24.4
million per year through 2016, ranging from $6.6 million in
1998 to $43.0 million in 2016. Under the PEPCO Scenario, the
Panda-Brandywine Facility's net cash flow will average
approximately $19.6 million per year through 2016, ranging
from $1.7 in 1997 to $40.5 million in 2016.
(iv) During the 20-year term of the Brandywine Facility
Lease, under the Brandywine Scenario, the Panda-Brandywine
Facility's lease coverage (i.e., the ratio of earnings
before income taxes to lease payments) will range from
2.23:1 in 1998 to 1.88:1 in 2015, and the Panda-Brandywine
Facility's average lease coverage through 2016 will be
1.95:1. Under the PEPCO Scenario, lease coverage will range
from 1.76:1 in 1997 to 2.08:1 in 2016 and the average lease
coverage will be 1.77:1.
Independent Engineer's Report - Brandywine
PES has prepared a report, dated July 22, 1996, and an update
report dated January 10, 1997 (as updated, the "Brandywine
Engineering Report"), evaluating the design, construction and
expected operation of the Panda-Brandywine Facility. The Brandywine
Engineering Report is attached hereto as Appendix G and should be
read in its entirety by all prospective investors. PES has provided
engineering services to approximately 50 power plants within the last
seven years. Such services include technical review, construction
monitoring, performance testing and certification, and operation and
maintenance audits. Approximately half of these plants utilize
combined-cycle combustion turbine technology with cogeneration as
does the Panda-Brandywine Facility. PES has been involved with the
Panda-Brandywine Facility since it performed a due diligence review
for GE Capital in connection with the closing of the Panda-Brandywine
Facility's construction loan in March 1995, and PES has monitored
construction of the Panda-Brandywine Facility since that date.
PES's review and assessment is based, among other things, on due
diligence work previously completed, construction monitoring of the
Panda-Brandywine Facility and a review of significant project
agreements. In providing its conclusions set forth in the Brandywine
Engineering Report, PES made certain assumptions. As previously
mentioned, the assumptions are inherently subject to significant
uncertainties and, if actual conditions differ from those assumed,
actual results will differ from those projected, perhaps materially.
PES has independently reviewed the project engineering, cost,
construction schedule, permits, contracts, operations and
maintenance, and performance estimates for completeness, risk,
variation from practices typical in the industry, and the ability of
the Panda-Brandywine Facility to perform as intended. Its principal
conclusions include the following:
(i) The Panda-Brandywine Facility is substantially complete and
is capable of meeting all commercial operating requirements
under the Brandywine Power Purchase Agreement and the
Brandywine Steam Agreement.
(ii) The Panda-Brandywine Facility has received or is
expected to receive all necessary operating permits. There
is no reason to believe that any necessary operating permit
not yet received will not be obtained.
(iii) The Panda-Brandywine Facility meets or exceeds all
guarantees or design conditions based on the final
information supplied during testing by Raytheon and others.
(iv) If future operation and maintenance is performed within
standard industry practices, PES finds no technical
constraints to prevent the Panda-Brandywine Facility from
being able to perform at a level consistent with that
anticipated in ICF's pro forma projections.
Independent Fuel Consultant's Report - Brandywine
C.C. Pace has prepared a report, dated July 2, 1996, and a
supplemental letter update dated January 10, 1997 (as updated, the
"Brandywine Fuel Consultant's Report"), reviewing the sufficiency of
the fuel supply and transportation arrangements for the Panda-
Brandywine Facility. The Brandywine Fuel Consultant's Report is
attached hereto as Appendix H and should be read in its entirety by
all prospective investors. C.C. Pace is an energy consulting firm
based in Fairfax, Virginia, that specializes in analyzing fuel supply
and transportation arrangements for independent power projects.
The Brandywine Fuel Consultant's Report reviews whether the
Panda-Brandywine Partnership has contracted for adequate fuel supply
and transportation services to meet its obligations under the
Brandywine Power Purchase Agreement and the relationship between the
energy payments under the Brandywine Power Purchase Agreement and the
fuel and transportation costs the Panda-Brandywine Partnership is
likely to incur.
The Brandywine Fuel Consultant's Report is based upon certain
assumptions regarding the availability and future pricing of fuel.
The assumptions are inherently subject to significant uncertainties
and, if actual conditions differ from those assumed, actual results
will differ from those projected, perhaps materially.
Subject to the information contained and the assumptions made in
the Brandywine Fuel Consultant's Report, C.C. Pace offers the
following key characteristics concerning the fuel supply and
transportation arrangements for the Panda-Brandywine Facility:
(i) Cogen Development Company ("CDC"), the natural gas supplier
for the Panda-Brandywine Facility, has sufficient natural
gas reserves and gas marketing operations to support its
obligations under the Brandywine Gas Agreement. CDC is
required annually to ensure its reserves continue to be
adequate to meet its fixed price obligations to the Panda-
Brandywine Facility, and CDC's parent has substantial assets
backing its corporate warranty of CDC's gas supply
obligations.
(ii) The market-based pricing provided under the Brandywine
Power Purchase Agreement corresponds to the pricing at which
gas supplies are generally available, and is similar to the
pricing at which gas supplies are available from CDC.
(iii) The Panda-Brandywine Partnership has contracted for
adequate firm transportation arrangements for its natural
gas supplies. Regulatory approvals are in place and
construction of necessary pipeline facilities is completed
for these arrangements.
(iv) There is a strong match between changes in the Panda-
Brandywine Facility's expected fuel-related costs and
changes in the revenues it will receive from energy payments
under the Brandywine Power Purchase Agreement. The risk of a
mismatch between changes in fuel costs and changes in
project revenues is mitigated by significant initial
positive margins in energy payment components.
(v) PEPCO has found that the fuel supply and transportation
arrangements for the Panda-Brandywine Facility fulfill, and
should continue to fulfill, the requirement in the
Brandywine Power Purchase Agreement that the Panda-
Brandywine Partnership maintain a reliable supply of fuel,
and can reasonably be expected to result in variable fuel-
related costs that are less than the energy payments under
the Brandywine Power Purchase Agreement. Under reasonable
assumptions, the fuel supply arrangements should continue to
fulfill the contractual requirements of the Brandywine Power
Purchase Agreement.
(vi) The fuel supply and transportation arrangements for the
Panda-Brandywine Facility are flexible enough to meet the
dispatch requirements under the Brandywine Power Purchase
Agreement. CDC, which also provides fuel management services
for the Panda-Brandywine Partnership, has the experience
necessary to manage these arrangements and CDC's fuel
management performance is backed by a corporate warranty of
its parent.
(vii) The fuel oil supply plan for the Panda-Brandywine
Facility provides the Panda-Brandywine Partnership with the
capability to meet dispatch requirements under the
Brandywine Power Purchase Agreement, assuming fuel oil
supply and transportation contracts with local fuel oil
suppliers and trucking companies are in place before each
heating season. The Panda-Brandywine Partnership has
executed sufficient fuel oil supply and transportation
contracts for the 1996-1997 winter heating season.
(viii) The pro forma modeling of the Panda-Brandywine
Facility contained in the Brandywine Pro Forma reflects the
Panda-Brandywine Facility's fuel supply arrangements, using
the gas and oil price projections of ICF. ICF is a
recognized forecaster of gas and oil prices. As a
consequence of the expected dispatch of the Panda-Brandywine
Facility also projected by ICF, such pro forma modeling
reflects significant benefits of certain pipeline balancing
provisions under the assumption that these provisions will
continue over the term of the Brandywine Power Purchase
Agreement. Although C.C. Pace has found these assumptions to
be reasonable as modeled, there can be no guaranty that
these provisions will continue over the entire pro forma
modeling term. Additionally, the PEPCO payment invoice for
the initial month of commercial operation of the Panda-
Brandywine Facility uses certain fuel rate calculations
which, if correct, could have an adverse material effect on
the financial results in comparison to the pro forma model.
The Panda-Brandywine Partnership has informed C. C. Pace
that it does not agree with aspects of the PEPCO invoice and
is currently investigating the discrepancy. C.C. Pace
believes the pro forma assumptions are reasonable, based on
information available at this time.
RISK FACTORS
In addition to the other information contained in this
Prospectus, before tendering Old Bonds for the Exchange Bonds offered
hereby, holders of Old Bonds should consider carefully the following
factors as well as the other matters described in this Prospectus.
The terms of the Exchange Bonds are substantially identical to the
terms of the Exchange Bonds, and the Exchange Bonds will evidence the
same debt as the Old Bonds which they replace. Accordingly, the
following factors may be generally applicable to the Old Bonds as
well as to the Exchange Bonds.
Consequences of Failure to Exchange Old Bonds
Holders of Old Bonds who do not exchange their Old Bonds for
Exchange Bonds pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Old Bonds, as
described in the legend thereon, as a consequence of the issuance of
the Old Bonds pursuant to exemptions from, or in transactions not
subject to, the registration requirements of the Securities Act and
applicable state securities laws. In general, the Old Bonds may not
be offered or sold unless registered under the Securities Act and
applicable state securities laws, or pursuant to an exemption
therefrom. Except under certain limited circumstances contained in
the Registration Rights Agreement, the Issuer does not intend to
register the Old Bonds under the Securities Act. Upon consummation
of the Exchange Offer, certain rights of holders of Old Bonds who are
eligible to tender their Old Bonds for exchange in the Exchange Offer
and fail to do so will terminate. To the extent Old Bonds are
tendered and accepted in the Exchange Offer, the trading market, if
any, for the Old Bonds not so tendered could be adversely affected.
See "The Exchange Offer - Termination of Certain Rights" and "Old
Bonds Registration Rights."
Dependence on Distributions from Project Entities
The ability of the Company to make payments on the Exchange
Bonds will depend almost entirely upon the financial performance of
the Projects in the Project Portfolio and the ability of the Project
Entities that own such Projects to make distributions through the PIC
Entities to the Company. The failure of a Project in the Project
Portfolio to perform as expected or the inability of one or more of
the Project Entities to make distributions through the PIC Entities
to the Company could have a material and adverse effect on the
ability of the Company to make payments on the Company Notes and,
consequently, on the ability of the Issuer to make payments on the
Exchange Bonds. The Projects in the Project Portfolio are subject to
a number of financial, operating and regulatory risks that could
materially and adversely affect their performance, and the ability of
the Project Entities to make distributions is subject to a number of
contractual and legal restrictions. Prospective investors should read
the remaining risk factors set forth below for a more complete
discussion of certain factors that could materially and adversely
affect the performance of the Projects in the Project Portfolio and
the ability of the Project Entities to make distributions.
Currently, the Project Portfolio contains two Projects that are
in operation, the Panda-Rosemary Facility and the Panda-Brandywine
Facility. The determination of the interest rate that is the basis
for reduction in capacity payments under the Brandywine Power
Purchase Agreement is the subject of a dispute between PEPCO and the
Panda-Brandywine Partnership. If this PEPCO Interest Rate Dispute is
determined adversely to the Panda-Brandywine Partnership, the
capacity payments paid by PEPCO will be less than originally
anticipated, thereby adversely affecting the revenues realized by the
Panda-Brandywine Partnership, and consequently, reducing the amount
of funds that would be available for distribution to the Company and
ultimately repayment of the Exchange Bonds. In addition, the
distributions the Company expects to receive in respect of these two
Projects will not be sufficient to enable the Company to meet the
minimum Company Debt Service Coverage Ratio and the minimum
Consolidated Debt Service Coverage Ratio (if then applicable)
required under the Indenture in order for the Company to incur
additional debt. Accordingly, the ability of the Company to raise
debt for Projects in the future would be impaired. See "- Dispute
With PEPCO Over Calculation of Capacity Payments" below.
Financial Risks
Substantial Leverage
The Company and its Project Entities are and will continue to be
highly leveraged, primarily as a result of the non-recourse Project-
level indebtedness incurred to finance the development and
construction of the Projects. As of September 30, 1996, the Company's
total consolidated long-term indebtedness was $405.0 million, its
total consolidated assets were $317.2 million and its consolidated
shareholder's deficit was $104.3 million. The Company's Project-
level indebtedness related to the Panda-Rosemary Facility and the
Panda-Brandywine Facility is collateralized by the assets of the
underlying Projects, as well as, in the case of the Panda-Rosemary
Facility and the Panda-Brandywine Facility, a pledge of the equity
interests in the Project Entity. If a lender forecloses on a
Project's assets (or, in the case of a Project financed through a
sale and leaseback arrangement, if the lessor terminates the lease),
there can be no assurance that the related Project Entities will
maintain any interest in the Project or receive any compensation upon
a sale of the foreclosed assets by such lender. Additionally, if a
lender forecloses on its security interest in the equity interests of
a Project Entity, the value of the capital stock of the Company and
certain of its subsidiaries that own U.S. Projects which are pledged
to secure the Bonds may be materially impaired. In addition to the
foreclosure and lease termination risk, high leverage and the lack of
unencumbered collateral could adversely affect the ability of a
Project Entity, and the Company, to obtain additional financing in
the future for working capital, capital expenditures or other
purposes. Such adverse consequences could materially and adversely
affect the financial performance of the Company and its ability to
make payments on the Company Notes and, consequently, on the Issuer's
ability to make payments on the Exchange Bonds. See "Capitalization,"
"Unaudited Pro Forma Financial Data" and "Description of Outstanding
Project-Level Debt."
Additional Project-level Debt
While the Indenture imposes limitations on the ability of the
Company, the Issuer and any other PIC Entity to incur additional
indebtedness, the Indenture does not limit the amount of debt that
the Project Entities may incur, except that such Project-level debt
(other than such debt created or in existence on the date a Project
is transferred to the Project Portfolio or the date the Company or a
PIC Entity makes its initial investment in a Project) cannot be
incurred or refinanced if, as a result thereof, Cash Available for
Distribution from all Projects combined would be reduced by 10% in
the aggregate for all Future Ratio Determination Periods, in which
event, the Company would have to meet certain debt coverage ratios
and the rating of the Bonds would have to be Reaffirmed by at least
two rating agencies prior to the incurrence or refinancing of such
Project-level debt. In addition, the issuance of additional
indebtedness by the Project Entities would create additional
potential claims against the Project Entities, including the Panda-
Rosemary Partnership or the Panda-Brandywine Partnership, and could
result in a reduction in the cash available for distribution by such
Project Entities upstream, thus reducing the cash available to make
payments on the principal of, and premium, if any, and interest on
the Exchange Bonds. See "Description of the Bonds - Certain
Covenants - Limitations on Debt" and "Description of Outstanding
Project-Level Debt."
Effective Subordination of Exchange Bonds and Company Guaranty
The Exchange Bonds and the Company Guaranty will be the
exclusive obligations of the Issuer and the Company, respectively,
and not of any of the Project Entities or any other affiliate of the
Company. The Project Entities are highly leveraged and their debt
agreements restrict their ability to pay dividends, make
distributions or otherwise transfer funds to the Company. The
restrictions in such agreements generally require that, prior to the
payment of dividends, distributions or other transfers, the Project
Entity provide for the payment of other obligations, including
operating expenses, debt service and the funding of reserves. The
Project Entities are separate and distinct legal entities and have no
obligation to pay any amounts due pursuant to the Exchange Bonds or
to make any funds available therefor, whether by dividends, loans or
other payments, and do not guarantee the payment of the Exchange
Bonds. Thus, payments on the Exchange Bonds and under the Company
Guaranty are effectively subordinated to the payment of all
obligations of the Project Entities. In addition, the Company's right
to receive any assets of the Project Entities upon their liquidation
or reorganization will be effectively subordinated to the claims of
such Project Entities' creditors (including trade creditors and
holders of other debt issued by such Project Entity). As of
September 30, 1996, the Project Entities had outstanding $314.6
million of indebtedness and other liabilities, which are effectively
senior to the Existing Bonds and the Company Guaranty. See
"Description of Outstanding Project-Level Debt."
Default on Project-level Debt; Enforcement of Rights and
Realization of Collateral
If a Project Entity fails to generate cash flows sufficient to
service its debt, such Project Entity could default on its
indebtedness or breach another covenant governing such indebtedness.
If a Project Entity were to default in the payment of any such
indebtedness or in the performance of any such covenant, then,
subject to the terms of such indebtedness, the obligees thereunder
would be permitted to accelerate the maturity of such indebtedness,
which could terminate distributions to the Company and cause a
default under the Exchange Bonds. In such circumstances, holders of
the Exchange Bonds may be forced to accelerate the maturity of the
Exchange Bonds to protect their interests at a time when it would not
otherwise have been in their interests to do so. Furthermore, such
defaults could delay or preclude payments on the Exchange Bonds or
result in the loss of a Project or the Company's entire indirect
ownership interest in a Project. See "Financial Risks - Substantial
Leverage" and "- Effective Subordination of Exchange Bonds and
Company Guaranty" above and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
All series of the Bonds will be secured by pledges of, or grants
of security interests in, the Collateral to the Trustee for the
benefit of the holders of the Bonds. If a Project Entity is in
default on an obligation with respect to Project-level debt, the
acceleration of such debt and foreclosure on the related security
will not enable the Trustee to foreclose upon the Collateral unless
such default also resulted in a default with respect to the Bonds.
Therefore, all or a portion of the assets constituting or underlying
the Collateral could be lost to foreclosure without the Trustee
having any foreclosure rights of its own with respect to such
Collateral. Even if the Trustee were able to foreclose on the
Collateral securing the Bonds, the foreclosure on the security for
the Project-level debt could substantially diminish the value of such
Collateral. Furthermore, because the Trustee will not have a
security interest in accounts established under the Indenture into
which distributions from the PIC International Entities will be
deposited, in order to realize upon those accounts, the Trustee would
have to foreclose first against the capital stock of the Company and
then realize on the Company's security interest in those accounts.
See "Description of the Exchange Bonds - Collateral for the Exchange
Bonds."
Addition of Projects to Project Portfolio
Pursuant to the Additional Projects Contract, additional
Projects developed by Panda International, if any, will be
transferred to the Project Portfolio if certain conditions are
satisfied, and it is likely that additional series of Bonds will be
issued to finance debt or equity investments in such Projects, which
additional series will rank pari passu with the Existing Bonds. If
the Panda-Rosemary Facility or the Panda-Brandywine Facility (which
already have been transferred to the Project Portfolio), or
additional Projects, if any, to be transferred to the Project
Portfolio in the future do not perform up to expectations, their
inclusion in the Project Portfolio could weaken the overall
performance of the Project Portfolio and impair the ability of the
Company to make payments on the Company Notes and, consequently, the
ability of the Issuer to make payments on the Bonds (including the
Exchange Bonds). While it is the Company's belief that
diversification of the Project Portfolio will reduce the risks
associated with poor performance by any one Project or a small
portion of the Project Portfolio, there can be no assurance that this
will be the case.
Mandatory Redemption and Repurchase of Bonds Upon a Change of Control
The Existing Bonds and all additional series of Bonds, if any,
then outstanding will be subject to mandatory redemption, in whole or
in part, under certain circumstances in the event of a sale or other
disposition of any Collateral or any interest in a Project or any
event of casualty, loss or condemnation with respect to a Project
involving over $2.0 million. Mandatory redemptions will be made at a
redemption price equal to 100% of the principal amount of the Bonds
to be redeemed plus interest thereon accrued to the date of such
redemption, plus a premium, if any, provided for in the supplemental
indenture for each series of Bonds to be redeemed. In addition, upon
the occurrence of a Change of Control, the Issuer must offer to
purchase all Existing Bonds and all additional series of Bonds, if
any, then outstanding at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest to the date
of purchase. See "Description of the Exchange Bonds - Redemption -
Mandatory Redemption" and "- Certain Covenants - Change of Control."
There can be no assurance that the Issuer will have available
funds sufficient to fund the redemption of Bonds upon the occurrence
of a Mandatory Redemption Event or purchase of the Bonds upon a
Change of Control. It is likely that, in the event of a casualty,
loss or condemnation of a Project, a Project agreement or other
instrument governing the indebtedness incurred by the Project Entity
to finance such Project will require that the proceeds of any
insurance or condemnation award be applied to the redemption of such
indebtedness or for other specified purposes. Accordingly, there is
no assurance that the Company, any PIC Entity, or any person or
entity on behalf of the Company or any PIC Entity, will receive any
distribution of proceeds resulting from a Mandatory Redemption Event.
In the event a Mandatory Redemption Event or a Change of Control
occurs at a time when the Issuer does not have available funds
sufficient to redeem all of the Bonds subject to such redemption or
pay for all of the Bonds delivered by holders seeking to accept the
Issuer's repurchase offer, respectively, an Event of Default would
occur under the Indenture.
Reliance upon Projections and Underlying Assumptions
Contained in Independent Engineers' and Consultants' Reports
Included as Appendices C, D, E, G and H are reports of
independent engineers and consultants concerning the Panda-Rosemary
Facility and the Panda-Brandywine Facility. Included as Appendix B is
a summary consolidation of the projections contained in the Rosemary
Engineering Report and the Brandywine Pro Forma Report. The terms of
the Existing Bonds have been structured on the basis of the
projections contained in such reports. For the purpose of preparing
the projections contained in such reports, of necessity, certain
assumptions have been made with respect to general business,
financial and economic conditions, the prices that will be paid for
electric generating capacity of and electric energy produced by the
Panda-Rosemary Facility and the Panda-Brandywine Facility, the costs
of obtaining fuel for such facilities, the number of hours that such
facilities will be dispatched and other matters and contingencies
that are not within the control of the Company or its affiliates and
the outcome of which are difficult to predict. The independent
engineers' and consultants' reports contain discussions of the
assumptions used in preparing the projections and potential investors
should review the reports carefully.
Projections are inherently inaccurate and actual results are
likely to vary from such projections, sometimes materially.
Accordingly, the assumptions made and the projections prepared by
such engineering and consulting firms are not necessarily indicative
of future performance. No representation is made or intended, nor
should any be inferred, with respect to the likely existence of any
particular set of facts or circumstances. If actual results are less
favorable than those projected, or if the assumptions used in
formulating the projections contained in such reports prove to be
incorrect, the Company's ability to make payments on the Company
Notes and, consequently, the ability of the Issuer to make payments
on the Exchange Bonds, could be materially and adversely affected.
All projections of future operations and the economic results
thereof included in the independent engineers' and consultants'
reports have been reviewed and accepted by the Issuer and the Company
on the basis of present knowledge and assumptions that the Issuer and
the Company believe to be reasonable. These projections have not been
prepared in accordance with published guidelines of the Commission,
the American Institute of Certified Public Accountants, any
regulatory or professional agency or body or generally accepted
accounting principles. Deloitte & Touche LLP, the Company's
independent accountants, has neither examined nor compiled any
projections and, accordingly, does not express an opinion or any
other form of assurance with respect thereto. After the issuance of
the Exchange Bonds, no independent engineer or other consultant will
provide the holders of the Bonds with revised projections or report
any difference between the projections and the actual operating
results achieved by the Projects.
Dispute With PEPCO Over Calculation of Capacity Payments
In late August 1996, the Panda-Brandywine Partnership and PEPCO
commenced discussions concerning commercial operation requirements
relating to the Panda-Brandywine Facility and conversion of the
construction loan to long-term financing. During these discussions,
disagreements arose between the Panda-Brandywine Partnership and
PEPCO with respect to certain provisions of the Brandywine Power
Purchase Agreement, one of which relates to the determination of the
interest rate that is the basis for reduction in capacity payments
thereunder. PEPCO and the Panda-Brandywine Partnership are presently
attempting to resolve these disagreements but there are no assurances
that such efforts will be successful. If the PEPCO Interest Rate
Dispute is determined adversely to the Panda-Brandywine Partnership,
the capacity payments paid by PEPCO under the Brandywine Power
Purchase Agreement would be less than originally anticipated, thereby
adversely affecting the revenues realized by the Panda-Brandywine
Partnership, and consequently, reducing the amount of funds that
would be available for distribution to the Company and ultimately
repayment of the Exchange Bonds.
The Consolidated Pro Forma Report sets forth certain prospective
financial data of the Panda-Brandywine Partnership for the 16-year
term of the Existing Bonds under both the PEPCO Scenario (where it is
assumed that the PEPCO Interest Rate Dispute is resolved in a manner
consistent with PEPCO's position) and the Brandywine Scenario (where
it is assumed that the PEPCO Interest Rate Dispute is resolved in a
manner consistent with the Panda-Brandywine Partnership's position).
Under the PEPCO Scenario, the Consolidated Pro Forma Report indicates
that the projected minimum Company Debt Service Coverage Ratio would
be 1.3:1 and the projected minimum Consolidated Debt Service Coverage
Ratio would be 1.1:1 (except during 1997 in which the projected
Company Debt Service Coverage Ratio is 0.8:1 and the projected
Consolidated Debt Service Coverage Ratio is 0.96:1), which are less
than the minimum Company Debt Service Coverage Ratio of 1.7:1 and
minimum Consolidated Debt Service Ratio (if then applicable) of
1.25:1 required under the Indenture to permit the incurrence of
additional debt. Accordingly, the ability of the Company to raise
debt for Projects in the future would be impaired. In addition, the
projected coverage ratios under the PEPCO Scenario indicate that
distributions the Company expects to receive from its Project
Entities would be insufficient to service the Existing Bonds in 1997.
In such case, monies held in the Accounts and Funds, if any, may be
applied toward any debt service deficiency as set forth in the
Indenture. The current balances in the Accounts and Funds are as
follows: U.S. Project Account, $7.0 million; Capitalized Interest
Fund, $9.8 million; Debt Service Reserve Fund, $6.4 million; Company
Expense Fund, $247,000. See "Description of the Projects - The Panda-
Brandywine Facility - Dispute With PEPCO Over Calculation of Capacity
Payments," "Offering Circular Summary - Independent Engineers' and
Consultants' Reports - Consolidating Engineer's Pro Forma Report" and
"- Independent Pro Forma Analysis - Brandywine," and "Description of
the Exchange Bonds - The Accounts and Funds" and "- Certain
Covenants - Limitations on Debt."
Project Risks
Construction Risk
Additional Projects may be transferred to the Company prior to
the commencement of, or during, their construction. The construction
of a Project involves many risks, including shortages of equipment,
material and labor, work stoppages, labor disputes, weather
interferences, unforeseen engineering, environmental and geological
problems and unanticipated cost increases, any of which could give
rise to delays or cost overruns. Difficulties in obtaining any
requisite licenses or permits could adversely affect the design or
increase the cost of a Project, or delay or prevent the completion of
construction or the commencement of commercial operations of a
Project. Construction-related risks can be mitigated through fixed-
price "turnkey" construction contracts; however, there can be no
assurance that a contractor will honor its commitments or have the
financial resources to satisfy its obligations under any liquidated
damages provisions, or that any affected Project would continue to
operate at its design specifications after the expiration of the
contractors' and equipment suppliers' warranties. There is also a
risk that construction delays will be caused by events, such as
events of force majeure, not covered by liquidated damages or
insurance. See "Dependence on Distributions from Project Entities"
and "Financial Risks - Default on Project-level Debt; Enforcement of
Rights and Realization of Collateral" above.
Start-up Risks
The commencement of commercial operations of a newly constructed
Project involves many risks, including start-up problems, the
breakdown or failure of equipment or processes and performance below
expected levels of output or efficiency. Generally, insurance is
maintained to protect against certain of these risks, warranties are
obtained relating to the construction of a Project and the equipment
associated therewith, and construction contractors and equipment
suppliers are obligated to meet certain performance levels. Such
insurance, warranties or performance guaranties, however, may not be
adequate to cover lost revenues or increased expenses. As a result, a
Project may be unable to fund principal and interest payments under
its financing obligations. A default under such a financing
obligation could result in the Company losing its ownership interest
in a Project. In addition, power purchase agreements, which are
typically entered into with a utility early in the development phase
of a Project, often enable the utility to terminate such agreement,
or to retain security posted by the developer as liquidated damages
if a Project fails to commence commercial operations or certain
operating levels by specified dates or fails to make certain
specified payments. If such a termination right is exercised, a
Project may not produce revenues, the default provisions in a
financing agreement would likely be triggered (rendering the Project-
level debt immediately due and payable) and the Project would likely
be rendered insolvent as a result. See "Financial Risks - Default on
Project-level Debt; Enforcement of Rights and Realization of
Collateral" above.
Operating Risks
The operation of power generation facilities involves many
risks, including the breakdown or failure of power generation
equipment, transmission lines, pipelines or other equipment or
processes, the inability to obtain adequate fuel supplies and
performance below expected levels of output or efficiency (whether
due to misuse, unexpected degradation or design or manufacturing
defects), failure to keep on hand adequate supplies of spare parts,
operation error, labor disputes, catastrophic events such as fires,
floods, earthquakes, and other similar events and the need to comply
with the directions of the relevant government authority or utility.
Although the Panda-Rosemary Facility and the Panda-Brandywine
Facility contain certain redundancies and back-up mechanisms, there
can be no assurance that any such breakdown or failure would not
prevent the affected facility from performing under applicable power
and steam purchase agreements. The Rosemary Power Purchase Agreement
and the Brandywine Power Purchase Agreement provide for a reduction
in capacity payments in the event of an outage or unavailability.
The occurrence or continuance of any of the events described above
could increase the cost of operating the Panda-Rosemary Facility or
the Panda-Brandywine Facility, reduce the payments due from the
purchaser under the relevant power purchase agreement or otherwise
adversely affect any of such Projects.
Although insurance is maintained to protect against certain of
these operating risks, the proceeds of such insurance may not be
adequate to cover lost revenues or increased expenses and, as a
result, the Project Entities owning such Project might be unable to
service the Project-level debt. A default under such Project-level
debt could result in the Company losing its indirect ownership
interest in such Project. Furthermore, in the event of a major
casualty or loss involving a Project, casualty insurance proceeds, to
the extent not applied to repair such Project, would be applied first
to satisfy redemption or other obligations under Project-level debt,
and it is unlikely (until such Project-level debt is less than the
maximum insurance proceeds payable) that any such insurance proceeds
would be available for mandatory redemption of the Bonds. See
"Financial Risks - Default on Project-level Debt; Enforcement of
Rights and Realization of Collateral" above.
Construction of the Panda-Brandywine Facility was substantially
complete in October 1996, and the Panda-Brandywine Facility has no
significant operating history. The Panda-Brandywine Partnership has
obtained warranties in limited amounts and for limited periods
relating to the Panda-Brandywine Facility and its major equipment
from Raytheon and suppliers of such equipment. However, there can be
no assurance that any of such warranties will be sufficient or
effective under all circumstances or that the issuer of the warranty
will have adequate capital resources to meet its warranty
obligations. In addition, the warranties generally are limited to an
obligation to repair or replace defective equipment and do not cover
revenues lost while the equipment is out of service.
Dispatchability Risk
The power purchase agreements for the Projects may provide
substantial leeway to the power purchaser in determining when, and to
what extent, a facility is dispatched. For example, the Rosemary
Power Purchase Agreement provides VEPCO the contractual right to
schedule the Panda-Rosemary Facility for dispatch on a daily basis at
full capacity, partial capacity or off-line. The Panda-Rosemary
Facility has been used by VEPCO primarily as a peaking plant and, as
a result, the number of hours for which the facility has been
dispatched and the quantity of electricity produced by the facility
have fluctuated throughout the facility's operating history.
Similarly, the Brandywine Power Purchase Agreement permits PEPCO to
dispatch at its sole discretion a substantial portion of the Panda-
Brandywine Facility's capacity. While availability-based capacity
payments and other fixed payments under the power purchase agreements
relating to the Panda-Rosemary Facility and the Panda-Brandywine
Facility are unaffected by levels of dispatch, revenues would be
adversely affected (due to a reduction in energy payments thereunder)
if these facilities were dispatched at levels materially below the
recent operating experience, in the case of the Panda-Rosemary
Facility, or the anticipated level, in the case of the Panda-
Brandywine Facility. See "Description of the Projects - The Panda-
Rosemary Facility - Sale of Capacity and Electricity" and "- The
Panda-Brandywine Facility - Sale of Capacity, Electricity and Steam."
Adjustments to Fixed Payments
The Panda-Rosemary Facility and the Panda-Brandywine Facility
are dependent on capacity payments due from VEPCO and PEPCO,
respectively, under their respective power purchase agreements to
meet their fixed obligations. In the case of the Panda-Rosemary
Facility, capacity payments are payable by VEPCO whether or not the
facility is dispatched, provided that the facility satisfies certain
seasonal capacity tests which may be required by VEPCO in its sole
discretion and meets certain minimum availability standards. If these
minimum availability standards are not met, then capacity payments
otherwise due to the Panda-Rosemary Partnership are subject to rebate
or reduction and, in certain circumstances, the Panda-Rosemary
Partnership may be required to pay liquidated damages to VEPCO. See
"Description of the Projects - The Panda-Rosemary Facility - Sale of
Capacity and Electricity." In the case of the Panda-Brandywine
Facility, capacity payments are payable by PEPCO whether or not the
facility is dispatched, provided that the capacity payments will be
reduced if the facility cannot maintain 88% equivalent availability
and may be reduced starting in 2006 depending on when and whether
PEPCO's system peak load exceeds 5,697 MW during 1997, 1998 or 1999.
The determination of PEPCO's system peak load under the Brandywine
Power Purchase Agreement is the subject of a dispute between the
Panda-Brandywine Partnership and PEPCO. See "Description of the
Projects - The Panda-Brandywine Facility - Sale of Capacity,
Electricity and Steam" and "- Dispute With PEPCO Over Calculation of
Capacity Payments."
Fuel Related Pricing
Payments related to electric energy purchases by VEPCO and PEPCO
under the Rosemary Power Purchase Agreement and the Brandywine Power
Purchase Agreement, respectively, generally adjust upon the same or
substantially equivalent fuel indices or pricing mechanisms that
govern adjustments to the base commodity charges for natural gas
under, respectively, the Rosemary Gas Agreement and the Brandywine
Gas Agreement. Nevertheless, the Panda-Rosemary Facility and the
Panda-Brandywine Facility are subject to the risk that the fuel
compensation components of electric energy prices paid under their
respective power purchase agreements and their respective actual fuel
costs may differ. Accordingly, increases in fuel supply costs which
are not matched by increases in electric energy prices could have an
adverse effect on the performance of these two Projects. See
"Description of the Projects - The Panda-Rosemary Facility - Sale of
Capacity and Electricity" and "- Gas Supply and Fuel Management" and
"- The Panda-Brandywine Facility - Sale of Capacity, Electricity and
Steam" and "- Gas Supply and Fuel Management," Appendix D, Rosemary
Fuel Consultant's Report and Appendix G, Brandywine Fuel Consultant's
Report.
Regulatory Disallowance
The Rosemary Power Purchase Agreement contains a clause known as
a "regulatory disallowance" provision, which requires the Panda-
Rosemary Facility to repay to VEPCO or reduce any capacity charges in
excess of $5.62 per kilowatt per month (as adjusted by the Gross
National Product Implicit Price Deflator ("GNPIPD") from 1987
dollars) that are disallowed by any regulatory authority from
recovery by VEPCO in its rate base (except where such disallowance is
due to VEPCO's failure to seek recovery or comply with procedural
requirements governing recovery of such costs). VEPCO cannot initiate
such a disallowance and must appeal such a disallowance, if
practicable. If a disallowance occurs, the cash flow of the Panda-
Rosemary Partnership could be materially and adversely affected and
the Company's ability to make payments on the Company Notes and,
consequently, the Issuer's ability to make payments on the Exchange
Bonds, could be materially and adversely affected. See "Description
of the Projects - The Panda-Rosemary Facility - Sale of Capacity and
Electricity" and "Regulation."
Fuel Supply Risks
The Panda-Rosemary Partnership has contracted for most of its
natural gas supplies and transportation services on an interruptible
basis because the Panda-Rosemary Partnership has assumed that the
Panda-Rosemary Facility will be dispatched by VEPCO as a peaking
plant, with the bulk of the facility's dispatch hours occurring
during the summer months when operational experience suggests that
gas typically will be available for purchase. The Panda-Brandywine
Partnership has similarly contracted for approximately one-half of
its natural gas supply and transportation on an interruptible basis.
Interruptible gas supply and transportation arrangements are subject
to interruption or curtailment during periods of peak demand for gas.
Although independent consultants have found the fuel supply and
delivery arrangements for the Panda-Rosemary Facility and the Panda-
Brandywine Facility to be reasonable, if a power purchaser were to
significantly increase its dispatch of a facility, the risk of
potential curtailment in natural gas supply and transportation, and
thus that a facility would be unavailable for dispatch, would be
increased. See "Dispatchability Risk" above, "Description of the
Projects - The Panda-Rosemary Facility - Gas Supply and Fuel
Management" and "- Gas Transportation," "- The Panda-Brandywine
Facility - Gas Supply and Fuel Management" and "- Gas
Transportation," Appendix D, Rosemary Fuel Consultant's Report, and
Appendix H, Brandywine Fuel Consultant's Report.
If natural gas supply or transportation is not available to the
Panda-Rosemary Facility or the Panda-Brandywine Facility, each such
facility can operate utilizing No. 2 fuel oil. The Panda-Rosemary
Facility has the capacity to store two million gallons of fuel oil on
site, which is enough fuel oil to operate the facility at full load
for approximately seven days. The Panda-Brandywine Facility has on-
site storage for approximately two million gallons of fuel oil, which
is enough fuel oil to operate the facility at full load for
approximately six days. As a result of current market conditions,
the Panda-Rosemary Partnership purchases its fuel oil supply on a
spot market basis. Under its fuel management plan, the Panda-
Brandywine Partnership will endeavor to enter into fuel oil supply
and transportation agreements by October 10 of each year that will
provide it with access to adequate fuel oil supplies for the
immediately succeeding winter season (November through March).
Future changes in market conditions or governmental policy, however,
could adversely affect the ability of a facility to obtain economical
fuel oil supply when needed and, consequently, adversely affect the
availability of the facility for dispatch. See "Dispatchability Risk"
above, "Description of the Projects - The Panda-Rosemary Facility -
Fuel Oil" and "- The Panda-Brandywine Facility - Fuel Oil."
The Rosemary Gas Supply Agreement and the Rosemary Fuel
Management Agreement expire on November 30, 2005, approximately seven
years prior to the maturity date of the Exchange Bonds. The firm
transportation contracts the Panda-Rosemary Partnership has entered
into with Transco, Texas Gas and CNG expire on November 1, 2006,
approximately six years prior to the maturity date of the Exchange
Bonds. Certain other contracts providing for interruptible
transmission services for the Panda-Rosemary Facility are on a month-
to-month basis. There can be no assurance that the terms of any of
such contracts can be extended or, if they expire, that the Panda-
Rosemary Partnership will be able to enter into replacement contracts
or fuel transportation arrangements on terms no less favorable to the
Panda-Rosemary Partnership than those contained in the current
agreements. The failure to extend such terms or to enter into
replacement contracts or fuel transportation arrangements is an event
of default under the Rosemary Indenture. See "Description of the
Projects - The Panda-Rosemary Facility - Gas Supply and Fuel
Management" and "- Gas Transportation" and "Description of
Outstanding Project-Level Debt - The Panda-Rosemary Financing."
Dependence on Third Parties and Concentration of Customers
The nature of the Company's Projects is such that each facility
generally relies on one power purchase agreement with a single
electric utility customer for substantially all, if not all, of such
facility's revenues over the life of the Project. Furthermore, each
power generation facility may depend on a single or limited number of
entities to purchase thermal energy, to supply or transport natural
gas to such facility or to supply other goods and services which
constitute the principal inputs to such facility's operations. Any
material breach by any of these parties of its obligations under its
respective agreement with a facility, or any event or circumstance
that reduces or suspends the payment obligation of the other party to
an agreement or affects such party's ability or willingness to meet
its obligations, could adversely affect the Company's ability to make
payments on the Company Notes and, consequently, the Issuer's ability
to make payments on the Exchange Bonds. The other parties to each
Project agreement have the right to terminate or withhold payments or
performance under such agreement upon the occurrence of certain
events of default specified therein, which include the failure of any
Project Entity that is a party to such agreement to materially
perform its obligations thereunder. Additionally, if a party to a
Project agreement were to undergo bankruptcy, the trustee in the
bankruptcy proceeding could disaffirm such agreement. If a Project
agreement were terminated due to nonperformance by a Project Entity,
disaffirmation in a bankruptcy proceeding or for any other reason,
there is no assurance that the Project Entity would be able to enter
into a substitute agreement having terms and conditions substantially
equivalent to those contained in such terminated agreement.
Dependence on Panda International; Ability of Panda International
to Develop Additional Projects
All development activities in respect of Projects will be
undertaken by Panda International and certain of its affiliates. The
Company and the PIC Entities have no employees of their own (other
than officers) and, in any event, do not engage in development
efforts. Thus, the Company is entirely dependent on Panda
International for the development of Projects which may be
transferred to the Project Portfolio. See "No Restrictions on Panda
International's Business" below.
The development of electric power generation facilities is
subject to substantial risks. In developing a power generation
facility that may become eligible for transfer to the Project
Portfolio, Panda International must generally obtain power and
thermal energy purchase agreements, governmental permits and
approvals, fuel supply and transportation agreements, electricity
transmission agreements, site agreements and construction contracts,
as well as long-term non-recourse debt financing. There can be no
assurance that Panda International will be successful in doing so. In
addition, Project development is subject to environmental,
engineering and construction risks relating to cost-overruns, delays
and performance. In developing Projects in emerging markets such as
China, Nepal and India, these risks may be increased by political and
regulatory uncertainties, the nature and evolution of legal systems,
the lack of developed infrastructure and other factors. Although
Panda International and its subsidiaries attempt to minimize the
financial risk in the development of a Project by securing a
favorable long-term power purchase agreement, obtaining all required
governmental permits and approvals and arranging adequate financing
prior to the commencement of construction, the development of a
Project may require Panda International or its subsidiaries to expend
significant sums for preliminary engineering, permitting and legal
and other expenses before it can be determined that a Project is
feasible, economically attractive or capable of being financed. If
Panda International were unable to complete a Project, it would
generally not be able to recover its investment in such Project, thus
impairing its ability to develop future Projects that could become
eligible for transfer to the Project Portfolio pursuant to the
Additional Projects Contract. No assurance can be given that Panda
International or its affiliates will successfully develop and arrange
financing for any additional Projects or that Projects currently
under development or to be developed in the future will become
eligible for transfer to the Project Portfolio pursuant to the
Additional Projects Contract. In addition, although Panda
International has indicated that it intends to continue the
development of electric generation projects as its primary business,
it is under no obligation to do so and may use distributions from the
Company available to it for other purposes. See "The Company, the
Issuer and Panda International - The Additional Projects Contract."
Competition
The electric power generation industry is characterized by
intense competition and, in the United States, the Company encounters
competition from utilities, industrial companies and other
independent power producers. In recent years, there has been
increasing competition for new power purchase agreements and this
competition has often contributed to a reduction in electricity
tariffs in power purchase agreements. In this regard, many utilities
often engage in competitive bid solicitations to satisfy demand for
additional capacity. This competition adversely affects the ability
of the Company to obtain power purchase agreements and reduces the
price paid for electricity. Internationally, the competitive
characteristics of Project development are less developed, although
there is a growing trend toward competitive bidding in the
privatization of government-owned electric utility systems and the
entry of foreign developers into these markets has increased.
Industry Conditions; Restructuring Initiatives; Utility Responses
The Federal Energy Regulatory Commission (the "FERC") and many
state utility commissions, including the Virginia State Corporation
Commission (the "SCC"), are currently studying a number of proposals
to restructure the electric utility industry in the United States to
permit utility customers to choose their supplier in a competitive
electric energy market. In April 1996, the FERC issued a rule
requiring utilities to offer wholesale customers and suppliers open
access on their transmission lines on a basis that is comparable to
the utilities' own use of the lines. In addition, a number of bills
have been introduced in the United States Congress to promote
electric utility restructuring and deregulation of electric rates.
Many utilities fear that current captive customers may leave
their system to procure electricity from other electric power
suppliers and that the utilities may thereafter be unable to recover
their fixed costs from their remaining customers. These potential
"stranded" or "transition" costs include the cost of maintaining
electric generating capacity under many QF contracts. The
restructuring proposals being considered by regulatory agencies and
Congress differ as to how, and to what extent, utilities' "stranded"
or "transition" costs would be recoverable if current captive
customers leave the utilities' systems. To minimize the risk that
"stranded" or "transition" costs may not be recovered by utilities if
such restructuring proposals are enacted, many utilities have
implemented certain cost control strategies. Such strategies include
attempts to renegotiate, buy out or terminate existing power purchase
agreements containing prices that utilities believe will not be
competitive in a short-term marginal cost electric energy market. In
addition, some utilities have sought to rigorously enforce the terms
of such agreements and to exercise their contractual termination
rights if the agreements' provisions are not strictly observed. Some
utilities have engaged in litigation against Qualifying Facilities to
achieve these ends.
On November 12, 1996, the SCC issued an order that requires
VEPCO to file reports on its efforts to renegotiate its contracts
with non-utility generators, including the Panda-Rosemary Facility.
The first such report must be filed on or before June 1, 1997 and
reports must be filed quarterly thereafter. VEPCO has not yet filed
the first report required by the order but previously has filed
comments with the SCC indicating that it will aggressively pursue
initiatives to restructure contracts with Qualifying Facilities to
minimize its costs. VEPCO has filed a request with the SCC for
permission to institute a formal QF monitoring program under which
certain facilities (including the Panda-Rosemary Facility) would be
required to furnish certain operational data to VEPCO on an annual
basis. Under the proposed monitoring program, if VEPCO believed,
based on data provided by a facility and any additional information,
that a facility no longer satisfied the QF criteria, VEPCO could
institute proceedings with the FERC to revoke such facility's QF
status. On October 10, 1996, the SCC staff, pursuant to the SCC's
directive, filed a legal memorandum with the SCC discussing VEPCO's
proposal in which the staff argued that the SCC has the legal
authority to implement a QF monitoring program. On December 18, 1996,
the SCC staff filed a report recommending that the SCC adopt a QF
monitoring program for all QFs that have a power purchase agreement
with VEPCO. The program would direct VEPCO to collect, audit and
analyze calendar year operating information, including actual annual
operating results and a copy of meter calibration results, to be
submitted by all such QFs by May 1 of the following year. VEPCO
would report annually to the SCC the results of its compliance
evaluation. On December 30, 1996, VEPCO filed a response in support
of the Staff Report. See "Maintaining Qualifying Facility Status"
below.
VEPCO is currently involved in several proceedings with parties
with whom it has entered into power purchase agreements, including
several in which the interpretation of the power purchase agreements
is being disputed. Although there is currently no dispute between
the Panda-Rosemary Partnership and VEPCO, the Panda-Rosemary
Partnership anticipates that VEPCO will closely monitor the Panda-
Rosemary Partnership's compliance with the Rosemary Power Purchase
Agreement and vigorously enforce its rights thereunder. Because the
capacity and energy payments that the Panda-Rosemary Partnership
receives from VEPCO under the Rosemary Power Purchase Agreement
constitutes major sources of revenue for the Panda-Rosemary
Partnership, a termination of the Rosemary Power Purchase Agreement
would, in the absence of another source of funds, terminate the Panda-
Rosemary Partnership's ability to service its Project-level debt and
to make distributions to the Company. In this event, the Company may
not be able to perform its obligations under the Company Notes and,
consequently, the Issuer may not be able to make payments on the
Exchange Bonds. See "Regulation - Federal Energy Regulation."
Maintaining Qualifying Facility Status
PURPA and the regulations promulgated thereunder provide
Qualifying Facilities such as the Panda-Rosemary Facility and the
Panda-Brandywine Facility with certain exemptions from federal and
state legislation and regulation, including regulation of rates at
which electricity can be sold. For a cogeneration facility to
maintain QF status, no more than 50% of the facility may be owned by
an electric utility, electric utility holding company or combination
thereof and the facility must produce both electricity and a related
quantity of useful thermal energy and satisfy certain operational and
efficiency criteria. If for any reason a Project failed to maintain
its status as a Qualifying Facility, or if there were a change in law
or regulation that eliminated the Project's status as a Qualifying
Facility (or exemption from regulation granted to Qualifying
Facilities), the Project would be subject to additional regulation
and the revenues of the Panda-Rosemary Partnership and the Panda-
Brandywine Partnership could be materially and adversely affected.
For discussions of the steam sales arrangements that permit the Panda-
Rosemary Facility and the Panda-Brandywine Facility to maintain their
QF status, see "Description of the Projects - The Panda-Rosemary
Facility - Steam and Chilled Water Sales" and "- The Panda-
Brandywine Facility - Sale of Capacity, Electricity and Steam."
On July 3, 1996, Bibb, the steam host and lessor of the Panda-
Rosemary Facility site, filed a voluntary petition under Chapter 11
of the Bankruptcy Code with the United States Bankruptcy Court in
Delaware. In connection therewith, a reorganization was effected on
September 27, 1996, which did not affect the Rosemary Steam Agreement
or the Rosemary Site Lease. However, there can be no assurance that
Bibb will be able to meet its needs for capital on an ongoing basis
or meet its future obligations under the Rosemary Steam Agreement. If
Bibb were to fail to purchase and use the minimum quantity of steam
necessary for the Panda-Rosemary Facility to satisfy the Qualifying
Facility criteria, the Panda-Rosemary Facility could continue to
satisfy the Qualifying Facility criteria if a distilled water
facility or other thermal operation were installed at the Panda-
Rosemary Facility. The Rosemary Indenture permits the borrowing of
funds to make enhancements or improvements which are necessary to
maintain the facility's Qualifying Facility status. There can be no
assurance, however, that the Panda-Rosemary Partnership would have or
be able to obtain the funds necessary to install such a facility.
Certain Other Regulatory Risks Relating to U.S. Projects
Regulatory Approvals
The Company's U.S. Projects are subject to stringent energy and
environmental regulation by federal, state and local authorities.
Power plants in the United States are required to comply with
numerous federal, state and local statutory and regulatory
requirements and the Projects are required to obtain and maintain in
effect numerous approvals relating to energy and environmental laws.
There can be no assurance that existing regulations will not be
revised, that new laws and regulations will not be adopted or become
applicable to the Projects or that the Company's business and
financial condition will not be materially and adversely affected by
such future changes in laws and regulations (including the possible
loss of exemptions from regulations). See "Regulation."
Gas Transportation Regulation
The various gas transportation agreements for the U.S. Projects
contemplate the use of interstate natural gas pipelines and services.
These gas transportation arrangements, including pipeline facilities
and the rates charged for transportation services, are subject to the
jurisdiction of the FERC. In exercising such jurisdiction, the FERC
maintains or may maintain authority to modify aspects of the rates,
terms and conditions that govern the gas transportation services
provided. It is possible that such a modification could materially
increase the gas transportation costs of each U.S. Project. In
addition, certain provisions of the gas transportation agreements and
the approved tariffs allow the transporter to terminate, suspend
performance under or reduce the amount of gas transported upon the
occurrence of certain conditions, such as the taking of an adverse
action by a regulatory authority, if the transporter, in its
judgment, deems it necessary to make modifications or repairs to its
pipeline facilities or upon the occurrence of an event of force
majeure. Any failure by a transporter to provide gas transportation
services could have a material adverse effect on a Project's
operations. See "Description of the Projects - The Panda-Rosemary
Facility - Gas Transportation," "- The Panda-Brandywine Facility -
Gas Transportation" and "Regulation - Natural Gas Regulation."
Environmental and Other Matters
In operating any Project, the owner is generally required to
comply with a number of statutes and regulations relating to the
safety and health of personnel and the public, including the
identification, generation, storage, handling, transportation,
disposal, recordkeeping, labeling, reporting of and emergency
response in connection with hazardous and toxic materials or
substances associated with the facility, limits on noise emissions
from the facility, safety and health standards, practices and
procedures applicable to construction and operation of the facility
and environmental protection requirements including standards and
limitations relating to the discharge of air and water pollutants and
disposal of solid waste. Failure to comply with any of such statutes
and regulations could have adverse effects on a Project, including
the imposition of criminal or civil liability by regulatory agencies
or as a result of litigation by private parties, imposition of clean-
up fines or liens and the mandatory expenditure of funds to bring the
Project into compliance. Pursuant to the various financing, lease,
construction, easement and encroachment agreements, and as is common
practice in the independent power industry, the Panda-Rosemary
Partnership and the Panda-Brandywine Partnership have indemnified
third parties against the consequences of each Project's storage or
emission of hazardous and toxic materials. While the Company believes
that the Panda-Rosemary Facility's and the Panda-Brandywine
Facility's use of natural gas as the primary fuel source provides
comparative environmental advantages over other fossil fuel-fired
power production technologies, there can be no assurance that
environmental laws and regulations, whether now existing or adopted
in the future, will not impose significant constraints and increased
costs on such Facilities' operations. The 1990 Amendments to the
Federal Clean Air Act require the State of North Carolina, the State
of Maryland and the federal government, at various times, to take
regulatory actions that may affect the U.S. Projects. There can be no
assurance that each U.S. Project will or can satisfy all requirements
that may result from actions in response to the 1990 Amendments to
the Federal Clean Air Act. See "Regulation - Environmental
Regulations."
Permitting Risk
Each Project Entity is responsible for obtaining various permits
and other regulatory approvals required for the operation of its
facility. Some of the permits and other approvals that are obtained
for a particular facility may contain certain continuing conditions,
including the obligation to renew or extend the permit or approval by
a certain date. Failure to satisfy any such condition could prevent
the operation of the Project or result in fines or other additional
costs. The Company believes that all Projects developed by Panda
International have been or will be designed and constructed in order
to substantially comply, insofar as can be reasonably controlled,
with their respective permit and approval conditions. All material
permits and other regulatory approvals currently required to operate
the Panda-Rosemary Facility and the Panda-Brandywine Facility have
been obtained. If future levels of dispatch of the Panda-Rosemary
Facility exceed the levels allowed under the facility's existing
operating permits (which is projected to be the case; see Appendix C,
Rosemary Engineering Report), additional equipment designed to
control air emissions would have to be installed in order for the
facility to maintain compliance with such permits. While the Panda-
Rosemary Partnership has set aside certain reserves which it believes
are sufficient to fund the cost of such equipment, there can be no
assurance that such reserves will be sufficient to pay the actual
cost of such equipment if and when required to be installed. There
can be no assurance that in the future the Projects will operate
within the limits established by current or future permits or other
approvals. Any particular Project could be adversely affected if
regulatory changes or new permit conditions were implemented which
impose more comprehensive or stringent requirements resulting in
increased compliance costs or which reduce certain benefits expected
by the Company.
Risks Relating to Future Non-U.S. Projects
The Company does not hold an interest in any Non-U.S. Project.
The Company anticipates that one or more of the Non-U.S. Projects
under development by Panda International may reach Financial Closing
or commence Commercial Operations and thus be eligible for transfer
to the Project Portfolio pursuant to the Additional Projects
Contract, provided that the conditions contained therein for such a
transfer can be satisfied. See "The Company, the Issuer and Panda
International - The Additional Projects Contract" and "Description of
the Projects - Other Projects under Development by Panda
International." For any Non-U.S. Project transferred to the Project
Portfolio upon Financial Closing, there will remain significant risks
relating to the completion of construction and commencement of
commercial operations. Such risks include political and economic
uncertainties, including risks of war, expropriation,
nationalization, renegotiation or nullification of existing
contracts, changes in rates and methods of taxation and international
exchange controls or governmental restrictions on the repatriation of
currency. The Company expects that Non-U.S. Project Entities may
receive a substantial part of their revenues in international
currencies, which will need to be converted into other currencies to
meet international currency obligations or to pay dividends or make
distributions, thus exposing the Company to convertibility,
remittance and exchange risks. Certain countries in which Projects
may be developed may not have well-developed legal systems with a
consolidated body of laws governing international investment
enterprises. The uncertainty of the legal environment in these
countries could make it difficult for the Company or a Project Entity
to enforce its rights under its Project agreements.
No Restrictions on Panda International's Business
Panda International has informed the Company that it presently
intends to continue to focus on the development, acquisition and
ownership of electric power generation projects as its principal
business; however, the Indenture contains no restrictions on Panda
International's business or on its ability to use proceeds from the
issuance of Bonds or distributions from the Company to pursue other
businesses.
Control by Principal Stockholders
Robert and Janice Carter, members of their family and Carter
family trusts collectively own approximately 38.8% of the outstanding
shares of capital stock of Panda International. In addition, W.M.
Huffman (who is related to Mr. Carter by marriage), members of Mr.
Huffman's family and family trusts and partnerships own approximately
18.7% of such capital stock. See "The Company, the Issuer and Panda
International - General." By virtue of their ownership share, the
Carters are in a position to influence the management and direction
of Panda International and, through Panda International, its
subsidiaries, including the Issuer and the Company. Moreover, the
Carters and the Huffmans, if they were to agree to act together in
voting their shares, could control the vote for election of
directors, and consequently the management and direction, of Panda
International and its subsidiaries, including the Issuer and the
Company.
Lack of Profitable Operations
The Company recorded net losses for 1993, 1994, 1995 and the
nine months ended September 30, 1996. Although these losses are
primarily attributable to the substantial costs incurred in
developing Projects and the absence of significant revenues during
the development phase, the Company's ability to continue in business
and maintain its financing arrangements may be adversely affected by
a continued lack of profitability.
Absence of Market for the Exchange Bonds
The Exchange Bonds are being offered to the holders of the Old
Bonds. The Old Bonds were offered and sold in July 1996 to a small
number of investors and are eligible for trading in the Private
Offerings, Resale and Trading through Automatic Linkages ("PORTAL")
Market, although an active trading market for the Old Bonds has not
developed to date.
There is currently no established market for the Exchange Bonds,
and the Exchange Bonds will not be eligible for trading in the PORTAL
Market. The Issuer does not intend to list the Exchange Bonds or the
Old Bonds on a securities exchange or seek approval for quotation
through any automated dealer quotation system. There can be no
assurance that a market for the Exchange Bonds will develop or as to
the ability of holders of the Exchange Bonds to sell their Exchange
Bonds or the price at which such holders would be able to sell their
Exchange Bonds. If a market for the Exchange Bonds does not develop,
purchasers may be unable to resell the Exchange Bonds for an extended
period of time, if at all. Consequently, a purchaser may not be able
to liquidate the investment readily, and the Exchange Bonds may not
be readily accepted as collateral for loans. If a market for the
Exchange Bonds were to develop, the Exchange Bonds could trade at
prices that may be lower than the initial market values or at a
discount from their face amount depending on many factors, including
prevailing interest rates, the markets for similar securities, and
the financial performance of the Company and its subsidiaries. The
liquidity of, and trading market for, the Exchange Bonds also may be
adversely affected by general declines in the market for similar
securities and other factors that are independent of the financial
performance of, and prospects for, the Company.
THE COMPANY, THE ISSUER AND PANDA INTERNATIONAL
General
The Company is an indirect wholly-owned Delaware subsidiary of
Panda International, an independent power company that is engaged
principally in the development, acquisition, ownership and operation
of electric power generation facilities, both in the United States
and internationally. Panda International also owns a subsidiary
engaged in oil and gas exploration and development. The Issuer is a
wholly-owned Delaware subsidiary of the Company organized for the
sole purpose of issuing the Existing Bonds and any additional series
of Bonds. The Issuer and the Company were formed by Panda
International in July 1996 as vehicles for financing project
development, including the making of equity and debt investments in
electric power generation projects. Subject to the terms of the
Additional Projects Contract, Panda International intends to
transfer, to the Project Portfolio, Projects developed and to be
developed by Panda International, at the point in time when such
Projects have reached Financial Closing or achieved Commercial
Operations, thereby reducing development risk to the Company. See
"Additional Projects Contract" below.
Panda International's principal business strategy is to use its
experience in developing, constructing, financing and managing
electric power generation facilities to provide low cost electricity
and electric generating capacity. Panda International will seek to
expand its presence in the electric power industry by implementing
this strategy in the United States and certain other countries.
Panda International has placed into commercial operations facilities
with a combined electric generating capacity of approximately 410 MW.
In addition, Panda International has executed power purchase
agreements or entered into other development arrangements relating to
four potential Projects with a combined electric generating capacity
of approximately 750 MW. See "Description of the Projects - Other
Projects under Development by Panda International." Panda
International is continually engaged in the evaluation of various
opportunities for the development and acquisition of additional
electric power generation facilities, both in the United States and
internationally. See "Risk Factors - Project Risks" and "- Risks
Relating to Future Non-U.S. Projects" and "Business - General."
With 46 employees, Panda International has assembled a team of
professionals with expertise in business development, marketing,
engineering, design, construction management, fuel supply,
transportation and exploration, equipment procurement, utility
practices, contract management, regulatory policy and procedures,
environmental matters, law and finance and accounting. Panda
International believes that this team's scope of expertise allows
Panda International to compete effectively for cogeneration and
private power development opportunities.
Panda International was formed as part of a corporate
reorganization that took place in October 1995 in which all of the
capital stock of PEC was exchanged for shares of Panda International,
with the result that PEC became a wholly-owned subsidiary of Panda
International. PEC was organized in 1982 by Robert and Janice Carter,
who are the Chairman of the Board, President and Chief Executive
Officer, and the Executive Vice President, Treasurer and Secretary,
respectively, of Panda International, PEC, the Company and the
Issuer. See "Management."
Company Structure
Panda International is the parent company of PEC and through PEC
and its subsidiaries holds controlling interests in U.S. and non-U.S.
entities that hold interests in Projects that are in operation or
under development. Panda International generally holds its interests
in Projects that are being developed outside of the United States
through entities organized in tax favorable jurisdictions (such as
the Cayman Islands), which in turn hold interests in entities
organized in the country where Panda International's Projects will be
located (e.g., China and Nepal). Panda International's U.S. Projects
are generally held in limited partnerships, with general and limited
partners organized as Delaware subsidiaries of PEC.
There are currently two PIC Entities, Panda Interholding
Corporation, a wholly-owned Delaware subsidiary of the Company (a PIC
U.S. Entity), and Panda Cayman Interfunding Company, a wholly-owned
Cayman Islands subsidiary of the Company (a PIC International
Entity). Under the terms of the Indenture, PIC Entities, with certain
exceptions, cannot incur debt, become liable in connection with
guaranties or enter into Project Agreements, and are subject to
certain other restrictions, all for the purpose of assuring that the
PIC Entities' primary purpose is to hold Project Entities and
receive, and distribute to the Company, distributions from Project
Entities. Other PIC Entities may be established in the future, and
each will be directly wholly owned by the Company. Project Entities,
on the other hand, are those entities that are owned by PIC Entities
and directly or indirectly own Projects or are obligated under
Project Agreements. Under the terms of the Indenture, Project
Entities are permitted to incur Project Debt, become liable in
connection with guaranties created, required or expressly permitted
to exist under Project Agreements and enter into and amend Project
Agreements, in each case subject to certain restrictions.
The PIC U.S. Entity referred to above, Panda Interholding
Corporation, owns the Project Entities that are the general and
limited partners of the Panda-Rosemary Partnership and the Panda-
Brandywine Partnership and a related distilled water subsidiary
(which serves as the QF steam host for the Panda-Brandywine
Facility). The Company expects that Project Entities owning future
U.S. Projects, if any, will generally be transferred to and held by a
PIC U.S. Entity in a manner similar to the ownership structure of the
Panda-Rosemary Project and the Panda-Brandywine Project described
above. In the future, if Project Entities owning a Non-U.S. Project
are to be transferred to the Project Portfolio pursuant to the
Additional Projects Contract, Panda International, PEC or their
affiliates will transfer them to a PIC International Entity. The
Company expects that Project Entities owning future Non-U.S.
Projects, if any, will be transferred to the Project Portfolio
pursuant to the Additional Projects Contract to the PIC International
Entity referred to above, Panda Cayman Interfunding Company, or to
another PIC International Entity (unless U.S. tax deferral
arrangements are not being sought). Such transfers will generally be
made by a transfer to a PIC International Entity of the capital stock
of the off-shore Project Entities that hold the in-country Project
Entities. Methods of transfer may, however, vary depending upon,
among other considerations, U.S. and foreign tax treatment and
Project-level restrictions.
The following diagram shows the ownership structure of Panda
International and certain of its subsidiaries as of the date of this
Prospectus.
[PANDA ENERGY INTERNATIONAL ORGANIZATIONAL CHART]
(1) Pursuant to the Additional Projects Contract, interests in
Projects developed by Panda International and its affiliates will
be available for transfer to the Project Portfolio only if
Financial Closing is reached or Commercial Operations is achieved
and if certain other conditions contained in the Additional
Projects Contract are satisfied (except that the Panda-Kathleen
Project must be transferred if Financial Closing is achieved,
regardless of whether such other conditions are satisfied). "Risk
Factors - Project Risks" and "- Risks Relating to Non-U.S.
Projects" and "The Additional Projects Contract" below.
(2) In the case of other U.S. Project Entities and non-U.S.
Project Entities, the percentage ownership interest of Panda
International is expected to vary depending on the Project in
question.
(3) NNW, Inc. holds a cash flow participation in the
distributions from the Panda-Rosemary Partnership, (which the
Company believes is 0.433% and would increase to 1.732% after 2008
based on projected distributions, but which percentages are the
subject of dispute). See "Description of the Projects - The Panda-
Rosemary Facility - Cash Flow Participation" and "Legal
Proceedings - NNW, Inc. Proceeding."
The common stock or other equity interests of Panda
International's subsidiaries are subject to the following liens:
(i) all of the outstanding capital stock of the Company and the
Issuer has been pledged to secure the payment of the Bonds;
(ii) all of the outstanding capital stock of Panda
Interholding Corporation, the existing PIC U.S. Entity, has
been pledged to secure the payment of the Bonds;
(iii) 60% of the outstanding capital stock of Panda Cayman
Interfunding Company, the existing PIC International Entity,
has been pledged to secure the payment of the Bonds;
(iv) all of the capital stock of Panda-Rosemary Corporation
and PRC II Corporation, as well as the general partner and
limited partner interests in Panda-Rosemary, L.P., have been
pledged to secure the payment of the Rosemary Bonds; and
(v) all of the capital stock of Panda Brandywine Corporation,
Panda Energy Corporation (Delaware), and Brandywine Water
Company, as well as the general and limited partner
interests in the Panda-Brandywine Partnership, have been
pledged to secure the obligations of the Panda-Brandywine
Partnership under the Brandywine Financing Documents.
There were 11,401,212 shares of Common Stock of Panda
International outstanding at December 31, 1996. Of this amount,
4,418,957 shares (38.8%) are owned by Robert and Janice Carter and
members of their family and family trusts. See "Management." W.M.
Huffman and members of his family and family trusts and a family
partnership own 2,134,443 of the outstanding shares (18.7%). Other
directors, officers and employees of Panda International own less
than 1% of the outstanding shares of Common Stock. At December 31,
1996: (i) there were outstanding options to acquire 1,209,000 shares
of Common Stock of Panda International (options for 1,050,000 shares
being fully vested and for 159,000 shares vesting over a six-year
period) held by directors, officers and employees of Panda
International, and of this amount options for 250,000 shares are held
by Robert Carter and options for 25,000 shares are held by W.M.
Huffman; (ii) Trust Company of the West held warrants to purchase
1,004,000 shares of Common Stock of Panda International; and (iii)
NNW, Inc. held rights to acquire up to 181,500 shares of Common Stock
of Panda International. See "Description of the Projects - The Panda-
Rosemary Facility - Cash Flow Participation."
Executive Offices
The principal executive offices of the Issuer, the Company, PEC
and Panda International are located at 4100 Spring Valley Road, Suite
1001, Dallas, Texas 75244. The telephone number at such offices is
(972) 980-7159.
The Additional Projects Contract
Subject to certain conditions, including those set forth below,
the Additional Projects Contract requires Panda International and its
affiliates to transfer to the Company, or to one or more PIC
Entities, each additional Project for which a power purchase
agreement is entered into prior to July 31, 2001 and which has
reached Financial Closing or achieved Commercial Operations prior to
July 31, 2006. Panda International and its affiliates are required to
transfer a Project to the Project Portfolio only if the principal
amount of additional series of Bonds that can be issued after giving
effect to the inclusion of the Project in the Project Portfolio
equals or exceeds the amount of "Anticipated Additional Debt." A
Project will not be transferred if: (i) the Project has not reached
Financial Closing or achieved Commercial Operations; (ii) Panda
International does not own a controlling interest in the Project;
(iii) the transfer would be prohibited under any Project-level
financing, power purchase or related agreement; or (iv) after giving
effect to the issuance of the additional series of Bonds in
connection with the inclusion of the Project in the Project Portfolio
(a) the rating of the previously issued Bonds is not Reaffirmed by at
least two rating agencies at a rating equal to or higher than that in
effect immediately prior to the issuance of such additional series or
(b) the projected Company Debt Service Coverage Ratio or the
projected Consolidated Debt Service Coverage Ratio (if then
applicable) would be less than 1.7:1 or 1.25:1, respectively, for any
Future Ratio Determination Period. The Additional Projects Contract
requires Panda International to use commercially reasonable efforts
to cause each Project to meet the conditions for transfer to the
Project Portfolio as of the date a Project reaches Financial Closing
or achieves Commercial Operations, whichever occurs first, or within
a 90-day period thereafter. If, however, the conditions for such a
transfer cannot be satisfied using commercially reasonable efforts,
Panda International will have no further obligation to the Company in
respect of such Project and may retain such Project or sell it to
third parties.
The Additional Projects Contract provides that in the case of a
Project being developed in phases, Panda International will use all
commercially reasonable efforts to separate the ownership of the
phases so that each phase will be owned and developed by a different
Project Entity. In that case, when each phase reaches Financial
Closing or achieves Commercial Operations, it will be required to be
transferred to a PIC Entity if it meets the other conditions for
transfer described above. If the ownership of a Project that is being
developed in phases cannot be separated into different ownership
arrangements for each phase, then the Project will not be required to
be transferred to a PIC Entity until all phases have reached
Financial Closing or achieved Commercial Operations if the conditions
for transfer are satisfied at that time. If Panda International
determines to discontinue development of a subsequent phase of a
Project, the earlier phase or phases of such Project shall be
required to be transferred to a PIC Entity once they have reached
Financial Closing or achieved Commercial Operations if the other
conditions for transfer are satisfied.
"Anticipated Additional Debt," as that term is used in the
Additional Projects Contract, means the original principal amount of
an additional series of Bonds proposed to be issued by the Issuer
which is equal to the largest principal amount of such series that
will provide a projected Company Debt Service Coverage Ratio and a
projected Consolidated Debt Service Coverage Ratio (if then
applicable) of at least 1.7:1 and 1.25:1, respectively, for each
Future Ratio Determination Period, as confirmed by the Consolidating
Engineer, assuming, in respect of the additional series of Bonds
proposed to be issued: (i) a maximum maturity and average life
generally available in the marketplace for debt of a similar nature
and (ii) a coupon rate then prevailing in the market for debt of a
similar nature, and taking into account (a) in the case of the
Company Debt Service Coverage Ratio, Cash Available for Distribution
from the Project Portfolio and (b) in the case of the Consolidated
Debt Service Coverage Ratio, Cash Available from Operations (net of
any reserve requirements at both the Project and the Company debt
levels) from the Project Portfolio (giving effect, in each case, to
the transfer to the Project Portfolio of any Project in respect of
which such additional series of Bonds is proposed to be issued). In
making this analysis, the Consolidating Engineer is required to use
generally accepted financial analysis methods and generally follow
the methods used to calculate the amount of the offering of the Old
Bonds, including the methods used in the Consolidated Pro Forma
Report.
The Company believes that Panda International will continue to
actively develop Projects; however, Panda International is under no
obligation to do so, or to use any proceeds from the Prior Offering
or future distributions from the Company to fund such development. In
addition, there can be no assurance that the Projects currently under
development by Panda International will reach Financial Closing or
achieve Commercial Operations or will meet the other conditions for
transfer to the Project Portfolio pursuant to the Additional Projects
Contract. See "Risk Factors - Financial Risks," "- Project Risks," "-
Risks Relating to Future Non-U.S. Projects" and "- No Restrictions on
Panda International's Business."
USE OF PROCEEDS
There will be no cash proceeds to the Issuer or the Company
resulting from the Exchange Offer.
The proceeds from the sale of the Old Bonds was loaned to the
Company and is evidenced by the Initial Company Note. The net
proceeds of such loan of approximately $103.4 million (after
deducting underwriter discounts and commissions) was and will be used
by the Company for the following purposes: (i) to fund the
Capitalized Interest Fund in the amount of $9.8 million; (ii) to fund
the Debt Service Reserve Fund in the amount of approximately $6.4
million; (iii) to fund the Company Expense Fund in the amount of
approximately $300,000; (iv) to pay transaction expenses incurred in
connection with the Prior Offering, estimated at approximately
$900,000; (v) to fund in the amount of approximately $25.1 million a
portion of the acquisition of the limited partner interest in the
Panda-Rosemary Partnership held by Ford Credit and (vi) to distribute
approximately $60.9 million to Panda International, of which
approximately $26.4 million was used to prepay senior indebtedness
held by Trust Company of the West, and the balance of which Panda
International intends to use for the development of Projects and for
general corporate purposes.
CAPITALIZATION
The following table sets forth the capitalization of the Company
as of September 30, 1996. The Exchange Offer, if consummated, would
not affect the capitalization of the Company as set forth below.
September 30, 1996
(in thousands)
Short-term debt
Bonds due 2012 $ 216
Current portion of long-term non-recourse
project financing 5,503
---------
Total short-term debt 5,719
---------
Long-term debt
Bonds due 2012 105,309
Long-term non-recourse project financing,
less current portion 299,641
---------
Total long-term debt 404,950
Shareholder's deficit (104,310)
---------
Total Capitalization $306,359
=========
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data are derived
from the historical financial statements of the Company set forth
elsewhere herein. The unaudited pro forma financial data give effect
to the issuance of $111.4 million in aggregate principal amount of
the Rosemary Bonds and the application of the net proceeds thereof to
refinance the Panda-Rosemary Partnership's Project debt and to fund a
portion of the acquisition of Ford Credit's limited partner interest
in the Panda-Rosemary Partnership. In addition, the unaudited pro
forma financial data give effect to the Prior Offering and the
application of the net proceeds thereof to (a) fund the Debt Service
Reserve Fund, the Capitalized Interest Fund and the Company Expense
Fund, (b) to fund the remaining portion of the acquisition of Ford
Credit's limited partner interest in the Panda-Rosemary Partnership
and (c) to make a distribution to the Company's parent. As a result
of the acquisition of Ford Credit's limited partner interest, the
Company owns 100% of the Panda-Rosemary Partnership and accordingly,
the acquisition was accounted for using the purchase method of
accounting. The excess of minority interest over the amount paid to
Ford Credit was allocated to plant and equipment.
Pro forma balance sheet data as of September 30, 1996 are not
required because the transactions are reflected in the historical
balance sheet as of September 30, 1996 presented elsewhere herein.
The unaudited pro forma statement of operations data reflect such
adjustments as if such transactions had occurred as of January 1,
1995. As required by the Securities and Exchange Commission, the pro
forma statement of operations data do not reflect the extraordinary
loss on early extinguishment of debt. Such extraordinary loss is
reflected in the historical statement of operations for the nine
months ended September 30, 1996 presented elsewhere herein. The
unaudited pro forma financial data should be read in conjunction with
the notes thereto and the historical financial statements of the
Company, and the notes thereto, included elsewhere herein.
The unaudited pro forma financial data do not purport to be
indicative of the results of operations which would actually have
occurred if the transactions described had occurred as presented in
such statements or which may be obtained in the future.
<TABLE>
<CAPTION>
PANDA INTERFUNDING CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1996
(in thousands)
Rosemary Prior Pro
Historical Offering Offering Forma
<S> <C> <C> <C> <C>
Revenue:
Electric capacity and energy sales $21,496 $ - $ - $21,496
Steam and chilled water sales 388 - - 388
Interest income 611 - - 611
Total revenue 22,495 - - 22,495
Expenses:
Plant Operating expenses 7,814 - - 7,814
Development and administrative expenses 1,261 - - 1,261
Interest expense 11,096 (21)(A) 5,331 (C) 16,406
Depreciation 3,159 - (143)(E) 3,016
Amortization-Debt issue costs 395 (196)(B) 52 (D) 251
Amortization-Partnership formation costs 400 - - 400
Total expenses 24,125 (217) 5,240 29,148
Income (loss) before minority interest (1,630) 217 (5,240) (6,653)
Minority interest (2,405) - 2,405 (F) -
Net loss before extraordinary item $(4,035) $ 217 $(2,835) $(6,653)
<CAPTION>
PANDA INTERFUNDING CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(in thousands)
Rosemary Prior Pro
Historical Offering Offering Forma
Revenue:
Electric capacity and energy sales $29,859 $ - $ - $29,859
Steam and chilled water sales 473 - - 473
Interest income 895 - - 895
Total revenue 31,227 - - 31,227
Expenses:
Plant operating expenses 9,348 - - 9,348
Development and administrative expenses 1,821 - - 1,821
Interest expense 11,716 (611)(G) 10,770 (I) 21,875
Depreciation 4,210 - (190)(E) 4,020
Amortization - Debt issue costs 554 (346)(H) 104 (J) 312
Amortization-Partnership formation costs 533 - - 533
Total expenses 28,182 (957) 10,684 37,909
Income (loss) before minority interest 3,045 957 (10,684) (6,682)
Minority interest (5,048) - 5,048 (F) -
Net loss before extraordinary item $(2,003) $ 957 $(5,636) $(6,682)
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
PANDA INTERFUNDING CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(in thousands)
(A) The adjustment represents the net effect of (i) the inclusion
of $7,206 of interest expense related to the Rosemary Bonds at an
interest rate of 8-5/8% and (ii) the elimination of actual
interest expense of $7,227 related to the Panda-Rosemary
Partnership's project debt which was refinanced with the Rosemary
Bonds.
(B) The adjustment represents the net effect of (i) the inclusion
of $112 of amortization of debt issue costs related to the
Rosemary Offering and (ii) the elimination of $308 of actual
amortization of debt issue costs related to the Panda-Rosemary
Partnership's project debt which was refinanced with the Rosemary
Bonds.
(C) The adjustment represents the net effect of (i) the inclusion
of $9,200 of interest expense related to the Prior Offering at an
interest rate of 11-5/8%, and (ii) the elimination of actual
interest expense of $3,869 related to the TCW indebtedness which
was repaid with a portion of the proceeds from the Prior Offering.
(D) The adjustment represents the net effect of (i) the inclusion
of $140 of amortization of debt issue costs related to the Prior
Offering and (ii) the elimination of $88 of actual amortization of
debt issue costs related to the TCW indebtedness which was repaid
with a portion of the proceeds from the Prior Offering.
(E) The adjustment represents the reduction in depreciation
expense resulting from the acquisition of Ford Credit's limited
partnership interest in the Panda-Rosemary Partnership. The
acquisition was accounted for using the purchase method of
accounting. The excess of minority interest over the purchase
price (approximately $3.8 million) was allocated to plant and
equipment. Depreciation is recorded on a straight line basis and
assumes a remaining useful life of 20 years.
(F) The adjustment represents the removal of minority interest
resulting from the acquisition of Ford Credit's limited
partnership interest in the Panda-Rosemary Partnership.
(G) The adjustment represents the net effect of (i) the inclusion
of $9,608 of interest expense related to the Rosemary Bonds at an
interest rate of 8-5/8% and (ii) the elimination of actual
interest expense of $10,219 related to the Panda-Rosemary
Partnership's project debt which was refinanced with the Rosemary
Bonds.
(H) The adjustment represents the net effect of (i) the inclusion
of $150 of amortization of debt issue costs related to the
Rosemary Offering and (ii) the elimination of $496 of actual
amortization of debt issue costs related to the Panda-Rosemary
Partnership's project debt which was refinanced with the Rosemary
Bonds.
(I) The adjustment represents the net effect of (i) the inclusion
of $12,267 of interest expense related to the Prior Offering at an
interest rate of 11-5/8%, and (ii) the elimination of actual
interest expense of $1,497 related to the TCW indebtedness which
was repaid with a portion of the proceeds from the Prior Offering.
(J) The adjustment represents the net effect of (i) the inclusion
of $187 of amortization of debt issue costs related to the Prior
Offering and (ii) the elimination of $83 of actual amortization of
debt issue costs related to the TCW indebtedness which was repaid
with a portion of the proceeds from the Prior Offering.
SELECTED FINANCIAL DATA
(in thousands, except ratios)
Presented below is selected financial data for the Company as of
and for each of the years in the five-year period ended December 31,
1995 and as of and for the nine months ended September 30, 1995 and
1996, which have been derived from the Company's financial
statements. Results for the nine months ended September 30, 1996 are
not necessarily indicative of the results that may be expected for
the full fiscal year. The selected financial data should be read in
conjunction with the information contained under the captions
"Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements of
the Company, including the notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
Nine Months Ended
------------- Year Ended December 31,----------- --September 30,--
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Electric capacity and energy sales $31,396 $29,537 $29,856 $30,664 $29,859 $22,139 $21,496
Steam and chilled water sales 409 624 618 650 473 376 388
Interest income 797 562 365 603 895 696 611
Total revenue 32,602 30,723 30,839 31,917 31,227 23,211 22,495
Expenses:
Plant operating expenses 7,795 7,534 7,676 8,940 9,348 6,751 7,814
Development and administrative expenses 1,196 1,608 2,278 1,376 1,821 1,183 1,261
Interest expense 15,414 11,478 11,066 11,018 11,716 8,525 11,096
Depreciation 4,131 4,177 4,282 4,208 4,210 3,157 3,159
Amortization-Debt issue costs 493 436 502 600 554 409 395
Amortization-Partnership formation costs - 533 533 533 533 400 400
Total expenses 29,029 25,766 26,337 26,675 28,182 20,425 24,125
Income (loss) before taxes and minority
interest 3,573 4,957 4,502 5,242 3,045 2,786 (1,630)
Minority interest - (5,249) (5,474) (5,700) (5,048) (3,736) (2,405)
Provision for income taxes 1,930 - - - - - -
Income (loss) before extraordinary items 1,643 (292) (972) (458) (2,003) (950) (4,035)
Extraordinary loss, net(1) (6,640) - - - - (21,336)
Net loss $(4,997) $ (292) $ (972) $ (458) $(2,003) $ (950) $(25,371)
Other Data:
Ratio of earnings to fixed charges(2) 1.22 1.42 1.39 1.36 (2) (2)(2)
<CAPTION>
------------------ December 31,------------------ --September 30 --
1991 1992 1993 1994 1995 1995 1996
Balance Sheet Data:
Cash and other current assets $ 5,642 $15,167 $14,084 $15,538 $11,333 $20,928 $17,125
Power plant and equipment (net) 99,125 96,529 93,815 94,893 216,794 190,572 263,995
Reserves and escrow deposits,
and other assets 21,562 15,029 14,901 14,728 14,722 14,378 36,109
Total assets $126,329 $126,725 $122,800 $125,159 $242,849 $225,878 $317,229
Current liabilities $ 32,625 $ 9,735 $ 11,252 $ 12,531 $ 18,457 $ 15,590 $ 16,589
Long-term debt, less current portion 107,600 103,200 98,454 106,343 234,608 208,111 404,950
Minority Interest - 33,346 34,479 35,588 36,836 36,316 -
Shareholder's deficit (13,896) (19,556) (21,385) (29,303) (47,052) (34,139) (104,310)
Total liabilities and
shareholder's deficit $126,329 $126,725 $122,800 $125,159 $242,849 $225,878 $317,229
</TABLE>
______________________
Notes (in thousands):
(1) In 1991, there was an extraordinary loss from early
extinguishment of debt of $8,435, and an extraordinary gain from
utilization of net operating loss carry forwards of $1,795. In
1996, there was an extraordinary loss from early extinguishment of
debt of $21,336.
(2) For purposes of computing the ratio of earnings to fixed
charges, earnings represent income (loss) before minority
interest, taxes and extraordinary items plus fixed charges. Fixed
charges consist of interest expense, capitalized interest and
amortization of debt issuance costs. Earnings were insufficient to
cover fixed charges in 1995 by $2,748, for the nine months ended
September 30, 1995 by $472, and for the nine months ended
September 30, 1996 by $11,309. In 1994 and 1995, and for the nine
months ended September 30, 1995 and 1996, fixed charges included
capitalized interest of $803, $5,793, $3,258 and $9,679,
respectively, related to the Panda-Brandywine Facility. This
capitalized interest is funded by additional borrowings under the
Brandywine Construction Loan Facility.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The historical and pro forma financial statements included in
this Prospectus reflect the financial data of the entities that held
interests in the Panda-Rosemary Partnership and the Panda-Brandywine
Partnership, or their predecessors, during the periods presented.
The Company was recently created to hold these partnership interests,
which were transferred to the Company by its parent and recorded at
the parent's historical cost. The Company was incorporated on July
1, 1996 and was not in existence during the majority of these
historical periods; however, the entities that currently own such
partnership interests are wholly-owned subsidiaries of the Company.
Thus, references herein to historical and pro forma financial data of
the Company are for convenience of reference, and it should be
understood that all such references are to the historical and pro
forma information of the entities that held such interests during the
periods presented.
The Company owns indirect equity interests in two electric power
generation facilities in the United States, the Panda-Rosemary
Facility, which began commercial operations in December 1990, and the
Panda-Brandywine Facility, which began commercial operations in
October 1996. The historical operating results of the Company
primarily represent the revenue and expenses of the Panda-Rosemary
Facility. Certain development expenses for the Panda-Rosemary
Facility and the Panda-Brandywine Facility have been included in the
operating results of the Company and are discussed below as having
arisen from development activities of the Company. However,
development expenses in respect of Projects which may be transferred
to the Project Portfolio in the future will not be included in the
results of operations of the Company because future development
activities will be undertaken by Panda International and its
affiliates. Such Projects, if any, will be transferred to the Project
Portfolio (at Panda International's historical cost) only upon
reaching Financial Closing or achieving Commercial Operations and
meeting the other conditions for transfer to the Project Portfolio
pursuant to the Additional Projects Contract.
See "Description of the Projects," "Regulation" and "Description
of Outstanding Project-Level Debt" for a description of the Panda-
Rosemary Facility and the Panda-Brandywine Facility, including
various contracts, regulatory matters and financing arrangements
relating thereto.
Results of Operations
The Company's revenues from electric power generation are
derived from long-term contracts which include both a fixed capacity
payment and a variable energy payment. The capacity payments, which
are based upon the specified power generating capacity of a project,
are designed to cover fixed costs (including debt service, local
taxes and insurance) and to provide an acceptable return on equity.
The energy payments, which are based on actual electricity output,
are designed to cover variable costs including fuel costs and
variable operating expenses incurred in connection with electricity
output. Accordingly, the impact of price fluctuations on the results
of operations is generally not material. The extent to which a
facility is dispatched (i.e., required to deliver electricity), and
therefore the actual electricity output for a given period, are
subject to the discretion of the power purchaser, with certain
limitations. The capacity payments are the predominant source of
revenue for the Company.
First nine months of 1996 compared to 1995
The Company recorded a net loss before taxes, minority interest
and extraordinary item of $1,630,000 in the first nine months of 1996
on revenues of $22,495,000 compared to net income before taxes and
minority interest of $2,786,000 on revenues of $23,211,000 during the
same period in 1995. This 3% decrease in revenues was primarily a
result of the decrease in dispatch hours at the Panda-Rosemary
Facility. During the first nine months of 1996, the Panda-Rosemary
Facility was dispatched 490 hours as compared to 1,768 hours in the
1995 period, resulting in a decrease in recorded energy revenues of
$642,000. (The number of dispatched hours in 1995 was unusually
high, as explained below.) For the first nine months of 1996 and
1995, capacity revenues were $19,785,000 in both periods and energy
revenues were $1,711,000 and $2,353,000, respectively. Plant
operating expenses, which included fuel cost, operation and
maintenance expense, insurance and property taxes related to the
Panda-Rosemary Facility, increased from $6,751,000 (29% of revenues)
in the first nine months of 1995 to $7,814,000 (35% of revenues)
during the same period in 1996, primarily due to the insurance
deductible and other non-covered costs of approximately $552,000
relating to hurricane damage sustained in September 1996 as discussed
below. Other factors contributing to the increase in plant operating
expenses included additional scheduled maintenance costs incurred at
the end of March 1996 and the fuel cost increases relating to
increased operation of the auxiliary boiler for steam and chilled
water production.
Project development and administrative expenses were $1,183,000
(5% of revenues) and $1,261,000 (6% of revenues) for the nine months
ended September 30, 1995 and 1996, respectively.
Interest expense increased from $8,525,000 (37% of revenues) in
the first nine months of 1995 to $11,096,000 (49% of revenues) in the
first nine months of 1996 as a result of the increase in outstanding
indebtedness under the TCW term loan which was partially offset by
the scheduled reduction in outstanding indebtedness under the taxable
revenue bonds issued in 1989 for the Panda-Rosemary Facility, and as
a result of the increase in outstanding indebtedness from the
issuance of the Rosemary Bonds and the Old Bonds on July 31, 1996.
The impact of such new indebtedness was partially offset by the
refinancing of the taxable revenue bonds issued in 1989 for the Panda-
Rosemary Facility and the repayment of the TCW term loan on July 31,
1996.
Depreciation, amortization of debt issue costs and amortization
of partnership formation costs were stable and collectively amounted
to 17% of revenues for the first nine months of 1996 and 1995.
On September 6, 1996, a transformer and two switches at the
Panda-Rosemary Facility sustained damage from a hurricane. A
substitute transformer has been temporarily installed pending repair
of the damaged transformer, which is expected to be completed during
the first quarter of 1997. The Company estimates the total cost to
repair the Panda-Rosemary Facility (including substitute transformer
rental costs) at approximately $2,450,000, all of which is covered by
insurance except for deductible and certain non-covered items in the
amount of approximately $552,000. The impact on revenues was not
material. Management believes that this event will not have a
material adverse effect on the Company's financial condition or
results of operations.
For the first nine months of 1996 and 1995, minority interest in
net income was $2,405,000 and $3,736,000, respectively. The decrease
in 1996 was due to lower net income (before minority interest and
extraordinary item) in the Panda-Rosemary Partnership and the
acquisition on July 31, 1996 of the minority interest holder's
limited partnership interest as discussed below.
In connection with the issuance of the Rosemary Bonds and the
Old Bonds, the Company refinanced the taxable revenue bonds issued in
1989 for the Panda-Rosemary Facility and repaid the TCW term loan.
The Company incurred an extraordinary loss of $21,336,000 on the
early extinguishment of these obligations. Additionally, the Company
acquired the minority interest holder's limited partnership interest
in the Panda-Rosemary Partnership for a purchase price of
approximately $34.3 million. As a result of this acquisition, the
Company owns 100% of the Panda-Rosemary Partnership. The acquisition
was accounted for using the purchase method of accounting. The
excess of minority interest over the purchase price (approximately
$3.8 million) was allocated to plant and equipment. Additionally,
the Company advanced approximately $34.8 million to Panda
International for project development and general corporate purposes.
As a result of the various factors discussed above, the Company
recorded net losses of $25,371,000 and $950,000 for the first nine
months of 1996 and 1995 respectively.
1995 compared to 1994
The Company recorded income before taxes and minority interest
of $3,045,000 on revenues of $31,227,000 in 1995 compared to
$5,242,000 on revenues of $31,917,000 in 1994. The decrease in
revenues was primarily the result of a scheduled contractual decrease
in capacity payments of $1,526,000, which was partially offset by
additional income generated due to an increase in the number of hours
the Panda-Rosemary Facility was dispatched by VEPCO and an increase
in interest income. The Panda-Rosemary Facility was dispatched 2,224
hours in 1995 versus 764 hours in 1994, due primarily to forced
outages at two VEPCO generating plants that are not likely to be
repeated. For 1995 and 1994, capacity revenues were $27,204,000 and
$28,730,000 and energy revenues were $2,655,000 and $1,934,000,
respectively. For approximately 1,200 of the dispatch hours in 1995,
the Panda-Rosemary Facility used natural gas provided directly by
VEPCO under a special fueling arrangement provided for in the
Rosemary Power Purchase Agreement. The Panda-Rosemary Facility's
margin on energy sales is lower when VEPCO supplies natural gas for
the Panda-Rosemary Facility than when the Panda-Rosemary Facility is
dispatched under normal energy pricing terms. However, overall
margins at the Panda-Rosemary Facility are increased in such
circumstances (relative to not operating at all) by the ability to
provide steam and chilled water to Bibb from the steam turbine
offtake, which reduces the operating costs of the auxiliary boilers.
Plant operating expenses, which included fuel cost, operations
and maintenance expense, insurance and property taxes related to the
Panda-Rosemary Facility, were $9,348,000 (30% of revenues) in 1995 as
compared to $8,940,000 (28% of revenues) in 1994, primarily due to
additional maintenance expenses and fuel related costs incurred due
to the increase in the number of hours the Panda-Rosemary Facility
was dispatched by VEPCO. Project development and administrative
expense increased from $1,376,000 (4% of revenues) in 1994 to
$1,821,000 (6% of revenues) in 1995 primarily due to additional
administrative expenses relating to construction of the Panda-
Brandywine Facility.
Interest expense was $11,716,000 (38% of revenues) in 1995
compared to $11,017,000 (35% of revenues) in 1994. The increase in
1995 was attributable to additional borrowings. Depreciation,
amortization of debt issue costs and amortization of partnership
formation costs were stable and collectively amounted to 17% of
revenues in 1995 and 1994.
In 1995, the Company recorded a net loss of $2,003,000 as
compared to a net loss of $458,000 in 1994. An allocation of
$5,048,000 was made in 1995 for minority interest, a decrease of
$652,000 from 1994 as a result of the overall decrease in net income
of the Panda-Rosemary Partnership.
1994 compared to 1993
The Company's 1994 income before taxes and minority interest was
$5,242,000 on revenues of $31,917,000, compared to $4,502,000 on
revenues of $30,839,000 in 1993. The increase in revenues was
primarily due to increased energy sales in 1994, as compared to 1993,
as a result of the Panda-Rosemary Facility being dispatched
approximately 764 hours in 1994 compared to 324 hours in 1993. For
1994 and 1993, capacity revenues were $28,730,000 and $28,888,000 and
energy revenues were $1,934,000 and $968,000, respectively. In
addition, interest income increased slightly in 1994 as short-term
interest rates were higher than 1993 levels.
Plant operating expenses, which included fuel cost, operation
and maintenance expense, insurance and property taxes related to the
Panda-Rosemary Facility, increased to $8,940,000 (28% of revenues) in
1994 from $7,676,000 (25% of revenues) in 1993. The increase was
primarily a result of increased fuel and maintenance costs related to
the increase in the number of hours the Panda-Rosemary Facility was
dispatched by VEPCO and a $257,000 increase in tariff rates for firm
transportation on the Transco pipeline through which gas is
transported to the Panda-Rosemary Facility. The dispatch hours for
1994 were substantially greater than in 1993 due primarily to the
second amendment to the Rosemary Power Purchase Agreement entered
into in 1993, under which the formula used to calculate the energy
purchase price was amended to more closely match the fuel and
variable operation and maintenance costs of the Panda-Rosemary
Facility. The amendment to the formula resulted in lower energy
margins in the spring, summer and fall periods, when the Panda-
Rosemary Facility primarily runs on natural gas, and better cost
recovery during the winter period when it runs primarily on fuel oil.
The reduction in the energy margin during the summer months, when
most of the dispatch hours were incurred, caused the increase in run
hours to have little overall impact on net income.
Project development and administrative expenses decreased from
$2,278,000 (7% of revenues) in 1993 to $1,376,000 (4% of revenues) in
1994. The higher level of such expenses in 1993 was primarily due to
preliminary development costs incurred in connection with the Panda-
Brandywine Facility.
Interest expense was $11,017,000 (35% of revenues) in 1994
compared to $11,066,000 (36% of revenues) in 1993. Depreciation,
amortization of debt issue costs and amortization of partnership
formation costs were stable and collectively amounted to 17% of
revenues in 1994 and 1993.
The Company recorded a net loss of $458,000 in 1994 as compared
to a net loss of $972,000 in 1993. The allocation for minority
interest was $5,700,000, an increase of $226,000 from 1993 as the
Panda-Rosemary Partnership's net income increased slightly.
Liquidity and Capital Resources
To date, the Company has obtained cash from operations of the
Panda-Rosemary Facility, borrowings under non-recourse project debt
of the Panda-Rosemary Partnership and the Panda-Brandywine
Partnership, an equity contribution by Ford Credit (a former minority
interest partner in the Panda-Rosemary Partnership), senior
indebtedness issued to Trust Company of the West, and the Initial
Company Note issued in connection with the sale of the Old Bonds. The
Company utilized this cash to refinance and acquire a 100% interest
in the Panda-Rosemary Facility, fund development and construction of
the Panda-Brandywine Facility, service its debt obligations, make
distributions to its parent to fund project development efforts, and
for general and administrative expenses. On July 31, 1996, the
Company repaid all outstanding senior indebtedness to Trust Company
of the West and purchased Ford Credit's remaining limited partnership
interest in the Panda-Rosemary Partnership.
The principal future cash requirements of the Company will be
the payment of its obligations under the Company Notes, thus enabling
the Issuer to satisfy its obligations under the Existing Bonds. Semi-
annual principal and interest payments on the Initial Company Note
that was issued in connection with the issuance of the Old Bonds are
expected to total $6.4 million on February 20, 1997 and $6.1 million
on each of August 20 and February 20 through February 20, 1999, after
which time scheduled payments will increase as more significant
principal amortization begins. The amount of principal payments
generally increases over time. See "Description of the Exchange
Bonds - Payment of Principal and Interest."
Because substantially all of the Company's operations are
conducted through its Project Entities, management believes that the
Company should have no direct operating or administrative expenses
other than those to be paid out of the Company Expense Fund
established under the Indenture. The Company is required to fund the
Company Expense Fund annually in an amount established under the
Indenture, which is currently set at $300,000. This amount is
adjusted upward each year for inflation. See "Description of the
Exchange Bonds - The Accounts and Funds." Panda International
performs certain accounting, legal, insurance and consulting services
for the Company. The cost of these services is allocated to the
Company through an intercompany charge. The Company is not required
to settle such intercompany charges on a current basis.
The Company will rely almost exclusively on distributions from
its Project Entities to meet its cash requirements. The Project
Entities' ability to make such distributions will depend upon the
financial performance of the Projects in the Project Portfolio and
will be subject to a number of limitations on distributions contained
in the Project-level debt agreements. See "Risk Factors - Dependence
on Distributions from Project Entities" and "Description of
Outstanding Project-Level Debt." The Consolidated Pro Forma Report
which is attached hereto as Appendix B presents two measures of debt
service coverage for the Company over the 16-year term of the
Existing Bonds. Under the Brandywine Scenario, the Company Debt
Service Ratio is projected to be at least 1.3:1 and on average is
2.0:1, and the Consolidated Debt Service Ratio is projected to be at
least 1.09:1 and on average is 1.27:1. Under the PEPCO Scenario, the
Company Debt Service Ratio is projected to be at least 1.3:1 (except
for 1997 in which it is projected to be 0.8:1) and on average is
1.6:1, and the Consolidated Debt Service Ratio is projected to be at
least 1.1:1 (except for 1997 in which it is projected to be 0.96:1)
and on average is 1.17:1. In preparing the coverage ratios presented
in the Consolidated Pro Forma Report, ICF made certain assumptions as
more fully described therein. Although ICF believes that the use of
these assumptions is reasonable, assumptions are inherently subject
to significant uncertainties and, if actual conditions differ from
those assumed, actual results will differ from those projected,
perhaps materially.
Under such prospective financial data, distributions the Company
expects to receive from its Project Entities that own the Panda-
Brandywine Partnership and the Panda-Rosemary Partnership would be
sufficient to service the Existing Bonds, except in 1997 under the
PEPCO Scenario. In such case, monies held in the Accounts and Funds,
if any, may be applied toward any debt service deficiency as set
forth in the Indenture. The current balances in the Accounts and
Funds are as follows: U.S. Project Account, $7.0 million; Capitalized
Interest Fund, $9.8 million; Debt Service Reserve Fund, $6.4 million;
Company Expense Fund, $247,000. See "Description of the Exchange
Bonds - Accounts and Funds." Accordingly, the Company believes that
it will have sufficient liquidity from the cash flows available for
distribution from the Panda-Rosemary Partnership and the Panda-
Brandywine Partnership, together with the amounts held in the
Accounts and Funds, to satisfy all obligations under the Initial
Company Note, thus enabling the Issuer to meet its obligations under
the Existing Bonds. However, there can be no assurance that any one
or more of the following factors, or those described under "Risk
Factors," will not adversely affect the cash flows available for
distribution to the Company. Additionally, under the PEPCO Scenario,
the distributions that the Company expects to receive from its Project
Entities would not be sufficient to enable the Company to meet the
minimum Company Debt Service Coverage Ratio of 1.7:1 and minimum
Consolidated Debt Service Ratio (if then applicable) of 1.25:1 required
under the Indenture to permit the incurrence of additional debt.
Accordingly, the ability of the Company to raise debt for Projects in the
future would be impaired. For a discussion of this and certain other
restrictive covenants under the Indenture, see "Description of the Exchange
Bonds -- Certain Covenants."
The Panda-Rosemary Partnership and the Panda-Brandywine
Partnership are dependent on capacity payments under their respective
power purchase agreements to meet their fixed obligations, including
the payment of Project-level debt service, and make distributions to
the Company's Project Entities. Capacity payments can be adversely
affected by a major equipment failure, resulting in a facility being
unavailable for dispatch for an extended period of time. Capacity
payments can also be subject to reduction pursuant to regulatory
disallowance and, under contractual provisions, as a result of events
outside the Company's control. In 1997, 1999 and 2006, the capacity
payments for the Panda-Rosemary Facility are scheduled to decrease by
approximately $1.8 million (6.7%), $1.8 million (7.1%) and $5.4
million (23.1%), respectively, based on the facility's current
capacity rating. The capacity payments for the Panda-Brandywine
Facility, which commenced commercial operations in October 1996, are
subject to specified contractual downward adjustments in 1997, 1998
and 2000, and upward adjustments in 2001 and 2007 through 2021. The
Company expects to be able to continue to meet its obligations during
the periods such reductions are applicable. For more information
regarding the projected capacity payments to be received by the Panda-
Rosemary Partnership and the Panda-Brandywine Partnership, see the
Rosemary Engineering Report attached hereto as Appendix C and the
Brandywine Pro Forma Report attached hereto as Appendix E,
respectively. See also "Risk Factors - Project Risks - Operating
Risks" and "- Project Risks - Adjustments to Fixed Payments."
Each of the electric energy purchasers under the power purchase
agreements for the Panda-Rosemary Facility and the Panda-Brandywine
Facility has a contractual right to schedule the facility for
dispatch largely at such purchaser's discretion. Thus, revenues from
energy payments will vary depending on the hours these facilities are
dispatched by such purchasers. The Company believes that it can meet
its liquidity requirements solely from the capacity payments in the
unlikely event that these facilities are not dispatched at all. See
"Risk Factors - Project Risks - Dispatchability Risk." In addition,
the sustained failure of a fuel supplier to deliver natural gas at
the specified contract price could have a material adverse effect on
the operating results of the affected facility. See "Risk Factors -
Project Risks - Fuel Supply Risks."
Change in Independent Accountant
On January 8, 1997, the Company and the Issuer dismissed Price
Waterhouse LLP as their independent accountants. Each of the
Company's and the Issuer's Board of Directors participated in and
approved the decision to change independent accountants.
The reports of Price Waterhouse LLP on the combined financial
statements of the Company for the past two fiscal years contained no
adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principle. In
connection with the audits of the Company for the two most recent
fiscal years and through January 8, 1997, there have been no
disagreements with Price Waterhouse LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing
scope or procedure, which if not resolved to the satisfaction of
Price Waterhouse LLP would have caused them to make reference thereto
in their report on the combined financial statements for such years.
The Company and the Issuer have requested that Price Waterhouse
LLP furnish them with a letter addressed to the Commission stating
whether or not it agrees with the foregoing statements. A copy of
such letter, dated January 10, 1997, which states that Price
Waterhouse LLP agrees with the foregoing statements is filed as an
exhibit to the Registration Statement of which this Prospectus
constitutes a part.
The Company engaged Deloitte & Touche LLP on December 3, 1996 in
connection with matters related to certain Project Entities. On
January 8, 1997, Deloitte & Touche LLP became the Company's and the
Issuer's principal independent accountants.
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (SFAS 121). SFAS 121 is effective for financial
statements for fiscal years beginning after December 15, 1995 and
requires the write-down to market value of certain long-lived assets.
The Company adopted SFAS 121 in 1996 and such adoption did not have a
material impact on its financial position or results of operations.
Impact of Inflation
Inflationary increases in the Company's costs, primarily project
development costs, energy costs, and capital costs, may be offset by
increases in revenue as provided in the various power purchase
agreements, although competition may limit the Company's ability to
fully recover all such increases. The Company attempts, where
possible, to obtain provisions in its power purchase agreements
whereby certain revenue components, such as energy and operations and
maintenance, may be adjusted with inflationary increases. In
management's opinion, inflation will not have a material adverse
effect on the Company's financial position, results of operations or
cash flows in the foreseeable future.
THE EXCHANGE OFFER
Purpose and Effects of the Exchange Offer
The Old Bonds were issued and sold by the Issuer on July 31,
1996 to the Initial Purchaser pursuant to the Purchase Agreement.
The Initial Purchaser subsequently placed the Old Bonds with
Qualified Institution Buyers and Institutional Accredited Investors
in transactions exempt from the registration requirements of the
Securities Act. As a condition of the Purchase Agreement, the
Company, the Issuer and the Initial Purchaser entered into the
Registration Rights Agreement, pursuant to which the Company and the
Issuer agreed (i) to file with the Commission a registration
statement under the Securities Act relating to the Exchange Offer
within 90 days after the Issue Date, (ii) to use their best efforts
to cause such registration statement to become effective no later
than 180 days after the Issue Date and (iii) upon effectiveness of
such registration statement to commence the Exchange Offer and offer
to the holders of Old Bonds the opportunity to exchange their Old
Bonds for a like principal amount of Exchange Bonds. This
Registration Statement is intended to satisfy the foregoing
obligations of the Company and the Issuer under the Registration
Rights Agreement. See "Old Bonds Registration Rights."
Upon the effectiveness of the Registration Statement and
consummation of the Exchange Offer within the aforementioned periods
of time, payment of additional interest on the Old Bonds provided for
in the Series A Supplemental Indenture will not be required.
Following the consummation of the Exchange Offer, any holder of Old
Bonds (other than one not permitted by law or any policy of the
Commission to participate in the Exchange Offer) which has not
exchanged its Old Bonds pursuant to the Exchange Offer will not have
any further registration rights under the Registration Rights
Agreement and its Old Bonds will continue to be subject to certain
restrictions on transfer. See "Termination of Certain Rights" and
"Transfer Restrictions on Old Bonds" below and "Risk Factors -
Consequences of Failure to Exchange Old Bonds." Accordingly, the
liquidity of the market, if any, for any Old Bonds which remain
outstanding could be materially adversely affected.
Based on an interpretation by the staff of the Commission set
forth in no-action letters issued to third parties, the Company
believes that Exchange Bonds issued in exchange for Old Bonds
pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by any holders thereof (other than any such
holder which is an Affiliate of the Company or the Issuer) without
compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Exchange Bonds are acquired
in the ordinary course of such holders' business and such holders
have no arrangements with any person to participate in the
distribution of such Exchange Bonds. To comply with the securities
laws of certain jurisdictions, if applicable, the Exchange Bonds may
not be offered or sold unless they have been registered or qualified
for sale in such jurisdictions or an exemption from registration or
qualification is available and the conditions thereto have been met.
In addition, each broker-dealer that received Exchange Bonds for its
own account in exchange for Old Bonds, where such Old Bonds were
acquired by such broker-dealer as a result of market making
activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange
Bonds. See "Plan of Distribution."
Terms of the Exchange Offer
The Issuer hereby offers, upon the terms and subject to the
conditions set forth herein and in the accompanying Letter of
Transmittal, to exchange $1,000 principal amount of Exchange Bonds
for each $1,000 principal amount of outstanding Old Bonds. As of the
date of this Prospectus, $105,525,000 principal amount of the Old
Bonds is outstanding. The Exchange Bonds will bear interest from the
date of their issuance. Interest on the Old Bonds accepted for
exchange will accrue thereon to, but not including, the date of
issuance of the Exchange Bonds and will be paid together with the
first interest payment on the Exchange Bonds issued in exchange
therefor.
The form and terms of the Exchange Bonds will be identical to
the form and terms of the Old Bonds, except that (i) the Exchange
Bonds will have been registered under the Securities Act, and
therefore, will not bear legends restricting their transfer pursuant
to the Securities Act, and (ii) the holders of the Exchange Bonds
will not be entitled to certain rights of the holders of Old Bonds
under the Registration Rights Agreement, which will terminate as to
Old Bonds tendered pursuant to the Exchange Offer upon the
consummation of the Exchange Offer. Such rights will also terminate
as to holders of Old Bonds who are eligible to tender their Old Bonds
for exchange in the Exchange Offer but fail to do so. See
"Termination of Certain Rights" below and "Old Bonds Registration
Rights." The Exchange Bonds will evidence the same debt as the Old
Bonds which they replace and will be issued under, and be entitled to
the same benefits as the Old Bonds pursuant to, the Indenture. See
"Description of the Exchange Bonds."
The Exchange Offer will expire at 5:00 p.m. New York City time,
on _____________, 1997, unless extended in the Issuer's sole
discretion. Tendered Old Bonds may be withdrawn at any time prior to
the Expiration Date. For a description of the Issuer's right to
extend the period of time during which the Exchange Offer is open,
and to delay, terminate or amend the Exchange Offer, and of tendering
holders' withdrawal rights, see "Expiration Date; Extensions;
Termination; Amendments" and "Withdrawal of Tenders" below.
The Issuer shall be deemed to have accepted validly tendered Old
Bonds in the Exchange Offer when, as and if the Issuer has given oral
or written notice thereof to the Exchange Agent. The Exchange Agent
will act as agent for the tendering holders of Old Bonds for the
purposes of receiving the Exchange Bonds from the Issuer. The
Exchange Bonds will be delivered as soon as practicable after
acceptance of the Old Bonds, which is expected to occur on the
Expiration Date.
This Prospectus, together with the Letter of Transmittal and
other relevant materials, will be mailed by the Issuer to record
holders of Old Bonds and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear
on the lists of holders for subsequent transmittal to beneficial
owners of Old Bonds. Holders of Old Bonds who tender in the Exchange
Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer
taxes with respect to the exchange of Old Bonds pursuant to the
Exchange Offer. The Company and the Issuer will pay all charges and
expenses, other than certain applicable taxes, in connection with the
Exchange Offer.
Although the Issuer has no plan or intention to do so, it
reserves the right in its sole discretion to purchase or make offers
for any Old Bonds that remain outstanding subsequent to the
Expiration Date, and to the extent permitted by applicable law,
purchase Old Bonds in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
Holders of Old Bonds do not have any appraisal or dissenters'
rights under the Delaware General Corporation Law or the Indenture in
connection with the Exchange Offer.
Expiration Date; Extensions; Termination; Amendments
The Exchange Offer expires on the Expiration Date. The term
"Expiration Date" means 5:00 p.m., New York City time, on
_______________, 1997, unless the Issuer in its sole discretion
extends the period during which the Exchange Offer is open, in which
event the term "Expiration Date" means the latest time and date on
which the Exchange Offer, as so extended by the Issuer, expires. The
Issuer reserves the right to extend the Exchange Offer at any time
and from time to time prior to the Expiration Date. The Issuer shall
notify the Exchange Agent of any extension by oral or written notice
and shall make a public announcement thereof prior to 5:00 p.m., New
York City time, on the next Business Day after the previously
scheduled Expiration Date. Such announcement may state that the
Issuer is extending the Exchange Offer for a specified period or on a
daily basis. Without limiting the manner by which the Issuer may
choose to make such public announcement thereof, the Issuer currently
intends to make such announcements, if any, by issuing a release to
the Dow Jones News Service. During any extension of the Exchange
Offer, all Old Bonds previously tendered pursuant to the Exchange
Offer will remain subject to the Exchange Offer.
The Issuer reserves the right (i) to extend the Exchange Offer,
(ii) to delay accepting any tendered Old Bonds, (iii) if any of the
events set forth below under "Conditions of the Exchange Offer" shall
have occurred and shall not have been waived by the Issuer, terminate
the Exchange Offer and not accept any Old Bonds, by giving oral or
written notice of such delay, extension or termination to the
Exchange Agent, and (iv) to amend at any time, or from time to time,
the terms of the Exchange Offer in any manner, whether before or
after any tender of the Old Bonds. Any amendment applicable to the
Exchange Offer will apply to all Old Bonds tendered in the Exchange
Offer, regardless of when or in what order the Old Bonds were
tendered. Any delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by public
announcement thereof in a manner set forth above. If the Exchange
Offer is amended (including by waiver of a condition to the Exchange
Offer) in a manner determined by the Issuer to constitute a material
change, the Issuer will promptly disclose such amendment in a manner
reasonably calculated to inform the holders of Old Bonds of such
amendment, and if the Exchange Offer would otherwise expire during
such period, the Issuer will extend the Exchange Offer for a period
which the Issuer in its discretion deems appropriate, depending upon
the significance of the amendment and the manner of disclosure to the
holders of Old Bonds. All of the conditions to the Exchange Offer set
forth below under the caption "Conditions of the Exchange Offer" must
be satisfied or waived prior to the consummation of the Exchange
Offer. The rights reserved by the Issuer in this paragraph are in
addition to the Issuer's rights set forth below under the caption
"Conditions of the Exchange Offer."
Conditions of the Exchange Offer
Notwithstanding any other term of the Exchange Offer, the Issuer
shall not be required to accept for exchange, or exchange the
Exchange Bonds for, any Old Bonds, and may terminate the Exchange
Offer as provided herein before the acceptance of such Old Bonds, if:
(i) any action or proceeding is instituted or threatened in any
court or by or before any governmental agency with respect
to the Exchange Offer which, in the sole judgment of the
Issuer, may materially impair the ability of the Issuer to
proceed with the Exchange Offer in accordance with the terms
contained herein and in the Letter of Transmittal or
materially impair the contemplated benefits of the Exchange
Offer to the Issuer, or any material adverse development has
occurred in any existing action or proceeding with respect
to the Company or any of its subsidiaries or affiliates;
(ii) any change, or any development involving a prospective
change, in the business or financial affairs of the Company
or any of its subsidiaries has occurred which, in the sole
judgment of the Issuer, may materially impair the ability of
the Issuer to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to
the Issuer;
(iii) any law, statute, rule or regulation is proposed,
adopted or enacted, which, in the sole judgment of the
Issuer, may materially impair the ability of the Issuer to
proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Issuer;
(iv) any governmental approval has not been obtained, which
approval the Issuer shall, in its sole discretion, deem
necessary for the consummation of the Exchange Offer as
contemplated hereby;
(v) any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus
constitutes a part or qualification of the Indenture under
the Trust Indenture Act of 1939, as amended; or
(vi) the Trustee shall have objected in any respect to, or
taken any action that could, in the sole judgment of the
Issuer, adversely affect the consummation of the Exchange
Offer, or shall have taken any action that challenges the
validity or effectiveness of the procedures used by the
Issuer in making the Exchange Offer or the acceptance of Old
Bonds in exchange for Exchange Bonds.
The foregoing conditions to the Exchange Offer are for the sole
benefit of the Issuer and may be asserted by the Issuer in its sole
discretion regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Company or the
Issuer) and may be waived by the Issuer, in whole or in part, at any
time and from time to time in its sole discretion. All of the
foregoing conditions must be satisfied or waived prior to the
consummation of the Exchange Offer. The failure by the Issuer at any
time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to
time. Any determination by the Issuer concerning the events
described in this section or the fulfillment or nonfulfillment of any
conditions shall be final and binding upon all persons.
The Exchange Offer is not conditioned upon any minimum principal
amount of Old Bonds being tendered.
Procedures for Tendering
Only a registered holder of the Old Bonds may tender such Old
Bonds in the Exchange Offer. To tender in the Exchange Offer, a
holder must, prior to the Expiration Date, either (i) complete and
sign the Letter of Transmittal (or a facsimile thereof), in
accordance with the instructions contained herein and therein, and
deliver such Letter of Transmittal, together with any signature
guarantees and any other documents required by the Letter of
Transmittal, to the Exchange Agent at its address set forth on the
back cover page of this Prospectus and the tendered Old Bonds must
either be (a) physically delivered to the Exchange Agent or (b)
transferred pursuant to the procedures for book-entry transfer
described herein and a confirmation of such book-entry transfer must
be received by the Exchange Agent prior to the Expiration Date, or
(ii) comply with the guaranteed delivery procedures set forth herein.
To be validly tendered, the Old Bonds, together with a properly
completed Letter of Transmittal (or facsimile thereof), executed by
the holder of record thereof, and any other documents required by the
Letter of Transmittal, must be received by the Exchange Agent at the
address set forth on the back cover page of this Prospectus prior to
5:00 p.m., New York City time, on the Expiration Date, except as
otherwise provided below under the caption "Guaranteed Delivery
Procedures."
The tender by a holder will constitute an agreement between such
holder and the Issuer in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
THE METHOD OF DELIVERY OF THE OLD BONDS AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS
AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL,
IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY
SERVICE. IF DELIVERY IS TO BE MADE BY MAIL, IT IS SUGGESTED THAT THE
HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF
THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR THE OLD BONDS
SHOULD BE SENT TO THE ISSUER OR THE COMPANY.
Any beneficial owner whose Old Bonds are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such
beneficial owner's behalf. See "Instructions to Registered Holder
from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal must be guaranteed unless
the Old Bonds tendered pursuant thereto are (i) tendered by a
registered holder of the Old Bonds who has not completed the box
entitled "Special Delivery Instructions" on the Letter of Transmittal
or (ii) tendered for the account of an Eligible Institution (as
defined below). In the event that signatures on a Letter of
Transmittal are required to be guaranteed, such guarantee must be by
a firm that is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc.
or by a commercial bank or trust company having an office or
correspondent in the United States, or by an entity that is otherwise
an "eligible guarantor institution" within the meaning of Rule 17Ad-
15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than
the registered holder of any Old Bonds listed therein, such Old Bonds
must be endorsed by the registered holder or accompanied by a
properly completed bond power or other written instrument of transfer
in form satisfactory to the Issuer in its sole discretion, signed by
such registered holder as such registered holder's name appears on
such Old Bonds. If the Letter of Transmittal is signed by the
registered holder and (a) the entire principal amount of the holder's
Old Bonds is tendered or (b) untendered Old Bonds are to be issued to
the registered holder, then the registered holder need not endorse
any certificates for tendered Old Bonds or provide a separate bond
power. In any other case, the registered holder must transmit a
separate bond power with the Letter of Transmittal.
If the Letter of Transmittal or any Old Bonds or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-
in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when
signing, and proper evidence satisfactory to the Issuer of their
authority to so act must be submitted.
The Exchange Agent will establish accounts with respect to the
Old Bonds at DTC for the purpose of the Exchange Offer, and any
financial institution that is a participant in DTC may make book-
entry transfer of the Old Bonds by causing DTC to transfer such Old
Bonds into the Exchange Agent's account at DTC. Although delivery of
Old Bonds may be effected through book-entry transfer in the Exchange
Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received
by the Exchange Agent at its address set forth on the back cover of
this Prospectus prior to 5:00 p.m., New York City time, on the
Expiration Date, except as otherwise provided under the caption
"Guaranteed Delivery Procedures" below. DELIVERY OF DOCUMENTS TO DTC
IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT. NOTWITHSTANDING COMPLIANCE WITH BOOK-ENTRY TENDER
DELIVERY PROCEDURES, FAILURE TO DELIVER TO THE EXCHANGE AGENT AN
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE MAY RESULT
IN THE TENDERED OLD BONDS NOT BEING ACCEPTED FOR EXCHANGE.
All questions as to the validity, form, eligibility (including
time of receipt) and acceptance of Old Bonds tendered for exchange
will be determined by the Issuer in its sole discretion, whose
determination will be final and binding. The Issuer reserves the
absolute right to reject any or all tenders that are not in proper
form or the acceptance of which would, in the opinion of the Issuer
or counsel for the Issuer, be unlawful. The Issuer also reserves the
right to waive certain of the conditions to the Exchange Offer or any
irregularities or defects in the tender of Old Bonds. The Issuer's
interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be
final and binding on all persons. Unless waived, any irregularities
in connection with tenders of Old Bonds must be cured within such
time as the Issuer shall determine. Neither the Company, the Issuer,
the Exchange Agent nor any other person shall be under any duty to
give notifications of defects or irregularities in such tenders or
shall incur any liability for failure to give such notification.
Tenders of Old Bonds will not be deemed to have been made until any
defects with respect to such tenders have been cured or waived.
By tendering, each registered holder of Old Bonds will represent
to the Issuer that, among other things, (i) the Exchange Bonds to be
acquired by the holder and any beneficial owner(s) of such Old Bonds
("Beneficial Owner(s)") in connection with the Exchange Offer are
being acquired by the holder and such Beneficial Owner(s) in the
ordinary course of business of the holder and any Beneficial
Owner(s), (ii) the holder (other than a broker-dealer referred to in
the last sentence of this paragraph) and each Beneficial Owner are
not participating and do not intend to participate in the
distribution (within the meaning of the Securities Act) of the
Exchange Bonds, (iii) the holder and each Beneficial Owner have no
arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the
Exchange Bonds, (iv) the holder and each Beneficial Owner acknowledge
and agree that any person participating in the Exchange Offer for the
purpose of distributing the Exchange Bonds must comply with the
registration and prospectus delivery requirements of the Securities
Act in connection with a secondary resale transaction of the Exchange
Bonds acquired by such person and cannot rely on the position of the
staff of the Commission set forth in no-action letters that are
discussed herein under "Resale of Exchange Bonds," below, (v) the
holder and each Beneficial Owner understand that a secondary resale
transaction described in clause (iv) above should be covered by an
effective registration statement containing the selling security
holder information required by Item 507 of Regulation S-K of the
Commission and (vi) neither the holder nor any Beneficial Owner is an
Affiliate of the Company or the Issuer, or if it is an Affiliate, it
will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. In
addition, each broker-dealer that receives Exchange Bonds for its own
account in exchange for Old Bonds, where such Old Bonds were acquired
by such broker-dealer as a result of market making activities or
other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Bonds. See
"Plan of Distribution."
Unless an exemption applies under the applicable law and
regulations concerning "backup withholding" of United States federal
income tax, the Exchange Agent will be required to withhold, and will
withhold, 31% of the gross proceeds otherwise payable to a holder
pursuant to the Exchange Offer if the holder does not provide its
taxpayer identification number (social security number or employer
identification number, as applicable) and certify that such number is
correct. Each tendering holder should complete and sign the main
signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal, so as to provide the information and
certification necessary to avoid backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to
the Issuer and the Exchange Agent.
Guaranteed Delivery Procedures
If a holder of Old Bonds desires to tender such Old Bonds and if
the Old Bonds are not immediately available, or time will not permit
such holder's Old Bonds or any other required documents to reach the
Exchange Agent before 5:00 p.m., New York City time, on the
Expiration Date, a tender for exchange may be effected if:
(i) the tender for exchange is made by or through an Eligible
Institution;
(ii) prior to 5:00 p.m., New York City time, on the
Expiration Date, the Exchange Agent has received from such
Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of
the holder of the Old Bonds and the principal amount of Old
Bonds tendered for exchange, stating that tender is being
made thereby and guaranteeing that, within five Business
Days after the Expiration Date, the duly executed Letter of
Transmittal (or facsimile thereof), properly completed and
validly executed, together with the Old Bonds in proper form
for transfer (or confirmation of book-entry transfer of such
Old Bonds into the Exchange Agent's account with DTC), and
any other documents required by the Letter of Transmittal
and the instructions thereto, will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) such properly completed and executed Letter of
Transmittal (or facsimile thereof), as well as the
certificate(s) representing all tendered Old Bonds in proper
form for transfer (or confirmation of book-entry transfer of
such Old Bonds into the Exchange Agent's account with DTC)
and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within five
Business Days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed
Delivery will be sent to holders who wish to tender their Old Bonds
according to the guaranteed delivery procedures set forth above.
Acceptance of Old Bonds for Exchange; Delivery of Exchange Bonds
Upon the terms and subject to the conditions of the Exchange
Offer, the Issuer will accept on the Expiration Date all Old Bonds
properly tendered in the Exchange Offer and not withdrawn and will
issue the Exchange Bonds as soon as practicable after the acceptance
of the Old Bonds. The Exchange Bonds will be issued in fully
registered form only. For purposes of the Exchange Offer, the Issuer
shall be deemed to have accepted properly tendered Old Bonds when, as
and if the Issuer has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the
tendering holders of Old Bonds for the purpose of receiving the
Exchange Bonds from the Issuer and transmitting the Exchange Bonds to
each holder exchanging Old Bonds.
If any tendered Old Bonds are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set
forth herein, the withdrawal of tendered Old Bonds under
circumstances permitting such withdrawal as described herein or
otherwise, or if Old Bonds are submitted for a greater principal
amount than the holder thereof desires to exchange, any such
unaccepted or non-exchanged Old Bonds will be returned, without
expense, to the tendering holder thereof (or, in the case of the Old
Bonds tendered by book-entry transfer, to an account maintained at
DTC), as soon as practicable after the expiration or termination of
the Exchange Offer.
Withdrawal of Tenders
Tenders of Old Bonds may be withdrawn at any time prior to the
Expiration Date. Thereafter, such tenders are irrevocable. To
withdraw a tender of Old Bonds in the Exchange Offer, a written
notice of withdrawal, delivered by hand, mail or facsimile
transmission, must (i) be received by the Exchange Agent prior to
5:00 p.m., New York City time, on the Expiration Date at the address
set forth on the back cover hereof, (ii) specify the name of and be
signed by the registered holder of such Old Bonds in the same manner
as the applicable Letter of Transmittal (including any required
signature guarantees) as set forth above under "Procedures for
Tendering," (iii) specify the name of the person identified in the
Letter of Transmittal as having tendered the Old Bonds to be
withdrawn and (iv) specify the aggregate principal amount represented
by such withdrawn Old Bonds. If Old Bonds have been tendered
pursuant to the procedures for book-entry transfer as set forth
herein, any notice of withdrawal must also specify the name and
number of the account at DTC to be credited with the withdrawn Old
Bonds. Withdrawals of tenders of Old Bonds may not be rescinded, and
any Old Bonds withdrawn will thereafter be deemed not validly
tendered for purposes of the Exchange Offer; provided, however, that
withdrawn Old Bonds may be re-tendered by again complying with the
procedures for tendering Old Bonds described herein at any time prior
to 5:00 p.m., New York City time, on the Expiration Date.
All questions as to the validity, form and eligibility
(including time of receipt) of notices of withdrawal will be
determined by the Issuer, such determination to be final and binding.
None of the Company, the Issuer, the Exchange Agent or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal of Old Bonds or incur any
liability for failure to give any such notification.
Lost or Missing Certificates
If a holder of Old Bonds desires to tender Old Bonds pursuant to
the Exchange Offer, but such Old Bonds have been mutilated, lost,
stolen or destroyed, such holder should write to or telephone the
Trustee, at the address listed below, concerning the procedures for
obtaining replacement certificates for such Old Bonds, arranging for
indemnification or any other matter that requires handling by the
Trustee:
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Mr. Scott Thiel
Telephone: (212) 250-8327
Facsimile: (212) 250-6392
Termination of Certain Rights
Holders of Old Bonds have certain rights under the Registration
Rights Agreement that will terminate as a result of the consummation
of the Exchange Offer. The Exchange Offer shall be deemed to be
"consummated" upon the issuance and delivery of Exchange Bonds in
exchange for Old Bonds validly tendered and not withdrawn in the
Exchange Offer in accordance with the terms of the Registration
Rights Agreement. Such rights will terminate for all holders
exchanging Old Bonds in the Exchange Offer and all holders who are
eligible to participate in the Exchange Offer and fail to do so. The
rights of holders of Old Bonds provided for in the Registration
Rights Agreement which will terminate upon the consummation of the
Exchange Offer are discussed in "Old Bonds Registration Rights"
below.
The Exchange Agent
The Exchange Agent for the Exchange Offer is Bankers Trust
Company. All deliveries, correspondence and questions sent or
presented to the Exchange Agent relating to the Exchange Offer should
be directed to the following address or telephone number (which are
also set forth on the back cover of this Prospectus):
By Registered or Certified Mail, Hand Delivery or Overnight Courier:
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Mr. Matthew Seeley
Telephone Number: (212) 250-6657
or
By Facsimile:
Bankers Trust Company
Attention: Mr. Matthew Seeley
Facsimile Number: (212) 250-6392
Delivery to an address other than as set forth herein, or
transmissions of instructions via a facsimile number other than the
one set forth herein, will not constitute a valid delivery.
Fees and Expenses
The expenses of soliciting tenders will be borne by the Company
and the Issuer. The principal solicitation is being made by mail;
however, additional solicitation may be made by facsimile, telephone
or in person by officers and representatives of the Issuer and its
affiliates. The Issuer has not retained any dealer-manager in
connection with the Exchange Offer and will not make any payments to
brokers, dealers or others soliciting acceptance of the Exchange
Offer. The Issuer, however, will pay the Exchange Agent reasonable
and customary fees for its services and will reimburse it for
reasonable out-of-pocket expenses incurred in connection therewith.
The expenses to be incurred in connection with the Exchange Offer
will be paid by the Issuer and the Company and are estimated in the
aggregate to be approximately $190,000. Such expenses include fees
and expenses of the Exchange Agent and Trustee, accounting and legal
fees and independent engineers' and fuel consultants' fees.
The Issuer will pay all transfer taxes, if any applicable, to
the transfer of Old Bonds to it pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the
transfer of Old Bonds to the Issuer pursuant to the Exchange Offer
(including, without limitation, any transfer taxes imposed as a
result of the Exchange Bonds or Old Bonds not exchanged being
delivered to, or issued in the name of, any person other than the
record holder, or certificates being tendered that are recorded in
the name of a person other than the person signing the Letter of
Transmittal), then the amount of any such transfer taxes (whether
imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed
directly to such tending holder.
Accounting Treatment
The Exchange Bonds will be recorded at the carrying value of the
Old Bonds, as reflected in the Issuer's accounting records on the
date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized.
Transfer Restrictions on Old Bonds
The Old Bonds that are not exchanged for Exchange Bonds pursuant
to the Exchange Offer will remain "restricted securities" (within the
meaning of the Securities Act). Accordingly, prior to the date that
is three years after the later of the Issue Date and the last date on
which the Issuer or any Affiliate of the Issuer was the owner
thereof, such Old Bonds may be resold only (i) to the Issuer (upon
redemption thereof or otherwise), (ii) so long as the Old Bonds are
eligible for resale pursuant to Rule 144A, to a person whom the
seller reasonably believes is a Qualified Institutional Buyer,
purchasing for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the resale, pledge
or other transfer is being made in reliance on Rule 144A, (iii) to an
Institutional Accredited Investor that is purchasing for its own
account or the account of an Institutional Accredited Investor, (iv)
in an offshore transaction in accordance with Regulation S under the
Securities Act, (v) pursuant to another available exemption from
registration under the Securities Act, or (vi) pursuant to an
effective registration statement under the Securities Act, subject in
each of the foregoing cases to compliance with applicable state
securities laws.
Resales of Exchange Bonds
With respect to resales of the Exchange Bonds, based on an
interpretation by the staff of the Commission set forth in no-action
letters issued to third parties, the Company believes that a holder
(other than a person that is an Affiliate of the Company or the
Issuer) who exchanges Old Bonds for Exchange Bonds will be allowed to
resell the Exchange Bonds acquired in the Exchange Offer to the
public without further registration under the Securities Act and
without delivering to the purchasers of the Exchange Bonds a
prospectus that satisfies the requirements of Section 10 thereof;
provided that (i) the Exchange Bonds are acquired in the ordinary
course of the holder's business, (ii) the holder (other than a broker-
dealer referred to in the next sentence) is not participating and
does not intend to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Bonds and (iii) the
holder has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities
Act) of the Exchange Bonds. In addition, each broker-dealer that
receives Exchange Bonds for its own account in exchange for Old
Bonds, where such Old Bonds were acquired by such broker-dealer as a
result of market making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Bonds. However, if any holder acquires
Exchange Bonds in the Exchange Offer for the purpose of distributing
or participating in a distribution of the Exchange Bonds, such holder
cannot rely on the position of the staff of the Commission enunciated
in such no-action letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection
with a secondary resale transaction, unless an exemption from
registration is otherwise available. In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the Exchange
Bonds may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and the conditions thereto
have been met. See "Plan of Distribution."
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE EXCHANGE OFFER
The following discussion is based upon current provisions of the
Internal Revenue Code of 1986, as amended, applicable Treasury
regulations, judicial authority and administrative rulings and
practice. There can be no assurance that the Internal Revenue
Service will not take a contrary view, and no ruling from the
Internal Revenue Service has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions
set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders of
the Old Bonds. Certain holders (including insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the
United States) may be subject to special rules not discussed below.
The exchange of the Exchange Bonds for the Old Bonds pursuant to
the Exchange Offer should not be treated as an "exchange" for United
States federal income tax purposes because the Exchange Bonds should
not be considered to differ materially in kind or extent from the Old
Bonds. The Exchange Bonds received by a holder should be treated as a
continuation of the Old Bonds in the hands of such holder. As a
result, there should be no federal income tax consequences to holders
as a result of the exchange of the Old Bonds for the Exchange Bonds
pursuant to the Exchange Offer. If, however, the exchange of the Old
Bonds for the Exchange Bonds were treated as an "exchange" for
federal income tax purposes, such exchange should constitute a
recapitalization for federal income tax purposes. Holders exchanging
the Old Bonds pursuant to such recapitalization should not recognize
any gain or loss upon the exchange.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
EACH HOLDER OF OLD BONDS SHOULD CONSULT ITS OWN TAX ADVISOR AS TO
PARTICULAR TAX CONSEQUENCES OF HOLDING, EXCHANGING OR SELLING THE OLD
BONDS, INCLUDING THE APPLICATION AND EFFECT OF ANY FEDERAL, STATE,
LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGES IN APPLICABLE TAX LAWS.
BUSINESS
General
The Company is an indirect wholly-owned subsidiary of Panda
International, an independent (i.e., non-utility) power company that
is engaged primarily in the development, acquisition, ownership and
operation of electric power generation facilities. As of the date of
this Prospectus, the Company indirectly owns 100% interests in two
operating electric power generation facilities with an aggregate
electric generating capacity of approximately 410 MW: the Panda-
Rosemary Facility located in Roanoke Rapids, North Carolina, which
has been operational since December 1990; and the Panda-Brandywine
Facility, Brandywine, Maryland, which has been operational since
October 1996. Each of these facilities produces electricity for sale
to a utility. Thermal energy produced by these facilities is sold to
an industrial user (which, in the case of the Panda-Brandywine
Facility, is a subsidiary of the Company).
The Company believes that there is and will continue to be
significant demand for new generating capacity worldwide and that
much of this new capacity will be provided by independent power
developers such as Panda International. Panda International is
continually engaged in the evaluation of various opportunities for
the development and acquisition of additional electric power
generation facilities. The Company has been informed by Panda
International that it intends to focus primarily on development and
acquisition opportunities where it is able to capitalize on its
management and technical expertise to implement an innovative and
fully integrated approach to project development in which Panda
International controls the entire development process, including
design, engineering, procurement, construction management, fuel and
resource acquisition and finance. Panda International has informed
the Company that it believes that it is able to minimize the
financial risks associated with project development primarily by
utilizing this fully integrated approach, by carefully controlling
development expenses and by securing project financing and power
purchase agreements prior to making significant capital investments.
Pursuant to the Additional Projects Contract, if a power purchase
agreement for a Project is executed prior to July 31, 2001 and the
Project reaches Financial Closing or achieves Commercial Operations
prior to July 31, 2006, such Project will be eligible for transfer to
the Company or to a PIC Entity if certain other conditions contained
in the Additional Projects Contract are satisfied. See "The Company,
the Issuer and Panda International - The Additional Projects
Contract."
The Independent Power Industry
The United States independent power industry expanded rapidly in
the 1980s following the enactment of PURPA in 1978. Prior to PURPA,
the demand for power in the United States had traditionally been met
by utilities constructing large-scale electric generating plants
under cost-of-service based regulation. PURPA removed most regulatory
constraints on the production and sale of electric energy by certain
non-utility generators known as "Qualifying Facilities" or "QFs" and
required electric utilities to buy electricity from QFs at the
utilities' avoided costs, thereby encouraging companies other than
electric utilities to enter the electric power production market.
Concurrently, due in part to regulatory disallowance of many large
utility construction project costs, there was a general decline in
the construction of generating plants by electric utilities. As a
result, a significant market for electric power produced by
independent power producers has developed in the United States since
the enactment of PURPA.
The future market for independently produced power in the United
States will be determined primarily by the need for new electric
generation capacity. According to the North American Electricity
Reliability Council's 1995-2004 Electricity Supply and Demand Report,
electric utilities forecast that they will need approximately 78,000
MW of new generating capacity from 1995 through 2004. Many published
forecasts reflect expectations for the continued growth of
independent power producers. According to RCG/Hagler Bailly, based on
a review of the capacity of the top 125 U.S. electric utilities, it
is probable that, from 1994 to 2003, independent power producers will
supply from 45-50% of total electric generating capacity additions.
In February 1993, the Utility Data Institute projected that, of the
total amount of generating capacity projected to be added through the
year 2000, the amount of new independent power capacity expected to
become operational in the United States will be approximately 45,000
MW. For a discussion of the movement to restructure the electric
utility industry, see "Regulation - Federal Energy Regulation."
The Company believes that there is and will continue to be
significant demand for new generating capacity worldwide and that
much of this new capacity will be provided by independent power
developers such as Panda International.
Natural gas-fired power generation has become the predominant
power generation technology utilized by new power plants in the
United States, accounting for 60% or more of the annual increase in
independent power generation capacity during each of the last three
years. Industry analysts predict that natural gas will continue to be
the dominant fuel for new power generation facilities in the United
States for the foreseeable future. Natural gas-fired power plants
offer significant advantages over other power generation
technologies, such as coal, oil or nuclear energy, including
favorable resource prices, significant environmental benefits, the
availability of high efficiency turbines and shorter construction
periods. Internationally, Panda International believes that private
power projects will continue to rely on indigenous fuel supplies that
are the least expensive and most abundant for the region needing the
electric power. Those fuels and technologies will most likely
emphasize coal, hydroelectric and natural gas.
Competition
The Company competes both in the United States and
internationally with other independent power producers, including
affiliates of utilities, in obtaining long-term contracts to sell
electric power to utilities. In addition, utilities may elect to
expand or create generating capacity through their own direct
investments in new plants. Over the past decade, obtaining a power
purchase agreement with a utility has become a progressively more
difficult, expensive and competitive process. In recent years, more
contracts have been awarded through competitive bidding. Increased
competition also has lowered profit margins of successful projects.
The demand for power in the United States traditionally has been
met by utilities constructing large-scale electric generating plants
under rate-based regulation. The enactment of PURPA in 1978 spawned
the growth of the independent power industry, which expanded rapidly
in the 1980s. The initial independent power producers were
cogenerators and small power producers who recognized the potential
business opportunities offered by PURPA. This initial group was
joined by larger, better capitalized companies, such as subsidiaries
of fuel supply companies, engineering companies, equipment
manufacturers and affiliates of other industrial companies. In
addition, a number of regulated utilities have created subsidiaries
(known as "utility affiliates") that compete with independent power
producers. Some independent power producers operate in market niches
by utilizing a specific technology or fuel (for example, geothermal,
gas-fired cogeneration, hydroelectric, refuse-to-energy, wind, solar,
coal or wood) or by operating in a specific region of the United
States where they believe they have a market advantage.
Recent amendments to the Public Utility Holding Company Act of
1935 ("PUHCA") made by the Energy Policy Act are likely to increase
the number of competitors in the independent power industry in the
United States by reducing certain restrictions currently applicable
to certain facilities that are not QFs under PURPA. However, these
amendments also should make it simpler for the Company to develop new
Projects, by enabling the Company to develop large gas-fired
electrical generation Projects without the necessity of locating them
in the vicinity of a steam purchaser or otherwise finding a steam
purchaser to accept the useful thermal output required of a
cogeneration QF under PURPA.
The FERC is currently studying a number of proposals to
restructure the electric utility industry to permit utility customers
to choose their utility supplier in a competitive electric energy
market. The FERC has recently issued a rule (Order 888) requiring
utilities to offer wholesale customers and suppliers open access on
their transmission lines, on a basis which is comparable to the
utilities' own use of the lines. In addition, a number of bills have
been introduced in the United States Congress to promote electric
utility restructuring and deregulation of electric rates. See
"Regulation."
Due to the movement toward privatization of generation capacity
in many foreign countries and the burgeoning need for new capacity in
developing countries significant new markets now exist outside the
United States. Panda International has informed the Company that it
believes that its knowledge gained from developing and operating
power plants in the United States can be utilized to take advantage
of opportunities in these new markets. Development of new power
generation projects in foreign markets is, however, difficult and
expensive, and many competitors in these foreign markets have
significantly larger capital resources and greater local market
expertise than Panda International. In addition, due to increased
competition in the United States, there has been an increasing number
of entrants into these foreign markets.
Typical Project Structure
In many cases, a Project's economic structure will include long-
term contracts under which customers pay the Project:
(i) a fixed capacity payment based upon a specified power
generating capacity of the Project; capacity payments are
designed to cover fixed costs (including debt service, local
taxes and insurance) and to provide an acceptable return on
equity; and
(ii) a variable energy payment based on actual energy
output; energy payments are designed to cover variable costs
including fuel costs and variable operating expenses
incurred in connection with energy output.
In many cases, the capacity payments are the predominant source
of revenue for a Project. Thus, the resulting earnings stream is more
predictable than that of a business that encounters market
fluctuations in supply or demand for its product. As a result,
Project lenders are often more willing to make long-term loans to a
Project that has been structured to cover debt service from capacity
payments. Because Panda International usually seeks long-term loans
with limited recourse to the Project owners, the lenders generally
must rely on the more predictable Project revenues to ensure loan
repayment. Moreover, Project lenders expect Project cash flow, after
operating costs and local taxes, to cover debt service by an
acceptable margin, and these lenders review Project contracts,
equipment specifications, operator qualifications, permits,
warranties, performance testing procedures and sensitivities
carefully before providing limited recourse funds. Thus, each new
Project is evaluated not only by Panda International but also by the
Project lenders, Panda International's financial partners, if any, in
that Project and certain of the Project's vendors including
independent engineers, construction service providers and other
contractors, such as fuel suppliers.
Project Development
The development of electric power generation projects is a
complex endeavor, which requires expertise in several areas,
including evaluation of development opportunities, project design and
engineering, negotiation of power and steam sales agreements,
acquisition of necessary land rights, permits and fuel resources,
law, finance and construction management. Panda International has
informed the Company that it intends to continue to focus primarily
on development opportunities where it is able to capitalize on its
expertise in implementing an integrated approach to Project
development in which it controls the entire development process.
Utilizing this approach, the Company believes that Panda
International is able to enhance the value of its Projects through
each stage of development and to minimize the financial risks
associated with Project development by securing project financing and
power purchase agreements prior to making significant capital
investments.
Panda International initially evaluates and selects potential
development Projects based on a variety of factors, including
location, the likelihood of obtaining a power purchase agreement
containing acceptable pricing terms, the availability of rights to a
favorable geographic site, in emerging markets the ability to
denominate tariffs and re-patriate profits in U.S. dollars and the
probability of obtaining required licenses and permits. For coal and
gas-fired power Projects, Panda International also evaluates the
access to and likely cost of potential fuel supplies and
transportation and, in the case of cogeneration plants, considers the
proximity to industrial or commercial users of the plant's thermal
energy. Following the initial selection of an opportunity, Panda
International analyzes the technical and commercial requirements of
the Project and formulates a conceptual design. The design becomes
the foundation for selecting the equipment configuration for the
Project, developing the Project structure and developing a financial
plan. Panda International also prepares financial feasibility studies
and analyzes various structural alternatives to determine a financial
plan for the Project.
As part of the development process, Panda International
identifies and obtains the land rights necessary to install and
operate the proposed Project. A particular site may also require the
installation of a new electrical transmission line to deliver energy
to the existing grid.
Beginning early in the development process, Panda International
also seeks to obtain all permits, licenses and other approvals
required for the construction and operation of the Project, including
siting, construction and environmental permits, rights-of-way and
planning approvals.
Power Purchase and Steam Sales Agreements
The power generated by Panda International's Projects is or will
be sold pursuant to power purchase agreements at pricing formulas
generally consisting of separate payments for energy and capacity but
in certain cases consisting only of payments for energy actually
produced. Panda International's objective is to negotiate or obtain
power purchase agreements that result in adequate cash flow to fund
the Project's non-recourse debt and provide income to Panda
International. Panda International also seeks opportunities to
achieve revenue growth through a schedule of increasing prices for
electrical energy and capacity sold in future years. As part of Panda
International's effort to minimize the financial risks in the
development of new Projects, Panda International does not incur
significant capital expenditures until a power purchase agreement has
been executed.
A portion of the thermal energy produced by cogeneration
Projects may be sold to industrial or other users pursuant to a steam
sales agreement. Steam sales agreements may require a purchaser to
take at least the minimum amount of steam necessary for the Project
to retain its QF status under PURPA if the Project is a U.S.
facility.
Project Financing
Panda International has informed the Company that its electric
power generation projects are and will continue to be financed using
a variety of leveraged financing structures, primarily consisting of
limited recourse debt and lease obligations. Each such obligation is
structured to be fully paid out of cash flow provided by the Project.
In the case of U.S. Projects, the Project assets (together with the
stock or partnership interests in the Project Entities owning or
leasing the Project) are pledged to secure such obligations, without
recourse to the general corporate assets of Panda International or
its subsidiaries (other than the Project Entities) or the other
Projects in which Panda International has an interest. The security
for Non-U.S. Projects will depend on the laws of the applicable
jurisdiction. Panda International's existing Projects are financed
using a high proportion of debt to equity, and Panda International
has informed the Company that it intends to continue using such high
leverage.
Construction
Panda International manages the construction of its Projects
usually by entering into a fixed-price turnkey contract with a
construction company. Under such a turnkey contract, the contractor
generally assumes the risks of cost overruns, other than costs for
changes to the Project requested by the owners and specified events
beyond the control of the contractor. The contractor manages
construction through various subcontractors and retains ultimate
responsibility for the timely completion of the Project and for
achieving specified performance levels.
Operating and Maintenance Contracts
Panda International currently contracts with third parties for
operations and maintenance ("O&M") services for power generation
facilities in which Panda International has an interest. These
services are performed under the terms of an O&M agreement pursuant
to which Panda International generally reimburses the O&M provider
for certain costs, pays an annual operating fee and pays an incentive
fee based on the performance of the facility. Panda International
has recently established an indirect wholly owned subsidiary, Panda
Global Services, Inc., a Delaware corporation ("Panda Global
Services"), to provide O&M services to independent power plants.
Panda Global Services has entered into a contract with the Panda-
Rosemary Partnership under which Panda Global Services provides O&M
services to the Panda-Rosemary Facility. See "Description of the
Projects - The Panda-Rosemary Facility - Operations and Maintenance."
Fuel Supply
Panda International acquires fuel reserves (usually coal or
natural gas) from third parties under supply agreements, and
transportation services for those supplies are also acquired from
third parties. Panda International endeavors to structure a
Project's fuel supply agreement so that the payments received for
electricity generated exceed fuel costs.
DESCRIPTION OF THE PROJECTS
The following summary table presents selected information
concerning the two power generation Projects, both of which are
operational, that constitute the initial Projects in the Project
Portfolio. In addition, information is provided regarding certain
other Projects which are under development by Panda International and
could become eligible for transfer to the Project Portfolio if the
conditions for transfer set forth in the Additional Projects Contract
are satisfied. Following the table are more detailed descriptions of
the Panda-Rosemary Facility, the Panda-Brandywine Facility and
certain other Projects being developed by Panda International. The
descriptions of selected provisions of certain principal agreements
related to these projects should not be considered to be a full
statement of the terms and provisions of such agreements.
The Company believes the information presented in the table
below with respect to the Projects under development to be accurate;
however, because these Projects remain in the development stage,
there can be no assurance as to how long the information presented
will remain accurate. In addition, there can be no assurance that any
of the Projects under development will reach Financial Closing or
achieve Commercial Operations or meet the other conditions making
them eligible for inclusion in the Project Portfolio. See "Risk
Factors - Financial Risks" and "- Project Risks - Operating Risks"
and "The Company, the Issuer and Panda International - The
Additional Projects Contract."
<TABLE>
<CAPTION>
Facilities in the Project Portfolio
Construction Commercial
PPA Commencement Operations Fuel Electric Contract
Facility Signed Date Date Technology Output Term
<S> <C> <C> <C> <S> <C> <C>
Panda-Rosemary 1Q 1989 3Q 1989 4Q 1990 Gas-fired 180 MW Through
Roanoke Rapids, NC Combined December
Cycle 2015
Panda-Brandywine 3Q 1991 2Q 1995 4Q 1996 Gas-fired 230 MW Through
Brandywine, MD Combined October 2021
Cycle
Total 410 MW
</TABLE>
<TABLE>
<CAPTION>
Facilities Under Contract
Projected Projected Contract
Construction Commercial Expected Term from
PPA Signed Commencement Operations Fuel Electric Commercial
Facility or Acquired Date Date Technology Output Operations
<S> <C> <C> <C> <S> <C> <C>
Panda-Luannan 3Q 1995 1Q 1997 1Q 1999 Coal 100 MW 20 yrs
Luannan County
Tangshan Municipality
Hebei Province, China
Panda of Nepal 3Q 1996 1Q 1997 4Q 1999 Hydroelectric 36 MW 25yrs
Nepal
Panda-Lapanga (3) 3Q 1994 (3) (3) Coal 500 MW25 yrs
State of Orissa, India
Panda-Kathleen(4) 3Q 1992 (4) (4) Gas-fired 115 MW 30 yrs
Lakeland, FL Combined
Cycle
Total 751 MW
</TABLE>
(1) Estimated.
(2) A merger of PEPCO and Baltimore Gas & Electric Company
("BG&E") has been publicly announced and is anticipated to close
in 1997. BG&E's bond credit rating is A- -.
(3) The future of this Project is uncertain due to a cancellation
notice received from the State of Orissa. See "Description of the
Projects - Other Projects Under Development by Panda International
- The Panda-Lapanga Project."
(4) The future of this Project is uncertain due to pending
litigation. See "Legal Proceedings - Florida Power Proceedings."
(5) This percentage may be reduced to 78% if a second shareholder
in an intermediate holding company is successful in developing Non-
U.S. Projects. The cash flow interest of a PIC International
Entity in this Project may be larger than the stated percentage,
however, because it is intended that such PIC International Entity
would satisfy its obligations to fund the Project Entity's equity
investment requirements through a loan to, or a preferred stock
equity investment in, the Project Entity. See "The Company, the
Issuer and Panda International - Company Structure."
(6) Final equity interests may vary depending on financing
arrangements for these Projects.
<TABLE>
<CAPTION>
Facilities in the Project Portfolio
Customer/ Panda
Credit Rating Fuel Supplier Project Cost Financing Ownership Status
<S> <S> <C> <C> <C> <S>
VEPCO/A2 Natural Gas Clearinghouse $125 M Funded 100% Operational
PEPCO/A1 (2) Cogen Development $215 M(1) Funded 100% Operational
Company ______
$340 M(1)
</TABLE>
<TABLE>
<CAPTION>
Facilities Under Contract
Customer/ Estimated Panda
Credit Rating Fuel Supplier Project Cost Financing Ownership Status
<S> <C> <C> <C> <C> <S>
North China Power Kailuan Coal Administration $118 M To be funded 85% (5)(6) In Financing
Group Company/ and certain other coal mines
Not Applicable
Nepal Electricity Not Applicable $100 M To be funded 75% (6) Multilateral lenders have
Authority/Not provided commitment
Applicable letters for providing debt
requirements
Orissa State Electricity Dedicated coal mine to be $600 M To be funded 90% (6) Certain required clearances
Board/Not developed by Project received.
Applicable resolution of
dispute regarding
notice of
cancellation of
power purchase
agreement
given by the
State of Orissa
Florida Power/AA Not Selected $100 M To be funded 100% Litigation with Florida Power
$918 M
</TABLE>
The Panda-Rosemary Facility
The Panda-Rosemary Facility is a combined-cycle cogeneration
facility located in Roanoke Rapids, North Carolina, with a total
electric generating capacity of approximately 180 MW. A cogeneration
facility produces electric energy and forms of useful thermal energy
(such as heat or steam), used for industrial, commercial, heating or
cooling purposes through the sequential use of one or more energy
inputs. A properly designed and constructed cogeneration facility is
able to convert the energy contained in the input fuel source to
useful energy outputs more efficiently than plants employing what
was, historically, conventional utility electrical generation
technology. The Panda-Rosemary Facility uses natural gas as its
primary fuel input to produce electric energy for sale to VEPCO and
to produce useful thermal energy in the form of steam and chilled
water for sale to Bibb. The Panda-Rosemary Facility uses No. 2 fuel
oil as an alternate fuel in the event gas supplies or transportation
are curtailed. The Panda-Rosemary Facility was designed and
constructed by Hawker Siddeley Power Engineering.
The Panda-Rosemary Facility began commercial operations in
December 1990. The Panda-Rosemary Facility is certified as a
Qualifying Facility under PURPA and thus is exempt from rate
regulation as an electric utility under federal and state law,
provided that it continues to meet the applicable requirements of
PURPA. See "Regulation - Federal Energy Regulation - PURPA."
The Panda-Rosemary Facility is designed to be operated in a
combined-cycle mode. It uses natural gas or fuel oil to power two
General Electric combustion turbine generators, a GE Frame 6 and a GE
Frame 7, each fitted with a heat recovery steam generator ("HRSG").
The HRSGs use the reject heat from the combustion turbines that might
otherwise dissipate to produce steam which drives a steam turbine
generator. The combustion and steam turbines generate electric energy
for sale to VEPCO. When the Panda-Rosemary Facility is being
dispatched, some of the steam produced by the HRSGs is sold to Bibb
and some is used in two absorption chillers to supply chilled water
for Bibb. The combustion turbines use natural gas as their primary
fuel and can use No. 2 fuel oil as an alternate fuel. When the
facility is not being dispatched, two auxiliary boilers are available
to be used to produce steam for direct use by Bibb and to produce
chilled water for use by Bibb. The design of the Panda-Rosemary
Facility permits flexible operation, including the production of both
electricity and a sufficient amount of thermal energy to meet QF
requirements, using either one or both of the combustion turbine
generators.
Recent Hurricane Damage Sustained
On September 6, 1996, a transformer and two switches at the
Panda-Rosemary Facility sustained damage from a hurricane. A
substitute transformer has been temporarily installed pending repair
of the damaged transformer, which is expected to be completed during
the first quarter of 1997. The Company estimates the total cost to
repair the Panda-Rosemary Facility (including substitute transformer
rental costs) at approximately $2,450,000, all of which is covered by
insurance except for a deductible and certain non-covered items in
the amount of approximately $552,000. The Company believes that this
event will not have a material adverse effect on the financial
condition or operating results of the Panda-Rosemary Partnership or
its ability to make distributions to the Company through the PIC
Entities.
Sale of Capacity and Electricity
The Panda-Rosemary Partnership sells electric capacity and
energy to VEPCO pursuant to a Power Purchase and Operating Agreement
(the "Rosemary Power Purchase Agreement"). The Rosemary Power
Purchase Agreement has an initial term ending December 26, 2015, and
may be extended for periods of up to five years if the parties so
agree.
VEPCO has the right to dispatch the Panda-Rosemary Facility
(i.e., require the Panda-Rosemary Facility to deliver electricity)
on a daily basis within certain guidelines and the design limits
(which specify load levels, start-up and shutdown times and minimum
run times consistent with prudent utility practice). VEPCO must
dispatch all facilities obligated to deliver electricity to VEPCO
based upon economic factors and without regard to the facilities'
ownership.
The Rosemary Power Purchase Agreement provides for two types of
payments: a capacity payment and an energy payment. The capacity
payment is a fixed charge required to be paid regardless of whether
the Panda-Rosemary Facility is dispatched, subject to reductions
under certain circumstances as described below. Energy payments are
calculated based on the actual electrical output transmitted to VEPCO
and are designed to compensate the Panda-Rosemary Partnership for its
cost of fuel and its variable operations and maintenance expense.
Monthly capacity payments throughout the term of the Rosemary
Power Purchase Agreement are calculated by multiplying the Panda-
Rosemary Facility's "Dependable Capacity" by the following rates:
$12.488 per kilowatt per month through December 1996; $11.654 per
kilowatt per month through December 1998; $10.821 per kilowatt per
month through December 2005; and $8.321 per kilowatt per month
through December 2015. The Panda-Rosemary Facility's Dependable
Capacity is currently 165 MW for the summer period and 198 MW for the
winter period, which are the maximum Dependable Capacity levels for
which capacity payments must be made under the Rosemary Power
Purchase Agreement. Dependable Capacity is determined by semi-annual
tests which may be requested by VEPCO.
Capacity payments may be reduced if any of the following events
or circumstances occur:
(i) if the Panda-Rosemary Facility fails to meet required
dispatch levels within a tolerance of 5%, the operating
level (as adjusted for ambient weather conditions) does not
exceed Dependable Capacity and such failure is not the
result of a forced outage, then VEPCO has the right to
decrease the capacity payment in respect of the then-current
billing month by 10% per occurrence;
(ii) if, as a result of a performance test, the Panda-
Rosemary Facility's Dependable Capacity is set at less than
90% of the initial Dependable Capacity as set forth in the
Rosemary Power Purchase Agreement (150 MW for the first
summer period and 180 MW for the first winter period), then
the Panda-Rosemary Partnership is obligated to pay VEPCO
liquidated damages for the deficiency in an amount equal to
the product of $21.60 per kilowatt, in 1987 dollars as
escalated annually by the GNPIPD, multiplied by the
Dependable Capacity shortfall;
(iii) if a forced outage is designated by the Panda-Rosemary
Partnership as having resulted from an event of force
majeure, then beginning the day after the Panda-Rosemary
Partnership makes such designation, capacity payments are
suspended and prorated daily until the Panda-Rosemary
Partnership notifies VEPCO that the condition of force
majeure has ended; and
(iv) if the number of forced outage days in a given capacity
test period exceeds the number of permitted forced outage
days, then within 60 days after the end of the capacity test
period, the Panda-Rosemary Partnership is obligated to
reimburse VEPCO an amount equal to 4% of the capacity
payments paid during the capacity test period for each
forced outage day in excess of the permitted number; the
Panda-Rosemary Partnership is entitled to the greater of 25
forced outage days per capacity test period (the period from
December 1 through November 30) and 10% of the number of
days that the Panda-Rosemary Facility is dispatched during
such period, without any loss of capacity payments for such
period.
Energy payments are calculated based on the actual electrical
output transmitted to VEPCO and are designed to compensate the Panda-
Rosemary Partnership for its cost of fuel and its variable operations
and maintenance expense. During the period December 1, 1995 through
November 30, 1996, the number of forced outage days was 16, including
15 forced outage days attributable to the damage caused by the
hurricane in September 1996.
The Panda-Rosemary Partnership is required to maintain the Panda-
Rosemary Facility as a QF. VEPCO may terminate the Rosemary Power
Purchase Agreement within one year after the loss of QF certification
if the Panda-Rosemary Partnership has not obtained all necessary
governmental or regulatory approvals for the Rosemary Power Purchase
Agreement to remain in effect and for electricity to continue to be
sold to VEPCO.
The Rosemary Power Purchase Agreement also contains a provision
known as a "regulatory disallowance" provision, which requires the
Panda-Rosemary Partnership to repay or reduce any capacity charges in
excess of $5.62 per kilowatt per month, as adjusted by the GNPIPD
from 1987 dollars, that are disallowed by any regulatory authority
from recovery by VEPCO in its rate base (except where such
disallowance is due to VEPCO's failure to properly seek such
recovery). VEPCO cannot initiate such a disallowance, and must appeal
such a disallowance, if practicable. If such a disallowance were to
occur prior to December 27, 2006, beginning on such date up to 75% of
the capacity payments could be withheld by VEPCO to make up for any
disallowance, plus interest, until the sooner of December 27, 2007 or
the date on which such disallowance, plus interest, was recouped by
VEPCO. If such disallowance, plus interest, were not fully recouped
by December 27, 2007, the Partnership would be obligated to pay the
remaining balance, plus interest, by January 24, 2008. If any
disallowance were to occur for capacity payments after December 27,
2006, future capacity payments would be reduced to the amount of the
capacity payment unaffected by the disallowance. In addition, the
Panda-Rosemary Partnership would be required to repay the amount of
previously received capacity payments which are affected by the
disallowance, plus interest, by the later of one year from the date
of the disallowance or December 27, 2007. The amount upon which a
possible reduction in, or repayment of, capacity charges by the Panda-
Rosemary Partnership would be calculated if a disallowance occurred
was $7.24 per kilowatt per month as of December 1995. Assuming a
GNPIPD of 3.0% per year throughout the initial term of the Rosemary
Power Purchase Agreement, this amount would increase to $10.02 per
kilowatt per month in 2006 and $13.07 per kilowatt per month upon the
expiration of the initial term. The monthly capacity payments due
from VEPCO under the Rosemary Power Purchase Agreement are calculated
based on Dependable Capacity at the following rates: $12.488 per
kilowatt per month through December 1996; $11.654 per kilowatt per
month through December 1998; $10.821 per kilowatt per month through
December 2005; and $8.321 per kilowatt per month through December
2015. Thus, assuming a GNPIPD of 3.0% per year from 1996 through
2015, the risk that the Panda-Rosemary Partnership may be required to
reduce or repay capacity charges under the "regulatory disallowance"
provision would exist through 2005. See "Regulation - Federal Energy
Regulation - PURPA."
Steam and Chilled Water Sales
The Panda-Rosemary Partnership sells steam and chilled water to
Bibb for use in its textile manufacturing facility, located adjacent
to the Panda-Rosemary Facility, pursuant to a Cogeneration Energy
Supply Agreement (the "Rosemary Steam Agreement"). The Rosemary Steam
Agreement has an initial term that expires on December 26, 2015. Upon
expiration of the initial term, Bibb has the option to (i) negotiate
a 10-year extension of the Rosemary Steam Agreement, (ii) purchase
the Panda-Rosemary Facility with VEPCO's consent or (iii) terminate
the Rosemary Steam Agreement.
Bibb is obligated to pay $1.00 per 1,000 pounds of steam for the
first 45,000 pounds of steam delivered in an hour and $2.50 per 1,000
pounds of steam for any additional quantities of steam delivered in
an hour. Bibb is obligated to pay the following fixed prices for
chilled water: $0.035/ton/hour through December 27, 2000;
$0.04/ton/hour thereafter through December 27, 2005; $0.045/ton/hour
thereafter through December 27, 2010; and $0.05/ton/hour thereafter
through December 27, 2015.
Although Bibb is not required to purchase a minimum quantity of
steam or chilled water, Bibb has an irrevocable obligation to
purchase all of its steam and chilled water requirements from the
Panda-Rosemary Facility to the extent that the Panda-Rosemary
Facility is able to supply such requirements. The Rosemary Steam
Agreement requires that the Panda-Rosemary Facility have the capacity
to produce an annual average of 65,000 pounds of steam per hour at
150 psi and 2,000 tons of 45 degrees F chilled water for up to 8,000 hours
per year. This requirement is not currently met because the Panda-
Rosemary Facility's actual capacity to produce chilled water does not
exceed 1,600 tons per year of chilled water. However, because Bibb's
chilled water requirements have never exceeded 1,500 tons per year
and, in most cases, have been approximately 1,200 tons per year, the
Panda-Rosemary Facility has never failed to satisfy Bibb's chilled
water requirements. Furthermore, the Rosemary Steam Agreement allows
the Panda-Rosemary Partnership to utilize, at its own expense, back-
up electric chillers located at Bibb's textile mill to supply chilled
water to meet Bibb's demands. Finally, if Bibb's requirements were
to exceed the facility's current capacity to produce chilled water,
the Panda-Rosemary Partnership could expand the capacity of its
absorption chillers to reach the required level by purchasing a new
chiller at a cost currently estimated at approximately $770,000. For
these reasons, the Company does not believe that the current capacity
limitations of the absorption chillers will adversely affect the
Panda-Rosemary Partnership's rights under the Rosemary Steam
Agreement.
Site Lease
The 4.83 acre site on which the Panda-Rosemary Facility is
located is leased to the Panda-Rosemary Partnership by Bibb pursuant
to a Real Property Lease and Easement Agreement (the "Rosemary Site
Lease") in exchange for a nominal yearly rental payment. The initial
term of the Rosemary Site Lease expires on December 31, 2015 and is
automatically extended on the same terms and conditions for 10 years
if the Rosemary Steam Agreement is extended for an additional 10-year
period. At the Panda-Rosemary Partnership's option, the initial term
of the Rosemary Site Lease may also be extended on the same terms and
conditions for a 10-year term if the Panda-Rosemary Partnership gives
Bibb two years' notice prior to December 31, 2015 and for an
additional 10-year term if the Panda-Rosemary Partnership gives Bibb
two years' notice prior to December 31, 2025, regardless of whether
the Rosemary Steam Agreement is extended or terminated.
The public records of the City of Roanoke Rapids and Halifax
County, North Carolina indicate that Bibb, which has recently emerged
from Chapter 11 bankruptcy proceeding, failed to pay when due all of
its 1994 and 1995 property taxes relating to its parcel of real
property, which includes the site on which the Panda-Rosemary
Facility is located (the "Rosemary Facility Site"). The local taxing
authorities have a lien against Bibb's property, including the
Rosemary Facility Site, to secure the payment by Bibb of delinquent
property taxes owed by Bibb with respect to such property. In May
1996, Bibb reached an agreement with the City of Roanoke Rapids and
Halifax County regarding payment of the delinquent 1994 and 1995
taxes, and subsequently paid all of such taxes, including interest
and penalties (as reflected in the public records). In addition, Bibb
has paid substantially all of its property taxes attributable to
1996, which were due to the City of Roanoke Rapids and Halifax County
by January 7, 1997. As of January 9, 1997, an aggregate amount of
approximately $7,200 in interest and other fees (as reflected in the
public records) remained outstanding. In the event that Bibb should
fail to pay its property taxes when due, the local taxing authorities
could foreclose their lien against Bibb's property and title to such
property (including the Rosemary Facility Site) would pass to the
taxing authorities, or to a purchaser at a foreclosure sale, and
would not be subject to the leasehold interest in the Rosemary
Facility Site held by the Panda-Rosemary Partnership under the
Rosemary Site Lease. Therefore, unless the Panda-Rosemary Partnership
or another person paid Bibb's past due taxes upon such foreclosure,
the taxing authorities, or a purchaser at a foreclosure sale, could
terminate the Rosemary Site Lease and (i) cause the Panda-Rosemary
Partnership to remove the Panda-Rosemary Facility from the Rosemary
Facility Site or (ii) negotiate a new lease for the Rosemary Facility
Site which could be on terms that are much less favorable to the
Panda-Rosemary Partnership than the terms contained in the Rosemary
Site Lease.
Concurrently with the Prior Offering, Panda-Rosemary Funding
Corporation (the "Rosemary Issuer"), a wholly-owned subsidiary of the
Panda-Rosemary Partnership, issued $111.4 million in aggregate
principal amount of the Rosemary Bonds. The payment of the Rosemary
Bonds is secured by, among other things, a lien on the Panda-Rosemary
Partnership's leasehold interest in the Rosemary Facility Site. See
"Financing" below and "Description of Outstanding Project-Level Debt
- - The Panda-Rosemary Financing." A title insurance policy exists for
the benefit of the holders of the Rosemary Bonds which insures such
holders' security interest in the Panda-Rosemary Partnership's
leasehold interest in the Rosemary Facility Site against losses which
may be sustained as a result of the tax lien on the Rosemary Facility
Site. An agreement entered into by the Panda-Rosemary Partnership at
the time of issuance of the Rosemary Bonds provides for the escrow of
sums to pay the current year's property taxes assessed against the
Bibb property, including the Rosemary Facility Site. In accordance
with this requirement, each month, the Panda-Rosemary Partnership has
been paying into a property tax escrow fund an amount equal to one-
twelfth of the current year's property taxes. Upon the payment by
Bibb to the taxing authorities of such property taxes, the Panda-
Rosemary Partnership is entitled to have the corresponding amounts
released from the property tax escrow fund.
Gas Supply and Fuel Management
The Panda-Rosemary Partnership purchases certain quantities of
natural gas on a firm basis from Natural Gas Clearinghouse ("NGC")
pursuant to a Gas Purchase Contract (the "Rosemary Gas Supply
Agreement"). The Rosemary Gas Supply Agreement is effective through
November 30, 2005, and thereafter from month-to-month until
terminated by either NGC or the Panda-Rosemary Partnership. The
Rosemary Indenture provides that with certain limited exceptions the
Panda-Rosemary Partnership will not be permitted to make
distributions to its partners if the Rosemary Gas Supply Agreement is
not extended or replaced on or before the end of its term. See
"Description of Outstanding Project-Level Debt - The Panda-Rosemary
Financing - Partnership Distributions." NGC has agreed to deliver
natural gas on a firm basis to the Panda-Rosemary Partnership, at
pipeline points near the Gulf of Mexico or (at the Panda-Rosemary
Partnership's request and using the Panda-Rosemary Partnership's firm
transportation arrangements) to the Panda-Rosemary Pipeline, up to
the total contract quantity under the Firm Gas Transportation
Agreements (as defined below), which is currently the thermal
equivalent of 3,075 Mcf of natural gas per day. The firm natural gas
supplied under the Rosemary Gas Supply Agreement enables the Panda-
Rosemary Partnership to have adequate natural gas supplies available
to meet its estimate of Bibb's requirements for steam and chilled
water.
The price paid by the Panda-Rosemary Partnership for gas
delivered by NGC is generally equal to an indexed price (based upon
monthly market-price indices determined by reference to the receipt
points where NGC delivers gas to the Panda-Rosemary Partnership) plus
$0.04 per MMBtu. If gas is required in daily volumes that are greater
than those included in monthly estimates delivered to NGC, the price
for the excess volume required is equal to NGC's actual cost incurred
in acquiring such excess plus $0.04 per MMBtu. If the Panda-Rosemary
Partnership fails to purchase the amount included in monthly
estimates delivered to NGC, and such failure is not excused by force
majeure, the Panda-Rosemary Partnership must pay NGC, as liquidated
damages for such failure, $0.14 for each MMBtu of gas not purchased
below the monthly estimates delivered.
The Panda-Rosemary Partnership receives certain fuel supply
management services from NGC pursuant to a Fuel Supply Management
Agreement, (the "Rosemary Fuel Management Agreement"). The Rosemary
Fuel Management Agreement is effective through the expiration date of
the Rosemary Gas Supply Agreement, which is November 30, 2005, unless
extended.
NGC's responsibilities under the Fuel Supply Management
Agreement include advising the Panda-Rosemary Partnership with
respect to the negotiation of natural gas and fuel oil purchase and
transportation arrangements, arranging for the delivery to the Panda-
Rosemary Facility of natural gas or fuel oil, endeavoring to make
such arrangements on a "best cost" basis, managing the communications
among the Panda-Rosemary Facility and the Panda-Rosemary
Partnership's pipeline transporters and natural gas and fuel oil
suppliers and advising and assisting the Panda-Rosemary Partnership
with respect to fuel oil inventory hedging arrangements.
The Panda-Rosemary Partnership pays NGC a management fee based
on fuel supply arranged by NGC. The management fee is composed as
follows: (i) $0.04 per MMBtu of natural gas purchased and transported
to the Panda-Rosemary Facility pursuant to arrangements made by NGC;
(ii) $0.03 per MMBtu of natural gas reserves owned by the Panda-
Rosemary Partnership and transported to the Panda-Rosemary Facility
pursuant to arrangements made by NGC; (iii) $0.01 per MMBtu of
natural gas purchased from North Carolina Natural Gas Corporation
("NCNG") and transported to the Panda-Rosemary Facility pursuant to
arrangements made by NGC; (iv) $0.002 per gallon of fuel oil
purchased and delivered to the Panda-Rosemary Facility pursuant to
arrangements made by NGC; and (v) $0.005 per MMBtu of natural gas and
$0.05 per barrel of No. 2 fuel oil as a transaction fee for fuel
hedging transactions executed by NGC as approved by the Panda-
Rosemary Partnership. The Panda-Rosemary Partnership must also
reimburse NGC for the cost of any letter of credit NGC must provide
to purchase gas pursuant to the Rosemary Fuel Management Agreement.
If in a given month NGC arranges for natural gas supplies at a
delivered price less than the benchmark delivered price for such
month, the Panda-Rosemary Partnership pays NGC an additional amount
equal to 60% of the difference in such prices.
Gas Transportation
The Rosemary Indenture provides that with certain limited
exceptions the Panda-Rosemary Partnership will not be permitted to
make distributions to its partners if the Firm Gas Transportation
Agreements are not extended or replaced on or before the end of their
terms. See "Description of Outstanding Project-Level Debt - The Panda-
Rosemary Financing - Partnership Distributions."
The Panda-Rosemary Partnership receives firm transportation
service that provides for delivery to the Panda-Rosemary Pipeline of
up to the thermal equivalent of 3,075 Mcf of natural gas per day. The
Panda-Rosemary Partnership has recently converted this firm
transportation service from service provided pursuant to an
individual certificate of public convenience and necessity issued by
FERC pursuant to section 7 of the Natural Gas Act ("NGA") to service
provided pursuant Part 284 of the FERC's rules and regulations. To
effectuate this conversion, the Panda-Rosemary Partnership and
Transco executed the Transco 284 Agreement, which expires on November
1, 2006, and the Panda-Rosemary Partnership executed similar firm
transportation agreements with Texas Gas and CNG. The Transco 284
Agreement, together with the firm transportation agreements the Panda-
Rosemary Partnership entered into with Texas Gas and CNG
(collectively, the "Firm Gas Transportation Agreements"), replicate
the firm transportation service previously provided by Transco under
a separate agreement.
The Panda-Rosemary Partnership also has the right to receive
interruptible gas transportation service from Columbia Gas
Transmission Company and Columbia Gulf Transmission Company under the
Columbia Gas IT Agreement and the Columbia Gulf IT Agreement,
respectively. Under the Columbia Gas IT Agreement, the Panda-Rosemary
Partnership may request up to 36,000 Dth per day of interruptible
transportation service from an interconnection between the facilities
of Columbia Gas and Columbia Gulf near Leach, Kentucky to an
interconnection between Columbia Gas's facilities and the Panda-
Rosemary Pipeline. Under the Columbia Gulf IT Agreement, the Panda-
Rosemary Partnership may request up to 39,000 Dth per day of
interruptible transportation service from various available receipt
points on Columbia Gulf's system to an interconnection between the
facilities of Columbia Gas and Columbia Gulf near Leach, Kentucky.
The terms of both the Columbia Gas IT Agreement and the Columbia Gulf
IT Agreement are month-to-month until terminated by either party to
the respective agreements.
The rates and most of the significant terms and conditions of
service under the Firm Gas Transportation Agreements, the Columbia
Gas IT Agreement and the Columbia Gulf IT Agreement are set forth in
the respective pipeline's effective FERC gas tariff. These rates,
terms and conditions are subject to review, approval and modification
by FERC.
Panda-Rosemary Pipeline
The Panda-Rosemary Partnership owns, and NCNG operates and
maintains for the Panda-Rosemary Partnership, the Panda-Rosemary
Pipeline, which runs for 10.26 miles through portions of Halifax and
Northampton Counties, North Carolina. The Panda-Rosemary Pipeline is
located under, over and upon properties owned, in certain instances,
by private landowners and, in others, by the State of North Carolina
or the City of Roanoke Rapids, pursuant to easement agreements or
encroachment agreements. The Panda-Rosemary Pipeline terminates on a
1.26-acre parcel in Pleasant Hill Township, Northampton County, North
Carolina, which is owned by the Panda-Rosemary Partnership. The meter
stations and certain appurtenant facilities interconnecting the Panda-
Rosemary Pipeline and the interstate pipeline facilities of Columbia
Gas and Transco are located on this parcel.
The Partnership has entered into a Pipeline Operating Agreement
with NCNG (the "Pipeline Operating Agreement"), pursuant to which
NCNG has agreed to operate the Panda-Rosemary Pipeline and provide
certain natural gas balancing services for the Panda-Rosemary
Partnership's gas supplies. The term of the Pipeline Operating
Agreement continues until December 27, 2005, and may be extended for
two additional periods of five years each upon the agreement of the
parties.
NCNG is obligated to manage the day-to-day operations of the
Panda-Rosemary Pipeline, including the interconnection facilities
between the Panda-Rosemary Pipeline and the pipeline facilities of
Columbia Gas and Transco, using the same degree of care and diligence
with which it operates its own gas distribution system. NCNG's
management activities include the right to suggest and make repairs
to the Panda-Rosemary Pipeline under certain circumstances. The Panda-
Rosemary Partnership is responsible for all costs of such repairs.
The Pipeline Operating Agreement provides NCNG with an option to
purchase the Panda-Rosemary Pipeline at its fair market value if
certain specified events occur. NCNG's purchase option is subject to
a right of first refusal of VEPCO to purchase the pipeline and the
Panda-Rosemary Facility. NCNG's option to purchase the Panda-Rosemary
Pipeline survives VEPCO's exercise of its right of first refusal or
the sale of the pipeline to a third party, and parties taking an
interest in the Panda-Rosemary Pipeline take such rights subject to
NCNG's option.
The Panda-Rosemary Partnership is required to pay NCNG an
operator fee equal to $20,000 per month until December 27, 1999.
Thereafter, the operator fee will be at least $240,000 per year,
adjusted by the percentage increase, if any, in the U.S. Bureau of
Labor Statistics Consumer Price Index from December 27, 1990 to
December 27, 1999, which yearly sums will be payable in equal monthly
installments.
Several of the easements and encroachment agreements, pursuant
to which the Panda-Rosemary Partnership is granted the right to
locate the Panda-Rosemary Pipeline, contain provisions allowing the
underlying interest owner to cause the Panda-Rosemary Pipeline to be
removed from its current location. Most of such easements and
encroachment agreements require the underlying interest owner to
provide an alternate location for the pipeline, and in some cases the
underlying interest owner must share the cost of relocating the
pipeline. However, two such easements allow the underlying interest
owner to cause the Panda-Rosemary Pipeline to be removed, but do not
require such owner to provide an alternate location or share the cost
of relocating the pipeline. The Company does not expect that the
Panda-Rosemary Pipeline will be required to be removed pursuant to
these easements or, if it were required to be removed, that
relocating the Panda-Rosemary Pipeline from these two easement tracts
would significantly interfere with the supply of natural gas to the
Panda-Rosemary Facility for an extended period of time or, given the
ability of the Panda-Rosemary Facility to operate utilizing fuel oil,
significantly limit the availability of the Panda-Rosemary Facility
for dispatch by VEPCO. However, there can be no assurance that the
Panda-Rosemary Partnership could relocate the Panda-Rosemary
Pipeline, if required to do so, without incurring significant
expenses or, if the pipeline could not be relocated, that the Panda-
Rosemary Partnership could make alternate arrangements for the
delivery of a supply of fuel which would be adequate to assure the
availability of the Panda-Rosemary Facility for dispatch by VEPCO.
In addition, the Panda-Rosemary Partnership has entered into
agreements with Transco and Columbia Gas, pursuant to which the Panda-
Rosemary Partnership has agreed to pay for the maintenance and repair
expenses relating to the interconnection facilities between the Panda-
Rosemary Pipeline and the facilities of Transco and Columbia Gas,
respectively.
Fuel Oil
The Panda-Rosemary Facility was constructed with the capability
to operate on No. 2 fuel oil and is designed to change fuel sources
from natural gas to fuel oil and back without interrupting the
generation of electricity. The Panda-Rosemary Facility currently has
on-site storage for approximately 2.0 million gallons of fuel oil, a
supply sufficient to operate the Panda-Rosemary Facility at full load
for approximately 168 hours. The Panda-Rosemary Partnership purchases
fuel oil on a spot-market basis. Since the fuel oil suppliers either
own their own trucks or have contracts with local trucking firms for
regional truck delivery and the purchase price includes delivery to
the Panda-Rosemary Facility, the Panda-Rosemary Partnership does not
independently arrange trucking service from the terminals to the
Panda-Rosemary Facility. The Panda-Rosemary Partnership has entered
into an agreement with New Dixie Oil Corporation pursuant to which
such corporation assists the Panda-Rosemary Partnership with spot
market fuel oil purchases.
Operations and Maintenance
The Panda-Rosemary Partnership purchases operations and
maintenance services for the Panda-Rosemary Facility from Panda
Global Services pursuant to an Operation and Maintenance Agreement
(the "Rosemary O&M Agreement") which expires on December 31, 2003.
Under the Rosemary O&M Agreement, Panda Global Services is paid a
fixed monthly fee of $130,000 per month during 1997, with annual
adjustments based on changes in the consumer price index for
subsequent years. In addition, the agreement includes bonus and
penalty provisions based on maintenance of dependable capacity
levels, availability of the Panda-Rosemary Facility for dispatch and
the achievement of certain safety and training goals established by
the Panda-Rosemary Partnership. The Rosemary O&M Agreement is on
substantially similar terms as the Panda-Rosemary Partnership's
previous operations and maintenance agreement with University
Technical Services, Inc., a subsidiary of EMCOR Group, Inc., which
was obtained through a competitive bid process and expired on
December 31, 1996.
Operating History
The following table contains a summary of certain levels of
operating performance achieved by the Panda-Rosemary Facility since
the beginning of 1991:
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Summer Dependable Capacity (MW) 161 161 165 165 165 165
Winter Dependable Capacity (MW) 192 198 198 198 198 198
Hours Under VEPCO Dispatch 1,174 377 324 764 2,224 635
Electric Energy Production (GWH) 129.0 44.8 31.9 76.7 234.9 64.5
Steam Production (MM Lbs) 330.8 377.9 429.9 364.8 291.2 294.6
Chilled Water Production (MM Ton-hours) N/A 4.0 3.7 4.1 4.1 3.3
Forced Outage Days (1) 12 1 16 12 18 16
</TABLE>
(1) Data for forced outage days is for the 12-month period
starting on December 1 of the prior year and ending on November 30
of the year indicated.
The Panda-Rosemary Facility was dispatched for 1,174 hours in
1991. Dispatch was reduced to 377 hours in 1992 and 324 hours in 1993
due to several new coal-fired, non-utility generation plants becoming
available for dispatch by VEPCO. The increases in dispatch hours to
764 in 1994 and 2,224 in 1995 were partially due to the effect of the
second amendment to the Rosemary Power Purchase Agreement entered
into in 1993, under which the formula used to calculate the energy
payment was amended to more closely match the fuel and variable
operation and maintenance costs incurred by the Panda-Rosemary
Partnership.
During 1995, the Panda-Rosemary Facility was dispatched for 2,224
hours. The significant increase in dispatch hours from 1994 to 1995
was primarily due to the fact that, during much of the 1995 summer
months, two of VEPCO's gas-fired plants suffered forced outages that
are not likely to be repeated and, under the terms of the Rosemary
Power Purchase Agreement, VEPCO was allowed to redirect to the Panda-
Rosemary Facility the gas that would otherwise have been transported
to these unavailable plants. For approximately 1,200 of the 2,224
hours, the Panda-Rosemary Facility used natural gas provided directly
by VEPCO under this fueling arrangement. The Panda-Rosemary
Partnership's profit margin on the energy payment from VEPCO is lower
for this type of dispatch compared to its energy margins under normal
dispatch conditions under which the Panda-Rosemary Partnership
provides the fuel.
During 1996, the Panda-Rosemary Facility was dispatched a total of
635 hours. This number reflects a more normal level of operation
than the unusually high 1995 number. The number of dispatch hours
for 1996 also reflects the unavailability of the Panda-Rosemary
Facility for 15 forced outage days during September 1996 due to
hurricane damage and cooler-than-normal weather in the VEPCO service
territory during the summer of 1996.
Cash Flow Participation
NNW, Inc., formerly known as Nova Northwest, Inc., an Oregon
corporation ("NNW"), has a cash flow participation (the "NNW Cash
Flow Participation") in the Panda-Rosemary Partnership arising out of
a Credit, Term Loan and Security Agreement (the "Credit Agreement")
entered into by PEC, PR Corp., PRC II (collectively, the "Rosemary
Borrowers") and NNW in August 1993, under which NNW made a loan to
the Rosemary Borrowers which has since been repaid. The Credit
Agreement provides that NNW, in addition to repayment of debt, is to
receive a cash flow participation equal to 4.33% of certain
distributions from the Panda-Rosemary Partnership to the Rosemary
Borrowers. At the time the Credit Agreement was entered into the
aggregate equity interest in the Panda-Rosemary Partnership held by
PR Corp. and PRC II was 10%. After the redemption of Ford Credit's
90% limited partner interest in the Panda-Rosemary Partnership from a
portion of the proceeds of the Rosemary Offering and the Prior
Offering, PR Corp. and PRC II, collectively, own 100% of the equity
interest in the Panda-Rosemary Partnership.
The Credit Agreement states that the parties intend that any
financial restructuring of the Panda-Rosemary Facility shall not
materially affect the NNW Cash Flow Participation, positively or
negatively. The Credit Agreement also provides that, in the case of
any such financial restructuring, the calculation of the amount of
distributions to be paid to NNW shall continue to be based on the
scheduled principal and interest amounts of the then existing
indebtedness of the Panda-Rosemary Partnership under the Second
Amended and Restated Letter of Credit and Reimbursement Agreement
dated as of January 6, 1992 among the Panda-Rosemary Partnership, The
Fuji Bank, Limited, and certain other banks party thereto (the
"Reimbursement Agreement"). Accordingly, it is the position of Panda
International and the Company that the NNW Cash Flow Participation
remained the same following the closing of the Rosemary Offering (as
if the Reimbursement Agreement had remained in place with the letter
of credit and bonds relating thereto and as if the redemption of Ford
Credit's 90% limited partner interest and the issuance of the
Rosemary Bonds had never occurred). Based on the position of Panda
International and the Company, the NNW Cash Flow Participation is
equal to 0.433% of distributions to the Rosemary Borrowers and would
increase to 1.732% after 2008 based on projected distributions. NNW
has disputed the position of Panda International and the Company with
respect to the redemption of Ford Credit's 90% limited partner
interest. NNW claims that it is entitled to receive 4.33% of
distributions to the Rosemary Borrowers following redemption of Ford
Credit's interest. PEC has, as a result, filed a petition against NNW
to have the amount of the NNW Cash Flow Partnership determined. See
"Legal Proceedings - NNW, Inc. Proceeding." Because the debt
structure existing prior to the issuance of the Rosemary Bonds would
have resulted in cash flow distributions during the early years after
such date that are lower than the cash flow distribution under the
new debt structure, a NNW Cash Flow Participation at the percentage
claimed by NNW, if NNW were to prevail in this dispute, would not
have a material adverse impact on the Company or its financial
condition. If NNW prevails in this dispute and the NNW Cash Flow
Participation is not converted into Panda International common stock
or cash (as described below), the reduction in total cash flows to be
received by the Company through 2012 would be approximately $1.9
million on a net present value basis and the reduction in annual cash
flows to be received by the Company would be (i) approximately
$81,000 during the balance of 1996 and increase to approximately
$255,000 in 2004; (ii) in the range of approximately $525,000 to
$550,000 per year during the years 2005 to 2008; and (iii)
approximately $333,000 in 2009 and decline thereafter to
approximately $310,000 in 2012. See Appendix B, Consolidated Pro
Forma Report.
The Credit Agreement gives NNW a right to convert the NNW Cash
Flow Participation into common stock of Panda International under
certain circumstances. It also gives Panda International the right to
convert the NNW Cash Flow Participation into Panda International
common stock or cash under certain circumstances. Panda International
has informed the Company that it does not have any current intention
of exercising such right, and accordingly, holders of the Exchange
Bonds should assume that the NNW Cash Flow Participation will
continue indefinitely.
The Panda-Brandywine Facility
The Panda-Brandywine Facility is a combined-cycle cogeneration
facility located in Brandywine, Maryland (near Washington, D.C.),
with a total electric generating capacity of 230 MW. The Panda-
Brandywine Facility uses natural gas as its primary fuel input and
No. 2 fuel oil as an alternative fuel in the event that gas supplies
or transportation are curtailed. The Panda-Brandywine Facility was
constructed by Raytheon Engineers and Constructors, Inc. ("Raytheon")
pursuant to the Amended and Restated Turnkey Cogeneration Facility
Agreement between the Panda-Brandywine Partnership and Raytheon (the
"Brandywine EPC Agreement"). Raytheon has met its performance
guarantees and the requirements for commercial operations and
substantial completion under the Brandywine EPC Agreement although
the date on which commercial operations was achieved is the subject
of a dispute between the Panda-Brandywine Partnership and Raytheon as
discussed below. Pursuant to a power purchase agreement entered into
in 1991 and amended in 1994, the Panda-Brandywine Partnership sells
the capacity of, and energy produced by, the Panda-Brandywine
Facility to Potomac Electric Power Company ("PEPCO"), a utility that
serves the District of Columbia and parts of Maryland. The Panda-
Brandywine Facility commenced commercial operations under the
Brandywine Power Purchase Agreement on October 31, 1996. A merger of
PEPCO and Baltimore Gas & Electric Company ("BG&E"), a utility that
serves other parts of Maryland, has been publicly announced and is
anticipated to close in 1997. The term of the Brandywine Power
Purchase Agreement will expire on October 30, 2021.
The Panda-Brandywine Facility is currently leased by the Panda-
Brandywine Partnership pursuant to the Brandywine Facility Lease.
The initial term of the Brandywine Facility Lease is 20 years. At the
end of the initial lease term, so long as no default or event of
default shall have occurred and be continuing under the Brandywine
Facility Lease, the Panda-Brandywine Partnership may renew the
Brandywine Facility Lease for two consecutive five-year terms.
Alternatively, the Panda-Brandywine Partnership may purchase the
Panda-Brandywine Facility at fair sales market value at the end of
the initial lease term or any renewal term. If the Panda-Brandywine
Partnership does not renew the Brandywine Facility Lease or purchase
the Panda-Brandywine Facility, it must surrender possession of the
Panda-Brandywine Facility. See "Description of Outstanding Project-
Level Debt - The Panda-Brandywine Financing - Brandywine Facility
Lease."
The Panda-Brandywine Facility is certified as a Qualifying
Facility under PURPA and thus is exempt from rate regulation as an
electric utility under federal and state law, provided that, upon and
during commercial operations, it continues to meet the applicable
requirements of PURPA. See "Regulation - Federal Energy Regulation -
PURPA."
Construction Contract
Pursuant to the Brandywine EPC Agreement, Raytheon agreed to
construct the Panda-Brandywine Facility (including the distilled
water plant) for approximately $122 million (including change
orders). Because Raytheon provided a letter of credit, initially
equal to 10% of the contract price, no retainage is withheld. The
amount of this letter of credit was reduced as of the commencement of
commercial operations to 5% of the aggregate amount paid by the Panda-
Brandywine Partnership to Raytheon through that date, and thereafter
the letter of credit must be maintained at a level which is twice the
cost of completing punch list items remaining at final acceptance of
the Panda-Brandywine Facility. Raytheon Company, a Delaware
corporation and the parent corporation of Raytheon, has provided a
guaranty covering all obligations of Raytheon under the Brandywine
EPC Agreement.
Raytheon warrants and guarantees in the Brandywine EPC Agreement
(i) that the Panda-Brandywine Facility will commence commercial
operations on or before October 31, 1996 and (ii) that it will meet
certain performance criteria, including (a) that the net power output
of the Panda-Brandywine Facility will be 230,000 kW at commercial
operations and (b) that the net plant heat rate of the Panda-
Brandywine Facility will not exceed 7,124 Btu/kWh LHV, plus 2%. The
Brandywine EPC Agreement provides that Raytheon will be paid bonuses
by exceeding the timing and/or performance guarantees contained in
the Brandywine EPC Agreement, including (i) $16,600 per day for each
day that commercial operations occur after September 30, 1996 but on
or before October 31, 1996, and $40,000 per day for each day that
commercial operations occur on or after August 1, 1996 but on or
before September 30, 1996; (ii) $300 per kW by which the net power
output is greater than 230,000 kW up to 233,000 kW; and (iii) $22,500
per Btu/kWh by which the plant heat rate is less than the net plant
heat rate guarantee, less 2%. Raytheon also guarantees that the Panda-
Brandywine Facility will not exceed certain air contaminant emission
and noise level limitations.
Raytheon conducted initial acceptance testing of the Panda-
Brandywine Facility and has met the requirements for commercial
operations and substantial completion under the Brandywine EPC
Agreement. Raytheon has also met its performance guarantees. A
dispute exists between the Panda-Brandywine Partnership and Raytheon
as to the specific date on which commercial operations under the
Brandywine EPC Agreement occurred and the amount of the early
completion bonus to which Raytheon is entitled. Raytheon sent the
Panda-Brandywine Partnership a notice claiming September 12, 1996 as
the date on which commercial operations under the Brandywine EPC
Agreement occurred. However, the testing mechanism utilized proved
faulty and the Panda-Brandywine Facility initially did not pass
certain emissions tests. The facility was subsequently re-tested and
it then met the required emissions levels. The Panda-Brandywine
Partnership is currently evaluating the situation. Pending the
outcome of its investigation, the Panda-Brandywine Partnership
believes that commercial operations under the Brandywine EPC
Agreement occurred no earlier than September 30, 1996, and may have
occurred on a later date. The amount of bonus payments at issue for
the period between the commercial operations date claimed by Raytheon
and the earliest date which the Panda-Brandywine Partnership believes
that commercial operations occurred is $720,000 ($40,000 per day x 18
days).
In addition, the Panda-Brandywine Partnership and Raytheon
disagree as to the number of force majeure days to which Raytheon is
entitled as a result of a January 1996 snowstorm during which
construction work could not be carried on, and as to the validity and
number of owner-caused delay days. Raytheon claims that it is
entitled to seven force majeure days as a result of the snowstorm and
four owner-caused delay days. The Panda-Brandywine Partnership
believes that Raytheon is entitled to at most three force majeure
days as a result of the snowstorm and is currently evaluating
Raytheon's claims regarding owner-caused delays. However, even in
the event that an agreement on the number of such days is reached,
the Panda-Brandywine Partnership and Raytheon further disagree as to
the affect, if any, such delays would have on the amount of the bonus
payable under the Brandywine EPC Agreement for early completion of
the facility. Raytheon takes the position that for purposes of
determining the amount of the early completion bonus under the
Brandywine EPC Agreement, the date on which commercial operations was
achieved should be moved back in time by the number of force majeure
and owner-caused delay days. The Panda-Brandywine Partnership
believes that the purpose of force majeure and owner-caused delay
days under the Brandywine EPC Agreement is to excuse performance
under specified conditions and was not intended to affect bonus
payments. The Panda-Brandywine Partnership takes the position that
no adjustment should be made with respect to any claimed force
majeure days; however, the Panda-Brandywine Partnership is willing to
consider a possible adjustment with respect to owner-caused delays
pending the outcome of its investigation of Raytheon's claims. It is
anticipated that adjustments, if any, would be made at the rate
equivalent to the bonus payment of $40,000 per day for the number of
agreed-upon days.
Taking into account all of the foregoing issues with Raytheon,
the Panda-Brandywine Partnership believes that the total amount in
dispute between the Panda-Brandywine Partnership and Raytheon is less
than $1.0 million. Representatives of the Panda-Brandywine
Partnership and Raytheon have agreed to meet in the near future in an
attempt to resolve the difference of opinion as to when the
commercial operations date under the Brandywine EPC Agreement
occurred and the other matters in dispute. The bonus for early
achievement of the commercial operations date discussed above, if
ultimately determined to be owed, would be payable over time and
funded from cash flows from the operation of the Panda-Brandywine
Facility which may otherwise have been available for distributions.
Operations and Maintenance
The Panda-Brandywine Partnership purchases operations and
maintenance services from Ogden Brandywine Operations, Inc. ("Ogden
Brandywine") pursuant to an Operation and Maintenance Agreement, (the
"Brandywine O&M Agreement"). The Brandywine O&M Agreement is
effective until October 31, 1999, and may be extended thereafter by
agreement of the parties. In exchange for such services, Ogden
Brandywine paid a fixed fee of $117,750 per month, with bonus and
penalty provisions based on maintenance of dependable capacity levels
and availability of the Panda-Brandywine Facility for dispatch.
Sale of Capacity, Electricity and Steam
The Panda-Brandywine Partnership sells electric capacity and
energy to PEPCO pursuant to a Power Purchase Agreement (as amended by
a first amendment ("First Amendment") thereto, the "Brandywine Power
Purchase Agreement"). The Brandywine Power Purchase Agreement has an
initial term that expires in October 2021, 25 years from the
commercial operations date, and may be extended by agreement of the
parties. The Maryland Public Service Commission has approved the
Brandywine Power Purchase Agreement (including the First Amendment).
The District of Columbia Public Service Commission has issued orders
indicating its approval of the Brandywine Power Purchase Agreement as
in the public interest and the First Amendment as a reasonable
modification thereof. The District of Columbia Public Service
Commission also has made certain findings of fact and conclusions of
law that were conditions precedent to the effectiveness of the First
Amendment according to its terms.
PEPCO has the right to dispatch the Panda-Brandywine Facility on
a daily basis within certain guidelines and design limits. The design
limits specify load levels, start-up and shutdown times and minimum
run times, specifically adhering to Prudent Utility Practices. The
guidelines require PEPCO to dispatch all facilities obligated to
deliver electricity to PEPCO based on economic factors and without
regard to the ownership of such facilities. PEPCO is required to
dispatch 99 MW of the Panda Brandywine Facility's dependable capacity
for no fewer than 60 hours per week (Monday through Friday). The
remaining portion of the Panda-Brandywine Facility can be dispatched
by PEPCO under the guidelines described above.
The Brandywine Power Purchase Agreement provides for two
payments: a capacity payment and an energy payment. The capacity
payment is a fixed charge to be paid regardless of whether the Panda-
Brandywine Facility is dispatched, subject to reduction in certain
circumstances described below. Monthly capacity payments throughout
the term of the Brandywine Power Purchase Agreement are based on the
Panda-Brandywine Facility's dependable capacity, the capacity rate
and other factors. Under the Brandywine Power Purchase Agreement, the
Panda-Brandywine Facility is required to establish a dependable
capacity of 230 MW in summer ambient conditions (defined as 92 degrees F
and 50% humidity). The dependable capacity will be determined by semi-
annual tests and PEPCO has the right to require the Panda-Brandywine
Partnership to revalidate the dependable capacity. The capacity rate,
stated in $/kW/month, is a fixed schedule of payments for each of the
25 years of the initial term of the Brandywine Power Purchase
Agreement, ranging from $13.74 in 1997 to $23.63 in 2014. The
capacity payment is subject to specified downward adjustments in
contract years one, two and four, and to specified upward adjustments
in the fifth and 11th through the 25th contract years. Capacity
payments will be reduced if the Panda-Brandywine Facility cannot
maintain 88% equivalent availability, and will be increased if it
exceeds 92% equivalent availability. Capacity payments may also be
decreased commencing in 2006 depending on whether PEPCO's system peak
load exceeds 5,697 MW during 1997, 1998 or 1999 or later. Calculation
of capacity payments pursuant to these provisions of the Brandywine
Power Purchase Agreement is the subject of a dispute between the
Panda-Brandywine Partnership and PEPCO, as discussed below.
The energy payment is determined in accordance with a series of
formulas that reflect specified heat rates, hours of synchronization
and operation and a combination of fixed and market prices for
natural gas. The Brandywine Power Purchase Agreement provides that
the energy price will be increased to compensate the Panda-Brandywine
Partnership for its variable costs of fuel oil if the gas supply is
interrupted. In such event, the Brandywine Power Purchase Agreement
specifies a base cost of oil, which is escalated at the annual rate
of change according to an oil index described therein.
The Panda-Brandywine Partnership has constructed a seven-mile
long electric transmission line to connect the Panda-Brandywine
Facility and the transmission facilities of PEPCO. Consolidated Rail
Corporation entered into an agreement with the Panda-Brandywine
partnership to provide transmission line easements for a portion of
the transmission line. The Panda-Brandywine Partnership transferred
ownership of the transmission line to PEPCO on October 30, 1996.
The Panda-Brandywine Partnership sells steam to the Brandywine
Water Company pursuant to a Steam Sales Agreement dated March 30,
1995 (the "Brandywine Steam Agreement"). Brandywine Water Company,
which is an indirect wholly owned subsidiary of the Company, uses the
steam to generate distilled water which is sold locally. This
production and sale of thermal energy allows the Panda-Brandywine
Facility to achieve QF status. The Brandywine Steam Agreement
continues until October 31, 2021 and may be extended by agreement of
the parties for additional terms of five years. Brandywine Water
Company unconditionally agrees to purchase all of the thermal energy
produced by the Panda-Brandywine Facility and has entered into a
contract with the United States Navy to sell it distilled water for
heating and other industrial uses in a naval facility. The contract
is for a one-year term that commenced on October 1, 1996. Prior to
the expiration of the term of the Navy contract, Brandywine Water
Company will have to extend the contract or find one or more other
customers to purchase the distilled water. If Brandywine Water
Company is unable to extend its contract to sell distilled water to
the United States Navy or to find one or more replacement contracts
for the sale of such water, there is no assurance that the Panda-
Brandywine Facility will be able to remain a Qualifying Facility.
PEPCO may terminate the Brandywine Power Purchase Agreement under
certain circumstances if the Panda-Brandywine Facility ceases to be a
QF, unless the Panda-Brandywine Partnership receives all governmental
and regulatory approvals necessary to continue operating the Panda-
Brandywine Facility without QF certification. See "Risk Factors -
Maintaining Qualifying Facility Status."
Dispute With PEPCO Over Calculation of Capacity Payments
In late August 1996, the Panda-Brandywine Partnership and PEPCO
commenced discussions concerning commercial operation requirements of
the Panda-Brandywine Facility and conversion of the construction loan
to long-term financing. During these discussions, two disagreements
arose between the Panda-Brandywine Partnership and PEPCO as to how
capacity payments should be calculated under the Brandywine Power
Purchase Agreement. PEPCO and the Panda-Brandywine Partnership are
presently attempting to resolve this dispute but there are no
assurances that such efforts will be successful.
The Panda-Brandywine Partnership and PEPCO disagree as to the
date on which the yield to maturity on United States Treasury Bonds
with a maturity of 12 years ("12 year T-Bonds") should be determined
under a provision in the Brandywine Power Purchase Agreement that
requires capacity payments to be reduced if such interest rate is
less than 8%. Such provision states that the interest rate of 12
year T-Bonds is to be determined, and adjustments to capacity
payments made, as of the date that the interest rate for permanent
financing for the Panda-Brandywine Facility is designated pursuant to
an executed commitment for such financing. On October 6, 1994, the
Panda-Brandywine Partnership entered into a written commitment with
GE Capital with respect to permanent financing for the Panda-
Brandywine Facility, which commitment designated an interest rate for
such financing. Accordingly, the Panda-Brandywine Partnership takes
the position that October 6, 1994 should be the date used to
determine the interest rate of 12 year T-Bonds under the Brandywine
Power Purchase Agreement. The interest rate for 12 year T-Bonds on
such date was 7.94% per annum. PEPCO, on the other hand, takes the
position that since the interest rate designated in such commitment
was a floating rate, the date to be used for determining the interest
rate of 12 year T-Bonds is the closing date of the conversion of the
Brandywine Construction Loan Facility to long-term financing in the
form of a leveraged lease, which occurred on December 30, 1996. The
interest rate for 12 year T-Bonds on such date was 6.40%.
If the foregoing PEPCO Interest Rate Dispute is determined
adversely to the Panda-Brandywine Partnership, the capacity payments
paid by PEPCO under the Brandywine Power Purchase Agreement will be
less than originally anticipated, thereby adversely affecting the
revenues realized by the Panda-Brandywine Partnership, and
consequently, reducing the amount of funds that would be available
for distribution to the Company and ultimately repayment of the
Exchange Bonds. The Consolidated Pro Forma Report sets forth certain
prospective financial data of the Panda-Brandywine Partnership for
the 16-year term of the Existing Bonds under both the PEPCO Scenario
(where it is assumed that the PEPCO Interest Rate Dispute is resolved
in a manner consistent with PEPCO's position) and the Brandywine
Scenario (where it is assumed that the PEPCO Interest Rate Dispute is
resolved in a manner consistent with the Panda-Brandywine
Partnership's position). Under the PEPCO Scenario, the Consolidated
Pro Forma Report indicates that the projected minimum Company Debt
Service Coverage Ratio would be 1.3:1 and the projected minimum
Consolidated Debt Service Coverage Ratio would be 1.1:1 (except
during 1997 in which the projected Company Debt Service Coverage
Ratio is 0.8:1 and the projected Consolidated Debt Service Coverage
Ratio is 0.96:1). In such case, the distributions that the Company
expects to receive from its Project Entities that own the Panda-
Brandywine Partnership and the Panda-Rosemary Partnership will be
sufficient to service the Existing Bonds (except in 1997); however,
such distributions will not be sufficient to enable the Company to
meet the minimum Company Debt Service Coverage Ratio of 1.7:1 and the
minimum Consolidated Debt Service Coverage Ratio (if then applicable)
of 1.25:1 required under the Indenture to permit the Company to incur
additional debt. Accordingly, the ability of the Company to raise
debt for Projects in the future would be impaired. In addition, the
projected coverage ratios under the PEPCO Scenario indicate that
distributions the Company expects to receive from its Project
Entities would be insufficient to service the Existing Bonds in 1997.
In such case, monies held in the Accounts and Funds, if any, may be
applied toward any debt service deficiency as set forth in the
Indenture. The current balances in the Accounts and Funds are as
follows: U.S. Project Account, $7.0 million; Capitalized Interest
Fund, $9.8 million; Debt Service Reserve Fund, $6.4 million; Company
Expense Fund, $247,000. See "Offering Circular Summary - Independent
Engineers' and Consultants' Reports - Consolidating Engineer's Pro
Forma Report" and "- Independent Pro Forma Analysis - Brandywine" and
"Description of the Exchange Bonds - The Accounts and Funds" and "-
Certain Covenants - Limitations on Debt."
To the extent that PEPCO's position with respect to the PEPCO
Interest Rate Dispute does not prevail, PEPCO claims that it is
entitled to a reduction in capacity payments under another provision
of the Brandywine Power Purchase Agreement that requires PEPCO to
share equally in any "refinancing or new or revised lease
arrangements" savings. The Panda-Brandywine Partnership takes the
position that all transactions to be entered into at or near closing
of the Brandywine Financing Conversion were provided for under the
Brandywine Financing Documents and do not constitute a refinancing or
new or revised lease arrangements. In the event that the capacity
payments were reduced pursuant to this provision, the reduction would
be significantly less than the reduction claimed by PEPCO in
connection with the PEPCO Interest Rate Dispute.
PEPCO and the Panda-Brandywine Partnership also disagree as to
the determination of PEPCO's system peak load which is the basis for
reductions in capacity payments under the Brandywine Power Purchase
Agreement. Under such provision, capacity payments are to be
reduced, commencing in 2006, if PEPCO's system peak load does not
exceed 5,697 MW prior to 1998, and are reduced by a greater amount if
PEPCO's system peak load does not exceed such amount prior to 1999.
PEPCO and BG&E have announced their intention to merge during 1997
into a new entity to be known as Constellation Energy Corporation
("Constellation"), and PEPCO has asked the Panda-Brandywine
Partnership to agree that peak load under the Brandywine Power
Purchase Agreement would be calculated on the basis of the pre-merger
PEPCO system and not the post-merger Constellation system. Peak load
based on the Constellation system would greatly exceed 5,679 MW
during 1997. However, PEPCO's position is that the parties intended
to use the current PEPCO system in calculating peak load and that the
merger with BG&E should be disregarded for such purpose. The Panda-
Brandywine Partnership disagrees with such position. The Brandywine
Power Purchase Agreement does not contain any provision requiring
adjustments due to mergers or reorganizations. It is the Panda-
Brandywine's position that Constellation, as the successor of PEPCO,
would be substituted for PEPCO under the Brandywine Power Purchase
Agreement and the Constellation system should be used to calculate
peak load.
The Brandywine Pro Forma and the Consolidated Pro Forma are
prepared under the assumption that PEPCO's system peak load (based on
the pre-merger PEPCO system) exceeds 5,697 MW during 1997, and
accordingly, there is no reduction in capacity payments under this
provision. ICF believes that such assumption is reasonable in light
of recent peak day demand on PEPCO's system and is not dependent upon
the outcome of the current dispute between Panda-Brandywine
Partnership and PEPCO regarding the basis for the determination of
PEPCO's system peak load. See "Offering Circular Summary -
Independent Engineers' and Consultants' Reports - Consolidating
Engineer's Pro Forma Report" and "- Independent Pro Forma Analysis -
Brandywine."
Gas Supply and Fuel Management
The Panda-Brandywine Partnership purchases both firm and
interruptible natural gas supply from Cogen Development Company
("CDC") pursuant to the Gas Sales Agreement, dated March 30, 1995,
between the Panda-Brandywine Partnership and CDC (the "Brandywine Gas
Agreement"). MCN Corporation, the parent corporation of CDC, has
unconditionally guaranteed the payment and performance obligations of
CDC under the Brandywine Gas Agreement. The Brandywine Gas Agreement
commenced October 31, 1996 and continues until October 31, 2011, and
thereafter is automatically renewed for an additional two-year term
unless terminated by either party upon nine months' written notice.
CDC is obligated to sell and deliver to the Panda-Brandywine
Partnership, at receipt points along the pipeline system of Columbia
Gas, up to 24,240 MMBtu of gas per day on a firm basis and up to
24,240 MMBtu of gas per day on an interruptible basis. Gas delivered
by CDC within the firm basis limit falls within one of the three
following categories: "Limited Dispatch Gas," "Scheduled Dispatch
Gas" or "Dispatchable Gas" (each as defined in the Brandywine Gas
Agreement).
The price for the gas delivered by CDC is dependent upon the
category of the gas delivered. The price for Limited Dispatch Gas
consists of a monthly demand charge, a commodity charge and a charge
relating to costs incurred by CDC for gas storage service CDC
receives from ANR Pipeline Company. The commodity charge escalates
annually while the demand charge and the ANR-related charge increase
after the fifth year of the initial term of the Brandywine Gas
Agreement. The price for Scheduled Dispatch Gas consists of a
commodity charge based on the monthly NYMEX settlement price for
natural gas futures contracts plus a margin which increases after
year five of the Brandywine Gas Agreement. The price for Scheduled
Dispatch Gas is capped based on three monthly natural gas price
indices. The price for Dispatchable Gas is a negotiated price or, if
a negotiated price cannot be reached, is based on a daily natural gas
price index. In addition, the Panda-Brandywine Partnership receives a
price credit from CDC for each MMBtu of gas delivered by CDC during a
month not to exceed the demand charge for Limited Dispatch Gas.
The Panda-Brandywine Partnership must annually take or pay for
no less than 2,299,500 MMBtu (or 2,305,800 MMBtu during a leap year)
of Limited Dispatch Gas, which amount is reduced by 7,000 MMBtu for
each day of regularly scheduled outage at the Panda-Brandywine
Facility. In addition, the Panda-Brandywine Partnership must take or
pay for a quantity of Scheduled Dispatch Gas each month that is no
less than 80% of the Scheduled Dispatch Gas that was scheduled for
delivery during such month. If the Panda-Brandywine Partnership pays
for but fails to take the minimum quantities of Limited Dispatch Gas
or Scheduled Dispatch Gas, the Panda-Brandywine Partnership has the
opportunity later to receive the quantities of gas paid for but not
taken.
Each year, CDC must deliver a report to the Panda-Brandywine
Partnership demonstrating that the expected production from the
proven gas reserves owned by CDC or an affiliate will be greater than
CDC's total firm gas supply commitments over the next five years. If
the total firm commitments exceed the gas reserves, CDC must take
action to ensure that its gas reserves will equal or exceed the total
firm commitments within six months, or CDC must dedicate adequate
reserves to meet its obligation to provide Limited Dispatch Gas to
the Panda-Brandywine Partnership through the end of the term of the
Brandywine Gas Agreement. The dedicated gas reserves can be released
from dedication if CDC submits reports for three consecutive years
demonstrating that CDC's gas reserves exceed total firm commitments
or CDC submits a report demonstrating that CDC's gas reserves are
greater than or equal to 125% of total firm commitments.
The Panda-Brandywine Partnership also purchases fuel management
services from CDC pursuant to the Fuel Supply Management Agreement
between CDC and the Panda-Brandywine Partnership (the "Brandywine
Fuel Management Agreement"). MCN Investment Corporation has
unconditionally guaranteed CDC's payment and performance obligations
under the Brandywine Fuel Management Agreement. The Brandywine Fuel
Management Agreement is effective for an initial term that is the
greater of 15 years from the date the Panda-Brandywine Facility
commenced commercial operations and the initial term of the
Brandywine Gas Agreement, and will be extended for an additional two-
year term unless terminated by either party upon nine months' written
notice. The Brandywine Fuel Management Agreement will immediately
terminate at either party's option if (i) the Brandywine Gas
Agreement terminates; (ii) the MCN Investment Corporation guaranty is
terminated; or (iii) the Panda-Brandywine Facility ceases operations
for twelve consecutive months.
CDC's fuel management responsibilities under the Brandywine Fuel
Management Agreement include advising the Panda-Brandywine
Partnership with respect to the negotiation of natural gas and fuel
oil supply and transportation arrangements, arranging for the
delivery to the Panda-Brandywine Facility of natural gas or fuel oil,
endeavoring to make such arrangements on "best efforts" and "best
competitive offer" basis and advising the Panda-Rosemary Partnership
with respect to fuel hedging arrangements.
Gas Transportation
The Panda-Brandywine Partnership and Columbia Gas have entered
into a Precedent Agreement (the "Columbia Precedent Agreement"),
pursuant to which Columbia Gas constructed new pipeline facilities to
expand its existing interstate pipeline and provide the Panda-
Brandywine Partnership with firm gas transportation service. The
Panda-Brandywine Partnership has contributed $6,772,590, plus
applicable tax gross-up, toward the construction of Columbia Gas'
pipeline facilities.
The Panda-Brandywine Partnership purchases firm gas
transportation service from Columbia Gas pursuant to an Amended and
Restated FTS Service Agreement (the "Columbia Gas FT Agreement").
Service under the Columbia Gas FT Agreement commenced on November 1,
1996 and continues until October 31, 2021, and year-to-year
thereafter unless terminated by either party upon six months' notice.
Columbia Gas is obligated to provide the Panda-Brandywine
Partnership with up to 24,240 Dth per day of firm gas transportation
service from a receipt point near Monclova, Ohio to an
interconnection between the facilities of Columbia Gas and Cove Point
LNG Limited Partnership ("Cove Point") in Loudoun County, Virginia.
Columbia Gas provides the firm transportation service pursuant to the
terms of the Columbia Gas FT Agreement Rate Schedule and the general
terms and conditions of Columbia Gas's effective FERC gas tariff.
The Panda-Brandywine Partnership purchases from Cove Point firm
gas transportation service to transport gas delivered by Columbia Gas
to the facilities of Cove Point pursuant to a FTS Service Agreement
(the "Cove Point FT Agreement"). The Cove Point FT Agreement
continues until October 31, 2021.
Cove Point is obligated to provide the Panda-Brandywine
Partnership with up to 24,000 Dth per day of firm gas transportation
service from an interconnection between the facilities of Cove Point
and Columbia Gas in Loudoun, Virginia to an interconnection between
the facilities of Cove Point and Washington Gas Light Company ("WGL")
in Charles County, Maryland. Cove Point provides the firm
transportation service pursuant to the Cove Point FT Agreement, the
Rate Schedule FTS and the general terms and conditions of its
effective FERC gas tariff.
The Panda-Brandywine Partnership and Cove Point have also
entered into the Service Agreement Under Rate Schedule ITS, dated
June 20, 1996, whereby Cove Point provides the Panda-Brandywine
Partnership with 30,000 Dth per day of interruptible transportation
service on a month-to-month basis over the same pipeline path Cove
Point utilizes to provide firm transportation service to the Panda-
Brandywine Partnership.
The Panda-Brandywine Partnership purchases from WGL gas
transportation, gas sales and gas balancing service pursuant to a Gas
Transportation and Supply Agreement (the "WGL Agreement"). The WGL
Agreement continues until October 31, 2021, and thereafter will
continue year-to-year unless terminated by either party upon six
months' written notice.
WGL is obligated to provide the Panda-Brandywine Partnership
with firm transportation service, up to the quantity of gas nominated
for such service on a given day, from an interconnection between the
facilities of Cove Point and WGL in Charles County, Maryland to the
interconnection between the WGL facilities and the Panda-Brandywine
Facility, provided that WGL only must use its best efforts to deliver
transportation gas to the Panda-Brandywine Facility when the pressure
on the Cove Point pipeline is less than 500 psig. During the months
of January, February and December of any calendar year, WGL may,
under certain circumstances, request that the Panda-Brandywine
Partnership release to WGL for its system use a quantity of gas
purchased by the Panda-Brandywine Partnership under the Brandywine
Gas Agreement and transported to the WGL system.
Additionally, WGL sells and delivers gas to the Panda-Brandywine
Facility on an as-available basis from November through March and on
a best efforts basis from April through October, at a price to be
agreed by the parties. WGL also provides the Panda-Brandywine
Partnership with both a daily and monthly balancing service with
respect to gas that it transports on behalf of the Panda-Brandywine
Partnership.
WGL constructed, at its expense, the necessary pipeline and
appurtenant facilities necessary to deliver gas from the Cove Point
pipeline to the Panda-Brandywine Facility.
Fuel Oil
The Panda-Brandywine Facility was constructed with the
capability to operate on No. 2 fuel oil and has the ability to change
fuel sources from natural gas to fuel oil and back without
interrupting the generation of electricity. The Panda-Brandywine
Facility has on-site storage for approximately two million gallons of
fuel oil, a supply sufficient to operate the Panda-Brandywine
Facility at full load for approximately six days. In accordance with
the fuel management plan for the Panda-Brandywine Facility, which the
Panda-Brandywine Partnership developed with the assistance of its
fuel manager (CDC) and which was approved by PEPCO, the Panda-
Brandywine Partnership will endeavor to enter into fuel oil supply
and transportation contracts by October 10 of each year that will
have a duration through the immediately succeeding winter season
(November through March). For the winter season of November 1996
through March 1997, the Panda-Brandywine Partnership has entered into
three contracts relating to fuel oil supply and transportation. The
Panda-Brandywine Partnership has entered into a Fuel Oil Coordinator
Agreement with ERK Energy, Inc. ("ERK") pursuant to which ERK manages
the purchase, storage and transportation of fuel oil on behalf of the
Panda-Brandywine Partnership on a best efforts basis, and assists
with spot market fuel oil purchases. The Panda-Brandywine Partnership
pays a fixed monthly fee to ERK plus certain performance-incentive
payments. The term of this Fuel Oil Coordinator Agreement continues
until July 31, 1997 and may be extended for additional one-year
periods upon mutual agreement.
The Panda-Brandywine Partnership has entered into a Sales and
Storage Agreement with Koch Refining Company, L.P. ("Koch") pursuant
to which the Panda-Brandywine Partnership purchased and maintains one
million gallons of No. 2 fuel oil in storage tanks located near
Baltimore, Maryland. The term of this Sales and Storage Agreement
commenced December 1, 1996 and terminates February 28, 1997; however,
the Panda-Brandywine Partnership has until March 31, 1997 to take
delivery of the stored fuel oil. The Panda-Brandywine Partnership
has access to the stored fuel oil at all times. Upon request of the
Panda-Brandywine Partnership, Koch will use its best efforts to
replenish any fuel oil removed from the storage tank at market-based
prices plus additional storage charges. If Koch is not able to
purchase the requested fuel oil within a specified time period, the
Panda-Brandywine Partnership may purchase such fuel oil from another
supplier.
The Panda-Brandywine Partnership has also entered into an
agreement (the "Hardesty Transportation Agreement") with Hardesty &
Son, Inc. ("Hardesty") pursuant to which the Panda-Brandywine
Partnership has rights to firm transportation of a minimum of 20
truckloads of fuel oil per day during the months of December through
February and ten truckloads of fuel oil per day during the months of
March through November. Hardesty will use its best efforts to
provide additional transportation upon the request of the Panda-
Brandywine Partnership. If Hardesty is unable to provide such
additional transportation when requested, the Panda-Brandywine
Partnership may use other means of delivery. The Hardesty
Transportation Agreement continues until October 1, 1997 and will
automatically be renewed for successive one-year terms unless
terminated by either party.
Water
The Panda-Brandywine Partnership has entered into a 25-year
Treated Effluent Water Purchase Agreement ("Water Supply Agreement")
with the County Commissioners of Charles County, Maryland to purchase
up to 2.7 million gallons per day of treated effluent from a local
sewage treatment plant. Treated effluent is a byproduct of the sewage
treatment process and is used as the primary cooling water source for
the Panda-Brandywine Facility's cooling towers. The treated effluent
is transported from the sewage treatment plant to the Panda-
Brandywine Facility by a buried transmission pipeline that has the
capacity to supply up to 3.0 million gallons per day. The Panda-
Brandywine Partnership received approval to use well water for boiler
and potable water.
Other Projects under Development by Panda International
The following are additional Projects that Panda International
and its affiliates are developing. There are substantial risks
associated with the development of Projects, and increased risks
associated with the development of Projects outside the United
States. There can be no assurance that any Project under development
will reach Financial Closing, achieve Commercial Operations or
satisfy the other conditions for transfer to the Project Portfolio
pursuant to the Additional Projects Contract. See "Risk Factors -
Project Risks" and "- Risks Relating to Future Non-U.S. Projects."
The Panda-Luannan Project
The Panda-Luannan Facility will be comprised of two 50 MW coal-
fired electric generating units and a steam and hot water
distribution system and will be located in Luannan County near
Tangshan City in Tangshan Municipality, Hebei Province, PRC. Luannan
County is located in northeastern Hebei Province in the area that is
frequently referred to as the Beijing-Tianjin-Tangshan Triangle, an
important economic and political center in the PRC.
PEC has formed four equity joint ventures with PRC registered
companies for purposes of developing, constructing and operating the
Panda-Luannan Facility (collectively, the "Joint Venture Companies").
The Panda Luannan Facility will sell power to North China Power
Group Company ("NCPGC") pursuant to an Electric Energy Purchase and
Sales Agreement and a General Interconnection Agreement
(collectively, the "Luannan Power Purchase Agreement"), among NCPGC
and two of the Joint Venture Companies. Gross generation amounts vary
among three eight-hour periods per day, designated as peak hours, non-
peak hours and trough hours, as determined under the Luannan Power
Purchase Agreement. The Company understands that, subject to output
limitations during non-peak hours and trough hours, NCPGC has agreed
to purchase and take all electric energy delivered to NCPGC from the
Panda-Luannan Facility, as dispatched by the grid. The Joint Venture
Companies may not sell any electric energy directly to third parties
without the consent of NCPGC. Steam generated by the Panda-Luannan
Facility will be sold to industrial purchasers, and possibly to
governmental purchasers, located in Luannan County under various heat
and supply agreements.
Panda International, through two of the Joint Venture Companies,
has selected Harbin Power Engineering Company Limited as the
engineering, procurement and construction contractor ("Harbin").
Harbin has extensive engineering, procurement and construction
experience in the power industry in the PRC. A bank guaranty is
expected to be provided by The Export-Import Bank of China in respect
of Harbin's obligations under the construction contract in a maximum
amount of 35% of the construction contract price. The two Joint
Venture Companies also will reserve as retainage 10% of the payments
for construction costs, as made, and a guaranty of all of Harbin's
liabilities and obligations under the construction contract will be
provided by Harbin's parent company, Harbin Power Equipment Group
Company.
Two of the Joint Venture Companies and NCPGC entered into a
transmission line construction agreement on February 10, 1996 for the
construction of transmission lines and associated facilities to
connect the Panda-Luannan Facility to the grid. These two Joint
Venture Companies subsequently transferred their interests in the
transmission line construction agreement to another Joint Venture
Company. NCPGC will own the transmission lines and perform all
operation, maintenance and repair of the transmission lines during
the term of the Luannan Power Purchase Agreement. The Joint Venture
Company which was transferred the interest in the transmission line
construction agreement will make funds available through a financial
intermediary to cover the cost of constructing the transmission lines
and associated facilities.
The Panda-Luannan Facility's largest coal supplier will be the
Kailuan Coal Mining Administration ("Kailuan"), a central government
coal mining bureau. Kailuan has committed by contract to supply
300,000 metric tons of coal per year to the Panda-Luannan Facility
for ten years. Additional coal supplies totaling 310,000 metric tons
per year are available under contracts with five other coal mines.
All coal will be delivered to the Panda-Luannan Facility by truck.
The commitments under these six coal supply agreements are equivalent
to 150% of the Panda-Luannan Facility's projected annual
requirements, but the Joint Venture Companies are not required to
purchase that entire amount. A contract for the provision of
operation and maintenance services has been signed with Duke/Fluor
Daniel International Services, Inc.
The formation of a Sino-foreign equity joint venture, including
both the joint venture contract and the articles of association,
requires the approval of the Ministry of Foreign Trade and Economic
Cooperation (MOFTEC) or, if the amount of the total investment in the
joint venture falls below the applicable approval threshold, the
applicable provincial or, in some cases, local commission of foreign
trade and economic cooperation (COFTEC). All businesses in China
require business licenses issued by the local branch of the State
Administration of Industry and Commerce (SAIC). The Panda-Luannan
Facility also requires certain other approvals with respect to such
items as grid interconnection, legal and financial structure,
transmission systems, land use, zoning, pricing, international
exchange, water usage, environmental protection, ash transportation
and ash disposal. These various approvals have been obtained.
The Panda of Nepal Project
Panda International has formed a joint venture with a major
hydroelectric engineering company and a local Nepalese party to build
a 36 MW hydroelectric facility on the upper Bhote Koshi River in
Nepal. Approval of the joint venture was received from the
Government of Nepal in June 1996. A power purchase agreement with
the Nepal Electricity Authority ("NEA") and a project agreement with
the Government of Nepal obligating the Government of Nepal to
guarantee NEA's payment obligations and provide certain other support
and incentives were signed in July 1996. A fixed price turnkey
engineering, procurement and construction contract for the project
was signed with China Gezhouba Construction in October 1996. Panda
International has received commitment letters from two multilateral
agencies to provide debt financing for this Project, subject to their
satisfaction with due diligence reviews and other matters.
The Panda-Lapanga Project
In August 1994, Panda International acquired from another
independent power developer a 90% interest in a Project company that
had entered into a power purchase agreement with the Orissa State
Electricity Board for a proposed 500 MW coal-fired power project to
be located in the State of Orissa, India. Certain of the central
governmental approvals for the Project have been obtained. Although
Panda International believes its power purchase agreement is valid
and enforceable, the State of Orissa has given a notice of
cancellation of such agreement to Panda International, as well as to
several other third parties with respect to their respective power
purchase agreements. Panda International has objected to such
notice. Development efforts have been delayed pending resolution of
this dispute.
The Panda-Kathleen Project
The Panda-Kathleen Facility is planned to be a combined-cycle,
natural gas-fired, intermediate-load, cogeneration facility to be
located on a 7.5-acre site owned by the Panda-Kathleen Partnership in
an industrial park near Lakeland, Florida. The Panda-Kathleen
Partnership entered into a power purchase agreement with Florida
Power Corporation ("Florida Power") in 1991.
The Panda-Kathleen Partnership and Florida Power are engaged in
litigation before various state and federal forums in Florida over
the interpretation of the Panda-Kathleen power purchase agreement.
See "Legal Proceedings - Florida Power Proceedings." The outcome of
this litigation may determine whether construction of the Panda-
Kathleen Facility is initiated and completed. The entities which are
partners of the Panda-Kathleen Partnership will be required to be
transferred to a PIC U.S. Entity and become part of the Project
Portfolio if, and within 180 days after, the Panda-Kathleen Facility
reaches the earlier of Financial Closing or Commercial Operations.
LEGAL PROCEEDINGS
The Company, the Issuer and certain of their affiliates are
claimants or defendants in various legal proceedings which have
arisen in the ordinary course of business. The Company believes such
claims and legal actions, individually or in the aggregate, will not
have a material adverse effect on the business or financial
condition, results of operations or cash flows of the Company.
NNW, Inc. Proceeding
On July 12, 1996, PEC filed an action against NNW captioned
Panda Energy Corporation v. NNW, Inc. f/k/a Nova Northwest Inc. (No.
96-07151-C), in the District Court of Dallas County, Texas (68th
Judicial District). PEC's petition seeks a declaratory judgment that
the NNW Cash Flow Participation remains at 0.433% after the
restructuring of the Panda-Rosemary Partnership interest pursuant to
the terms of the Credit Agreement. See "Description of the Projects -
The Panda-Rosemary Facility - Cash Flow Participation." Pursuant to
the Credit Agreement, NNW received a cash flow participation interest
in distributions from the Panda-Rosemary Partnership in the amount of
4.33% of PEC's own participation interest. At the time the Credit
Agreement was entered into, the aggregate equity interest in the
Panda-Rosemary Partnership held by PEC was 10%, making the NNW Cash
Flow Participation equal to 0.433%. As a result of the redemption of
Ford Credit's 90% limited partner interest in the Panda-Rosemary
Partnership in July 1996. PEC (through the Company) owns an indirect
100% interest in the Panda-Rosemary Partnership.
Pursuant to the Credit Agreement, the NNW Cash Flow
Participation is not to be affected either positively or negatively
by "any financial restructuring." It is the opinion of Panda
International and the Company that the redemption of Ford Credit's
limited partner interest constituted a "financial restructuring"
within the meaning of that term in the Credit Agreement and that, as
a result, the NNW Cash Flow Participation remains equal to 0.433% of
total cash flow distributions by the Panda-Rosemary Partnership
(based on the prior debt structure). NNW is disputing this position
and asserts that upon the redemption, it became entitled to 4.33% of
PEC's distributions from the Panda-Rosemary Partnership. The
declaratory judgment petition seeks a determination that the NNW Cash
Flow Participation is equal to 0.433%. Management believes that a
resolution of this dispute and the declaratory judgment proceeding
adverse to PEC and the Company would not have a material adverse
effect on the Company. See "'Description of the Projects - The Panda-
Rosemary Facility - Cash Flow Participation."
Heard Proceedings
PEC is a party to a lawsuit captioned Panda Energy Corporation,
Plaintiff v. Heard Energy Corporation, CLF Energia Y Electricidad,
S.A., Robert A. Wolf, Armin Alexander Budzinsky, Edward R. Gwynn,
Donald L. Kinney, Morgan Stanley & Co., Inc., Allstate Insurance
Company, Allstate Life Insurance Company, Entergy Corporation,
Entergy Enterprises, Inc., Entergy Power, Inc., Entergy Power
Development Corporation, Anil Desai, Drs. IR. Poerwanto P., and PT
Panca Serodja Pradhana, Defendants, (No. 94-0672-J), District Court
of Dallas County, Texas (191st Judicial District). PEC initiated this
litigation in April 1994 and alleges that defendants Wolf, Gwynn and
Kinney, former PEC employees, formed a competing company (Heard
Energy Corporation) and misappropriated certain of PEC's
international power project opportunities. PEC alleges that the other
defendants knowingly participated, collaborated and/or conspired in
the misappropriation. PEC alleges causes of action for
misappropriation, conspiracy, fraud, breach of contract, breach of
fiduciary duty and legal malpractice against one or more of the
defendants and alleges damages in an unspecified amount.
Defendant Morgan Stanley filed a counterclaim on September 14,
1995 against PEC, alleging that it had performed services for PEC
pursuant to an engagement agreement relating to the Panda-Brandywine
Project. PEC terminated the engagement agreement on May 4, 1993.
Morgan Stanley alleges that the services it performed prior to such
termination included assisting PEC in obtaining certain regulatory
approvals, preparing a draft solicitation booklet and identifying
potential project financing sources, including GE Capital. Morgan
Stanley further alleges that PEC obtained financing from GE Capital
after Morgan Stanley was terminated, and that Morgan Stanley is
entitled to a "transaction fee," either pursuant to the engagement
agreement or based on the value of the services it allegedly
performed, in an amount of not less than $4.3 million, plus
attorneys' fees and interest.
Defendants Heard Energy Corporation, Wolf, Gwynn, Kinney and
Budzinsky (the "Heard Defendants") also filed a counterclaim during
November 1994 against PEC and a third-party claim against Robert
Carter and Janice Carter, alleging that PEC, Robert Carter and Janice
Carter negligently made misrepresentations of PEC's lack of a
continued interest in developing international power projects. The
Heard Defendants allege that they would not have engaged in allegedly
competing international power project transactions but for these
misrepresentations and that they incurred damages in the amount of
approximately $5.0 million as a result of these misrepresentations,
such damages allegedly consisting of expenses incurred by Heard
Energy Corporation, certain portions of which allegedly are
guaranteed by the individual Heard Defendants. In both the
counterclaim and the third-party claim, the Heard Defendants further
allege that PEC, Robert Carter and Janice Carter violated a
confidentiality order relating to certain documents produced by the
Heard Defendants during the discovery phase of this action by
misappropriating confidential information in these documents for the
purpose of gaining a competitive advantage over Heard Energy
Corporation. The Heard Defendants seek $5.0 million in damages as
well as unspecified "exemplary" damages based on this alleged
violation. PEC believes that the Heard Defendants' discovery order
claim is not actionable as a claim for damages.
On March 15, 1996, all of the defendants filed motions for
summary judgment, and PEC filed motions for summary judgment with
respect to Morgan Stanley's counterclaim and the Heard Defendants'
counterclaim and third-party claim. By letter dated April 30, 1996,
the court advised all counsel that it intended to grant the
defendants' motions for summary judgment, indicating that PEC could
not show legally sufficient evidence of damages to sustain its
claims. This order was entered on June 19, 1996.
PEC has appealed the court's ruling. In light of the court's
ruling and pending the appeal, Morgan Stanley and the Heard
Defendants have dismissed without prejudice their counterclaims and
third-party claims, and PEC has agreed that any applicable statutes
of limitations or other time-based defenses will be tolled during the
pendency of the appeal.
The Company has been informed by PEC that PEC does not believe
that either the Morgan Stanley counterclaim or the Heard Defendants'
counterclaims and third-party claims will be refiled unless and until
the judgment dismissing PEC's claims against those parties is
reversed and remanded to the trial court by the appellate court. In
any event, PEC does not believe that these counterclaims or third-
party claims, if reasserted, have any merit, nor does PEC believe
that these claims, if eventually decided adversely to PEC, would have
a material effect on the business of PEC.
Brandywine Proceedings
On June 26, 1996, certain plaintiffs commenced a proceeding
against the Panda-Brandywine Partnership and one of its contractors
captioned Jeannine McConnell, McConnell Pool Service, Inc. and
McConnell Fuel Oil, Inc. v. Panda-Brandywine, L.P. and Flippo
Construction (Case No. CV 96-1344) in the Circuit Court for Charles
County, Maryland. In this proceeding, plaintiffs allege that in
connection with the construction of an effluent water pipeline, a
contractor for the Panda-Brandywine Partnership, Flippo Construction
("Flippo") and the Panda-Brandywine Partnership left their easement
and inadvertently trespassed on to plaintiffs' property. While on
plaintiffs' property, Flippo and the Panda-Brandywine Partnership
allegedly dug a deep and wide hole and laid pipe in it. Plaintiffs
allege that this trespass damaged the property, decreased its fair
market value and resulted in loss of use thereof. Plaintiffs' claim
damages in numerous counts that aggregate to $3,250,000 in actual
damages against each defendant plus punitive damages aggregating
$3,000,000 against each defendant.
The Panda-Brandywine Partnership intends to vigorously contest
this proceeding. Panda International and the Company do not believe
that the outcome of this proceeding will have any material adverse
effect on the financial condition, results of operations or cash
flows of the Company or the Panda-Brandywine Partnership. Immediately
following the inadvertent digging of the hole on plaintiffs'
property, Flippo went onto such property, filled in and compacted the
hole and moved the pipeline route off of plaintiffs' property. Panda
International and the Company believe that this action should be
sufficient to eliminate any substantial damage to this property.
Flippo has offered to go on to plaintiffs' property and fix any
remaining damage (if any) to plaintiffs' property but plaintiffs have
refused this offer.
In the opinion of Panda International and the Company, the
contract between the Panda-Brandywine Partnership and Flippo requires
Flippo to hold the Panda-Brandywine Partnership harmless for any
activities relating to the plaintiffs' property.
Florida Power Proceedings
In January 1995, Florida Power commenced a proceeding before the
Florida PSC against the Panda-Kathleen Partnership captioned In re:
Petition for Declaratory Statement Regarding Eligibility for Standard
Offer Contract and Payment Thereunder by Florida Power Corporation,
Case No. 950110-EI. Florida Power's petition seeks a declaratory
statement that the Kathleen Power Purchase Agreement is not
"available" to the Panda-Kathleen Partnership because the Panda-
Kathleen Partnership's proposed cogeneration facility allegedly is
not in compliance with the Florida PSC's rules (because it may be
capable of exceeding 75 MW in electric generating capacity).
Additionally, if the contract is "available" to the Panda-Kathleen
Partnership, Florida Power seeks a declaratory statement that it is
only obligated to pay capacity payments under the Kathleen Power
Purchase Agreement for a term of 20 years rather than for the entire
30-year term of the Kathleen Power Purchase Agreement. The Panda-
Kathleen Partnership filed a cross-petition seeking a declaratory
statement that the milestone dates in the Kathleen Power Purchase
Agreement must be extended due to Florida Power's improper actions
and as a result of the delays in developing the Panda-Kathleen
Facility caused by Florida Power's petition and the ensuing
proceeding before the Florida PSC. The Panda-Kathleen Partnership
filed a motion to dismiss the proceeding based on lack of
jurisdiction, but that motion was denied by the Florida PSC. In
February of 1996, the Florida PSC held a one-day hearing.
On May 20, 1996, the Florida PSC issued a decision granting
Florida Power's petition, and holding that the Kathleen Power
Purchase Agreement is not available to the Panda-Kathleen Facility as
proposed because it has an electric generating capacity in excess of
75 MW and that Florida Power is only obligated to make capacity
payments under the Panda-Kathleen Power Purchase Agreement for 20
years. The Florida PSC's decision also grants the Panda-Kathleen
Partnership's cross-petition insofar as it grants the Panda-Kathleen
Partnership a 18-month extension to meet the construction
commencement milestone date and an 18-month extension to meet the
commercial operation milestone date. The Panda-Kathleen Partnership
has appealed the Florida PSC's order to the Florida Supreme Court.
There is one action related to this matter pending before the
United States District Court for the Middle District of Florida
pertaining to jurisdictional issues.
UNITED STATES REGULATION
Project subsidiaries of the Company located in the United States
are subject to complex and stringent energy, environmental and other
governmental laws and regulations at the federal, state and local
levels in connection with the development, ownership and operation of
its electricity generation facilities. Federal laws and regulations
govern transactions by electric and gas utility companies, the types
of fuel that may be utilized by an electric generating facility, the
type of energy that may be produced by such a facility and the
ownership of the facility. State utility regulatory commissions must
approve the rates and terms and conditions under which public
utilities sell electric power at retail and, under certain
circumstances, purchase electric power from independent producers.
Under certain circumstances where specific exemptions are otherwise
unavailable, state utility regulatory commissions may have broad
jurisdiction over non-utility electric power generation facilities.
Energy producing projects located in the United States also are
subject to federal, state and local laws and administrative
regulations governing the emissions and other substances produced,
discharged or disposed of by a facility and the geographical
location, zoning, land use and operation of a facility. Applicable
federal environmental laws typically have state and local enforcement
and implementation provisions. These environmental laws and
regulations generally require that a variety of permits and other
approvals be obtained before the commencement of construction or
operation of an energy-producing facility and that the facility then
operate in compliance with those permits and approvals.
Federal Energy Regulation
PURPA
The Public Utility Regulatory Policies Act of 1978 ("PURPA") and
the regulations promulgated thereunder provide certain rate and
regulatory incentives to an electric generating facility that is a
qualifying cogeneration or small power production facility ("QF").
The Panda-Rosemary Facility and the Panda-Brandywine Facility are
QFs. If built, the Panda-Kathleen Facility also would be a QF. A
cogeneration facility is a QF if it (i) sequentially produces both
electricity and useful thermal energy that is used for industrial,
commercial, heating or cooling purposes, (ii) meets certain energy
efficiency and operating standards when oil or natural gas is used as
a fuel source and (iii) is not more than 50%-owned by an electric
utility, electric utility holding company or an entity or person
owned by either or any combination thereof.
Under PURPA and the regulations promulgated thereunder, QFs
receive two primary benefits. First, a QF is exempt from most
provisions of the Public Utility Holding Company Act of 1935, as
amended ("PUHCA"), from most provisions of the Federal Power Act, as
amended (the "FPA"), and from certain state laws relating to
organizational, rate and financial regulation. Second, regulations
promulgated by the Federal Energy Regulatory Commission (the "FERC")
under PURPA require that (i) electric utilities purchase electricity
generated by QFs, construction of which commenced on or after
November 9, 1978, at a price based on the purchasing utility's full
"avoided costs" and (ii) the utilities sell supplementary, back-up,
maintenance and interruptible power to the QFs on a just and
reasonable and non-discriminatory basis. See "PUHCA" and "FPA" below.
PURPA and the regulations promulgated thereunder define "avoided
costs" as the "incremental costs to an electric utility of electric
energy or capacity or both which, but for the purchase from the
qualifying facility or qualifying facilities, such utility would
generate itself or purchase from another source." Utilities may also
purchase power from QFs at prices other than "avoided costs" pursuant
to negotiations as provided by FERC regulations.
The FERC's regulations also provide that if energy or capacity
is provided pursuant to a legally enforceable obligation over a
specified term, avoided costs may be determined, at the option of the
QF, either at the time the energy or capacity is delivered or as
calculated at the time the obligation is incurred. The FERC's
regulations further provide that, in the case of rates based on
estimates of avoided costs over the term of a contract, the rates do
not violate the FERC's rules if the rules for such purchases differ
from avoided costs at the time of delivery.
In certain instances, payments based upon avoided costs
estimated at the time a contract is entered into have proven to be
greater than a utility's avoided costs at the time of delivery. Many
utilities have attempted to minimize the disparity by implementing
strategies designed to reduce avoided cost payments under such
contracts to levels that the utilities believe will be more
competitive in a short-term marginal cost electric energy market. See
"Industry Restructuring Proposals" below. Such strategies include
attempts to renegotiate or buy out power purchase contracts with QFs.
Some utilities have sought rigorously to enforce the terms of such
contracts and to exercise their contractual termination rights if the
contracts are not strictly observed. In addition, some utilities have
engaged in litigation and regulatory action against QFs to achieve
these ends.
The FERC has refused to disturb QF contract rates on two
operating projects where estimates of a utility's avoided costs,
calculated at the time the contracts were signed, were higher than
the actual avoided costs at the time of delivery and the contract
rates were not challenged at the time the contracts were signed and
were not the subject of an ongoing challenge to the state's avoided
cost determination. New York State Electric & Gas Corporation, 71
FERC 61,027, reconsideration denied, 72 FERC Para. 61,067 (1995). This
decision is currently the subject of a petition for review in the
United States Court of Appeals for the D.C. Circuit.
Relying in part on the FERC's regulations, a federal court of
appeals has held that once a state commission has approved (by final
and nonappealable order) a QF contract rate as being consistent with
avoided costs, just, reasonable and prudently incurred, any action or
order by the state commission to reconsider its approval or deny the
pass-through of the QF's charges to the utility's retail customers
under purported state authority is preempted by PURPA. Freehold
Cogeneration Associates, L.P. v. Board of Regulatory Comm'rs of New
Jersey, 44 F.3d 1178 (3rd Cir.), cert. denied sub nom., Jersey
Central Power & Light Co. v. Freehold Cogeneration Associates, L.P.,
116 S. Ct. 68 (1995).
In Independent Energy Producers Assoc. v. California Public
Utilities Comm'n, 36 F.3d 848 (9th Cir. 1994), the U.S. Court of
Appeals for the Ninth Circuit held that states are not preempted by
PURPA from instituting a program that requires QFs to submit
operating data, to purchasing utilities for monitoring compliance
with QF status requirements, as long as the monitoring requirements
do not impose an undue burden on the QFs. However, the same court
determined that states and utilities are preempted by federal law
from taking action on their determination that a QF is no longer in
compliance with QF status requirements, other than requesting that
the FERC revoke the facility's QF status, either by filing a request
for revocation or by filing a petition for a declaratory order that
the facility is no longer a QF.
On May 29, 1996, VEPCO filed with the State Corporation
Commission of the Commonwealth of Virginia ("SCC") a request for
authorization to institute a formal QF status monitoring program. The
request states that the proposed monitoring program would apply to
all QFs that have entered into power purchase agreements with VEPCO.
Under the proposed program, QFs would submit to VEPCO by March 1 of
each year certain operational data from the previous year. If VEPCO
believes, on the basis of such data, that a QF does not comply with
QF requirements, the request indicates that VEPCO would first inform
the QF and, if the QF agreed with or failed to respond to VEPCO's
findings, VEPCO would file a petition seeking a declaration from the
FERC that such a facility is not a QF.
The North Carolina Utilities Commission ("NCUC") has disallowed
the pass-through to VEPCO's North Carolina retail rates of a portion
of capacity payments VEPCO had been making to several non-utility
generation plants. The capacity payment rates for the plants had been
determined by an arbitrator and approved by the SCC. The NCUC found
that bids from a 1988 solicitation (the "1988 VEPCO Solicitation")
were available at the time the contract was approved and should have
been used, instead of arbitration, to determine VEPCO's avoided
costs. The NCUC ruled that rates in excess of the rates derived from
bids received in the 1988 VEPCO Solicitation were therefore
disallowed in VEPCO's North Carolina retail rates. The North Carolina
Supreme Court upheld the NCUC's decision, saying that the NCUC had
simply disallowed rates above avoided costs. North Carolina Utilities
Comm'n v. North Carolina Power, 338 N.C 412, 450 S.E.2d 896 (1994).
The United States Supreme Court declined to review that decision.
While the Rosemary Power Purchase Agreement with VEPCO was not
specifically approved by the SCC, the SCC did approve the 1988 VEPCO
Solicitation that resulted in the Rosemary Power Purchase Agreement.
Although the NCUC used the 1988 VEPCO Solicitation to determine the
avoided costs in the North Carolina decision discussed above, there
can be no assurance that it would not disallow the pass-through of
the Rosemary Power Purchase Agreement rates, which arose from the
1988 VEPCO Solicitation. If the NCUC were to disallow such pass-
through, and if the courts were to allow the decision to stand, the
Company believes that any such disallowance would affect only that
portion of VEPCO's rates allocated to its North Carolina retail
customers. The Brandywine Power Purchase Agreement has been approved
by both the Maryland and District of Columbia Public Service
Commissions.
The Company endeavors to develop its U.S. Projects, monitor
compliance by the U.S. Projects with applicable regulations and
choose its customers in a manner which minimizes the risks of losing
their QF status. Certain factors necessary to maintain QF status are,
however, subject to the risk of events outside the Company's control.
For example, loss of a thermal energy customer or failure of a
thermal energy customer to take required amounts of thermal energy
from a cogeneration facility that is a QF could cause the facility to
fail to satisfy the criteria required for QF status regarding the
level of useful thermal energy output. Upon the occurrence of such an
event, the Company would seek to replace the thermal energy customer
or find another use for the thermal energy that meets PURPA's
requirements, but no assurance can be given that this would be
possible.
If one of the U.S. Projects in which the Company has an interest
should lose its status as a QF, the Project would no longer be
entitled to the exemptions from PUHCA and the FPA. This could subject
the U.S. Project to rate regulation as a public utility under the FPA
and state law and could result in the Company inadvertently becoming
a public utility holding company by owning more than 10% of the
voting securities of, or controlling, a facility that would no longer
be exempt from PUHCA. This could cause all of the Company's remaining
U.S. Projects to lose their QF status, because QFs may not be
controlled, or more than 50% owned, by public utility holding
companies. Loss of QF status may also trigger defaults under
covenants to maintain QF status in the Projects' power purchase
agreements, steam sales agreements and financing agreements and
result in termination, penalties or acceleration of indebtedness
under such agreements. A facility may lose its QF status on a
retroactive or a prospective basis.
If a U.S. Project were to lose its QF status (because, for
example, it lost its steam customer), the Company could attempt to
avoid holding company status (and thereby protect the QF status of
its other Projects) on a prospective basis by restructuring its
interests in the U.S. Project. For instance, the Company could change
its voting interest in the entity owning the nonqualifying Project to
nonvoting or limited partnership interests and sell the voting
interest to an individual or company which could tolerate the lack of
exemption from PUHCA, or by otherwise restructuring ownership of the
Project so as not to become a holding company. These actions,
however, would require approval of the Commission or a no-action
letter from the Commission, and would result in a loss of control
over the nonqualifying Project, could result in a reduced financial
interest therein and might result in a modification of the Company's
operation and maintenance agreement relating to such Project. A
reduced financial interest could result in a gain or loss on the sale
of the interest in such Project, the removal of the affiliate through
which the ownership interest is held from the consolidated income tax
group or the consolidated financial statements of the Company, or a
change in the results of operations of the Company. Loss of QF status
on a retroactive basis could lead to, among other things, fines and
penalties being levied against the Company and its subsidiaries and
claims by utilities for refund of payments previously made.
Under the Energy Policy Act of 1992 ("Energy Policy Act"), a
company engaged exclusively in the business of owning and/or
operating a facility used for the generation of electric energy
exclusively for sale at wholesale may be exempted from PUHCA as an
"exempt wholesale generator." An exempt wholesale generator may not
make retail sales of electricity. If a Project can be qualified as an
exempt wholesale generator ("EWG") under Section 32 of PUHCA it will
be exempt from PUHCA even if it does not qualify as a QF. Therefore,
if a QF in the Company's Project Portfolio were to lose its QF
status, the Company could apply to have the Project qualified as an
EWG. However, assuming this changed status would be permissible under
the terms of the applicable power purchase agreement, rate approval
from FERC would be required. See "FPA" below. In addition, the
Project would be required to cease selling electricity to any retail
customers (such as the thermal energy customer) and could become
subject to state regulation of sales of thermal energy. See "PUHCA"
below.
PUHCA
PUHCA provides that any corporation, partnership or other entity
or organized group that owns, controls or holds power to vote 10% or
more of the outstanding voting securities of a "public utility
company" or a company that is a "holding company" of a public utility
company is subject to regulation under PUHCA, unless an exemption is
established or a FERC order declaring it not to be a holding company
is granted. Registered holding companies under PUHCA are required to
limit their utility operations to a single integrated utility system
and to divest any other operations not functionally related to the
operation of the utility system. In addition, a public utility
company that is a subsidiary of a registered holding company under
PUHCA is subject to financial and organizational regulation,
including approval by the Commission of certain of its financing
transactions.
As discussed above, a QF is exempt from most of the provisions
of PUHCA. A foreign utility company is also exempt from most of the
provisions of PUHCA if certain notice and other requirements are
satisfied.
FPA
Under the FPA, the FERC has exclusive rate-making jurisdiction
over wholesale sales of electricity and transmission in interstate
commerce. These rates may be determined on either a cost-of-service
basis or a market-based approach. If a QF in the Company's Project
Portfolio were to lose its Qualifying Facility status, the rates set
forth in the applicable power purchase agreement would have to be
filed with the FERC and would be subject to initial and potentially
subsequent reviews by the FERC under the FPA, which could result in
reductions to the rates.
Industry Restructuring Proposals
The United States Congress is currently considering legislation
to repeal PURPA entirely, or at least to repeal the obligation of
utilities to purchase from Qualifying Facilities. There is strong
Congressional support for grandfathering existing Qualifying
Facilities contracts if such legislation is passed, and also support
for requiring utilities to conduct competitive bidding for new
electric generation if the PURPA purchase obligation is eliminated.
The FERC and many state utility commissions are currently
studying a number of proposals to restructure the electric utility
industry in the United States to permit utility customers to choose
their utility supplier in a competitive electric energy market. The
FERC has recently issued a final rule requiring utilities to offer
wholesale customers and suppliers open access on their transmission
lines, on a basis comparable to the utilities' own use of the lines.
Although the rule (Order No. 888) may be appealed, many utilities
have already filed "open access" tariffs. The utilities contend that
they should recover from departing customers their fixed costs that
will be "stranded" if their wholesale customers choose new electric
power suppliers. These stranded costs include the capacity costs
utilities are required to pay under many QF contracts, which the
utilities view as excessive when compared with current market prices
for capacity. Many utilities are therefore seeking ways to lower
these contract prices or terminate the contracts altogether, out of
fear that their shareholders will have to bear all or part of such
"stranded" costs. Some utilities have engaged in litigation against
QFs to achieve these ends. See "PURPA" above. The FERC's rule allows
full recovery of "legitimate and verifiable" prudently incurred
stranded costs at the wholesale level. However, the FERC has
jurisdiction over only a small percentage of electric rates, and
there is likely to be litigation over whether wholesale stranded
costs are "legitimate and verifiable."
In addition to restructuring proposals being considered by
regulatory agencies, a number of bills have been introduced in the
U.S. Congress to promote electric utility restructuring and
deregulation of electric rates. These bills differ as to how and to
what extent a utility's "stranded" or "transition" costs would be
recoverable if current captive customers left the utility's system.
The existence of this legislation may increase the desire of
utilities to renegotiate, buy out or attempt to terminate existing
power purchase agreements containing prices that the utilities
believe will not be competitive in a short-term marginal cost
electric energy market. In addition, if electric energy prices are
deregulated, electric energy producers will have to sell electric
energy at competitive market prices.
State Regulations
State public utility commissions ("PUCs") have broad authority
to regulate both the rates charged by and financial activities of
electric utilities, and to promulgate regulations implementing PURPA.
Since a power purchase agreement will become a part of a utility's
cost structure (and therefore generally is reflected in its retail
rates), power purchase agreements from independent power producers
are potentially subject to the regulatory purview of PUCs,
particularly the process by which the utility has entered into the
power purchase agreements. If a PUC has approved the process by which
a utility secures its power supply, a PUC generally will be inclined
to allow a utility to "pass through" the expenses associated with an
independent power contract to the utility's retail customers.
Moreover, a PUC may not disallow the full reimbursement to a utility
for the purchase of electricity from a QF once the PUC has approved
the rates as consistent with the requirements of PURPA. In addition,
retail sales of electricity or thermal energy by an independent power
producer may be subject to PUC regulation, depending on state law.
Independent power producers that are not QFs under PURPA are
considered to be public utilities in many states and are subject to
broad regulation by PUCs ranging from the requirement that
certificates of public convenience and necessity be obtained to
regulation of organizational, accounting, financial and other
corporate matters. However, sales of electricity at wholesale are
subject to the exclusive regulatory jurisdiction of the FERC. In
addition, states may assert jurisdiction over the siting and
construction of facilities, and over the issuance of securities and
the sale or other transfer of assets by these facilities that are not
QFs.
State PUCs also have jurisdiction over the transportation and
retail sale of natural gas by local distribution companies. Each
state's regulatory laws are somewhat different; however, all
generally require a local distribution company to obtain approval
from the PUC to provide services and construct facilities. The rates
of local distribution companies are usually subject to continuing
oversight by the PUC.
In the case of the Panda-Rosemary Facility, the Panda-Rosemary
Partnership is subject to a number of conditions imposed by the NCUC
pursuant to a Certificate of Public Convenience and Necessity
("CPCN"), including that the Panda-Rosemary Facility and the Panda-
Rosemary Pipeline both be owned by the Panda-Rosemary Partnership,
that the Panda-Rosemary Partnership not transport gas for or sell or
deliver gas to any other entity, that all electricity generated at
the Panda-Rosemary Facility be sold to an electric utility and that
all thermal energy produced at the Panda-Rosemary Facility be sold
only to Bibb. If Bibb were no longer the steam purchaser, the Panda-
Rosemary Partnership would be obligated to notify the NCUC and VEPCO
and the NCUC could order such further proceedings as it deemed
appropriate, which proceedings could result in revocation of the CPCN
or the imposition of other conditions. See "Risk Factors -
Maintaining Qualifying Facility Status."
Natural Gas Regulation
The Company has an ownership interest in and operates two
natural gas-fired cogeneration projects in the United States. The
cost of natural gas (other than debt costs) is ordinarily the largest
expense of a gas-fired power project and is critical to the project's
economics. The risks associated with using natural gas can include
the need to arrange transportation of the gas across great distances,
including obtaining removal, export and import authority if the gas
is transported from Canada, the possibility of interruption of the
gas supply or transportation (depending on the quality of the gas
reserves purchased or dedicated to the Project, the financial and
operating strength of the gas supplier and whether firm or non-firm
transportation is purchased), and obligations to take a minimum
quantity of gas or pay for it (take-or-pay obligations).
Pursuant to the Natural Gas Act, the FERC has jurisdiction over
the transportation and storage of natural gas in interstate commerce.
With respect to most transactions that do not involve the
construction of pipeline facilities, regulatory authorization can be
obtained on a self-implementing basis. However, pipeline rates for
such services are subject to continuing FERC oversight. Order No.
636, issued by the FERC in April 1992, mandated the restructuring of
interstate natural gas pipeline sales and transportation services.
The restructuring required by the rule includes (i) the separation
("unbundling") of a pipeline's sales and transportation services,
(ii) the implementation of a straight fixed-variable rate design
methodology under which all of a pipeline's fixed costs are recovered
through its reservation charge, (iii) the implementation of a
capacity release mechanism under which holders of firm transportation
capacity on pipelines can release that capacity for resale by the
pipeline, and (iv) the opportunity for pipelines to recover 100% of
their prudently incurred costs ("transition costs") associated with
implementing the restructuring mandated by the rule. On July 16,
1996, the United States Court of Appeals for the District of Columbia
Circuit issued an order following appeals of Order No. 636 by various
interested parties (United Distribution Companies v. FERC, No.
92-1485). The court approved most of Order No. 636. However, the
court remanded some issues to the FERC for further consideration. The
remanded issues include: (i) the FERC's requirement that an existing
firm transportation customer bid up to a 20-year term to retain its
rights to firm transportation capacity at the end of its contract
term; (ii) certain aspects of the FERC's efforts to mitigate the
economic effect of Straight Fixed-Variable ("SFV") transportation
rates on certain transportation customers; (iii) the FERC's
limitation on the obligation of the pipelines to provide "no-notice"
transportation service; and (iv) the FERC's determination that
pipelines can recover 100% of their prudently-incurred Gas Supply
Realignment ("GSR") costs from their transportation customers and can
recover 10% of these costs from their interruptible transportation
customers. The FERC's order on remand of these issues should not have
an adverse effect on the Partnership's gas transportation
arrangements.
Environmental Regulations
The development, construction and operation of power projects in
the United States is subject to extensive federal, state and local
laws and regulations adopted for the protection of the environment
and to regulate land use. The laws and regulations applicable to the
Company and its domestic subsidiaries primarily involve the discharge
of emissions into the water and air and the use of water, but can
also include wetlands preservation, endangered species, waste
disposal and noise regulations. These laws and regulations in many
cases require a lengthy and complex process of obtaining licenses,
permits and approvals from federal, state and local agencies.
Noncompliance with environmental laws and regulations can result
in the imposition of civil or criminal fines or penalties. In some
instances, environmental laws also may impose clean-up or other
remedial obligations in the event of a release of pollutants or
contaminants into the environment. The following federal laws are
among the more significant environmental laws that may apply to the
Company and its domestic subsidiaries. In most cases, analogous state
laws also exist that may impose similar, and in some cases more
stringent, requirements on the Company and its domestic subsidiaries.
Clean Air Act
The Federal Clean Air Act, as amended (the "Clean Air Act"),
provides for the regulation, largely through state implementation of
federal requirements, of ambient air quality and emissions of air
pollutants from certain facilities and operations. As originally
enacted, the Clean Air Act set guidelines for emissions standards for
major pollutants (e.g., sulfur dioxide and nitrogen oxide) from new
sources. The 1990 Clean Air Act Amendments tightened regulations on
emissions from existing sources, particularly previously exempted
older power plants. The Company believes that the Panda-Rosemary
Facility and the Panda-Brandywine Facility are in compliance with
federal performance standards mandated for such plants under the
Clean Air Act.
Clean Water Act
The Federal Clean Water Act, as amended (the "Clean Water Act"),
also provides for the regulation, largely through state
implementation of federal requirements, of the quality of surface
waters and imposes limitations on discharges to those waters from
point sources, including certain facilities and operations. The water
quality standards established under the Clean Water Act are used as
the basis for developing specific pollutant discharge limitations
from point sources. The discharge limitations are incorporated into
permits called National Pollutant Discharge Elimination System
("NPDES") permits. The Company believes that the Panda-Rosemary
Facility is in compliance with the federal and state requirements
applicable through its NPDES wastewater discharge permit under the
Clean Water Act. The Company believes that the Panda-Brandywine
Facility does not make any discharges of wastewater for which the
Panda-Brandywine Facility is required to have an NPDES permit. The
Clean Water Act also imposes requirements with respect to the
discharge of stormwater runoff from industrial sites. Those
requirements are implemented through state stormwater discharge
permits, which have been obtained for the Panda-Rosemary Facility and
the Panda-Brandywine Facility. The Company believes that the
operation of the Panda-Rosemary Facility and the Panda-Brandywine
Facility complies with the requirements of their respective
stormwater discharge permit. The Clean Water Act also restricts
discharges of fill materials to wetlands. The Panda-Rosemary Facility
obtained approval for discharges in connection with its construction.
Resource Conservation and Recovery Act
The Resource Conservation and Recovery Act of 1976 ("RCRA")
regulates the generation, treatment, storage, handling,
transportation and disposal of solid and hazardous waste. The Company
believes that it and its subsidiaries are in material compliance with
solid and hazardous waste requirements under RCRA.
Comprehensive Environmental Response, Compensation, and Liability
Act
The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA" or "Superfund"), requires
the remediation of sites from which there has been a release or
threatened release of hazardous substances and authorizes the United
States Environmental Protection Agency to take any necessary response
action at Superfund sites, including ordering potentially responsible
parties liable for the release to take or pay for such actions.
Potentially Responsible Parties are broadly defined under CERCLA to
include past and present owners and operators of such sites, as well
as generators, arrangers and transporters of wastes sent to a site.
MANAGEMENT
Director, Independent Director and Officers of the Issuer and the
Company
The number of members of the Board of Directors of each of the
Issuer and the Company has been set at one, but the number may be
increased or decreased by the Board of Directors or the stockholders.
Directors of each of the Issuer and the Company are elected annually
and each elected director holds office until a successor is elected.
Robert W. Carter is the current director of each of the Issuer and
the Company and has served in such capacity since July 1996.
The Certificate of Incorporation of each of the Issuer and the
Company provides that the corporation shall always have an individual
serving as an "Independent Director" who shall have the right to vote
or consent only on, and whose affirmative vote or consent shall be
required with respect to, any decision by the corporation or the
Board of Directors to (i) file a bankruptcy petition, make an
assignment for the benefit of creditors, apply for the appointment of
a custodian, receiver or trustee for the corporation or its property,
consent to the filing of such proceeding or admit in writing to the
corporation's inability to pay its debts generally as they become
due; (ii) commence the dissolution, liquidation, consolidation,
merger or sale of all or substantially all of the assets of the
corporation; (iii) amend the Certificate of Incorporation to broaden
the purposes of the corporation and in other respects; or (iv)
authorize the corporation to engage in any activity other than those
set forth in the Certificate of Incorporation. The Certificate of
Incorporation of each of the Issuer and the Company provides that the
Independent Director shall be a person who is not and has not been,
for the five years preceding his election, (i) a direct or indirect
legal or beneficial owner of the corporation or its affiliates (or a
member of the immediate family of such owner), (ii) a creditor,
supplier, officer, director, promoter, underwriter, manager or
contractor of the corporation or any of its affiliates (or a member
of the immediate family of any such officer or director) or (iii) a
person (or a member of the immediate family of a person) employed by
the corporation or any of its affiliates or by any creditor,
supplier, employee, stockholder, officer, director, promoter,
underwriter, manager or contractor thereof. The Independent Director
may, however, serve in such capacity for other special purpose
subsidiaries of Panda International. In July 1996, Brian G. Trueblood
was elected as the Independent Director of each of the Issuer and the
Company. Mr. Trueblood also serves as the Independent Director for
Panda Interholding, PRC II, PR Corp. and Panda-Rosemary Funding
Corporation.
The following table sets forth the names and ages of the
directors and the executive officers of each of the Issuer and the
Company and their positions with the Issuer and the Company. Since
the formation of the Issuer and the Company, each executive officer
of the Issuer and the Company has held the same office(s) with the
Issuer and the Company that he or she has held with Panda
International, PEC and each other corporation that is currently a
direct or indirect subsidiary of the Company.
<TABLE>
<CAPTION>
Name Age Position with the Issuer and the Company
<S> <C> <C>
Robert W. Carter 58 Director, Chairman of the Board, President and
Chief Executive Officer
Janice Carter 55 Executive Vice President, Secretary and Treasurer
William C. Nordlund 42 Senior Vice President and General Counsel
Marjean Henderson 46 Senior Vice President and Chief Financial Officer
James D. (Pete) Wright 43 Senior Vice President, Project Finance and Acquisitions
Brian G. Trueblood 35 Independent Director
</TABLE>
Robert W. Carter has been the Chairman of the Board and Chief
Executive Officer of Panda International since January 1995. Mr.
Carter has held similar chief executive positions with PEC and its
subsidiaries since he founded PEC in 1982. Mr. Carter also is
President of Robert Carter Oil & Gas, Inc. (an oil and gas
exploration company), which he founded in 1980. From 1978 to 1980,
Mr. Carter was Vice President of oil and gas lease sales for Reserve
Energy Corporation (an oil and gas exploration company). From 1974 to
1978, he served as a marketing consultant to Forward Products, Inc.
(a petrochemical company). Mr. Carter was Executive Vice President of
Blasco Industries (a chemical and textile manufacturer) from 1970 to
1974. He served as a sales representative and sales manager for Olin
Mathieson Chemical Corporation (a petrochemical, pulp and paper
company) from 1965 to 1970. From 1960 to 1965, he was a sales
representative for Inland, Mead Paper Company in Atlanta. Mr. Carter
attended the University of Georgia.
Janice Carter has been the Executive Vice President, Secretary,
Treasurer and a Director of Panda International since January 1995
and has served as a Director of PEC from its organization in 1982 to
October 1995. Mrs. Carter has also served as an officer of PEC in the
capacities described above since its inception in 1982. From 1975 to
1980, Mrs. Carter was office manager of Reserve Energy Corporation.
From 1969 to 1972, Mrs. Carter worked for University Computing, and
from 1962 to 1968 she directed administration for the engineering
department of Otis Engineering, a division of Halliburton
International. Mrs. Carter also serves as Vice President and
Secretary/Treasurer of Robert Carter Oil & Gas, Inc. Mrs. Carter
attended Texas Tech University. Mrs. Carter is married to Robert W.
Carter.
William C. Nordlund has served as Senior Vice President and
General Counsel of Panda International and PEC since August 1996.
Prior thereto, he served as Vice President and General Counsel of
Panda International since January 1995 and of PEC since January 1994.
Mr. Nordlund was General Counsel of PEC from April 1993 to January
1994. He was Senior Vice President and General Counsel from August
1992 to April 1993 and Vice President and General Counsel from
September 1991 to August 1992 for The Oxford Energy Company (a
developer of independent power facilities). From July 1990 to
September 1991, Mr. Nordlund was an attorney with Constellation
Holdings, Inc., an affiliate of Baltimore Gas & Electric Company
which developed independent power facilities. Prior to July 1990, he
was a partner in the law firm of Winston & Strawn in Chicago. Mr.
Nordlund earned a Bachelor of Arts degree from Vanderbilt University,
a Juris Doctor degree from Duke University and a Master of Management
degree from the J.L. Kellogg Graduate School of Business at
Northwestern University.
Marjean Henderson has been Senior Vice President and Chief
Financial Officer of Panda International since August 1996 and a
Director of Panda International, since January 1995. Ms. Henderson
served as a Director of PEC from January 1993 to October 1995. Prior
to joining Panda International Ms. Henderson was the Senior Vice
President, Chief Financial Officer, Treasurer and Secretary for Nest
Entertainment, a producer and distributor of children's animated home
videos and movies. From 1987 to 1993, Ms. Henderson was the Vice
President, Chief Financial Officer, Treasurer and Secretary at RCL
Enterprises, the holding company for the Lyons Group/Lyrick Studios,
the creator, producer and distributor of the home video television
series, "Barney, the Purple Dinosaur." Ms. Henderson was previously
with Arthur Andersen and Co. for twelve years, specializing in the
energy and distribution industries, with significant initial public
offering responsibilities. Ms. Henderson earned a BBA with a
concentration in accounting from the University of Texas at Austin
and she is a Certified Public Accountant.
James D. (Pete) Wright has served as Senior Vice President,
Project Finance and Acquisitions of Panda International and PEC since
August 1996. Prior thereto, he served as Vice President and Chief
Financial Officer of Panda International since January 1995 and of
PEC since January 1994. Mr. Wright served as Chief Financial Officer
of PEC from February 1993 to January 1994. Prior to joining PEC in
February 1993, he served as Vice President of Banc One Capital
Corporation (a merchant banking group) from May 1986 to December
1992. Mr. Wright previously held the position of Vice President with
the investment banking firms of Schneider, Bernet & Hickman, Inc. in
Dallas and Wheat, First Securities, Inc. in Richmond, Virginia. Mr.
Wright earned a Bachelor of Science degree from Vanderbilt University
and a Master of Business Administration degree from the Colgate
Darden Graduate School of Business Administration of the University
of Virginia.
Brian G. Trueblood became the Independent Director of the Issuer
and the Company in July 1996. He has served as Vice President of TNS
Partners, Inc. (a Dallas-based retained executive search firm) since
August 1994. From September 1989 to August 1994, Mr. Trueblood served
as a senior partner in the Dallas office of Lucas Associates (an
Atlanta-based executive search firm). Mr. Trueblood received a
Bachelor of Science degree in general engineering from the United
States Military Academy.
Executive and Board Compensation and Benefits
No cash or non-cash compensation was paid in any prior year or
is proposed to be paid in the current calendar year to any of the
officers and directors listed under "Management" for their services
to the Issuer or the Company. Mr. Trueblood will be paid $1,000 per
year by each of the Issuer and the Company for serving as an
Independent Director thereof.
DESCRIPTION OF OUTSTANDING PROJECT-LEVEL DEBT
The Panda-Rosemary Financing
Concurrently with the Prior Offering, Panda-Rosemary Funding
Corporation (the "Rosemary Issuer"), a wholly-owned subsidiary of the
Panda-Rosemary Partnership, consummated the offering and sale (the
"Rosemary Offering") of $111.4 million in aggregate principal amount
of its 8-5/8% First Mortgage Bonds due 2016 (the "Rosemary Bonds").
The Rosemary Bonds were issued pursuant to an indenture (the
"Rosemary Indenture") among the Panda-Rosemary Partnership, the
Rosemary Issuer and Fleet National Bank, as trustee. The following
description of the Rosemary Bonds and certain provisions of the
Rosemary Indenture does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Rosemary
Indenture, a copy of which is attached as an exhibit to the
Registration Statement of which this Prospectus constitutes a part.
Interest and Principal Payments
The Rosemary Bonds bear interest at the rate of 8-5/8% per year
from July 31, 1996, the date of original issuance, or from the most
recent interest payment date to which interest has been paid or
provided for, payable quarterly on February 15, May 15, August 15 and
November 15, commencing November 15, 1996. Principal of the Rosemary
Bonds is payable in quarterly installments as follows:
<TABLE>
<CAPTION>
Percentage Percentage
of Original of Original
Principal Principal
Payment Date Amount Payable Payment Date Amount Payable
<C> <C> <C> <C>
November 15, 1996 1.2356% August 15, 2006 0.9632%
February 15, 1997 1.2356% November 15, 2006 0.9632%
May 15, 1997 1.2344% February 15, 2007 0.9632%
August 15, 1997 1.2344% May 15, 2007 1.0081%
November 15, 1997 1.2344% August 15, 2007 1.0081%
February 15, 1998 1.2344% November 15, 2007 1.0081%
May 15, 1998 1.3291% February 15, 2008 1.0081%
August 15, 1998 1.3291% May 15, 2008 1.0558%
November 15, 1998 1.3291% August 15, 2008 1.0558%
February 15, 1999 1.3291% November 15, 2008 1.0558%
May 15, 1999 1.1429% February 15, 2009 1.0558%
August 15, 1999 1.1429% May 15, 2009 1.1039%
November 15, 1999 1.1429% August 15, 2009 1.1039%
February 15, 2000 1.1429% November 15, 2009 1.1039%
May 15, 2000 1.2282% February 15, 2010 1.1039%
August 15, 2000 1.2282% May 15, 2010 1.1541%
November 15, 2000 1.2282% August 15, 2010 1.1541%
February 15, 2001 1.2282% November 15, 2010 1.1541%
May 15, 2001 1.3196% February 15, 2011 1.1541%
August 15, 2001 1.3196% May 15, 2011 1.2168%
November 15, 2001 1.3196% August 15, 2011 1.2168%
February 15, 2002 1.3196% November 15, 2011 1.2168%
May 15, 2002 1.4124% February 15, 2012 1.2168%
August 15, 2002 1.4124% May 15, 2012 1.2772%
November 15, 2002 1.4124% August 15, 2012 1.2772%
February 15, 2003 1.4124% November 15, 2012 1.2772%
May 15, 2003 1.5119% February 15, 2013 1.2772%
August 15, 2003 1.5119% May 15, 2013 1.3359%
November 15, 2003 1.5119% August 15, 2013 1.3359%
February 15, 2004 1.5119% November 15, 2013 1.3359%
May 15, 2004 1.6192% February 15, 2014 1.3359%
August 15, 2004 1.6192% May 15, 2014 1.3888%
November 15, 2004 1.6192% August 15, 2014 1.3888%
February 15, 2005 1.6192% November 15, 2014 1.3888%
May 15, 2005 1.7273% February 15, 2015 1.3888%
August 15, 2005 1.7273% May 15, 2015 1.3534%
November 15, 2005 1.7273% August 15, 2015 1.3534%
February 15, 2006 1.7273% November 15, 2015 1.3534%
May 15, 2006 0.9632% February 15, 2016 1.3534%
</TABLE>
Collateral
All obligations of the Rosemary Issuer with respect to the
Rosemary Bonds are unconditionally guaranteed by the Panda-Rosemary
Partnership. The obligations of the Panda-Rosemary Partnership under
the guaranty, as well as certain other obligations, are secured by
(i) liens on, and security interests in, substantially all of the
assets of the Panda-Rosemary Partnership, including the Panda-
Rosemary Facility, (ii) pledges by each of PR Corp. and PRC II, which
are wholly-owned indirect subsidiaries of the Company, of their
respective interests in the Panda-Rosemary Partnership and (iii)
pledges of all of the capital stock of the Rosemary Issuer and each
of PR Corp. and PRC II.
Partnership Distributions
Subject to certain limited exceptions, distributions may be made
by the Panda-Rosemary Partnership to its partners only from, and to
the extent of, amounts then on deposit in the Panda-Rosemary
Partnership distribution fund established pursuant to the Rosemary
Indenture. Such distributions may only be made upon the satisfaction
of the following conditions: (i) amounts deposited in certain funds
established pursuant to the Rosemary Indenture shall be equal to or
greater than the amount then required to be deposited therein,
including the debt service and debt service reserve funds; (ii) no
event or condition has occurred and is continuing that constitutes a
default or an event of default under the Rosemary Indenture; and
(iii) if there has been a loss of QF status, the Panda-Rosemary
Facility has achieved a permitted alternative utility status. In
addition, except for certain limited exceptions, the Panda-Rosemary
Partnership may not make distributions unless (i) the average of the
debt service coverage ratios for the two semi-annual payment periods
on the Rosemary Bonds immediately preceding the distribution date is
at least 1.2:1 and (ii) after giving effect to such distributions,
the average of the projected debt service coverage ratios for the
current semi-annual payment period and the next succeeding semi-
annual payment period on the Rosemary Bonds is at least 1.2:1.
Notwithstanding the requirements of the immediately preceding
sentence, the Panda-Rosemary Partnership may make distributions to
its partners solely for the purpose of enabling the partners to pay
their income tax liabilities if a lower debt service coverage ratio
(1.1:1) and projected debt service coverage ratio (1.1:1) for certain
periods exist. Except for certain limited exceptions set forth in the
Rosemary Indenture, the Panda-Rosemary Partnership will not be
permitted to make any distributions to its partners after November
30, 2005 unless (i) the Rosemary Gas Supply Agreement and the Firm
Gas Transportation Agreements have been extended on substantially the
same terms to have a termination date no earlier than the longest
stated maturity of the Rosemary Bonds, (ii) the Rosemary Gas Supply
Agreement and the Firm Gas Transportation Agreements, if not so
extended on substantially the same terms, have been otherwise
extended to have a termination date no earlier than the longest
stated maturity of the Rosemary Bonds and the rating agencies confirm
that the then current rating of the Rosemary Bonds will not be
reduced as a result of such extension or (iii) the Rosemary Gas
Supply Agreement and the Firm Gas Transportation Agreements, if not
extended as described in clause (i) or (ii), are replaced with a new
gas supply agreement or gas transportation agreement (or with respect
to a transportation agreement, a gas transportation plan), provided
that the effect of the replacement agreement or plan would not reduce
the average of the annual projected debt service coverage ratios for
the remaining term of the Rosemary Bonds below 1.2:1 and the rating
agencies confirm that the then current ratings of the Rosemary Bonds
will not be reduced as a result of such replacement.
Certain Other Covenants
The Rosemary Indenture contains numerous other affirmative and
negative covenants which restrict the activities of the Rosemary
Issuer and the Panda-Rosemary Partnership, including, but not limited
to, the following:
(i) prohibition against incurring debt (including guaranties of
debt) except as described below, and a prohibition against
other guaranties except certain permitted guaranties;
(ii) a prohibition against creating or suffering to exist
liens on any of their respective properties other than
certain permitted liens;
(iii) a prohibition against selling, leasing or otherwise
disposing of any property or assets except worn-out
equipment and certain property with a fair market value not
in excess of $3.0 million in the aggregate in any one year
and, with respect to any single item of property, a fair
market value in excess of $1.0 million, and certain other
exceptions;
(iv) a limitation on the Panda-Rosemary Partnership's
ability to enter into new project agreements or to
terminate, amend or modify certain project agreements unless
certain tests are satisfied;
(v) a limitation on the ability of the Panda-Rosemary
Partnership and the Rosemary Issuer to merge or consolidate
with or into any person, or acquire all or any substantial
part of the assets or business of any person, or form
subsidiaries; and
(vi) covenants regarding compliance with laws and
governmental regulations, maintenance of government
approvals, employee benefit plans, affiliate transactions,
payment of taxes, the preparation of various budgets and
reports, the maintenance of specified insurance coverages
and other matters.
The debt that the Rosemary Issuer is permitted to incur is
limited to the Rosemary Bonds, other series of bonds permitted to be
issued under the Rosemary Indenture and certain other indebtedness
ranking pari passu or subordinate to the Rosemary Bonds and such
other series of bonds, the proceeds of which are loaned to the Panda-
Rosemary Partnership. The debt permitted by the Rosemary Indenture to
be incurred by the Rosemary Issuer or the Panda-Rosemary Partnership
includes: (i) purchase money or capitalized lease obligations not
exceeding $1.0 million in the aggregate outstanding at any time; (ii)
trade accounts payable; (iii) working capital loans or letter of
credit reimbursement obligations if the minimum annual projected debt
service coverage ratios for the remaining term of the Rosemary Bonds
and the average of the annual projected debt service coverage ratios
for the remaining term of the Rosemary Bonds equal or exceed 1.5:1
and 1.75:1, respectively; (iv) debt incurred to finance enhancements
to or modifications of the Panda-Rosemary Facility if, after giving
effect to such debt, the same minimum and average annual projected
debt service coverage ratios are satisfied (or, if the enhancement is
required to maintain QF status, each of such debt service coverage
ratios described above is at least 1.2:1); (v) certain interest rate
protection agreements; (vi) guaranties arising in the ordinary course
of business not exceeding $1.0 million in the aggregate; and (vii)
various indemnities with respect to mechanics and other liens,
obligations to governmental authorities, surety bonds and guaranties,
indemnities or similar obligations provided under or required by a
Panda-Rosemary Project agreement.
Events of Default
Events of default under the Rosemary Indenture include: (i) a
default in the payment of principal of, interest on or premium, if
any, on any Rosemary Bonds; (ii) any misrepresentation made by the
Panda-Rosemary Partnership or the Rosemary Issuer under the Rosemary
Indenture which has resulted in a material adverse change; (iii) the
breach by the Panda-Rosemary Partnership or the Rosemary Issuer of
any covenant under the Rosemary Indenture or related collateral
documents; (iv) the bankruptcy or insolvency of the Panda-Rosemary
Partnership or the Rosemary Issuer; (v) a final judgment or judgments
for the payment of money in excess of $1.0 million rendered against
either of the Panda-Rosemary Partnership or the Rosemary Issuer
unless covered by indemnity or insurance; (vi) a default on certain
other debt of the Panda-Rosemary Partnership or the Rosemary Issuer;
(vii) the termination or expiration of certain Project agreements to
which the Panda-Rosemary Partnership is a party (some of which are
currently scheduled to expire prior to the maturity date of the
Rosemary Bonds; see "Partnership Distributions" above); (viii) the
cessation of liens or certain collateral; (ix) a modification of
certain Project agreements which results in a material adverse
change; (x) Panda International shall cease to own directly or
indirectly 51% of the capital stock of PR Corp. or PRC II; and (xi)
PR Corp. shall withdraw or be removed as general partner of the Panda-
Rosemary Partnership. Upon the occurrence of an event of default and
after the lapse of certain applicable cure periods, the trustee under
the Rosemary Indenture has the right, among other things, to
accelerate the maturity of the Rosemary Bonds and to direct a
collateral agent to foreclose the mortgage on the Panda-Rosemary
Facility and otherwise realize upon the collateral securing the
repayment of the Rosemary Bonds and other secured obligations,
including the capital stock of PR Corp. and PRC II (through which the
Company holds an indirect equity interest in the Panda-Rosemary
Partnership).
The Funds
The Rosemary Indenture establishes the following funds: (a) a
project reserve fund, (b) an operating fund, (c) a debt service fund,
(d) a property tax fund, (e) a debt service reserve fund, (f) an
overhaul fund, (g) a pollution control finance fund, (h) a
restoration fund, (i) a partnership distribution fund and (j) an
additional permitted debt fund. All revenues received by the Panda-
Rosemary Partnership are to be deposited into the project revenue
fund. Amounts in the project revenue fund are used to pay operating
expenses related to the Panda-Rosemary Facility and then are
distributed to the other funds established pursuant to the Rosemary
Indenture in the priority listed above.
Upon the issuance of the Rosemary Bonds, the Panda-Rosemary
Partnership deposited approximately $8.1 million into the debt
service reserve fund established under the Rosemary Indenture. The
balances that must be maintained in the debt service reserve fund
generally decline over the life of the Rosemary Bonds. In addition,
the Panda-Rosemary Partnership is required to maintain in the debt
service reserve fund an amount equal to the maximum amount of debt
service due in respect of certain other debt permitted under the
Rosemary Indenture for any six-month period during the succeeding
three-year period. The debt service reserve fund may be drawn upon to
pay principal of, premium, if any, and interest on the Rosemary
Bonds, any additional series of bonds issued under the Rosemary
Indenture and certain debt permitted under the Rosemary Indenture, to
the extent of funds allocated within the debt service reserve fund to
such obligations, if funds otherwise available for such payments are
insufficient.
Rating
In July 1996, the Rosemary Bonds were rated Baa3 by Moody's
Investors Service, Inc. and BBB- by Duff & Phelps Rating Co. Inc.
Each such rating reflects only the view of the applicable Rating
Agency at the time the rating is issued, and any explanation of the
significance of such rating may only be obtained from such Rating
Agency. There is no assurance that any such credit rating will
remain in effect for any given period of time or that such rating
will not be lowered, suspended or withdrawn entirely by the
applicable Rating Agency if, in such Rating Agency's judgment,
circumstances so warrant.
The Panda-Brandywine Financing
The Panda-Brandywine Partnership, PBC and GE Capital entered
into the Construction Loan Agreement and Lease Commitment dated as of
March 30, 1995 (the "Brandywine Loan Agreement"), pursuant to which
GE Capital agreed, either directly or indirectly through an owner
trustee, to (i) provide construction financing for the Panda-
Brandywine Facility, (ii) issue letters of credit as security for
certain obligations of the Panda-Brandywine Partnership under the
Brandywine Power Purchase Agreement, (iii) lease the Panda-Brandywine
Facility site from, and immediately thereafter sublease the site to,
the Panda-Brandywine Partnership, (iv) upon substantial completion of
the construction of the Panda-Brandywine Facility, purchase the Panda-
Brandywine Facility from the Panda-Brandywine Partnership and lease
the Panda-Brandywine Facility back to the Panda-Brandywine
Partnership and (v) upon completion of the construction of the Panda-
Brandywine Facility, make certain equity loans to the Panda-
Brandywine Partnership or its partners. The following description of
the Brandywine Loan Agreement and the other Brandywine Financing
Documents does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Brandywine Financing
Documents, including definitions therein not contained in this
Prospectus, copies of which are attached as exhibits to the
Registration Statement of which this Prospectus constitutes a part.
Construction Loans
Pursuant to the Brandywine Loan Agreement, GE Capital committed
to make construction loans to the Panda-Brandywine Partnership (the
"Brandywine Construction Loan Facility"), the proceeds of which were
required to be used to pay costs incurred by the Panda-Brandywine
Partnership in connection with the development and construction of
the Panda-Brandywine Facility. Construction of the Panda-Brandywine
Facility is substantially complete. On December 30, 1996, the
Brandywine Construction Loan Facility was converted to long-term
financing in the form of a leveraged lease (the "Brandywine Financing
Conversion"). In connection therewith, all amounts outstanding under
the Brandywine Construction Loan Facility were repaid in full. At
such time, the Panda-Brandywine Partnership funded the completion
account described below in the amount of $5.3 million. Funds from
such account will be used to complete construction of the Panda-
Brandywine Facility.
Long-Term Financing
Pursuant to the Brandywine Financing Conversion, the Brandywine
Loan Agreement was terminated and various agreements were entered
into in order to provide long-term financing for the Panda-Brandywine
Facility. In connection therewith, the Panda-Brandywine Partnership
sold the Panda-Brandywine Facility and leased the facility site to
Fleet National Bank, as Owner Trustee (the "Owner Trustee"), for the
purchase price of approximately $217.5 million. The Owner Trustee
financed the purchase of the Panda-Brandywine Facility through an
equity investment of $45.5 million from GE Capital and loans
aggregating $172 million from Loan Participants under the
Participation Agreement described below. The Owner Trustee then
leased the Panda-Brandywine Facility and sub-leased the facility site
back to the Panda-Brandywine Partnership pursuant to the Brandywine
Facility Lease and a site sublease, respectively. The proceeds from
the sale of the Panda-Brandywine Facility were used to repay the
outstanding balance under the Brandywine Construction Loan Facility,
fund the reserve accounts described below and pay a success fee to
the partners of the Panda-Brandywine Partnership in the amount of
approximately $6.7 million. Such funds were deposited by the
partners into the U.S. Project Account under the Indenture.
In addition, GE Capital has committed to provide certain letters
of credit for the account of the Panda-Brandywine Partnership and to
make equity loans to the partners of the Panda-Brandywine
Partnership, as more fully described below. All of the assets of the
Panda-Brandywine Partnership and all of the ownership interests in
the Panda-Brandywine Partnership, as well as certain other
collateral, are pledged to secure the obligations of the Panda-
Brandywine Partnership under the Brandywine Financing Documents.
Participation Agreement
The Panda-Brandywine Partnership, PBC, GE Capital as Owner
Participant, Fleet National Bank as Owner Trustee and Security Agent,
First Security Bank, National Association, as Indenture Trustee,
Credit Suisse as Administrative Agent and certain other entities
listed therein (Credit Suisse and such other entities are referred to
herein as the "Loan Participants") entered into a Participation
Agreement, dated as of December 18, 1996 (the "Participation
Agreement"). Under the Participation Agreement, each Loan Participant
loaned a specified amount to the Owner Trustee who used the proceeds
thereof to purchase the Panda-Brandywine Facility. The Owner
Trustee will use funds received under the Brandywine Facility Lease
to repay the loans under the Participation Agreement. The Owner
Trustee's obligation to repay the loans is secured by a pledge of all
of the collateral pledged to the Owner Trustee to secure the
obligations of the Panda-Brandywine Partnership under the Brandywine
Financing Documents. However, a default by the Owner Trustee under
the Participation Agreement does not entitle the Loan Participants to
cause a foreclosure upon such collateral or a termination of the
Brandywine Facility Lease unless a default or an event of default
shall have occurred and be continuing under the Brandywine Financing
Documents which would entitle the Owner Trustee to foreclose upon the
collateral thereunder or terminate the Brandywine Facility Lease.
The Participation Agreement contains substantially the same
representations, warranties, conditions precedent, covenants and
defaults as were contained in the Brandywine Loan Agreement.
Brandywine Facility Lease
The Panda-Brandywine Partnership entered into a Facility Lease,
dated as of December 18, 1996, with the Owner Trustee (the
"Brandywine Facility Lease") pursuant to which it leases the Panda-
Brandywine Facility from the Owner Trustee. The Brandywine Facility
Lease is a net lease and its initial term ends on December 30, 2016.
Basic rent is payable quarterly on January 31, April 30, July 31 and
October 31, commencing January 31, 1997, as follows:
<TABLE>
<CAPTION>
Basic Rent Payment Basic Rent ($)
<C> <C>
1 0
2-5 2,610,509
6-9 2,602,976
10-13 4,993,980
14-17 5,165,114
18-21 6,816,268
22-25 6,984,563
26-29 6,976,747
30-37 6,864,048
38-41 7,047,103
42-45 7,517,816
46-49 7,632,159
50-53 7,821,232
54-57 8,303,090
58-61 8,980,537
62-65 10,109,363
66-69 10,463,802
70-73 10,684,854
74-77 10,292,055
78-80 9,429,196
</TABLE>
In addition, and from time to time, the Owner Trustee may require
the Panda-Brandywine Partnership to pay, as supplemental rent, (i)
certain agreed-upon amounts required to be paid to the Owner Trustee
following a specified event of loss or event of regulation, after
payment of which the Brandywine Facility Lease would terminate and
the Panda-Brandywine Partnership would receive title to the Panda-
Brandywine Facility; (ii) amounts owed pursuant to certain tax change
indemnity obligations; (iii) certain lender swap breakage costs
arising as a result of an event of default, loss or regulation; (iv)
interest on overdue rent payments; and (v) amounts owed as a result
of certain other obligations arising pursuant to the Brandywine
Financing Documents. Basic rent may also be reduced if GE Capital
elects to consummate a refinancing under the Participation Agreement.
At the end of the initial lease term, so long as no default or
event of default shall have occurred and be continuing under the
Brandywine Facility Lease, the Panda-Brandywine Partnership may renew
the Brandywine Facility Lease for two consecutive five-year terms.
Upon renewal, the basic rent will be 50% of the average basic rent
payment during the initial term. Alternatively, the Panda-Brandywine
Partnership may purchase the Panda-Brandywine Facility in exchange
for its fair market sales value at the end of the initial lease term
or any renewal term. If the Panda-Brandywine Partnership does not
renew the Brandywine Facility Lease or purchase the Panda-Brandywine
Facility, it must surrender possession of the Panda-Brandywine
Facility.
Reserve Accounts
In connection with the obligations of the Panda-Brandywine
Partnership under the Brandywine Financing Documents, various
accounts were established for the benefit of the Owner Trustee, GE
Capital and others. All revenues of the Panda-Brandywine Partnership
are to be deposited into a project revenue account. Amounts in the
project revenue account are used to pay operating expenses related to
the Panda-Brandywine Facility, including letter of credit fees and
basic rent, and then are distributed quarterly to lease reserve
accounts in the following priority: (i) operation and maintenance
reserve account; (ii) rent reserve account; (iii) distribution
reserve account (in the event the conditions for distributions to the
partners of the Panda-Brandywine Partnership contained in the
Participation Agreement are not met); and (iv) partnership security
account (in the event the conditions for distributions to the
partners of the Panda-Brandywine Partnership contained in the
Participation Agreement are met). In addition, a warranty reserve
account and completion account were funded upon closing of the
Brandywine Financing Conversion, which accounts terminate upon the
occurrence of specified events as described below. A special payment
account may also be established in the event of unreliable fuel
supply to the Panda-Brandywine Facility as described below.
The Panda-Brandywine Partnership funded the operation and
maintenance reserve account upon the closing of the Brandywine
Financing Conversion in the amount of $1.0 million. Until the balance
of such reserve account reaches $5.0 million (which amount is
adjusted upward annually for inflation after December 30, 2001),
quarterly contributions of $125,000 in each of the first eight
calendar quarters and $375,000 for each of the next eight calendar
quarters are made to this reserve account out of funds available from
the project revenue account. Thereafter, contributions will be made
out of funds available in the project revenue account as necessary to
maintain the required balance. Subject to specified conditions,
funds held in this reserve account will be used to replenish a
drawing under the O&M Letter of Credit described below. After any
withdrawal from the operation and maintenance reserve account, 50% of
cash flow remaining after payment of project operating expenses,
rent, letter of credit fees and debt service ("Brandywine Available
Cash Flow") will be contributed to such reserve account, in addition
to any required contribution in the event of a balance deficiency,
until the reserve account has been replenished in the amount of the
withdrawal.
The Panda-Brandywine Partnership funded the rent reserve account
upon the closing of the Brandywine Financing Conversion in the amount
of $2.4 million. The balance in the rent reserve account must be
maintained at the greater of (i) $2.4 million and (ii) the sum of the
next two payments of basic rent. Until the required balance is
reached, 50% of the excess, if any, of Brandywine Available Cash
Flow over required contributions to the operation and maintenance
reserve account ("Brandywine Distributable Cash Flow") will be
contributed to such reserve account. In the event that funds
available in the project revenue account, the distribution reserve
account and the partnership security account are insufficient to pay
basic rent, funds in the rent reserve account will be applied toward
such deficiency. After any withdrawal from the rent reserve account,
100% of Brandywine Distributable Cash Flow will be contributed to
such reserve account, in addition to any required contribution in the
event of a balance deficiency, until the reserve account has been
replenished in the amount of the withdrawal.
The Panda-Brandywine Partnership funded the warranty maintenance
reserve account upon the closing of the Brandywine Financing
Conversion in the amount of $750,000. Subject to specified
conditions, funds in this reserve account will be used to satisfy
warranty obligations to the manufacturer of the Panda-Brandywine
Facility's combustion and steam turbine generators. This reserve
account will be terminated on the earlier of (i) the date the turbine
warranty expires or (ii) the second anniversary of the date of final
completion of the Panda-Brandywine Facility, and the balance of the
account will be transferred to the project revenue account, so long
as no default or event of default has occurred and is continuing
under the Brandywine Facility Lease.
The Panda-Brandywine Partnership funded the completion account
upon the closing of the Brandywine Financing Conversion in the amount
of $5.3 million. Subject to specified conditions, funds held in the
completion account will be used to pay costs and expenses incurred in
connection with the construction and completion of the Panda-
Brandywine Facility. After the date of final acceptance of the Panda-
Brandywine Facility under the Brandywine EPC Agreement, funds will be
distributed out of the completion account to the Panda-Brandywine
Partnership from time to time upon satisfaction of the conditions
specified therefor.
If the Panda-Brandywine Partnership receives a notice from PEPCO
that PEPCO has determined that the Panda-Brandywine Partnership has
failed to comply with its obligation under the Brandywine Power
Purchase Agreement to have a reliable supply of fuel for the Panda-
Brandywine Facility, then the Panda-Brandywine Partnership is
required to establish and fund a special payment account with 100% of
the excess, if any, of Brandywine Distributable Cash Flow over
required contributions to the rent reserve account until such notice
is rescinded or the fuel default is cured. Subject to specified
conditions, funds held in the special payment account will be used to
cure the fuel default. Any funds remaining in the special payment
account after the cure of the fuel default will be transferred to the
partnership security account, so long as no default or event of
default has occurred and is continuing under the Brandywine Facility
Lease.
In the event that funds in the project revenue account are
insufficient to pay letter of credit fees and rent, and to make the
required contributions to the reserve accounts, such payments and
transfers may be made out of the partnership security account and
distribution reserve account. Subject to specified conditions, funds
held in the partnership security account may from time-to-time be
distributed to the partners of the Panda-Brandywine Partnership and
funds held in the distribution reserve account may from time-to-time
be transferred to the project revenue account.
Equity Loans
Pursuant to an Equity Loan Facility Letter Agreement and subject
to certain conditions, GE Capital has agreed to make available to PBC
and/or Panda Energy Delaware, a multiple draw credit facility (the
"Brandywine Equity Loan Facility") of up to approximately $17.5
million. The Brandywine Equity Loan Facility may be drawn against
for four years from the date of final completion of the Panda-
Brandywine Facility in a minimum amount of $4.0 million per draw.
Interest will be payable on amounts drawn against the Brandywine
Equity Loan Facility at a rate per annum equal to 515 basis points
over the applicable treasury rate in effect at the time of each draw.
The loans borrowed under the Equity Loan Facility will mature on
December 30, 2011. The loans made thereunder will be secured by a
pledge by PBC and Panda Energy Delaware of their respective
partnership interests in the Panda-Brandywine Partnership. The
documentation relating to the Brandywine Equity Loan Facility shall
include substantially the same representations, warranties,
conditions precedent, covenants and defaults as contained in the
Participation Agreement.
Letters of Credit
GE Capital has agreed to issue and maintain outstanding stand-by
letters of credit for the account of the Panda-Brandywine Partnership
in favor of PEPCO to secure certain obligations of the Panda-
Brandywine Partnership under the Brandywine Power Purchase Agreement.
The Interconnection Letter of Credit was initially issued under the
Brandywine Loan Agreement in the amount of $2.0 million, was reduced
to $330,000 on July 1, 1996 and will expire in April 1997. The
Performance Letter of Credit, in the stated amount of $2.0 million,
was issued on October 31, 1996 and will expire on December 31, 1997,
unless earlier terminated or extended. The Company anticipates that
the Performance Letter of Credit will be renewed annually. PEPCO may
draw on the Performance Letter of Credit to pay any monetary damages
awarded to it as a result of the termination of the Brandywine Power
Purchase Agreement. Subject to specified conditions, the O&M Letter
of Credit will be issued in the stated amount of $1.0 million on
December 31, 1998 and will expire on December 31, 1999, unless
earlier terminated or renewed. The Company anticipates that the O&M
Letter of Credit will be renewed annually. Subject to specified
conditions, the stated amount of the O&M Letter of Credit will be
increased to $2.0 million on December 31, 1999 and to $5.0 million on
December 31, 2000. PEPCO may draw on the O&M Letter of Credit to pay
certain maintenance expenses relating to the Panda-Brandywine
Facility.
The aggregate stated amount of all letters of credit outstanding
at any one time in connection with the Brandywine Facility Lease
cannot exceed a specified aggregate amount, currently $7,330,000. The
Panda-Brandywine Partnership is required to reimburse GE Capital for
any disbursement under any letter of credit on the day that GE
Capital makes any payment to a beneficiary thereof. If the Panda-
Brandywine Partnership does not reimburse GE Capital on such day, it
must pay interest on the amount not reimbursed at a rate per annum
equal to 2.50% plus a base rate of the higher of (i) the base
commercial lending rate of Credit Suisse, New York or (ii) the
overnight federal funds rate plus 0.5%. The Panda-Brandywine
Partnership is obligated to pay to GE Capital an issuance fee of
1.75% of the stated amount of each letter of credit upon initial
issuance, a letter of credit fee of 1.5% per annum on the aggregate
stated amounts of all outstanding letters of credit and a commitment
fee of 1.25% per annum on the unused balance of the letter of credit
commitment.
Partnership Distributions
The Participation Agreement places limitations on the ability of
the Panda-Brandywine Partnership to make distributions to its
partners. Subject to certain other conditions, the Panda-Brandywine
Partnership may make distributions to its partners only if: (i) all
amounts then required to be deposited in certain reserve accounts,
including the reserve accounts described above, have been deposited;
(ii) all rent payments then due to the Owner Trustee under the
Brandywine Facility Lease have been paid; (iii) the Panda-Brandywine
Facility meets an operating cash flow to basic rent ratio of 1.2:1;
and (iv) at the time of such distribution, and after giving effect
thereto, no default or event of default has occurred and is
continuing under the Brandywine Financing Documents.
Certain Other Covenants
The Brandywine Financing Documents also contain certain
affirmative and negative covenants which restrict the ability of the
Panda-Brandywine Partnership and PBC to take certain actions
including, but not limited to, the following:
(i) a requirement that the Panda-Brandywine Partnership pay
all of its indebtedness and obligations under the Brandywine
Financing Documents and perform its obligations under the
related project documents;
(ii) a requirement that the Panda-Brandywine
Partnership and PBC maintain their current respective form
of organization, that PBC remain the general partner of the
Panda-Brandywine Partnership and that the Panda-Brandywine
Facility be maintained as a QF;
(iii) a prohibition against mergers, sales of assets
other than electric power and steam, and certain
acquisitions;
(iv) a prohibition against indebtedness other than
under the Brandywine Financing Documents;
(v) a prohibition against amending certain contracts
without the consent of a majority of the Loan Participants
and GE Capital;
(vi) a prohibition against entering into leases other
than those specifically contemplated by the Brandywine
Financing Documents; and
(vii) a requirement (set forth in a stock pledge agreement
entered into by Panda Interholding) that all subsidiaries of
Panda Interholding (either existing or subsequently acquired
or formed) which are engaged in the financing, development,
construction or operation of independent power projects or
energy transmission projects located in the United States
(other than the Panda-Kathleen Partnership and the partners
of that partnership) remain as subsidiaries of Panda
Interholding; provided, that the Panda-Kathleen Partnership
and the partners thereof shall continue to be subsidiaries
of PEC and shall be transferred to Panda Interholding within
180 days after the earlier of financial closing or the date
of commercial operations with respect to such Project, and
provided, further, that, subject to certain restrictions in
the Participation Agreement, Panda Interholding may sell all
or any of the stock of any subsidiary that is subject to
this requirement to any person who is not an affiliate of
Panda Interholding.
Events of Default
The Brandywine Facility Lease contains certain events of default,
including but not limited to: (i) default in the payment of any
rental amount payable under the Brandywine Facility Lease; (ii) a
misrepresentation contained in any document furnished by or on behalf
of the Panda-Brandywine Partnership or any partner; (iii) a failure
of the Panda-Brandywine Partnership or any affiliate to perform or
observe any covenants or obligations contained in the Brandywine
Financing Documents to which it is a party; (iv) a default in payment
under any indebtedness of the Panda-Brandywine Partnership or PBC or
certain affiliates or in the observance or performance of any
covenant relating to such indebtedness; (v) bankruptcy or insolvency
of any party to or participant under any of the Brandywine Financing
Documents or other project agreements related to the operation of the
Panda-Brandywine Facility; (vi) a judgment or judgments in excess of
$150,000 being rendered against the Panda-Brandywine Partnership,
Brandywine Water Company or PBC and remaining in effect and unstayed
for more than 30 days; (vii) if PEC and Panda Interholding shall
cease to own, directly or indirectly, 51% of PBC, Panda Energy
Delaware and Brandywine Water Company; and (viii) the Panda-
Brandywine Facility ceases to be a QF. Upon an event of default under
the Brandywine Financing Documents, the Owner Trustee may, in
addition to other remedies, foreclose upon or terminate the
Brandywine Facility Lease.
Collateral
All obligations of the Panda-Brandywine Partnership under the
Brandywine Financing Documents to GE Capital and the Owner Trustee,
and in turn, all obligations of the Owner Trustee to the Loan
Participants under the Participation Agreement, are secured by (i) a
pledge of, and a security interest in, substantially all of the
assets of the Panda-Brandywine Partnership, (ii) pledges by PBC and
Panda Energy Delaware, which are indirect wholly-owned subsidiaries
of the Company, of their respective interests in the Panda-Brandywine
Partnership and (iii) pledges of all the capital stock of PBC and
Panda Energy Delaware, and all of the stock and all of the assets of
Brandywine Water Company, which is an indirect wholly-owned
subsidiary of the Company that operates the distilled water facility
serving as the steam host for the Panda-Brandywine Facility. In
addition, the Panda-Brandywine Partnership has assigned its interest
in the Brandywine Power Purchase Agreement to the Owner Trustee, to
take effect if the Brandywine Facility Lease terminates and the Panda-
Brandywine Partnership elects not to repurchase the Panda-Brandywine
Facility.
DESCRIPTION OF THE EXCHANGE BONDS
The Exchange Bonds will be issued under the Indenture, including
the Series A Supplemental Indenture which forms a part thereof. In
issuing the Exchange Bonds and performing its obligations under the
Indenture, the Issuer is acting both as principal and as agent for
the Company. The following summaries of certain provisions of the
Exchange Bonds, the Company Guaranty, the Indenture and the Security
Documents do not purport to be complete or definitive and are
qualified in their entirety by reference to the full terms of the
Exchange Bonds, the Company Guaranty, the Indenture and the Security
Documents, including the definitions therein of certain terms that
are not otherwise defined in this Prospectus, copies of which are
attached as exhibits to the Registration Statement of which this
Prospectus constitutes a part.
General
The Exchange Bonds constitute one series of the Bonds that may
be issued under the Indenture. The title of the Exchange Bonds is "11-
5/8% Pooled Project Bonds, Series A-1 due 2012." The source of
payment for the Exchange Bonds and all additional series of Bonds, if
any, will be the payments by the Company to the Issuer of principal,
premium, if any, and interest due under the Company Notes and
payments, if any, by the Company under the Company Guaranty. The
principal source of payments under the Company Notes is distributions
to the Company and the PIC Entities from the Project Entities that
own Projects that are part of the Project Portfolio. Thus, while the
Exchange Bondholders have recourse against the Issuer and, through
the Company Guaranty, the Company and the Collateral for payment
should the Issuer be unable to make payments on the Exchange Bonds,
the ability of the Issuer to make such payments depends primarily
upon the performance of the Projects and the ability of the Project
Entities to make distributions to the PIC Entities and ultimately to
the Company. See "Collateral for the Exchange Bonds - General" below.
Ranking
The indebtedness evidenced by the Existing Bonds and all
additional series of Bonds, if any, will constitute senior secured
indebtedness of the Issuer. In order for the Company to receive
distributions or payments on a PIC International Entity Note and for
the Issuer then to receive payments from the Company on the Company
Notes, Projects must generate sufficient operating cash flow to pay
all operating expenses, all debt service, debt service and other
reserve requirements and other payment obligations to lenders and
other Project creditors. Therefore, although the Issuer and the
Company have no other secured indebtedness, the Existing Bonds and
the Company Guaranty are effectively subordinated to all liabilities
of the Project Entities incurred in respect of the Projects. As of
September 30, 1996, the Project Entities had outstanding $314.6
million of indebtedness and other liabilities, which are effectively
senior to the Existing Bonds and the Company Guaranty. See "Risk
Factors - Financial Risks - Substantial Leverage; Effective
Subordination of Exchange Bonds and Company Guaranty" and
"Description of Outstanding Project-Level Debt."
Company Guaranty
The obligations of the Issuer under the Existing Bonds are, and
all additional series of Bonds, if any, will be guaranteed on a
senior secured basis by the Company. Rights of subrogation under the
Company Guaranty will be subordinated to the prior right of the
holders of the Bonds to be paid in full.
Transfer, Exchange and Replacement
The Exchange Bonds will have been registered under the
Securities Act. Based upon its view of interpretations provided to
third parties by the staff of the Commission, the Company believes
that the Exchange Bonds issued pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders
thereof (other than any holder which is (i) an Affiliate of the
Company or the Issuer, (ii) a broker-dealer who acquired Old Bonds
directly from the Issuer or (iii) a broker-dealer who acquired Old
Bonds as a result of market making or other trading activities)
without registration under the Securities Act provided that such
Exchange Bonds are acquired in the ordinary course of such holders'
business and such holders are not engaged in, and do not intend to
engage in, and have no arrangement or understanding with any person
to participate in, a distribution (within the meaning of the
Securities Act) of such Exchange Bonds. Each broker-dealer that
receives Exchange Bonds for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Bonds. The Letter of
Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange
Bonds received in exchange for Old Bonds where such Old Bonds were
acquired by such broker-dealer as a result of market making
activities or other trading activities. The Company and the Issuer
have agreed, for a period of 180 days after the consummation of the
Exchange Offer, to make available a prospectus meeting the
requirements of the Securities Act to any such broker-dealer for use
in connection with any such resale. A broker-dealer that delivers
such a prospectus to a purchaser in connection with such resales will
be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the
Registration Rights Agreement (including certain indemnification
rights and obligations). Any holder who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange
Bonds and any other holder that cannot rely upon such interpretations
must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary
resale transaction. In addition, to comply with the securities laws
of certain jurisdictions, if applicable, the Exchange Bonds may not
be offered or sold unless they have been registered or qualified for
sale in such jurisdictions or an exemption from registration or
qualification is available and the conditions thereto have been met.
Subject to any restrictions under applicable federal and state
securities laws, upon registration of transfer of an Exchange Bond
and surrender of the old Exchange Bond, a new Exchange Bond will be
executed and delivered in the name of the new beneficial owner or the
record holder for the new beneficial owner. The security registrar is
not required (i) to issue, register the transfer of or exchange any
physical Exchange Bonds during a period (a) beginning at the opening
of business 15 days before the day of the mailing of notice of
redemption of Exchange Bonds and ending at the close of business on
the day of such mailing and (b) beginning on the regular record date
for the payment of any installment of principal of or interest on the
Exchange Bonds and ending on the date of payment of such installment
of principal or interest or (ii) to issue, register the transfer of
or exchange any physical Exchange Bonds selected for redemption in
whole or in part except the unredeemed portion of any such Exchange
Bonds selected for redemption in part. Subject to the terms of the
Indenture, the Exchange Bonds will be exchangeable at any time into
an equal aggregate amount of Exchange Bonds of different authorized
denominations. The Issuer will maintain an office or agency of the
Security Registrar where Exchange Bonds may be presented for
registration of transfer or exchange, which shall initially be the
corporate trust office of the Trustee in New York, New York. No
service charge shall be made for any transfer or exchange, but the
Issuer or the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in
relation thereto.
Exchange Bonds that become mutilated, destroyed, stolen or lost
will be replaced upon delivery to the Trustee, or delivery to the
Issuer and the Trustee of evidence of the loss, theft or destruction
thereof satisfactory to the Issuer and the Trustee. An indemnity
satisfactory to the Trustee and the Issuer may be required at the
expense of the holder of such Exchange Bond before a replacement
Exchange Bond will, at the Bondholder's cost, be issued.
Payment of Principal and Interest
Interest on the Exchange Bonds will be paid semiannually on each
February 20 and August 20, commencing February 20, 1997 (each, an
"Interest Payment Date"), at the Issuer's option, at the corporate
office of the Trustee or by check mailed on such Interest Payment
Date to the registered owners thereof at the close of business on the
February 6 or August 6, as the case may be, immediately preceding
such Interest Payment Date or, if a Bondholder owning $2.0 million or
more in aggregate principal amount (or such lesser principal amount
as results from all payments of principal and redemptions in respect
of Existing Bonds or any additional series of Bonds in the original
principal amount of $2.0 million) requests in writing, by wire
transfer. Interest shall be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Principal of the Exchange Bonds is payable semiannually in
installments on each February 20 and August 20, commencing on
February 20, 1997 (each, a "Principal Payment Date"), in the amounts
set forth below, at the Issuer's option, at the corporate office of
the Trustee or by check mailed on such Principal Payment Date to the
registered owners thereof on the close of business on the February 6
or August 6, as the case may be, immediately preceding such Principal
Payment Date or, if a Bondholder owning $2.0 million or more in
aggregate principal amount (or such lesser principal amount as
results from all payments of principal and redemptions in respect of
Existing Bonds or any additional series of Bonds in the original
principal amount of $2.0 million) requests in writing, by wire
transfer.
<TABLE>
<CAPTION>
Percentage of
Original Principal
Payment Date Amount Payable
<C> <C>
February 20, 1997 0.2045%
August 20, 1997 0.0000%
February 20, 1998 0.0000%
August 20, 1998 0.0000%
February 20, 1999 0.0000%
August 20, 1999 0.5933%
February 20, 2000 0.6129%
August 20, 2000 0.0000%
February 20, 2001 0.0000%
August 20, 2001 1.3753%
February 20, 2002 1.4691%
August 20, 2002 2.2184%
February 20, 2003 2.3565%
August 20, 2003 2.9328%
February 20, 2004 3.1031%
August 20, 2004 3.2796%
February 20, 2005 3.4687%
August 20, 2005 3.5977%
February 20, 2006 3.7820%
August 20, 2006 2.8098%
February 20, 2007 3.0076%
August 20, 2007 4.8415%
February 20, 2008 5.1145%
August 20, 2008 5.0057%
February 20, 2009 5.2949%
August 20, 2009 5.5185%
February 20, 2010 5.8300%
August 20, 2010 5.7248%
February 20, 2011 6.0590%
August 20, 2011 6.4800%
February 20, 2012 6.8808%
August 20, 2012 8.4390%
</TABLE>
Redemption
Mandatory Redemption
In the event of (i) the sale or disposition of any of the
Collateral, any Project or portion thereof or any direct or indirect
interest of the Company, any PIC Entity or any Project Entity in any
Project or (ii) an event of casualty, loss or condemnation with
respect to any Project (each, a "Mandatory Redemption Event") then
there shall be deposited in the U.S. Mandatory Redemption Account if
such Mandatory Redemption Event relates to a U.S. Project or in the
International Mandatory Redemption Account if such Mandatory
Redemption Event relates to a Non-U.S. Project, all proceeds of any
distributions resulting from or arising out of such Mandatory
Redemption Event received by the Company, any PIC Entity, or any
person on behalf of the Company or any PIC Entity in excess of $2.0
million in the aggregate (net of related unreimbursed reasonable
costs and expenses) in any calendar year that may be legally
distributed or paid to the Company or any PIC Entity, or to any
person or entity on behalf of the Company or any PIC Entity, without
contravention of any Project agreement, unless (a) the Company
provides a certificate to the Trustee (supported by a certificate to
the Trustee from the Consolidating Engineer) stating that such
Mandatory Redemption Event (without giving effect to any required
redemption that would otherwise be required in respect thereof) would
not result in either the projected Company Debt Service Coverage
Ratio being less than 1.7:1 or the projected Consolidated Debt
Service Coverage Ratio (if then applicable) being less than 1.25:1,
in each case for each Future Ratio Determination Period and (b) the
rating of the Bonds in effect immediately prior to the Mandatory
Redemption Event is Reaffirmed. Notwithstanding the foregoing, the
applicable Consolidated Debt Service Coverage Ratio, for purposes of
determining whether amounts are to be deposited in the Mandatory
Redemption Accounts or for any other purposes under the Indenture,
need not be satisfied on and after the time that more than four
Projects have been transferred to the Project Portfolio. It is
likely that, in the event of a casualty, loss or condemnation of a
Project, a Project agreement or other instrument governing the
indebtedness incurred by the Project Entity to finance such Project
will require that the proceeds of any insurance or condemnation award
be applied to the redemption of such indebtedness or for other
specified purposes. Accordingly, there is no assurance that the
Company, any PIC Entity, or any person or entity on behalf of the
Company or any PIC Entity, will receive any distribution from the
proceeds of such a Mandatory Redemption Event.
The Existing Bonds, and all additional series of Bonds, if any,
shall be subject to mandatory redemption, in whole or in part, to the
extent that at any time (after giving effect to transfers required to
be made to the other Accounts and Funds on such date pursuant to the
Indenture), the aggregate amount of monies on deposit in the U.S. and
International Mandatory Redemption Accounts is in excess of $2.0
million. The amount of Bonds required to be so redeemed pursuant to
the mandatory redemption provisions of the Indenture shall not exceed
the amount necessary (after giving effect to such mandatory
redemption) to satisfy the coverage ratio requirements described
above as are then applicable to be met and the rating on the Bonds in
effect immediately prior to the Mandatory Redemption Event to be
Reaffirmed.
Mandatory redemptions shall be made at a redemption price equal
to 100% of the principal amount of the Bonds to be redeemed plus
interest thereon accrued to the date of such redemption, plus a
premium, if any, provided for in the supplemental indenture for each
series of Bonds to be redeemed. For the Exchange Bonds, such premium
is equal to that payable were the Exchange Bonds to be redeemed at
the Issuer's option on such date to the extent that the mandatory
redemption results from a sale or other voluntary disposition of any
Collateral or any interest in a Project (or if no optional redemption
is available, a premium determined as the excess, if any, of the
present value of the remaining payments due on the Exchange Bonds,
discounted at a rate which is equal to the then current treasury rate
(the "Applicable Treasury Rate") on the most actively traded security
having a maturity approximately equal to the remaining average life
of the Exchange Bonds, plus one-half of one percent over the par
value of such Exchange Bonds).
Interest earned on amounts (i) on deposit in the U.S. Mandatory
Redemption Account will be transferred to the U.S. Project Account
and (ii) on deposit in the International Mandatory Redemption Account
will be transferred to the International Project Account on each
Monthly Distribution Date. Any determination of mandatory redemption
shall be made within 60 days following the applicable Payment Date.
The Trustee will select the Bonds to be redeemed pro rata as provided
in the Indenture. The Bonds may be redeemed in multiples of $1,000
only. Notice of redemption will be mailed not less than 30 nor more
than 60 days before the redemption date to each holder whose Bonds
are to be redeemed at such holder's address of record. On and after
the redemption date, interest shall cease to accrue on the portion of
the Bonds called for redemption.
If, on any Monthly Distribution Date, after giving effect to any
transfers required to be made to the other Accounts and Funds and
after deducting any amounts required to effect a mandatory redemption
on such Monthly Distribution Date, the aggregate balance in the
Mandatory Redemption Accounts is equal to or less than $2.0 million
(or exceeds $2.0 million due only to funds on deposit therein not
needed to effect a mandatory redemption because the debt service
coverage ratio requirements described above are otherwise met and the
rating of the Bonds has been Reaffirmed) and (i) transfers to the
Distribution Funds would be permitted under the Indenture, such
monies on deposit in the U.S. and International Mandatory Redemption
Accounts may be transferred to the U.S. and International
Distribution Suspense Funds, respectively, or (ii) transfers to the
Distribution Funds would not be permitted under the Indenture, such
monies on deposit in the U.S. and International Mandatory Redemption
Accounts shall be held in such accounts until the next Monthly
Distribution Date on which transfers to the Distribution Funds would
be permitted under the Indenture, at which time such amounts may be
transferred to the applicable Distribution Suspense Funds.
Optional Redemption.
The Exchange Bonds will be redeemable, at the Issuer's option in
whole or in part, at any time on or after August 20, 2001, and prior
to maturity, upon not less than 30 nor more than 60 days prior notice
at the following redemption prices (expressed as a percentage of
principal amount), plus accrued interest to the date of redemption,
if redeemed during the 12-month period commencing on or after August
20 of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
<C> <C>
2001 105.8125%
2002 104.3594%
2003 102.9063%
2004 101.4532%
2005 and thereafter 100.0000%
</TABLE>
In addition, all distributions and other amounts received by the
Company, any PIC Entity, or any other person on behalf of the Company
or any PIC Entity (net of related unreimbursed costs and expenses),
that may be legally distributed or paid to the Company or any PIC
Entity without contravention of any Project agreement, resulting from
or arising out of (i) settlements, judgments or other payments
received in respect of a Project in connection with any litigation,
arbitration or similar proceeding at law or in equity or any
administrative proceeding, except to the extent that any such
proceeding is in connection with a Mandatory Redemption Event, (ii)
any monies released from an escrow or similar account established by
or on behalf of a Project in connection with the financing or
contractual arrangements of such Project (other than (a) monies held
in an escrow or similar account established under the Project's
financing arrangements for the purpose of governing the disbursement
of such Project's revenue, either before or subsequent to a default
by a Project under any of such Project's contractual obligations, (b)
moneys held in operating or similar reserve accounts established for
Project operating contingencies and funded out of the Project's
operating cash flow and (c) monies held in an escrow or similar
account as a construction contingency or for the payment of
development or similar fees), (iii) any buy-out or settlement of a
contract to which a Project is a party or (iv) any transaction which
results in the receipt of cash or other property upon the sale,
transfer or other disposition (other than as set forth in clause
(iii) hereof) of any contractual rights of a Project except to the
extent that such transaction is in connection with a Mandatory
Redemption Event (each of clauses (i) through (iv) being an
"Extraordinary Financial Distribution") will be deposited in the U.S.
Extraordinary Distribution Account if such Extraordinary Distribution
relates to a U.S. Project and in the International Extraordinary
Distribution Account if it relates to a Non-U.S. Project.
If, on any Monthly Distribution Date, after giving effect to any
transfers required to be made to the other Accounts and Funds on such
Monthly Distribution Date, any amounts remain on deposit in either
Extraordinary Distribution Account and transfers to the Distribution
Funds would be permitted under the Indenture, the Company may request
the Trustee to transfer 100% of the monies in the U.S. Extraordinary
Distributions Account to the U.S. Distribution Suspense Fund and the
Company, on behalf of any PIC International Entity, may request the
International Collateral Agent to transfer 100% of the monies in the
International Extraordinary Distribution Account to the International
Distribution Suspense Fund, provided that the Company provides a
certificate (with supporting calculations attached to such
certificate) to the Trustee or the International Collateral Agent, as
the case may be, stating that as of such Monthly Distribution Date
after giving effect to such proposed transfer the following is true:
(i) the conditions for transfers to the Distribution Funds, as
described under "Certain Covenants - Limitations or Distributions,"
have been satisfied; and (ii) the projected Company Debt Service
Coverage Ratio and the projected Consolidated Debt Service Coverage
Ratio (if then applicable) equal or exceed 1.7:1 and 1.25:1,
respectively, for each Future Ratio Determination Period. In
addition, if the amount on deposit in either Extraordinary
Distribution Account is equal to or greater than $5.0 million on any
Monthly Distribution Date, after giving effect to any transfer
required to be made to the other Accounts and Funds on such Monthly
Distribution Date, in order for transfers to the appropriate
Distribution Suspense Fund to be made from such Extraordinary
Distribution Account, the Consolidating Engineer must provide a
certificate to the Trustee or the International Collateral Agent, as
the case may be, stating that (i) it has reviewed and confirmed the
reasonableness of (in accordance with the guidelines set forth in the
Indenture) the projections prepared by the Company of Cash Available
for Distribution and Cash Available from Operations (if the projected
Consolidated Debt Service Coverage Ratio is then applicable) after
giving effect to the event or events which caused such Extraordinary
Financial Distribution and (ii) based on such review it confirms the
reasonableness of the calculations supporting the Company's
certification described above.
If any balance in excess of $2.0 million remains on deposit in
either Extraordinary Distribution Account for more than 35 days, then
prior to the next Monthly Distribution Date the Company shall deliver
to the Trustee a certificate setting forth its election either (i)(a)
in the case of a balance in the U.S. Extraordinary Distribution
Account, to apply any such amount to redeem or partially redeem the
Existing Bonds and additional series of Bonds, if any, which
redemption shall be deemed a prepayment or partial prepayment of the
Company Notes; and (b) in the case of a balance in the International
Extraordinary Distribution Account, to instruct one or more PIC
International Entities to apply any such amount to redeem or
partially redeem any PIC International Entity Notes, which amounts
will then be used by the Company to redeem or partially redeem the
Bonds (which redemption shall be deemed a prepayment or partial
prepayment of the Company Notes) or (ii) to have the amount of any
such balance segregated and held in the U.S. or International
Extraordinary Distribution Account, as the case may be, until the
next Monthly Distribution Date, if any, with respect to which the
certificates described in the immediately preceding paragraph, are
delivered, whereupon on such Monthly Distribution Date such balance
shall be transferred to the appropriate Distribution Suspense Fund.
If, on any Monthly Distribution Date, after giving effect to any
transfers required to be made to other Accounts and Funds, the
balance in either Extraordinary Distribution Account is equal to or
less than $2.0 million and transfers to the Distribution Funds would
not be permitted under the Indenture, such balance shall be held in
such Extraordinary Distribution Account until the next Monthly
Distribution Date, if any, with respect to which transfers to the
Distribution Funds would be permitted under the Indenture, whereupon
such balance shall be transferred to the appropriate Distribution
Suspense Fund.
If the Company elects to redeem the Bonds, the Trustee will
select the Bonds to be redeemed pro rata as provided in the
Indenture. The Bonds may be redeemed in multiples of $1,000 only.
Notice of redemption will be mailed to holders not less than 30 nor
more than 60 days before the redemption date to each holder whose
Bonds are to be redeemed at such holder's address of record. On any
date after the redemption date, interest shall cease to accrue on the
portion of the Bonds called for redemption.
Offer to Purchase
As described below, upon the occurrence of a Change of Control,
the Issuer will be obligated to make an offer to purchase all
Existing Bonds and all additional series of Bonds, if any, then
outstanding at a purchase price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the
date of purchase. See "Certain Covenants - Change of Control."
Ratings
Moody's Investors Service, Inc., and Duff & Phelps Credit Rating
Co. assigned the Exchange Bonds ratings of Ba3 and BB-, respectively,
in October 1996. Each such rating reflects only the view of the
applicable Rating Agency at the time the rating is issued, and any
explanation of the significance of such rating may only be obtained
from such Rating Agency. There is no assurance that any such credit
rating will remain in effect for any given period of time or that
such rating will not be lowered, suspended or withdrawn entirely by
the applicable Rating Agency if, in such Rating Agency's judgment,
circumstances so warrant. Any such lowering, suspension or withdrawal
of any rating may have an adverse effect on the market price or
marketability of the Exchange Bonds.
Collateral for the Exchange Bonds
General
To secure the payment of the Existing Bonds and all additional
series of Bonds, if any, PEC, the Company and the Issuer have granted
the security interests described below pursuant to the PEC Stock
Pledge Agreement, the Issuer Security Agreement, the Company Security
Agreement and the Company Stock Pledge Agreement (each as defined
below) (collectively, the "Security Documents"). Pursuant to the PEC
Stock Pledge Agreement, PEC has pledged to Bankers Trust Company, as
collateral agent (the "Collateral Agent") for the benefit of the
Secured Parties (as defined below), all of the issued and outstanding
capital stock of the Company. Pursuant to the Issuer Security
Agreement, the Issuer has collaterally assigned to the Collateral
Agent for the benefit of the Secured Parties (i) the Company Notes,
including, without limitation, the Initial Company Note representing
the loan of the proceeds of the issuance of the Old Bonds, (ii) its
interest under the Company Loan Agreement and (iii) other personal
property of the Issuer. Pursuant to the Company Security Agreement,
to secure the Company Guaranty and the payment of the Bonds, the
Company has pledged to the Collateral Agent for the benefit of the
Secured Parties (i) all of its rights with respect to each Account
and Fund (excluding the International Accounts and Funds and the
Distribution Funds), including all funds and investments in
securities and other instruments from time to time therein and all
letters of credit or other instruments substituting for funds in any
such Accounts or Funds (collectively, the "U.S. Account Rights"),
(ii) all of the Company's interest in distributions from PIC U.S.
Entities and (iii) all of the Company's interest in and under the
Additional Projects Contract. Pursuant to the Company Stock Pledge
Agreement, to secure the Company Guaranty and the payment of the
Bonds, the Company pledged to the Collateral Agent for the benefit of
the Secured Parties (i) all of the issued and outstanding capital
stock of the Issuer, (ii) all of the issued and outstanding capital
stock of each PIC U.S. Entity and (iii) 60% of the issued and
outstanding capital stock of each PIC International Entity. The
aforesaid interests and rights so pledged are referred to herein,
collectively, as the "Collateral." Although the Bondholders have
recourse against the Issuer (whose sole assets are the Company Notes
and the Company Loan Agreement) and, through the Company Guaranty,
against the Company, and against the Collateral for payment of the
Bonds, the ability of the Company to make payments under the Company
Notes, and consequently the ability of the Issuer to make payments on
the Bonds, depends entirely upon the performance of the Projects and
their ability to make distributions through the PIC U.S. Entities to
the Company. See "Risk Factors - Financial Risks." Each of PEC, the
Company and the Issuer may have available to it certain defenses
against enforcement of the Security Documents if the Collateral Agent
proceeds against the Collateral under the applicable Security
Documents. See "Risk Factors - Default on Project-level Debt;
Enforcement of Rights and Realization of Collateral."
All of the Collateral is held by the Collateral Agent for the
benefit of the Secured Parties as collateral and security for the
Bonds, the Company Guaranty and, on a subordinated basis, the
obligations of Panda International or any affiliate thereof under any
Letter of Credit reimbursement agreement.
PEC Stock Pledge Agreement
PEC has executed and delivered a Stock Pledge Agreement to the
Collateral Agent (the "PEC Stock Pledge Agreement") for the benefit
of the Secured Parties pledging all of the issued and outstanding
capital stock of the Company.
Issuer Security Agreement
The Issuer has entered into a Security Agreement with the
Collateral Agent (the "Issuer Security Agreement") for the benefit of
the Secured Parties providing for the collateral assignment of all of
the Issuer's personal property, including, without limitation, (i)
the Company Notes, (ii) the Issuer's rights under the Company Notes,
(iii) all of the Issuer's other contract rights, receivables and
insurance proceeds, (iv) all of the Issuer's interest in and under
the Company Loan Agreement, (v) all of the Issuer's other assets and
(vi) all proceeds of the foregoing.
Company Security Agreement
The Company has entered into a Security Agreement with the
Collateral Agent (the "Company Security Agreement") for the benefit
of the Secured Parties providing for the collateral assignment of (i)
all of the Company's interests in and rights to receive distributions
from PIC Entities in respect of U.S. Projects, (ii) the U.S. Account
Rights, (iii) all of the Company's interest in and rights under the
Additional Projects Contract and (iv) all proceeds of the foregoing.
Company Stock Pledge Agreement
The Company has entered into a Stock Pledge Agreement with the
Collateral Agent (the "Company Stock Pledge Agreement") for the
benefit of the Secured Parties providing for the pledge of (i) all
the issued and outstanding capital stock of the Issuer and each PIC
U.S. Entity and (ii) 60% of the issued and outstanding capital stock
of each PIC International Entity.
Sharing of Collateral
The Bondholders (represented by the Trustee), the Letter of
Credit Provider (when and if a Letter of Credit is provided as
permitted by the Indenture), the Trustee (collectively, the "Secured
Parties") and the Collateral Agent have entered into a Collateral
Agency Agreement with the Issuer and the Company, pursuant to which
the Collateral Agent has been appointed as agent for the Secured
Parties and acts as such under the Security Documents. Accordingly,
the rights of the Secured Parties with respect to the Collateral are
shared among the Secured Parties in accordance with the terms of the
Collateral Agency Agreement as described in more detail below.
Collateral Agency Agreement
The Collateral Agency Agreement provides that, upon an Event of
Default, the Collateral Agent shall, on behalf of the Secured
Parties, take such action to exercise its remedies under the Security
Documents as directed by the Trustee acting pursuant to a request of
the holders of a majority in aggregate principal amount of all
outstanding Bonds in accordance with and subject to the terms and
conditions set forth in the Indenture.
The proceeds of any sale or other realization upon the
Collateral pursuant to the Collateral Agent's exercise of remedies
under the Security Documents are to be distributed as follows:
First, to the Collateral Agent and the Trustee, ratably, in an
amount equal to any fees, costs, expenses and other amounts then due
to them;
Second, to the Trustee for distribution in accordance with the
Indenture, an amount equal to the principal of and premium, if any,
and interest on the Existing Bonds and all additional series of
Bonds, if any, and all other amounts owed to the Bondholders pursuant
to the Indenture;
Third, to the Letter of Credit Provider, in an amount equal to
the unpaid amount of all reimbursement obligations, interest and
other obligations owed to the Letter of Credit Provider; and
Fourth, to the applicable grantors and pledgors of the
Collateral under the Security Documents.
Remedies Under the Security Documents
If an Event of Default shall have occurred and be continuing and
the conditions contained in the Indenture have been satisfied, the
Trustee may take any or all of the following actions: (i) declare all
or any portion of the Issuer's obligations under the Indenture (or
the Company's obligations under the Company Notes) to be immediately
due and payable; (ii) to the extent not already in its possession,
direct the Collateral Agent to take possession of all or any portion
of the Collateral; (iii) to the extent it has not already done so,
instruct all obligors on any of the Collateral to make payment
directly to the Collateral Agent; (iv) direct the Collateral Agent to
take all cash or cash proceeds in respect of the Collateral; (v)
direct the Collateral Agent to take actions necessary to protect the
first priority perfected security interest in the Collateral; (vi)
direct the Collateral Agent to foreclose or otherwise realize (as
permitted by law) upon the Collateral; (vii) direct the Collateral
Agent to exercise all voting and other rights associated with the
capital stock included in the Collateral; (viii) direct the
Collateral Agent to receive all distributions made by the U.S.
Projects with respect to the Collateral; and (ix) direct the
Collateral Agent to exercise any additional rights afforded a secured
party under the Uniform Commercial Code.
Nonetheless, there is no assurance that a foreclosure or other
realization upon the Collateral will produce proceeds in an amount
that would be sufficient to pay the principal of and accrued and
unpaid interest on the Secured Obligations (as defined in the
Collateral Agency Agreement), including, without limitation, the
Existing Bonds. Furthermore, the ability of the Collateral Agent (on
behalf of the Secured Parties, including the Bondholders) to
foreclose or otherwise realize upon the Collateral following the
occurrence of an Event of Default under the Security Documents will
be subject in certain instances to perfection and priority issues and
to practical problems associated with the realization of security
interests in collateral of a type such as the Collateral. There can
be no assurance that procedural impediments or delays will not affect
the prompt execution of foreclosure or other realization upon the
Collateral.
Certain Bankruptcy Limitations
The right of the Collateral Agent to repossess and dispose of
the Collateral upon the occurrence of an Event of Default is likely
to be significantly impaired by applicable law, if a bankruptcy,
insolvency or similar proceeding were to be commenced by or against
the Issuer, the Company or PEC or if a receiver were appointed with
respect to PEC, the Company or the Issuer, prior to the Collateral
Agent having repossessed the Collateral. Under bankruptcy law, a
secured creditor such as the Collateral Agent is prohibited from
repossessing its security from a debtor in a bankruptcy case, or from
disposing of security repossessed from such debtor, without
bankruptcy court approval. Moreover, the bankruptcy law permits the
debtor to continue to retain and use collateral even though the
debtor is in default under applicable debt instruments, provided that
the secured creditor is given "adequate protection." The meaning of
the term "adequate protection" may vary according to the
circumstances, but it is intended in general to protect the value of
the secured creditor's interest in the collateral and may include
cash payments or the granting of additional security, if and at such
times as the court in its discretion determines, for any diminution
in the value of the collateral as a result of the stay of
repossession or disposition or any use of the collateral by the
debtor during the pendency of the bankruptcy case. Generally,
adequate protection payments, in the form of interest or otherwise,
are not required to be paid by the debtor to a secured creditor
unless the bankruptcy court determines that the value of the secured
creditor's interest in the collateral is declining during the
pendency of the bankruptcy case. In view of the lack of a precise
definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to
predict how long payments on the Bonds, including the Exchange Bonds,
could be delayed following commencement of a bankruptcy case, whether
or when the Collateral Agent could repossess or dispose of the
Collateral or whether or to what extent holders of the Bonds,
including the Exchange Bonds, would be compensated for any delay in
payment or loss of value of the Collateral through the requirement of
"adequate protection."
The Accounts and Funds
The Company has established and maintains with and in the name
of the Trustee, acting as agent for the Collateral Agent for the
benefit of the Secured Parties, the U.S. Project Account, the Debt
Service Fund, the Debt Service Reserve Fund, the Company Expense
Fund, the Capitalized Interest Fund, the U.S. Mandatory Redemption
Account, the U.S. Extraordinary Distribution Account, and the U.S.
Distribution Suspense Fund (collectively, the "U.S. Accounts"). The
Company, on behalf of the PIC International Entities, will establish
and maintain with and in the name of the Trustee acting as agent for
the PIC International Entities for the benefit of the Company
(referred to in this capacity as the "International Collateral
Agent") the International Project Account, the International
Mandatory Redemption Account, the International Extraordinary
Distribution Account, and the International Distribution Suspense
Fund.
In addition, the Company has established a U.S. Distribution
Fund, and it will establish on behalf of the PIC International
Entities, an International Distribution Fund. The U.S. Distribution
Fund is in the name and sole control of the Company, and the
International Distribution Fund will be in the name and sole control
of the PIC International Entities.
Project Accounts
All (i) distributions and other amounts received by the Company,
any PIC U.S. Entity or any person on behalf of the Company or any PIC
U.S. Entity, from, or in connection with, the U.S. Projects that may
be legally distributed or paid to the Company or any PIC U.S. Entity
without contravention of any Project agreement (other than in each
case Extraordinary Financial Distributions (which shall be applied as
set forth in "Redemption - Optional Redemption" above) and
distributions received that are required to be deposited in the
Mandatory Redemption Account (which shall be applied as set forth in
"Redemption - Mandatory Redemption" above), (ii) interest earned and
received on amounts on deposit in the U.S. Accounts and Funds, (iii)
payments of regularly scheduled interest and, if applicable,
principal on the PIC International Entity Notes (other than in
connection with any redemption or partial redemption thereof) and
(iv) payments resulting from the redemption or partial redemption of
the outstanding Other International Notes upon the occurrence of an
International Redemption Event, are required to be deposited in the
U.S. Project Account. All (i) distributions and other amounts
received by any PIC International Entity or any person on behalf of
any PIC International Entity, from or in connection with, the Non-
U.S. Projects that may be legally distributed or paid to any PIC
International Entity without contravention of any Project Agreement
and (ii) interest earned and received on amounts on deposit in the
International Accounts and Funds are required to be deposited in the
International Project Account.
The Trustee shall, on the first Business Day of each calendar
month (each a "Monthly Distribution Date"), transfer monies from the
U.S. Project Account (to the extent then available therein after
giving effect to any transfers to be made to the U.S. Project Account
on such Monthly Distribution Date and after withdrawing an amount
equal to the agreed-upon fees and reasonable expenses of the Trustee
and its agents and counsel due under the Indenture), in the
respective amounts and in the order of priority as follows:
(i) to the Debt Service Fund (the "Debt Service Fund"), for
application to the payment of principal and interest on the
Bonds, an amount equal to the excess, if any, of (a) the
aggregate amount of interest (less any amount on deposit in
the Capitalized Interest Fund in respect of such payment)
and, if applicable, principal due and payable on the Company
Notes (including any past due amounts) on the Payment Date
for each series of Bonds then outstanding next following the
day immediately preceding such Monthly Distribution Date
(other than in connection with a call for redemption) over
(b) the amount then on deposit in the Debt Service Fund.
(ii) to the Capitalized Interest Fund (the "Capitalized
Interest Fund"), an amount equal to the excess, if any, of
(a) the Capitalized Interest Requirement then in effect over
(b) the amount then on deposit in the Capitalized Interest
Fund, after giving effect to any withdrawals from such Fund
on such date;
(iii) to the Debt Service Reserve Fund (the "Debt Service
Reserve Fund"), an amount equal to the excess, if any, of
(a) the Debt Service Reserve Requirement then in effect over
(b) the sum of (1) the amount then on deposit in the Debt
Service Reserve Fund, after giving effect to any withdrawals
from such Fund on such date, and (2) the amount available to
be drawn under any Letter of Credit, after giving effect to
any drawings under any Letter of Credit on such date;
(iv) to the Company Expense Fund (the "Company Expense
Fund"), an amount equal to the excess, if any, of (a) the
sum of (1) the Company Expenses Amount for the applicable
calendar year plus (2) the Annual Letter of Credit Fee, if
any, for such calendar year over (b) the aggregate amount
deposited in the Company Expense Fund since the beginning of
such calendar year; and
(v) to the U.S. Distribution Suspense Fund (the "U.S.
Distribution Suspense Fund"), the remaining balance, if any,
on deposit in the U.S. Project Account.
On each Monthly Distribution Date, the International Collateral
Agent shall transfer monies from the International Project Account
(to the extent then available therein after giving effect to any
transfers to be made to the International Project Account on such
Monthly Distribution Date and after withdrawing an amount equal to
the agreed upon fees and reasonable expenses of the International
Collateral Agent and its agents and counsel due under the Indenture)
(i) first to the payment of any amount then due on any PIC
International Entity Note and (ii) then to the International
Distribution Suspense Fund, the remaining balance, if any on deposit
in the International Project Account.
Debt Service Fund
Amounts on deposit in the Debt Service Fund shall be applied by
the Trustee solely to pay interest and principal (whether at stated
maturity or by acceleration or otherwise, other than in connection
with a call for redemption), due and payable on the Company Notes, as
and when provided under the Company Notes (for application by the
Trustee to the payment of interest and principal on the Bonds).
Currently, there are no funds on deposit in the Debt Service Fund;
however, the U.S. Project Account has $7.0 million on deposit which
will be available for distribution to the Debt Service Fund as
required on the next Monthly Distribution Date. If, on any Payment
Date the amounts on deposit in the Debt Service Fund (after giving
effect to all transfers to the Debt Service Fund on such date) are
insufficient for the payment in full of the interest and, if
applicable, principal on the Company Notes scheduled to be paid on
such date, including any past due amounts (such deficiency
hereinafter referred to as a "Debt Service Deficiency"), an amount
equal to such Debt Service Deficiency shall be withdrawn and
transferred to the Debt Service Fund first, from the U.S.
Distribution Suspense Fund, then, from the U.S. Extraordinary
Distribution Account (using Available Amounts only), then, from the
Company Expense Fund, then, from the Debt Service Reserve Fund, the
monies on deposit therein, then, from the Debt Service Reserve Fund,
the proceeds received by the Trustee after making a drawing on the
Letter of Credit, if any, then, from the Capitalized Interest Fund
and then, from the U.S. Mandatory Redemption Account (using Available
Amounts only); provided, however, that if there are not sufficient
funds in the U.S. Accounts and Funds to eliminate a Debt Service
Deficiency, monies will be transferred from the International
Accounts and Funds by the International Collateral Agent to effect a
redemption or partial redemption of the Other International Notes in
an amount equal to the lesser of (A) the amount necessary to cure the
remaining Debt Service Deficiency, (B) the entire outstanding
principal amount of the Other International Notes and (C) the amount
then on deposit in the International Accounts and Funds. The amount
of any Other International Note that is redeemed or partially
redeemed for purposes of eliminating a Debt Service Deficiency will
be transferred to the U.S. Project Account and then from the U.S.
Project Account to the Debt Service Fund. PEC has agreed to cause
the Company (and, if necessary, to make contributions to the Company)
to loan $6.4 million to a PIC International Entity evidenced by an
Other International Note, on or prior to the earlier of (i) the first
date on which Commercial Operations have been achieved by any Non-
U.S. Project in the Project Portfolio and (ii) the date of transfer
to the Project Portfolio of any Non-U.S. Project that has already
achieved Commercial Operations. The Company may, but is under no
obligation to, lend additional amounts to the PIC International
Entities to create additional Other International Notes.
Capitalized Interest Fund
Upon issuance of the Old Bonds, the Company delivered to the
Trustee for deposit in the Capitalized Interest Fund approximately
$9.8 million out of the loan by the Issuer to the Company of the
proceeds from the issuance of the Old Bonds, which is the current
balance in the Capitalized Interest Fund. Monies from time to time
held on deposit in the Capitalized Interest Fund shall be transferred
to the Debt Service Fund on the Interest Payment Dates and in the
amounts set forth in each Series Supplemental Indenture. On any
Monthly Distribution Date on which the Company provides a certificate
to the Trustee (supported by a certificate to the Trustee from the
Consolidating Engineer) stating that (i) the Company Debt Service
Coverage Ratio and the Consolidated Debt Service Coverage Ratio (if
then applicable) for the 12 months immediately preceding the month in
which such Monthly Distribution Date occurs equal or exceed 1.7:1 and
1.25:1, respectively, and (ii) the projected Company Debt Service
Coverage Ratio and the projected Consolidated Debt Service Coverage
Ratio (if then applicable) will (after giving effect to any
distribution from the Capitalized Interest Fund to the U.S.
Distribution Suspense Fund proposed to be made on such Monthly
Distribution Date), equal or exceed 1.7:1 and 1.25:1, respectively,
for each Future Ratio Determination Period, then all amounts in the
Capitalized Interest Fund may be transferred to the U.S. Distribution
Suspense Fund. Upon any such transfer, the Capitalized Interest
Requirement shall be zero unless and until a new Capitalized Interest
Requirement is established by a subsequent Series Supplemental
Indenture. If, on any Monthly Distribution Date, the amount on
deposit in the Capitalized Interest Fund (after giving effect to all
transfers to the Capitalized Interest Fund to be made on such Monthly
Distribution Date) is less than the Capitalized Interest Requirement
in effect on such date (each such deficiency, a "Capitalized Interest
Deficiency"), an amount equal to such Capitalized Interest Deficiency
shall be withdrawn and transferred to the Capitalized Interest Fund
first, from the U.S. Distribution Suspense Fund, then from the U.S.
Extraordinary Distribution Account (using Available Amounts only),
then from the Company Expense Fund, then from the Debt Service
Reserve Fund, the monies on deposit therein, then from the Debt
Service Reserve Fund, the proceeds received by the Trustee after
making a drawing on the Letter of Credit, if any, and then from the
U.S. Mandatory Redemption Account (using Available Amounts only);
provided, however, that if there are not sufficient funds in the U.S.
Accounts and Funds to eliminate a Capitalized Interest Deficiency,
monies will be transferred from the International Accounts and Funds
(after giving effect to any transfers therefrom in respect of a Debt
Service Deficiency) by the International Collateral Agent to effect a
redemption or partial redemption of the Other International Notes in
an amount equal to the lesser of (A) the amounts on deposit in the
International Accounts and Funds, (B) the outstanding principal
amount of the Other International Notes and (C) the amount of such
Capitalized Interest Deficiency. The amounts realized from the
redemption or partial redemption of any Other International Notes for
purposes of eliminating a Capitalized Interest Deficiency will be
transferred to the U.S. Project Account and then from the U.S.
Project Account to the Capitalized Interest Fund. PEC has agreed to
cause the Company (and, if necessary, to make contributions to the
Company) to loan $6.4 million to a PIC International Entity evidenced
by an Other International Note, on or prior to the earlier of (i) the
first date on which Commercial Operations have been achieved by any
Non-U.S. Project in the Project Portfolio and (ii) the date of
transfer to the Project Portfolio of any Non-U.S. Project that has
already achieved Commercial Operations. The Company may, but is under
no obligation to, lend additional amounts to the PIC International
Entities to create additional Other International Notes.
Debt Service Reserve Fund
Upon the issuance of the Old Bonds, the Company delivered to the
Trustee for deposit in the Debt Service Reserve Fund $6.4 million out
of the loan by the Issuer to the Company of the proceeds from the
issuance of the Old Bonds, which is the current balance in the Debt
Service Reserve Fund. The Trustee shall apply amounts held in the
Debt Service Reserve Fund solely to eliminate any Debt Service
Deficiency or Capitalized Interest Deficiency.
At any time when the Capitalized Interest Requirement for any
series of Bonds is zero, in lieu of maintaining monies in the Debt
Service Reserve Fund, all or a portion of the Debt Service Reserve
Requirement in respect of such series may be satisfied by the
delivery to the Trustee of one or more Letters of Credit.
On any Payment Date on which a Debt Service Deficiency exists,
an amount equal to any Debt Service Deficiency, subject to the order
of priority established under "Debt Service Fund" above, will be
withdrawn from the Debt Service Reserve Fund, with any Letter of
Credit being drawn upon only after all monies on deposit in the Debt
Service Reserve Fund have been exhausted.
If thirty days prior to the expiration of any Letter of Credit
delivered in respect of the Debt Service Reserve Requirement, such
Letter of Credit has not been renewed, extended or replaced, the
Trustee shall make a drawing thereunder in an amount equal to the
lesser of (i) the excess, if any, of (a) the Debt Service Reserve
Requirement then in effect over (b) the sum of the undrawn face
amount of all other Letters of Credit, if any, and the amount of
monies held in the Debt Service Reserve Fund and (ii) the maximum
amount available to be drawn under such Letter of Credit. The
proceeds of any such drawing shall be deposited in the Debt Service
Reserve Fund to be applied in accordance with the Indenture. If, on
any Monthly Distribution Date, the amount on deposit in the Debt
Service Reserve Fund (after giving effect to all transfers to the
Debt Service Reserve Fund to be made on such Monthly Distribution
Date) is less than the Debt Service Reserve Requirement in effect on
such date (each such deficiency, a "Debt Service Reserve
Deficiency"), an amount equal to such Debt Service Reserve Deficiency
shall be withdrawn and transferred to the Debt Service Reserve Fund
first, from the U.S. Distribution Suspense Fund, then from the U.S.
Extraordinary Distribution Account (using Available Amounts only),
then from the Company Expense Fund and then from the U.S. Mandatory
Redemption Account (using Available Amounts only); provided, however,
that if there are not sufficient funds in the U.S. Accounts and Funds
to eliminate a Debt Service Reserve Deficiency, monies will be
transferred from the International Accounts and Funds (after giving
effect to any transfers therefrom in respect of a Debt Service
Deficiency or a Capitalized Interest Deficiency) by the International
Collateral Agent to effect a redemption or partial redemption of the
Other International Notes in an amount equal to the lesser of (A) the
amounts on deposit in the International Accounts and Funds, (B) the
outstanding principal amount of the Other International Notes and (C)
the amount of such Debt Service Reserve Deficiency. The amounts
realized from the redemption or partial redemption of any Other
International Notes for purposes of eliminating a Debt Service
Reserve Deficiency will be transferred to the U.S. Project Account
and then from the U.S. Project Account to the Debt Service Reserve
Fund. PEC has agreed to cause the Company (and, if necessary, to make
capital contributions to the Company) to loan $6.4 million to a PIC
International Entity evidenced by an Other International Note, on or
prior to the earlier of (i) the first date on which Commercial
Operations have been achieved by any Non-U.S. Project in the Project
Portfolio and (ii) the date of transfer to the Project Portfolio of
any Non-U.S. Project that has already achieved Commercial Operations.
The Company may, but is under no obligation to, lend additional
amounts to the PIC International Entities to create additional Other
International Notes.
Company Expense Fund
Except as otherwise provided in the Indenture, on each Monthly
Distribution Date monies held on deposit in the Company Expense Fund
shall be applied solely to pay all reasonable accrued and unpaid
costs and expenses incurred by or on behalf of the Issuer, the
Company or any PIC Entity in connection with the management of, and
the general and administrative expenses of, the Issuer, the Company
or the PIC Entities through such Monthly Distribution Date plus any
portion of the Annual Letter of Credit Fee that is due and payable or
past due on such Monthly Distribution Date. Upon the issuance of the
Old Bonds, the Company delivered to the Trustee for deposit in the
Company Expense Fund $300,000, which is the current Company Expenses
Amount. The Company Expenses Amount is adjusted upward each year for
inflation and may be increased from time to time at the request of
the Company, subject to the limitations set forth in the Indenture.
The current balance in the Company Expense Fund is approximately
$247,000.
Distribution Suspense Funds and Distribution Funds
On each Monthly Distribution Date, upon receipt of the
appropriate required Distribution Certificate from the Company, the
Trustee shall transfer from the U.S. Distribution Suspense Fund to
the U.S. Distribution Fund and the International Collateral Agent
shall transfer from the International Distribution Suspense Fund to
the International Distribution Fund monies then on deposit in such
Distribution Suspense Funds, in the amount set forth in such
Distribution Certificate as being available for distribution to such
Distribution Fund (see "Certain Covenants - Limitations on
Distributions" below). The U.S. Distribution Fund is in the name and
sole control of the Company, the International Distribution Fund
shall be in the name and sole control of the PIC International
Entities, and none of the Issuer, the Trustee, the International
Collateral Agent or the Bondholders will have any interest in the
Distribution Funds.
Mandatory Redemption Accounts
Promptly after receipt by the Company or any PIC Entity, monies
received in respect of Mandatory Redemption Events (subject to
certain exceptions described in "Redemption - Mandatory Redemption"
above), shall be deposited in the U.S. Mandatory Redemption Account
if such Mandatory Redemption Event relates to a U.S. Project and in
the International Mandatory Redemption Account if such Mandatory
Redemption Event relates to a Non-U.S. Project, and all such amounts
deposited in the Mandatory Redemption Accounts shall remain therein
until they are used in the manner described in the Indenture for the
mandatory redemption of the Bonds or otherwise are transferred or
distributed as provided in the Indenture. See "Redemption - Mandatory
Redemption" above.
Extraordinary Distribution Accounts
Promptly after receipt by the Company or any PIC Entity, all
Extraordinary Financial Distributions shall be deposited in the U.S.
Extraordinary Distribution Account if such Extraordinary Financial
Distribution relates to a U.S. Project and in the International
Extraordinary Distribution Account if it relates to a Non-U.S.
Project, and all such amounts deposited in the Extraordinary
Distribution Accounts shall remain therein until they are used in the
manner described in the Indenture for the optional redemption of
Bonds or otherwise are transferred or distributed as provided in the
Indenture. See "Redemption - Optional Redemption" above.
Investment of Accounts and Funds
If directed by the Company or any PIC International Entity, the
Trustee and the International Collateral Agent, as the case may be,
shall invest the monies on deposit in the Accounts and Funds in
Permitted Investments, provided that if an Event of Default has
occurred and is continuing, the Trustee or the International
Collateral Agent, as the case may be, may only invest monies in the
Accounts and Funds in Permitted Investments of a maturity of 30 days
or less. Neither the Trustee nor the International Collateral Agent
shall be liable for any losses incurred on such investments. Any
earnings received from and losses on Permitted Investments using
monies in the U.S. Accounts and Funds shall be deposited in the U.S.
Project Account, and any earnings received from and losses on
Permitted Investments using monies in the International Accounts and
Funds shall be deposited in the International Project Account.
Identity and Role of Consolidating Engineer
ICF currently serves as the Consolidating Engineer in accordance
with the Indenture. Pursuant to the Indenture, the Consolidating
Engineer is responsible for providing certificates to the Trustee
with respect to the calculations made by the Company in certificates
delivered to the Trustee in connection with (i) any issuance of
additional series of Bonds, (ii) Mandatory Redemption Events and
(iii) requests for distributions in respect of Extraordinary
Financial Distributions in excess of $5.0 million. In providing such
certificates, the Consolidating Engineer is entitled to rely on
reports or certificates of qualified Independent Engineers or other
independent consultants. See "Consolidating Engineer."
Certain Covenants
Limitations on Distributions
Transfers from the Distribution Suspense Funds to the
corresponding Distribution Funds are subject to the satisfaction of
the following conditions on the applicable Monthly Distribution Date
and the Trustee shall have received a certificate (with supporting
calculations attached to such certificate) at least two Business Days
prior to such Monthly Distribution Date to the effect that, after
giving effect to such proposed transfer: (i) the amount on deposit in
the Debt Service Fund is equal to or greater than the aggregate
amount of interest (less amounts on deposit in the Capitalized
Interest Fund in respect of such interest payment) and, if
applicable, principal due and payable on the Bonds (including any
past due amounts) on the Payment Date for each series of Bonds then
outstanding next following the day immediately preceding such Monthly
Distribution Date (other than in connection with a call for
redemption); (ii) the amount on deposit in each of the Capitalized
Interest Fund, the Debt Service Reserve Fund, the Company Expense
Fund, the Mandatory Redemption Accounts and the Extraordinary
Distribution Accounts is equal to or greater than the amount then
required to be on deposit in each such Fund or Account as of such
date; (iii) no Default (to the knowledge of any officer of the
Company) or Event of Default under the Indenture has occurred and is
continuing; (iv) with certain exceptions, the Company Debt Service
Coverage Ratio is equal to or greater than 1.4:1 for the 12 months
immediately preceding the month in which such Monthly Distribution
Date is to occur (or for such shorter period as the Bonds have been
outstanding); and (v) the projected Company Debt Service Coverage
Ratio is equal to or greater than 1.4:1 for the 12 months immediately
succeeding the month in which such Monthly Distribution Date is to
occur (or for such shorter period as the series of Bonds with the
latest Final Stated Maturity is scheduled to be outstanding).
Notwithstanding the foregoing, on the Monthly Distribution Date
immediately succeeding the delivery to the Trustee of any Letter of
Credit, any amounts on deposit in the Debt Service Reserve Fund in
excess of the Debt Service Reserve Requirement minus the undrawn
stated amount of all such Letters of Credit shall be transferred by
the Trustee to the U.S. Distribution Suspense Fund.
Neither the Company nor any PIC Entity shall make payments or
distributions to PEC or any other affiliate of the Company or
payments to any subordinated lender with respect to any subordinated
loan and the Issuer shall not distribute any dividends to the Company
(such payments, distributions and dividends being herein referred to
as "Distributions") out of Project Distributions or any Collateral
except from, and to the extent of, in the case of the Company or any
PIC U.S. Entity, monies on deposit in the U.S. Distribution Fund and,
in the case of any PIC International Entity, monies on deposit in the
International Distribution Fund.
Limitations on Debt
Neither the Issuer nor the Company shall, nor shall the Company
permit any PIC Entity or Project Entity to, create or incur or suffer
to exist any debt, except:
(i) in the case of the Issuer, (a) the Existing Bonds and
(b) additional series of Bonds, if any, provided that at the
time of the creation of each additional series of Bonds
(other than any series issued solely in exchange for an
equivalent aggregate principal amount of outstanding Bonds
of another series) (1) the Company provides a certificate to
the Trustee (supported by a certificate to the Trustee from
the Consolidating Engineer) stating that, after giving
effect to the issuance of such additional series of Bonds
and the application of the proceeds therefrom, the projected
Company Debt Service Coverage Ratio and the projected
Consolidated Debt Service Coverage Ratio (if then
applicable) equal or exceed 1.7:1 and 1.25:1, respectively,
for each Future Ratio Determination Period, and (2) the
rating (in effect immediately prior to the issuance of such
additional series) of the Bonds is Reaffirmed after giving
effect to the issuance of such additional series, provided,
further, that such Reaffirmation shall not be required if
(A) neither the Company nor any PIC Entity has acquired (or
is acquiring in connection with the issuance of such
additional series of Bonds), sold or otherwise disposed of,
since the last date upon which the Bonds were rated or a
Reaffirmation of rating was given in respect thereof, any
amount of direct or indirect interests in one or more
Projects with respect to which the sum of (w) the aggregate
purchase prices of all such acquisitions and (x) the
aggregate sales prices and proceeds received in connection
with any such disposition of all such sales or other
disposition, exceeds the greater of (y) $50 million and (z)
25% of the aggregate principal amount of the Bonds then
outstanding and (B) the aggregate principal amount of the
additional series of Bonds to be issued is less than the
lesser of (x) $50 million and (y) 25% of the then
outstanding aggregate principal amount of the Bonds then
outstanding;
(ii) in the case of the Company, the Company Notes, the
Company Guaranty and allocations among the Company and
affiliates of the Company of overhead expenses not in excess
at any one time of the Company Expenses Amount;
(iii) in the case of the PIC International Entities, (a) the
PIC International Entity Notes and (b) subordinated debt
(including Other International Notes) payable to the Company
or any PIC Entity which shall not have independent rights of
acceleration or remedies without the occurrence of rights of
acceleration or remedies on the Company Notes;
(iv) in the case of the PIC U.S. Entities, (a) the PIC U.S.
Entity Guaranties and (b) subordinated debt payable to the
Company or any PIC Entity which shall not have independent
rights of acceleration or remedies without the occurrence of
rights of acceleration or remedies on the Company Notes; and
(v) in the case of Project Entities, Project debt and debt
arising under guaranties permitted pursuant to the
Indenture.
Limitations on Guaranties
Neither the Issuer nor the Company shall, and the Company shall
not permit any PIC Entity or Project Entity to, contingently or
otherwise, be or become liable, directly or indirectly, in connection
with any guaranty except (i) guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of
business; (ii) in the case of the Company, the Company Guaranty;
(iii) in the case of any PIC U.S. Entity, the PIC U.S. Entity
guaranties; and (iv) in the case of any Project Entity, guaranties of
Project Debt permitted by the Indenture and guaranties of payment or
performance created, required or expressly permitted to exist under
any Project agreement.
Limitations on Liens
The Issuer and the Company shall not, and the Company shall not
permit any PIC Entity to, create or suffer to exist or permit any
Lien upon or with respect to any of their respective property or any
Project Distributions, except (i) Liens created or otherwise
expressly permitted or required to exist by the Indenture or any
Transaction Document, (ii) Liens for taxes, assessments, charges,
levies, claims or obligations which are either not yet due, are due
but payable without penalty or are the subject of a good faith
contest by the Issuer, the Company, or any PIC Entity, as the case
may be, (iii) legal or equitable encumbrances deemed to exist by
reason of the existence of any litigation or other legal proceeding
if the same are the subject of a good faith contest, (iv) with
respect to property of, or Project Distributions to, any PIC Entity,
Liens required or permitted to exist by the Project agreements if
such Liens were required to exist or existed (a) on the date the
Existing Bonds are issued or (b), with respect to Liens upon or with
respect to property or Project Distributions relating to a particular
Project, at the time the Company or any PIC Entity makes its initial
capital contribution or purchase price payment with respect to such
Project or receives interests in such Project acquired subsequent to
such initial contribution or payment, or any replacement or successor
Lien created in connection with the refinancing of any Project,
provided such replacement or successor Lien shall not secure any
monetary obligation materially greater than the Lien it replaces or
succeeds or encumber any Property not subject to the Lien it replaces
or succeeds unless (and only to the extent that) the provisions for
incurring or refinancing Project Debt (as provided in "Limitations on
Project Debt and Project Agreements" below) have been satisfied, (v)
Liens in connection with worker's compensation, unemployment
insurance or other social security or pension obligations and (vi)
with respect to property of, or Project Distributions to, any PIC
Entity, Liens other than to secure debt, provided such Lien could not
reasonably be expected to (A) result in a Material Adverse Change or
(B) in the case of any Lien on the Collateral, materially diminish
the value of, or the security offered by, the Property subject to
such Lien.
Limitations on Activities of the Issuer and the Company
The Company shall not engage in any business other than (i) the
direct or indirect ownership of PIC Entities, Project Entities and
Projects, (ii) the making of loans to its controlling affiliates, PIC
Entities and Project Entities, (iii) the issuance of the Company
Notes and the Company Guaranty, (iv) distributions and investments
permitted by the Indenture and (v) activities reasonably necessary,
in the judgment of the Company, to preserve, protect or enhance the
value of the Company's investments in the Projects.
The Issuer shall not have any Subsidiaries. The Company shall
not create, acquire or purchase (i) any direct Subsidiary other than
the PIC Entities or (ii) any indirect Subsidiary other than the
Project Entities, in each case for the purposes contemplated above or
in connection with the acquisition of interests in Project Entities
permitted by the Indenture.
The Issuer shall not engage in any business other than (i) the
issuance of the Existing Bonds and the additional series of Bonds, if
any, (ii) the performance of its obligations under the Transaction
Documents, (iii) enforcement of its rights under the Security
Documents and the Company Notes and (iv) activities reasonably
related to the foregoing.
Ownership of Projects
The Company shall maintain (i) at least a 50% (direct or
indirect) ownership or equivalent interest in each Project or (ii)(a)
at least a 25% (direct or indirect) ownership or equivalent interest
in each Project not meeting the requirements of clause (i) above and
(b) a controlling influence over the management and policies with
respect to each Project, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, provided
that no other entity has greater control than the Company over the
management and policies of such Project. Notwithstanding the
foregoing, this covenant shall not prohibit the sale, lease, transfer
or other disposition of all interests in a Project, or a reduction in
the ownership or equivalent interest of, or control over, a Project
occurring pursuant to the terms of a build-operate-transfer
arrangement at least ten years after the entering into of such
arrangement. See "Prohibition on Fundamental Changes and Dispositions
of Assets" below.
Limitations on Project Debt and Project Agreements
The Company shall not, nor shall it permit any PIC Entity to,
incur or refinance any Project Debt or enter into any Project
agreement (other than in connection with Liens permitted under the
Indenture), and the Company shall not permit any Project Entity to,
(i) incur any Project Debt other than that existing or created on the
date that the Project to which such Project Debt relates is
transferred to the Project Portfolio or on the date that the Company
or any PIC Entity makes its initial investment in the Project to
which such Project Debt relates, (ii) refinance any Project Debt,
(iii) enter into any Project agreements other than any Project
agreement existing or created on the date that the Project to which
such Project Debt relates is transferred to the Project Portfolio or
on the date that the Company or any PIC Entity makes its initial
contribution with respect to the Project to which such Project
agreement relates or (iv) amend or modify any Project agreement, if
in the case of clause (i), (ii), (iii) or (iv) such action could
reasonably be expected to reduce Cash Available for Distribution
(including any such action that could (a) decrease the amount of, or
postpone the receipt of, any revenues, distributions or other amounts
to be received by or on behalf of the Company, a PIC Entity or such
Project Entity, (b) increase the amount of, or accelerate the date
for payment of, any fees, prepayments, costs, expenses, liabilities
or other amounts payable by or on behalf of the Company, a PIC Entity
or such Project Entity or (c) create additional conditions precedent
to, or modify existing conditions if such modification could impair,
the right of the Company or a PIC Entity to receive distributions or
other amounts directly or indirectly from any PIC Entity or Project
Entity) by 10% or more in the aggregate during any Future Ratio
Determination Period unless at the time of such action (1) the
Company provides a certificate to the Trustee (supported by a
certificate to the Trustee from the Consolidating Engineer) stating
that, after giving effect to such action, the projected Company Debt
Service Coverage Ratio and the projected Consolidated Debt Service
Coverage Ratio (if then applicable) equal or exceed 1.7:1 and 1.25:1,
respectively, for each Future Ratio Determination Period and (2) the
rating of the outstanding Bonds, after giving effect to such action,
has been Reaffirmed.
Distributions by Projects
Subject to reasonable working capital and capital improvement
requirements (taking into account reasonable currency exchange and
tax planning requirements), the Company shall cause each Project
Entity to distribute to the PIC Entities all distributions and other
amounts received, directly or indirectly, by such Project Entity or
by any other person on behalf of such Project Entity from, or in
connection with, the Project Portfolio that may be legally
distributed or paid to any PIC Entity without contravention of any
Project agreement.
Prohibition on Fundamental Changes and Disposition of Assets
None of the Issuer, the Company and any PIC Entity shall enter
into any transaction of merger, consolidation, sale, lease, transfer
or other disposition of all or substantially all of its assets
(including the Project Portfolio), change its form of organization or
its business, or liquidate or dissolve itself (or suffer any
liquidation or dissolution); provided, however, that the Issuer, the
Company or any PIC Entity may merge or consolidate or sell, lease,
transfer or otherwise dispose of all or substantially all of its
assets, if: (i) (a) in the case of the Issuer, the successor or
transferee entity is a wholly owned Subsidiary of the Company and
such successor or transferee entity expressly assumes, by an
instrument in form and substance reasonably satisfactory to the
Trustee, all of the Issuer's obligations under the Indenture, the
Bonds and the other Transaction Documents to which the Issuer is a
party; (b) in the case of the Company, the successor or transferee
entity shall be an entity organized and existing under the laws of
any state of the United States or the District of Columbia and shall
expressly assume, by an instrument in form and substance satisfactory
to the Trustee, all of the obligations of the Company under the
Indenture, the Company Guaranty, the Company Notes and the other
Transaction Documents to which the Company is a party; and (c) in the
case of any PIC Entity, the successor or transferee entity shall be
organized under the laws of any state of the United States or the
District of Columbia, or, in the case of a PIC International Entity,
an appropriate foreign tax jurisdiction, and shall expressly assume,
by an instrument in form and substance satisfactory to the Trustee
all of the obligations of such PIC Entity, if any, under the
Transaction Documents to which such PIC Entity is a party; (ii)
immediately before and immediately after giving effect to such
transaction on a pro forma basis (and after giving effect to any
modifications made to the terms of the Indenture in order to reflect
the particular characteristics of the purchasing or surviving entity,
provided that the rating in effect immediately prior to such
modification of the Existing Bonds and any additional series of
Bonds, then outstanding, is Reaffirmed), no Event of Default shall
have occurred and be continuing; (iii) the Company shall have
delivered an Officer's Certificate and an Opinion of Counsel (as
defined in the Indenture) each stating that all conditions precedent
provided in the Indenture relating to such transaction have been
complied with and (iv) the rating then in effect on the Existing
Bonds and any additional series of Bonds, then outstanding, is
Reaffirmed, after giving effect to such merger, consolidation, sale,
lease, transfer or other transaction. Notwithstanding the foregoing,
(i) in no event shall the Company be permitted to merge or
consolidate with or into, or sell, lease, transfer or otherwise
dispose of all or substantially all of its assets to, the Issuer and
(ii) in no event shall the Issuer be permitted to merge or
consolidate with or into, or sell, lease, transfer or otherwise
dispose of all or substantially all of its assets to, the Company.
Notwithstanding anything in this paragraph to the contrary, the
Company or a PIC Entity may sell its direct or indirect interests in
a Project or Projects to the extent provided in "Sales of Projects"
below. None of the Issuer, the Company or any PIC Entity shall
purchase or otherwise acquire all or substantially all of the assets
of any person except that (i) the Company and the PIC Entities may
acquire direct or indirect interests in Project Entities and Projects
to the extent permitted by the Indenture, (ii) in connection with any
merger, consolidation or sale, lease, transfer or other transaction
satisfying the applicable requirements of this paragraph and as
provided in "Sales of Projects" below, (iii) for the creation or
acquisition by PIC of a PIC Entity or by a PIC Entity of a Project
Entity or (iv) any purchase or other acquisition of interests in or
held by the Company's or any PIC Entity's existing investments if
after giving effect to any such purchase or acquisition, no Default
or Event of Default will exist or result therefrom. Except in
connection with any merger, consolidation or sale transaction
satisfying the applicable requirements of this paragraph, or as
contemplated by the Security Documents, the Company may not transfer
all or any portion of its ownership interest in the Issuer or any PIC
Entity.
Change of Control
Upon the occurrence of a Change of Control, the Issuer will be
obligated to make an offer to purchase all of the then outstanding
Existing Bonds and additional series of Bonds, if any (a "Change of
Control Offer"), and will purchase on a Business Day (the "Change of
Control Purchase Date") not more than 60 nor less than 30 days
following such Change of Control, all of the then outstanding Bonds
validly tendered pursuant to such Change of Control Offer and not
withdrawn, at a purchase price (the "Change of Control Purchase
Price") equal to 101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the Change of Control Purchase Date
in accordance with the terms of the Indenture. The Change of Control
Offer is required to remain open for at least 20 Business Days and
until the close of business on the fifth Business Day prior to the
Change of Control Purchase Date.
In order to effect such Change of Control Offer, the Issuer
will, not later than the 30th day after the Change of Control, mail
to the Trustee and each Bondholder a notice of the Change of Control
Offer, which notice shall govern the terms of the Change of Control
Offer and shall state, among other things, the procedures that
Bondholders must follow to accept the Change of Control Offer.
There can be no assurance that the Issuer will have available
funds sufficient to fund the purchase of the Bonds upon a Change of
Control. In the event a Change of Control occurs at a time when the
Issuer does not have available funds sufficient to pay the Change of
Control Purchase Price for all of the Bonds delivered by Bondholders
seeking to accept the Change of Control Offer, an Event of Default
would occur under the Indenture. The definition of Change of Control
includes an event by which the Company sells, conveys, transfers,
leases or otherwise disposes of all or substantially all of the
properties and assets of the Company and its Subsidiaries, taken as a
whole. There is little case law interpreting the phrase "all or
substantially all" in the context of an indenture. Because there is
no precise established definition of this phrase, there may be
uncertainty as to whether a Change of Control has occurred as a
result of any particular sale, conveyance, transfer, lease or other
disposition of assets of the Company and its Subsidiaries. Any such
uncertainty may adversely affect the enforceability of the Change of
Control provisions of the Indenture.
The Issuer will not be required to make a Change of Control
Offer upon a Change of Control if another person makes the Change of
Control Offer at the same purchase price, at the same time and
otherwise in substantial compliance with the requirements applicable
to a Change of Control Offer to be made by the Issuer and purchases
all Bonds validly tendered and not withdrawn under such Change of
Control Offer.
The Issuer will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder, if
applicable, if a Change of Control occurs and the Issuer is required
to repurchase Bonds as described above. The existence of a
Bondholder's right to require, subject to certain conditions, the
Issuer to repurchase its Bonds upon a Change of Control may deter a
third party from acquiring the Issuer in a transaction that
constitutes, or results in, a Change of Control.
The Issuer shall, subject to certain exceptions described in the
Indenture, be required to purchase all Existing Bonds and Bonds of
additional series, if any, properly tendered pursuant to the Change
of Control Offer and not withdrawn.
Additional Collateral
If the U.S. federal income tax laws are amended to permit the
International Accounts and Funds or any shares of the capital stock
of or other ownership interests in the PIC International Entities
that have not been pledged to the Collateral Agent pursuant to the
Security Documents to be included as part of the Collateral without
adversely affecting Panda International's ability to defer U.S.
federal income taxes on earnings from Non-U.S. Projects, then (i) the
Issuer and the Company will enter into a supplemental indenture with
the Trustee to include such capital stock or other ownership
interests and the International Accounts and Funds as part of the
Collateral and (ii) the Company shall, and shall cause the PIC
International Entities to, execute appropriate security documents
pledging to the Collateral Agent as Collateral such International
Accounts and Funds and such stock or other ownership interests, as
the case may be.
Transactions with Affiliates
The Issuer and the Company shall not, and the Company shall not
permit any PIC Entity or Project Entity (collectively, the "PIC
Group") to, engage in transactions with affiliates of the Company
other than members of the PIC Group except for (i) transactions which
are on terms no less favorable to the PIC Group than the PIC Group
could obtain in arms-length transactions from third parties which are
not affiliates of the Company, (ii) distributions, loans and
investments permitted by the Indenture and (iii) transactions
required by the Indenture or the Transaction Documents.
Use of Proceeds
The Issuer loaned all of the proceeds received by it from the
issuance of the Old Bonds to the Company which used and will use the
net proceeds thereof (after deducting underwriting discounts and
commissions) (i) to fund the Capitalized Interest Fund in the amount
of approximately $9.8 million; (ii) to fund the Debt Service Reserve
Fund in the amount of approximately $6.4 million; (iii) to fund the
Company Expense Fund in the amount of approximately $300,000; (iv) to
pay transaction expenses and fees incurred in connection with the
Prior Offering, estimated at approximately $900,000; (v) to fund in
the amount of approximately $25.1 million a portion of the
acquisition by the Panda-Rosemary Partnership of the limited
partnership interest therein held by Ford Credit; (vi) to distribute
approximately $60.9 million to Panda International, of which
approximately $26.4 million was used by Panda International to prepay
senior indebtedness held by Trust Company of the West.
Sales of Projects
The Company will not, and the Company will not permit any PIC
Entity or Project Entity to, sell any direct or indirect interests in
Projects for aggregate consideration in excess of $2,000,000 in any
calendar year; provided, however, that any such sale may be made (i)
if after giving effect to any such sale, the Company complies with
the requirements set forth in "Certain Covenants - Ownership of
Projects," (ii) the proceeds of any such sale are applied as provided
in "Mandatory Redemption" above to effect a mandatory redemption of
any PIC International Entity Notes or Bonds, as the case may be,
(iii) the Company provides a certificate to the Trustee (supported by
a certificate to the Trustee from the Consolidating Engineer) stating
that, after giving effect to such sale and the application of the
proceeds therefrom (including through a mandatory redemption), the
projected Company Debt Service Coverage Ratio and the projected
Consolidated Debt Service Coverage Ratio (if then applicable) equal
or exceed 1.7 to 1.0 and 1.25 to 1.0, respectively for each Future
Ratio Determination Period and (iv) if the proceeds of such sale to
be received by the Company or any PIC Entity exceed the lesser of (x)
$50 million and (y) 25% of the aggregate principal amount of the
Bonds then outstanding, the rating on the Bonds immediately prior to
such sale is Reaffirmed (after giving effect to such sale and the
application of the proceeds therefrom). (Section 7.28)
PIC International Entity Loan Agreements
The Company shall cause each PIC International Entity that is
created, acquired or purchased after the Issue Date to execute, and
to deliver a copy to the Trustee, a loan agreement, substantially in
the form of the PIC International Entity Loan Agreement attached to
the Indenture, at the time such PIC International Entity is so
created, acquired or purchased, and to enter into the security
documents granting the Company a security interest in the
International Accounts and Funds and distributions from PIC
International Entities.
PIC U.S. Entity Guaranties
The Company shall cause each PIC U.S. Entity that is created,
acquired or purchased after the Issue Date to execute and deliver to
the Trustee a PIC Entity Guaranty, substantially in the form attached
to the Indenture, at the time such PIC U.S. Entity is so created,
purchased or acquired.
Additional Covenants
In addition to the covenants described above, the Indenture also
contains covenants of the Issuer and the Company regarding
maintenance of existence, compliance with organizational documents,
nonmodification and nonamendment of organizational documents (except
in the manner provided therein and in a manner that does not modify
certain provisions relating to the existence of an independent
director or the business purpose of such entity and that could not be
reasonably expected to result in a Material Adverse Change), payment
of taxes, pursuing rights to compensation upon the occurrence of a
casualty or condemnation, maintenance of books and records, the right
of the Trustee to inspect the property, compliance with laws,
opinions of counsel regarding the maintenance of recordations and
filings, providing further assurances, delivery of financial
statements, compliance certificates, reports, notices of certain
material subsequent events and certain information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act in
order to permit compliance by a Bondholder with Rule 144A in
connection with the resale of Existing Bonds and additional series of
Bonds, if any, restrictions on termination or amendment of any
Transaction Document or entry into any new agreement which could
reasonably be expected to result in a Material Adverse Change,
limitations on investments, restrictions on actions that require
registration as an "investment company" under the Investment Company
Act, pursuing rights to compensation with respect to certain events
of loss, compliance with the Public Utility Holding Company Act,
appointments to fill vacancy in the office of Trustee, the issuance
of Other International Notes and furnishing of lists of holders of
the Existing Bonds and the additional series of Bonds, if any, to the
Trustee.
Defaults and Remedies
Events of Default.
Each of the following shall constitute an Event of Default:
(i) the failure to pay or cause to be paid principal of, or
premium, if any, or interest on any Existing Bond or any
Bond of an additional series when the same becomes due and
payable, whether by scheduled maturity or required
redemption, upon repurchase pursuant to a Change of Control
Offer, or by acceleration or otherwise, and the continuation
of such failure for 15 or more days;
(ii) any representation, warranty or statement made by any
of Panda International, PEC, the Company, the Issuer or any
PIC Entity in any certificate, financial statement or other
document furnished to the Trustee by or on behalf of Panda
International, PEC, the Company, the Issuer or any PIC
Entity under the Indenture, any Security Document or any
other Transaction Document proves to have been false or
misleading in any material respect as of the time made,
confirmed or furnished and the fact, event or circumstance
that gave rise to such inaccuracy has resulted in a Material
Adverse Change, and the fact, event or circumstance that
gave rise to such Material Adverse Change, shall continue
uncured for 30 or more days after the earlier to occur of
(a) any officer of such person obtaining actual or
constructive knowledge thereof and (b) written notice
thereof being given to such person; provided that if such
person commences and diligently pursues efforts to cure such
fact, event or circumstance within such 30-day period, such
person may continue to effect such cure of the fact, event
or circumstance (and such misrepresentation shall not be
deemed an "Event of Default") for an additional 60 days so
long as such person is diligently pursuing the cure;
(iii) failure by the Company or the Issuer to perform or
observe its respective covenants contained in the Indenture
relating to maintenance of existence, prohibition on
fundamental changes and disposition of assets, limitations
on Debt, limitations on Liens, limitations on guaranties,
limitations on distributions, limitations of activities by
the Company or the Issuer, limitations on transactions with
affiliates, limitation on formation of Subsidiaries,
limitations on Project Debt and Project agreements,
distributions by Projects, additional collateral,
limitations on sales of Projects, PIC International Entity
Loan Agreements, PIC U.S. Entity guaranties and not being
required to register under the Investment Company Act and
such failure continues uncured for 30 or more days;
(iv) failure by the Company or the Issuer to perform or
observe any of the covenants contained in the Indenture and
not listed in clause (iii) or clause (xv) under "Events of
Default", and such failure continues uncured for 30 or more
days after the earlier to occur of (a) any officer of the
Company or the Issuer, as the case may be, obtaining actual
or constructive knowledge of such failure and (b) written
notice thereof being given to the Company or the Issuer by
the Trustee or to the Company, the Issuer or the Trustee by
holders of at least 10% in aggregate principal amount of the
Bonds then outstanding; provided that if the Company or the
Issuer, as the case may be, commences and diligently pursues
efforts to cure such default within such 30-day period, the
Company or the Issuer, as the case may be, may continue to
effect such cure of the default (and such default shall not
be deemed an "Event of Default") for an additional 60 days
so long as the Company or the Issuer, as the case may be, is
diligently pursuing the cure;
(v) failure by Panda International, PEC, the Company, the
Issuer or any PIC Entity to observe or perform any of their
respective covenants or agreements contained in any
Transaction Document other than the Indenture, and such
failure continues unremedied beyond the expiration of any
applicable grace period which may be expressly allowed under
such Transaction Document;
(vi) certain events involving the bankruptcy, insolvency,
dissolution, receivership or reorganization of the Company,
the Issuer or any PIC Entity;
(vii) the entry of one or more final and non-appealable
judgments for the payment of money in excess of $2.0 million
against any of the Company, the Issuer or any PIC Entity
which remain unpaid or unstayed for a period of 60 or more
consecutive days;
(viii) failure by the Company, the Issuer or any PIC Entity to
make any payment when due (subject to any applicable grace
period) in respect of any debt, which debt is in an amount
exceeding $2.0 million (other than debt which is
subordinated debt and other than any amount due under or
pursuant to the Indenture), which failure continues unwaived
beyond any applicable grace period;
(ix) failure by any PIC Entity to make any payment when due
(subject to any applicable grace period) in respect of any
outstanding subordinated debt, which subordinated debt is in
an amount exceeding $2.0 million and a default and
acceleration is declared with respect to such debt;
(x) any grant of a Lien contained in the Security Documents
ceases to be effective to grant a perfected Lien to the
Collateral Agent on any of the Collateral described therein
with the priority purported to be created thereby which
cessation results in a Material Adverse Change; provided,
however, that an Event of Default shall not result from the
creation of Permitted Liens;
(xi) the Company Guaranty or any PIC Entity Guaranties shall
for any reason cease to be, or be asserted by the Company,
any PIC U.S. Entity or the Issuer not to be, in full force
and effect and enforceable in accordance with its terms;
(xii) the Issuer shall cease to have ownership of the Company
Notes free and clear of all Liens and other encumbrances on
title thereto or the Company shall cease to have ownership
of the PIC International Entity Notes free and clear of all
Liens and other encumbrances on title thereto;
(xiii) (a) the Company shall cease to own and control 100% of
the capital stock or ownership interest of the Issuer or any
PIC Entity (excluding any director's qualifying shares
required to be held by third parties pursuant to applicable
law) that holds direct or indirect ownership interests in
any Project or (b) PEC or Panda International shall cease to
own and control directly or indirectly 100% of the capital
stock of the Company (except as permitted under "Prohibition
on Fundamental Changes and Disposition of Assets" above);
(xiv) any Letter of Credit ceases to be in full force and
effect and valid, binding and enforceable in accordance with
its terms and is not replaced within 10 days, unless the
amount on deposit in the Debt Service Reserve Fund (without
giving effect to such Letter of Credit) at such time equals
or exceeds the Debt Service Reserve Requirement then
applicable; and
(xv) the failure to make or consummate a Change of Control
Offer in accordance with the provisions of the "Change of
Control" covenant.
Remedies
If an Event of Default described in clause (i) under "Defaults
and Remedies - Events of Default," above occurs, the Trustee may, and
upon request of the holders of not less than 33-1/3% in aggregate
principal amount of all Existing Bonds and all additional series of
Bonds, if any, then outstanding (considered as one class) shall,
declare the principal of all Existing Bonds and all additional series
of Bonds, if any, then outstanding to be immediately due and payable.
If an Event of Default (other than one described in the immediately
preceding sentence) occurs, the Trustee may, and upon request of the
holders of not less than 50% in aggregate principal amount of all
Existing Bonds and all additional series of Bonds, if any, then
outstanding (considered as one class) shall, declare the principal of
all Existing Bonds and all additional series of Bonds, if any, then
outstanding to be immediately due and payable. Upon such declaration
said principal, together with interest accrued thereon, shall become
due and payable immediately. If an Event of Default due to the
bankruptcy, insolvency or reorganization of the Company, the Issuer
or any PIC Entity occurs, all unpaid principal, premium, if any, and
interest will immediately become due and payable. For remedies
available under the Security Documents, see "Collateral for the
Exchange Bonds - Remedies under the Security Documents" above.
If, after the principal of the Existing Bonds and the additional
series of Bonds, if any, has been declared or is deemed to be due and
payable, the Issuer (i) pays all principal and interest due (other
than by a declaration of acceleration) on the Existing Bonds and the
additional series of Bonds, if any, including any Bonds required to
have been purchased on a Change of Control Date, and the reasonable
fees, expenses and advances of the Trustee and its agents and counsel
and (ii) cures all other Events of Default under the Indenture (other
than nonpayment of principal and interest on the Existing Bonds and
any additional series of Bonds that became due solely by reason of
such acceleration), the holders of a majority in aggregate principal
amount of the Existing Bonds and all additional series of Bonds, if
any, then outstanding (considered as one class) may annul such
declaration and its consequences.
If any Event of Default occurs and is continuing, the Trustee
may, and upon the request of a majority in aggregate principal amount
of the Existing Bonds and all additional series of Bonds, if any then
outstanding (considered as one class), and the offering to it of any
indemnity required under the Indenture shall (unless the Trustee in
good faith shall determine that such exercise would involve it in
personal liability or expense), enforce every right available to it
under the Indenture and under the Security Documents.
Any monies received by the Trustee following an Event of Default
shall be applied first to pay the compensation due to and reasonable
costs and expenses incurred by the Trustee and its agents and counsel
and second to pay principal and interest then owing on the Existing
Bonds and the additional series of Bonds, if any, (if such monies
shall be insufficient to pay the same in full, then to the payment of
principal and interest ratably). The Trustee shall pay the surplus,
if any, to the Collateral Agent to be applied pursuant to the
Collateral Agency Agreement or the person lawfully entitled to
receive the same. See "Collateral for the Exchange Bonds - Collateral
Agency Agreement" above.
Amendments and Supplements
Without the consent of the holders of any Existing Bonds or
additional series of Bonds, if any, the Issuer, the Company and the
Trustee may enter into one or more supplemental indentures thereto
for any of the following purposes: (i) to establish the form and
terms of any additional series permitted under the Indenture; (ii) to
evidence the succession of another entity to the Issuer or the
Company, and the assumption by any such successor of the covenants
and other obligations of such entity under the Existing Bonds or any
additional series of Bonds or the Indenture; (iii) to evidence the
succession of a new Trustee pursuant to the Indenture; (iv) to add to
the covenants of the Issuer or the Company, or to surrender any right
or power therein conferred upon the Issuer or the Company; (v) to
convey, transfer and assign to the Trustee properties or assets to
secure the Existing Bonds and the additional series of Bonds, if any,
and to correct or amplify the description of any property at any time
subject to the Indenture or to assure, convey and confirm unto the
Trustee or the Collateral Agent any property subject or required to
be subject to the Indenture; (vi) to permit or facilitate the
issuance of Existing Bonds or any additional series of Bonds in
uncertificated form; (vii) to change or eliminate any provision of
the Indenture that does not adversely affect the interests of the
holders of the Existing Bonds and the additional series of Bonds, if
any; (viii) to comply with any requirement of the Commission in
connection with qualifying the Indenture under the Trust Indenture
Act of 1939, as amended, or maintaining such qualification
thereafter; (ix) to provide for the issuance of a new series of Bonds
registered under the Securities Act in exchange for a series of Bonds
if such exchange is contemplated by any registration rights agreement
entered into in connection with the issuance of a series of Bonds or
any other exchange securities pursuant to any other agreement to
register any series of Bonds under the Securities Act, and to make
such other changes in the Indenture or the Transaction Documents as
the board of directors of the Company determines are necessary or
appropriate in connection therewith, provided such action shall not
adversely affect the interests of the holders of Bonds of any series
in any material respect; (x) to cure any ambiguity or to correct or
supplement any provision of the Indenture that may be defective or
inconsistent with any other provision therein; or (xi) to make any
other provisions with respect to matters or questions arising under
the Indenture, provided such action shall not adversely affect the
interests of the holders of any Existing Bonds or the additional
series of Bonds, if any, in any material respect.
With the consent of the holders of not less than a majority in
aggregate principal amount of the Existing Bonds and all additional
series of Bonds, if any, then outstanding (considered as one class)
the Issuer and the Company may, and the Trustee shall, enter into an
indenture or indentures supplemental thereto for the purpose of
adding any provisions to or changing in any manner or eliminating or
waiving any of the provisions of, the Indenture; provided, that no
such supplemental indenture shall, without the consent of the holder
of each outstanding Bond directly affected thereby, (i) change the
stated maturity of any Bond (or the stated maturity of any such
installment of principal of any Bond), or of any payment of interest
thereon, or the dates or circumstances of payment of premium, if any,
on any Bond or change the principal amount thereof or the interest
thereon or any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any
Bond or the premium, if any, or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment or interest on or after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date) or such
payment of premium, if any, on or after the date such payment of
premium becomes due and payable or change the dates or the amounts of
payments to be made through the operation of a sinking fund in
respect of such Bonds, (ii) permit the creation of any lien prior to
or pari passu with the Lien of the Security Documents with respect
to any of the property pledged under the Security Documents or
terminate the Lien of the Security Documents of any property pledged
thereunder or deprive any holder of the security afforded by the Lien
of the Security Documents, except to the extent expressly permitted
by the Indenture or any of the Security Documents, (iii) reduce the
percentage in principal amount of the outstanding Bonds, if any, the
consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver
(of compliance with certain provisions of the Indenture or certain
defaults thereunder and their consequences) provided for in the
Indenture, or reduce the requirements with respect to quorum or
voting, (iv) modify certain of the provisions of the Indenture
relating to the waiver of defaults or the making of modifications or
(v) amend, change or modify the obligation of the Issuer to make and
consummate a Change of Control Offer in the event of a Change of
Control, or to modify any of the provisions or definitions with
respect thereto.
Amendment of Security Documents or Collateral Agency Agreement
The Issuer, the Company, the Trustee or the Collateral Agent, as
the case may be, may, without the consent of or notice to the
Bondholders, consent to any amendment or modification of any Security
Document or the Collateral Agency Agreement as may be required (i) by
the provisions of such Security Document, the Collateral Agency
Agreement or the Indenture, (ii) to cure any ambiguity or formal
defect, (iii) to add additional rights in favor of the Issuer in the
Company Notes or Security Documents or (iv) in connection with any
other change in the Security Documents or the Collateral Agency
Agreement, including any change required by the rating agencies, with
respect to which the Trustee shall have received an officer's
certificate of the Company or the Issuer, as the case may be, or an
opinion of counsel reasonably satisfactory to the Trustee to the
effect that such change is not to the prejudice of the Trustee or the
Bondholders and which, in the judgment of the Trustee, is not to the
prejudice of the Trustee or the Bondholders provided that the Trustee
shall not be liable for any action it takes or omits to take in good
faith in reliance on any such officer's certificate or opinion of
counsel. Except as described above, neither the Issuer nor the
Trustee shall consent to any other amendment or modification of a
Security Document or the Collateral Agency Agreement without the
consent of the holders of not less than 66-2/3% in aggregate
principal amount of the Existing Bonds and the additional series of
Bonds, if any, then outstanding (considered as one class). An
amendment to a Security Document or the Collateral Agency Agreement
which changes the amounts of payments due thereunder, the person to
whom such payments are to be made or the date on which such payments
are to be made shall not be made without the unanimous consent of the
Bondholders.
Discharge of Indenture
The Issuer may terminate the Indenture by delivering all
outstanding Existing Bonds and the additional series of Bonds, if
any, to the Trustee for cancellation, by paying all sums payable
under the Indenture and by delivering an officer's certificate and
opinion of counsel stating that all conditions precedent in the
Indenture relating to its discharge have been complied with.
In addition to the foregoing, the Existing Bonds and any
additional series of Bonds, shall, prior to the stated maturity
thereof, be deemed to be paid, and the indebtedness of the Issuer
and, to the extent of the Company Guaranty, the Company in respect
thereof shall be deemed to be satisfied and discharged, on the 123rd
day after the date of the deposit referred to in clause (i) below and
the other conditions set forth below have been satisfied:
(i) the Issuer has irrevocably deposited with the Trustee,
in trust, monies or U.S. government obligations in an amount
which shall be sufficient to pay when due the principal of
and premium, if any, and interest due and to become due on
the Existing Bonds and any additional series of Bonds, on
each stated maturity of such principal or installment of
principal or interest (to and including the final
installment of principal thereof);
(ii) no Event of Default or Default with respect to the
Existing Bonds or any additional series of Bonds shall have
occurred and be continuing on the date of such deposit or
during the period ending on the 123rd day after such date;
(iii) the Issuer has delivered to the Trustee (a) a ruling
from the Internal Revenue Service or an opinion of counsel
to the effect that such satisfaction and discharge of the
indebtedness of the Issuer with respect to the Existing
Bonds or any additional series of Bonds shall not be deemed
to be, or result in, a taxable event with respect to the
holders of Existing Bonds or additional series of Bonds, if
any, for purposes of United States Federal income taxation
and (b) an Opinion of Counsel with respect to certain
Investment Company Act and bankruptcy matters set forth in
the Indenture;
(iv) the Issuer shall have irrevocably designated a
redemption date, if applicable; and
(v) the Issuer shall have delivered to the Trustee an
officer's certificate and Opinion of Counsel stating that
all conditions precedent in the Indenture relating to the
discharge of the Existing Bonds and any additional series of
Bonds, have been complied with.
Trustee
There shall at all times be a Trustee under the Indenture, which
shall be a corporation having a combined capital, surplus and
undivided profits of at least $50 million, authorized by federal or
state or District of Columbia law to exercise corporate trust powers,
to the extent there is such an institution eligible and willing to
serve. The Trustee may resign at any time by giving written notice
thereof to the Issuer, the Company and the holders of the Existing
Bonds and the additional series of Bonds, if any. The Trustee may be
removed at any time by act of the holders of the Bonds, if any, of a
majority in principal amount of the outstanding Existing Bonds and
the additional series of Bonds, if any, delivered to the Trustee and
to the Issuer. The Issuer shall give notice of each resignation and
removal of the Trustee and each appointment of a successor Trustee to
all Bondholders.
Governing Law
The Indenture, the Company Guaranty and the Existing Bonds shall
be governed by, and construed in accordance with, the laws of the
State of New York.
Agency Relationship
The Company has designated the Issuer as its agent under the
Indenture for the sole purpose of (i) issuing the Existing Bonds and
any additional series of Bonds, to the extent of the Company's
obligations thereunder, and (ii) otherwise carrying out the Company's
obligations and duties and exercising the Company's rights and
privileges under the Indenture and under the Company Guaranty. The
Company will indemnify the Issuer against all claims arising in
connection with the Issuer's performance of its obligations.
Information Available to Bondholders
The Company and the Issuer have filed the Registration Statement
with the Commission. This Prospectus constitutes a part of the
Registration Statement and does not contain all of the information
set forth in the Registration Statement or the exhibits thereto,
certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. For further information
pertaining to the Issuer, the Company, the Exchange Bonds and the
Company Guaranty, reference is made to the Registration Statement,
including the exhibits thereto. Statements made in this Prospectus
concerning the provisions of any documents to which reference is made
are not necessarily complete and, in the case of documents filed as
exhibits to the Registration Statement, reference is made to the copy
of the documents so filed for a more complete description of the
matter involved, and each such statement shall be deemed qualified in
its entirety by such reference.
As a result of this offering, the Company and the Issuer will be
subject to periodic reporting and other informational requirements of
the Exchange Act. The Registration Statement and the exhibits
thereto, as well as the periodic reports and other information filed
by the Company with the Commission, may be inspected and copied at
the public reference facility maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material may also be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549.
The Company's and the Issuer's obligation to file periodic
reports with the Commission pursuant to the Exchange Act may be
suspended if the Exchange Bonds are held of record by fewer than 300
holders at the beginning of any fiscal year of the Company or the
Issuer, other than the fiscal year in which the Registration
Statement becomes effective. Pursuant to the Indenture, the Company
and the Issuer have agreed that, so long as the Company is not
subject to the reporting requirements of either Section 13 or 15(d)
of the Exchange Act, they will furnish to the Trustee copies of
annual, quarterly and current reports that the Company would be
required to file under the Exchange Act if it were subject to such
reporting requirements. In addition, subject to the limitations set
forth in the Indenture, upon the written request of a holder of
Bonds, the Issuer or the Company will provide without charge to such
holder or prospective investor, a copy of such information as is
required by Rule 144A to enable resales of Bonds to be made pursuant
to Rule 144A, unless at the time of such request the Company or the
Issuer is subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act. Any such request will be subject to the
confidentiality provisions set forth below. Written requests for such
information should be addressed to Panda Funding Corporation, c/o
Panda Energy International, Inc., 4100 Spring Valley Road, Suite
1001, Dallas, Texas 75244, Attention: Chief Financial Officer.
By requesting additional information relating to the offering of
Bonds at a time when neither the Company nor the Issuer is subject to
the reporting requirements of Section 13 or 15(d) of the Exchange
Act, each holder and prospective investor agrees to keep confidential
the various documents and all written information which from time to
time have been or will be disclosed to it concerning the Issuer, the
Company or any of their affiliates which is not publicly available,
and agrees not to disclose any portion of the same to any person
other than to its own consultants, except as may be required by
applicable law or in a legal proceeding involving the Company or the
Issuer.
Book Entry; Delivery and Form
Except as described below, the Exchange Bonds initially will be
represented by a single, permanent global certificate in definitive,
fully registered form (the "Global Bond"). The Global Bond will be
deposited with, or on behalf of DTC and registered in the name of a
nominee of DTC. Exchange Bonds (i) issued in the Exchange Offer to
Institutional Accredited Investors or transferred to Institutional
Accredited Investors or "foreign purchasers" who are not Qualified
Institutional Buyers or (ii) issued to Qualified Institutional Buyers
who elect to take physical delivery of their certificates instead of
holding their interest through the Global Bond (and which are thus
ineligible to trade through DTC) (collectively referred to herein as
the "Non-Global Purchasers") will be issued in registered
certificated form ("Certificated Securities"). Upon the transfer to a
Qualified Institutional Buyer of any Certificated Security initially
issued to a Non-Global Purchaser, such Certificated Security will,
unless the transferee requests otherwise or the Global Bond has
previously been exchanged in whole for Certificated Securities, be
exchanged for an interest in the Global Bond.
The Global Bond
The Company and the Issuer expect that pursuant to procedures
established by DTC (i) upon the issuance of the Global Bond, DTC or
its custodian will credit, on its internal system, the principal
amount of Bonds of the individual beneficial interests represented by
such Global Bond to the respective accounts for persons who have
accounts with DTC and (ii) ownership of beneficial interests in the
Global Bond will be shown on, and the transfer of such ownership will
be effected only through, records maintained by DTC or its nominee
(with respect to interests of participants) and the records of
participants (with respect to interests of persons other than
participants). Ownership of beneficial interests in the Global Bond
will be limited to persons who have accounts with DTC
("participants") or persons who invest through participants.
Qualified Institutional Buyers will hold their interests in the
Global Bond directly through DTC, if they are participants in such
system, or indirectly through organizations which are participants in
such system.
So long as DTC or its nominee is the registered owner or holder
of the Exchange Bonds, DTC or such nominee, as the case may be, will
be considered the sole owner or holder of the Exchange Bonds
represented by such Global Bond for all purposes under the Indenture.
No beneficial owners of an interest in any Global Bond will be able
to transfer that interest except in accordance with DTC's procedures
in addition to those provided for under the Indenture.
Payments of the principal of, premium, if any, and interest on,
the Global Bond will be made to DTC or its nominee, as the case may
be, as the registered owner thereof. None of the Company, the Issuer,
the Trustee or any paying agent of the Company will have any
responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the
Global Bond or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company and the Issuer expect that DTC or its nominee, upon
receipt of any payment of principal, premium, if any, or interest in
respect of the Global Bond, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Bond as shown on the
records of DTC or its nominee. The Company and the Issuer also expect
that payments by participants to owners of beneficial interests in
the Global Bond held through such participants will be governed by
standing instructions and customary practice, as is now the case with
securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the
ordinary way in accordance with DTC rules and will be settled in
clearinghouse funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Exchange
Bonds to persons in states which require physical delivery of the
Certificated Securities, or to pledge such Securities, such holder
must transfer its interest in the Global Bond in accordance with the
normal procedures of DTC and with the procedures set forth in the
Indenture.
DTC has advised the Company and the Issuer that it will take any
action permitted to be taken by a holder of Exchange Bonds only at
the direction of one or more participants to whose account the
interests in the Global Bond are credited and only in respect of such
portion of the aggregate principal amount of Exchange Bonds as to
which such participant or participants have given such direction.
However, if there is an Event of Default under the Indenture, DTC
will exchange the Global Bond for Certificated Securities, which it
will distribute to its participants.
DTC has advised the Company and the Issuer as follows: DTC is a
limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "Clearing
corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book
entry changes in accounts of its participants, thereby eliminating
the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Bond among
participants of DTC, it is under no obligation to perform such
procedures, and such procedures may be discontinued at any time. None
of the Company, the Issuer or the Trustee will have any
responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules
and procedures governing their operations.
Certificated Securities
If DTC is at any time unwilling or unable to continue as a
depositary for the Global Bond and a successor depositary is not
appointed by the Company within 90 days, or at the Company's election
at any time, Certificated Securities will be issued in exchange for
the Global Bond.
OLD BONDS REGISTRATION RIGHTS
The holders of the Old Bonds have certain rights under the
Registration Rights Agreement, certain provisions of which are
discussed below. The following summary does not purport to be
complete or definitive and is qualified in its entirety by reference
to the Registration Rights Agreement, a copy of which is attached as
an exhibit to the Registration Statement of which this Prospectus
constitutes a part.
The Registration Rights Agreement provides that: (i) the Issuer
and the Company will file an Exchange Offer Registration Statement
with the Commission on or prior to 90 days after the Issue Date; (ii)
the Issuer and the Company will use their best efforts to have the
Exchange Offer Registration Statement declared effective by the
Commission on or prior to 180 days after the Issue Date; and (iii)
unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Issuer and the Company will commence the
Exchange Offer and use their best efforts to issue, on or prior to 30
business days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission, Exchange Bonds in
exchange for all Old Bonds tendered prior thereto in the Exchange
Offer. If (i) the Issuer and the Company are not permitted to file
the Exchange Offer Registration Statement or to consummate the
Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any holder of Old Bonds
notifies the Issuer and the Company within the specified time period
that (a) due to a change in law or Commission policy it is not
entitled to participate in the Exchange Offer, (b) due to a change in
law or Commission policy it may not resell the Exchange Bonds
acquired by it in the Exchange Offer to the public without delivering
a prospectus and the prospectus contained in the Exchange Offer
Registration Statement is not legally available for such resales by
such holder or (c) it is a broker-dealer and owns Old Bonds acquired
directly from the Issuer or an Affiliate of the Issuer, the Issuer
and the Company will file with the Commission the Shelf Registration
Statement to cover resales of the applicable Transfer Restricted
Bonds (as defined below) by the holders thereof. The Issuer and the
Company will use their best efforts to cause the applicable
registration statement to be declared effective by the Commission
within the specified periods. If obligated to file the Shelf
Registration Statement, the Issuer and the Company will file on or
prior to the later of (a) 90 days after the Issue Date or (b) 30 days
after such filing obligation arises and use their best efforts to
cause the Shelf Registration Statement to be declared effective by
the Commission on or prior to 90 days after such obligation arises;
provided that if the Issuer and the Company have not consummated the
Exchange Offer within 180 days after the Issue Date, then the Issuer
and the Company will file the Shelf Registration Statement with the
Commission on or prior to the 181st day after the Issue Date and use
their best efforts to cause the Shelf Registration Statement to be
declared effective within 60 days after such filing. The Issuer and
the Company will be required to use their best efforts to keep such
Shelf Registration Statement continuously effective, supplemented and
amended until the third anniversary of the Issue Date or such shorter
period that will terminate when all the Transfer Restricted Bonds
covered by the Shelf Registration Statement have been sold pursuant
thereto.
If (i) the Issuer and the Company fail to file any of the
registration statements required by the Registration Rights Agreement
on or before the date specified for such filing, (ii) any of such
registration statements are not declared effective by the Commission
on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (iii) the Issuer and the Company fail
to consummate the Exchange Offer, if obligated to do so, within 30
business days after the Exchange Offer Registration Statement is
declared effective by the Commission or (iv) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared
effective but thereafter, subject to certain exceptions, ceases to be
effective or usable in connection with the Exchange Offer or resales
of the applicable Transfer Restricted Bonds, as the case may be,
during the periods specified in the Registration Rights Agreement
(each such event referred to in clauses (i) through (iv) above, a
"Registration Default"), then the interest rate on Transfer
Restricted Bonds will increase ("Additional Interest") by 0.50% per
annum effective on the 181st day following the Issue Date and
Additional Interest will accrue until all Registration Defaults have
been cured. Following the cure of all Registration Defaults, the
accrual of Additional Interest will cease and the interest rate will
revert to the original rate; provided, however, if all Registration
Defaults are not cured within two years following the Issue Date,
such increase in the interest rate shall become permanent.
For purposes of the foregoing, "Transfer Restricted Bonds"
generally means each Old Bond until (i) the date on which such Old
Bond has been exchanged by a person for an Exchange Bond in the
Exchange Offer (other than a broker-dealer that received Exchange
Bonds in the Exchange Offer for its own account (a "Participating
Broker-Dealer")), (ii) following the exchange by a Participating
Broker-Dealer in the Exchange Offer of an Old Bond for an Exchange
Bond, the earlier of (A) the date on which such Exchange Bond is sold
to a purchaser who receives from such Participating Broker-Dealer on
or prior to the date of such sale a copy of the prospectus contained
in the Exchange Offer Registration Statement and (B) the date on
which the Exchange Offer Registration Statement has been effective
under the Securities Act for a period of six months after the
consummation of the Exchange Offer, (iii) the date on which such Old
Bond has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or
(iv) the date on which such Old Bond is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant
to Rule 144(k) under the Securities Act.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Bonds
for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of
such Exchange Bonds. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-
Dealer in connection with resales of Exchange Bonds received in
exchange for Old Bonds where such Old Bonds were acquired as result
of market making activities or other trading activities. The Company
and the Issuer have agreed to make available for a period of up to
six months a prospectus meeting the requirements of the Securities
Act to any Participating Broker-Dealer for use in connection with any
such resale. A broker-dealer that delivers such a prospectus to a
purchaser in connection with resales will be subject to certain of
the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement
(including certain indemnification provisions). In addition, until
_________ (90 days from the date of this Prospectus), all dealers
effecting transactions in the Exchange Bonds may be required to
deliver a prospectus.
Each holder of Old Bonds who wishes to exchange such Old Bonds
for Exchange Bonds in the Exchange Offer will be required to make
certain representations, including representations that (i) any
Exchange Bonds to be received by it will be acquired in the ordinary
course of its business (whether or not it is the registered holder of
such Exchange Bonds), (ii) it has no arrangement with any person to
participate in the distribution (within the meaning of the Securities
Act) of the Exchange Bonds and (iii) it is not an Affiliate of the
Issuer or the Company or, if it is an Affiliate, it will comply with
the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
Neither the Issuer nor the Company will receive any proceeds
from any sale of Exchange Bonds by broker-dealers. Exchange Bonds
received by broker-dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Bonds or
a combination of such methods of resale, at market prices prevailing
at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly
to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Bonds. Any
broker-dealer that resells Exchange Bonds that were received by it
for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Bonds may
be deemed to be an "underwriter" within the meaning of the Securities
Act and any profit on any such resale of Exchange Bonds and any
commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter
of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the
Securities Act.
The Company and the Issuer have agreed to pay all expenses
incidental to the Exchange Offer other than commissions and
concessions of any brokers or dealers and will indemnify holders of
the Bonds (including any brokers or dealers) against certain
liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
LEGAL MATTERS
The validity of the issuance of the Exchange Bonds is being
passed upon for the Company and the Issuer by Chadbourne & Parke LLP,
New York, New York, as special counsel to the Company and the Issuer.
EXPERTS
Independent Accountants
The consolidated financial statements of the Company as of
December 31, 1994 and 1995 and for each of the three years in the
period ended December 31, 1995 included in this Prospectus have been
audited by Deloitte & Touche LLP, independent accountants, as stated
in their report appearing herein (which report expresses an
unqualified opinion and includes an explanatory paragraph relating to
the restatement of such financial statements) and have been so
included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing. Deloitte & Touche
LLP has neither examined nor compiled the accompanying prospective
financial information appearing in the Appendices hereto and,
accordingly, does not express an opinion or any other form of
assurance with respect thereto.
Independent Engineers And Consultants
Consolidated Pro Forma
ICF Resources, Incorporated, a subsidiary of ICF Kaiser
International, has prepared a report entitled "Summary of the
Consolidated Pro Formas of the Panda-Rosemary and Panda-Brandywine
Power Projects," dated January 10, 1997, included as Appendix B to
this Prospectus. The Consolidated Pro Forma Report is included
herein in reliance upon such firm as experts in energy economics and
financial analysis. The Consolidated Pro Forma Report should be read
in its entirety by all prospective investors for an understanding of
the reliance placed by ICF on pro forma projections prepared by Burns
& McDonnell and of the methods of calculating the debt coverage
ratios projected therein.
Panda-Rosemary Project
Burns & McDonnell Engineering Company, Inc. has prepared a
report entitled "Panda-Rosemary Cogeneration Project Condition
Assessment Report," dated July 26, 1996, and update report dated
January 10, 1997, included as Appendix C to this Prospectus. The
Rosemary Engineering Report is included herein, in reliance upon such
firm as experts in preparing independent engineering reports for
similar projects. The Rosemary Engineering Report should be read in
its entirety by all prospective investors for information with
respect to the Panda-Rosemary Facility and the related subjects
discussed therein.
Benjamin Schlesinger and Associates, Inc. has prepared a report
entitled "Assessment of Fuel Price, Supply and Delivery Risks for the
Panda-Rosemary Cogeneration Project," dated September 20, 1996, and
an Officer's Certificate dated January 10, 1997, included as Appendix
D to this Prospectus. The Rosemary Fuel Consultant's Report is
included herein in reliance upon such firm as experts in preparing
fuel consultant's reports for similar projects. The Rosemary Fuel
Consultant's Report should be read in its entirety by all prospective
investors for information with respect to the Panda-Rosemary Facility
and related subjects discussed therein.
Panda-Brandywine Project
ICF Resources, Incorporated, a subsidiary of ICF Kaiser
International, has prepared a report entitled "Independent Panda-
Brandywine Pro Forma Projections," dated July 26, 1996, and an update
report dated January 10, 1997, included as Appendix E to this
Prospectus. The Brandywine Pro Forma Report is included herein in
reliance on such firm as experts in energy economics and financial
analysis. The Brandywine Pro Forma Report should be read in its
entirety by all prospective investors for information with respect to
the Panda-Brandywine Facility and related subjects discussed therein.
Pacific Energy Systems, Inc. has prepared a report entitled
"Independent Engineer's Report Panda-Brandywine Cogeneration
Project," dated July 22, 1996, and an update report dated January 10,
1997, included as Appendix G to this Prospectus. The Brandywine
Engineering Report is included herein in reliance upon such firm as
experts in preparing independent engineering reports for similar
projects. The Brandywine Engineering Report should be read in its
entirety by all prospective investors for information with respect to
the Panda-Brandywine Facility and the related subjects discussed
therein.
C.C. Pace Resources, Inc. has prepared a report entitled "Panda-
Brandywine, L.P. Generating Facility Fuel Consultant's Report," dated
July 2, 1996, and an update report dated January 10, 1997, included
as Appendix H to this Prospectus. The Brandywine Fuel Consultant's
Report is included herein in reliance upon such firm as experts in
preparing fuel consultant's reports for similar projects. The
Brandywine Fuel Consultant's Report should be read in its entirety by
all prospective investors for information with respect to the Panda-
Brandywine Facility and related subjects discussed therein.
F-1
INDEX TO FINANCIAL STATEMENTS
Panda Interfunding Corporation and Subsidiaries Consolidated
Financial Statements:
Independent Accountants' Report F-2
Consolidated Balance Sheets as of December 31, 1994
and 1995 F-3
Consolidated Statements of Operations for the years ended
December 31, 1993, 1994 and 1995 F-4
Consolidated Statements of Shareholder's Deficit for the
years ended December 31, 1993, 1994 and 1995 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1994 and 1995 F-6
Notes to Consolidated Financial Statements for the years
ended December 31, 1993, 1994 and 1995 F-7
Panda Interfunding Corporation and Subsidiaries Condensed
Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of December 31, 1995
and September 30, 1996 F-16
Condensed Consolidated Statements of Operations for the nine
months ended September 30, 1995 and 1996 F-17
Condensed Consolidated Statements of Shareholder's Deficit
for the nine months ended September 30, 1996 F-18
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1995 and 1996 F-19
Notes to Condensed Consolidated Financial Statements for the
nine months ended September 30, 1995 and 1996 F-20
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
of Panda Energy International, Inc.
We have audited the accompanying consolidated balance sheets of
Panda Interfunding Corporation and subsidiaries (the "Company")
as of December 31, 1994 and 1995, and the related consolidated
statements of operations, shareholder's deficit and cash flows
for each of the three years in the period ended December 31,
1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company at December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 3, the accompanying consolidated financial
statements have been restated to reflect advances to parent as
an increase in shareholder's deficit.
DELOITTE & TOUCHE LLP
Dallas, Texas
January 10, 1997
<TABLE>
<CAPTION>
PANDA INTERFUNDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(As Restated - Note 3)
December 31, 1994 and 1995
ASSETS
1994 1995
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,921,093 $ 1,160,096
Restricted cash -- current 2,571,826 1,876,142
Accounts receivable 5,660,318 5,199,999
Fuel oil, spare parts and supplies 3,345,684 3,084,168
Other current assets 39,148 12,664
Total current assets 15,538,069 11,333,069
Plant and equipment:
Electric generating facility 105,045,351 105,168,094
Furniture and fixtures 29,080 29,080
Less accumulated depreciation (16,798,583) (21,008,036)
Construction in progress 6,616,881 132,604,494
Total plant and equipment, net 94,892,729 216,793,632
Debt service reserves and escrow deposits 9,451,293 10,198,948
Debt issuance costs, net of accumulated
amortization of $2,614,974, and
$3,169,285, respectively 4,210,575 3,990,655
Partnership formation costs, net of
accumulated amortization of $1,599,324
and $2,132,440, respectively 1,066,216 533,100
----------- ------------
$125,158,882 $242,849,404
============ ============
<CAPTION>
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses:
Construction costs $ 1,489,412 $ 5,597,818
Interest and letter of credit fees 2,623,715 2,540,347
Operating expenses and other 1,217,421 1,219,061
Current portion of long-term debt 7,200,000 9,100,000
Total current liabilities 12,530,548 18,457,226
Long term debt, less current portion 106,342,894 234,608,361
Minority interest 35,588,365 36,835,666
Commitments and contingencies (Note 8) -- --
Shareholder's deficit:
Common stock, par value $.01;
1,000 shares authorized,
issued and outstanding 10 10
Advances to parent (16,517,526) (32,263,761)
Accumulated deficit (12,785,409) (14,788,098)
Total shareholder's deficit (29,302,925) (47,051,849)
------------ ------------
$125,158,882 $242,849,404
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
PANDA INTERFUNDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1993, 1994 and 1995
1993 1994 1995
<S> <C> <C> <C>
Revenue:
Electric capacity and energy sales $29,856,269 $30,664,096 $29,858,475
Steam and chilled water sales 617,598 650,575 473,040
Interest income 365,276 602,783 895,268
30,839,143 31,917,454 31,226,783
Expenses:
Plant operating expenses 7,676,470 8,940,146 9,347,707
Project development and administrative 2,277,786 1,376,349 1,821,376
Interest expense and letter of credit fees 11,065,648 11,017,418 11,715,929
Depreciation 4,281,673 4,208,314 4,209,453
Amortization of debt issuance costs 502,613 600,382 554,311
Amortization of partnership formation costs 533,104 533,116 533,116
26,337,294 26,675,725 28,181,892
Income before minority interest 4,501,849 5,241,729 3,044,891
Minority interest (5,474,483) (5,699,994) (5,047,580)
Net loss $ (972,634) $ (458,265) $(2,002,689)
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
PANDA INTERFUNDING CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S DEFICIT
(As Restated - Note 3)
For the Years Ended December 31, 1993, 1994 and 1995
Total
Common Advances Accumulated Shareholder's
Stock to Parent Deficit Deficit
<S> <C> <C> <C> <C>
Balance, January 1, 1993 $ 10 $ (8,201,521) $(11,354,510) $(19,556,021)
Advances to parent -- (855,933) -- (855,933)
Net loss -- -- (972,634) (972,634)
Balance, December 31, 1993 10 (9,057,454) (12,327,144) (21,384,588)
Advances to parent -- (7,460,072) -- (7,460,072)
Net loss -- -- (458,265) (458,265)
Balance, December 31, 1994 10 (16,517,526) (12,785,409) (29,302,925)
Advances to parent -- (15,746,235) -- (15,746,235)
Net loss -- -- (2,002,689) (2,002,689)
Balance, December 31, 1995 $ 10 $(32,263,761) $(14,788,098) $(47,051,849)
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
<CAPTION>
PANDA INTERFUNDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1993, 1994 and 1995
1993 1994 1995
<S> <C> <C> <C>
Operating activities:
Net loss $ (972,634) $ (458,265) $ (2,002,689)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Minority interest 5,474,483 5,699,994 5,047,580
Depreciation 4,281,673 4,208,314 4,209,453
Amortization of debt issuance costs 502,613 600,382 554,311
Amortization of partnership formation costs 533,104 533,116 533,116
Amortization of loan discount -- -- 124,176
Changes in assets and liabilities:
Restricted cash-current (330,888) 2,847,429 695,684
Accounts receivable 2,727,654 (2,454,524) 460,319
Fuel oil, spare parts and supplies 180,866 (33,698) 261,516
Other current assets (34,430) 6,646 26,484
Accounts payable and accrued expenses 45,433 (114,382) (81,728)
Net cash provided by operating activities 12,407,874 10,835,012 9,828,222
Investing activities:
Additions to plant and equipment (2,986,156) (3,801,777) (122,001,950)
Increase in debt service reserves and escrow
deposits (808,526) (457,538) (747,655)
Net cash used in investing activities (3,794,682) (4,259,315) (122,749,605)
Financing activities:
Distributions to minority interest owner (4,341,935) (4,590,354) (3,800,279)
Advances to parent (855,933) (8,701,884) (15,746,235)
Proceeds from long-term debt 2,550,000 16,534,706 147,541,291
Repayment of long-term debt (4,400,000) (7,500,000) (17,500,000)
Debt issuance costs (105,354) (498,281) (334,391)
Net cash provided by (used in) financing
activities (7,153,222) (4,755,813) 110,160,386
Increase (decrease) in cash and cash equivalents 1,459,970 1,819,884 (2,760,997)
Cash and cash equivalents, beginning of period 641,239 2,101,209 3,921,093
Cash and cash equivalents, end of period $ 2,101,209 $ 3,921,093 $ 1,160,096
Supplemental cash flow information:
Interest paid, net of amounts capitalized $11,078,485 $ 9,983,508 $ 5,968,240
Non cash investing and financing activities:
Accrued construction costs $ -- $ 1,489,412 $ 5,597,818
Interest cost -- -- 153,861
Debt discount -- 1,241,812 --
</TABLE>
See accompanying notes to consolidated financial statements.
PANDA INTERFUNDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1993, 1994 and 1995
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements reflect
the ownership interests of two independent power projects for all
periods. The projects include the Rosemary project and the
Brandywine project (see Note 5). These ownership interests are
held by certain entities which, until July 31, 1996, were wholly-
owned by Panda Energy Corporation, a Texas corporation ("PEC"),
which in turn is a wholly-owned subsidiary of Panda Energy
International, Inc. ("PEII"). These entities are collectively
referred to as "Panda Interfunding Corporation," "PIC" or the
"Company". The Company was formed in July 1996 to hold the
interests in the two independent power projects which were
transferred to the Company by PEC and recorded at PEC's
historical cost. Because the transfers occurred between entities
under common control, the transactions have been accounted for in
a manner similar to pooling of interests accounting. The entities
primarily include Panda Rosemary Corporation ("PRC"), a 1%
general partner in Panda-Rosemary, L.P. ("Panda-Rosemary"); PRC
II Corporation ("PRC II"), a 9% limited partner in Panda-
Rosemary; Panda Brandywine Corporation, a 50% general partner in
Panda-Brandywine, L.P. ("Panda-Brandywine"); Panda Energy
Corporation, a Delaware corporation ("PEC-Delaware"), a 50%
limited partner in Panda-Brandywine; and Brandywine Water
Company. The Company, through its general and limited
partnership interests, owns 100% of Panda-Brandywine. The
Rosemary project and the Brandywine project are in different
stages of construction and operation and are located in the
United States.
Additionally, Panda Funding Corporation ("PFC"), Panda-
Rosemary Funding Corporation ("PRFC"), Panda Cayman Interfunding
Corporation and Panda Interholding Corporation have been formed
as wholly-owned subsidiaries of the Company for purposes of
facilitating the financing of the future development and the
acquisition of debt and equity interests of certain electric
generation facilities and currently have no independent
operations.
All material intercompany accounts and transactions have
been eliminated in consolidation.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Cash -- Included in cash and cash equivalents are highly
liquid investments with original maturities of three months or
less.
Restricted Cash - Current -- Restricted cash-current
represents escrowed cash which may be used to pay operating
expenses and make debt payments and distributions to partners
pursuant to the trust indenture agreements.
Debt Service Reserves and Escrow Deposits -- Debt service
reserves and escrow deposits include cash held by the bank to pay
debt service and capital improvements pursuant to the trust
indenture agreements.
Fuel Oil, Spare Parts and Supplies -- These items include
fuel oil stored on-site, chemical inventory and various spare
parts and supplies necessary for plant maintenance. The items are
valued at cost using the weighted average method, and are
expensed, as plant operating expenses, when used.
Plant and Equipment -- Electric generating facility assets
are recorded at cost and depreciated using the straight-line
method over the estimated useful lives of the assets, generally
twenty-five years. Depreciation of office furniture, equipment,
and leasehold improvements is provided using the straight-line
method over the estimated useful lives of the assets, generally
three to five years. Costs, including interest on funds borrowed
to finance the construction of facilities, related to projects
under construction are capitalized as construction in progress.
Construction in progress balances are transferred to electric
generating facilities when the assets are ready for their
intended use. Capitalized interest was $0, $803,254, and
$5,793,296 during 1993, 1994 and 1995, respectively. Maintenance
and repair costs are charged to expense as incurred. Other
projects currently under development by PEII may be transferred
to the Company at PEII's historical cost when construction financing
has been obtained or when the completed projects have commenced
commercial operations.
Debt Issuance Costs -- The costs related to the issuance of
debt are capitalized and amortized using the effective interest
method over the term of the related debt.
Partnership Formation Costs -- The costs related to the
formation of Panda-Rosemary are capitalized and amortized over
five years.
Environmental Matters -- The operations of the Company are
subject to federal, state and local laws and regulations relating
to protection of the environment. Although the Company believes
that its operations are in compliance with applicable
environmental regulation, risks of additional costs and
liabilities are inherent in cogeneration operations, and there
can be no assurance that significant costs and liabilities will
not be incurred by the Company. Management is not aware of any
contingent liabilities that currently exist with respect to
environmental matters.
Environmental expenditures are expensed or capitalized as
appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current
or future revenue generation, are expensed. Liabilities are
recorded if environmental assessments and/or remedial efforts
become probable, and the costs reasonably estimable.
Revenue Recognition -- Revenue generated from the sale of
electric capacity and energy from the Rosemary project is
recognized based on the amount billed under the power purchase
agreement, which was entered into prior to May 21, 1992. The
revenue generated from the sale of electric capacity and energy
from other projects will be recognized based on the lesser of the
amount billable under the power purchase agreement or an amount
determined by the annual kilowatts made available multiplied by
the estimated average revenue per kilowatt over the term of the
power purchase agreement. Revenue from the sale of steam and
chilled water is recognized based on the output delivered at
rates specified under contract terms.
Income Taxes -- The Company records income taxes according
to Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" (SFAS 109) which requires deferred
tax liabilities or assets to be recognized for the anticipated
future tax effects of temporary differences that arise as a
result of the differences in the carrying amounts and the tax
bases of assets and liabilities. SFAS 109 also requires a
valuation allowance for deferred tax assets in certain
circumstances.
The Company is included in the consolidated federal income
tax return of PEII. The accompanying financial statements reflect
income taxes as if the Company were a separate tax filing entity.
Allocation of Administrative Costs -- PEII performs certain
accounting, legal, insurance, and consulting services for the
Company. These general and administrative costs are generally
allocated to the Company using the percentage of time PEII spent
performing these services. The expenses allocated were $701,153,
$600,353 and $870,200 in 1993, 1994 and 1995, respectively, and
are included in project development and administrative expenses
in the statement of operations. Management believes the method
used to allocate these costs is reasonable.
New Accounting Pronouncements -- In March 1995, the
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (SFAS 121). SFAS 121 is effective for financial
statements for fiscal years beginning after December 15, 1995 and
requires the write-down of certain long-lived assets if
circumstances indicate that the carrying value of those assets
may not be recoverable. The Company will adopt SFAS 121 in 1996
and such adoption will not have a material impact on its
financial position or results of operations.
Interest Cost -- Total interest cost incurred, including
capitalized interest, was $11,065,648, $11,820,672 and
$17,509,225 in 1993, 1994 and 1995, respectively.
3. RESTATEMENT
The Company has restated its financial statements to reflect
$16.5 million and $32.3 million as of December 31, 1994 and 1995,
respectively, as an increase in shareholder's deficit. These
amounts represent cash advances to the parent, allocations of
general and administrative expenses from the parent, and the
excess of liabilities assumed over the assets contributed on
projects owned by the parent and contributed in connection with
the formation of the Company.
Previously, these amounts were recorded in the balance sheet
as Receivable from Parent. Based upon review of the nature and
terms of such advances and other transactions, management
determined that the transactions should be recorded as a
component of shareholder's deficit. Accordingly, the financial
statements have been restated to reflect such treatment. This
restatement had no effect on previously reported results of
operations of the Company but increased the shareholder's deficit
from that previously reported by $16.5 million and $32.3 million
at December 31, 1994 and 1995, respectively.
4. FUEL OIL, SPARE PARTS AND SUPPLIES
Fuel oil, spare parts and supplies are comprised of the
following amounts:
1994 1995
Fuel oil $1,235,022 $1,182,310
Spare parts 2,082,310 1,880,732
Chemicals 28,352 21,126
Total $3,345,684 $3,084,168
5. POWER PROJECTS
Rosemary Project -- Effective May 5, 1989, PEII formed a
wholly-owned subsidiary, now a wholly-owned subsidiary of the
Company, to develop, construct, and operate the 180 megawatt gas-
fired Rosemary cogeneration facility in Roanoke Rapids, North
Carolina ("Rosemary Project"). Construction on the Rosemary
Project began in September 1989, and commercial operation of the
facility began on December 27, 1990.
The Rosemary Project produces both electricity and useful
thermal energy in the form of steam. Electric capacity and energy
sales are based on the terms of the power purchase agreement
between Panda-Rosemary and Virginia Electric Power Company
("VEPCO") dated January 24, 1989. The agreement requires Panda-
Rosemary to provide VEPCO with all the available capacity of the
Rosemary Project on an as-needed basis with VEPCO obligated to
pay for the power delivered and dependable capacity of the
facility at a rate per kilowatt which decreases in certain
periods as defined by the agreement. The term of the agreement is
25 years and it expires December 2015. Steam and chilled water
are sold to the Bibb Company under a separate agreement.
On January 6, 1992, PRC contributed substantially all
project assets and liabilities and $216,553 in cash to Panda-
Rosemary, in exchange for a 10% combined general partnership and
limited partnership interest. The assets and liabilities were
recorded at historical cost, resulting in $19,874,216 in
partners' deficit being contributed by PRC. An institutional
investor ("Investor") contributed $30,948,987 in cash in exchange
for a 90% limited partnership interest. The Rosemary Project is
managed by PRC, the general partner, and is operated by an
unrelated third party. In 1996, the Investor's limited
partnership interest was acquired by the Company (see Note 11).
Prior to the acquisition of the Investor's limited
partnership interest, the Investor received percentage
allocations of income, expense, and cash flow which decline over
time if certain rate of return requirements are achieved. The
allocations to the Investor begin at 90%, then decrease to 60%,
30%, and finally 15% based upon attainment of the designated rate
of return requirements. The corresponding remainder of the cash
flow (10%, 40%, 70%, and finally 85%) is allocated to the
Company.
The Company controls Panda-Rosemary through its one percent
general partner interest and a 9% limited partner interest, which
increases over time if certain rate of return requirements are
achieved by Panda-Rosemary. As general partner, the Company has
exclusive management authority over the operations of Panda-
Rosemary. Accordingly, Panda-Rosemary's balance sheet as of
December 31, 1994 and 1995, and statements of income for the
years ended December 31, 1993, 1994, and 1995 have been
consolidated in the accompanying financial statements. The
capital of the Investor and Panda-Rosemary's net income allocated
to the Investor are presented as minority interest in the
accompanying financial statements.
Brandywine Project -- On August 9, 1991, through a wholly-
owned partnership, Panda-Brandywine L.P. ("Panda-Brandywine"),
PEII entered into a power purchase agreement with Potomac
Electric Power Company ("PEPCO") to build a 230 megawatt gas-
fired facility ("Brandywine Project"). The agreement requires
Panda-Brandywine to supply PEPCO with all available capacity from
the facility for the 25-year term of the agreement with a
guaranteed dispatch level of at least 60 hours per week for the
first 15 years. The Brandywine Project, in Brandywine, Maryland,
constructed by Raytheon Engineers and Constructors, Inc. under a
fixed fee, turn-key contract was substantially completed and
commenced commercial operations in October, 1996. A construction
loan commitment in the amount of $215 million was provided by
General Electric Capital Corporation ("GECC") in April, 1995.
Upon substantial completion of construction, the loan converted
to a capital lease with GECC with a twenty year term and two five
year renewal options (see Note 11). The Company has incurred
total costs of $132.6 million as of December 31, 1995, which is
included in plant and equipment under construction in progress in
the accompanying balance sheet.
6. LONG-TERM DEBT
Long-term debt of the Company as of December 31, 1994, and
1995 is summarized as follows:
1994 1995
Taxable Revenue Bonds for Rosemary project $97,200,000 $90,000,000
Development Loan for Brandywine project 10,084,706 --
Construction Loan for Brandywine project -- 134,735,719
Term Loan with TCW, net of discount 6,258,188 18,972,642
113,542,894 243,708,361
Less current portion (7,200,000) (9,100,000)
------------ ------------
$106,342,894 $234,608,361
============ ============
Taxable Revenue Bonds -- In October 1989, PRC obtained long-
term financing for the Rosemary Project in the form of $116
million of taxable revenue bonds ("Tax Bonds") issued by the
Halifax Regional Economic Development Corporation ("Halifax"), a
nonprofit corporation organized in North Carolina. The Tax Bonds
bear interest at a fixed rate of 9.25% payable semiannually.
Scheduled principal payments are required annually and began on
October 1, 1991 and will continue through maturity on October 1,
2005. Such principal and interest payments paid by Panda-Rosemary
to Halifax are used to make required payments on the Tax Bonds.
The Tax Bonds are subject to mandatory redemption prior to
maturity under certain conditions.
The Tax Bonds are fully guaranteed by an irrevocable, direct-
pay letter of credit issued by The Fuji Bank, Limited, Houston
Agency ("Fuji"). The letter of credit has a term equal to the
term of the Tax Bonds and includes annual fees of .9375% for
years 1-5, 1.3125% for years 6-10, and 1.6875% thereafter. The
letter of credit is secured by the Rosemary Project as well as
all of the outstanding capital stock of PRC. The letter of credit
contains certain covenants including a minimum debt service
coverage ratio to be maintained by Panda-Rosemary.
During the Rosemary Project's operating period and while
amounts are outstanding under the long-term financing
arrangements, all revenues of Panda-Rosemary are paid to a
collateral agent, acting on behalf of Fuji. On a quarterly basis,
the collateral agent remits to Panda-Rosemary remaining funds
available after payment of all expenditures relating to the
Rosemary Project, including debt service, provided that Panda-
Rosemary is in compliance with the debt service coverage ratio
and other covenants under the letter of credit. Under the long-
term financing arrangements, the collateral agent withholds funds
to meet future debt service, maintenance and pollution control
requirements, if necessary. These amounts are reflected as
restricted cash-current and debt service reserves and escrow
deposits in the accompanying consolidated balance sheets.
Fuji has also provided a letter of credit for approximately
$5 million guaranteeing Panda-Rosemary's performance under the
power purchase agreement.
Term Loan -- On October 27, 1995, PEII obtained a term loan
in the amount of $20 million from Trust Company of the West
("TCW"). This loan amended and restated the loan agreement dated
November 8, 1994. The loan bears interest at a rate of 13.5%,
payable at a rate of 11.0%, and matures on November 8, 2004. The
2.5% interest not payable currently is added to the principal
balance of the loan. The loan is secured by the pledge of the
common stock of PEC which currently owns the interest in all
PEII's various projects (including the projects held by the
Company). In addition, the Company is in the process of
completing a debt offering in which a portion of the proceeds
will be used to retire all the term loan debt (see Note 11).
Under the loan agreement, TCW also received 1,004,000
warrants to purchase shares of PEII stock. A loan discount of
$1,241,812 was created as a result of allocating value to the
warrants. The warrants are exercisable at $8 per share, subject
to adjustment, and expire on November 8, 2004. If a public
offering of PEII's stock has not occurred, PEII is obligated to
repurchase the warrants at the holder's option for $2.18 and
$2.91 at November 8, 1999 and 2001, respectively. The warrants
are callable in total by PEII if a public offering of stock has
occurred at $12 per warrant during a call period when the closing
price for PEII's common stock has equaled or exceeded 250% of the
exercise price of the warrants. The carrying value of the
warrants is adjusted annually to the redemption price. Such
adjustment was $153,861 in 1995 and was recorded as interest
expense in the accompanying statement of operations. The
carrying value of the warrants was $1,395,673 at December 31,
1995 and will increase periodically to the ultimate redemption
value of $2,921,640 on November 8, 2001. The term loan contains
certain restrictive covenants including limitations on
indebtedness, limitations on corporate investments and others.
Proceeds from the November 8, 1994, TCW loan were used to
pay unpaid principal and accrued interest in the amount of
$1,431,781 on an existing term loan with Nova Northwest Inc.
("Nova"). Under the agreement, Nova will continue to receive
4.33% of cash flow participation in the distributions received by
PEII from the Rosemary Project for the term of the Panda-Rosemary
L.P. partnership agreement. PEII and Nova each have the option to
convert the present value of cash flow participation, as defined
by the agreement, to PEII common stock at $6 a share.
Construction Loan -- On April 10, 1995, Panda-Brandywine
closed the initial funding of a $215 million construction loan
commitment with GECC. The construction loan is considered non-
recourse project debt and should provide for all capital costs of
the project. The construction loan bears an interest rate of the
Eurodollar rate plus 2.5%, and upon completion of the Brandywine
facility the construction loan was converted to a capital lease
with GECC which has a 20-year initial term and two 5-year renewal
options. The lease payments anticipated under the capital lease
are used to determine the future minimum payments (see Note 11).
The construction loan provides for commitments under letters of
credit aggregating approximately $12.4 million of which
approximately $5.4 million is outstanding as of December 31,
1995. The letters of credit have terms up to the terms of the
lease, an annual fee of 1.50% on any amounts outstanding and
1.25% on the unused commitment and are collateralized by the
Brandywine Project.
Long-term Debt Maturities -- The maturities of long-term
obligations, excluding the construction loan, for each of the
five years succeeding December 31, 1995 and thereafter, are as
follows:
1996 $9,100,000
1997 9,178,000
1998 9,978,000
1999 9,278,000
2000 11,178,000
Thereafter 60,260,642
------------
$108,972,642
============
7. INCOME TAXES
A provision for income taxes for 1993, 1994 and 1995 has not
been recorded since operating losses were incurred for each year.
PEII has approximately $16 million of net operating loss
carryforwards at December 31, 1995 which are available to the
Company and will expire during the years 2007 to 2010. PEII may
become subject to a limitation on the amount of net operating
loss carryforwards which may be used annually to offset income
should certain changes in its ownership occur in the future.
Deferred tax assets of approximately $8 million and $10
million as of December 31, 1994 and 1995, respectively, consist
primarily of interest in partnerships and net operating losses
and are offset by a valuation allowance. The deferred tax asset
for interest in partnerships relates to the difference between
the tax basis of the assets contributed to the partnership upon
its formation and the Company's financial reporting basis in
those assets.
SFAS No. 109 requires that a valuation allowance be recorded
against tax assets which are not likely to be realized. The
Company's carryforwards expire at specific future dates and
utilization of certain carryforwards is limited to specific
amounts each year. However, due to the uncertain nature of their
ultimate realization based upon past performance and expiration
dates, the Company has established a full valuation allowance
against these carryforward benefits and will recognize the
benefits only when reassessment demonstrates that it is more
likely than not that such benefits will be realized. Realization
is entirely dependent upon future earnings in specific tax
jurisdictions. While the need for this valuation allowance is
subject to periodic review, if the allowance is reduced, the tax
benefits of the carryforwards will be recorded in future
operations as a reduction of the Company's income tax expense.
8. COMMITMENTS AND CONTINGENCIES
The Company has entered into various long-term contracts for
the purchase and transportation of fuel to be supplied at market
prices subject to termination only in certain limited
circumstances. These contracts have remaining terms of 10 to 25
years.
The Brandywine Project, upon substantial completion of
construction, was leased under a capital lease with GECC. See
Note 11 for the future minimum lease commitments under the
capital lease.
PEC is also involved in other legal and administrative
proceedings in the ordinary course of business. Management
believes, based on the advice of counsel, the amount of ultimate
liability with respect to these matters will not have a material
affect on the financial position, results of operations or cash
flows of the Company.
See Note 11 for information concerning additional matters
which have arisen subsequent to December 31, 1995.
9. RELATED PARTY TRANSACTIONS
The Company purchases insurance coverage through an agency
owned by a shareholder of PEII who is also a member of the board
of directors of PEII and a relative of PEII's chairman. The
Company believes such coverage is on terms that are no less
favorable than reasonably available from unaffiliated third
parties. Total insurance purchases through this agency were
$336,616, $291,142 and $298,728 for the years ended December 31,
1993, 1994 and 1995, respectively.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF
CREDIT RISK
The estimated fair values of the Company's financial
instruments as of December 31, 1995 are as follows:
Carrying Value Fair Value
Long-term debt $243,708,361 $257,877,561
The carrying amounts of variable rate debt approximate their
fair values. The taxable revenue bonds have limited trading. The
fair value of these bonds is estimated based on a March 1996,
third party quotation, adjusted to reflect changes in the yield
of government securities with similar maturities since December
31, 1995. The fair value of the other long-term debt is
established using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types
of borrowing arrangements.
The Company is also a party to letters of credit.
Historically, no claims have been made against these financial
instruments and management does not expect any material losses to
result from these off-balance-sheet instruments because
performance is not usually expected to be required. Therefore,
management is of the opinion that the fair value of these
instruments is zero.
The Company has various purchase commitments for gas supply
and delivery incident to the ordinary conduct of business. In the
aggregate, such commitments are not at prices in excess of the
current market.
The Company's electric capacity and energy sales are
currently under one power sales contract with a single customer.
The failure of this customer to fulfill its contractual
obligations could have a substantial negative impact on the
Company's revenue. However, the Company does not anticipate non-
performance by the customer under this contract.
11. SUBSEQUENT EVENTS
In July 1996, Panda-Rosemary Funding Corporation ("PRFC"), a
wholly-owned subsidiary of Panda-Rosemary, issued $111,400,000 of
first mortgage bonds ("Rosemary Bonds"). The Rosemary Bonds bear
interest at a fixed rate of 8-5/8% payable quarterly commencing
November 15, 1996. Scheduled principal payments are required
quarterly commencing November 15, 1996, and will continue through
maturity on February 15, 2016. The Rosemary Bonds are subject to
mandatory redemption prior to maturity under certain conditions.
The Rosemary Bonds are unconditionally guaranteed by Panda-
Rosemary but are non-recourse to the Company, and are secured by
substantially all of the assets of Panda-Rosemary as well as all
of the outstanding capital stock of PRC, PRC II and PRFC. The
indenture contains certain covenants, including limitations on
distributions, additional debt and certain other transactions.
While amounts are outstanding under the Rosemary Bonds, all
revenues of Panda-Rosemary are paid to a collateral agent.
Periodically, the collateral agent remits to Panda-Rosemary
remaining funds available after payment of all expenditures
relating to the Rosemary project, including debt service,
provided that Panda-Rosemary is in compliance with the debt
covenants. Under the indenture, the collateral agent withholds
funds to meet future debt service, maintenance and pollution
control requirements, if necessary. These amounts are included
in the accompanying consolidated balance sheets as restricted
cash-current and debt service reserves and escrow deposits.
Also in July 1996, Panda Funding Corporation ("PFC"), a
wholly-owned subsidiary of the Company, issued $105,525,000 of
pooled project bonds ("Series A Bonds"). The Series A Bonds bear
interest at a fixed rate of 11-5/8% payable semiannually
commencing February 20, 1997. Scheduled principal payments are
required semiannually commencing February 20, 1997 and will
continue through maturity on August 20, 2012. The Series A Bonds
are subject to mandatory redemption prior to maturity under
certain conditions. The Series A Bonds are fully and
unconditionally guaranteed by the Company and are secured by (i)
all of the capital stock of PFC, the Company and its subsidiaries
that indirectly own projects located in the U.S. and certain
international projects for which no U.S. tax deferral will be
sought (the "U.S. Entities"), (ii) 60% of the capital stock of
the Company's subsidiaries that indirectly own projects not
located in the U.S. and for which U.S tax deferral will be sought
(the "International Entities"), (iii) the Company's interest in
distributions from the U.S. Entities, and (iv) certain other
collateral. The Series A Bonds are effectively subordinated to
the obligations of the Company's subsidiaries under project-level
financing arrangements. The indenture contains certain
covenants, including limitations on distributions, additional
debt and certain other transactions.
While amounts are outstanding under the Series A Bonds, all
distributions from the Company's U.S. Entities and certain
proceeds received from the International Entities will be paid to
a collateral agent. Periodically, the collateral agent will
remit to the Company remaining funds available after satisfaction
of the Company's debt service obligations (including amounts
withheld, if necessary, to meet future debt service and reserve
fund requirements as required by the indenture) provided that the
Company is in compliance with the debt covenants.
In connection with the issuance of the Rosemary Bonds and
the Series A Bonds, the Company refinanced the taxable revenue
bonds issued in 1989 for the Rosemary project and repaid the TCW
term loan. The Company incurred a loss of $21,336,550 on the
early extinguishment of these obligations. Additionally, the
Company acquired the minority interest holder's limited
partnership interest in Panda-Rosemary for a purchase price of
approximately $34.3 million. As a result of this acquisition,
the Company owns 100% of Panda-Rosemary. The acquisition was
accounted for using the purchase method of accounting. The
excess of minority interest over the purchase price
(approximately $3.8 million) was allocated to plant and
equipment. Additionally, the Company advanced approximately
$34.8 million to PEII for project development and general
corporate purposes.
The Brandywine Project commenced commercial operations in
October 1996. As discussed in Note 6, General Electric Capital
Corporation provided a construction loan to finance construction
of the Brandywine Project. The construction loan was converted
to long-term financing of $217.5 million in the form of a capital
lease (together with the construction loan, the "Panda-Brandywine
Financing") during December 1996. To effect the lease financing,
title to the Brandywine Project was transferred to a third party
trustee and leased back to Panda-Brandywine. The Brandywine
facility lease is a net lease and its initial term is 20 years.
The documents governing the Panda-Brandywine Financing contain
various affirmative and negative covenants, including limitations
on the ability of Panda-Brandywine to make distributions to its
partners.
The future minimum lease commitments under the capital lease
for the Brandywine Project are as follows:
1997 $ 7,831,527
1998 10,419,439
1999 17,584,915
2000 20,489,320
2001 25,613,918
Thereafter 501,415,526
------------
Total minimum lease payments 583,354,645
Amounts representing interest (365,866,000)
------------
Present value of net minimum
payments $217,488,645
============
In August 1996, Panda-Brandywine and PEPCO commenced
discussions concerning commercial operational requirements of the
Brandywine Project and conversion of the construction loan to
long-term financing in the form of a lease. During these
discussions, disagreements arose between Panda-Brandywine and
PEPCO with respect to certain provisions of the Brandywine Power
Purchase Agreement, one of which relates to the determination of
the interest rate that is the basis for reduction in capacity
payments thereunder (the "PEPCO Interest Rate Dispute"). PEPCO
and Panda-Brandywine are presently attempting to resolve these
disagreements but there are no assurances that such efforts will
be successful. If the PEPCO Interest Rate Dispute is determined
adversely to Panda-Brandywine, the capacity payments paid by
PEPCO under the Brandywine Power Purchase Agreement will be less
than originally anticipated, thereby adversely affecting the
revenues realized by Panda-Brandywine, and consequently, reducing
the amount of funds that would be available for distribution to
the Company.
Raytheon Engineers and Constructors, Inc. ("Raytheon")
constructed the Brandywine Project pursuant to a fixed-price,
turnkey engineering, procurement and construction contract (the
"Brandywine EPC Agreement") with Panda-Brandywine. Raytheon
completed the construction and start-up of the Brandywine Project
and has met the requirements for commercial operations and
substantial completion under the Brandywine EPC Agreement,
although the date on which commercial operations were achieved
and the entitlement of Raytheon to certain early completion
bonuses under the Brandywine EPC Agreement are the subject of a
dispute between Panda-Brandywine and Raytheon. The Company
estimates that the amount in dispute is less than $1 million and
believes that the resolution of this dispute will not have a
material adverse effect upon the Brandywine Project or Panda-
Brandywine.
<TABLE>
<CAPTION>
PANDA INTERFUNDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
December 31 September 30
1995 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,160,096 $ 1,777,537
Restricted cash -- current 1,876,142 4,796,962
Accounts receivable 5,199,999 7,279,292
Fuel oil, spare parts and supplies 3,084,168 3,243,548
Other current assets 12,664 27,189
------------ ------------
Total current assets 11,333,069 17,124,528
Plant and equipment:
Electric generating facilities 105,168,094 101,706,112
Furniture and fixtures 29,080 61,432
Less: accumulated depreciation (21,008,036) (24,167,695)
Construction in progress 132,604,494 186,395,144
------------ ------------
Total plant and equipment, net 216,793,632 263,994,993
Debt service reserves and escrow deposits 10,198,948 29,085,297
Debt issuance costs, net of accumulated
amortization of $3,169,285 and $65,997,
respectively 3,990,655 6,891,138
Partnership formation costs, net of accumulated
amortization of $2,132,440 and $2,532,266,
respectively 533,100 133,274
------------ ------------
$242,849,404 $317,229,230
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses:
Construction costs $ 5,597,818 $ 4,015,270
Interest and letter of credit fees 2,540,347 3,645,922
Operating expenses and other 1,219,061 3,209,228
Current portion of long-term debt 9,100,000 5,718,960
------------ ------------
Total current liabilities 18,457,226 16,589,380
Long-term debt, less current portion 234,608,361 404,950,386
Minority interest 36,835,666 --
Commitments and contingencies -- --
Shareholder's deficit:
Common stock, par value $.01;
1,000 shares authorized, issued
and outstanding 10 10
Advances to parent (32,263,761) (64,151,114)
Accumulated deficit (14,788,098) (40,159,432)
------------ ------------
Total shareholder's deficit (47,051,849) (104,310,536)
------------ ------------
$242,849,404 $317,229,230
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
PANDA INTERFUNDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1995 and 1996
(Unaudited)
1995 1996
<S> <C> <C>
Revenue:
Electric capacity and energy sales $ 22,139,124 $ 21,495,843
Steam and chilled water sales 375,862 388,119
Interest income 695,707 611,242
------------ ------------
23,210,693 22,495,204
------------ ------------
Expenses:
Operating expenses 6,751,249 7,813,737
Project development and administrative 1,183,143 1,260,884
Interest expense and letter of credit fees 8,525,125 11,095,941
Depreciation 3,156,234 3,159,659
Amortization of debt issuance costs 408,954 394,781
Amortization of partnership formation costs 399,837 399,826
------------ ------------
20,424,542 24,124,828
------------ ------------
Income (loss) before minority interest and
extraordinary item 2,786,151 (1,629,624)
Minority interest (3,736,176) (2,405,160)
------------ ------------
Loss before extraordinary item (950,025) (4,034,784)
Extraordinary item - loss on early
extinguishment of debt -- (21,336,550)
------------ ------------
Net loss $ (950,025) $(25,371,334)
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
PANDA INTERFUNDING CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDER'S DEFICIT
For the nine months ended September 30, 1996
(Unaudited)
Total
Common Advances Accumulated Shareholder's
Stock to Parent Deficit Deficit
<S> <C> <C> <C> <C>
Balance, January 1, 1996 $ 10 $(32,263,761) $(14,788,098) $(47,051,849)
Advances to parent (Note 4) -- (31,887,353) -- (31,887,353)
Net loss -- -- (25,371,334) (25,371,334)
------ ------------ ------------ -------------
Balance, September 30, 1996 10 $(64,151,114) $(40,159,432) $(104,310,536)
====== ============ ============ ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
PANDA INTERFUNDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1995 and 1996
(Unaudited)
1995 1996
<S> <C> <C>
Operating activities:
Net loss $ (950,025) $(25,371,334)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Loss on early extinguishment of
debt -- 21,336,550
Minority interest 3,736,176 2,405,160
Depreciation 3,156,234 3,159,659
Amortization of debt issuance costs 408,954 394,781
Amortization of partnership formation
costs 399,837 399,826
Amortization of loan discount
and deferred interest 93,132 391,491
Changes in assets and liabilities:
Restricted cash-current (7,983,994) (2,920,820)
Accounts receivable 760,397 (2,079,293)
Fuel oil, spare parts and supplies 203,513 (159,380)
Other current assets 7,488 (14,525)
Accounts payable and accrued expenses 3,114,658 3,095,742
----------- ------------
Net cash provided by operating activities 2,946,370 637,857
----------- ------------
Investing activities:
Additions to property, plant and equipment (98,890,745) (55,332,280)
Acquisition of minority interest -- (34,700,000)
Increase in debt service reserves
and escrow deposits (458,299) (18,886,349)
----------- ------------
Net cash used in investing activities (99,349,044) (108,918,629)
----------- ------------
Financing activities:
Distributions to minority interest owner (3,008,667) (1,152,113)
Advances to parent (3,886,187) (31,887,353)
Proceeds from long-term debt 101,675,197 275,933,627
Repayment of long-term debt -- (127,038,813)
Debt issuance costs -- (6,957,135)
----------- ------------
Net cash provided by financing activities 94,780,343 108,898,213
----------- ------------
Increase (decrease) in cash and cash equivalents (1,622,331) 617,441
Cash and cash equivalents, beginning of period 3,921,093 1,160,096
----------- ------------
Cash and cash equivalents, end of period $ 2,298,762 $ 1,777,537
=========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
PANDA INTERFUNDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 1995 and 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements reflect
the ownership interests of two independent power projects for all
periods. The projects include the Rosemary project and the
Brandywine project. These ownership interests are held by certain
entities which, until July 31, 1996, were wholly-owned by Panda
Energy Corporation, a Texas corporation ("PEC"), which in turn is
a wholly-owned subsidiary of Panda Energy International, Inc.
("PEII"). These entities are collectively referred to as "Panda
Interfunding Corporation," "PIC" or the "Company". The Company
was formed in July 1996 to hold the interests in the independent
power projects which were transferred to the Company by PEC and
recorded at PEC's historical cost. Because the transfers occurred
between entities under common control, the transactions have been
accounted for in a manner similar to pooling of interests
accounting. The entities primarily include Panda Rosemary
Corporation ("PRC"), a 1% general partner in Panda-Rosemary, L.P.
("Panda-Rosemary"); PRC II Corporation ("PRC II"), a 99% limited
partner in Panda-Rosemary; Panda-Rosemary Funding Corporation
("PRFC"), a wholly-owned subsidiary of Panda-Rosemary; Panda
Brandywine Corporation, a 50% general partner in Panda-
Brandywine, L.P. ("Panda-Brandywine"); Panda Energy Corporation,
a Delaware corporation ("PEC-Delaware"), a 50% limited partner in
Panda-Brandywine; Brandywine Water Company; and Panda Funding
Corporation ("PFC") and Panda Interholding Corporation, both
wholly-owned subsidiaries of PIC. The Company, through its
general and limited partnership interests, owns 100% of Panda-
Brandywine and, as of July 31, 1996, owns 100% of Panda-Rosemary.
Prior to July 31, 1996, the Company owned 10% of Panda-Rosemary
(see Note 4). The Rosemary project and the Brandywine project are
in different stages of construction and operation and are located
in the United States.
Additionally, Panda Cayman Interfunding Corporation has been
formed as a wholly-owned subsidiary of the Company for purposes
of facilitating the financing of the future development and the
acquisition of debt and equity interests of certain electric
generation facilities and currently has no independent
operations.
All material intercompany accounts and transactions have
been eliminated in consolidation.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles and should be read in conjunction
with the audited financial statements for the year ended December
31, 1995. The accompanying unaudited condensed consolidated
financial statements for the nine months ended September 30, 1995
and 1996 include all adjustments, consisting of normal recurring
accruals, which management considers necessary for a fair
presentation of the results for the interim periods. The results
of operations for the nine months ended September 30, 1996 are
not necessarily indicative of the results that may be expected
for the year ending December 31, 1996. The amounts presented in
the balance sheet as of December 31, 1995 were derived from the
Company's audited consolidated financial statements.
Allocation of Administrative Costs -- PEII performs certain
accounting, legal, insurance, and consulting services for the
Company. These general and administrative costs are generally
allocated to the Company using the percentage of time PEII spent
performing these services. The expenses allocated were $660,000
and $946,000 for the nine months ended September 30, 1995 and
1996, respectively, and are included in project development and
administrative expenses in the statement of operations.
Management believes the method used to allocate these costs is
reasonable.
3. POWER PROJECTS AND LONG-TERM DEBT
The Company has incurred total costs on the Brandywine
Project of $132.6 million and $186.4 million as of December 31,
1995 and September 30, 1996, respectively, which is included in
plant and equipment under construction in progress in the
accompanying balance sheets. Long-term debt related to the
Brandywine Project was $134.7 million and $193.7 million at
December 31, 1995 and September 30, 1996, respectively.
4. LONG-TERM DEBT AND MINORITY INTEREST
In July 1996, Panda-Rosemary Funding Corporation ("PRFC"), a
wholly-owned subsidiary of Panda-Rosemary, issued $111,400,000 of
first mortgage bonds ("Rosemary Bonds"). The Rosemary Bonds bear
interest at a fixed rate of 8-5/8% payable quarterly commencing
November 15, 1996. Scheduled principal payments are required
quarterly commencing November 15, 1996, and will continue through
maturity on February 15, 2016. The Rosemary Bonds are subject to
mandatory redemption prior to maturity under certain conditions.
The Rosemary Bonds are unconditionally guaranteed by Panda-
Rosemary but are non-recourse to the Company, and are secured by
substantially all of the assets of Panda-Rosemary as well as all
of the outstanding capital stock of PRC, PRC II and PRFC. The
indenture contains certain covenants, including limitations on
distributions, additional debt and certain other transactions.
While amounts are outstanding under the Rosemary Bonds, all
revenues of Panda-Rosemary are paid to a collateral agent.
Periodically, the collateral agent remits to Panda-Rosemary
remaining funds available after payment of all expenditures
relating to the Rosemary project, including debt service,
provided that Panda-Rosemary is in compliance with the debt
covenants. Under the indenture, the collateral agent withholds
funds to meet future debt service, maintenance and pollution
control requirements, if necessary. These amounts are included
in the accompanying consolidated balance sheets as restricted
cash-current and debt service reserves and escrow deposits.
Also in July 1996, Panda Funding Corporation ("PFC"), a
wholly-owned subsidiary of the Company, issued $105,525,000 of
pooled project bonds ("Series A Bonds"). The Series A Bonds bear
interest at a fixed rate of 11-5/8% payable semiannually
commencing February 20, 1997. Scheduled principal payments are
required semiannually commencing February 20, 1997 and will
continue through maturity on August 20, 2012. The Series A Bonds
are subject to mandatory redemption prior to maturity under
certain conditions. The Series A Bonds are fully and
unconditionally guaranteed by the Company and are secured by (i)
all of the capital stock of PFC, the Company and its subsidiaries
that indirectly own projects located in the U.S. and certain
international projects for which no U.S. tax deferral will be
sought (the "U.S. Entities"), (ii) 60% of the capital stock of
the Company's subsidiaries that indirectly own projects not
located in the U.S. and for which U.S tax deferral will be sought
(the "International Entities"), (iii) the Company's interest in
distributions from the U.S. Entities, and (iv) certain other
collateral. The Series A Bonds are effectively subordinated to
the obligations of the Company's subsidiaries under project-level
financing arrangements. The indenture contains certain
covenants, including limitations on distributions, additional
debt and certain other transactions.
While amounts are outstanding under the Series A Bonds, all
distributions from the Company's U.S. Entities and certain
proceeds received from the International Entities will be paid to
a collateral agent. Periodically, the collateral agent will
remit to the Company remaining funds available after satisfaction
of the Company's debt service obligations (including amounts
withheld, if necessary, to meet future debt service and reserve
fund requirements as required by the indenture) provided that the
Company is in compliance with the debt covenants.
In connection with the issuance of the Rosemary Bonds and
the Series A Bonds, the Company refinanced the taxable revenue
bonds issued in 1989 for the Rosemary project and repaid the TCW
term loan. The Company incurred a loss of $21,336,550 on the
early extinguishment of these obligations. Additionally, the
Company acquired the minority interest holder's limited
partnership interest in Panda-Rosemary for a purchase price of
approximately $34.3 million. As a result of this acquisition,
the Company owns 100% of Panda-Rosemary. The acquisition was
accounted for using the purchase method of accounting. The
excess of minority interest over the purchase price
(approximately $3.8 million) was allocated to plant and
equipment. Additionally, the Company advanced approximately
$34.8 million to PEII for project development and general
corporate purposes.
5. COMMITMENTS AND CONTINGENCIES
In August 1996, Panda-Brandywine and PEPCO commenced
discussions concerning commercial operational requirements of the
Brandywine Project and conversion of the construction loan to
long-term financing in the form of a lease. During these
discussions, disagreements arose between Panda-Brandywine and
PEPCO with respect to certain provisions of the Brandywine Power
Purchase Agreement, one of which relates to the determination of
the interest rate that is the basis for reduction in capacity
payments thereunder (the "PEPCO Interest Rate Dispute"). PEPCO
and Panda-Brandywine are presently attempting to resolve these
disagreements but there are no assurances that such efforts will
be successful. If the PEPCO Interest Rate Dispute is determined
adversely to Panda-Brandywine, the capacity payments paid by
PEPCO under the Brandywine Power Purchase Agreement will be less
than originally anticipated, thereby adversely affecting the
revenues realized by Panda-Brandywine, and consequently, reducing
the amount of funds that would be available for distribution to
the Company.
Raytheon Engineers and Constructors, Inc. ("Raytheon")
constructed the Brandywine Project pursuant to a fixed-price,
turnkey engineering, procurement and construction contract (the
"Brandywine EPC Agreement") with Panda-Brandywine. Raytheon
completed the construction and start-up of the Brandywine Project
and has met the requirements for commercial operations and
substantial completion under the Brandywine EPC Agreement,
although the date on which commercial operations were achieved
and the entitlement of Raytheon to certain early completion
bonuses under the Brandywine EPC Agreement are the subject of a
dispute between Panda-Brandywine and Raytheon. The Company
estimates that the amount in dispute is less than $1 million and
believes that the resolution of this dispute will not have a
material adverse effect upon the Brandywine Project or Panda-
Brandywine.
6. SUBSEQUENT EVENTS
The Brandywine Project commenced commercial operations in
October 1996. As discussed in Notes 6 and 11 to the consolidated
financial statements for the year ended December 31, 1995,
General Electric Capital Corporation provided a construction loan
to finance construction of the Brandywine Project. The
construction loan was converted to long-term financing of $217.5
million in the form of a capital lease (together with the
construction loan, the "Panda-Brandywine Financing") during
December 1996. To effect the lease financing, title to the
Brandywine Project was transferred to a third party trustee and
leased back to Panda-Brandywine. The Brandywine facility lease is
a net lease and its initial term is 20 years. The documents
governing the Panda-Brandywine Financing contain various
affirmative and negative covenants, including limitations on the
ability of Panda-Brandywine to make distributions to its
partners.
APPENDIX A
PART I -- DEFINED TERMS
Unless the context requires otherwise, any reference in
this Prospectus to any agreement means such agreement and all
schedules, exhibits and attachments thereto as amended,
supplemented or otherwise modified and in effect from time to
time. Unless otherwise stated, any reference in this
Prospectus to any person or entity shall include its
successors and assigns and, in the case of any governmental
authority, any entity succeeding to its functions and
capacities. All terms defined herein used in the singular
shall have the same meanings when used in the plural and vice
versa.
TERM DEFINITION
"Accounts and Funds" means Project Accounts, the Debt
Service Fund, the Capitalized
Interest Fund, the Debt Service
Reserve Fund, the Company Expense
Fund, the Mandatory Redemption
Accounts, the Extraordinary
Distribution Accounts and the
Distribution Suspense Funds.
"Additional Interest" means the additional interest
payable on Transfer Restricted Bonds
as a result of a Registration
Default.
"Additional Projects
Contract" means the Additional
Projects Contract, dated the Issue
Date, among Panda International, PEC
and the Company.
"Affiliate" means an affiliate within the
meaning of Rule 405 promulgated under
the Securities Act.
"Annual Letter of Credit
Fee" means the annual fee, or
the cumulative fees charged over one
year, charged by the Letter of Credit
Provider.
"Anticipated Additional
Debt" means the original
principal amount of an additional
series of Bonds proposed to be issued
by the Issuer which is equal to the
largest principal amount of such
series that will provide a projected
Company Debt Service Coverage Ratio
and a projected Consolidated Debt
Service Coverage Ratio (if then
applicable) of at least 1.7:1 and
1.25:1, respectively, for each Future
Ratio Determination Period, as
confirmed in each case by a
Consolidating Engineer Certificate,
assuming, in respect of the
additional series of Bonds proposed
to be issued: (i) a maximum maturity
and average life generally available
in the marketplace for debt of a
similar nature and (ii) a coupon rate
then prevailing in the market for
debt of a similar nature, and taking
into account (a) in the case of the
Company Debt Service Coverage Ratio,
Cash Available for Distribution and
(b) in the case of the Consolidated
Debt Service Coverage Ratio, Cash
Available from Operations (net of any
reserve requirements under Project-
level debt and Company-level debt)
from the Project Portfolio (giving
effect, in each case, to the transfer
to the Project Portfolio of any
Project in respect of which such
additional series of Bonds is
proposed to be issued); in making
this analysis, the Consolidating
Engineer is required to use generally
accepted financial analysis methods
and generally follow the methods used
to calculate the amount of the
offering of the Existing Bonds,
including the methods used in the
Consolidated Pro Forma Report
attached to this Prospectus as
Appendix B.
"Applicable Treasury
Rate" means a rate which is equal
to the then current treasury rate on
the most actively traded security
having a maturity approximately equal
to the remaining average life of the
Existing Bonds.
"Available Amounts" means, as of any date of
determination, amounts held in the
Extraordinary Distribution Accounts
and the Mandatory Redemption
Accounts, as the case may be, that
are not needed to effect a redemption
as specified in a written request or
order of the Issuer to the Trustee
given prior to such date.
"Beneficial Owners" means the beneficial owners of
the Old Bonds.
"Bibb" means The Bibb Company, a
Delaware corporation.
"BG&E" means Baltimore Gas & Electric
Company, a Maryland utility.
"Bond" or "Bonds" means, individually or
collectively, the Existing Bonds and
any additional series of bonds that
may be issued under the Indenture.
"Bondholder" or
"Bondholders" means a holder or holders
of the Bonds.
"Brandywine Available
Cash Flow" means Panda-Brandywine
Partnership's cash flow remaining
after payment of Project expenses,
rent, letter of credit fees and debt
service.
"Brandywine Construction Loan
Facility" means the construction loan
facility in the aggregate principal
amount of $215 million under the
Brandywine Loan Agreement.
"Brandywine Distributable
Cash Flow" means Brandywine Available Cash
Flow less any required deposits into
the Operation and Maintenance Reserve
Account established under the
Brandywine Facility Lease.
"Brandywine Engineering
Report" means the report entitled
"Independent Engineer's Report Panda-
Brandywine Cogeneration Project"
prepared by PES dated July 22, 1996,
as supplemented by an update report
dated January 10, 1997, evaluating
the design, construction and expected
operation of the Panda-Brandywine
Facility.
"Brandywine EPC
Agreement" means the Amended and
Restated Turnkey Cogeneration
Facility Agreement, dated March 30,
1995, between Raytheon and the Panda-
Brandywine Partnership.
"Brandywine Equity Loan
Facility" means the $17.5
million multiple draw credit facility
under the Equity Loan Facility Letter
Agreement, dated December 18, 1996,
among PBC, Panda Energy Delaware and
GE Capital.
"Brandywine Facility
Lease" means the Facility Lease,
dated December 18, 1996, between the
Panda-Brandywine Partnership and
Fleet National Bank, as Owner
Trustee, pursuant to which the Panda-
Brandywine Partnership leases the
Panda-Brandywine.
"Brandywine Financing
Conversion" means the conversion on December
30, 1996 of the Brandywine
Construction Loan Facility to long-
term financing under the Brandywine
Facility Lease and other Brandywine
Financing Documents.
"Brandywine Financing
Documents" means the Brandywine Loan
Agreement, the Brandywine Facility
Lease, the Participation Agreement
and certain agreements relating
thereto.
"Brandywine Fuel
Consultant's Report" means the report entitled "Panda-
Brandywine, L.P. Generating Facility
Fuel Consultant's Report" prepared by
C.C. Pace, dated July 2, 1996, as
supplemented by an update report
dated January 10, 1997, analyzing the
sufficiency of the fuel supply and
transportation arrangements for the
Panda-Brandywine Facility.
"Brandywine Fuel
Management
Agreement" means the Fuel Supply Management
Agreement, dated March 30, 1995,
between CDC and the Panda-Brandywine
Partnership.
"Brandywine Gas
Agreement" means the Gas Sales
Agreement, dated March 30, 1995,
between the Panda-Brandywine
Partnership and CDC.
"Brandywine Loan
Agreement" means the Construction Loan
Agreement and Lease Commitment, dated
March 30, 1995, among GE Capital, the
Panda-Brandywine Partnership and PBC.
"Brandywine O&M
Agreement" means the Operations &
Maintenance Agreement, dated November
21, 1994, as amended on December 7,
1994, between the Panda-Brandywine
Partnership and Ogden Brandywine.
"Brandywine Power
Purchase Agreement" means the Power Purchase
Agreement, dated August 9, 1991, as
amended September 16, 1994, between
the Panda-Brandywine Partnership and
PEPCO.
"Brandywine Pro
Forma" means the pro forma financial
projections prepared by Burns &
McDonnell which are contained in the
Brandywine Pro Forma Report.
"Brandywine Pro Forma
Report" means the report entitled
"Independent Panda-Brandywine Pro
Forma Projections" prepared by ICF
dated July 26, 1996, as supplemented
by an update report dated January 10,
1997, presenting an independent
assessment of the pro forma for the
Panda-Brandywine Facility.
"Brandywine
Scenario" means a resolution of the PEPCO
Interest Rate Dispute in favor of the
position of the Panda-Brandywine
Partnership.
"Brandywine Steam
Agreement" means the Steam Sales
Agreement, dated March 30, 1995,
between Brandywine Water Company and
the Panda-Brandywine Partnership.
"Brandywine Water
Company" means Brandywine Water
Company, a Delaware corporation.
"Burns & McDonnell" means Burns & McDonnell
Engineering Company, Inc.
"Business Day" means any day on which
commercial banks are not authorized
or required to close in New York
City, New York, Dallas, Texas, the
Cayman Islands or Luxembourg.
"Capital Stock" means, with respect to any
person, any and all shares,
interests, participations, rights or
other equivalents in the equity
interests (however designated) in
such person, and any rights (other
than debt securities convertible into
an equity interest), warrants or
options exercisable for, exchangeable
for or convertible into such an
equity interest in such person.
"Capitalized Interest
Deficiency" means, with respect to
any Monthly Distribution Date, the
amount by which the amount on deposit
in the Capitalized Interest Fund as
of such date (after giving effect to
all transfers to the Capitalized
Interest Fund to be made on such
date) is less than the Capitalized
Interest Requirement in effect on
such date.
"Capitalized Interest
Fund" means the fund entitled
"Capitalized Interest Fund" described
in and maintained by the Trustee
pursuant to Article IV of the
Indenture.
"Capitalized Interest
Requirement" means for purposes of
the Indenture an amount equal to the
aggregate amounts required to be on
deposit in the Capitalized Interest
Fund on any date as set forth in all
Series Supplemental Indentures, as
the same may be reduced pursuant to
the Indenture.
"Cash Available for
Distribution" means Total Cash Flow
from all Project Entities on a
consolidated basis less (i) regularly
scheduled payments of principal and
interest on Project Debt, (ii)
additions to reserves required by
Project agreements, (iii) Trustee's
fees under the Indenture and (iv) the
NNW Cash Flow Participation, plus
interest earned on reserves required
by Transaction Documents entered
into by the
Company, excluding, however,
Extraordinary Financial Distributions
and proceeds received as a result of
Mandatory Redemption Events, that at
the time of determination is
available to be legally distributed
from the Project Entities to the PIC
Entities without contravention of any
Project agreement.
"Cash Available from
Operations" means, for any period,
Total Cash Flow from all Project
Entities on a consolidated basis
prior to all Consolidated Debt
Service, less (i) additions to
reserves required by Project
agreements, (ii) Trustee's fees under
the Indenture plus interest earned on
reserves required by Transaction
Documents entered into by the
Company, and (iii) the NNW Cash Flow
Participation, excluding, however,
Extraordinary Financial Distributions
and proceeds received as a result of
Mandatory Redemption Events.
"C.C. Pace" means C.C. Pace Resources, Inc.
"CDC" means Cogen Development Company.
"Change of Control" means the occurrence of any
event or series of events by which:
(a) any "person" or "group" (as such
terms are used in Sections 13(d) and
14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as
defined in Rule 13d-3 under the
Exchange Act), directly or
indirectly, of more than 50% of the
total voting stock of the Company;
(b) the Company consolidates with or
merges into another person or any
person consolidates with, or merges
into, the Company, in any such event
pursuant to a transaction in which
the outstanding voting stock of the
Company is changed into or exchanged
for cash, securities or other
property, other than any such
transaction where (i) the outstanding
voting stock of the Company is
changed into or exchanged for voting
stock of the surviving or resulting
person that is Qualified Capital
Stock and (ii) the holders of the
voting stock of the Company
immediately prior to such transaction
own, directly or indirectly, not less
than a majority of the voting stock
of the surviving or resulting person
immediately after such transaction;
(c) the Company, either individually
or in conjunction with one or more of
its Subsidiaries, sells, assigns,
conveys, transfers, leases or
otherwise disposes of, or the
Subsidiaries of the Company sell,
assign, convey, transfer, lease or
otherwise dispose of, all or
substantially all of the properties
of the Company and its Subsidiaries,
taken as a whole (either in one
transaction or a series of related
transactions), including Capital
Stock of such Subsidiaries, to any
person (other than the Company or a
wholly owned Subsidiary of the
Company); or (d) the liquidation or
dissolution of the Company.
"Change of Control
Offer" means an offer by the
Issuer to purchase all then
outstanding Bonds upon the occurrence
of a Change of Control.
"Change of Control
Purchase Date" means a Business Day
not more than 60 nor less than 30
days following a Change of Control on
which the Issuer is obligated to
purchase Bonds pursuant to a Change
of Control Offer.
"Change of Control
Purchase Price" means a purchase price
equal to 101% of the principal amount
of Bonds to be purchased by the
Issuer in connection with a Change of
Control, plus accrued and unpaid
interest thereon.
"China" means the People's Republic of China.
"CNG" means CNG Transmission Corporation.
"Collateral" means all of the property and
interests in property, real or
personal, now owned or hereafter
acquired in or upon which a Lien has
been or is purported or intended to
have been granted to the Collateral
Agent pursuant to the Security
Documents.
"Collateral Agency
Agreement" means the Collateral Agency
Agreement, dated the Issue Date,
among the Collateral Agent, the
Issuer, the Trustee, PEC, the Letter
of Credit Provider and the Company.
"Collateral Agent" means Bankers Trust Company, a
New York banking corporation.
"Columbia Gas" means Columbia Gas Transmission
Corporation, a Delaware corporation.
"Columbia Gas FT
Agreement" means the Amended and
Restated FTS Service Agreement, dated
March 23, 1995, between the Panda-
Brandywine Partnership and Columbia
Gas.
"Columbia Gas IT
Agreement" means the Service Agreement
for Service Under ITS Rate Schedule,
dated as of April 4, 1991, between
Columbia Gas and PR Corp., which
agreement was assigned by PR Corp.
to, and assumed by, the Panda-
Rosemary Partnership on January 6,
1992.
"Columbia Gulf" means Columbia Gulf Transmission
Company, a Delaware corporation.
"Columbia Gulf IT
Agreement" means the ITS-1
Transportation Service Agreement,
dated as of June 13, 1996, between
Columbia Gulf and the Panda-Rosemary
Partnership.
"Columbia Precedent
Agreement" means the Precedent
Agreement, dated as of February 25,
1994, as amended by the Amending
Agreement, dated March 24, 1995,
between the Panda-Brandywine
Partnership and Columbia Gas.
"Commercial Operations" means, with respect to a
Project, (i) the completion of
construction and testing and the
functioning of such Project and (ii)
the satisfaction and discharge of all
completion requirements of, and
commencement of regular capacity or
reservation payments under, the
purchase, transportation or other off-
take or use contracts for such
Project.
"Commission" means the U.S. Securities and
Exchange Commission.
"Company" means Panda Interfunding
Corporation, a Delaware corporation.
"Company Debt Service" means, for any period, scheduled
principal and interest payments on
the Bonds.
"Company Debt Service
Coverage Ratio" means for purposes of the
Indenture, as of any date of
determination, the ratio of (i) Cash
Available for Distribution during the
relevant period to (ii) Company Debt
Service for such period.
"Company Distribution
Certificate" means the officer's certificate
from the Company stating that the
conditions precedent for transferring
monies from a Distribution Suspense
Fund to the appropriate Distribution
Fund have been satisfied.
"Company Expense Fund" means the fund entitled "Company
Expense Fund" described in and
maintained by the Trustee pursuant to
Article IV of the Indenture.
"Company Expenses
Amount" means for each calendar
year commencing with 1997, an amount
equal to $300,000 as adjusted as of
January of each year ratably for
inflation and for each partial
calendar year in which Bonds shall be
outstanding, and as such amount may
otherwise be increased pursuant to
the Indenture.
"Company Guaranty" means the full and unconditional
guarantee of the Existing Bonds by
the Company.
"Company Loan
Agreement" means the Loan Agreement, dated
the Issue Date, between the Company
and the Issuer.
"Company Notes" means the Initial Company Note
and each promissory note evidencing
loans from the Issuer to the Company
of the proceeds from the Prior
Offering and any future offerings of
additional series of Bonds.
"Company Security
Agreement" means the Security
Agreement, dated the Issue Date,
between the Company and the
Collateral Agent.
"Company Stock Pledge
Agreement" means the Stock Pledge
Agreement, dated the Issue Date,
between the Company and the
Collateral Agent, pledging as
Collateral all of the issued and
outstanding capital stock of the
Issuer and each PIC U.S. Entity and
60% of the issued and outstanding
capital stock or other ownership
interests of each PIC International
Entity.
"Consolidated Debt
Service" means for purposes of the
Indenture, for any period, Company
Debt Service plus scheduled principal
and interest payments on all Project
Debt.
"Consolidated Debt
Service Coverage
Ratio" means, as of any date of
determination, the ratio of (i) Cash
Available from Operations during the
relevant period to (ii) Consolidated
Debt Service for such period;
provided, however, that at any time
that the Company holds Project
Interests in more than four Projects,
then the Consolidated Debt Service
Coverage Ratio shall not be applied
in respect of any event or
requirement.
"Consolidated Pro
Forma" means a summary consolidation of
the pro forma financial projections
for the Panda-Brandywine Facility and
the Panda-Rosemary Facility.
"Consolidated Pro
Forma Report" means the report
entitled "Summary of the Consolidated
Pro Formas of the Panda-Rosemary and
Panda-Brandywine Power Projects"
prepared by ICF dated January 10, 1997,
containing the Consolidated Pro Forma.
"Consolidating Engineer" means ICF, or its successor,
which shall be a firm of national
reputation with expertise in
engineering and financial analysis
and which may rely, to the extent
necessary for purposes of performing
its duties under the Indenture, on
other Independent Engineers.
"Constellation" means Constellation Energy
Corporation, the surviving
corporation after the merger of PEPCO
and BG&E.
"Cove Point" means Cove Point LNG Limited
Partnership.
"Cove Point FT
Agreement" means that certain FTS
Service Agreement, dated March 30,
1995, between the Panda-Brandywine
Partnership and Cove Point.
"Credit Agreement" means the Credit, Term Loan and
Security Agreement, dated August 31,
1993, among PEC, PR Corp., PRC II and
NNW.
"Credit Suisse" means Credit Suisse, a Swiss bank.
"Debt Service
Deficiency" means, with respect to any
Payment Date, the amount by which
monies on deposit in the Debt Service
Fund as of such date (after giving
effect to all transfers to the Debt
Service Fund to be made on such date)
is insufficient for the payment of
the amounts of interest and, if
applicable, principal due and payable
on the Company Notes (including any
past due amounts) on the Payment Date
for each series of Bonds outstanding
next following the day immediately
preceding such Monthly Distribution
Date.
"Debt Service Fund" means the fund entitled "Debt
Service Fund" described in and
maintained by the Trustee pursuant to
Article IV of the Indenture.
"Debt Service Reserve
Fund" means the fund entitled
"Debt Service Reserve Fund" described
in and maintained by the Trustee
pursuant to Article IV of the
Indenture.
"Debt Service Reserve
Deficiency" means the amount, with
respect to any Monthly Distribution
Date, the amount by which the amount
on deposit in the Debt Service
Reserve Fund as of such date (after
giving effect to all transfers to the
Debt Service Reserve Fund to be made
on such date) is less than the Debt
Service Reserve Requirement in effect
on such date.
"Debt Service Reserve
Requirement" means on the Issue
Date, an amount equal to $6.4
million, and, except as may be
otherwise provided in any Series
Supplemental Indenture, at any time
thereafter, an amount equal to the
scheduled principal and interest
payments on the Bonds created by such
Series Supplemental Indenture due
pursuant to the Indenture during the
12-month period immediately following
the date of determination, except
that, if less than 12 months remain
before the Final Stated Maturity of
the Bonds, then an amount equal to
the scheduled principal and interest
payments on the Bonds due pursuant to
the Indenture for such period shall
be maintained; provided that the Debt
Service Reserve Requirement, as
determined at any time, shall be
reduced by the amount then on deposit
in the Capitalized Interest Fund in
respect of interest payments
scheduled to be made during the 12-
month period immediately following
the date of determination.
"Disqualified Capital
Stock" means any Capital Stock
that, either by its terms, by the
terms of any security into which it
is convertible or exchangeable or by
contract or otherwise, is, or upon
the happening of an event or passage
of time would be, required to be
redeemed or repurchased prior to the
final stated maturity of the Bonds or
is redeemable at the option of the
holder thereof at any time prior to
such final stated maturity, or is
convertible into or exchangeable for
debt securities at any time prior to
such final stated maturity.
"Distribution Funds" means the U.S. Distribution Fund
and the International Distribution
Fund.
"Distribution Suspense
Funds" means the U.S. Distribution
Suspense Fund and the International
Distribution Suspense Fund.
"DTC" means The Depository Trust
Company, a limited purpose trust
company organized under the laws of
the State of New York and a member of
the Federal Reserve System.
"Effectiveness Target
Date" means the respective target
date for effectiveness of the
Exchange Offer Registration Statement
or the Shelf Registration Statement
as specified in the Registration
Rights Agreement.
"Eligible Institution" means a firm that is a member of
a registered national securities
exchange or a member of the National
Association of Securities Dealers,
Inc., or a commercial bank or trust
company having an office or
correspondent in the United States,
or an entity that is otherwise an
"eligible guarantor institution"
within the meaning of Rule 17Ad-15
under the Exchange Act.
"Energy Policy Act" means the Energy Policy Act of
1992.
"ERK" means ERK Energy, Inc., the fuel
oil coordinator for the Panda-
Brandywine Facility.
"Event of Default" means the events listed in
Section 9.1 of the Indenture.
"EWG" means an Exempt Wholesale
Generator.
"Exchange Act" means the Securities Exchange
Act of 1934, as amended.
"Exchange Agent" means Bankers Trust Company.
"Exchange Bonds" means the 11-5/8% Pooled Project
Bonds, Series A-1 due 2012, of Panda
Funding Corporation.
"Exchange Offer" means the offer of the Issuer,
upon the terms and subject to the
conditions set forth in the
Prospectus and in the Letter of
Transmittal, to exchange up to
$105,525,000 in aggregate principal
amount of its 11-5/8% Pooled Project
Bonds, Series A-1 due 2012 for a like
principal amount of its 11-5/8%
Pooled Project Bonds, Series A due
2012.
"Exchange Offer
Registration
Statement" means a registration statement
covering an offer by the Issuer to
exchange Old Bonds for like bonds to
be filed with the Commission by the
Company and the Issuer pursuant to
the Registration Rights Agreement.
"Exempt Wholesale
Generator" means a company that the
FERC has declared to be an exempt
wholesale generator pursuant to
Section 32 of PUHCA and that, as a
result, is exempt from PUHCA.
"Existing Bonds" means collectively, the Old
Bonds and the Exchange Bonds.
"Expiration Date" means the expiration of the
Exchange Offer at 5:00 p.m., New York
City time, on _________, 1996, unless
extended by the Issuer in its sole
discretion.
"Extraordinary
Distribution Accounts" means the U.S.
Extraordinary Distribution Account
and the International Extraordinary
Distribution Account.
"Extraordinary Financial
Distribution" means all Project
distributions received by the Company
or any PIC Entity or any person on
behalf of the Company or any PIC
Entity, directly or indirectly, in
respect of any of the Projects
(including all distributions from
Project Entities directly or
indirectly to the Company or any PIC
Entity), net of related unreimbursed
costs and expenses that are
attributable to or incurred by the
Company or any PIC Entity that may be
legally distributed or paid to the
Company or any PIC Entity without
contravention of any Project
agreement, in respect of (i)
settlements, judgments or other
payments received by a Project in
connection with any litigation,
arbitration or similar proceeding at
law or in equity or any
administrative proceeding, except to
the extent that any such proceeding
is in connection with a Mandatory
Redemption Event, (ii) any monies
released from an escrow or similar
account established by or on behalf
of a Project in connection with the
financing or contractual arrangements
of such Project (other than (a)
monies held in an escrow or similar
account established under the
Project's financing arrangements for
the purpose of governing the
disbursement of such Project's
revenue either before or subsequent
to a default by a Project under any
of such Project's contractual
obligations, (b) monies held in
operating or similar reserve accounts
established for Project operating
contingencies and funded out of the
Project's operating cash flow and (c)
monies held in an escrow or similar
account as a construction contingency
or for the payment of development or
similar fees), (iii) any buy-out or
settlement of a contract to which a
Project is a party or (iv) any
transaction that results in the
receipt of cash or other property
upon the sale, transfer or other
disposition (other than as set forth
in clause (iii) hereof) of any
contractual rights of a Project
except to the extent that such
transaction is in connection with a
Mandatory Redemption Event.
"FERC" means the Federal Energy
Regulatory Commission.
"Final Stated Maturity means the last stated maturity
date of any series of Bonds
outstanding under the Indenture.
"Financial Closing" means closing of the initial
construction or long-term project
financing of a Project.
"Firm Gas Transportation
Agreements" means the Transco
284 Agreement and the similar firm
transportation agreements the Panda-
Rosemary Partnership entered into
with Texas Gas and CNG.
"Flippo" means Flippo Construction.
"Florida Act" means the Florida Securities Act.
"Florida Power" means Florida Power Corporation,
a Florida corporation.
"Florida PSC" means the Florida Public Service
Commission.
"Ford Credit" means Ford Motor Credit Company,
a Delaware corporation.
"FPA" means the Federal Power Act, as
amended.
"Fuel Consultant" means, with respect to the Panda-
Rosemary Facility, Schlesinger and,
with respect to the Panda-Brandywine
Facility, C.C. Pace, or their
respective successors.
"Future Ratio
Determination Period" means, as of the
date of determination, each of the
following: (1) the period beginning
with the date of determination
through December 31 of that calendar
year; (2) each period consisting of a
calendar year thereafter through the
calendar year immediately prior to
the calendar year in which the Final
Stated Maturity occurs and (3) the
period thereafter beginning with
January 1 and ending with the Final
Stated Maturity.
"GE Capital". means General Electric Capital
Corporation, a New York corporation.
"Global Bond" means the single permanent
global certificate in definitive,
fully registered form that represents
the Exchange Bonds.
"GNPIPD" means the Gross National Product
Implicit Price Deflator.
"Harbin" means Harbin Power Engineering
Company Limited, the engineering,
procurement and construction
contractor for the Panda-Luannan
Facility.
"Hardesty" means Hardesty & Son, Inc., a
fuel oil trucking transportation
company.
"Heard Defendants" means the Heard Energy
Corporation, collectively with
certain individual former PEC
officers, employees and advisors who
are involved in litigation with PEC.
"ICF" means ICF Resources,
Incorporated, a Florida corporation.
"Indenture" means collectively the Trust
Indenture, dated the Issue Date,
among the Issuer, the Company and the
Trustee and all Series Supplemental
Indentures.
"Independent Director" means the "Independent Director"
of each of the Issuer and the
Company, with the power and authority
and duties provided in the respective
Certificates of Incorporation and By-
laws thereof.
"Independent Engineer" means, with respect to the Panda-
Rosemary Facility, Burns & McDonnell,
and, with respect to the Panda-
Brandywine Facility, PES, or their
respective successors.
"Initial Company Note" means the promissory note issued
by the Company to the Issuer with an
original principal amount equal to
the original aggregate principal
amount of the Old Bonds, representing
a loan to the Company of the proceeds
of the issuance of the Old Bonds.
"Initial Purchaser" means Jefferies & Company, Inc.,
a Delaware corporation.
"Institutional Accredited
Investors" means institutional "accredited investors"
as defined under Rule 501(a)(1), (2),
(3) or (7) under the Securities Act.
"Interest Payment Date" means each February 20 and
August 20, commencing February 20,
1997, on which interest on the
Existing Bonds is paid, and the dates
on which each installment of interest
is due on any other series of Bonds.
"International Accounts
and Funds" means the International Accounts
and Funds described in and maintained by
the International Collateral Agent
pursuant to Article IV of the
Indenture.
"International Collateral
Agent" means the Trustee
acting in its capacity as agent for
the PIC International Entities for
the benefit of the Company.
"International
Distribution Fund" means the fund
entitled "International Distribution
Fund" described in and maintained
pursuant to Article IV of the
Indenture.
"International Distribution
Suspense Fund" means the fund entitled
"International Distribution Suspense
Fund" described in and maintained by
the International Collateral Agent
pursuant to Article IV of the
Indenture.
"International Extraordinary
Distribution Account" means the account entitled
"International Extraordinary
Distribution Account" described in
and maintained by the International
Collateral Agent pursuant to Article
IV of the Indenture.
"International Mandatory
Redemption Account" means the account entitled
"International Mandatory Redemption
Account" described in and maintained
by the International Collateral Agent
pursuant to Article IV of the
Indenture.
"International Project
Account" means the account
entitled "International Project
Account" described in and maintained
by the International Collateral Agent
pursuant to Article IV of the
Indenture.
"International Project
Distributions" means distributions and amounts received
by any PIC International Entity or any
other person on behalf of any PIC
International Entity from, or in
connection with, Non-U.S. Projects
that may be legally distributed or
paid to any PIC International Entity
without contravention of any Project
agreement, other than Extraordinary
Financial Distributions and amounts
that are required to be deposited in
the International Mandatory
Redemption Account pursuant to the
Indenture, and all interest earned
and received on amounts on deposit in
the International Accounts and Funds.
"Investment Company Act" means the Investment Company Act
of 1940, as amended.
"Issue Date" means July 31, 1996, the date of
issuance of the Old Bonds.
"Issuer" means Panda Funding Corporation,
a Delaware corporation.
"Issuer Security
Agreement" means that certain Security
Agreement, dated the Issue Date,
between the Issuer and the Collateral
Agent which provides for the
collateral assignment of all of the
Issuer's personal property.
"Joint Venture Companies" means collectively the four
equity joint ventures formed under
PRC law for purposes of developing,
constructing and operating the Panda-
Luannan Facility.
"Koch" means Koch Refining Company, L.P.
"Letter of Credit" means for purposes of the
Indenture an irrevocable standby
letter of credit which may be used to
satisfy in whole or in part, the Debt
Service Reserve Requirement.
"Letter of Credit
Provider" means any commercial bank
that issues a Letter of Credit and
that enters into a reimbursement
agreement as required pursuant to the
Indenture and becomes a party to the
Collateral Agency Agreement.
"Letter of Transmittal" means the Letter of Transmittal
accompanying the Prospectus which
holders of Old Bonds must execute and
deliver to the Exchange Agent in
order to tender their Old Bonds in
the Exchange Offer.
"Lien" means for purposes of the
Indenture any mortgage, pledge,
hypothecation, security interest,
collateral assignment, lien
(statutory or other), preference,
priority or other security agreement
or payment arrangement or encumbrance
of any kind or nature whatsoever,
including, without limitation, any
conditional sale or other title
retention agreement, any financing
lease having substantially the same
effect as any of the foregoing and
the filing of any financing statement
or similar instrument under the
Uniform Commercial Code or comparable
law of any jurisdiction, domestic or
international.
"Loan Participants" means Credit Suisse and the
other participants that loaned
amounts to the Owner Trustee under
the Participation Agreement to
finance the acquisition of the Panda-
Brandywine Facility.
"Mandatory Redemption
Accounts" mean the U.S.
Mandatory Redemption Account and the
International Mandatory Redemption
Account.
"Mandatory Redemption
Event" means (i) the sale or
disposition of any Collateral, any
Project or portion thereof or any
direct or indirect interest of the
Company or any PIC Entity in any
Project or (ii) any event of
casualty, loss or condemnation with
respect to any Project.
"Material Adverse Change" means (i) a material
adverse change in the business,
results of operations, condition
(financial or otherwise) or property
of (a) the Company, (b) the Issuer,
(c) any PIC Entity or (d) any Project
or (e) any Project Entity, in each
case to the extent that such change
could be reasonably expected to have
a material adverse effect on the
Issuer or its ability to make
payments on the Bonds, or on the
Company or its ability to make
payments on the Company Notes or to
perform its obligations under the
Company Guaranty or (ii) any event or
occurrence of whatever nature, which
in any case has a material adverse
effect on (a) the ability of PEC, the
Company, the Issuer or any PIC Entity
to perform its obligations under any
agreement governing the rights and
obligations of such entity, including
any Transaction Document, or any
Project Entity's ability to perform
its obligations under any agreement
governing the rights and obligations
of such entity, in each such case, to
the extent that such event or
occurrence could be reasonably
expected to have a material adverse
effect on the Issuer or its ability
to make payments on all series of
Bonds, or on the Company or its
ability to make payments on the
Company Notes or its ability to
perform its obligations under the
Company Guaranty or (b) the validity
or priority of the Trustee's or
Collateral Agent's Lien on the
Collateral.
"Monthly Distribution
Date" means a date prescribed
each month for the distribution of
monies deposited in the Project
Accounts according to the priority
set forth in Article IV of the
Indenture.
"NCNG" means North Carolina Natural Gas
Corporation, a Delaware corporation.
"NCPG" means North China Power Group,
one of five interprovincial power
groups in China.
"NCPGC" means North China Power Group
Company, the business arm of NCPG.
"NCUC" means the North Carolina
Utilities Commission.
"NEA" means Nepal Electricity
Authority.
"NGC" means Natural Gas Clearinghouse,
a Colorado general partnership.
"Non-U.S. Projects" means the Projects owned by PIC
International Entities and located
outside of the United States in
respect of which deferral of U.S.
federal income taxes is being sought.
"NNW" means NNW, Inc., formerly known
as Nova Northwest, Inc., an Oregon
corporation.
"NNW Cash Flow
Participation" means NNW's cash flow
participation in distributions from
the Panda-Rosemary Partnership.
"NPDES" means the National Pollutant
Discharge Elimination System.
"Ogden Brandywine" means Ogden Brandywine
Operations, Inc., a subsidiary of
Ogden Power Corporation.
"Ogden Rosemary" means Ogden Rosemary Operations,
Inc., a subsidiary of Ogden Power
Corporation.
"Old Bonds" means the 11-5/8% Pooled Project
Bonds, Series A due 2012, of Panda
Funding Corporation.
"Other International
Note" means any loan to a PIC
International Entity from the Company
which is not evidenced by a PIC
International Entity Note.
"Owner Trustee" means the entity that holds
title to the Panda-Brandywine
Facility as trustee on behalf of the
Loan Participants.
"Panda-Brandywine
Facility" means the 230 MW natural gas-fired,
combined-cycle cogeneration facility
located in Brandywine, Prince George's
County, Maryland.
"Panda-Brandywine
Financing" means, collectively, the
construction loan provided by GE
Capital and the leveraged lease
provided under the Brandywine Lease
Facility and Participation Agreement
in respect of the Brandywine
Facility.
"Panda-Brandywine
Partnership" means Panda-Brandywine, L.P., a Delaware
limited partnership.
"Panda Energy Delaware" means Panda Energy Corporation,
a Delaware corporation.
"Panda Global Services" means Panda Global Services,
Inc., a Delaware corporation.
"Panda Interholding" means Panda Interholding
Corporation, a Delaware corporation.
"Panda International" means Panda Energy
International, Inc., a Texas
corporation.
"Panda-Kathleen Facility" means the natural gas-
fired, combined-cycle cogeneration
facility to be located near Lakeland,
Florida that is being developed by
Panda International.
"Panda-Kathleen
Partnership" means Panda-Kathleen, L.P.,
a Delaware limited partnership.
"Panda-Lapanga Facility" means the 500 MW coal-fired
power generation facility to be
located in the State of Orissa, India
that is being developed by Panda
International.
"Panda-Luannan Facility" means the 2 X 50 MW coal-fired
cogeneration facility to be located
in Luannan County, Tangshan
Municipality, Hebei Province, China
that is being developed by Panda
International.
"Panda-Nepal Facility" means the 36 MW hydroelectric
generation facility to be located on
the upper Bhote Koshi River in Nepal
that is being developed by Panda
International.
"Panda-Rosemary Facility" means the 180 MW natural
gas-fired, combined-cycle
cogeneration facility located in
Roanoke Rapids, North Carolina.
"Panda-Rosemary
Partnership" means Panda-Rosemary, L.P.,
a Delaware limited partnership.
"Panda-Rosemary
Partnership Loan" means the loan by the
Rosemary Issuer to the Panda-Rosemary
Partnership of funds from the
proceeds from the sale of the
Rosemary Bonds.
"Panda-Rosemary Pipeline" means the approximately
10.26 mile natural gas pipeline owned
by the Panda-Rosemary Partnership
commencing in Pleasant Hill, North
Carolina and terminating at the Panda-
Rosemary Facility, together with all
appurtenant facilities.
"Participating
Broker-Dealer" means a broker-dealer that
received Exchange Bonds in the
Exchange Offer for its own account in
exchange for Old Bonds acquired as a
result of market making or other
trading activities.
"Participation Agreement" means the Participation
Agreement, dated December 18, 1996,
among the Panda-Brandywine
Partnership, PBC, GE Capital as Owner
Participant, Fleet National Bank as
Owner Trustee and Security Agent,
First Security Bank, National
Association as Indenture Trustee,
Credit Suisse as Administrative Agent
and the Loan Participants.
"Payment Date" means a Principal Payment Date
or Interest Payment Date.
"PBC" means Panda Brandywine
Corporation, a Delaware corporation.
"PEC" means Panda Energy Corporation,
a Texas corporation.
"PEC Stock Pledge
Agreement" means the Stock Pledge
Agreement, dated the Issue Date,
between PEC and the Collateral Agent,
pursuant to which PEC pledges 100% of
its capital stock in the Company as
Collateral.
"PEPCO" means Potomac Electric Power
Corporation, a District of Columbia
and Virginia corporation.
"PEPCO Interest Rate
Dispute" means the dispute between
PEPCO and the Panda-Brandywine
Partnership regarding the
determination of the interest rate
that is the basis for reduction in
capacity payments under the
Brandywine Power Purchase Agreement.
"PEPCO Scenario" means a resolution of the PEPCO
Interest Rate Dispute in favor of the
position of PEPCO.
"Permitted Investments" means those investments of
balances in Accounts and Funds that
are permitted under the Indenture.
"PES" means Pacific Energy Services, Inc.
"PIC Entity or Entities" means one or more corporations,
companies, partnerships, limited
liability companies or other entities
(i) that are not Project Entities,
(ii) 100% of the voting capital stock
or other voting equity interests of
which is owned directly by the
Company, other than directors'
qualifying shares mandated by
applicable law and (iii) through
which the Company owns indirect
interests in Project Entities.
"PIC Entity Guaranties" means the guaranty agreement
dated the Issue Date, among the PIC
U.S. Entities and the Collateral
Agent.
"PIC International
Entities" means PIC Entities that
own, through Project Entities, Non-
U.S. Projects.
"PIC International
Entity Loan" means any loan by the
Company to a PIC International Entity
of the proceeds of the issuance of a
series of Bonds (issued by the Issuer
to the Company and represented by a
Company Note), the payments on which
are to be made from distributions
from a Non-U.S. Project to be held by
such PIC International Entity as part
of the Project Portfolio.
"PIC International
Entity Note" means a note
evidencing a PIC International Entity
Loan.
"PIC U.S. Entities" means PIC Entities that, through
Project Entities, own U.S. Projects.
"Pipeline Operating
Agreement" means the Pipeline
Operating Agreement, dated as of
February 14, 1990, among PEC, PR
Corp., and NCNG, as amended, which
agreement was assigned by PEC to PR
Corp. on January 15, 1990 and as the
same was assigned by PR Corp. to, and
assumed by, the Panda-Rosemary
Partnership.
"PORTAL" means the Private Offerings,
Resale and Trading through Automatic
Linkages.
"PR Corp." means Panda-Rosemary
Corporation, a Delaware corporation.
"PRC" means the People's Republic of
China.
"PRC II" means PRC II Corporation, a
Delaware corporation.
"Principal Payment Date" means each February 20 and
August 20, commencing on February 20,
1997, on which principal on the
Existing Bonds is paid, and the dates
on which each installment of
principal is due on any other series
of Bonds.
"Prior Offering" means the offering of the Old
Bonds.
"Project" or "Projects" means one or more electric power
generation projects (including
businesses substantially related
thereto, such as a steam host
affiliated therewith) that has been
or will be transferred to the Company
or a PIC Entity pursuant to the
Additional Projects Contract.
"Project Accounts" means the U.S. Project Account
and the International Project
Account.
"Project Debt" means any indebtedness created,
incurred or assumed by a Project
Entity or secured by the assets of a
Project.
"Project Distributions" means U.S. Project Distributions
and International Project
Distributions.
"Project Entity" means any corporation, company,
partnership, limited liability
company or other entity that is (i)
directly or indirectly owned by a PIC
Entity and (ii) (A) that is the
direct or indirect owner of a Project
or (B) that is obligated under or a
guarantor of Project Debt or that has
granted a security interest in any of
its assets (including Project cash
flows), other than the capital stock
of any of its Subsidiaries (and any
dividends or other distributions on
such capital stock and proceeds
therefrom), to secure the payment of
Project Debt or the performance of
any Project agreement.
"Project Interest" means an equity or similar
ownership interest in a Project.
"Project Portfolio" means the portfolio of Projects
owned, directly or indirectly, by the
Company.
"Project Distributions" means U.S. Project Distributions
and International Project
Distributions.
"Prospectus" means this Prospectus dated
________ with respect to the Exchange
Bonds.
"Prudent Utility
Practices" means 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.
"PUCs" means state public utility
commissions in the United States.
"PUHCA" means the Public Utility Holding
Company Act of 1935, as amended.
"Purchase Agreement" means the Purchase Agreement
dated July 26, 1996, between the
Issuer and the Initial Purchaser.
"PURPA" means the Public Utility
Regulatory Policies Act of 1978, as
amended.
"QF" means Qualifying Facility.
"Qualified Capital Stock" of any person means any and
all Capital Stock of such person
other than Disqualified Capital
Stock.
"Qualified Institutional Buyer" means a qualified
institutional buyer as such term is
defined in Rule 144A.
"Qualifying Facility" means either a small power
production facility or a cogeneration
facility that has satisfied the
definition of "qualifying facility"
as set forth in 18 C.F.R.
292.101(b)(1) of the regulations
promulgated under PURPA.
"Rating Agencies" means Moody's Investors Service,
Inc. and Duff & Phelps Credit Rating
Co.
"Raytheon" means Raytheon Engineers and
Constructors, Inc.
"Reaffirmation" means, with respect to any
event, a confirmation in writing from
at least one rating agency that the
rating of the Bonds in effect
immediately prior to such event will
be maintained or improved after
giving effect to such event. The
terms "Reaffirm" or "Reaffirmed" used
as verbs have a correlative meaning.
"Registration Default" means the occurrence of any of
the following: (a) the Issuer and
the Company fail to file any of the
registration statements required by
the Registration Rights Agreement on
or before the date specified for such
filing, (ii) any of such registration
statements are not declared effective
by the Commission on or prior to the
Effectiveness Target Date, (iii) the
Issuer and the Company fail to
consummate the Exchange Offer within
30 business days after the
Effectiveness Target Date or (iv) the
Shelf Registration Statement or the
Exchange Offer Registration Statement
is declared effective but thereafter,
subject to certain exceptions, ceases
to be effective or usable in
connection with the Exchange Offer or
resales of Transfer Restricted Bonds,
as the case may be, during the
periods specified in the Registration
Rights Agreement.
"Registration Rights
Agreement" means the Registration
Rights Agreement, dated the Issue
Date, among the Company, the Issuer
and the Initial Purchaser.
"Registration Statement" means this Registration
Statement on Form S-1, Registration
Numbers 333-14495 and 333-14495-01,
filed with the Commission covering
the Exchange Bonds and the Company
Guaranty.
"Reimbursement Agreement" means the Second Amended
and Restated Letter of Credit and
Reimbursement Agreement, dated
January 6, 1992, among the Panda-
Rosemary Partnership, The Fuji Bank,
Limited, and certain other banks
party thereto.
"Rosemary Bonds" means the 8-5/8% First Mortgage
Bonds due 2016 of Panda-Rosemary
Funding Corporation.
"Rosemary Borrowers" means PEC, PR Corp. and PRC II.
"Rosemary Engineering
Report" means the report entitled
"Panda-Rosemary Corporation Project
Condition Assessment Report for
Potential Investors at the Request of
Panda Energy Corporation" prepared by
Burns & McDonnell, dated July 26,
1996, as supplemented by an update
report dated January 10, 1997,
concerning certain technical,
environmental and economic aspects of
the Panda-Rosemary Facility.
"Rosemary Facility Site" means the site on which the
Panda-Rosemary Facility is located.
"Rosemary Fuel
Consultant" means Schlesinger or its successor.
"Rosemary Fuel
Consultant's Report" means the report
entitled "Assessment of Fuel Price,
Supply and Delivery Risks for the
Panda-Rosemary Cogeneration Project"
prepared by Schlesinger, dated
September 20, 1996, analyzing the
sufficiency of the fuel supply and
transportation arrangements for the
Panda-Rosemary Facility.
"Rosemary Fuel Management
Agreement" means the Fuel Supply Management
Agreement, dated October 10, 1990,
between the Panda-Rosemary
Partnership and NGC, as amended.
"Rosemary Gas Supply
Agreement" means the Gas Purchase
Contract, dated April 12, 1990,
between the Panda-Rosemary
Partnership and NGC, as amended.
"Rosemary Indenture" means the indenture, dated as of
the Issue Date, among the Panda-
Rosemary Partnership, Panda-Rosemary
Funding Corporation, and Fleet
National Bank.
"Rosemary Issuer" means Panda-Rosemary Funding
Corporation, a Delaware corporation.
"Rosemary O&M Agreement" means the Operations &
Maintenance Agreement, effective as
of January 1, 1997, between the Panda-
Rosemary Partnership and Panda Global
Services.
"Rosemary Offering" means the offering of the
Rosemary Bonds.
"Rosemary Power Purchase
Agreement" means the Power Purchase and
Operating Agreement, dated January
24, 1989, as amended on October 24,
1989 and July 30, 1993, between VEPCO
and the Panda-Rosemary Partnership.
"Rosemary Pro Forma" means the pro forma financial
projections prepared by Burns &
McDonnell that are contained in the
Rosemary Engineering Report.
"Rosemary Site Lease" means the Real Property Lease
and Easement Agreement, dated June 9,
1989, as amended on October 1, 1989
and as further amended on January 31,
1990 and March 15, 1996, between the
Panda-Rosemary Partnership and Bibb.
"Rosemary Steam Agreement" means the Cogeneration
Energy Supply Agreement, dated
January 12, 1989, by and between PEC
and Bibb, which contract was assigned
by PEC to, and assumed by, PR Corp.,
as such contract was amended October
1, 1989, and as the same was further
assigned by PR Corp. to, and assumed
by, the Panda-Rosemary Partnership on
January 3, 1990.
"Rule 144A" means Rule 144A under the
Securities Act.
"SCC" means the Virginia State
Corporation Commission.
"Schlesinger" means Benjamin Schlesinger and
Associates, Inc.
"Secured Parties" means the Bondholders, the
Letter of Credit Provider and the
Trustee.
"Securities Act" means the Securities Act of
1933, as amended.
"Security Documents" means, collectively, (i) the
Collateral Agency Agreement, (ii) the
Issuer Security Agreement, (iii) the
PEC Stock Pledge Agreement, (iv) the
Company Stock Pledge Agreement, (v)
the Company Security Agreement, and
all financing statements executed in
connection therewith and any and all
other agreements or instruments now
or hereafter executed by the Issuer,
the Company, any PIC Entity, PEC,
Panda International or any other
person as security for the payment or
performance of the Bonds.
"Series A Supplemental
Indenture" means collectively,
the First Supplemental Indenture,
dated the Issue Date, and the Second
Supplemental Indenture, dated as of
January 6, 1997, entered into in
accordance with the Indenture among
the Company, the Issuer and the
Trustee in connection with the
Existing Bonds.
"Series Supplemental
Indenture" means any supplemental
indenture entered into in accordance
with the Indenture among the Company,
the Issuers and the Trustee.
"Shelf Registration
Statement" means a shelf
registration statement covering
resales of the Old Bonds which the
Company and the Issuer may be
required to file with the Commission
pursuant to the Registration Rights
Agreement.
"SPC" means the State Planning
Commission of the People's Republic
of China.
"Subsidiary" means, in respect of any person,
a corporation, partnership, limited
liability company or other entity,
(i) at least a 50% (direct or
indirect) ownership or equivalent
interest of the outstanding stock or
other equity interests of which are
owned, directly or indirectly, by
such person or (ii) (a) at least a
25% (direct or indirect) ownership or
equivalent stock or other equity
interests are owned, directly or
indirectly, by such person and (b)
such person exercises a controlling
influence over the management and
policies with respect to such
corporation, partnership, limited
liability company or other entity,
directly or indirectly, whether
through the ownership of voting
securities, by contract or otherwise,
provided that no other entity has
greater control than such person over
the management and policies of such
corporation, partnership, limited
liability company or other entity.
"TCW" means Trust Company of the West.
"Texas Gas" means Texas Gas Transmission
Corporation.
"Total Cash Flow" means, as to any person, the sum
of the net income of such person for
any period plus, to the extent
deducted from net income, all non-
cash items, including, but not
limited to, depreciation, depletion
and impairment, amortization of
intangibles and deferred taxes, in
each case for such period and
determined as to such person minus
to the extent included in net income,
all non-cash income, calculated in
accordance with generally accepted
accounting principles.
"Transaction Documents" means the Security Documents,
the Company Notes, the Bonds, the
Company Guaranty, the Indenture, the
Company Loan Agreement, the PIC U.S.
Entity Guarantees, the PIC
International Entity Pledge
Agreement, the PIC International
Entity Loan Agreement, the PIC
International Entity Notes, the Other
International Notes and the
Additional Projects Contract,
together with any other document,
instrument or agreement, now or
hereafter entered into in connection
with the Indenture, the Bonds or the
Collateral.
"Transco" means Transcontinental Gas Pipe
Line Corporation, a Delaware
corporation.
"Transco Service
Agreement" means the Service
Agreement, dated October 22, 1991,
between Transco and PEC, which
agreement was assigned by PEC to, and
assumed by, PR Corp., thereafter
assigned by PR Corp. to, and assumed
by, the Panda-Rosemary Partnership.
"Transco 284 Agreement" means the Service Agreement,
dated July 26, 1996, between Transco
and the Panda-Rosemary Partnership,
as amended.
"Transfer Restricted
Bonds" means each Old Bond until
(i) the date on which such Old Bond
has been exchanged by a person other
than a broker-dealer for an Exchange
Bond in the Exchange Offer, (ii)
following the exchange by a broker-
dealer in the Exchange Offer of an
Old Bond for an Exchange Bond, the
date on which such Exchange Bond is
sold to a purchaser who receives from
such broker-dealer on or prior to the
date of such sale a copy of the
prospectus contained in the Exchange
Offer Registration Statement, (iii)
the date on which such Old Bond has
been effectively registered under the
Securities Act and disposed of in
accordance with the Shelf
Registration Statement or (iv) the
date on which such Old Bond is
distributed to the public pursuant to
Rule 144 under the Securities Act.
"Trustee" means Bankers Trust Company, a
New York banking corporation, as
trustee under the Indenture.
"U.S. Accounts and Funds" means U.S. Accounts and
Funds described in and maintained by
the Trustee pursuant to Article IV of
the Indenture.
"U.S. Account Rights" means for purposes of the
Indenture, collectively, all of the
rights with respect to each U.S.
Account and Fund, including all funds
and investments in securities and
other instruments from time to time
therein and all letters of credit or
other instruments substituting for
funds in any such U.S. Accounts or
Funds.
"U.S. Distribution Fund" means the fund entitled "U.S.
Distribution Fund" described in and
maintained by the Trustee pursuant to
Article IV of the Indenture.
"U.S. Distribution
Suspense Fund" means the fund
entitled "U.S. Distribution Suspense
Fund" described in and maintained by
the Trustee pursuant to Article IV of
the Indenture.
"U.S. Extraordinary Distribution
Account" means the account entitled "U.S.
Extraordinary Distribution Account"
described in and maintained by the
Trustee pursuant to Article IV of the
Indenture.
"U.S. Mandatory Redemption
Account" means the account entitled "U.S.
Mandatory Redemption Account"
described in and maintained by the
Trustee pursuant to Article IV of the
Indenture.
"U.S. Project Account" means the account entitled "U.S.
Project Account" described in and
maintained by the Trustee pursuant to
Article IV of the Indenture.
"U.S. Project
Distributions" means distributions and
amounts received by the Company, any
PIC U.S. Entity or any other person
on behalf of the Company or any PIC
U.S. Entity from, or in connection
with, U.S. Projects that may be
legally distributed or paid to the
Company or any PIC U.S. Entity
without contravention of any Project
agreement, other than Extraordinary
Financial Distributions and amounts
that are required to be deposited in
the Mandatory Redemption Accounts
pursuant to the Indenture, and all
interest earned and received on
amounts on deposit in the U.S.
Accounts and Funds.
"U.S. Projects" means the Projects owned by PIC
U.S. Entities and located in the
United States and certain other
international Projects in respect of
which deferral of U.S. federal income
taxes is not being sought.
"U-Tech" means University Technical
Services, Inc., a California
corporation, doing business as UTECH
Services, Inc., a wholly owned
subsidiary of EMCOR Group, Inc.
"VEPCO" means Virginia Electric and
Power Company, a Virginia public
service corporation (including North
Carolina Power).
"WGL" means the Washington Gas Light
Company, a District of Columbia
Corporation and a Virginia
Corporation.
"WGL Agreement" means the Gas Transportation and
Supply Agreement, dated November 10,
1994, between the Panda-Brandywine
Partnership and WGL.
PART II -- CERTAIN TECHNICAL TERMS COMMONLY USED IN THE UTILITY
INDUSTRY
Defined below are certain technical terms commonly used
in the electric and gas utility industries.
TERM DEFINITION
"Available" means the status of a major
piece of equipment which is capable
of service, whether or not it is
actually in service.
"Bcf" means one billion standard cubic
feet.
"Btu" means British Thermal Unit, the
amount of heat required to raise the
temperature of 1 pound of pure water
1 degree F from 59 degrees F to 60
degrees F at a constant pressure of
14.73 pounds per square inch
absolute.
"Capability" means the maximum load which an
electric generating unit can carry
under specific conditions for a given
period of time, without exceeding
approved limits of temperature and
stress.
"Capacity" means the load for which an
electric generating unit is rated
either by the user or by the
manufacturer.
"Capacity Factor" means the ratio of the average
operating load of an electric
generating unit for a period of time
to the capacity rating of the unit
during that period.
"Cogeneration" means the sequential production
of electric energy and useful thermal
energy for industrial, commercial,
heating or cooling purposes.
"Cogeneration Facility" means a facility that produces
electric energy and useful thermal
energy used for industrial,
commercial, heating or cooling
purposes. A cogeneration facility
must meet certain efficiency and
useful thermal output criteria to
qualify for certain regulatory
benefits under PURPA.
"Dekatherm" or "Dth" means a unit of heating value
equivalent to 10 therms or 1,000,000
Btu's.
"Dispatch" means the operating control of
an integrated electric system to
assign generation to specific
generating stations and other sources
of supply to effect the most reliable
and economical supply as demand rises
or falls.
"Dispatch Factor" means the amount of production
scheduled by an electric generating
unit's power purchaser in a given
time period (i.e., output level of
that unit times the number of hours
dispatched).
"Economic Dispatch" means the start-up, shutdown and
allocation of load to individual
electric generating units to effect
the most economical production of
electricity for customers by a
utility.
"Equivalent Availability Factor" means the ratio of the
number of megawatt hours a facility
could have produced in a given period
to the rated number of megawatt hours
of the facility.
"GWh" means gigawatt hour or one
million kilowatt hours.
"Heat Rate" means a measure of generating
station thermal efficiency, generally
expressed in Btu per net kilowatt-
hour. It is computed by dividing the
total Btu content of fuel burned for
electric generation by the resulting
net kilowatt-hour generation.
"Heating Value" means the amount of heat
produced by the complete combustion
of a unit quantity of fuel. The gross
or higher heating value (HHV) is that
which is obtained when all of the
products of combustion are cooled to
the temperature existing before
combustion, the water vapor formed
during combustion is condensed and
all the necessary corrections have
been made. The net or lower heating
value (LHV) is obtained by
subtracting the latent heat of
vaporization of the water vapor,
formed by the combustion of the
hydrogen in the fuel, from the gross
or higher heating value.
"HRSGs" means Heat Recovery Steam
Generators.
"Kilowatt" or "kW" means 1,000 watts.
"Kilowatt-hour" or "kWh" means the basic unit of electric
energy equal to one kilowatt of power
supplied to or taken from an
electrical circuit steadily for one
hour.
"Load Factor" means, in the context of
electric generation, the ratio of the
average load in kilowatts supplied
during a designated period to the
peak or maximum load in kilowatts
occurring in that period. Load
factor, in percent, also may be
derived by multiplying the kilowatt-
hours in the period by 100 and
dividing by the product of the
maximum demand in kilowatts and the
number of hours in the period. In the
context of gas transportation, "load
factor" means the ratio of the
average actual requirement for gas
transportation capacity to the
maximum contractual gas
transportation capacity for the same
time period.
"LHV" means lower heating value (see
Heating Value)
"Mcf" means one thousand standard
cubic feet of gas (cubic feet at 60
degrees F and at a pressure of 14.73
pounds per square inch absolute).
"MMBtu" means one million British thermal units.
"MM Lbs" means one million pounds.
"MW" or "Megawatt" means one million watts.
"No " means oxides of nitrogen.
"O&M" means operating and maintenance.
"Partial Outage" means the outage of an electric
generating unit or plant auxiliary
equipment which reduces the
capability of the electric generating
unit without causing a complete
shutdown.
"Watt" means the electric unit of real
power or rate of doing work. The rate
of energy transfer equivalent to one
ampere flowing due to an electrical
pressure of one volt at unity power
factor.
A P P E N D I X B
Summary of the
Consolidated Pro Formas of the
Panda Rosemary and
Panda Brandywine Power Projects
Prepared for:
Panda Energy International, Inc.
Prepared by:
ICF Resources Incorporated,
A Subsidiary of ICF Kaiser International
January 10, 1997
This report was produced by ICF
Resources Incorporated (ICF) in
accordance with an agreement with Panda
Energy International, Inc., who paid for
its services in producing the report and
this report is subject to the terms of
that agreement. This report is meant to
be read as a whole and in conjunction
with this disclaimer. Any use of this
report other than as a whole and in
conjunction with this disclaimer is
forbidden. Any use of this report,
other than as provided for in ICF's
agreement with Panda Energy
International, is forbidden. This
report may not be copied in whole or in
part or distributed to anyone outside
Panda Energy International without ICF's
prior express and specific written
permission.
This report and information and
statements herein are based in whole or
in part on information obtained from
various sources. ICF makes no
assurances as to the accuracy of any
such information or any conclusions
based thereon. ICF bears no
responsibility for the results of any
actions taken on the basis of this
Report.
============================================================
CONSOLIDATED PRO FORMA
============================================================
ICF Resources, Incorporated ("ICF"), a subsidiary of ICF
Kaiser International, was retained by Panda Energy
International ("Panda") on behalf of its subsidiary, Panda
Interfunding Corporation (the "Company"), to create a
consolidated summary of the pro forma financial projections
(the "Consolidated Pro Forma") for the Panda-Rosemary
cogeneration project (the "Rosemary Project") and the Panda-
Brandywine cogeneration project (the "Brandywine Project")
(collectively, the "Projects"). In preparing the
Consolidated Pro Forma, ICF has relied on the independent
reports described below of Burns & McDonnell, the
independent engineer for the Rosemary Project and of ICF and
Pacific Energy Systems, Inc. ("PES"), the independent
consultant and independent engineer, respectively, for the
Brandywine Project. This report describes the Consolidated
Pro Forma and explains how it was derived.
Background
The Rosemary Project
The Rosemary Project is a 180 MW gas- and oil-fired
cogeneration project operating in Roanoke Rapids, North
Carolina. The Rosemary Project sells electricity to Virginia
Electric and Power Company pursuant to a Power Purchase
Agreement that expires on December 27, 2015.
Burns & McDonnell, the independent engineer for the Rosemary
Project since 1988, has prepared pro forma financial
projections (the "Rosemary Pro Forma"), which are presented
in Panda-Rosemary Cogeneration Project Condition Assessment
Report dated July 26, 1996, as supplemented by an Update
Report dated January 10, 1997 (as so supplemented, the
"Rosemary Engineering Report"). The Rosemary Engineering
Report contains the primary assumptions underlying, and the
conclusions drawn from, the Rosemary Pro Forma, a copy of
which is attached as Appendix C to the Prospectus of which
this report constitutes a part. ICF has reviewed the
Rosemary Engineering Report only to the extent necessary to
incorporate the results of the Rosemary Pro Forma in the
Consolidated Pro Forma, and has made no independent
investigation of the conclusions or the assumptions
contained therein.
The Brandywine Project
The Brandywine Project is a 230 MW gas- and oil-fired
cogeneration project under construction in Brandywine,
Maryland. According to Pacific Energy Systems ("PES"),
construction was substantially complete as of October 31,
1996, when commencement of commercial operations occurred.
Beginning on the commercial operations date, the Brandywine
Project began selling electricity to Potomac Electric Power
Company pursuant to a 25-year Power Purchase Agreement.
ICF has prepared pro forma financial projections for the
Brandywine Project's operations (the "Brandywine Pro
Forma"), which are presented in Independent Panda-Brandywine
Pro Forma Projections dated July 26, 1996, as supplemented
by an Update Report dated January 10, 1997. (as so
supplemented the "Brandywine Pro Forma Report"). As
discussed more fully in the Brandywine Pro Forma Report in
preparing the Brandywine Pro Forma, ICF relied, among other
things, on PES's report, Independent Engineer's Report:
Panda-Brandywine Cogeneration Project dated July 22, 1996,
and supplemented by an Update Report dated January 10, 1997
(as so supplemented the "Brandywine Engineering Report"). A
more complete discussion of the assumptions underlying the
Brandywine Pro Forma and the conclusions drawn therefrom are
contained in the Brandywine Pro Forma Report, a copy of
which is attached as Appendix E to the Prospectus of which
this report constitutes a part.
The capacity payment adjustment factor based upon 12-year T-
Bill rates is fixed at 7.94 percent using the 12-year T-Bill
rate on October 6, 1994, GECC's initial commitment date for
permanent financing. Brandywine is currently in a dispute
with PEPCO over the T-Bill rate which should be used for
this adjustment factor. PEPCO's position on this issue
designates a T-Bill rate of 6.40 which was the effective
rate on the closing date of the conversion to permanent
financing in the form of a leveraged lease. If the rate was
established in favor of PEPCO ("the PEPCO Scenario") it
would have a material adverse effect on the amount of
capacity payments received by the project and the net cash
flow from the Project (see conclusion).
Results
The attached table presents the Consolidated Pro Forma. The
information set forth under Company Debt Service reflects
the issuance of Pooled Project Bonds (the "Bonds") in an
aggregate principal amount of $105.525 million, an interest
rate of 115/8 percent and due 2012. Amounts for Trustee
Fees, the NNW Interest (as defined below), and Interest from
Company Reserves have been provided by the Company based on
estimates of Trustee's fees provided by Bankers Trust
Company, the requirements of the cash flow participation
interest held by NNW, Inc. (the "NNW Interest"), and an
assumed interest factor on Company reserves of 5 percent.
The operating cash flows prior to Project-level debt, as
taken from the Rosemary Pro Forma and the Brandywine Pro
Forma, presented as the Projects' "Total Operating Cash
Flow." In 1997, the first full calendar year after issuance
of the Bonds, the Projects have a Total Operating Cash Flow
of approximately $42.7 million. This figure increases to
over $72 million by 2001. Under the PEPCO Scenario, the
Projects have a total operating cash flow of approximately
$38.5 million in 1997 increasing to $67.7 million by 2001.
Project Debt Service and Additions to Reserves for the
Projects are then subtracted from Total Operating Cash Flow
to arrive at "Net Cash Available from Projects." After
subtracting Trustee Fees, the NNW Interest, and adding
Interest from Company Reserves, the result is "Total Cash
Flow Available for Company Debt Service." This figure is
divided by the total debt service on the Bonds to arrive at
the Company Coverage ratio. Company Coverage is at least
1.4 times Company Debt Service through the final maturity of
the Bonds. The average Company Coverage ratio over the life
of the Bonds is 2.0:1. Under the PEPCO Scenario, Company
Coverage is at least 1.3 times (except during 1997 in which
it is 0.90 times) Company Debt Service with an average
Company Coverage ratio over the life of the bonds of 1.6:1.
The Projects' consolidated debt service coverages are also
provided in the Consolidated Pro Forma. Consolidated
Coverage divides the Total Operating Cash Flow, less
Additions to Reserves, less Trustee Fees and the NNW
Interest, plus Interest from Company Reserves, by the sum of
the Company's and the Projects' debt service. Consolidated
Coverage does not fall below 1.12 times the combined debt
service of the Company and the Projects through the final
maturity of the Bonds. The average Consolidated Coverage
ratio over the life of the Bonds is 1.27:1. Under the PEPCO
Scenario, the Consolidated Coverage does not fall below 1.10
times (except during 1997 in which it is 0.98 times) and the
average Consolidated Coverage ratio over the life of the
Bonds is 1.17.
Please refer to the footnotes to the Consolidated Pro Forma
included herewith for a discussion of certain other variables
tht may affect the Company Coverage and Consolidated Coverage
ratios.
Respectfully Submitted,
/s/ ICF Resources Incorporated
<PAGE>
CONSOLIDATED PRO FORMA FOR Page 1 of 3
PANDA BRANDYWINE AND
PANDA ROSEMARY
($ IN THOUSANDS)
<TABLE>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
OPERATING CASH FLOW
Rosemary $10,922 $20,188 $20,624 $19,116 $19,445 $19,806
Brandywine 7,675 23,166 23,179 40,056 41,274 52,894
------- ------- ------- ------- ------- -------
TOTAL OPERATING CASH FLOW 18,596 43,354 43,803 59,172 60,719 72,700
PROJECT DEBT SERVICE (1)
Rosemary $ 7,928 $14,694 $14,627 $13,314 $13,242 $13,164
Brandywine - 10,442 10,412 19,976 20,660 27,265
------- ------- ------- ------- ------- -------
TOTAL PROJECT DEBT SERVICE 7,928 25,136 25,039 33,290 33,902 40,429
ADDITIONS TO RESERVES
Rosemary $ 37 $ 250 $ (265) $ 483 $ 615 $ 743
Brandywine (2) 125 4,330 6,201 2,588 5,144 2,528
------- ------- ------- ------- ------- -------
TOTAL ADDITIONS TO RESERVES 162 4,580 5,936 3,071 5,759 3,271
NET CASH AVAILABLE FROM PROJECTS 10,506 13,638 12,828 22,811 21,058 29,000
Less: Trustee Fees (20) (40) (40) (40) (40) (40)
Less: NNW Interest (9) (14) (19) (19) (20) (23)
Plus: Interest from Company Reserves 216 588 689 750 622 881
------- ------- ------- ------- ------- -------
TOTAL CASH FLOW AVAILABLE FOR COMPANY
DEBT SERVICE 10,693 14,171 13,458 23,503 21,619 29,818
------- ------- ------- ------- ------- -------
COMPANY DEBT SERVICE (3)
Principal Payments - - - 2,052 - 4,554
Interest Payments 6,572 10,865 10,865 10,813 10,655 10,541
------- ------- ------- ------- ------- -------
TOTAL COMPANY BONDS DEBT SERVICE 6,572 10,865 10,865 12,865 10,655 15,095
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
==============================================================
COVERAGE RATIOS (2)(4)(5)
Company Coverage 1.7x 1.4x 2.4x 1.8x 2.0x 2.0x
Consolidated Coverage 1.30x 1.12x 1.26x 1.23x 1.25x 1.27x
PEPCO SCENARIO COVERAGE RATIOS (6)
Company Coverage 1.7x 0.9x 1.6x 1.4x 1.6x 1.6x
Consolidated Coverage 1.30x 0.98x 1.10x 1.13x 1.14x 1.18x
</TABLE>
(1) Represents debt service for the year ended January 31 and February 15
in the year immediately following the year presented for Brandywine,
and Rosemary respectively.
(2) In the event Raytheon receives the full disputed amount of its bonus,
additions to reserves could be $0.88 million more in 1997 resulting in a
projected Company Coverage Ratio of 1.2x and a projected Consolidated
Coverage Ratio of 1.07x in 1997.
(3) Represents debt service for the year ended February 20 in the year
immediately following the year presented.
(4) Ratios are calculated net of capitalized interest of $617,449,
$2,421,348, $6,688,699, and $106,614 for 1996, 1997, 1998, and 2000
respectively.
(5) In the event NNW were to prevail in its dispute with Panda Energy
Corporation concerning the value of its Cash Flow Participation Interest
in Rosemary, the Company Coverage Ratio would be projected to be
maintained at a level of at least 1.4x in all years. In such event,
the Consolidated Coverage Ratio would be projected to be maintained at a
level of at least 1.23x in all years (excluding, (i) 1997, where the
level would be projected to be 1.12, (ii) 2008, where the level would be
projected to be 1.19x).
(6) Assumes that the dispute with PEPCO regarding designation of the T-Bill
rate is resolved in favor of PEPCO. Does not include adjustment for the
disputes with Raytheon regarding its claimed bonus or the dispute with
NNW.
<PAGE>
CONSOLIDATED PRO FORMA FOR Page 2 of 3
PANDA BRANDYWINE AND
PANDA ROSEMARY
($ IN THOUSANDS)
<TABLE>
YEAR ENDED DECEMBER 31
--------------------------------------------------------------
2002 2003 2004 2005 2006 2007
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
OPERATING CASH FLOW
Rosemary $19,915 $20,139 $20,309 $20,532 $14,697 $14,269
Brandywine 54,116 54,158 53,501 53,750 54,820 58,180
------- ------- ------- ------- ------- -------
TOTAL OPERATING CASH FLOW 74,031 74,297 73,810 74,282 69,517 72,449
PROJECT DEBT SERVICE (1)
Rosemary $13,058 $12,943 $12,825 $12,669 $ 8,710 $ 8,534
Brandywine 27,938 27,907 27,456 27,602 28,188 30,071
------- ------- ------- ------- ------- -------
TOTAL PROJECT DEBT SERVICE 40,996 40,850 40,281 40,271 36,898 38,605
ADDITIONS TO RESERVES
Rosemary $ 810 $ 920 $ 997 $ (850) $ 1,091 $ 1,081
Brandywine (2) 1,500 728 1,122 3,916 4,758 1,319
------- ------- ------- ------- ------- -------
TOTAL ADDITIONS TO RESERVES 2,310 1,648 2,119 3,066 5,849 2,400
NET CASH AVAILABLE FROM PROJECTS 30,725 31,799 31,410 30,945 26,769 31,444
Less: Trustee Fees (40) (40) (40) (40) (40) (40)
Less: NNW Interest (27) (28) (28) (58) (61) (58)
Plus: Interest from Company Reserves 937 839 1,003 993 886 1,097
------- ------- ------- ------- ------- -------
TOTAL CASH FLOW AVAILABLE FOR COMPANY
DEBT SERVICE 31,595 32,570 32,344 31,840 27,554 32,443
------- ------- ------- ------- ------- -------
COMPANY DEBT SERVICE (3)
Principal Payments 6,024 4,940 8,337 9,044 8,106 12,669
Interest Payments 10,037 9,448 8,856 7,983 7,081 6,136
------- ------- ------- ------- ------- -------
TOTAL COMPANY BONDS DEBT SERVICE 16,061 14,388 17,192 17,027 15,187 18,805
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
==============================================================
COVERAGE RATIOS (2)(4)(5)
Company Coverage 2.0x 2.3x 1.9x 1.9x 1.8x 1.7x
Consolidated Coverage 1.27x 1.33x 1.27x 1.26x 1.24x 1.24x
PEPCO SCENARIO COVERAGE RATIOS (6)
Company Coverage 1.7x 1.9x 1.6x 1.6x 1.5x 1.4x
Consolidated Coverage 1.19x 1.24x 1.18x 1.17x 1.14x 1.15x
</TABLE>
<PAGE>
CONSOLIDATED PRO FORMA FOR Page 3 of 3
PANDA BRANDYWINE AND
PANDA ROSEMARY
($ IN THOUSANDS)
<TABLE>
YEAR ENDED DECEMBER 31
----------------------------------------
2008 2009 2010 2011
------- ------- ------- -------
<S> <C> <C> <C> <C>
OPERATING CASH FLOW
Rosemary $13,824 $13,366 $13,335 $13,086
Brandywine 59,024 60,398 63,836 68,609
------- ------- ------- -------
TOTAL OPERATING CASH FLOW 72,848 73,764 77,171 81,695
PROJECT DEBT SERVICE (1)
Rosemary $ 8,352 $ 8,154 $ 7,946 $ 7,772
Brandywine 30,529 31,285 33,212 35,922
------- ------- ------- -------
TOTAL PROJECT DEBT SERVICE 38,881 39,439 41,158 43,694
ADDITIONS TO RESERVES
Rosemary $ 1,064 $ 1,052 $ 1,063 $ 1,055
Brandywine (2) 2,236 2,130 4,167 5,086
------- ------- ------- -------
TOTAL ADDITIONS TO RESERVES 3,300 3,182 5,230 6,141
NET CASH AVAILABLE FROM PROJECTS 30,668 31,143 30,783 31,860
Less: Trustee Fees (40) (40) (40) (40)
Less: NNW Interest (58) (222) (213) (210)
Plus: Interest from Company Reserves 1,195 1,101 1,052 142
------- ------- ------- -------
TOTAL CASH FLOW AVAILABLE FOR COMPANY
DEBT SERVICE 31,765 31,982 31,581 31,751
------- ------- ------- -------
COMPANY DEBT SERVICE (3)
Principal Payments 15,726 15,720 16,514 2,315
Interest Payments 4,760 3,148 1,514 119
------- ------- ------- -------
TOTAL COMPANY BONDS DEBT SERVICE 20,486 18,868 18,029 2,434
------- ------- ------- -------
------- ------- ------- -------
========================================
COVERAGE RATIOS (2)(4)(5)
Company Coverage 1.6x 1.7x 1.8x 13.0x
Consolidated Coverage 1.19x 1.23x 1.23x 1.64x
PEPCO SCENARIO COVERAGE RATIOS (6)
Company Coverage 1.3x 1.4x 1.4x 10.8x
Consolidated Coverage 1.10x 1.14x 1.14x 1.52x
</TABLE>
APPENDIX C
PANDA - ROSEMARY COGENERATION PROJECT
CONDITION ASSESSMENT REPORT
Dated July 26, 1996 as Supplemented
and Modified for an Update Report,
Dated January 10, 1997
for
POTENTIAL INVESTORS
at the Request of
PANDA ENERGY CORPORATION
(SYMBOL OF PANDA LOGO)
Burns
&
McDonnell
[Burns & McDonnell Letterhead]
July 26, 1996
Mr. Bryan Urban
Panda Energy International, Inc.
4100 Spring Valley, Suite 1001
Dallas, TX 75244
Panda - Rosemary Cogeneration Project
Burns & McDonnell Project No. 94-443-4
--------------------------------------
Dear Bryan:
We are pleased to submit this Final Report for the Panda - Rosemary
Cogeneration project. This document summarizes efforts by Panda Energy
Corporation and Burns & McDonnell to assess the conditions, operating history,
and operating projections of the 180-MW Panda - Rosemary Cogeneration project
on behalf of potential Project Investors.
Please feel free to call if you have any comments or questions.
Sincerely,
BURNS & MCDONNELL
Gregory L. Mack, P.E.
Project Manager
Jeffrey J. Greig
Senior Economist
Melissa A. Yancey
Project Analyst
cc: Pete Wright
TABLE OF CONTENTS
Page No.
PART I - EXECUTIVE SUMMARY
Assumptions. . . . . . . . .. . . . . . . . . . . . . . . . C-1
Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . C-3
PART II - INTRODUCTION
PART III - FACILITY DESCRIPTION
Project Site . . . . . . . . . . . . . . . . . . . . . . . . C-8
Mechanical Equipment and Systems . . . . . . . . . . . . . . C-8
Environmental Control Equipment. . . . . . . . . . . . . . . C-9
Electrical Intertie. . . . . . . . . . . . . . . . . . . . . C-11
Site Visit . . . . . . . . . . . . . . . . . . . . . . . . . C-11
PART IV - OPERATING HISTORY
Electric Power Production. . . . . . . . . . . . . . . . . . C-14
Steam Production . . . . . . . . . . . . . . . . . . . . . . C-14
Availability . . . . . . . . . . . . . . . . . . . . . . . . C-15
Heat Rate. . . . . . . . . . . . . . . . . . . . . . . . . . C-16
Qualifying Facility Compliance . . . . . . . . . . . . . . . C-18
Environmental Compliance . . . . . . . . . . . . . . . . . . C-19
Air Permit. . . . . . . . . . . . . . . . . . . . . . C-20
Clean Air Act Amendments. . . . . . . . . . . . . . . C-20
NPDES Permit. . . . . . . . . . . . . . . . . . . . . C-20
Spill Prevention. . . . . . . . . . . . . . . . . . . C-20
Forced Outages . . . . . . . . . . . . . . . . . . . . . . . C-21
Major Maintenance Activities . . . . . . . . . . . . . . . . C-21
Equipment and System Design Changes. . . . . . . . . . . . . C-22
Freeze Protection . . . . . . . . . . . . . . . . . . C-22
Transformers. . . . . . . . . . . . . . . . . . . . . C-23
Corrosion Protection. . . . . . . . . . . . . . . . . C-23
Chiller #2. . . . . . . . . . . . . . . . . . . . . . C-24
Fire Protection . . . . . . . . . . . . . . . . . . . C-24
Oil Conditioning. . . . . . . . . . . . . . . . . . . C-25
Ultraviolet Protection. . . . . . . . . . . . . . . . C-25
Chemical Feed Lines . . . . . . . . . . . . . . . . . C-25
TABLE OF CONTENTS
(continued)
Page No.
PART IV - OPERATING HISTORY (continued)
Automatic Generation Control . . . . . . . . . . . . C-25
O&M Contractor . . . . . . . . . . . . . . . . . . . . . . C-26
Training Program . . . . . . . . . . . . . . . . . . . . . C-26
PART V - EQUIPMENT ASSESSMENT
Operating Condition. . . . . . . . . . . . . . . . . . . . C-27
Major Maintenance and Overall Programs . . . . . . . . . . C-28
Equipment Replacement Program. . . . . . . . . . . . . . . C-28
PART VI - PROJECTED PLANT PERFORMANCE
Capacity . . . . . . . . . . . . . . . . . . . . . . . . . C-30
Capacity and Heat Rate Degradation. . . . . . . . . C-30
Dispatch . . . . . . . . . . . . . . . . . . . . . . . . . C-32
Availability . . . . . . . . . . . . . . . . . . . . . . . C-32
Heat Rate. . . . . . . . . . . . . . . . . . . . . . . . . C-32
Annual Operation and Maintenance Costs . . . . . . . . . . C-35
Major Maintenance Programs and Costs . . . . . . . . . . . C-35
Equipment Replacement Provisions . . . . . . . . . . . . . C-36
Overall Economic Life. . . . . . . . . . . . . . . . . . . C-36
Steam Turbine Rankine Cycle . . . . . . . . . . . . C-37
Combustion Turbines Brayton Cycle . . . . . . . . . C-37
PART VII - FINANCIAL ASSESSMENT OF PROJECT
Power Purchase Agreement . . . . . . . . . . . . . . . . . C-39
Factors Affecting Project. . . . . . . . . . . . . . . . . C-39
Effective Operating Service Life of the Project . . C-39
Expected Rates for Capacity and Energy. . . . . . . C-39
Expected Dispatch of the Project. . . . . . . . . . C-44
Zero Dispatch Case. . . . . . . . . . . . . . . . . C-44
Expected Operating Performance. . . . . . . . . . . C-44
Project Capacity. . . . . . . . . . . . . . C-47
Project Heat Rate . . . . . . . . . . . . . C-47
Project Fixed Operating Costs . . . . . . . C-48
Project Variable Operation and
Maintenance Expenses . . . . . . . . . . C-49
Project Overhaul Requirements . . . . . . . C-49
Project Steam/Chilled Water Sales and
Costs. . . . . . . . . . . . . . . . . . C-49
Expected Fuel Costs. . . . . . . . . . . . . . . . C-49
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . C-52
Statement of Limiting Conditions . . . . . . . . . . . . . C-52
TABLE OF CONTENTS
(continued)
Page No.
PART VIII - CONCLUSIONS
Project Condition . . . . . . . . . . . . . . . . . . . . . C-55
EXHIBIT A - PROJECT PRO FORMA
EXHIBIT B - PROJECT PRO FORMA FOR ZERO DISPATCH
LIST OF TABLES
Table No. Page No.
PART I - EXECUTIVE SUMMARY
I-1 Summary of Project Debt Coverage Ratios. . . . . . . . . . C-5
PART IV - OPERATING HISTORY
IV-1 Panda-Rosemary Project Operating History . . . . . . . . . C-14
IV-2 Project Availability History . . . . . . . . . . . . . . . C-16
IV-3 Annual Average Heat Rate . . . . . . . . . . . . . . . . . C-16
IV-4 Average Fired Hours Per Start. . . . . . . . . . . . . . . C-17
IV-5 History of Qualifying Facility Status. . . . . . . . . . . C-19
PART V - EQUIPMENT ASSESSMENT
V-1 Comparison of Manufacturers' Recommendations with 10 Year
Plan Maintenance Activities for Major Pieces of Rotating
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . C-29
PART VI - PROJECTED PLANT PERFORMANCE
VI-1 Historical Capacity Test Results. . . . . . . . . . . . . . C-30
VI-2 Results of Heat Rate Review . . . . . . . . . . . . . . . . C-33
PART VII - FINANCIAL ASSESSMENT OF PROJECT
VII-1 Contractual Capacity Charges . . . . . . . . . . . . . . . . C-40
VII-2 Summer and Winter Gas Energy Charges . . . . . . . . . . . . C-42
VII-3 Dispatch Assumptions . . . . . . . . . . . . . . . . . . . . C-45
VII-4 Fuel Cost Assumptions. . . . . . . . . . . . . . . . . . . . C-50
VII-5 Summary of Project Debt Coverage Ratios. . . . . . . . . . . C-53
VII-6 Summary of Project Debt Coverage Ratios, Zero Dispatch
Option. . . . . . . . . . . . . . . . . . . . . . . . . . C-54
LIST OF FIGURES
Figure No. Page No.
PART III - FACILITY DESCRIPTION
III-1 Panda-Rosemary Simplified Process Diagram. . . . . . . . . C-10
III-2 Panda-Rosemary Electrical Interconnections- One
Line Diagram. . . . . . . . . . . . . . . . . . . . . . . C-12
III-3 Panda-Rosemary Project Site Plan. . . . . . . . . . . . . . C-13
PART VI - PROJECTED PLANT PERFORMANCE
VI-1 Heavy-Duty Gas Turbine Degradation as a Function
of Total Factored Hours. . . . . . . . . . . . . . . . . C-31
PART VII - FINANCIAL ASSESSMENT OF PROJECT
VII-1 Contractural Capacity Charges . . . . . . . . . . . . . . . . C-41
VII-2 Summer and Winter Gas Energy Charges. . . . . . . . . . . . . C-43
VII-3 Dispatch Assumptions. . . . . . . . . . . . . . . . . . . . . C-46
VII-4 Fuel Cost Assumptions . . . . . . . . . . . . . . . . . . . . C-51
PART I
EXECUTIVE SUMMARY
This Report includes, among other things, a review and assessment of the 180-MW
Panda-Rosemary cogeneration project (the "Project") and its facility (the
"Facility"), the Facility's equipment and operating condition, its operating
history, the significant Project agreements and projections of revenues,
expenses and debt service coverage for the Facility for the period that the
First Mortgage Bonds due 2016 (the "Bonds") proposed to be issued by a finance
subsidiary of the Panda-Rosemary Partnership (the "Partnership") are scheduled
to be outstanding. Burns & McDonnell provides a variety of professional and
technical services in the fields of engineering, architecture, planning,
economics and environmental sciences. Our project work includes studies,
design, planning, construction and construction management for electric power
generation and transmission facilities as well as for waste management, water
treatment, airport, and other transportation infrastructure facilities. Burns
& McDonnell has been involved with the Facility since 1989.
In the preparation of this Report and the opinions contained herein, Burns &
McDonnell made certain assumptions with respect to conditions that may exist
or events that may occur in the future. Although Burns & McDonnell believes
those assumptions to be reasonable for the purposes of this Report, they are
dependent upon future events, and actual conditions may differ from those
assumed. In addition, Burns & McDonnell used and relied upon certain
information provided to us by sources that we believe to be reliable. Burns &
McDonnell believes the use of such information and assumptions is reasonable
for the purposes of this Report. However, some assumptions may prove to be
inaccurate, perhaps materially, due to unanticipated events and circumstances.
To the extent that actual future conditions differ from those assumed in this
Report or provided to us by others, the results will vary from those forecast.
This Report summarizes our work up to the date hereof. Thus, changed
conditions occurring or becoming known after this date could affect the
material presented to the extent of these changes.
Burns & McDonnell has relied upon projections of the Facility's dispatch
profile and fuel costs over the term of the Power Purchase Agreement prepared
by ICF Resources Incorporated ("ICF"). Based on ICF's experience in
undertaking similar analyses, Burns & McDonnell believes that the use of ICF's
dispatch profile and fuel cost projections is reasonable for the purposes of
this Report.
ASSUMPTIONS
The principal assumptions made in developing the projected operating results
are as follows:
1. We have made no determination as to the validity and enforceability
of any contract, agreement, rule or regulation applicable to the
Facility and its operations. For purposes of this Report, we have
assumed that all such contracts, agreements, rules and regulations
will be fully enforceable in accordance with their terms and that
all parties will comply with the provisions of their respective
agreements.
2. The operator under the Operations and Maintenance Agreement (the
"Operator") will operate the Facility as currently required under
such agreement.
3. The Operator will maintain the Facility in accordance with good
engineering practice, and make all required equipment renewals and
replacements in a timely manner.
4. The Operator will employ qualified and competent personnel who will
properly operate the equipment in accordance with the manufacturers'
recommendations and good engineering practice and will generally
operate the Facility in a sound and businesslike manner.
5. Inspections, overhauls, repairs and modifications have been and will
continue to be planned for and conducted in accordance with
manufacturers' recommendations and with special regard for the need
to monitor certain operating parameters to identify early signs of
potential problems.
6. All permits and approvals necessary to operate the Facility will
remain in full force and effect.
7. Long-term fuel costs will equal the projections prepared by ICF.
8. The Facility will be dispatched as projected by ICF, except that
ICF's dispatch projections have been increased by 400 hours annually
in 1996-1997, 500 hours annually in 1998-2002, and 600 hours annually
in 2003-2015 to reflect hours that we project the Facility will be
dispatched using gas supplied by Virginia Electric Power Co. Under
these assumptions, dispatch is projected to increase from 1,144
equivalent full load hours in 1997 to 4,216 equivalent full load
hours in 2005. After 2005, dispatch is projected to decrease
steadily to 3,201 equivalent full load hours in 2010, and thereafter
to stay relatively constant through 2015.
9. Thermal energy in the form of steam and chilled water will be
exported from the Facility, operating in the cogeneration mode, to
Bibb's facility such that the useful thermal energy, as defined under
PURPA and the regulations promulgated thereunder, will be sufficient
to maintain the Facility's QF status. The Partnership will continue
to absorb an annual operating loss on the sale of steam and chilled
water over the life of the Facility.
10. Steam and chilled water sales to Bibb will remain constant at 50,000
lbs/hr for 7,800 hours per year and 1,010 tons/hr for 4,000 hours
per year, respectively.
11. Operating costs, including fixed fuel transportation and operating
and maintenance and other administrative costs, will equal those
estimated by the Partnership. The fixed operating cost forecast
reflects an annual 3.0% escalation for most cost components. The
exceptions include property taxes, Facility maintenance costs, and
firm gas transportation costs. The property tax estimate is
decreased 3.0% annually to reflect a declining asset value. The
general maintenance and repair costs are escalated at a rate of 8.0%
per year due to an increase in anticipated maintenance and repair.
The additional maintenance allowance component of Facility
maintenance costs is held constant.
12. By August 1996, the Partnership expects to convert its existing fixed
fuel transportation agreement with Transco to a new agreement that
will permit the release of pipeline transportation capacity when not
required by the Facility. The benefits of capacity released and
bundled sales of pipeline capacity and gas sales are estimated to
result in a 50% return of firm gas transportation costs for 1800
MMBtu/d of the Facility's contracted capacity of 3075 MMBtu/d.
13. The original principal amount of the bonds will be $111,400,000.
14. The projected annual interest rate on the Bonds outstanding upon
their initial date of issuance (the "Issue Date") will be 8.63.
15. On the Issue Date, the Debt Service Reserve Fund will be funded at
$8,090,714 and thereafter will be maintained at adequate levels
throughout the Bonds' repayment period. The Debt Service Reserve
fund will earn interest at a rate of 5% per year.
16. The Partnership will not be required to establish or maintain any
balance in the Property Tax Fund.
17. The actual amortization schedule of the Bonds will be as provided by
the Partnership.
CONCLUSIONS
Set forth below are the principal conclusions that we have reached with respect
to the technical, economic and environmental aspects of the Facility. For a
complete understanding of the estimates, assumptions and calculations upon
which these conclusions are based, this Report should be read in its entirety.
On the basis of our review and analysis of the Facility and the assumptions
set forth in this Report, we conclude that:
1. The technology incorporated in the Facility is a sound, proven
method of generating electric and thermal energy and incorporates
commercially proven technology. The design, operation and
maintenance of the Facility implemented by the Partnership and the
Operator were developed and have been implemented in accordance with
good engineering practices and generally accepted industry practices
and have taken into consideration existing and proposed
environmental and permit requirements applicable to the Facility.
The Independent Engineer knows of no significant technical problems
relating to the Facility that should be of concern to potential
investors.
2. The Facility is in good condition and has a competent, conscientious
operation and maintenance staff that has developed a long-term
Facility maintenance program that is consistent with the
manufacturers' recommendations and generally-accepted practices
within the electric power generation industry.
3. The Facility will have an expected operating service life well
beyond the term of the Power Purchase Agreement if properly operated
and maintained, consistent with current practices.
4. The Partnership has obtained and maintained in full force and effect
the key environmental permits and approvals required from the various
federal, state and local agencies that are currently necessary to
operate the Facility.
5. The basis for the Partnership's estimates of the cost of operating
and maintaining the Facility is reasonable. The expense projections
prepared by the Partnership and based on projected levels of dispatch
appear adequate to account for the variable operation and maintenance
expenses. The budgeted allowance for overhauls should be increased
from $220 to $260 per fired hour.
6. The Facility's heat rate will average 9,100 Btu/kWh (HHV) over the
remaining initial term of the Power Purchase Agreement.
7. Table I-1 on the following page summarizes the projected revenues and
expenditures and debt coverage ratios of the Project based upon the
issuance of the Bonds and the refinancing plan submitted to us by the
Partnership. Projected revenues from the sale of thermal energy and
electricity and other income are adequate to pay annual operations
and maintenance expenses (including provision for major maintenance),
fuel costs, and other operating expenses and provide a minimum annual
debt service coverage on the Bonds of 1.37:1 and an average debt
service coverage over the outstanding term of the Bonds of 1.66:1,
as shown on Table I-1.
<PAGE>
<TABLE>
<CAPTION>
Table I-1
SUMMARY OF PROJECT DEBT COVERAGE RATIONS
Panda-Rosemary Cogeneration Project
Pre-Tax Total Debt
Total Total Operating Debt Service Coverage
Year Revenues Expenses Cashflow Costs Ratio
----- ----------- ---------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
7/96-12/96[1] $15,633,000 $ 4,731,000 $10,902,000 $ 7,928,000 1.38
1997 $30,151,000 $ 9,976,000 $20,175,000 $14,694,000 1.37
1998 $32,288,000 $11,567,000 $20,721,000 $14,627,000 1.42
1999 $32,670,000 $13,190,000 $19,480,000 $13,314,000 1.46
2000 $34,377,000 $14,542,000 $19,835,000 $13,242,000 1.50
2001 $36,189,000 $16,127,000 $20,062,000 $13,164,000 1.52
2002 $38,456,000 $18,009,000 $20,447,000 $13,058,000 1.57
2003 $41,244,000 $20,268,000 $20,976,000 $12,943,000 1.62
2004 $44,549,000 $23,032,000 $21,517,000 $12,825,000 1.68
2005 $48,512,000 $26,433,000 $22,079,000 $12,669,000 1.74
2006 $42,050,000 $26,334,000 $15,716,000 $ 8,710,000 1.80
2007 $41,179,000 $26,320,000 $14,859,000 $ 8,534,000 1.74
2008 $41,128,000 $26,356,000 $14,772,000 $ 8,352,000 1.77
2009 $40,751,000 $26,524,000 $14,227,000 $ 8,154,000 1.74
2010 $40,249,000 $26,746,000 $13,683,000 $ 7,946,000 1.72
2011 $41,487,000 $27,927,000 $13,560,000 $ 7,772,000 1.74
2012 $42,623,000 $29,252,000 $13,371,000 $ 7,565,000 1.77
2013 $43,969,000 $30,732,000 $13,237,000 $ 7,328,000 1.81
2014 $45,459,000 $32,403,000 $13,056,000 $ 7,042,000 1.85
2015 $47,137,000 $34,288,000 $12,849,000 $ 6,356,000 2.02
</TABLE>
Average coverage over the term of the Bonds is 1.66:1.
[1] Reflects one-half year of operations following the planned debt
refinancing in July 1996.
PART II
INTRODUCTION
The Panda-Rosemary Cogeneration Project (Project) is a 180-MW combined cycle
cogeneration plant located in Roanoke Rapids, North Carolina. Burns &
McDonnell has been involved with the Project since the initial development of
the Project in 1988. Burns & McDonnell's responsibility throughout the
development, financing, construction, start-up, and operation of the Project
has been to serve as independent engineer to Project investors. Burns &
McDonnell was originally retained by Heller Financial as their independent
engineer for a $6 million subordinated bridge loan. This bridge loan was
necessary to continue Project development efforts required to meet an
aggressive construction loan closing schedule. Based upon the Project
economics and the technical input provided by Burns & McDonnell, Heller
Financial provided the bridge loan despite the fact that key Project
development activities, such as the air permit, were not yet complete. As
anticipated, development activities were eventually completed and long- term
Project financing was placed through The Fuji Bank.
Since 1989, Burns & McDonnell has served as independent engineer for The Fuji
Bank. Throughout Project design, construction, start-up, and six years of
operation, Burns & McDonnell has continuously provided independent engineer
services to the Project lenders. These services have included:
- Monthly site visits and preparation of monthly progress
reports during Project construction and start-up activities.
- Participation in Project performance test activities to
confirm that actual Project performance met or exceeded
guarantees included in the turnkey construction contract.
- Review of Project spare parts inventories and planned
maintenance activities in comparison with generally-accepted
industry practices.
- Additional efforts following commercial operation of the
Project have included:
- review of monthly operating reports
- annual site visits
- preparation of annual reports to assess the Project
Most recently, Burns & McDonnell has been retained to provide independent
engineer services for potential investors in the Project refinancing.
During February 1996, Burns & McDonnell conducted a Project site visit. The
primary purpose of this site visit was to assess recent Project condition,
operations and maintenance activities, and to report any observed deficiencies
that could potentially have a detrimental impact upon existing or future
Project investors. The following report is based on Burns & McDonnell's long
association with the Project, the February 1996 site visit, and recent
telephone conversations with the Project participants, permitting agencies and
others.
PART III
FACILITY DESCRIPTION
PROJECT SITE
The Panda-Rosemary Project is a nominal 180-MW combined cycle, intermediate-
load cogeneration plant located in Roanoke Rapids, North Carolina. It is
located adjacent to the Bibb Company which is the Project's thermal host. The
Project commenced commercial operation on December 27, 1990. The Project is
presently operated by University Technical Services under contract to Panda-
Rosemary.
MECHANICAL EQUIPMENT AND SYSTEMS
The Project consists of two combustion turbines, each with a heat recovery
steam generator (HRSG). The facility also has one steam turbine along with two
auxiliary boilers, two absorption chillers, and miscellaneous equipment.
Combustion turbine No. 1 is a General Electric (GE) PG7111(EA) ("Frame 7").
Its nominal output is 83.5 megawatts. The first Frame 7 combustion turbines
were commercially available in 1984. Combustion turbine No. 2 is a General
Electric (GE) PG6541(B) ("Frame 6"). Its nominal output is 38.3 megawatts.
The first Frame 6 combustion turbines were introduced in 1978. Both combustion
turbines use natural gas as a primary fuel and No. 2 distillate fuel as a
backup. Both combustion turbines are capable of on-line fuel changes such
that potential fuel switch outages may be avoided.
HRSG No. 1 receives exhaust from the Frame 7 combustion turbine. It is a three-
pressure HRSG manufactured by Nooter Erikson. The high-pressure section of
the boiler operates at 1,455 psig and has a steam flow capacity of 265,540
pounds per hour. The intermediate-pressure section operates at 215 psig and
the low pressure section operates at 25 psig. The HRSG connected to the
Frame 6 combustion turbine (Unit No. 2) is also a three-pressure HRSG
manufactured by Nooter Erikson. The three pressures of HRSG No. 2 are the
same as those listed for Unit No. 1. The highpressure steaming capacity of
HRSG No. 2 is 130,470 pounds per hour.
The Project has one Asea Brown Boveri (ABB) "VAX" steam turbine. It has an
output of 60 megawatts. The high pressure and low pressure sections of the
turbine are split and operate at different speeds. The high pressure steam
turbine rotor and generator are coupled with a reducing gear while the low
pressure steam turbine rotor and generator are direct coupled. The turbine
has two controlled extractions at 200 and 40 psig and has a single 200 psig
controlled induction.
Two auxiliary boilers are on-site. These boilers supply steam to the thermal
host while the Project is not dispatched to Virginia Electric and Power Company
(VEPCO). The auxiliary boilers were manufactured by ABCO Industries, Inc.
They have the capacity to produce an annual average 65,000 pounds of steam
per hour at 150 psi.
The Project has two 1,000-ton absorption chillers manufactured by York
International. These chillers supply chilled water to the thermal host. Each
absorption chiller has a chilled water flow of 240 gpm at a cold water outlet
temperature of 45 degrees F.
For the reader's convenience and enhanced understanding of Project operations,
a simplified Process Flow diagram is shown in Figure III-1. Natural gas is
transported to the facility via three pipeline systems interconnected to a 10-
mile dedicated pipeline owned by the Project. These redundant gas
interconnections provide flexibility and added assurance of gas supply should
problems evelop in any of the pipeline systems.
The Project is also capable of operating on fuel oil during times when natural
gas is curtailed. Fuel oil is transported to the Project by trucks. The
Project has two million gallons of onsite fuel oil storage capacity capable of
operating the Project at full load for 168 hours. This fuel oil storage
capacity was installed by Panda to conform to requirements included in the
Power Purchase Agreement.
The condensate system consists of a 100,000-gallon demineralized water tank, a
100,000-gallon condensate storage tank, and an online conductivity meter for
determining condensate return quality. The operator may close the condensate
return valve when the conductivity meter indicates the return condensate
quality is unacceptable.
Bibb typically returns good-quality condensate. However, Bibb returns only
about 10 percent of the condensate from the steam it receives from Panda.
Panda uses on-site water treatment equipment to produce demineralized water
required as make-up to the HRSG's.
ENVIRONMENTAL CONTROL EQUIPMENT
The Project has several environmental control features including the following:
- Combustion turbines equipped with water injection capability
for NOx control.
- A berm around each fuel oil tank for spill containment.
- Silencers installed in the relief valve stacks for noise
attenuation.
- An oil-water separator for wastewater treatment.
FIGURE III-1
PANDA-ROSEMARY
SIMPLIED PROCESS
DIAGRAM
- Sanitary water treatment for pH control in a neutralization
tank before it is discharged. No hazardous waste is
produced on the site.
Panda and Burns & McDonnell know of no soil or groundwater contamination.
ELECTRICAL INTERTIE
The Project ties into the VEPCO grid system. The Project intertie with VEPCO
is rated 300 MVA at 230 kV. The interconnection point is the 230 kV
underground cable termination structure (205704) located inside the Project's
substation. See Figure III-2 for the electrical interconnection one-line.
Note that North Carolina Power (NCP) is an operating utility in the VEPCO
system and they are considered to be the same entity in this report.
SITE VISIT
Burns & McDonnell conducted a site visit on February 29, 1996. Figure III-3 is
a site plan. Photographs from the site visit are also included.
FIGURE III-2
PANDA-ROSEMARY
ELECTRICAL INTERCONNECTIONS
ONE-LINE DIAGRAM
HAWKER SIDDELEY POWER ENGINEERING INC.
PLOT PLAN
PANDA-ROSEMARY CORPORATION
BIBB ROSEMARY COGENERATION FACILITY
PART IV
OPERATING HISTORY
The operating history of the Project is summarized in Table IV-1.
<TABLE>
<CAPTION>
TABLE IV-1
PANDA-ROSEMARY PROJECT OPERATING HISTORY
1991 1992 1993 1994 1995
-------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Total Hours Dispatched 1,174 377 324 764 2,224
Total Electricity Produced (MW) 129,042 44,759 31,938 76,652 234,866
Summer Dependable Capacity (MW) 161 161 165 165 165
Winter Dependable Capacity (MW) 192 198 198 198 198
Forced Outage Days 12 1 16 12 18
Total Steam Produced (1,000 lbs) 330,832 377,940 429,915 364,786 291,170
Total Chilled Water Produced
(1,000 ton-hrs) N/A 4,028 3,694 4,123 4,069
</TABLE>
ELECTRIC POWER PRODUCTION
The dispatch hours for 1994 were greater than the previous two years due
primarily to an amendment to the Power Purchase Agreement (PPA). Panda
negotiated this amendment to the PPA as a means of increasing dispatch hours
which allows equipment exercising to be increasingly conducted while on-line.
During 1995, the Project was dispatched for 2,224 hours. A fueling
arrangement Included in a 1993 amendment to the PPA provided specific
provisions for the Project to use natural gas provided directly from VEPCO.
VEPCO had two extended forced outages at their other gas fired plants, which
resulted in gas being redirected to the Project. These two forced outages
were caused by unusual problems with major components at VEPCO's facilities.
For planning purposes, these extended outages by VEPCO are not anticipated in
the future. Approximately 54 percent of the total dispatch hours in 1995 were
due to this fuel arrangement contained in the amendment. Approximately
1,0002,000 dispatched hours would have been normal for 1995 based on typical
conditions.
STEAM PRODUCTION
The Bibb Company (Bibb) is the Project's thermal host. Bibb is a major
manufacturer of terry cloth towels. Bibb's Rosemary mill currently produces
approximately thirty percent of the terry cloth towels produced in the United
States. Steam and chilled water required by Bibb are supplied by the Project.
Steam and chilled water sales to Bibb are required to satisfy the requirements
of the Public Utilities Regulatory Policy Act (PURPA) as described further
below under the heading "Qualifying Facility Compliance". The amount of steam
produced in the HRSGs considered for PURPA requirements during 1995 was 88,852
klb. The total exported steam summarized in Table IV-1 includes both
extraction steam and steam produced by the auxiliary boilers. Bibb also
purchases chilled water for its Rosemary Complex textile mill. Chilled water
is derived from steam through the use of absorption chillers. While the steam
and chilled water sales contract between Panda and Bibb has no "minimum take"
requirement, Bibb is obligated to purchase all of its steam and chilled water
requirements from the Project.
In the event Bibb discontinued operations, Panda would need to either find a
new steam host, install a self-performing steam host, or have the Project
reclassified as an Exempt Wholesale Generator (EWG). Since the Bibb plant is
a major manufacturer of terry cloth towels, it is unlikely the plant will
discontinue operations under its current ownership or with future ownership.
In the event the Project's steam host did discontinue operations, two other
potential steam hosts in Roanoke Rapids include Champion Paper and Halifax
Paperboard. Although it is technically feasible to deliver steam to these
facilities, a relatively long steam pipeline directed through town would be
required. This would present additional economic and sociologic challenges to
the Project. As an alternative, Panda may build a distilled water plant or a
similar facility to replace Bibb as the steam host. This would allow the
Project to continue operation as a Qualifying Facility under PURPA.
Panda currently has a water distillation plant as the thermal host at their
Brandywine, MD facility. Because Panda has complete control over the steam
production and usage, PURPA requirements can be met without sacrificing heat
rate on output performance.
The Brandywine distilled water plant process uses steam from the Project to
evaporate effluent water into a vapor. Vapor released from the liquid is
condensed in a water-cooled condenser to produce distilled water. A complete
installed distilled water plant budget price for the Rosemary facility would
be approximately $2,000,000. This cost estimate appears reasonable for this
type of facility.
Burns & McDonnell believes Bibb will remain a viable steam host into the
foreseeable future. However, if they discontinue operations of the facility,
the Project has a sufficient back-up plan in the form of a distilled water
facility that is viable and cost effective.
AVAILABILITY
The facility was dispatched to VEPCO for 137 days during 1995. There were 18
forced-outage days declared and 26 scheduled maintenance-outage days declared.
The following table summarizes the information reported by Panda to the
National Electric Reliability Council - Generating Availability Data System
(NERC-GADS):
<TABLE>
<CAPTION>
TABLE IV-2
PROJECT AVAILABILITY HISTORY
1991 1992 1993 1994 1995
-------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Dispatched MWh 129,052 45,056 31,930 76,652 234,866
Period Hours 8,760 8,760 8,760 8,760 8,760
Forced MWh 23,908 3,857 60,357 44,193 23,890
Unavailable MWh 148,534 122,844 164,828 133,619 141,719
Hours Unavailable 906.1 776.2 949.4 768.4 818.9
Capacity Factor 7.56% 2.88% 1.98% 6.60% 14.56%
Equivalent Forced Outage Rate 1.40% 0.25% 3.75% 3.80% 1.48%
Equivalent Availability 91.29% 92.14% 89.76% 88.50% 91.22%
Availability 90.64% 91.16% 89.13% 88.36% 90.65%
</TABLE>
HEAT RATE
Hawker Siddely, the turnkey construction contractor, guaranteed the facility
would have a heat rate of 7,936 Btu/kWh (LHV) at full load, burning natural
gas, at an ambient temperature of 90 degrees F. This equates to a higher
heating value (HHV) heat rate of 8,809 Btu/kWh. Hawker Siddeley achieved its
performance guarantees during initial performance tests of the Project.
The contract heat rate as determined by the PPA is 8,900 Btu/kWh (HHV). The
weighted average heat rate for the Project, including start-ups and shut-
downs, is summarized in Table IV-3. The Project heat rates included in Table
IV-3 do not include a credit for thermal production of steam.
TABLE IV-3
ANNUAL AVERAGE HEAT RATE
Year Btu/kWh (HHV)
------- ----------------
1991 9,024
1992 9,290
1993 9,550
1994 9,459
1995 9,652
The actual heat rate of the Project has historically been greater than the
construction contract guaranteed heat rate. There are several factors that
contribute to this. First and foremost, the construction contract guaranteed
heat rate should be viewed in the proper context. The heat rate guarantee of
8,809 Btu/kWh (HHV) represents an achievable Project heat rate for full load,
steady state conditions with all equipment in "as new" condition. Second,
normal day-to-day operation of the Project has varied substantially from these
conditions with the plant being operated as a peaking facility with numerous
starts and stops and with the Frame 6 (highest heat rate) being dispatched
on-line for nearly twice the number of hours as the Frame 7 (lowest heat
rate), partially due to equipment availability and PURPA efficiency
requirements. The thermal efficiency of a combined cycle unit is lower
during the start-up period than when operating at full load. As a result,
more hours of full load operation and longer run times between starts would
improve annual heat rate. Table IV-4 illustrates the average fired hours per
start over the history of the Project.
<TABLE>
<CAPTION>
TABLE IV-4
AVERAGE FIRED HOURS PER START
1992 1993 1994 1995
------- ------- ------- --------
<S> <C> <C> <C> <C>
Frame 6 17 26 30 19
Frame 7 27 11 10 11
Plant Average 22 17 18 15
</TABLE>
The pattern of dispatch by VEPCO has require numerous start-ups and shut-downs
during the past three years. This has caused an increase in the heat rate
during this time period. All other variables constant, if the dispatch
pattern by VEPCO is modified to schedule more hours per start, the heat rate
of the Project would improve. According to our estimate, a heat rate
improvement of 1.6 percent may be realized if the hours per start are
increased from 20 to 50. It is unlikely the hours per start will be any less
than what has been experienced recently.
The PPA allows VEPCO to dispatch the Project at full load with both combustion
turbines or to use the Frame 6 or Frame 7 separately. The Frame 7 is more
efficient than the Frame 6. As a result the overall Project heat rate will
improve as the Frame 7 is operated more often. The more efficient Frame 7
combustion turbine was unavailable at times during 1993 and 1994 due to
problems with certain power transformers. During this period, the Project
operated its Frame 6 gas turbine which increased the average heat rate. In
addition, during 1994 and 1995, additional hours of only Frame 6 operation were
incurred in connection with Owner Requested Generation (ORG) runs necessary to
meet certain PURPA requirements. (See "Qualifying Facility Compliance"
section).
During 1994 and 1995, the Frame 7 operated 38 percent of the total fired hours
of both units. If the number of hours of operation had been equal between the
two machines, Burns & McDonnell would expect the heat rate to improve.
According to our estimate, if the Frame 7 would have been used for the same
number of hours as the Frame 6, a 3 to 4 percent heat rate improvement would
have been realized during the last two years.
Generation load also affects heat rate. The design heat rate was calculated
at full load output. Unit efficiency decreases as the output from the unit
decreases. Therefore, to realize the best heat rate possible for the Project,
the optimum operation is both the Frame 6 and Frame 7 together at full load.
VEPCO implemented Automatic Generation Control (AGC) in 1995. The purpose of
AGC was to use the help of computers to enhance economic dispatch of the
entire VEPCO system. During 1995 under AGC, the facility was ramped from full
load to minimum load and back to full load at the maximum ramp rate as often
as seven times in one hour. The PPA requires Panda to achieve a load ramp
rate of 16 MW/min. Panda has indicated most VEPCO power purchase agreements
are much less stringent with load ramp rates typically in the range of
5 MW/min.
Excessive load ramp rates are not consistent with prudent utility practices and
are detrimental to heat rate optimization. Panda has discussed this issue
with VEPCO and is optimistic less severe load ramp rates can be negotiated in
accordance with prudent utility practices. As an electric utility, VEPCO
should understand Panda's concerns regarding load ramp rates. Panda is
optimistic VEPCO will therefore be willing to reach agreement on this issue.
QUALIFYING FACILITY COMPLIANCE
The Public Utilities Regulatory Policies Act (PURPA) of 1978 established
certain criteria which must be met before facilities such as the Project may
be deemed as a Qualifying Facility (QF) as defined under PURPA. As a QF, the
Project may generate and sell electric power under legal constraints that are
far less stringent than those for electric utilities such as VEPCO. The
Federal Energy Regulatory Commission has jurisdiction over all QFs.
To maintain status as a QF under PURPA regulations, the Project must meet
minimum annual requirements for thermal output and efficiency. For any QF,
thermal output must be at least 5 percent of the total energy output of the
facility.
PURPA defines thermal output as that useful cogenerated thermal energy
delivered to the host facility while the Project is being dispatched. For the
Project, we estimate thermal efficiency as follows:
(Send-Out Steam, lbs)(1,094 Btu/lb) + (Send-Out Chilled
Thermal Water, Tons Hrs)(12,000 Btu/Ton Hr)
-----------------------------------------------
Output = Net Thermal and Electrical Output
PURPA also requires the Project to meet an efficiency standard ("FERC
Efficiency") of at least 45 percent (Note: This standard is at least 42.5
percent if the project produces more than 15 percent thermal output). FERC
Efficiency is defined under the regulations as the useful electric output
plus half the useable thermal energy output divided by the lower heating
value of fuel input for any calendar year.
FERC (Useful Net Electric Output) + (one-half)(Useful Thermal Output)
---------------------------------------------------------
Efficiency = Energy Input
Thermal Output and FERC Efficiency calculations are based upon operating
results while the Project is being dispatched to provide electric power to the
utility. The operation of the auxiliary boilers, therefore, has no impact upon
the calculations. Also, thermal and electrical energy sold or purchased by the
Project while the Project is not being dispatched has no impact on the above
calculations.
Another important criteria is that the Project must meet PURPA requirements
based only upon annual operating results. If the Project is unable to meet
PURPA requirements for one or more months, the Project will still be in
compliance so long as the annual operating results calculated at the end of
each calendar year meet PURPA requirements.
Panda reviews the PURPA requirements monthly. The early October 1994 review
revealed a shortage in the percentage of thermal heat exported to the host.
For the first time since commercial operations, Panda requested an ORG run
with VEPCO to raise the percentage of thermal energy exported to the host.
After the October 1994 ORG, the Project's annual operating results satisfied
all PURPA requirements.
Again in October 1995 an ORG was required to satisfy PURPA requirements. For
388 hours in October 1995, the plant ran below full capacity to ensure meeting
PURPA requirements. This was unfortunate that the October 1995 ORG was needed
because the project had been exceeding PURPA requirements until July when Bibb
shut down during an extended Project dispatch period. During this period,
annual thermal efficiency fell below PURPA requirements because a substantial
amount of electric power was produced without any steam sales (see "thermal
output" equation above). If Bibb would have taken steam during this period,
the October 1995 ORG may not have been required.
The project has shown the ability to effectively schedule ORG runs as needed
to facilitate meeting annual PURPA requirements or to test equipment after
maintenance outages.
Results from prior years of Project operation are summarized in Table IV-5.
<TABLE>
<CAPTION>
TABLE IV-5
HISTORY OF QUALIFYING FACILITY STATUS
1992 1993 1994 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Thermal Output 25.46% 16.30% 16.17% 15.18%
FERC Efficiency 48.39% 44.35% 44.70% 43.38%
Meet PURPA Yes Yes Yes Yes
</TABLE>
ENVIRONMENTAL COMPLIANCE
The Project records were reviewed to determine the status of compliance with
existing permit conditions and reporting requirements. Our review included
interviews with Panda representatives at the plant, and confirmation of the
responses by representatives of the City of Roanoke Rapids and the North
Carolina Department of Environmental Management (NCDEM). Based on our review,
it appears the Project is currently operating in compliance with all permit
conditions.
Air Permit
The existing air permit (No. 6586R2) required initial compliance stack testing
of nitrogen oxides, carbon monoxide, and particulate matter. It also requires
submittal of quarterly reports. Compliance tests, which were performed in
March 1991, showed the facility to be operating in compliance with the limits
set in the permit. There is no continuous emission monitoring required.
The permit also restricts the hours of operation of the two combustion turbine
units. Currently, the Project does not include SCR pollution control
equipment. If the fired hours exceed 2,000 for the Frame 7 combustion turbine
unit or the combined fired hours of both combustion turbines exceed 4,000, the
permit requires an SCR to be installed. In 1995, the Frame 6 unit had 2,220
fired hours, while the Frame 7 had 1,473 fired hours. Quarterly reports have
been submitted to the NCDEM regional office in Raleigh indicating the hours of
operation, fuel use, etc. The NCDEM indicated that the reports have been
satisfactory.
Clean Air Act Amendments
Title V of the Clean Air Act Amendments of 1990 requires that Panda obtain an
operating permit for the Project. In North Carolina, the mandated application
submittal date is third quarter 1996. Panda has retained a consultant to
review the operating permit requirements for the Project, to conduct an
emissions inventory of all plant emission sources, and to prepare the actual
permit application. They indicate the work is scheduled to be completed ahead
of the mandatory submittal date.
NPDES Permit
The Project has a valid National Pollution Discharge Elimination System
(NPDES) permit (NC0079014) which pertains to discharges related to the tank
farm containment area. The Project has submitted monthly reports as required
by the NPDES permit.
Panda currently discharges to the wastewater treatment facility to the City of
Roanoke Rapid's sanitary sewer system under a separate permit (No. 007) with
the Roanoke Rapids Sanitary District. The city requires monthly reports which
document the results of an effluent sampling program. Eight separate sampling
locations are included in the program. The Sanitary District has indicated
that there have been a few minor violations of the permit onditions since the
facility became operational in 1991. These violations reportedly were related
to plant start-up and appear to have been remedied to the point where future
violations are not expected.
Spill Prevention
Panda has indicated a Spill Prevention and Countermeasure Control (SPCC) plan
is currently in place for the Project.
No other unresolved permitting issues were identified during our investigation.
FORCED OUTAGES
In 1991, 12 Forced Outage Days, as defined under the PPA, were taken to
correct the Project's typical first year problems including: HRSG drum level
control problems, hot well level control problems, intermittent steam turbine
trips, and boiler tube failures. None of these problems have reoccurred.
Only one forced outage day was declared in 1992.
In 1993, 16 Forced Outage Days were experienced primarily due to failure in
the Frame 7 step-up power transformer bushings. The bushings were replaced
and minor modifications were made to the transformers to prevent reoccurrence.
In 1994, 12 Forced Outage Days were taken due to freeze problems during the
record January cold snap (3-day outage) and failure of an auxiliary power
transformer (9-day outage). Panda recognized improvements were needed in
these two areas. Actions taken to prevent future problems are described under
"Equipment and System Design Changes."
In 1995, 18 Forced Outage Days were experienced due to equipment problems on
the Combustion Turbines. The specific equipment causing the failures were the
hydraulic fluid lines to the gas control valve, generator breaker, electrical
synchronization equipment, and a faulty cable. A contributing factor to these
equipment failures was the unusually high ramp loading and unloading rates
imposed on the Project by the VEPCO AGC. These ramp load rates and the
inconsistency with prudent utility practices are discussed above in more
detail under the heading "Heat Rate".
Other events causing forced outages in 1995 were tube leaks in HRSG No. 1 and
a steam turbine trip caused by a sharp increase in steam demand by Bibb. High
axial vibration was a concern on the Frame 6 turbine, although it did not
cause a forced outage and was corrected in the fall of 1995.
MAJOR MAINTENANCE ACTIVITIES
Maintenance activities performed recently include:
- Reviewing of the heat tracing system to prevent overloading
feeder circuits.
- Repair of boiler feedwater heater tube leaks.
- Installation of new insulation and heat tracing on the Bibb
steam pressure control valve.
- Installation of sidewalks throughout the facility to improve
maintenance access.
- Installation of a skywalk for direct access across the top
landings of the HRSGs.
- Modification of Frame 6 bearing pedestal to reduce vibration.
- Planned outage which included inspection and scheduled
maintenance of both combustion turbines, both HRSGs,
steam turbine, and transformers T-1 and T-2.
EQUIPMENT AND SYSTEM DESIGN CHANGES
Freeze Protection
Weaknesses in freeze protection were responsible for a forced outage
experienced during January 1994. Actions taken by Panda to improve Project
freeze protection since January 1994 include the following:
- Heat tracing replacements - A portion of the Project's heat
tracing, a type of electric heating element used to prevent lines
from freezing, was and is being replaced by Panda with an improved
type of heat tracing. The new heat tracing to be installed will be
self-limiting such that it will not overheat and boil out the
fluid contained in the tubing.
- Transmitter relocations - A number of pressure transmitters were
originally installed at grade, requiring long tubing runs that
were susceptible to freezing in the event of cold weather and an
open circuit on the heat tracing or boiling in the event of
overheating by the heat tracing. These transmitters were relocated
closer to the equipment to minimize the length of tubing runs.
This should minimize freezing and boiling problems.
- Instrument air - Small diameter lines such as the tubing used to
convey compressed instrument air for Project instrumentation and
controls are typically susceptible to freezing in cold weather.
Moisture in the compressed air may freeze, causing the Project
controls to become inoperable. To minimize this problem, Panda
has modified their nitrogen blanketing system (see discussion
below regarding this new system) to allow the use of nitrogen in
the instrument air system. If properly purged with nitrogen
before the onset of cold weather, freezing in the instrument air
system should be avoided with the use of moisture-free nitrogen
which has a very low dew point of -70 degrees F. A new vent valve
and filter were installed in the compressed air system to prevent
moisture in the lines. This change should also minimize freezing
in the instrument air system.
- New deaerator level controls - Panda has added a new deaerator
level control column to replace the conventional transmitter and
tubing used previously. This is in response to frozen deaerator
controls that were a significant problem during the recent cold
ambient temperatures.
- Steam heat under HRSGs - Panda has enclosed the area under the
HRSGs and installed a bare steam line network under each HRSG.
This provides heat for the water and steam lines previously exposed
to the elements.
- Cold weather operating procedures - Panda operates the combustion
turbines at zero load whenever temperatures inside the HRSG drop
below 33 degrees F. Other systems found to be susceptible to
freezing are also operated during off-line conditions as a means of
building up heat in these systems.
- Enclosures - Panda has built enclosures around the air compressors
and raw water pumps. Provisions for heating these buildings have
been made to help prevent freezing in these systems.
Forced outages due to freezing will be minimized due to Panda's freeze
protection improvement plan. Burns & McDonnell feels Panda's freeze protection
improvements are prudent.
Transformers
A two-week forced outage was experienced in September 1993 due to a failure in
generator step-up transformer T-1. This transformer is connected to the
General Electric Frame 7 combustion turbine and is capable of being switched to
the steam turbine. The failure was attributed to the failure of the low
voltage bushing.
The bushing manufacturer has supplied new bushings with larger oil reservoirs.
These larger reservoirs are designed to allow for more expansion thereby
reducing the operating pressures within the bushing to acceptable levels. In
addition, ventilation ducts have been added to the transformer connection box
to reduce the temperatures inside the bushing housing, further reducing
internal bushing pressure due to thermal expansion of the oil inside the
bushing.
It appears the problems associated with these bushings have been eliminated
and should not be a problem in the future.
Transformer T-3 failed to meet performance guarantees while still under
warranty. In early 1994, T-3 was sent to ABB for extensive repair and was
re-installed at the Project site in April 1995. Panda has essentially a new
transformer in this location now.
Corrosion Protection
The Project currently operates as a peaking unit that typically goes on line
only during peak demand periods. This type of service requires equipment to
sit idle during extended periods between peak demands. During these periods
when the Project is not on line, internal heat transfer surfaces are
susceptible to corrosion due to the presence of oxygen. Panda has found
corrosion pitting has occurred in the steam drum, evidence of oxygen-related
corrosion.
In an effort to enhance the long term reliability of the Project, Panda
installed a nitrogen blanketing system in 1994. When the Project is taken off
line, equipment will return to ambient temperatures and pressures such that,
if left unchecked, the infiltration of atmospheric oxygen is possible. The
nitrogen blanketing system introduces compressed nitrogen to the waterside
internal components of the Project and maintains a positive pressure on these
components to prevent the infiltration of atmospheric oxygen. This reduces
the amount of corrosion experienced by the Project during off-line periods.
Similar systems have been used effectively to reduce corrosion at many other
operating facilities.
In Burns & McDonnell's opinion, the installation of the nitrogen blanketing
system should be viewed by the Project investors as a positive event. Panda's
efforts to install this system serves as a good indication that Panda is
concerned about the long term economic viability of the Project.
Chiller #2
Chilled water production was not initiated until March 1992. The turnkey
contractor for the chilled water system aborted attempts to make the system
work properly. An alternate contractor redesigned and modified the chilled
water system. Presently, the system operates satisfactorily. However, there
were damages to Chiller #2 from the original installation which cause the
system to not achieve full output. Operating data indicates Chiller #2 will
only produce approximately 50 to 60 percent of nominal capacity in its
current condition. Panda has recently tried unsuccessfully to correct the
problem by replacing damaged absorber tubes.
A pinhole leak in the original vacuum pump may have contributed to the
problems experienced by Chiller #2. The performance of the lithium bromide
chillers is dependent on a good vacuum existing in the machine. The
performance of Chiller #2 was improved when a new high volume vacuum pump was
purchased and used during start-up to initially pull the required vacuum.
However, this improvement is not perceived as a permanent solution. Chiller
#2 is budgeted to be replaced in 1996 at an estimated cost of $770,000.
Fire Protection
During 1993 Panda installed additions to the fire protection system including
installation of the following:
- New sprinklers around the steam turbine lube oil area to meet the
recommendation of Hartford Steam Boiler Insurance Co.
- Bearing protection system for the steam turbine.
- Wet suppression system on the subfloor under the steam turbine.
- Deluge system on the south side of both the administration building
and power house.
- Additional fire water pump at the cooling tower basin to support
the capacity of above mentioned systems.
These fire protection system improvements were made to lower the insurance
premium payments.
Oil Conditioning
During 1995, the Facility installed a permanent lube oil conditioning (filter
and coalescent) unit for the steam turbine. Conditioning the lube oil will
extend the life of the turbine by preventing foreign particles and water from
entering the bearings. This is increasingly important because of the high
rotational speed of the ABB VAX turbine.
Panda has plans in place to purchase a portable lube oil conditioner for the
combustion turbines. This portable unit will condition the combustion turbine
lube oil by a batch process. Consistent with the steam turbine, this
commitment to improving lube oil quality will improve bearing life and reduce
overall long-term turbine maintenance costs.
Ultraviolet Protection
Panda has completed covering the cable trays previously exposed to the
atmosphere. If left to the elements, cable insulation degrades from UV
exposure from direct sunlight. The covered cable trays should improve cable
life. This project completion should be viewed as a step to reduce cable
replacement costs in the future.
Chemical Feed Lines
Panda has added chemical feed lines from the bulk chemical storage to the
water treatment building. In the past, facility personnel were required to
carry chemicals in buckets to the water treatment equipment. This improvement
will cut down a chemical waste and, more importantly, improve safety at the
Project.
Automatic Generation Control
In July 1995 Automatic Generation Control was introduced to the Project. In
this operating mode, North Carolina Power (NCP), a wholly-owned subsidiary of
VEPCO and operating under VEPCO direction, uses computers to calculate the
most economic load for the Project and sends this information directly to the
Project's Distributed Control System (DCS). The DCS controls the plant
generation to match the continuously updated set point signal sent by NCP's
computer. Since the AGC was a new and complex control system, much tuning
needed to be done on the system. During the first week of operation, a
facility transducer caused an 11 MW error in its output set point
determination. The AGC is able to fluctuate load within a window between 80
percent and 100 percent of full load. Per the contract operating procedures,
AGC often changes load at a ramp rate of 8 MW/min up and 16 MW/min down.
These ramp rates are as much as four times the maximum ramp rate guidelines
used at other combined cycle facilities. The severe loading and shedding
ramp rates cause higher stresses on the plant equipment and, as discussed,
increased the number of forced outages incurred during 1995. Also, the
overall plant heat rate suffers because of the part load operation that AGC
requires.
O&M CONTRACTOR
University Technical Services (U-TECH) is responsible for managing the day-to-
day operations and administrative functions of the Project. U-TECH is under
contract to provide these services until December 1996. Panda's alternatives
after December 1996 include extending the term of the present agreement or
requesting bids for a new O&M contract. The current O&M contract calls for a
fixed monthly payment of approximately $130,000 and includes bonuses and
penalties based on availability and other factors. Panda should be able to
replace this agreement when it expires in 1996 without a significant change in
the basic terms. U-TECH has 19 employees on-site to operate and maintain the
facility.
It is the opinion of Burns & McDonnell that U-TECH's performance has been
adequate during the term of the O&M contract in force and that U-TECH has not
suffered any operational deficiencies as a result of its ownership by EMCOR,
the restructured entity established during the Chapter 11 bankruptcy of JWP
Inc., the former owner.
TRAINING PROGRAM
Since many of the current site employees were also working at the Project in
1990, they were able to take part in the Hawker Siddeley training program
during the start-up of the plant. Panda has frequent training sessions for the
U-TECH personnel. In November 1994, Panda held a training session for the
U-TECH employees on gas turbines. All new employees are required to go through
a 3- to 6-month training period with day shift personnel. After this period of
training, employees are allowed to work other shifts on their own without
constant supervision. Safety meetings are held monthly for all employees.
PART V
EQUIPMENT ASSESSMENT
OPERATING CONDITION
The current operating condition of the Project is very good with only a few
exceptions. The Unit No. 2 chiller is operating at reduced capacity, as
previously discussed. Another exception may be the recent problems with the
Frame 7 combustion turbine. Although of some concern, steps have been taken
to remedy this situation.
Hartford Steam Boiler and Chemtreat conducted the nnual package boiler
inspection in July 1995. The Operating Certificates for the two package
boilers have been extended until July 1996.
Panda completed a scheduled maintenance outage during September 16-30, 1995.
Activities that were successfully completed include:
- Hot gas path inspection on the Frame 6 combustion turbine.
- New first stage turbine buckets on the Frame 6.
- Frame 6 generator inspection.
- Borescopic inspection of the low pressure section of the
steam turbine.
- Replacement of several boiler tubes in HRSG No. 1.
- Annual HRSG inspections.
Results of the outage indicate the equipment is generally in very good
condition. Panda chose to perform a hot gas path inspection of the Frame 6
much earlier than scheduled because new first stage turbine buckets were
provided by GE free of charge. Panda's Frame 6 was a forecast unit (built
before the order was placed). GE improved the design of the first stage
buckets shortly after the Project's Frame 6 was built, but before Panda
placed the order with GE. Therefore, GE was obligated to install the
improved first stage buckets to upgrade the turbine to its design at the time
of the order. The casing was removed to replace the buckets, so a hot gas
path inspection was performed simultaneously. Only minor wear was detected
at various points along the hot gas path. Rebuilt combustion liners and
transition pieces were reinstalled during the inspection.
An exhaust temperature spread on the Frame 7 combustion turbine has been
consistently noticed while the unit operated at full load. In attempts to
solve this problem, Panda has replaced worn or inaccurate thermocouples,
replaced fuel nozzles with rebuilds from GE, and improved the purge air check
valves. The spread in exhaust temperature has been constant and as much as 120
degrees F, however the machine is operable in this condition. GE has stated
that the spread is acceptable and does not restrict the load capability of the
machine.
MAJOR MAINTENANCE AND OVERALL PROGRAMS
Burns & McDonnell feels adequate maintenance of major pieces of rotating
equipment (i.e. the combustion turbines and the steam turbine) is crucial for
long term Project reliability. For each of these pieces of equipment,
manufacturers provide recommended maintenance activities.
Burns & McDonnell has compared the manufacturer's recommendations with Panda's
proposed maintenance schedule as summarized in Table V-1. In addition to the
items listed in Table V-1, U-TECH performs borescopic inspections of the three
turbines annually. By reviewing Table V-1, Burns & McDonnell concludes that
planned maintenance activities meet or exceed manufacturer recommendations.
It is apparent that Panda has established a maintenance schedule that will
provide major equipment maintenance activities recommended by the equipment
manufacturers. Panda's 10-year maintenance plan is regarded by plant
personnel as a living document that will be reviewed and updated periodically,
as the actual operations become known and future predications regarding
turbine operating hours and starts become more accurate. Burns & McDonnell
views this as an indication that Panda's operation and maintenance philosophy
is geared toward long term Project reliability.
Although Burns & McDonnell has not inventoried maintenance activities on every
piece of equipment for the Project, we have generally observed that U-TECH
uses an organized computerized preventative maintenance program and noted that
annual spare parts inventory counts are performed. The computer schedules and
prioritizes all preventive and corrective maintenance requests. Based upon this
program, Panda completes approximately 90 to 110 preventative maintenance
requests in one month's time and also completes 40 to 70 maintenance requests
per month. Currently, they have a backlog of around 70 maintenance requests.
To respond to maintenance requests, Panda maintains a $2 million spare parts
inventory on-site.
EQUIPMENT REPLACEMENT PROGRAM
Project operating hours are relatively low and there is currently little need
for equipment replacement. Equipment replacement is set up on an operating
hours schedule. Panda has established a ten-year program for predicting
equipment replacement based on hours of equipment operation.
The No. 2 chiller replacement is a capital project that is required despite
low operating hours. This chiller was damaged during its installation and now
needs to be replaced. The replacement of the No. 2 chiller is included in the
1996 capital expenditure budget.
<TABLE>
<CAPTION>
TABLE V-1
COMPARISON OF MANUFACTURERS' RECOMMENDATIONS
WITH 10 YEAR PLAN MAINTENANCE ACTIVITIES FOR MAJOR PIECES OF ROTATING EQUIPMENT
Panda-Rosemary Cogeneration Project
(Factored Hours)
Combustion Hot Gas Path Major Limited Major
Unit Inspection Inspection Inspection Overhaul Overhaul
- -------- ------------ ------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MFG Panda MFG Panda MFG Panda MFG Panda MFG Panda
----- ------ ----- ------ ----- ----- ---- ----- ---- -----
Unit 1,
Frame 7 8,000 8,000 24,000 24,000 48,000 40,000
Combustion Turbine
Unit 2,
Frame 6 12,000 8,000 24,000 24,000 48,000 48,000
Combustion Turbine
Unit 3 25,000 16,000 50,000 50,000
Steam Turbine
</TABLE>
PART VI
PROJECTED PLANT PERFORMANCE
CAPACITY
Panda is required to perform capacity tests to satisfy the requirements of the
PPA. The maximum contract capacity payments are available if the plant can
achieve 198 MW in the winter and 165 MW in the summer. The winter period is
defined as October through March. The summer period starts in April and runs
through September. If required by VEPCO, the output capacity shall be
demonstrated for 12 hours in the summer and 6 hours in the winter.
Table VI-1 presents the historical capacity test results for the Project in
summer and winter periods. As indicated in Table VI-1, the Project was
exceeded the maximum contract capacity output of 198 MW winter and 165 MW
since 1993. The Project has not been requested to demonstrate capacity limits
by VEPCO during the past two years.
<TABLE>
<CAPTION>
TABLE V1-1
HISTORICAL CAPACITY TEST RESULTS
Test Date Result Contract Maximum
------------ --------- --------------------
<S> <C> <C>
Winter 1990 185 198
Winter 1991 192 198
Winter 1992 200 198
Summer 1991 161 165
Summer 1992 161 165
Summer 1993 168 165
Summer 1994 167 165
</TABLE>
Capacity and Heat Rate Degradation
Figure VI-1 indicates General Electric's anticipated combustion turbine
capacity and heat rate degradation as a function of factored hours. At
48,000 factored hours, a major combustion turbine overhaul is performed and
capacity returns to near-new condition (typically within 0.5 percent of as-new
condition). This cycle then is continue throughout the life of the Project.
Figure VI-1 indicates: (1) the anticipated capacity derate will vary from zero
to 5.5 percent and, (2) the anticipated heat rate derate will vary from zero
to 3.0 percent between major overhauls. Burns & McDonnell has used a
straight-line capacity and heat rate derate estimation of 4 percent and 3
percent, respectively, for the life of the Project. In any given year, this
estimation of capacity and heat rate derate will be higher or lower than
actual equipment performance depending upon the number of total factored
hours since the last major overhaul.
FIGURE VI-1
HEAVY-DUTY GAS TURBINE
DEGRADATION AS A
FUNCTION OF TOTAL
FACTORED HOURS
LINE CHART
Since the Project currently has about 8,000 factored hours, Project
performance during 1995 was deemed as representative of the estimated
straight-line derate performance throughout the life of the Project (refer
to Figure VI-1). Actual Project performance in 1995 was therefore used as
the basis for projecting Project capacity and heat rate throughout the life
of the Project.
Based upon actual performance in 1995, it was assumed the Project would, on
average, continue to achieve those capacity levels included in the PPA. A
more detailed discussion of heat rate is included below.
DISPATCH
Panda amended the Power Purchase Agreement with VEPCO in 1993 to effect the
results of an energy price redetermination. The amended PPA closely matches
energy payments with energy production costs. This increased the Project
dispatch hours and allowed Panda the opportunity to increase on-line exercise
of equipment more often. Refer dispatch analysis discussion in Part IV.
The Project realized a sharp increase in dispatch hours in 1995. VEPCO
furnished the Project with natural gas from their Chesterfield 7 gas turbine
unit. Under stipulations in the PPA, Panda was required to use this fuel
displaced from the Chesterfield unit experiencing an extended forced outage.
This caused an unexpected increase in dispatch hours during 1995. The total
dispatch hours in 1995 were 2,224 compared to 760 in 1994.
Due to emission permit requirements, annual dispatch hours are of concern. If
the fired hours exceed 2,000 hours for the Frame 7 or the total combined hours
of the combustion turbines exceed 4,000 hours, an SCR or alternate pollution
control system needs to be installed to reduce NOx emissions levels.
According to forecast predictions, which we have reviewed for adequacy of the
reserve provided, this NOx reduction equipment installation will take place
in 2003.
AVAILABILITY
Availability during 1994 was hampered largely due to transformer and freeze
protection problems. Since Panda addressed these issues, the availability of
the Project in 1995 has increased to 90.65 percent from 88.36 percent.
HEAT RATE
As noted earlier, the contract heat rate determined by the PPA is 8,900
Btu/kWh (HHV). Recent operating data shows the Project has demonstrated a
full continuous load plant heat rate of 8,678 Btu/kWh (HHV) during the
spring of 1995. This demonstrates the plant's ability of achieving the PPA
heat rate when the plant is operated at continuous full load and providing
steam to the thermal host. This heat rate includes fuel that was used to
cogenerate thermal energy for the steam host. In order to fairly compare
the Project's heat rate to the contract heat rate, credit must be given for
the portion of fuel used for process steam generation. Following is a summary
of the Project's 1995 heat rate review. Specific days selected were days
when no unusual operations events occurred and the plant was either running
continuously or had a normal start-up/shut-down transition.
The dates selected were:
- May 18 - The plant was operating for the entire 24 hour period at
full load with only a short period of minimum load on all units.
The plant was not on AGC.
- July 5-6 - These days represent normal morning dispatch, start-up,
continuous operation and shut-down with both CT's for short
operational periods. This data represents a period of operation
without the thermal host. The plant operated as it would in a
"merchant plant" mode. The low pressure section of the steam
turbine was not designed to handle full throttle flow steam rate.
Therefore, large quantities of steam were being dumped to the
condenser during this period.
- October 17 - This day represents the plant under an ORG "PURPA"
run. As was mentioned earlier, Panda was forced to run for
several days in October to meet PURPA requirements. The plant
operated the Frame 6 at part load while sending steam and chilled
water to Bibb. Table VI-2 summarizes the results of the heat rate
review.
<TABLE>
<CAPTION>
TABLE V1-2
RESULTS OF HEAT RATE REVIEW
Overall Project HR Electrical Portion of HR
(Btu/kWh) (Btu/kWh)
-------------------- --------------------------
<S> <C> <C>
PPA Contract -- 8,900
May 18 8,678 8,238
1995 Year End Results 9,652 9,095
July 5-6 9,160 9,160
October 17 11,899 9,640
</TABLE>
The plant heat rate increases when the Facility is not able to provide steam
to Bibb. This is evidenced by the July 5th and 6th records in which Bibb was
down for an outage. The plant operated at a heat rate of approximately 9,160
Btu/kWh (HHV). Since Bibb did not take steam, no credit can be given to this
heat rate figure. The design of the steam turbine does not allow more steam
through the low pressure section when the steam is not exported to process.
Therefore steam must be wasted directly to the condenser instead of using the
energy in the turbine or process.
The 1995 year end adjusted heat rate was higher than the contract heat rate
due to several circumstances that occurred in 1995. They include:
- The plant operated at full load in early July while Bibb was shut
down. It was during this time when the Project lost good PURPA
standing for the year, causing the ORG run in October.
- 1995 was the first year for AGC. This system automatically ramps
the Project load from 80 percent to 100 percent based on economic
dispatch factors. The AGC system had several first year "bugs"
which contributed to lower dispatch power levels.
- The PURPA run in October was performed operating only the Frame 6
at part load.
As can be seen in Table VI-2, the Project has demonstrated excellent heat rate
for as-designed conditions of full load, cogeneration mode. Presently, two
factors prevent the Project from demonstrating this excellent heat rate
potential: (1) the reliability of the thermal host, and (2) the dispatch
pattern of VEPCO. With the normalization of these events, Burns & McDonnell
feels that the contract heat rate of 8900 Btu/kWh can be consistently
obtained.
For planning purposes during the PPA term, Burns & McDonnell believes
estimating the Project's fuel costs on the contract heat rate of 8900 Btu/kWh
is achievable, but aggressive given the recent operating history of the
Project. Burns & McDonnell has estimated a more conservative net electrical
heat rate of 8900 Btu/kWh with a corresponding overall heat rate of 9100
Btu/kWh excluding a thermal production credit. Burns & McDonnell believes
the Project can achieve these heat rate performance levels if no ORG runs are
required in the future. If the Frame 7 unit dispatch can be increased and
the operating hours per start increased while mitigating the substantial AGC
fluctuations, Burns & McDonnell believes the Project can outperform the heat
rate estimates indicated.
Following the PPA term, Panda can pursue two capital improvement alternatives
to reduce the waste of steam that would otherwise be exported to Bibb and
impact the Project's heat rate. First, the steam turbine could be modified
to accept more steam in the LP section. A change in the LP design will
decrease the heat rate to a point under the contract heat rate when operating
without a steam host.
The second alternative consists of constructing a separate condensing system
for the steam extraction which would relieve a back pressure problem with
the steam turbine when more steam is sent through the LP section. This
change would reduce the heat rate penalty of operating the Project without a
steam host. A capital cost estimate has not been developed for either of
these alternatives.
ANNUAL OPERATION AND MAINTENANCE COSTS
Annual fixed and variable operation and maintenance (O&M) costs are
characterized as follows:
- The 19 member operational staff is the primary component of fixed
O&M cost.
- The variable O&M costs consist primarily of water usage and
discharge chemicals, equipment repairs and maintenance, consumable
equipment parts, and other expenses bought through purchase orders
and open Purchase orders.
Since an increase in staff size is unlikely, we do not anticipate a
substantial increase in fixed O&M costs other than those increases due to the
inflation rate. The maintenance budget should escalate at a slightly higher
rate than inflation due to the increasing age of the facility. As the plant
ages, an increasing amount of small consumables will be needed to repair and
replace worn-out components.
As is the case with any power facility, unexpected repairs are needed. Panda
has experienced these "extraordinary" events during the past few years with
the HRSG tube leaks and transformer bushing failures. These past
"extraordinary" events have been identified and an estimated dollar amount has
been assumed. This amount, it is assumed, would escalate with inflation.
Panda's actual expenditures have historically tracked budgeted expenditures
very closely. The 1996 budget was very similar to actual 1995 expenditures
on a total cost basis.
MAJOR MAINTENANCE PROGRAMS AND COSTS
The maintenance staff at Panda is doing an excellent job of maintaining the
major pieces of rotating equipment. In many cases, the inspections are being
done at more frequent intervals than are required by the manufacturers, but
in all cases the minimum manufacturers maintenance schedules are followed.
Panda plans to continue the same inspection interval policies as evidenced
by their ten year maintenance plan. The ten year plan charts the planned
maintenance on all the major equipment until 2005.
The Project maintains a Major Maintenance Overhaul Reserve to fund equipment
overhaul costs. As indicated in Table V-1 presented previously in the
report, Panda plans for combustion inspections of the combustion turbines at a
8,000 factored hours interval, hot gas path inspections at a 24,000 factored
hours interval, and major overhauls for the Frame 6 unit at 48,000 factored
hours and 40,000 factored hours for the Frame 7 unit. Panda also schedules
periodic limited and major overhauls of the steam turbine. As noted
previously, Panda plans to meet or exceed the manufacturer's recommended
maintenance overhauls for the major equipment. Burns & McDonnell has reviewed
the current ten year maintenance plan as well as a long-term forecast of
overhaul schedules and costs. Burns & McDonnell has concluded that Panda
has appropriately planned for maintenance overhauls and the costs of the
overhauls can be met with a hourly dispatch overhaul allowance of $260 per
fired hour. This is slightly higher than the current overhaul allowance of
$220 per hour.
EQUIPMENT REPLACEMENT PROVISIONS
Since maintenance and repairs on the No. 2 chiller have been unable to restore
its capacity to the original design, plans are being made for its replacement.
Auxiliary boilers typically have a life of 25-30 years. The auxiliary boiler
at the Project is operated a large number of hours but typically operates at
less than full load. The boilers also operate on gas fuel which is easier on
the equipment than heavier fuel oils. The boilers should last 30 years,
assuming similar modes of operation and proper water chemistry practices are
followed.
Assuming the recommended maintenance activities are performed as scheduled,
the combustion turbines and steam turbines are likely to last the entire
40 year economic life of the Project. Hence, no provisions need to be made
for their replacement.
OVERALL ECONOMIC LIFE
The financial projections included in this report assume the Project will
remain in operation well beyond the term of the PPA. Burns & McDonnell has
evaluated the Project and combined cycle/combustion turbine technology as a
whole and concluded this is a reasonable assumption in the event the Project
is continuously upgraded and maintained throughout the operating life of the
Project.
Additional repairs and maintenance allowances have been included in the
Project financial projections to account for future upgrades and maintenance
that may be required to extend the economic life of the Project beyond the
expiration date of the Power Purchase Agreement. Burns & McDonnell has
concluded these allowances are reasonable. The repairs and maintenance
allowances included in the financial projections include the following:
- General Maintenance and Repairs - This allowance in the annual
Project budget accounts for normal maintenance activities required
to keep the Project functioning on a dayto-day basis. Normal parts
replacement and repairs to equipment is included in this allowance.
The allowance was prepared using historic data escalated at an
accelerated rate of eight percent annually to account for the fact
that as the plant ages, additional repairs and maintenance will be
required. The compounding effect of this accelerated escalation
rate is intended to address the potential need in the future to
perform any upgrades or maintenance activities that may be required
to extend the economic life of the Project.
- Planned Plant Maintenance Projects - These costs represent regularly-
scheduled maintenance activities on the major pieces of equipment
including both combustion turbines and the steam turbine. The
overhaul allowance to fund these planned maintenance costs has been
calculated using the projected Project dispatch hours to estimate
the frequency of regularly-scheduled maintenance activities based
upon the manufacturers' recommendations. Key examples of
maintenance activities included in this allowance are combustion
turbine hot gas path inspections and major overhauls for the
combustion turbines and steam turbine.
- Additional Maintenance Allowance - This allowance has been included
to account for unplanned, medium-to large-scaled maintenance
activities that are required due to unforeseeable events. Typically,
during the first five-year "shake-out" period of a project, a fairly
high number of these maintenance activities are required. After the
shakeout period, far fewer unplanned maintenance activities are
required until the equipment becomes old enough that components begin
to show substantial signs of wear (after about twenty years). This
allowance was calculated using historic costs during the first five
years escalated at the rate of inflation.
To assess the economic life of the Project, Burns & McDonnell has evaluated
each of the major components of the Project as described below.
Steam Turbine Rankine Cycle
Based upon past operating experience within the electric power generation
industry, it is Burns & McDonnell's professional opinion that if the Project
continues to be appropriately maintained, the steam turbine and balance of
plant equipment should have an operating life well beyond the term of the PPA.
We base this conclusion primarily upon past experience with similar steam
turbine cycles that have received proper maintenance.
Combustion Turbines Brayton Cycle
Combustion turbine technology has been commercially available for power
generation for about thirty years. As a result, we are unable to refer to a
significant number of combustion turbines that, with good maintenance
practices, have historically operated for forty years or more. The
combustion turbines should therefore be of primary concern in assessing the
remaining life of the Project.
Panda plans to continue to maintain the Project in accordance with
recommendations by the major equipment manufacturers. The combustion turbine
manufacturer, General Electric, has developed their recommended maintenance
procedures based upon the operating experience of the entire General Electric
combustion turbine fleet. Based upon past experience with this fleet, General
Electric recommends periodic inspection and, as required, replacement of
combustion turbine components. Generally speaking, the components covered by
these recommended maintenance activities include those components that are in
direct contact with the gas path. This includes all blades for the compressor
and power turbine, combustion nozzles, combustor liners, transition pieces and
related parts.
The philosophy behind these periodic inspections is to identify and repair or
replace damaged components before they have the chance to break-off and
potentially cause additional downstream damage to other internal components.
However, due to the relatively recent commercialization of combustion turbine
technology, it is not possible to use historic information to determine if
these and other components will eventually need to be replaced due to
long-term metal fatigue.
Regardless, combustion turbines are fabricated using numerous components, each
of which can be epaired or replaced. Some components are more difficult and
expensive than others to replace. For example, the "wheels" which are bolted
together to form the rotor shaft, are designed to remain in service for the
life of the equipment. While we know of very few cases where it has been
necessary to actually replace the wheels of a combustion turbine, it can be
done if required over time due to metal fatigue.
But even a worst-case scenario resulting in the need in the future to replace
certain components originally designed for the life or the equipment would not
result in the combustion turbine reaching the end of it's operating life.
Notwithstanding a catastrophic failure requiring replacement of the casing,
each combustion turbine component, including the rotor shaft, is replaceable.
PART VII
FINANCIAL ASSESSMENT OF PROJECT
POWER PURCHASE AGREEMENT
Panda's existing Power Purchase Agreement (PPA) with VEPCO has a remaining
term of 20 years, until December 27, 2015. The PPA can be extended for
additional periods if both parties agree. The existing PPA provides for fixed
capacity payments subject to capacity and availability requirements, and energy
payments based on fuel prices, variable operation and maintenance expenses,
and the Project's dispatch. VEPCO retains the right to dispatch the Project
based on relative economic dispatch criteria, subject to specified operating
limitations.
FACTORS AFFECTING PROJECT
The primary factors influencing the value of the Project include the following
and are discussed below:
- Effective Operating Service Life of the Project
- Expected Rates for Capacity and Energy
- Expected Dispatch of the Project
- Expected Operating Performance of the Project
- Expected Fuel Costs
Effective Operating Service Life of the Project
Burns & McDonnell has concluded the Project will ave an expected operating
service life well beyond the term of the PPA if properly operated and
maintained, consistent with current practices.
Expected Rates for Capacity and Energy
The Project's capacity payments are fixed by the existing PPA and are only
adjusted if the Project's demonstrated capacity changes. The contract
capacity payments for the remainder of the PPA term are presented in Table
VII-1 and illustrated graphically in Figure VII-1.
Energy charges under the existing PPA are based on the delivered cost of fuel
and the Project's variable operation and maintenance expenses. The forecasted
value of energy sales under the current PPA as estimated by ICF are presented
in Table VII-2 and illustrated graphically in Figure VII-2. The forecasted
value of energy sales under the current PPA are based on a fuel cost forecast
prepared by ICF.
TABLE VII-1
CONTRACTUAL CAPACITY CHARGES
Panda-Rosemary Cogeneration Project
Year Capacity Charge
------- -----------------
($/kW-month)
1996 [1] 12.49
1997 11.65
1998 11.65
2000 10.82
2001 10.82
2002 10.82
2003 10.82
2004 10.82
2005 10.82
2006 8.32
2007 8.32
2008 8.32
2009 8.32
2010 8.32
2011 8.32
2012 8.32
2013 8.32
2014 8.32
2015 8.32
[1] Capacity payments through 2015 are contractually
established by the PPA.
FIGURE VII-1
CONTRACTUAL CAPACITY CHARGES
Panda-Rosemary Cogeneration Project
LINE CHART
<TABLE>
<CAPTION>
TABLE VII-2
SUMMER AND WINTER GAS ENERGY CHARGES
Panda-Rosemary Cogeneration Project
Summer Winter
Year Energy Charge Energy Charge
------- -------------- --------------
($/kWh) ($/kWh)
<S> <C> <C>
1996 [1] 0.0231 0.0288
1997 0.0233 0.0293
1998 0.0237 0.0297
1999 0.0240 0.0300
2000 0.0245 0.0304
2001 0.0254 0.0317
2002 0.0264 0.0331
2003 0.0276 0.0345
2004 0.0288 0.0359
2005 0.0300 0.0373
2006 0.0320 0.0397
2007 0.0340 0.0421
2008 0.0362 0.0446
2009 0.0386 0.0475
2010 0.0411 0.0504
2011 0.0433 0.0530
2012 0.0455 0.0558
2013 0.0479 0.0588
2014 0.0505 0.0616
2015 0.0532 0.0647
</TABLE>
[1] Summer and Winter gas energy charges under the PPA term
based cost of delivered fuel and variable operation
and maintenance expenditures. Delivered fuel cost forecast
prepared by ICF.
FIGURE VII-2
SUMMER & WINTER
GAS ENERGY CHARGES
Panda-Rosemary Cogeneration Project
LINE CHART
Expected Dispatch of the Project
VEPCO controls the dispatch of the Project under the terms of the existing
PPA. urrently, VEPCO uses the Project to meet peak and intermediate capacity
and energy requirements based on economic dispatch of its generation and
power supply resources. The expected dispatch for the remainder of the PPA
term are presented in Table VII-3 and illustrated graphically in Figure
VII-3 as estimated by ICF.
Zero Dispatch Case
To illustrate the ability to repay debt service under the most extreme
dispatch case, a Project pro forma analysis has been prepared under a zero
dispatch scenario, meaning it has been assumed that the Project is mothballed
with no dispatch over the remaining life of the PPA. Although extremely
unlikely, based on recent dispatch history and also based on the ICF forecast
of dispatch for the Project, the ability to pay debt service under this zero
dispatch case is illustrated in this scenario and demonstrates strong
coverages of debt service over the remainder of the PPA.
Certain operating assumptions consistent with mothballing the Project under
this zero dispatch case have been made including: release of turbine overhaul
reserves, release of gas transmission capacity and reduction in staff
associated with reduced operations of the Project. There is no reason to
believe the zero dispatch case is likely to materialize for the Project,
especially in light of the Project's recent performance, forecasted demand
growth in VEPCO system requirements, and the Project's competitive heat rate.
The pro forma analysis associated with this case was prepared as an
illustration of the Project's ability to repay Project debt in the most
unlikely dispatch case.
Expected Operating Performance
The expected operating performance of the Project under the long-term dispatch
forecast presented in Table VII-3 is dependent upon the following factors
discussed below:
- Project Capacity
- Project Heat Rate
- Project Fixed Operating Costs
- Project Variable Operation and Maintenance Costs
- Project Overhaul Requirements
- Project Steam/Chilled Water Sales and Costs
<TABLE>
<CAPTION>
TABLE VII-3
DISPATCH ASSUMPTIONS [1]
Panda-Rosemary Cogeneration Project
Summer Winter Gas Winter Oil VEPCO Gas Total
Dispatch Dispatch Dispatch Dispatch Dispatch
Year Hours Hours Hours Hours [2] Hours Percent
- ---- --------- ---------- ---------- ----------- ----------- ---------
%
<S> <C> <C> <C> <C> <C> <C>
1996[3] 674 3 0 400 1077 12.29%
1997 625 119 0 400 1144 13.06%
1998 918 219 0 500 1637 18.69%
1999 1201 210 0 500 2030 23.17%
2000 1463 248 15 500 2326 26.55%
2001 1715 276 30 500 2621 29.92%
2002 1887 480 48 500 2915 33.28%
2003 2077 601 76 500 3354 38.29%
2004 2285 742 122 600 3749 42.80%
2005 2513 908 195 600 4216 48.13%
2006 2418 763 185 600 3966 45.27%
2007 2327 642 175 600 3744 42.74%
2008 2239 539 166 600 3544 40.46%
2009 2155 452 157 600 3364 38.40%
2010 2073 379 149 600 3201 36.54%
2011 2000 429 147 600 3176 36.26%
2012 1929 485 144 600 3158 36.05%
2013 1861 548 142 600 3151 35.97%
2014 1794 619 140 600 3153 35.99%
2015 1729 698 138 600 3165 36.13%
</TABLE>
[1] Equivalent full load dispatch hours.
[2] VEPCO gas dispatch assumptions provided by Panda.
[3] Forecast of equivalent full dispatch hours prepared by ICF.
FIGURE VII-3
DISPATCH ASSUMPTIONS
Panda-Rosemary Cogeneration Project
BAR CHART
Project Capacity: The Project's demonstrated capacity directly impacts the
capacity charge revenues contracted in the PPA. The current capacity charges
under the existing PPA are based on a net summer capacity of 165 MW and a net
winter capacity of 198 MW. The Project may be tested twice per year at
VEPCO's discretion to demonstrate its dependable capacity. The capacity
charges will be adjusted through liquidated damage payments if the Project
fails to demonstrate a net capacity output within 10 percent of the 150 MW
summer and 180 MW winter capacity levels initially contracted with VEPCO in
the PPA. Demonstrated capacity output between the minimum capacity
requirements and a maximum capacity output level equal to 110 percent of the
initial contract levels determine the capacity payments made by VEPCO during
the corresponding summer or winter period. If the demonstrated capacity of
the Project exceeds the maximum capacity levels of 165 MW in the summer and
198 MW in the winter, which represent 110 percent of the initial levels,
VEPCO is not required to pay additional capacity charges. The Project has
demonstrated summer and winter capacity output in excess of the 110 percent
limits for the last three years consecutively.
As the Project ages during the term of the PPA, the expected capacity output
will degrade in the periods between major overhauls of the combustion turbines
and steam turbine. Major overhauls of this equipment can restore the expected
capacity output to near-original levels. The Project's historical capacity
tests and capacity degradation issues were discussed in Part VI of the Report.
As noted, the Project has demonstrated summer and winter capacity output in
excess of the 110 percent limits for the last three years consecutively.
During this time period, the Project has not yet undergone amajor overhaul of
the combustion turbines and steam turbine. The first major overhaul of the
combustion turbines is scheduled for 2002. Therefore, Burns & McDonnell
concludes it is reasonable to expect that the Project can maintain the
demonstrated capacity levels at the 110 percent maximum capacity limits of the
PPA throughout the remainder of the PPA term with adequately scheduled and
completed major overhauls.
Project Heat Rate: The Project's heat rate performance directly impacts the
annual fuel costs incurred in meeting the dispatch requirements of VEPCO.
During the term of the PPA, the Project's energy payments are based on a
contract average annual heat rate of 8900 Btu/kWh, irrespective of actual heat
rate performance. If the Project exceeds the contracted heat rate
performance, the additional fuel costs are absorbed by Panda. Conversely,
improved heat rate performance directly increases Panda's margin on energy
charges.
The Project's actual heat rate performance was reviewed in Part VI of the
Report. Historically, the Project has not been able to achieve the average
annual heat rate performance of 8900 Btu/kWh, but can achieve this target
under steady-state, full load operating conditions. The specific issues
related to the Project's heat rate performance and heat rate degradation were
reviewed in Part VI of the Report.
As the Project ages during the term of the PPA, the expected heat rate
performance will also degrade in the periods between major overhauls of the
combustion turbines and steam turbine. Major overhauls of this equipment can
restore the expected heat rate performance to near original levels. The
Project has not yet undergone a major overhaul of the combustion turbines
and steam turbine. The first major overhaul of the combustion turbines is
scheduled for 2002. Burns & McDonnell has estimated the Project can maintain
an average annual electrical heat rate performance of 9100 Btu/kWh throughout
the remainder of the PPA term with adequately scheduled and completed major
overhauls.
Project Fixed Operating Costs: The Project's fixed operating costs are
generally incurred independent of the dispatch of the Project. The major
cost items include fixed fuel transportation and management services, costs
for the Project's third-party operation and maintenance contract currently
provided by University Technical Services, annual recurring maintenance and
repair costs, property taxes, insurance, administration and office costs, and
Panda's management fee. Panda provided the actual fixed operating costs in
1995, the 1996 budget, and a forecast of fixed operating costs for the
remainder of the PPA term. Burns & McDonnell reviewed the actual and
projected fixed operating costs for reasonableness and concluded the expense
projections appear adequate to account for these cost items.
The fixed operating cost forecast reflects an annual 3.0 percent escalation
for most cost components. The exceptions include property taxes, Project
maintenance costs, the Panda management fee, and firm gas transportation
costs. The property tax cost estimate is decreased 3.0 percent annually
to reflect a declining asset value. The general maintenance and repair cost
component of Project maintenance costs is escalated at an 8.0 percent annual
rate to provide a conservative allowance that the increased age of the Project
will require additional maintenance and repair expenditures over time. The
additional maintenance allowance component of Project maintenance costs is
held constant throughout the planning period. In addition, Panda will
subordinate the management fee of $480,000 annually to all other Project
operating, debt, and capital costs. Therefore, the Panda management fee has
been removed from the Project fixed operating cost forecast.
The Project's firm gas transportation costs are based on 3075 MMBtu/d firm
capacity of which 1200 MMBtu/d is currently utilized on an average annual
basis. Historically, Panda's firm transportation agreement with Transco did
not permit capacity releases. By August 1996, Panda expects to convert its
existing FTNT transportation agreement to a new FT agreement that would permit
Panda to release pipeline transportation capacity when not required by the
Project. In addition, Panda expects to bundle excess pipeline capacity with
gas purchases and sell this bundled product to recapture firm gas
transportation costs. The benefits of capacity release and bundled capacity
and gas sales are estimated to result in a 50.0% return of firm gas
transportation costs for 1800 MMBtu/d of Panda's contracted capacity of 3075
MMBtu/d. This reduction in firm gas transportation costs as estimated by
Panda has been reflected in the economic analysis by Burns & McDonnell
beginning in August 1996.
Project Variable Operation and Maintenance Expenses: The Project's variable
operation and maintenance (O&M) expenses vary directly with the dispatch of
the project and consist of electricity usage when the Project is not
dispatched, water and chemical costs, and water discharge costs. Panda
provided the actual variable O&M expenses in 1995 and a forecast of variable
O&M expenses for the remainder of the PPA term. Burns & McDonnell reviewed
the actual and projected variable O&M expenses for reasonableness and
concluded the expense projections appear adequate to account for these cost
items. The variable O&M expense forecast is based on the projected dispatch
of the Project and also reflects an annual 3.0 percent escalation of costs.
Project Overhaul Requirements: Currently, Panda provides for an overhaul
allowance of $220 for each fired hour of the Project. As noted in Part VI,
Burns & McDonnell believes the Panda maintenance staff is doing an excellent
job of maintaining the major equipment. Inspections have been done and are
planned to be done at more frequent intervals than required by the
manufacturers. Burns & McDonnell has reviewed the 10 year maintenance plan
and the long-term scheduling of the major overhauls for the combustion
turbines. Burns & McDonnell concludes that the maintenance plan and overhaul
schedule are prudent, and that the budgeted costs are reasonable. Burns &
McDonnell recommends that the overhaul allowance be slightly increased to
$260 per fired hour to cover all overhaul costs in the future.
Project Steam/Chilled Water Sales and Costs: Currently, Panda provides both
steam and chilled water to its thermal host, the Bibb Company, to maintain QF
status under PURPA. However, due to the Project's low dispatch requirements,
the thermal loads for the Bibb Company are mainly met from the operation of
auxiliary boilers. The current steam and chilled water pricing in the
Cogeneration Energy Supply Agreement provides the Bibb Company with a
significant discount on the production costs of the thermal energy. Panda
currently absorbs an annual operating loss on the sale of steam and chilled
water to the Bibb Company. The pro forma assumes this will continue
throughout the life of the Project.
Expected Fuel Costs
As noted, energy charges under the existing PPA are based on the delivered
cost of fuel and the Project's variable operation and maintenance expenses.
A long-term fuel cost forecast was prepared for Panda by ICF. The forecast
of seasonal delivered fuel costs under the current PPA as estimated by ICF
are presented in Table VII-4 and illustrated graphically in Figure VII-4.
The forecasted fuel costs under the current PPA term were directly used to
determine the resulting energy charges presented in Table VII-2.
<TABLE>
<CAPTION>
TABLE VII-4
FUEL COST ASSUMPTIONS
Panda-Rosemary Cogeneration Project
Summer Winter Winter
Year Gas Cost Gas Cost Oil Cost
------ ---------- ---------- ----------
($/MMBtu) ($/MMBtu) ($/MMBtu)
<S> <C> <C> <C>
1996 [1] $2.26 $2.92 $3.82
1997 $2.28 $2.97 $3.96
1998 $2.31 $3.00 $4.10
1999 $2.34 $3.03 $4.25
2000 $2.38 $3.07 $4.40
2001 $2.47 $3.20 $4.43
2002 $2.57 $3.35 $4.46
2003 $2.69 $3.48 $4.48
2004 $2.81 $3.63 $4.51
2005 $2.94 $3.78 $4.54
2006 $3.14 $4.03 $4.59
2007 $3.35 $4.29 $4.64
2008 $3.57 $4.55 $4.70
2009 $3.82 $4.85 $4.76
2010 $4.08 $5.16 $4.82
2011 $4.31 $5.44 $4.87
2012 $4.54 $5.74 $4.93
2013 $4.78 $6.06 $5.00
2014 $5.05 $6.35 $5.06
2015 $5.33 $6.68 $5.12
</TABLE>
[1] Fuel cost forecast prepared by ICF.
FIGURE VII-4
FUEL COST ASSUMPTIONS
Panda-Rosemary Cogeneration Project
LINE CHART
CONCLUSION
Table VII-5 presents a summary of the forecasted revenues and expenditures,
and debt coverage ratios of the Project. The summary information was taken
from a detailed economic model which is included in Exhibit A of this Report.
Table VII-6 presents a summary of the forecasted revenues and expenditures,
and debt coverage ratios of the Project with the zero dispatch scenario. The
summary information was taken from a detailed economic model which is
included in Exhibit B of this Report.
Table VII-5 indicates the Project is expected to maintain strong debt coverage
ratios throughout the twenty-year debt repayment period under the dispatch
forecast presented in Table VII-4. Table VII-6 further indicates that the
Project can also maintain adequate debt coverage ratios under an extreme zero
dispatch scenario. This is due to the Project's fixed capacity revenues
which will provide adequate revenues for the Project irrespective of dispatch
operations.
STATEMENT OF LIMITING CONDITIONS
The conclusion stated above is subject to the following limiting conditions:
- In preparation of this Report, Burns & McDonnell has relied on
operating and financial information provided by Panda and its
consultants. While we have no reason to believe that the
information provided to Burns & McDonnell by Panda and its
consultants, and upon which we have relied, is inaccurate in any
material respect, Burns & McDonnell has not independently verified
such information and cannot guarantee its accuracy or
completeness.
- This Report is prepared on the assumption that all contracts and
agreements, specifically the Power Purchase Agreement, the
Cogeneration Energy Supply Agreement, the Gas Supply Agreement,
the Fuel Supply Management Agreement, and the Gas Transportation
Agreements, as well as all statutes, regulations, rules and
permits under which the Project is currently operating will be
fully enforceable in accordance with all provisions and conditions
throughout the duration of their term. Burns & McDonnell makes no
representations or warranties and provides no opinion concerning
the enforceability or legal interpretation of such contractual,
regulatory, or legal requirements.
In addition, in preparation of this Report and the opinions expressed herein,
Burns & McDonnell has made certain assumptions with respect to conditions
which may exist in the future. While we believe the assumptions made are
reasonable for the purposes of this Report, Burns & McDonnell makes no
representation that the conditions assumed will, in fact, occur. To the
extent future conditions differ from those assumed herein or from estimates
and information provided by Panda and its consultants, the actual results
will vary from those projected.
<TABLE>
<CAPTION>
TABLE VII-5
SUMMARY OF PROJECT DEBT COVERAGE RATIOS
Panda-Rosemary Cogeneration Project
Pre-Tax Total Debt Debt
Total Total Operating Service Coverage
Year Revenues Expenses Cashflow Cost Ratio
------ ---------- ---------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
7/96-12/96 [1] $15,633,000 $ 4,731,000 $10,902,000 $ 7,928,000 1.38
1997 $30,151,000 $ 9,976,000 $20,175,000 $14,694,000 1.37
1998 $32,288,000 $11,567,000 $20,721,000 $14,627,000 1.42
1999 $32,670,000 $13,190,000 $19,480,000 $13,314,000 1.46
2000 $34,377,000 $14,542,000 $19,835,000 $13,242,000 1.50
2001 $36,189,000 $16,127,000 $20,062,000 $13,164,000 1.52
2002 $38,456,000 $18,009,000 $20,447,000 $13,058,000 1.57
2003 $41,244,000 $20,268,000 $20,976,000 $12,943,000 1.62
2004 $44,549,000 $23,032,000 $21,517,000 $12,825,000 1.68
2005 $48,512,000 $26,433,000 $22,079,000 $12,669,000 1.74
2006 $42,050,000 $26,334,000 $15,716,000 $ 8,710,000 1.80
2007 $41,179,000 $26,320,000 $14,859,000 $ 8,534,000 1.74
2008 $41,128,000 $26,356,000 $14,772,000 $ 8,352,000 1.77
2009 $40,751,000 $26,524,000 $14,227,000 $ 8,154,000 1.74
2010 $40,429,000 $26,746,000 $13,683,000 $ 7,946,000 1.72
2011 $41,487,000 $27,927,000 $13,560,000 $ 7,772,000 1.74
2012 $42,623,000 $29,252,000 $13,371,000 $ 7,565,000 1.77
2013 $43,969,000 $30,732,000 $13,237,000 $ 7,328,000 1.81
2014 $45,459,000 $32,403,000 $13,056,000 $ 7,042,000 1.85
2015 $47,137,000 $34,288,000 $12,849,000 $ 6,356,000 2.02
</TABLE>
Average coverage over the term of the Bonds is 1.66:1.
[1] Reflects one-half year of operations following the planned debt
refinancing in July 1996.
<TABLE>
<CAPTION>
TABLE VII-6
SUMMARY OF PROJECT DEBT COVERAGE RATIOS
ZERO DISPATCH OPTION
Panda-Rosemary Cogeneration Project
Pre-Tax Total Debt
Total Total Operating Debt Service Coverage
Year Revenues Expenses Cashflow Costs Ratio
- ------- ---------- ---------- ---------- ------------- --------
<S> <C> <C> <C> <C> <C>
7/96-12/96 [1] $14,088,500 $2,748,500 $11,340,000 $ 7,928,000 1.43
1997 $26,343,000 $5,497,000 $20,846,000 $14,694,000 1.42
1998 $26,326,000 $5,553,000 $20,773,000 $14,627,000 1.42
1999 $24,494,000 $5,598,000 $18,896,000 $13,314,000 1.42
2000 $24,493,000 $5,689,000 $18,804,000 $13,242,000 1.42
2001 $24,512,000 $5,799,000 $18,713,000 $13,164,000 1.42
2002 $24,509,000 $5,928,000 $18,581,000 $13,058,000 1.42
2003 $24,507,000 $6,064,000 $18,443,000 $12,943,000 1.42
2004 $24,504,000 $6,205,000 $18,299,000 $12,825,000 1.43
2005 $24,451,000 $6,355,000 $18,096,000 $12,669,000 1.43
2006 $18,973,000 $6,572,000 $12,401,000 $ 8,710,000 1.42
2007 $18,969,000 $6,806,000 $12,163,000 $ 8,534,000 1.74
2008 $18,964,000 $7,045,000 $11,919,000 $ 8,352,000 1.43
2009 $18,959,000 $7,308,000 $11,651,000 $ 8,154,000 1.43
2010 $18,955,000 $7,585,000 $11,370,000 $ 7,946,000 1.43
2011 $18,970,000 $7,830,000 $11,140,000 $ 7,772,000 1.43
2012 $18,965,000 $8,108,000 $10,861,000 $ 7,565,000 1.43
2013 $18,959,000 $8,375,000 $10,584,000 $ 7,328,000 1.44
2014 $18,943,000 $8,673,000 $10,270,000 $ 7,042,000 1.44
2015 $18,853,000 $8,983,000 $ 9,870,000 $ 6,356,000 1.55
</TABLE>
[1] Reflects one-half year of operations following the planned debt
refinancing in July 1996.
PART VIII
CONCLUSIONS
This report summarizes Burns & McDonnell's efforts to assess the condition,
operating history, and pro forma operating projections of the 180-MW Panda-
Rosemary cogeneration project operating in Roanoke Rapids, North Carolina.
These efforts have been performed on behalf of potential Project investors.
PROJECT CONDITION
Overall, the Project is in very good condition. The Project has a competent,
conscientious operation and maintenance staff that has developed a long-term
Project maintenance program that is consistent with manufacturer's
recommendations and generally-accepted practices within the electric power
generation industry. Burns & McDonnell knows of no significant technical
problems with the Project that should be of concern to potential investors.
Burns & McDonnell concludes that the Project would have an expected operating
service life well beyond the term of the PPA if properly operated and
maintained, consistent with current practices.
Respectfully submitted,
/s/ BURNS & MCDONNELL
-----------------------------------
<PAGE>
Exhibit A
Project Pro Forma
Burns & McDonnell
94-433-4-001 PANDA
Panda Energy Corporation
Alternative: Case with ICF Dispatch Projections
Panda-Rosemary Cogen Project Refinancing
File Name: CASEICF3.WK4
********************************************************************************
26-Jul-96 Page 1
11:43 AM
<PAGE>
OPERATING ASSUMPTIONS
Planning Period
Base Year: 1996
PPA Final Year: 2015
PPA Remaining Term: 20 years
Planning Period: 20 years
Rounding Precision: -3
<TABLE>
<CAPTION>
Capacity Assumptions
--------------------
Summer Summer Winter Winter
Demonstrated Capacity Contract Demonstrated Capacity Contract
Year Capacity Degradation Capacity Capacity Degradation Capacity
---- -------- ----------- -------- -------- ----------- --------
(MW) (%) (MW) (MW) (%) (MW)
<S> <C> <C> <C> <C> <C> <C>
1996 174.0 0.00% 165.0 198.0 0.00% 198.0 674
1997 174.0 0.00% 165.0 198.0 0.00% 198.0
1998 174.0 0.00% 165.0 198.0 0.00% 198.0
1999 174.0 0.00% 165.0 198.0 0.00% 198.0
2000 174.0 0.00% 165.0 198.0 0.00% 198.0
2001 174.0 0.00% 165.0 198.0 0.00% 198.0
2002 174.0 0.00% 165.0 198.0 0.00% 198.0
2003 174.0 0.00% 165.0 198.0 0.00% 198.0
2004 174.0 0.00% 165.0 198.0 0.00% 198.0
2005 174.0 0.00% 165.0 198.0 0.00% 198.0
2006 174.0 0.00% 165.0 198.0 0.00% 198.0
2007 174.0 0.00% 165.0 198.0 0.00% 198.0
2008 174.0 0.00% 165.0 198.0 0.00% 198.0
2009 174.0 0.00% 165.0 198.0 0.00% 198.0
2010 174.0 0.00% 165.0 198.0 0.00% 198.0
2011 174.0 0.00% 165.0 198.0 0.00% 198.0
2012 174.0 0.00% 165.0 198.0 0.00% 198.0
2013 174.0 0.00% 165.0 198.0 0.00% 198.0
2014 174.0 0.00% 165.0 198.0 0.00% 198.0
2015 174.0 0.00% 165.0 198.0 0.00% 198.0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dispatch Assumptions
--------------------
Summer Gas Winter Gas Winter Oil VEPCO Gas Total
Dispatch Summer Dispatch Winter gas Dispatch Winter Gas Dispatch VEPCO Gas Dispatch
Year Hours(1) Output Hours(1) Output Hours(1) Output Hours(1)(2) Output Hours(1) Percent
- ---- -------- ------ -------- ------ -------- ------ ----------- ------ -------- -------
(MWh) (MWh) (MWh) (MWh) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 674 111,210 3 594 0 0 400 66,000 1077 12.29%
1997 625 103,125 119 23,562 0 0 400 66,000 1144 13.06%
1998 918 151,470 219 43,362 0 0 500 82,500 1637 18.69%
1999 1210 199,650 320 63,360 0 0 500 82,500 2030 23.17%
2000 1463 241,395 348 68,904 15 2,970 500 82,500 2326 26.55%
2001 1715 282,975 376 74,448 30 5,940 500 82,500 2621 29.92%
2002 1887 311,355 480 95,040 48 9,504 500 82,500 2915 33.28%
2003 2077 342,705 601 118,998 76 15,048 600 99,000 3354 38.29%
2004 2285 377,025 742 146,916 122 24,156 600 99,000 3749 42.80%
2005 2513 414,645 908 179,784 195 38,610 600 99,000 4216 48.13%
2006 2418 398,970 763 151,074 185 36,630 600 99,000 3966 45.27%
2007 2327 383,955 642 127,116 175 34,650 600 99,000 3744 42.74%
2008 2239 369,435 539 106,722 166 32,868 600 99,000 3544 40.46%
2009 2155 355,575 452 89,496 157 31,086 600 99,000 3364 38.40%
2010 2073 342,045 379 75,042 149 29,502 600 99,000 3201 36.54%
2011 2000 330,000 429 84,942 147 29,106 600 99,000 3176 36.26%
2012 1929 318,285 485 96,030 144 28,512 600 99,000 3158 36.05%
2013 1861 307,065 548 108,504 142 28,116 600 99,000 3151 35.97%
2014 1794 296,010 619 122,562 140 27,720 600 99,000 3153 35.99%
2015 1729 285,285 698 138,204 138 27,324 600 99,000 3165 36.13%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Electric Heat Assumptions(3) Aux. Boiler Steam/Chilled Water Assumptions
---------------------------- -------------------------------------------
Demonstrated Contract Steam C. Water Steam
Heat Heat Rate Heat Production Steam Production C. Water Heat
Year Rate Degradation Rate Hours Production Hours Production Requirement
- ---- ---- ----------- ---- ----- ---------- ----- ---------- -----------
(Btu/kWh) (%) (Btu/kWh) (pph) (ton-hr) (Btu/lb)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 8900 0.00% 8900 7800 50,000 4000 1010 1714
1997 8900 0.00% 8900 7800 50,000 4000 1010 1714
1998 8900 0.00% 8900 7800 50,000 4000 1010 1714
1999 8900 0.00% 8900 7800 50,000 4000 1010 1714
2000 8900 0.00% 8900 7800 50,000 4000 1010 1714
2001 8900 0.00% 8900 7800 50,000 4000 1010 1714
2002 8900 0.00% 8900 7800 50,000 4000 1010 1714
2003 8900 0.00% 8900 7800 50,000 4000 1010 1714
2004 8900 0.00% 8900 7800 50,000 4000 1010 1714
2005 8900 0.00% 8900 7800 50,000 4000 1010 1714
2006 8900 0.00% 8900 7800 50,000 4000 1010 1714
2007 8900 0.00% 8900 7800 50,000 4000 1010 1714
2008 8900 0.00% 8900 7800 50,000 4000 1010 1714
2009 8900 0.00% 8900 7800 50,000 4000 1010 1714
2010 8900 0.00% 8900 7800 50,000 4000 1010 1714
2011 8900 0.00% 8900 7800 50,000 4000 1010 1714
2012 8900 0.00% 8900 7800 50,000 4000 1010 1714
2013 8900 0.00% 8900 7800 50,000 4000 1010 1714
2014 8900 0.00% 8900 7800 50,000 4000 1010 1714
2015 8900 0.00% 8900 7800 50,000 4000 1010 1714
</TABLE>
(1) Dispatch hour forecast represents equivalent full load dispatch hours
incorporating planned and forced outage factors.
(2) VEPCO gas dispatch forecast during PPA term provided by Panda.
(3) Net electrical generation heat rate including credit from thermal
production.
<PAGE>
FUEL COST ASSUMPTIONS
Escalation 1996-2015 ICF Forecast
<TABLE>
<CAPTION>
Summer Gas Cost
---------------
SSG SGT SGT SGT SR1 SR2 SRX Summer Summer Summer
Gulf Spot Transco Panda NCG Transco NCNG Swing Gas Gas Gas Gas
Year Price IT Pipeline IT Mgt. Fee Retainage Retainage Retainage Charge Charge Cost Margin Margin
- ---- ----- -- ----------- -------- --------- --------- --------- ------ ------ ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) ($/MMBtu) ($/kWh) ($/MMBtu) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.79 $0.34 $0.26 $0.04 3.79% 2.00% 3.00% $2.59 $0.02307 $2.26 $0.33 $0.00297
1997 $1.81 $0.34 $0.27 $0.04 3.79% 2.00% 3.00% $2.62 $0.02335 $2.28 $0.34 $0.00304
1998 $1.84 $0.35 $0.27 $0.04 3.79% 2.00% 3.00% $2.66 $0.02372 $2.31 $0.35 $0.00312
1999 $1.85 $0.36 $0.28 $0.04 3.79% 2.00% 3.00% $2.69 $0.02398 $2.34 $0.36 $0.00320
2000 $1.88 $0.37 $0.29 $0.04 3.79% 2.00% 3.00% $2.75 $0.02447 $2.38 $0.37 $0.00329
2001 $1.96 $0.38 $0.30 $0.04 3.79% 2.00% 3.00% $2.86 $0.02542 $2.47 $0.38 $0.00339
2002 $2.05 $0.38 $0.31 $0.04 3.79% 2.00% 3.00% $2.97 $0.02642 $2.57 $0.39 $0.00351
2003 $2.15 $0.39 $0.32 $0.04 3.79% 2.00% 3.00% $3.10 $0.02757 $2.69 $0.41 $0.00363
2004 $2.26 $0.40 $0.33 $0.04 3.79% 2.00% 3.00% $3.23 $0.02877 $2.81 $0.42 $0.00375
2005 $2.37 $0.42 $0.34 $0.04 3.79% 2.00% 3.00% $3.37 $0.03001 $2.94 $0.44 $0.00388
2006 $2.55 $0.43 $0.35 $0.04 3.79% 2.00% 3.00% $3.59 $0.03198 $3.14 $0.45 $0.00404
2007 $2.75 $0.43 $0.36 $0.04 3.79% 2.00% 3.00% $3.83 $0.03404 $3.35 $0.47 $0.00421
2008 $2.95 $0.44 $0.37 $0.04 3.79% 2.00% 3.00% $4.07 $0.03620 $3.57 $0.49 $0.00438
2009 $3.18 $0.45 $0.38 $0.04 3.79% 2.00% 3.00% $4.34 $0.03859 $3.82 $0.51 $0.00456
2010 $3.41 $0.47 $0.39 $0.04 3.79% 2.00% 3.00% $4.62 $0.04110 $4.08 $0.53 $0.00475
2011 $3.61 $0.48 $0.40 $0.04 3.79% 2.00% 3.00% $4.86 $0.04326 $4.31 $0.55 $0.00493
2012 $3.83 $0.48 $0.41 $0.04 3.79% 2.00% 3.00% $5.11 $0.04552 $4.54 $0.58 $0.00512
2013 $4.05 $0.49 $0.43 $0.04 3.79% 2.00% 3.00% $5.38 $0.04787 $4.78 $0.60 $0.00531
2014 $4.30 $0.51 $0.44 $0.04 3.79% 2.00% 3.00% $5.67 $0.05048 $5.05 $0.62 $0.00552
2015 $4.55 $0.52 $0.45 $0.04 3.79% 2.00% 3.00% $5.98 $0.05321 $5.33 $0.64 $0.00573
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winter Gas Cost
---------------
WSG Panda WGT WR1 WR2 WR2 WRX
Appala- WGT WGT Pipe- NGC Transco CNG NCNG Swing Gas Winter Winter Winter Winter
chian Transco CNG line Mgt. Retain- Retain- Retain- Retain- Gas Gas Gas Gas
Year Price IT IT IT Fee age age age age Charge Charge Cost Cost Margin Margin
- ---- ----- -- -- -- --- --- --- --- --- ------ ------ ---- ---- ------ ------
(------------$/MMBtu-------------) (%) (%) (%) (%) ($/MMBtu) ($/kWh)($/MMBtu) ($/kWh) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $2.28 $0.24 $0.21 $0.26 $0.04 1.97% 2.28% 2.00% 3.00% $3.23 $0.02878 $2.92 $0.02596 $0.31673 $0.00282
1997 $2.31 $0.24 $0.21 $0.27 $0.04 1.97% 2.28% 2.00% 3.00% $3.29 $0.02932 $2.97 $0.02642 $0.32541 $0.00290
1998 $2.34 $0.25 $0.21 $0.27 $0.04 1.97% 2.28% 2.00% 3.00% $3.33 $0.02967 $3.00 $0.02669 $0.33403 $0.00297
1999 $2.36 $0.25 $0.21 $0.28 $0.04 1.97% 2.28% 2.00% 3.00% $3.37 $0.03001 $3.03 $0.02695 $0.34288 $0.00305
2000 $2.39 $0.26 $0.22 $0.29 $0.04 1.97% 2.28% 2.00% 3.00% $3.42 $0.03044 $3.07 $0.02731 $0.35196 $0.00313
2001 $2.50 $0.26 $0.23 $0.30 $0.04 1.97% 2.28% 2.00% 3.00% $3.56 $0.03169 $3.20 $0.02846 $0.36345 $0.00323
2002 $2.62 $0.27 $0.23 $0.31 $0.04 1.97% 2.28% 2.00% 3.00% $3.72 $0.03311 $3.35 $0.02977 $0.37563 $0.00334
2003 $2.74 $0.28 $0.24 $0.32 $0.04 1.97% 2.28% 2.00% 3.00% $3.87 $0.03447 $3.48 $0.03102 $0.38789 $0.00345
2004 $2.86 $0.29 $0.25 $0.33 $0.04 1.97% 2.28% 2.00% 3.00% $4.03 $0.03587 $3.63 $0.03231 $0.40055 $0.00356
2005 $2.98 $0.30 $0.26 $0.34 $0.04 1.97% 2.28% 2.00% 3.00% $4.19 $0.03733 $3.78 $0.03365 $0.41361 $0.00368
2006 $3.21 $0.30 $0.25 $0.35 $0.04 1.97% 2.28% 2.00% 3.00% $4.46 $0.03967 $4.03 $0.03584 $0.42962 $0.00382
2007 $3.45 $0.30 $0.26 $0.36 $0.04 1.97% 2.28% 2.00% 3.00% $4.73 $0.04211 $4.29 $0.03814 $0.44622 $0.00397
2008 $3.69 $0.31 $0.26 $0.37 $0.04 1.97% 2.28% 2.00% 3.00% $5.02 $0.04465 $4.55 $0.04053 $0.46305 $0.00412
2009 $3.95 $0.32 $0.27 $0.38 $0.04 1.97% 2.28% 2.00% 3.00% $5.33 $0.04745 $4.85 $0.04317 $0.48088 $0.00428
2010 $4.22 $0.33 $0.28 $0.39 $0.04 1.97% 2.28% 2.00% 3.00% $5.66 $0.05038 $5.16 $0.04594 $0.49936 $0.00444
2011 $4.46 $0.34 $0.29 $0.40 $0.04 1.97% 2.28% 2.00% 3.00% $5.95 $0.05298 $5.44 $0.04838 $0.51726 $0.00460
2012 $4.73 $0.35 $0.30 $0.41 $0.04 1.97% 2.28% 2.00% 3.00% $6.27 $0.05585 $5.74 $0.05108 $0.53622 $0.00477
2013 $5.01 $0.36 $0.31 $0.43 $0.04 1.97% 2.28% 2.00% 3.00% $6.61 $0.05884 $6.06 $0.05389 $0.55585 $0.00495
2014 $5.28 $0.37 $0.30 $0.44 $0.04 1.97% 2.28% 2.00% 3.00% $6.93 $0.06163 $6.35 $0.05651 $0.57572 $0.00512
2015 $5.58 $0.36 $0.31 $0.45 $0.04 1.97% 2.28% 2.00% 3.00% $7.27 $0.06472 $6.68 $0.05941 $0.59675 $0.00531
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winter Fuel Oil Cost
--------------------
Delivered Panda Winter Winter Winter
Fuel Oil Handling Oil Oil Fuel Oil Oil
Year Price Charge Charge Charge Usage Cost Margin Margin
- ---- ----- ------ ------ ------ ----- ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) (%) ($/MMBtu) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $4.05 $0.10 $4.14 $0.03686 80.00% $3.82 $0.32219 $0.00287
1997 $4.21 $0.10 $4.31 $0.03833 80.00% $3.96 $0.34700 $0.00309
1998 $4.38 $0.10 $4.48 $0.03985 80.00% $4.10 $0.37759 $0.00336
1999 $4.55 $0.11 $4.66 $0.04144 80.00% $4.25 $0.40979 $0.00365
2000 $4.73 $0.11 $4.84 $0.04309 80.00% $4.40 $0.44134 $0.00393
2001 $4.73 $0.11 $4.84 $0.04309 80.00% $4.43 $0.41551 $0.00370
2002 $4.73 $0.11 $4.84 $0.04309 80.00% $4.46 $0.38604 $0.00344
2003 $4.73 $0.11 $4.84 $0.04309 80.00% $4.48 $0.35809 $0.00319
2004 $4.73 $0.11 $4.84 $0.04309 80.00% $4.51 $0.32905 $0.00293
2005 $4.73 $0.11 $4.84 $0.04309 80.00% $4.54 $0.29888 $0.00266
2006 $4.73 $0.11 $4.84 $0.04309 80.00% $4.59 $0.24961 $0.00222
2007 $4.73 $0.11 $4.84 $0.04309 80.00% $4.64 $0.19805 $0.00176
2008 $4.73 $0.11 $4.84 $0.04309 80.00% $4.70 $0.14432 $0.00128
2009 $4.73 $0.11 $4.84 $0.04309 80.00% $4.76 $0.08489 $0.00076
2010 $4.73 $0.11 $4.84 $0.04309 80.00% $4.82 $0.02271 $0.00020
2011 $4.73 $0.11 $4.84 $0.04309 80.00% $4.87 ($0.03204) ($0.00029)
2012 $4.73 $0.11 $4.84 $0.04309 80.00% $4.93 ($0.09269) ($0.00082)
2013 $4.73 $0.11 $4.84 $0.04309 80.00% $5.00 ($0.15601) ($0.00139)
2014 $4.73 $0.11 $4.84 $0.04309 80.00% $5.06 ($0.21484) ($0.00191)
2015 $4.73 $0.11 $4.84 $0.04309 80.00% $5.12 ($0.27998) ($0.00249)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEPCO Gas Cost
--------------
MGT Panda VEPCO VEPCO Plant FA VEPCO VEPCO VEPCO VEPCO
Management Pipeline Gas Gas Variable NCNG Nomination Gas Nomination Gas
Year Fee Charge Charge Charge O&M Costs Retainage Fee Charge Fee Cost Margin
- ---- --- ------ ------ ------ --------- --------- --- ------ --- ---- ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) ($/kWh) (%) ($/day) ($/kWh) ($/day) ($/kWh) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $0.04 $0.13 $0.17 $0.00150 $0.00222 2.00% $ 7,500 $0.00391 $ 7,500 $0.00011 $0.00380
1997 $0.04 $0.13 $0.17 $0.00153 $0.00229 2.00% $ 7,500 $0.00402 $ 7,500 $0.00011 $0.00390
1998 $0.04 $0.14 $0.18 $0.00157 $0.00236 2.00% $ 9,375 $0.00412 $ 9,375 $0.00011 $0.00401
1999 $0.04 $0.14 $0.18 $0.00161 $0.00243 2.00% $ 9,375 $0.00423 $ 9,375 $0.00011 $0.00412
2000 $0.04 $0.14 $0.18 $0.00164 $0.00250 2.00% $ 9,375 $0.00434 $ 9,375 $0.00011 $0.00423
2001 $0.04 $0.14 $0.18 $0.00164 $0.00258 2.00% $ 9,375 $0.00442 $ 9,375 $0.00011 $0.00431
2002 $0.04 $0.14 $0.18 $0.00164 $0.00266 2.00% $ 9,375 $0.00450 $ 9,375 $0.00011 $0.00439
2003 $0.04 $0.14 $0.18 $0.00164 $0.00274 2.00% $11,250 $0.00458 $11,250 $0.00011 $0.00447
2004 $0.04 $0.14 $0.18 $0.00164 $0.00282 2.00% $11,250 $0.00466 $11,250 $0.00011 $0.00455
2005 $0.04 $0.14 $0.18 $0.00164 $0.00290 2.00% $11,250 $0.00475 $11,250 $0.00011 $0.00464
2006 $0.04 $0.14 $0.18 $0.00164 $0.00299 2.00% $11,250 $0.00484 $11,250 $0.00011 $0.00473
2007 $0.04 $0.14 $0.18 $0.00164 $0.00308 2.00% $11,250 $0.00493 $11,250 $0.00011 $0.00482
2008 $0.04 $0.14 $0.18 $0.00164 $0.00317 2.00% $11,250 $0.00503 $11,250 $0.00011 $0.00491
2009 $0.04 $0.14 $0.18 $0.00164 $0.00327 2.00% $11,250 $0.00512 $11,250 $0.00011 $0.00501
2010 $0.04 $0.14 $0.18 $0.00164 $0.00337 2.00% $11,250 $0.00522 $11,250 $0.00011 $0.00511
2011 $0.04 $0.14 $0.18 $0.00164 $0.00347 2.00% $11,250 $0.00533 $11,250 $0.00011 $0.00521
2012 $0.04 $0.14 $0.18 $0.00164 $0.00357 2.00% $11,250 $0.00543 $11,250 $0.00011 $0.00532
2013 $0.04 $0.14 $0.18 $0.00164 $0.00368 2.00% $11,250 $0.00554 $11,250 $0.00011 $0.00543
2014 $0.04 $0.14 $0.18 $0.00164 $0.00379 2.00% $11,250 $0.00565 $11,250 $0.00011 $0.00566
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Auxillary Boiler Steam/Chilled Water Fuel Cost
----------------------------------------------
Texas Steam Steam
Gulf Spot Transco GRI/ACA NCG Transco CNG Gas NCNG Gas Gas Steam
Year Price Commodity Surcharge Mgt. Fee Retainage Retainage Retainage Retainage Cost Cost Charge Margin
- ---- ----- --------- --------- -------- --------- --------- --------- --------- ---- ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) (%) ($/MMBtu) ($/klbs) ($/klbs) ($/klbs)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.79 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.05 $3.51 $1.15 ($2.36)
1997 $1.81 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.07 $3.55 $1.15 ($2.40)
1998 $1.84 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.10 $3.60 $1.15 ($2.45)
1999 $1.85 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.11 $3.62 $1.15 ($2.47)
2000 $1.88 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.15 $3.68 $1.15 ($2.53)
2001 $1.96 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.24 $3.83 $1.15 ($2.68)
2002 $2.05 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.34 $4.01 $1.15 ($2.86)
2003 $2.15 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.45 $4.20 $1.15 ($3.05)
2004 $2.26 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.56 $4.39 $1.15 ($3.24)
2005 $2.37 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.68 $4.60 $1.15 ($3.45)
2006 $2.55 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.88 $4.94 $1.15 ($3.79)
2007 $2.75 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.10 $5.32 $1.15 ($4.17)
2008 $2.95 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.32 $5.69 $1.15 ($4.54)
2009 $3.18 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.57 $6.12 $1.15 ($4.97)
2010 $3.41 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.83 $6.56 $1.15 ($5.41)
2011 $3.61 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.04 $6.93 $1.15 ($5.78)
2012 $3.83 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.29 $7.35 $1.15 ($6.20)
2013 $4.05 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.53 $7.76 $1.15 ($6.61)
2014 $4.30 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.79 $8.21 $1.15 ($7.06)
2015 $4.55 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $5.07 $8.69 $1.15 ($7.54)
</TABLE>
<PAGE>
PROJECT FINANCING ASSUMPTIONS
Equal
Financing Sources of Funds Annual
Refinancing Debt Service
----------- ------------
DEBT FINANCING:
First Mortage Bonds:
Percentage Financed 85.63%
Principal Amount $111,400,000 $11,879,000
Interest Rate 8.63%
Term 20.0
Years of Interest Only 0.0
Debt Service Reserve Fund
(% of Principal) 7.26%
Financing Fees 2.69%
Subordinate Debt A:
Percentage Financed 0.00%
Principal Amount $0 $0
Interest Rate 9.00%
Term 20.0
Years of Interest Only 0.0
Debt Service Reserve Fund
(% of Principal) 0.00%
Financing Fees 0.00%
OTHER FINANCING SOURCES:
Existing Debt Service
Reserve Fund $4,117,388
Existing Turbine Overhaul
Reserve $931,032
Existing Reimbursement
Obligation Account $8,247,605
Existing Pollution Control
Account $5,256,983
Existing Spare Parts
Account $113,737
Existing Revenue Account $27,763
-------
Total Other Financing
Sources $18,694,508
TOTAL SOURCES OF FUNDS $130,094,508
Financing Uses of Funds
REFINANCING COSTS::
Operating Account $868,226
Defeasance of Taxable Revenue
Bonds $103,209,600
PROJECT COSTS:
Pollution Control Reserve $5,256,983
Turbine Overhaul Reserve $942,632
FINANCING COSTS
Debt Service Reserve $8,090,714
Fees and Expenses $3,000,000
Partial Redemption of FMCC
Rosemary Interest $8,726,353
TOTAL USES OF FUNDS $130,094,508
<PAGE>
Custom Principal
Amortization Schedules
----------------------
First Mortgage Subordinate
Year Bonds Debt A
- ---- ----- ------
1996 2,752,798 0
2997 5,500,608 0
1998 5,992,178 0
1999 5,092,966 0
2000 5,472,948 0
2001 5,879,990 0
2002 6,293,568 0
2003 6,737,102 0
2004 7,215,320 0
2005 7,696,926 0
2006 4,292,216 0
2007 4,491,704 0
2008 4,704,828 0
2009 4,919,192 0
2010 5,142,758 0
2011 5,422,034 0
2012 5,691,114 0
2013 5,952,686 0
2014 6,188,248 0
2015 6,030,816 0
====================================
111,400,000
<PAGE>
<TABLE>
<CAPTION>
DEBT SERVICE CALCULATIONS 50.00%
1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 111,400,000 108,647,202 103,146,594 97,224,416 92,131,450 86,658,502 80,778,512 74,484,944
Interest 5,175,000 9,192,911 8,704,848 8,220,881 7,769,322 7,284,115 6,763,589 6,206,423
Principal 2,752,798 5,500,608 5,922,178 5,092,966 5,472,948 5,879,990 6,293,568 6,737,102
Debt Service 7,927,798 14,693,519 14,627,026 13,313,847 13,242,270 13,164,105 13,057,157 12,943,525
Ending Balance 108,647,202 103,146,594 97,224,416 92,131,450 86,658,502 80,778,512 74,484,944 67,747,842
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0 0 0
Interest 0 0 0 0 0 0 0 0
Principal 0 0 0 0 0 0 0 0
Debt Service 0 0 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 5,175,000 9,192,911 8,704,848 8,220,881 7,769,322 7,284,115 6,763,589 6,206,423
Principal 2,752,798 5,500,608 5,922,178 5,092,966 5,472,948 5,879,990 6,293,568 6,737,102
Debt Service 7,927,798 14,693,519 14,627,026 13,313,847 13,242,270 13,164,105 13,057,157 12,943,525
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 67,747,842 60,532,522 52,835,596 48,543,380 44,051,676 39,346,848 34,427,656 29,284,898
Interest 5,609,882 4,971,983 4,418,244 4,041,589 3,647,284 3,234,560 2,803,049 2,350,454
Principal 7,215,320 7,696,926 4,292,216 4,491,704 4,704,828 4,919,192 5,142,758 5,422,034
Debt Service 12,825,202 12,668,909 8,710,460 8,533,293 8,352,112 8,153,752 7,945,807 7,772,488
Ending Balance 60,532,522 52,835,596 48,543,380 44,051,676 39,346,848 34,427,656 29,284,898 23,862,864
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0 0 0
Interest 0 0 0 0 0 0 0 0
Principal 0 0 0 0 0 0 0 0
Debt Service 0 0 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 5,609,882 4,971,983 4,418,244 4,041,589 3,647,284 3,234,560 2,803,049 2,350,454
Principal 7,215,320 7,696,926 4,292,216 4,491,704 4,704,828 4,919,192 5,142,758 5,422,034
Debt Service 12,825,202 12,668,909 8,710,460 8,533,293 8,352,112 8,153,752 7,945,807 7,772,488
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2012 2013 2014 2015
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 23,862,864 18,171,750 12,219,064 6,030,816
Interest 1,874,100 1,374,781 853,744 325,100 94,821,650
Principal 5,691,114 5,952,686 6,188,248 6,030,816 111,400,000
--------- --------- --------- ---------
Debt Service 7,565,214 7,327,467 7,041,992 6,355,916
Ending Balance 18,171,750 12,219,064 6,030,816 0
Subordinated Debt A:
Beginning Balance 0 0 0 0
Interest 0 0 0 0
Principal 0 0 0 0
- - - -
Debt Service 0 0 0 0
Ending Balance 0 0 0 0
TOTAL DEBT SERVICE
Interest 1,874,100 1,374,781 853,744 325,100
Principal 5,691,114 5,952,686 6,188,248 6,030,816
--------- --------- --------- ---------
Debt Service 7,565,214 7,327,467 7,041,992 6,355,916
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 674 625 918 1,210 1,463 1,715 1,887
Winter Gas Dispatch 3 119 219 320 348 376 480
Winter Oil Dispatch 0 0 0 0 15 30 48
VEPCO Gas Dispatch 400 400 500 500 500 500 500
--- --- --- --- --- --- ---
Total Dispatch Hour 1,077 1,144 1,637 2,030 2,326 2,621 2,915
Percentage 12.29% 13.06% 18.69% 23.17% 26.55% 29.92% 33.28%
Winter Starts 0 3 5 8 9 9 12
Winter Start Duration 40 40 40 40 40 40 40
Net Generation
Availability Factor [1] 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
[1] Equivalent full load dispatch hours from Dispatch Assumptions incorporate
planned outage and forced outage availability factors.
Summer Output MWh 111,210 103,125 151,470 199,650 241,395 282,975 311,355
Winter Gas Output MWh 594 23,562 43,362 63,360 68,904 74,448 95,040
Winter Oil Dispatch MWh 0 0 0 0 2,970 5,940 9,504
VEPCO Gas Dispatch MWh 66,000 66,000 82,500 82,500 82,500 82,500 82,500
------ ------ ------ ------ ------ ------ ------
Net Generation MWh 177,804 192,687 277,332 345,510 395,769 445,863 498,399
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 989,769 917,813 1,348,083 1,776,885 2,148,416 2,518,478 2,771,060
Winter Gas Fuel MMBtu 5,287 209,702 385,922 563,904 613,246 662,587 845,856
Winter Oil Fuel MMBtu 0 0 0 0 26,433 52,866 84,586
VEPCO Gas Fuel MMBtu 587,400 587,400 734,250 734,250 734,250 734,250 734,250
------- ------- ------- ------- ------- ------- -------
Total Fuel MMBtu 1,582,456 1,714,914 2,468,255 3,075,039 3,522,344 3,968,181 4,435,751
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $2.26 $2.28 $2.31 $2.34 $2.38 $2.47 $2.57
Winter Gas Fuel $/MMBtu $2.92 $2.97 $3.00 $3.03 $3.07 $3.20 $3.35
Winter Oil Fuel $/MMBtu $3.82 $3.96 $4.10 $4.25 $4.40 $4.43 $4.46
VEPCO Gas Fuel $/kWh $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011
Summer Gas Fuel $ 2,236,000 2,094,000 3,120,000 4,149,000 5,113,000 6,233,000 7,134,000
Winter Gas Fuel $ 15,000 623,000 1,157,000 1,708,000 1,882,000 2,119,000 2,829,000
Winter Oil Fuel $ 0 0 0 0 116,000 234,000 377,000
VEPCO Gas Fuel $ 7,500 7,500 9,400 9,400 9,400 9,400 9,400
----- ----- ----- ----- ----- ----- -----
Total Fuel Cost $ 2,258,500 2,724,500 4,286,400 5,866,400 7,120,400 8,595,400 10,349,400
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 2,236,000 2,094,000 3,120,000 4,149,000 5,113,000 6,233,000 7,134,000
Winter Gas Fuel $ 15,000 623,000 1,157,000 1,708,000 1,882,000 2,119,000 2,829,000
Winter Oil Fuel $ 0 0 0 0 116,000 234,000 377,000
VEPCO Gas Fuel $ 7,500 7,500 9,400 9,400 9,400 9,400 9,400
Fuel Usage - Thermal MMBtu 35,561 38,537 55,466 69,102 79,154 89,173 99,680
Fuel Cost - Thermal [2]$ 73,000 80,000 116,000 146,000 170,000 199,000 233,000
------ ------ ------- ------- ------- ------- -------
Total Fuel Costs -
Cogen Plant 2,332,000 2,805,000 4,402,000 6,012,000 7,290,000 8,794,000 10,582,000
Average Fuel Cost($/MMBtu) $1.44 $1.60 $1.74 $1.91 $2.02 $2.17 $2.33
Average Fuel Cost($/kWh) $0.0131 $0.0146 $0.0159 $0.0174 $0.0184 $0.0197 $0.0212
[2] Boiler fuel cost estimate below used to determine fuel cost allocation of
thermal production.
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 6,723 6,656 6,163 5,770 5,474 5,179 4,885
Chilled Water Production
Hours - Boil 2,923 2,856 2,363 1,970 1,689 1,409 1,133
Steam Fuel - Boiler MMBtu 576,161 570,419 528,169 494,489 469,122 443,840 418,645
C. Water Fuel - Boiler MMBtu 90,070 88,006 72,814 60,704 52,045 43,417 34,913
------ ------ ------ ------ ------ ------ ------
Total Boiler Fuel MMBtu 666,231 658,425 600,983 555,193 521,167 487,258 453,557
Boiler Fuel Cost $/MMBtu $2.05 $2.07 $2.10 $2.11 $2.15 $2.24 $2.34
Boiler Fuel Cost $ 1,365,000 1,365,000 1,261,000 1,172,000 1,120,000 1,089,000 1,062,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 2,077 2,285 2,513 2,418 2,327 2,239 2,155
Winter Gas Dispatch 601 742 908 763 642 539 452
Winter Oil Dispatch 76 122 195 185 175 166 157
VEPCO Gas Dispatch 600 600 600 600 600 600 600
--- --- --- --- --- --- ---
Total Dispatch Hour 3,354 3,749 4,216 3,966 3,744 3,544 3,364
Percentage 38.29% 42.80% 48.13% 45.27% 42.74% 40.46% 38.40%
Winter Starts 15 19 23 19 16 13 11
Winter Start Duration 40 40 40 40 40 40 40
Net Generation
Availability Factor [1] 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
[1] Equivalent full load dispatch hours from Dispatch Assumptions incorporate
planned outage and forced outage availability factors.
Summer Output MWh 342,705 377,025 414,645 398,970 383,955 369,435 355,575
Winter Gas Output MWh 118,998 146,916 179,784 151,074 127,116 106,722 89,496
Winter Oil Dispatch MWh 15,048 24,156 38,610 36,630 34,650 32,868 31,086
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000 99,000 99,000 99,000
------ ------ ------ ------ ------ ------ ------
Net Generation MWh 575,751 647,097 732,039 685,674 644,721 608,025 575,157
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 3,050,075 3,355,523 3,690,341 3,550,833 3,417,200 3,287,972 3,164,618
Winter Gas Fuel MMBtu 1,059,082 1,307,552 1,600,078 1,344,559 1,131,332 949,826 796,514
Winter Oil Fuel MMBtu 133,927 214,988 343,629 326,007 308,385 292,525 276,665
VEPCO Gas Fuel MMBtu 881,100 881,100 881,100 881,100 881,100 881,100 881,100
------- ------- ------- ------- ------- ------- -------
Total Fuel MMBtu 5,124,184 5,759,163 6,515,147 6,102,499 5,738,017 5,411,423 5,118,897
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $2.69 $2.81 $2.94 $3.14 $3.35 $3.57 $3.82
Winter Gas Fuel $/MMBtu $3.48 $3.63 $3.78 $4.03 $4.29 $4.55 $4.85
Winter Oil Fuel $/MMBtu $4.48 $4.51 $4.54 $4.59 $4.64 $4.70 $4.76
VEPCO Gas Fuel $/kWh $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011
Summer Gas Fuel $ 8,205,000 9,431,000 10,835,000 11,146,000 11,455,000 11,754,000 12,100,000
Winter Gas Fuel $ 3,691,000 4,747,000 6,050,000 5,415,000 4,848,000 4,325,000 3,864,000
Winter Oil Fuel $ 600,000 970,000 1,561,000 1,497,000 1,432,000 1,374,000 1,316,000
VEPCO Gas Fuel $ 11,300 11,300 11,300 11,300 11,300 11,300 11,300
Total Fuel Cost $ 12,507,300 15,159,300 18,457,300 18,069,300 17,746,300 17,464,300 17,291,300
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 8,205,000 9,431,000 10,835,000 11,146,000 11,455,000 11,754,000 12,100,000
Winter Gas Fuel $ 3,691,000 4,747,000 6,050,000 5,415,000 4,848,000 4,325,000 3,864,000
Winter Oil Fuel $ 600,000 970,000 1,561,000 1,497,000 1,432,000 1,374,000 1,316,000
VEPCO Gas Fuel $ 11,300 11,300 11,300 11,300 11,300 11,300 11,300
Fuel Usage - Thermal MMBtu 115,150 129,419 146,408 137,135 128,944 121,605 115,031
Fuel Cost - Thermal [2]$ 282,000 332,000 393,000 395,000 400,000 404,000 410,000
------- ------- ------- ------- ------- ------- -------
Total Fuel Costs -
Cogen Plant 12,789,000 15,491,000 18,850,000 18,464,000 18,146,000 17,868,000 17,701,000
Average Fuel Cost($/MMBtu) $2.44 $2.63 $2.83 $2.96 $3.09 $3.23 $3.38
Average Fuel Cost($/kWh) $0.0222 $0.0239 $0.0257 $0.0269 $0.0281 $0.0294 $0.0308
[2] Boiler fuel cost estimate below used to determine fuel cost allocation of
thermal production.
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 4,446 4,051 3,584 3,834 4,056 4,256 4,436
Chilled Water Production
Hours - Boil 722 373 0 219 431 622 793
Steam Fuel - Boiler MMBtu 381,022 347,171 307,149 328,574 347,599
C. Water Fuel - Boiler MMBtu 22,248 11,494 0 6,748 13,281 19,166 24,436
------ ------ - ----- ------ ------ ------
Total Boiler Fuel MMBtu 403,270 358,664 307,149 335,322 360,880 383,906 404,601
Boiler Fuel Cost $/MMBtu $2.45 $2.56 $2.68 $2.88 $3.10 $3.32 $3.57
Boiler Fuel Cost $ 988,000 919,000 824,000 966,000 1,120,000 1,276,000 1,444,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 2,073 2,000 1,929 1,861 1,794 1,729
Winter Gas Dispatch 379 429 485 548 619 698
Winter Oil Dispatch 149 147 144 142 140 138
VEPCO Gas Dispatch 600 600 600 600 600 600
--- --- --- --- --- ---
Total Dispatch Hour 3,201 3,176 3,158 3,151 3,153 3,165
Percentage 36.54% 36.26% 36.05% 35.97% 35.99% 36.13%
Winter Starts 9 11 12 14 15 17
Winter Start Duration 40 40 40 40 40 40
Net Generation
Availability Factor [1] 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
[1] Equivalent full load dispatch hours from Dispatch Assumptions incorporate
planned outage and forced outage availability factors.
Summer Output MWh 342,045 330,000 318,285 307,065 296,010 285,285
Winter Gas Output MWh 75,042 84,942 96,030 108,504 122,562 138,204
Winter Oil Dispatch MWh 29,502 29,106 28,512 28,116 27,720 27,324
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000 99,000 99,000
------ ------ ------ ------ ------ ------
Net Generation MWh 545,589 543,048 541,827 542,685 545,292 549,813
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 3,044,201 2,937,000 2,832,737 2,732,879 2,634,489 2,539,037
Winter Gas Fuel MMBtu 667,874 755,984 854,667 965,686 1,090,802 1,230,016
Winter Oil Fuel MMBtu 262,568 259,043 253,757 250,232 246,708 243,184
VEPCO Gas Fuel MMBtu 881,100 881,100 881,100 881,100 881,100 881,100
------- ------- ------- ------- ------- -------
Total Fuel MMBtu 4,855,742 4,833,127 4,822,260 4,829,897 4,853,099 4,893,336
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $4.08 $4.31 $4.54 $4.78 $5.05 $5.33
Winter Gas Fuel $/MMBtu $5.16 $5.44 $5.74 $6.06 $6.35 $6.68
Winter Oil Fuel $/MMBtu $4.82 $4.87 $4.93 $5.00 $5.06 $5.12
VEPCO Gas Fuel $/kWh $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011
Summer Gas Fuel $ 12,433,000 12,648,000 12,858,000 13,066,000 13,309,000 13,546,000
Winter Gas Fuel $ 3,447,000 4,109,000 4,905,000 5,848,000 6,926,000 8,211,000
Winter Oil Fuel $ 1,265,000 1,262,000 1,252,000 1,250,000 1,247,000 1,245,000
VEPCO Gas Fuel $ 11,300 11,300 11,300 11,300 11,300 11,300
Total Fuel Cost $ 17,156,300 18,030,300 19,026,300 20,175,300 21,493,300 23,013,300
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 12,433,000 12,648,000 12,858,000 13,066,000 13,309,000 13,546,000
Winter Gas Fuel $ 3,447,000 4,109,000 4,905,000 5,848,000 6,926,000 8,211,000
Winter Oil Fuel $ 1,265,000 1,262,000 1,252,000 1,250,000 1,247,000 1,245,000
VEPCO Gas Fuel $ 11,300 11,300 11,300 11,300 11,300 11,300
Fuel Usage - Thermal MMBtu 109,118 108,610 108,365 108,537 109,058 109,963
Fuel Cost - Thermal [2]$ 417,000 439,000 465,000 491,000 523,000 558,000
------- ------- ------- ------- ------- -------
Total Fuel Costs -
Cogen Plant 17,573,000 18,469,000 19,491,000 20,666,000 22,016,000 23,571,000
Average Fuel Cost($/MMBtu) $3.54 $3.74 $3.95 $4.18 $4.44 $4.71
Average Fuel Cost($/kWh) $0.0322 $0.0340 $0.0360 $0.0381 $0.0404 $0.0429
[2] Boiler fuel cost estimate below used to determine fuel cost allocation of
thermal production.
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 4,599 4,624 4,642 4,649 4,647 4,635
Chilled Water Production
Hours - Boil 948 971 986 991 987 973
Steam Fuel - Boiler MMBtu 394,134 396,277 397,819 398,419 398,248 397,220
C. Water Fuel - Boiler MMBtu 29,212 29,921 30,383 30,537 30,414 29,982
------ ------ ------ ------ ------ ------
Total Boiler Fuel MMBtu 423,346 426,197 428,202 428,956 428,662 427,202
Boiler Fuel Cost $/MMBtu $3.83 $4.04 $4.29 $4.53 $4.79 $5.07
Boiler Fuel Cost $ 1,620,000 1,723,000 1,836,000 1,941,000 2,054,000 2,167,000
</TABLE>
<PAGE>
PLANT OPERATING COSTS
<TABLE>
<CAPTION>
1995 1996
Estimated Actual Budget Escalation
---------------- ------ ----------
<S> <C> <C> <C>
Fuel Transportation Costs:
Firm Transportation - Transco $1,097,889 $1,080,318 0.00%
Less: Capacity Release $0 ($132,000) 0.00%
Fuel Management Fee $240,000 $240,000 3.00%
-------- --------
Total Fuel Transportation $1,337,889 $1,188,318
Operating Costs:
O&M Contract Fee $1,641,825 $1,703,120 3.00%
General Maintenance & Repairs $144,622 $160,825 8.00%
Planned Plant Maintenance $156,972 $328,425 3.00%
Additional Maintenance $274,024 $155,000 0.00%
Parts Replacement $228,392 $167,940 3.00%
Other Plant Expenses $34,930 $52,100 3.00%
Panda Management Fee [2] $480,000 $0 0.00%
Office & Admin Expenses $231,061 $190,015 3.00%
Property Taxes $977,109 $972,000 -3.00%
Insurance $298,728 $300,000 3.00%
VEPCO Performance LOC $64,602 $66,232 Input Panda Forecast
------- -------
Total Operating Costs $4,532,265 $4,095,657
Total Plant Operating Cost $5,870,154 $5,283,975
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (132,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 240,000 247,000 255,000 262,000 270,000 278,000 287,000 295,000
O&M Contract Fee 1,703,000 1,754,000 1,807,000 1,861,000 1,917,000 1,974,000 2,034,000 2,095,000
General Maintenance & Repairs 161,000 174,000 188,000 203,000 219,000 236,000 255,000 276,000
Planned Plant Maintenanance 328,000 338,000 348,000 359,000 370,000 381,000 392,000 404,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 168,000 173,000 178,000 184,000 189,000 195,000 201,000 207,000
Other Plant Expenses 52,000 54,000 55,000 57,000 59,000 60,000 62,000 64,000
Panda Management Fee [2] 0 0 0 0 0 0 0 0
Office & Admin Expenses 190,000 196,000 202,000 208,000 214,000 220,000 227,000 234,000
Property Taxes 972,000 943,000 915,000 887,000 861,000 835,000 810,000 785,000
Insurance 300,000 309,000 318,000 328,000 338,000 348,000 358,000 369,000
VEPCO Performance LOC 66,000 66,000 66,000 66,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 5,283,000 5,173,000 5,251,000 5,334,000 5,440,000 5,530,000 5,629,000 5,732,000
Percent Change -10.00% -2.08% 1.51% 1.58% 1.99% 1.65% 1.79% 1.83%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 2004 2005 2006 2007 2008 2009 2010
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 304,000 313,000 323,000 332,000 342,000 352,000 363,000
O&M Contract Fee 2,157,000 2,222,000 2,289,000 2,358,000 2,428,000 2,501,000 2,576,000
General Maintenance & Repairs 298,000 321,000 347,000 375,000 405,000 437,000 472,000
Planned Plant Maintenanance 416,000 429,000 441,000 455,000 468,000 482,000 497,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 213,000 219,000 226,000 232,000 239,000 247,000 254,000
Other Plant Expenses 66,000 68,000 70,000 72,000 74,000 77,000 79,000
Panda Management Fee [2] 0 0 0 0 0 0 0
Office & Admin Expenses 241,000 248,000 255,000 263,000 271,000 279,000 287,000
Property Taxes 762,000 739,000 717,000 695,000 674,000 654,000 635,000
Insurance 380,000 391,000 403,000 415,000 428,000 441,000 454,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 5,840,000 5,953,00 6,074,000 6,200,000 6,332,000 6,473,000 6,620,000
Percent Change 1.88% 1.93% 2.03% 2.07% 2.13% 2.23% 2.27%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 2011 2012 2013 2014 2015
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 374,000 385,000 397,000 409,000 421,000
O&M Contract Fee 2,653,000 2,733,000 2,815,000 2,899,000 2,986,000
General Maintenance & Repairs 510,000 551,000 595,000 643,000 694,000
Planned Plant Maintenanance 512,000 527,000 543,000 559,000 576,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000
Parts Replacement 262,000 269,000 278,000 286,000 294,000
Other Plant Expenses 81,000 84,000 86,000 89,000 91,000
Panda Management Fee [2] 0 0 0 0 0
Office & Admin Expenses 296,000 305,000 314,000 323,000 333,000
Property Taxes 616,000 597,000 579,000 562,000 545,000
Insurance 467,000 481,000 496,000 511,000 526,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------
Plant Operating Costs 6,774,000 6,935,000 7,106,000 7,284,000 7,469,000
Percent Change 2.33% 2.38% 2.47% 2.50% 2.54%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<PAGE>
<TABLE>
<CAPTION>
VARIABLE PLANT COSTS
1995 1996
Actual Summary Escalation
------ ------- ----------
<S> <C> <C> <C>
Plant Electricity Usage
Hours Not Dispatched 7698 7683
Average Electric Load (kW) 1150 1150
Electric Rate ($/kWh) $0.0440 $0.0453 3.00%
------- -------
Total Plant Electricity Usage $389,519 $400,423
Water & Chemical Usage
Hours Dispatched 1062 1077
Gallons per Hour Usage - Cogen 32,000 32,000
Steam/Chilled Water Production Hours 11,800 11,800
Gallons per Hour Usage - Boiler 8,000 8,000
Total Gallons (1000s) 128,384 128,864
Water & Chemical Cost ($/1000 gal) $1.34 $1.38 3.00%
----- -----
Total Water & Chemical Usage $172,035 $177,858
Water Discharge
Hours Dispatched 1062 1077
Gallons per Hour Usage - Cogen 8,000 8,000
Steam/Chilled Water Production Hours 11,800 11,800
Gallons per Hour Usage - Boiler 2,000 2,000
Total Gallons (1000s) 32,096 32,216
Water Discharge Cost ($/1000 gal) $1.09 $1.12 3.00%
----- -----
Total Water Discharge $34,985 $36,169
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Variable Costs 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched 1077 1144 1637 2030 2326 2621 2915 3354 3749 4216
Hours Not Dispatched 7683 7616 7123 6730 6434 6139 5845 5406 5011 4544
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 400,000 409,000 394,000 383,000 377,000 371,000 364,000 347,000 331,000 309,000
Water & Chemical Usage 178,000 186,000 215,000 240,000 262,000 285,000 309,000 342,000 375,000 413,000
Water Discharge 36,000 38,000 44,000 49,000 53,000 58,000 63,000 70,000 76,000 84,000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Plant Variable Cost 614,000 633,000 653,000 672,000 692,000 714,000 736,000 759,000 782,000 806,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Variable Costs 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched 3966 3744 3544 3364 3201 3176 3158 3151 3153 3165
Hours Not Dispatched 4794 5016 5216 5396 5559 5584 5602 5609 5607 5595
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 336,000 362,000 388,000 413,000 438,000 453,000 469,000 483,000 497,000 511,000
Water & Chemical Usage 411,000 409,000 409,000 410,000 411,000 422,000 433,000 445,000 459,000 474,000
Water Discharge 83,000 83,000 83,000 83,000 84,000 86,000 88,000 91,000 93,000 96,000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Plant Variable Cost 830,000 854,000 880,000 906,000 933,000 961,000 990,000 1,019,000 1,049,000 1,081,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 674 625 918 1,210 1,463 1,715 1,887 2,077
Winter Gas Dispatch 3 119 219 320 348 376 480 601
Winter Oil Dispatch 0 0 0 0 15 30 48 76
VEPCO Gas Dispatch 400 400 500 500 500 500 500 600
Total Dispatch Hours 1,077 1,144 1,637 2,030 2,326 2,621 2,915 3,354
Percentage 12.29% 13.06% 18.69% 23.17% 26.55% 29.92% 33.28% 38.29%
Winter Starts 0 3 5 8 9 9 12 15
Winter Start Duration 40 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 111,210 103,125 151,470 199,650 241,395 282,975 311,355 342,705
Winter Gas Output MWh 594 23,562 43,362 63,360 68,904 74,448 95,040 118,998
Winter Oil Dispatch MWh 0 0 0 0 2,970 5,940 9,504 15,048
VEPCO Gas Dispatch MWh 66,000 66,000 82,500 82,500 82,500 82,500 82,500 99,000
Net Generation MWh 177,804 192,687 277,332 345,510 395,769 445,863 498,399 575,751
Capacity Revenues
Capacity Rate $/kw-mo $12.49 $11.65 $11.65 $10.82 $10.82 $10.82 $10.82 $10.82
Capacity Revenues - Summer 12,363,000 11,537,000 11,537,000 10,713,000 10,713,000 10,713,000 10,713,000 10,713,000
Capacity Revenues - Winter 14,836,000 13,845,000 13,845,000 12,855,000 12,855,000 12,855,000 12,855,000 12,855,000
Total Capacity Revenues 27,199,000 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000 23,568,000 23,568,000
Energy Revenues
Summer Gas Charge $/kWh $0.0231 $0.0233 $0.0237 $0.0240 $0.0245 $0.0254 $0.0264 $0.0276
Winter Gas Charge $/kWh $0.0288 $0.0293 $0.0297 $0.0300 $0.0304 $0.0317 $0.0331 $0.0345
Winter Oil Charge $/kWh $0.0369 $0.0383 $0.0399 $0.0414 $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $0.0039 $0.0040 $0.0041 $0.0042 $0.0043 $0.0044 $0.0045 $0.0046
Variable O&M Charge $/kWh $0.0022 $0.0023 $0.0024 $0.0024 $0.0025 $0.0026 $0.0027 $0.0027
Summer Gas Revenues $ 2,813,000 2,644,000 3,950,000 5,273,000 6,510,000 7,923,000 9,054,000 10,387,000
Winter Gas Revenues $ 18,000 745,000 1,389,000 2,055,000 2,270,000 2,552,000 3,400,000 4,427,000
Winter Oil Revenues $ 0 0 0 0 135,000 271,000 435,000 690,000
VEPCO Gas Revenues $ 258,000 265,000 340,000 349,000 358,000 365,000 371,000 454,000
Total Energy Revenues $ 3,089,000 3,654,000 5,679,000 7,677,000 9,273,000 11,111,000 13,260,000 15,958,000
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 0 154,000 283,000 499,000 611,000 566,000 687,000 779,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.035 $0.035 $0.035 $0.035 $0.035 $0.040 $0.040 $0.040
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 141,000 141,000 141,000 141,000 141,000 162,000 162,000 162,000
Total Thermal Revenues $ 590,000 590,000 590,000 590,000 590,000 611,000 611,000 611,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 2,285 2,513 2,418 2,327 2,239 2,155 2,073 2,000
Winter Gas Dispatch 742 908 763 642 539 452 379 429
Winter Oil Dispatch 122 195 185 175 166 157 149 147
VEPCO Gas Dispatch 600 600 600 600 600 600 600 600
Total Dispatch Hours 3,749 4,216 3,966 3,744 3,544 3,364 3,201 3,176
Percentage 42.80% 48.13% 45.27% 42.74% 40.46% 38.40% 36.54%
Winter Starts 19 23 19 16 13 11 9 11
Winter Start Duration 40 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 377,025 414,645 398,970 383,955 369,435 355,575 342,045 330,000
Winter Gas Output MWh 146,916 179,784 151,074 127,116 106,722 89,496 75,042 84,942
Winter Oil Dispatch MWh 24,156 38,610 36,630 34,650 32,868 31,086 29,502 29,106
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000 99,000 99,000 99,000 99,000
Net Generation MWh 647,097 732,039 685,674 644,721 608,025 575,157 545,589 543,048
Capacity Revenues
Capacity Rate $/kw-mo $10.82 $10.82 $8.32 $8.32 $8.32 $8.32 $8.32 $8.32
Capacity Revenues - Summer 10,713,000 10,713,000 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000
Capacity Revenues - Winter 12,855,000 12,855,000 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000
Total Capacity Revenues 23,568,000 23,568,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Revenues
Summer Gas Charge $/kWh $ $0.0288 $0.0300 $0.0320 $0.0340 $0.0362 $0.0386 $0.0411 $0.0433
Winter Gas Charge $/kWh $ $0.0359 $0.0373 $0.0397 $0.0421 $0.0446 $0.0475 $0.0504 $0.0530
Winter Oil Charge $/kWh $ $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $ $0.0047 $0.0048 $0.0048 $0.0049 $0.0050 $0.0051 $0.0052 $0.0053
Variable O&M Charge $/kWh $ $0.0028 $0.0029 $0.0030 $0.0031 $0.0032 $0.0033 $0.0034 $0.0035
Summer Gas Revenues $ 11,909,000 13,648,000 13,951,000 14,254,000 14,544,000 14,884,000 15,209,000 15,419,000
Winter Gas Revenues $ 5,684,000 7,233,000 6,444,000 5,744,000 5,104,000 4,539,000 4,033,000 4,795,000
Winter Oil Revenues $ 1,109,000 1,776,000 1,688,000 1,600,000 1,520,000 1,441,000 1,370,000 1,355,000
VEPCO Gas Revenues $ 462,000 470,000 479,000 488,000 498,000 507,000 517,000 527,000
Total Energy Revenues $ 19,164,000 23,127,000 22,562,000 22,086,000 21,666,000 21,371,000 21,129,000 22,096,000
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 881,000 934,000 515,000 124,000 498,000 421,000 345,000 421,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.040 $0.040 $0.045 $0.045 $0.045 $0.045 $0.045 $0.050
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 162,000 162,000 182,000 182,000 182,000 182,000 182,000 202,000
Total Thermal Revenues $ 611,000 611,000 631,000 631,000 631,000 631,000 631,000 651,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 2012 2013 2014 2015
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0
Summer Dispatch 1,929 1,861 1,794 1,729
Winter Gas Dispatch 485 548 619 698
Winter Oil Dispatch 144 142 140 138
VEPCO Gas Dispatch 600 600 600 600
Total Dispatch Hours 3,158 3,151 3,153 3,165
Percentage
Winter Starts 12 14 15 17
Winter Start Duration 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 318,285 307,065 296,010 285,285
Winter Gas Output MWh 96,030 108,504 122,562 138,204
Winter Oil Dispatch MWh 28,512 28,116 27,720 27,324
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000
Net Generation MWh 541,827 542,685 545,292 549,813
Capacity Revenues
Capacity Rate $/kw-mo $8.32 $8.32 $8.32 $8.32
Capacity Revenues - Summer 8,238,000 8,238,000 8,238,000 8,238,000
Capacity Revenues - Winter 9,885,000 9,885,000 9,885,000 9,885,000
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000
Energy Revenues
Summer Gas Charge $/kWh $0.0455 $0.0479 $0.0505 $0.0532
Winter Gas Charge $/kWh $0.0558 $0.0588 $0.0616 $0.0647
Winter Oil Charge $/kWh $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $0.0054 $0.0055 $0.0057 $0.0058
Variable O&M Charge $/kWh $0.0036 $0.0037 $0.0038 $0.0039
Summer Gas Revenues $ 15,625,000 15,827,000 16,065,000 16,294,000
Winter Gas Revenues $ 5,706,000 6,783,000 8,018,000 9,484,000
Winter Oil Revenues $ 1,330,000 1,315,000 1,299,000 1,284,000
VEPCO Gas Revenues $ 538,000 549,000 560,000 571,000
Total Energy Revenues $ 23,199,000 24,474,000 25,942,000 27,633,000
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 459,000 536,000 574,000 651,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.050 $0.050 $0.050 $0.050
Steam Revenues $ 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 202,000 202,000 202,000 202,000
Total Thermal Revenues $ 651,000 651,000 651,000 651,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 7/96-12/96 [1] 1997 1998 1999 2000 2001 2002
-------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 13,599,500 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000 23,568,000
Energy Charges
Summer Gas Charge 1,406,500 2,644,000 3,950,000 5,273,000 6,510,000 7,923,000 9,054,000
Winter Gas Charge 9,000 745,000 1,389,000 2,055,000 2,270,000 2,552,000 3,400,000
Winter Oil Charge 0 0 0 0 135,000 271,000 435,000
VEPCO Gas Charge 129,000 265,000 340,000 349,000 358,000 365,000 371,000
------- ------- ------- ------- ------- ------- -------
Total Energy Revenues 1,544,500 3,654,000 5,679,000 7,677,000 9,273,000 11,111,000 13,260,000
Winter Gas Start Revenues 0 154,000 283,000 499,000 611,000 566,000 687,000
Steam Sales Revenues 224,500 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 70,500 141,000 141,000 141,000 141,000 162,000 162,000
------ ------- ------- ------- ------- ------- -------
Total Thermal Revenues 295,000 590,000 590,000 590,000 590,000 611,000 611,000
Total Sales Revenues 15,439,000 29,780,000 31,934,000 32,334,000 34,042,000 35,856,000 38,126,000
Interest - D.S.R. 5.0% 194,000 371,000 354,000 336,000 335,000 333,000 330,000
------- ------- ------- ------- ------- ------- -------
Total Revenues 15,633,000 30,151,000 32,288,000 32,670,000 34,377,000 36,189,000 38,456,000
Expenses
Fuel Costs - Cogen Plant 1,166,000 2,805,000 4,402,000 6,012,000 7,290,000 8,794,000 10,582,000
Fuel Costs - Boiler 682,500 1,365,000 1,261,000 1,172,000 1,120,000 1,089,000 1,062,000
Plant Operating Costs 2,575,500 5,173,000 5,251,000 5,334,000 5,440,000 5,530,000 5,629,000
Plant Variable Costs 307,000 633,000 653,000 672,000 692,000 714,000 736,000
------- ------- ------- ------- ------- ------- -------
Total Operating Costs 4,731,000 9,976,000 11,567,000 13,190,000 14,542,000 16,127,000 18,009,000
Rev. Avail. for Debt Service 10,902,000 20,175,000 20,721,000 19,480,000 19,835,000 20,062,000 20,447,000
Debt Service
Total Interest Costs 5,175,000 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000 6,764,000
Total Principal Payments 2,753,000 5,501,000 5,922,000 5,093,000 5,473,000 5,880,000 6,294,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service 7,928,000 14,694,000 14,627,000 13,314,000 13,242,000 13,164,000 13,058,000
Operating Cashflow
Pre-Tax Cashflow from Operations 2,974,000 5,481,000 6,094,000 6,166,000 6,593,000 6,898,000 7,389,000
Overhaul Reserve Fund Additions (140,000) (306,000) (452,000) (577,000) (681,000) (790,000) (905,000)
Expected Debt Service Reserve Releases 655,000 26,000 670,000 30,000 33,000 47,000 50,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0 0
- - - - - - -
Net Balance from Operations [2] 3,489,000 5,201,000 6,312,000 5,619,000 5,945,000 6,155,000 6,534,000
Debt Service Coverage
Revenue Avail. for Debt Service 10,902,000 20,175,000 20,721,000 19,480,000 19,835,000 20,062,000 20,447,000
Total Interest Costs 5,175,000 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000 6,764,000
Total Principal Payments 2,753,000 5,501,000 5,922,000 5,093,000 5,473,000 5,880,000 6,294,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service Costs 7,928,000 14,694,000 14,627,000 13,314,000 13,242,000 13,164,000 13,058,000
Times Interest Coverage 2.11 2.19 2.38 2.37 2.55 2.75 3.02
Times Total Debt Coverage 1.38 1.37 1.42 1.46 1.50 1.52 1.57
</TABLE>
[1] Project closing of July 1996 assumed. Reflects one-half year's operations
following refinancing.
[2] Available for capital expenditures or distributions to Project owners.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 23,568,000 23,568,000 23,568,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 10,387,000 11,909,000 13,648,000 13,951,000 14,254,000 14,544,000 14,884,000
Winter Gas Charge 4,427,000 5,684,000 7,233,000 6,444,000 5,744,000 5,104,000 4,539,000
Winter Oil Charge 690,000 1,109,000 1,776,000 1,688,000 1,600,000 1,520,000 1,441,000
VEPCO Gas Charge 454,000 462,000 470,000 479,000 488,000 498,000 507,000
------- ------- ------- ------- ------- ------- -------
Total Energy Revenues 15,958,000 19,164,000 23,127,000 22,562,000 22,086,000 21,666,000 21,371,000
Winter Gas Start Revenues 779,000 881,000 934,000 515,000 124,000 498,000 421,000
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 162,000 162,000 162,000 182,000 182,000 182,000 182,000
------- ------- ------- ------- ------- ------- -------
Total Thermal Revenues 611,000 611,000 611,000 631,000 631,000 631,000 631,000
Total Sales Revenues 40,916,000 44,224,000 48,240,000 41,831,000 40,964,000 40,918,000 40,546,000
Interest - D.S.R. 5.0% 328,000 325,000 272,000 219,000 215,000 210,000 205,000
------- ------- ------- ------- ------- ------- -------
Total Revenues 41,244,000 44,549,000 48,512,000 42,050,000 41,179,000 41,128,000 40,751,000
Expenses
Fuel Costs - Cogen Plant 12,789,000 15,491,000 18,850,000 18,464,000 18,146,000 17,868,000 17,701,000
Fuel Costs - Boiler 988,000 919,000 824,000 966,000 1,120,000 1,276,000 1,444,000
Plant Operating Costs 5,732,000 5,840,000 5,953,000 6,074,000 6,200,000 6,332,000 6,473,000
Plant Variable Costs 759,000 782,000 806,000 830,000 854,000 880,000 906,000
------- ------- ------- ------- ------- ------- -------
Total Operating Costs 20,268,000 23,032,000 26,433,000 26,334,000 26,320,000 26,356,000 26,524,000
Rev. Avail. for Debt Service 20,976,000 21,517,000 22,079,000 15,716,000 14,859,000 14,772,000 14,227,000
Debt Service
Total Interest Costs 6,206,000 5,610,000 4,972,000 4,418,000 4,042,000 3,647,000 3,235,000
Total Principal Payments 6,737,000 7,215,000 7,697,000 4,292,000 4,492,000 4,705,000 4,919,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service 12,943,000 12,825,000 12,669,000 8,710,000 8,534,000 8,352,000 8,154,000
Operating Cashflow
Pre-Tax Cashflow from Operations 8,033,000 8,692,000 9,410,000 7,006,000 6,325,000 6,420,000 6,073,000
Overhaul Reserve Fund Additions (1,072,000) (1,235,000) (1,430,000) (1,386,000) (1,347,000) (1,314,000) (1,284,000)
Expected Debt Service Reserve Releases 51,000 70,000 2,034,000 85,000 87,000 96,000 100,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0 0
- - - - - - -
Net Balance from Operations [2] 7,012,000 7,527,000 10,014,000 5,705,000 5,065,000 5,202,000 4,889,000
Debt Service Coverage
Revenue Avail. for Debt Service 20,976,000 21,517,000 22,079,000 15,716,000 14,859,000 14,772,000 14,227,000
Total Interest Costs 6,206,000 5,610,000 4,972,000 4,418,000 4,042,000 3,647,000 3,235,000
Total Principal Payments 6,737,000 7,215,000 7,697,000 4,292,000 4,492,000 4,705,000 4,919,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service Costs 12,943,000 12,825,000 12,669,000 8,710,000 8,534,000 8,352,000 8,154,000
Times Interest Coverage 3.38 3.84 4.44 3.56 3.68 4.05 4.40
Times Total Debt Coverage 1.62 1.68 1.74 1.80 1.74 1.77 1.74
</TABLE>
[1] Project closing of July 1996 assumed. Reflects one-half year's operations
following refinancing.
[2] Available for capital expenditures or distributions to Project owners.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 15,209,000 15,419,000 15,625,000 15,827,000 16,065,000 16,294,000
Winter Gas Charge 4,033,000 4,795,000 5,706,000 6,783,000 8,018,000 9,484,000
Winter Oil Charge 1,370,000 1,355,000 1,330,000 1,315,000 1,299,000 1,284,000
VEPCO Gas Charge 517,000 527,000 538,000 549,000 560,000 571,000
------- ------- ------- ------- ------- -------
Total Energy Revenues 21,129,000 22,096,000 23,199,000 24,474,000 25,942,000 27,633,000
Winter Gas Start Revenues 345,000 421,000 459,000 536,000 574,000 651,000
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 182,000 202,000 202,000 202,000 202,000 202,000
------- ------- ------- ------- ------- -------
Total Thermal Revenues 631,000 651,000 651,000 651,000 651,000 651,000
Total Sales Revenues 40,228,000 41,291,000 42,432,000 43,784,000 45,290,000 47,058,000
Interest - D.S.R. 5.0% 201,000 196,000 191,000 185,000 169,000 79,000
------- ------- ------- ------- ------- ------
Total Revenues 40,429,000 41,487,000 42,623,000 43,969,000 45,459,000 47,137,000
Expenses
Fuel Costs - Cogen Plant 17,573,000 18,469,000 19,491,000 20,666,000 22,016,000 23,571,000
Fuel Costs - Boiler 1,620,000 1,723,000 1,836,000 1,941,000 2,054,000 2,167,000
Plant Operating Costs 6,620,000 6,774,000 6,935,000 7,106,000 7,284,000 7,469,000
Plant Variable Costs 933,000 961,000 990,000 1,019,000 1,049,000 1,081,000
------- ------- ------- --------- --------- ---------
Total Operating Costs 26,746,000 27,927,000 29,252,000 30,732,000 32,403,000 34,288,000
Rev. Avail. for Debt Service 13,683,000 13,560,000 13,371,000 13,237,000 13,056,000 12,849,000
Debt Service
Total Interest Costs 2,803,000 2,350,000 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 5,143,000 5,422,000 5,691,000 5,953,000 6,188,000 6,031,000
--------- --------- --------- --------- --------- ---------
Total Debt Service 7,946,000 7,772,000 7,565,000 7,328,000 7,042,000 6,356,000
Operating Cashflow
Pre-Tax Cashflow from Operations 5,737,000 5,788,000 5,806,000 5,909,000 6,014,000 6,493,000
Overhaul Reserve Fund Additions (1,259,000) (1,287,000) (1,318,000) (3,354,000) (2,396,000) (1,443,000)
Expected Debt Service Reserve Releases 82,000 99,000 115,000 139,000 476,000 3,145,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0
- - - - - -
Net Balance from Operations [2] 4,560,000 4,600,000 4,603,000 2,694,000 4,094,000 8,195,000
Debt Service Coverage
Revenue Avail. for Debt Service 13,683,000 13,560,000 13,371,000 13,237,000 13,056,000 12,849,000
Total Interest Costs 2,803,000 2,350,000 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 5,143,000 5,422,000 5,691,000 5,953,000 6,188,000 6,031,000
--------- --------- --------- --------- --------- ---------
Total Debt Service Costs 7,946,000 7,772,000 7,565,000 7,328,000 7,042,000 6,356,000
Times Interest Coverage 4.88 5.77 7.14 9.63 15.29 39.54
Times Total Debt Coverage 1.72 1.74 1.77 1.81 1.85 2.02
</TABLE>
[1] Project closing of July 1996 assumed. Reflects one-half year's operations
following refinancing.
[2] Available for capital expenditures or distributions to Project owners.
<PAGE>
<TABLE>
<CAPTION>
RESERVE FUNDS
Debt Service Reserve Fund 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 8,090,714 7,435,714 7,409,285 6,739,285 6,709,642 6,677,142 6,630,356 6,580,713
Additions 0 0 0 0 0 0 0 0
Interest 5.00% 388,000 371,000 354,000 336,000 335,000 333,000 330,000 328,000
Withdrawals (388,000) (371,000) (354,000) (336,000) (335,000) (333,000) (330,000) (328,000)
Releases (655,000) (26,429) (670,000) (29,643) (32,500) (46,786) (49,643) (51,429)
-------- ------- -------- ------- ------- ------- ------- -------
Ending Balance 7,435,714 7,409,285 6,739,285 6,709,642 6,677,142 6,630,356 6,580,713 6,529,284
Overhaul Reserve Fund
Beginning Balance 942,632 904,632 1,256,632 1,565,632 2,213,632 1,214,632 1,874,632 1,247,632
Additions 280,000 306,000 452,000 577,000 681,000 790,000 905,000 1,072,000
Additional Overhaul Allowance 0 0 0 0 0 0 0 0
Interest 5.00% 46,000 54,000 71,000 94,000 86,000 77,000 78,000
Turbine Overhauls (318,000) 0 (197,000) 0 (1,774,000) (216,000) (1,609,000) (2,575,000)
Other Withdrawals 0 0 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0 0 0
Releases 0 0 0 0 0 0 0 0
- - - - - - - -
Ending Balance 904,632 1,256,632 1,565,632 2,213,632 1,214,632 1,874,632 1,247,632 (177,368)
Dispatch Hours [1] 1,077 1,144 1,637 2,030 2,326 2,621 2,915 3,354
Reserve Addition 3.00% $260 $268 $276 $284 $293 $301 $310 $320
Reserve Addition 280,000 306,000 452,000 577,000 681,000 790,000 905,000 1,072,000
Overhaul Requirements
Frame 6 Operating Hours 4,863 6,007 7,644 9,674 12,000 14,621 17,536 20,890
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 14,056 16,940 21,556 27,281 33,840 41,231 49,452 58,910
Combustion Inspection (CI) [2] $59,000 $63,000 $65,000 $69,000
Hot Gas Path Inspection (HGP) [3]
Major Overhaul (MO) [4] $1,513,000
Frame 7 Operating Hours 3,525 4,669 6,306 8,336 10,662 13,283 16,198 19,552
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 10,186 13,167 17,783 23,508 30,067 37,458 45,678 55,137
Combustion Inspection (CI) [5] $85,000 $93,000 $96,000
Hot Gas Path Inspection (HGP) [6] $1,711,000
Major Overhaul (MO) [7] $2,445,000
Steam Turbine Equiv. Hours 9,029 10,173 11,810 13,840 16,166 18,787 21,702 25,056
Limited ST Overhaul (LO) [8] $53,000 $58,000 $61,000
Major ST Overhaul (MO) [9] $318,000
--------
Total Overhaul Costs $318,000 $0 $197,000 $0 $1,774,000 $216,000 $1,609,000 $2,575,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE FUNDS
Debt Service Reserve Fund 2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 6,529,284 6,458,927 4,424,641 4,339,284 4,252,141 4,156,427 4,056,070 3,973,927
Additions 0 0 0 0 0 0 0 0
Interest 5.00% 325,000 272,000 219,000 215,000 210,000 205,000 201,000 196,000
Withdrawals (325,000) (272,000) (219,000) (215,000) (210,000) (205,000) (201,000) (196,000)
Releases (70,357) (2,034,286) (85,357) (87,143) (95,714) (100,357) (82,143) (99,286)
------- ---------- ------- ------- ------- -------- ------- -------
Ending Balance 6,458,927 4,424,641 4,339,284 4,252,141 4,156,427 4,056,070 3,973,927 3,874,641
Overhaul Reserve Fund
Beginning Balance (177,368) 912,632 (777,368) 309,632 1,382,632 (1,019,368) 64,632 (1,921,368)
Additions 1,235,000 1,430,000 1,386,000 1,347,000 1,314,000 1,284,000 1,259,000 1,287,000
Additional Overhaul Allowance 0 0 0 0 0 0 0 0
Interest 5.00% 27,000 18,000 49,000 84,000 38,000 (12,000) 42,000 9,000
Turbine Overhauls (172,000) (1,315,000) (183,000) (4,506,000) (265,000) (199,000) (3,703,000) (212,000)
Other Withdrawals 0 0 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0 0 0
Releases 0 0 0 0 0 0 0 0
- - - - - - - -
Ending Balance 912,632 1,045,632 2,297,632 (777,368) 309,632 1,382,632 (1,019,368) 64,632
Dispatch Hours [1] 3,749 4,216 3,966 3,744 3,544 3,364 3,201 3,176
Reserve Addition 3.00% $329 $339 $349 $360 $371 $382 $393 $405
Reserve Addition 1,235,000 1,430,000 1,386,000 1,347,000 1,314,000 1,284,000 1,259,000 1,287,000
Overhaul Requirements
Frame 6 Operating Hours 24,639 28,855 32,821 36,565 40,109 43,473 46,674 49,850
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 69,482 81,371 92,555 103,113 113,107 122,594 131,621 140,577
Combustion Inspection (CI) [2] $71,000 $75,000 $80,000 $82,000 $87,000
Hot Gas Path Inspection (HGP) [3] $1,211,000 $1,404,000
Major Overhaul (MO) [4] $1,754,000
Frame 7 Operating Hours 23,301 27,517 31,483 35,227 38,771 42,135 45,336 48,512
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 65,709 77,598 88,782 99,340 109,334 118,821 127,848 136,804
Combustion Inspection (CI) [5] $101,000 $104,000 $108,000 $114,000 $117,000 $125,000
Hot Gas Path Inspection (HGP) [6] $2,299,000
Major Overhaul (MO) [7] $2,752,000
Steam Turbine Equiv. Hours 28,805 33,021 36,987 40,731 44,275 47,639 50,840 54,016
Limited ST Overhaul (LO) [8] $71,000
Major ST Overhaul (MO) [9]
Total Overhaul Costs $172,000 $1,315,000 $183,000 $4,506,000 $265,000 $199,000 $3,703,000 $212,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RESERVE FUNDS
Debt Service Reserve Fund 2012 2013 2014 2015
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning Balance 3,874,641 3,759,998 3,621,069 3,145,447
Additions 0 0 0 0
Interest 5.00% 191,000 185,000 169,000 79,000
Withdrawals (191,000) (185,000) (169,000) (79,000)
Releases (114,643) (138,929) (475,622) (3,145,449)
-------- -------- -------- ----------
Ending Balance 3,759,998 3,621,069 3,145,477 (2)
Overhaul Reserve Fund
Beginning Balance 64,632 (1,921,368) (2,060,368) 4,632
Additions 1,318,000 1,354,000 1,396,000 1,443,000
Additional Overhaul Allowance 0 2,000,000 1,000,000 0
Interest 5.00% (24,000) (46,000) (100,000) (51,000)
Turbine Overhauls (3,280,000) (3,447,000) (231,000) (2,763,000)
Other Withdrawals 0 0 0 0
Interest Withdrawal 0 0 0 0
Releases 0 0 0 0
- - - -
Ending Balance (1,921,368) (2,060,368) 4,632 (1,366,368)
Dispatch Hours [1] 3,158 3,151 3,153 3,165
Reserve Addition 3.00% $417 $430 $443 $456
Reserve Addition 1,318,000 1,354,000 1,396,000 1,443,000
Overhaul Requirements
Frame 6 Operating Hours 53,008 56,159 59,312 62,477
Estimated Maintenance Factor 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 149,483 158,368 167,260 176,185
Combustion Inspection (CI) [2] $90,000 $95,000 $98,000
Hot Gas Path Inspection (HGP) [3]
Major Overhaul (MO) [4] $2,094,000
Frame 7 Operating Hours 51,670 54,821 57,974 61,139
Estimated Maintenance Factor 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 145,709 154,595 163,487 172,412
Combustion Inspection (CI) [5] $132,000 $136,000
Hot Gas Path Inspection (HGP) [6] $2,665,000
Major Overhaul (MO) [7] $3,190,000
Steam Turbine Equiv. Hours 57,174 60,325 63,478 66,643
Limited ST Overhaul (LO) [8]
Major ST Overhaul (MO) [9] $1,221,000
----------
Total Overhaul Costs $3,280,000 $3,447,000 $231,000 $2,763,000
</TABLE>
[1] Equivalent full load dispatch hours.
[2] CI conducted each 8,000 factored hours. Estimated cost of $56,000 (1996$)
[3] HGP conducted each 24,000 factored hours. Estimated cost of $928,000
(1996$)
[4] MO conducted each 48,000 factored hours. Estimated cost of $1,267,000
(1996$)
[5] CI conducted each 8,000 factored hours. Estimated cost of $80,000 (1996$)
[6] HGP conducted each 24,000 factored hours. Estimated cost of $1,520,000
(1996$)
[7] MO conducted each 40,000 factored hours. Estimated cost of $1,988,000
(1996$)
[8] LO conducted each 16,000 equivalent hours. Estimated cost of $50,000
(1996$)
[9] MO conducted each 50,000 equivalent hours. Estimated cost of $739,000
(1996$)
<PAGE>
EXHIBIT B
PROJECTED PRO FORMA FOR ZERO DISPATCH
OPERATING ASSUMPTIONS
Planning Period
Base Year: 1996
PPA Final Year: 2015
PPA Remaining Term: 20 years
Planning Period: 20 years
Rounding Precision: -3
<TABLE>
<CAPTION>
Capacity Assumptions
--------------------
Summer Summer Winter Winter
Demonstrated Capacity Contract Demonstrated Capacity Contract
Year Capacity Degradation Capacity Capacity Degradation Capacity
---- -------- ----------- -------- -------- ----------- --------
(MW) (%) (MW) (MW) (%) (MW)
<S> <C> <C> <C> <C> <C> <C>
1996 174.0 0.00% 165.0 198.0 0.00% 198.0
1997 174.0 0.00% 165.0 198.0 0.00% 198.0
1998 174.0 0.00% 165.0 198.0 0.00% 198.0
1999 174.0 0.00% 165.0 198.0 0.00% 198.0
2000 174.0 0.00% 165.0 198.0 0.00% 198.0
2001 174.0 0.00% 165.0 198.0 0.00% 198.0
2002 174.0 0.00% 165.0 198.0 0.00% 198.0
2003 174.0 0.00% 165.0 198.0 0.00% 198.0
2004 174.0 0.00% 165.0 198.0 0.00% 198.0
2005 174.0 0.00% 165.0 198.0 0.00% 198.0
2006 174.0 0.00% 165.0 198.0 0.00% 198.0
2007 174.0 0.00% 165.0 198.0 0.00% 198.0
2008 174.0 0.00% 165.0 198.0 0.00% 198.0
2009 174.0 0.00% 165.0 198.0 0.00% 198.0
2010 174.0 0.00% 165.0 198.0 0.00% 198.0
2011 174.0 0.00% 165.0 198.0 0.00% 198.0
2012 174.0 0.00% 165.0 198.0 0.00% 198.0
2013 174.0 0.00% 165.0 198.0 0.00% 198.0
2014 174.0 0.00% 165.0 198.0 0.00% 198.0
2015 174.0 0.00% 165.0 198.0 0.00% 198.0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dispatch Assumptions
--------------------
Summer Gas Winter Gas Winter Oil VEPCO Gas Total
Dispatch Summer Dispatch Winter gas Dispatch Winter Gas Dispatch VEPCO Gas Dispatch
Year Hours Output Hours Output Hours Output Hours Output Hours Percent
- ---- -------- ------ -------- ------ -------- ------ ----------- ------ -------- -------
(MWh) (MWh) (MWh) (MWh) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 0 0 0 0 0 0 0 0 0 0
1997 0 0 0 0 0 0 0 0 0 0
1998 0 0 0 0 0 0 0 0 0 0
1999 0 0 0 0 0 0 0 0 0 0
2000 0 0 0 0 0 0 0 0 0 0
2001 0 0 0 0 0 0 0 0 0 0
2002 0 0 0 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0 0 0 0
2004 0 0 0 0 0 0 0 0 0 0
2005 0 0 0 0 0 0 0 0 0 0
2006 0 0 0 0 0 0 0 0 0 0
2007 0 0 0 0 0 0 0 0 0 0
2008 0 0 0 0 0 0 0 0 0 0
2009 0 0 0 0 0 0 0 0 0 0
2010 0 0 0 0 0 0 0 0 0 0
2011 0 0 0 0 0 0 0 0 0 0
2012 0 0 0 0 0 0 0 0 0 0
2013 0 0 0 0 0 0 0 0 0 0
2014 0 0 0 0 0 0 0 0 0 0
2015 0 0 0 0 0 0 0 0 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Electric Heat Assumptions(3) Aux. Boiler Steam/Chilled Water Assumptions
---------------------------- -------------------------------------------
Demonstrated Contract Steam C. Water Steam
Heat Heat Rate Heat Production Steam Production C. Water Heat
Year Rate Degradation Rate Hours Production Hours Production Requirement
- ---- ---- ----------- ---- ----- ---------- ----- ---------- -----------
(Btu/kWh) (%) (Btu/kWh) (pph) (ton-hr) (Btu/lb)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 8900 0.00% 8900 7800 50,000 4000 1010 1714
1997 8900 0.00% 8900 7800 50,000 4000 1010 1714
1998 8900 0.00% 8900 7800 50,000 4000 1010 1714
1999 8900 0.00% 8900 7800 50,000 4000 1010 1714
2000 8900 0.00% 8900 7800 50,000 4000 1010 1714
2001 8900 0.00% 8900 7800 50,000 4000 1010 1714
2002 8900 0.00% 8900 7800 50,000 4000 1010 1714
2003 8900 0.00% 8900 7800 50,000 4000 1010 1714
2004 8900 0.00% 8900 7800 50,000 4000 1010 1714
2005 8900 0.00% 8900 7800 50,000 4000 1010 1714
2006 8900 0.00% 8900 7800 50,000 4000 1010 1714
2007 8900 0.00% 8900 7800 50,000 4000 1010 1714
2008 8900 0.00% 8900 7800 50,000 4000 1010 1714
2009 8900 0.00% 8900 7800 50,000 4000 1010 1714
2010 8900 0.00% 8900 7800 50,000 4000 1010 1714
2011 8900 0.00% 8900 7800 50,000 4000 1010 1714
2012 8900 0.00% 8900 7800 50,000 4000 1010 1714
2013 8900 0.00% 8900 7800 50,000 4000 1010 1714
2014 8900 0.00% 8900 7800 50,000 4000 1010 1714
2015 8900 0.00% 8900 7800 50,000 4000 1010 1714
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COST ASSUMPTIONS
Summer Gas Cost
---------------
SSG SGT SGT SGT SR1 SR2 SRX Summer Summer Summer
Gulf Spot Transco Panda NCG Transco NCNG Swing Gas Gas Gas Gas
Year Price IT Pipeline IT Mgt. Fee Retainage Retainage Retainage Charge Charge Cost Margin Margin
- ---- ----- -- ----------- -------- --------- --------- --------- ------ ------ ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) ($/MMBtu) ($/kWh) ($/MMBtu) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.79 $0.34 $0.26 $0.04 3.79% 2.00% 3.00% $2.59 $0.02307 $2.26 $0.33 $0.00297
1997 $1.81 $0.34 $0.27 $0.04 3.79% 2.00% 3.00% $2.62 $0.02335 $2.28 $0.34 $0.00304
1998 $1.84 $0.35 $0.27 $0.04 3.79% 2.00% 3.00% $2.66 $0.02372 $2.31 $0.35 $0.00312
1999 $1.85 $0.36 $0.28 $0.04 3.79% 2.00% 3.00% $2.69 $0.02398 $2.34 $0.36 $0.00320
2000 $1.88 $0.37 $0.29 $0.04 3.79% 2.00% 3.00% $2.75 $0.02447 $2.38 $0.37 $0.00329
2001 $1.96 $0.38 $0.30 $0.04 3.79% 2.00% 3.00% $2.86 $0.02542 $2.47 $0.38 $0.00339
2002 $2.05 $0.38 $0.31 $0.04 3.79% 2.00% 3.00% $2.97 $0.02642 $2.57 $0.39 $0.00351
2003 $2.15 $0.39 $0.32 $0.04 3.79% 2.00% 3.00% $3.10 $0.02757 $2.69 $0.41 $0.00363
2004 $2.26 $0.40 $0.33 $0.04 3.79% 2.00% 3.00% $3.23 $0.02877 $2.81 $0.42 $0.00375
2005 $2.37 $0.42 $0.34 $0.04 3.79% 2.00% 3.00% $3.37 $0.03001 $2.94 $0.44 $0.00388
2006 $2.55 $0.43 $0.35 $0.04 3.79% 2.00% 3.00% $3.59 $0.03198 $3.14 $0.45 $0.00404
2007 $2.75 $0.43 $0.36 $0.04 3.79% 2.00% 3.00% $3.83 $0.03404 $3.35 $0.47 $0.00421
2008 $2.95 $0.44 $0.37 $0.04 3.79% 2.00% 3.00% $4.07 $0.03620 $3.57 $0.49 $0.00438
2009 $3.18 $0.45 $0.38 $0.04 3.79% 2.00% 3.00% $4.34 $0.03859 $3.82 $0.51 $0.00456
2010 $3.41 $0.47 $0.39 $0.04 3.79% 2.00% 3.00% $4.62 $0.04110 $4.08 $0.53 $0.00475
2011 $3.61 $0.48 $0.40 $0.04 3.79% 2.00% 3.00% $4.86 $0.04326 $4.31 $0.55 $0.00493
2012 $3.83 $0.48 $0.41 $0.04 3.79% 2.00% 3.00% $5.11 $0.04552 $4.54 $0.58 $0.00512
2013 $4.05 $0.49 $0.43 $0.04 3.79% 2.00% 3.00% $5.38 $0.04787 $4.78 $0.60 $0.00531
2014 $4.30 $0.51 $0.44 $0.04 3.79% 2.00% 3.00% $5.67 $0.05048 $5.05 $0.62 $0.00552
2015 $4.55 $0.52 $0.45 $0.04 3.79% 2.00% 3.00% $5.98 $0.05321 $5.33 $0.64 $0.00573
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winter Gas Cost
---------------
WSG Panda WGT WR1 WR2 WR2 WRX
Appala- WGT WGT Pipe- NGC Transco CNG NCNG Swing Gas Winter Winter Winter Winter
chian Transco CNG line Mgt. Retain- Retain- Retain- Retain- Gas Gas Gas Gas
Year Price IT IT IT Fee age age age age Charge Charge Cost Cost Margin Margin
- ---- ----- -- -- -- --- --- --- --- --- ------ ------ ---- ---- ------ ------
(------------$/MMBtu-------------) (%) (%) (%) (%) ($/MMBtu) ($/kWh)($/MMBtu) ($/kWh) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $2.28 $0.24 $0.21 $0.26 $0.04 1.97% 2.28% 2.00% 3.00% $3.23 $0.02878 $2.92 $0.02596 $0.31673 $0.00282
1997 $2.31 $0.24 $0.21 $0.27 $0.04 1.97% 2.28% 2.00% 3.00% $3.29 $0.02932 $2.97 $0.02642 $0.32541 $0.00290
1998 $2.34 $0.25 $0.21 $0.27 $0.04 1.97% 2.28% 2.00% 3.00% $3.33 $0.02967 $3.00 $0.02669 $0.33403 $0.00297
1999 $2.36 $0.25 $0.21 $0.28 $0.04 1.97% 2.28% 2.00% 3.00% $3.37 $0.03001 $3.03 $0.02695 $0.34288 $0.00305
2000 $2.39 $0.26 $0.22 $0.29 $0.04 1.97% 2.28% 2.00% 3.00% $3.42 $0.03044 $3.07 $0.02731 $0.35196 $0.00313
2001 $2.50 $0.26 $0.23 $0.30 $0.04 1.97% 2.28% 2.00% 3.00% $3.56 $0.03169 $3.20 $0.02846 $0.36345 $0.00323
2002 $2.62 $0.27 $0.23 $0.31 $0.04 1.97% 2.28% 2.00% 3.00% $3.72 $0.03311 $3.35 $0.02977 $0.37563 $0.00334
2003 $2.74 $0.28 $0.24 $0.32 $0.04 1.97% 2.28% 2.00% 3.00% $3.87 $0.03447 $3.48 $0.03102 $0.38789 $0.00345
2004 $2.86 $0.29 $0.25 $0.33 $0.04 1.97% 2.28% 2.00% 3.00% $4.03 $0.03587 $3.63 $0.03231 $0.40055 $0.00356
2005 $2.98 $0.30 $0.26 $0.34 $0.04 1.97% 2.28% 2.00% 3.00% $4.19 $0.03733 $3.78 $0.03365 $0.41361 $0.00368
2006 $3.21 $0.30 $0.25 $0.35 $0.04 1.97% 2.28% 2.00% 3.00% $4.46 $0.03967 $4.03 $0.03584 $0.42962 $0.00382
2007 $3.45 $0.30 $0.26 $0.36 $0.04 1.97% 2.28% 2.00% 3.00% $4.73 $0.04211 $4.29 $0.03814 $0.44622 $0.00397
2008 $3.69 $0.31 $0.26 $0.37 $0.04 1.97% 2.28% 2.00% 3.00% $5.02 $0.04465 $4.55 $0.04053 $0.46305 $0.00412
2009 $3.95 $0.32 $0.27 $0.38 $0.04 1.97% 2.28% 2.00% 3.00% $5.33 $0.04745 $4.85 $0.04317 $0.48088 $0.00428
2010 $4.22 $0.33 $0.28 $0.39 $0.04 1.97% 2.28% 2.00% 3.00% $5.66 $0.05038 $5.16 $0.04594 $0.49936 $0.00444
2011 $4.46 $0.34 $0.29 $0.40 $0.04 1.97% 2.28% 2.00% 3.00% $5.95 $0.05298 $5.44 $0.04838 $0.51726 $0.00460
2012 $4.73 $0.35 $0.30 $0.41 $0.04 1.97% 2.28% 2.00% 3.00% $6.27 $0.05585 $5.74 $0.05108 $0.53622 $0.00477
2013 $5.01 $0.36 $0.31 $0.43 $0.04 1.97% 2.28% 2.00% 3.00% $6.61 $0.05884 $6.06 $0.05389 $0.55585 $0.00495
2014 $5.28 $0.37 $0.30 $0.44 $0.04 1.97% 2.28% 2.00% 3.00% $6.93 $0.06163 $6.35 $0.05651 $0.57572 $0.00512
2015 $5.58 $0.36 $0.31 $0.45 $0.04 1.97% 2.28% 2.00% 3.00% $7.27 $0.06472 $6.68 $0.05941 $0.59675 $0.00531
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Winter Fuel Oil Cost
--------------------
Delivered Panda Winter Winter Winter
Fuel Oil Handling Oil Oil Fuel Oil Oil
Year Price Charge Charge Charge Usage Cost Margin Margin
- ---- ----- ------ ------ ------ ----- ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) (%) ($/MMBtu) ($/MMBtu) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $4.05 $0.10 $4.14 $0.03686 80.00% $3.82 $0.32219 $0.00287
1997 $4.21 $0.10 $4.31 $0.03833 80.00% $3.96 $0.34700 $0.00309
1998 $4.38 $0.10 $4.48 $0.03985 80.00% $4.10 $0.37759 $0.00336
1999 $4.55 $0.11 $4.66 $0.04144 80.00% $4.25 $0.40979 $0.00365
2000 $4.73 $0.11 $4.84 $0.04309 80.00% $4.40 $0.44134 $0.00393
2001 $4.73 $0.11 $4.84 $0.04309 80.00% $4.43 $0.41551 $0.00370
2002 $4.73 $0.11 $4.84 $0.04309 80.00% $4.46 $0.38604 $0.00344
2003 $4.73 $0.11 $4.84 $0.04309 80.00% $4.48 $0.35809 $0.00319
2004 $4.73 $0.11 $4.84 $0.04309 80.00% $4.51 $0.32905 $0.00293
2005 $4.73 $0.11 $4.84 $0.04309 80.00% $4.54 $0.29888 $0.00266
2006 $4.73 $0.11 $4.84 $0.04309 80.00% $4.59 $0.24961 $0.00222
2007 $4.73 $0.11 $4.84 $0.04309 80.00% $4.64 $0.19805 $0.00176
2008 $4.73 $0.11 $4.84 $0.04309 80.00% $4.70 $0.14432 $0.00128
2009 $4.73 $0.11 $4.84 $0.04309 80.00% $4.76 $0.08489 $0.00076
2010 $4.73 $0.11 $4.84 $0.04309 80.00% $4.82 $0.02271 $0.00020
2011 $4.73 $0.11 $4.84 $0.04309 80.00% $4.87 ($0.03204) ($0.00029)
2012 $4.73 $0.11 $4.84 $0.04309 80.00% $4.93 ($0.09269) ($0.00082)
2013 $4.73 $0.11 $4.84 $0.04309 80.00% $5.00 ($0.15601) ($0.00139)
2014 $4.73 $0.11 $4.84 $0.04309 80.00% $5.06 ($0.21484) ($0.00191)
2015 $4.73 $0.11 $4.84 $0.04309 80.00% $5.12 ($0.27998) ($0.00249)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VEPCO Gas Cost
--------------
MGT Panda VEPCO VEPCO Plant FA VEPCO VEPCO VEPCO VEPCO
Management Pipeline Gas Gas Variable NCNG Nomination Gas Nomination Gas
Year Fee Charge Charge Charge O&M Costs Retainage Fee Charge Fee Cost Margin
- ---- --- ------ ------ ------ --------- --------- --- ------ --- ---- ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) ($/kWh) (%) ($/day) ($/kWh) ($/day) ($/kWh) ($/kWh)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $0.04 $0.13 $0.17 $0.00150 $0.00222 2.00% $0 $0.00000 $0 $0.00000 $0.00000
1997 $0.04 $0.13 $0.17 $0.00153 $0.00229 2.00% $0 $0.00000 $0 $0.00000 $0.00000
1998 $0.04 $0.14 $0.18 $0.00157 $0.00236 2.00% $0 $0.00000 $0 $0.00000 $0.00000
1999 $0.04 $0.14 $0.18 $0.00161 $0.00243 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2000 $0.04 $0.14 $0.18 $0.00164 $0.00250 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2001 $0.04 $0.14 $0.18 $0.00164 $0.00258 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2002 $0.04 $0.14 $0.18 $0.00164 $0.00266 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2003 $0.04 $0.14 $0.18 $0.00164 $0.00274 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2004 $0.04 $0.14 $0.18 $0.00164 $0.00282 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2005 $0.04 $0.14 $0.18 $0.00164 $0.00290 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2006 $0.04 $0.14 $0.18 $0.00164 $0.00299 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2007 $0.04 $0.14 $0.18 $0.00164 $0.00308 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2008 $0.04 $0.14 $0.18 $0.00164 $0.00317 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2009 $0.04 $0.14 $0.18 $0.00164 $0.00327 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2010 $0.04 $0.14 $0.18 $0.00164 $0.00337 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2011 $0.04 $0.14 $0.18 $0.00164 $0.00347 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2012 $0.04 $0.14 $0.18 $0.00164 $0.00357 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2013 $0.04 $0.14 $0.18 $0.00164 $0.00368 2.00% $0 $0.00000 $0 $0.00000 $0.00000
2014 $0.04 $0.14 $0.18 $0.00164 $0.00379 2.00% $0 $0.00000 $0 $0.00000 $0.00000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Auxillary Boiler Steam/Chilled Water Fuel Cost
----------------------------------------------
Texas Steam Steam
Gulf Spot Transco GRI/ACA NCG Transco CNG Gas NCNG Gas Gas Steam
Year Price Commodity Surcharge Mgt. Fee Retainage Retainage Retainage Retainage Cost Cost Charge Margin
- ---- ----- --------- --------- -------- --------- --------- --------- --------- ---- ---- ------ ------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) (%) ($/MMBtu) ($/klbs) ($/klbs) ($/klbs)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $1.79 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.05 $3.51 $1.15 ($2.36)
1997 $1.81 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.07 $3.55 $1.15 ($2.40)
1998 $1.84 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.10 $3.60 $1.15 ($2.45)
1999 $1.85 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.11 $3.62 $1.15 ($2.47)
2000 $1.88 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.15 $3.68 $1.15 ($2.53)
2001 $1.96 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.24 $3.83 $1.15 ($2.68)
2002 $2.05 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.34 $4.01 $1.15 ($2.86)
2003 $2.15 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.45 $4.20 $1.15 ($3.05)
2004 $2.26 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.56 $4.39 $1.15 ($3.24)
2005 $2.37 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.68 $4.60 $1.15 ($3.45)
2006 $2.55 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $2.88 $4.94 $1.15 ($3.79)
2007 $2.75 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.10 $5.32 $1.15 ($4.17)
2008 $2.95 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.32 $5.69 $1.15 ($4.54)
2009 $3.18 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.57 $6.12 $1.15 ($4.97)
2010 $3.41 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $3.83 $6.56 $1.15 ($5.41)
2011 $3.61 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.04 $6.93 $1.15 ($5.78)
2012 $3.83 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.29 $7.35 $1.15 ($6.20)
2013 $4.05 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.53 $7.76 $1.15 ($6.61)
2014 $4.30 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $4.79 $8.21 $1.15 ($7.06)
2015 $4.55 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00% $5.07 $8.69 $1.15 ($7.54)
</TABLE>
<PAGE>
PROJECT FINANCING ASSUMPTIONS
Equal
Financing Sources of Funds Annual
Refinancing Debt Service
----------- ------------
DEBT FINANCING:
First Mortage Bonds:
Percentage Financed 85.63%
Principal Amount $111,400,000 $11,879,000
Interest Rate 8.63%
Term 20.0
Years of Interest Only 0.0
Debt Service Reserve Fund
(% of Principal) 7.26%
Financing Fees 2.69%
Subordinate Debt A:
Percentage Financed 0.00%
Principal Amount $0 $0
Interest Rate 9.00%
Term 20.0
Years of Interest Only 0.0
Debt Service Reserve Fund
(% of Principal) 0.00%
Financing Fees 0.00%
OTHER FINANCING SOURCES:
Existing Debt Service
Reserve Fund $4,117,388
Existing Turbine Overhaul
Reserve $931,032
Existing Reimbursement
Obligation Account $8,247,605
Existing Pollution Control
Account $5,256,983
Existing Spare Parts
Account $113,737
Existing Revenue Account $27,763
-------
Total Other Financing
Sources $18,694,508
TOTAL SOURCES OF FUNDS $130,094,508
Financing Uses of Funds
REFINANCING COSTS::
Operating Account $868,226
Defeasance of Taxable Revenue
Bonds $103,209,600
PROJECT COSTS:
Pollution Control Reserve $5,256,983
Turbine Overhaul Reserve $942,632
FINANCING COSTS
Debt Service Reserve $8,090,714
Fees and Expenses $3,000,000
Partial Redemption of FMCC
Rosemary Interest $8,726,353
TOTAL USES OF FUNDS $130,094,508
<PAGE>
Custom Principal
Amortization Schedules
----------------------
First Mortgage Subordinate
Year Bonds Debt A
- ---- ----- ------
1996 2,752,798 0
2997 5,500,608 0
1998 5,992,178 0
1999 5,092,966 0
2000 5,472,948 0
2001 5,879,990 0
2002 6,293,568 0
2003 6,737,102 0
2004 7,215,320 0
2005 7,696,926 0
2006 4,292,216 0
2007 4,491,704 0
2008 4,704,828 0
2009 4,919,192 0
2010 5,142,758 0
2011 5,422,034 0
2012 5,691,114 0
2013 5,952,686 0
2014 6,188,248 0
2015 6,030,816 0
====================================
111,400,000
<PAGE>
<TABLE>
<CAPTION>
DEBT SERVICE CALCULATIONS 50.00%
1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 111,400,000 108,647,202 103,146,594 97,224,416 92,131,450 86,658,502 80,778,512 74,484,944
Interest 5,175,000 9,192,911 8,704,848 8,220,881 7,769,322 7,284,115 6,763,589 6,206,423
Principal 2,752,798 5,500,608 5,922,178 5,092,966 5,472,948 5,879,990 6,293,568 6,737,102
Debt Service 7,927,798 14,693,519 14,627,026 13,313,847 13,242,270 13,164,105 13,057,157 12,943,525
Ending Balance 108,647,202 103,146,594 97,224,416 92,131,450 86,658,502 80,778,512 74,484,944 67,747,842
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0 0 0
Interest 0 0 0 0 0 0 0 0
Principal 0 0 0 0 0 0 0 0
Debt Service 0 0 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 5,175,000 9,192,911 8,704,848 8,220,881 7,769,322 7,284,115 6,763,589 6,206,423
Principal 2,752,798 5,500,608 5,922,178 5,092,966 5,472,948 5,879,990 6,293,568 6,737,102
Debt Service 7,927,798 14,693,519 14,627,026 13,313,847 13,242,270 13,164,105 13,057,157 12,943,525
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 67,747,842 60,532,522 52,835,596 48,543,380 44,051,676 39,346,848 34,427,656 29,284,898
Interest 5,609,882 4,971,983 4,418,244 4,041,589 3,647,284 3,234,560 2,803,049 2,350,454
Principal 7,215,320 7,696,926 4,292,216 4,491,704 4,704,828 4,919,192 5,142,758 5,422,034
Debt Service 12,825,202 12,668,909 8,710,460 8,533,293 8,352,112 8,153,752 7,945,807 7,772,488
Ending Balance 60,532,522 52,835,596 48,543,380 44,051,676 39,346,848 34,427,656 29,284,898 23,862,864
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0 0 0
Interest 0 0 0 0 0 0 0 0
Principal 0 0 0 0 0 0 0 0
Debt Service 0 0 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 5,609,882 4,971,983 4,418,244 4,041,589 3,647,284 3,234,560 2,803,049 2,350,454
Principal 7,215,320 7,696,926 4,292,216 4,491,704 4,704,828 4,919,192 5,142,758 5,422,034
Debt Service 12,825,202 12,668,909 8,710,460 8,533,293 8,352,112 8,153,752 7,945,807 7,772,488
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
2012 2013 2014 2015
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 23,862,864 18,171,750 12,219,064 6,030,816
Interest 1,874,100 1,374,781 853,744 325,100 94,821,650
Principal 5,691,114 5,952,686 6,188,248 6,030,816 111,400,000
--------- --------- --------- ---------
Debt Service 7,565,214 7,327,467 7,041,992 6,355,916
Ending Balance 18,171,750 12,219,064 6,030,816 0
Subordinated Debt A:
Beginning Balance 0 0 0 0
Interest 0 0 0 0
Principal 0 0 0 0
- - - -
Debt Service 0 0 0 0
Ending Balance 0 0 0 0
TOTAL DEBT SERVICE
Interest 1,874,100 1,374,781 853,744 325,100
Principal 5,691,114 5,952,686 6,188,248 6,030,816
--------- --------- --------- ---------
Debt Service 7,565,214 7,327,467 7,041,992 6,355,916
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0 0 0 0
Winter Gas Dispatch 0 0 0 0 0 0 0
Winter Oil Dispatch 0 0 0 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Dispatch Hour 0 0 0 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0 0 0 0
Winter Start Duration 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0 0 0 0
Winter Gas Output MWh 0 0 0 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Net Generation MWh 0 0 0 0 0 0 0
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 0 0 0 0 0 0 0
Winter Gas Fuel MMBtu 0 0 0 0 0 0 0
Winter Oil Fuel MMBtu 0 0 0 0 0 0 0
VEPCO Gas Fuel MMBtu 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Fuel MMBtu 0 0 0 0 0 0 0
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $2.26 $2.28 $2.31 $2.34 $2.38 $2.47 $2.57
Winter Gas Fuel $/MMBtu $2.92 $2.97 $3.00 $3.03 $3.07 $3.20 $3.35
Winter Oil Fuel $/MMBtu $3.82 $3.96 $4.10 $4.25 $4.40 $4.43 $4.46
VEPCO Gas Fuel $/kWh $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Summer Gas Fuel $ 0 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Fuel Cost $ 0 0 0 0 0 0 0
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 0 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0 0
Fuel Usage - Thermal MMBtu 0 0 0 0 0 0 0
Fuel Cost - Thermal [1]$ 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Fuel Costs - Cogen Plant 0 0 0 0 0 0 0
Average Fuel Cost($/MMBtu) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Average Fuel Cost($/kWh) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
[1] Boiler fuel cost estimate below used to determine fuel cost allocation of
thermal production.
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production
Hours - Boil 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Fuel - Boiler MMBtu 668,460 668,460 668,460 668,460 668,460 668,460 668,460
C. Water Fuel - Boiler MMBtu 123,257 123,257 123,257 123,257 123,257 123,257 123,257
------- ------- ------- ------- ------- ------- -------
Total Boiler Fuel MMBtu 791,717 791,717 791,717 791,717 791,717 791,717 791,717
Boiler Fuel Cost $/MMBtu $2.05 $2.07 $2.10 $2.11 $2.15 $2.24 $2.34
Boiler Fuel Cost $ 1,622,000 1,642,000 1,662,000 1,672,000 1,701,000 1,770,000 1,853,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0 0 0 0
Winter Gas Dispatch 0 0 0 0 0 0 0
Winter Oil Dispatch 0 0 0 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Dispatch Hour 0 0 0 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0 0 0 0
Winter Start Duration 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0 0 0 0
Winter Gas Output MWh 0 0 0 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Net Generation MWh 0 0 0 0 0 0 0
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 0 0 0 0 0 0 0
Winter Gas Fuel MMBtu 0 0 0 0 0 0 0
Winter Oil Fuel MMBtu 0 0 0 0 0 0 0
VEPCO Gas Fuel MMBtu 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Fuel MMBtu 0 0 0 0 0 0 0
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $2.69 $2.81 $2.94 $3.14 $3.35 $3.57 $3.82
Winter Gas Fuel $/MMBtu $3.48 $3.63 $3.78 $4.03 $4.29 $4.55 $4.85
Winter Oil Fuel $/MMBtu $4.48 $4.51 $4.54 $4.59 $4.64 $4.70 $4.76
VEPCO Gas Fuel $/kWh $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Summer Gas Fuel $ 0 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0 0
Total Fuel Cost $ --- --- --- --- --- --- ---
0 0 0 0 0 0 0
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 0 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0 0
Fuel Usage - Thermal MMBtu 0 0 0 0 0 0 0
Fuel Cost - Thermal $ 0 0 0 0 0 0 0
--- --- --- --- --- --- ---
Total Fuel Costs - Cogen Plant 0 0 0 0 0 0 0
Average Fuel Cost($/MMBtu) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Average Fuel Cost($/kWh) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production
Hours - Boil 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Fuel - Boiler MMBtu 668,460 668,460 668,460 668,460 668,460 668,460 668,460
C. Water Fuel - Boiler MMBtu 123,257 123,257 123,257 123,257 123,257 123,257 123,257
------- ------- ------- ------- ------- ------- -------
Total Boiler Fuel MMBtu 791,717 791,717 791,717 791,717 791,717 791,717 791,717
Boiler Fuel Cost $/MMBtu $2.45 $2.56 $2.68 $2.88 $3.10 $3.32 $3.57
Boiler Fuel Cost $ 1,939,000 2,029,000 2,123,000 2,280,000 2,457,000 2,630,000 2,825,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FUEL COSTS
Dispatch Operations 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0 0 0
Winter Gas Dispatch 0 0 0 0 0 0
Winter Oil Dispatch 0 0 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0 0 0
--- --- --- --- --- ---
Total Dispatch Hour 0 0 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0 0 0
Winter Start Duration 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0 0 0
Winter Gas Output MWh 0 0 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0 0 0
--- --- --- --- --- ---
Net Generation MWh 0 0 0 0 0 0
Fuel Usage - Electrical Generation
Net Electric
Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 0 0 0 0 0 0
Winter Gas Fuel MMBtu 0 0 0 0 0 0
Winter Oil Fuel MMBtu 0 0 0 0 0 0
VEPCO Gas Fuel MMBtu 0 0 0 0 0 0
--- --- --- --- --- ---
Total Fuel MMBtu 0 0 0 0 0 0
Fuel Cost - Electrical Generation
Summer Gas Fuel $/MMBtu $4.08 $4.31 $4.54 $4.78 $5.05 $5.33
Winter Gas Fuel $/MMBtu $5.16 $5.44 $5.74 $6.06 $6.35 $6.68
Winter Oil Fuel $/MMBtu $4.82 $4.87 $4.93 $5.00 $5.06 $5.12
VEPCO Gas Fuel $/kWh $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Summer Gas Fuel $ 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0
Total Fuel Cost $ --- --- --- --- --- ---
0 0 0 0 0 0
Total Fuel Costs - Cogen Plant
Summer Gas Fuel $ 0 0 0 0 0 0
Winter Gas Fuel $ 0 0 0 0 0 0
Winter Oil Fuel $ 0 0 0 0 0 0
VEPCO Gas Fuel $ 0 0 0 0 0 0
Fuel Usage - Thermal MMBtu 0 0 0 0 0 0
Fuel Cost - Thermal $ 0 0 0 0 0 0
--- --- --- --- --- ---
Total Fuel Costs - 0 0 0 0 0 0
Cogen Plant
$0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Average Fuel Cost($/MMBtu) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Average Fuel Cost($/kWh)
Steam/Chilled Water
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production
Hours - Boil 4,000 4,000 4,000 4,000 4,000 4,000
Steam Fuel - Boiler MMBtu 668,460 668,460 668,460 668,460 668,460 668,460
C. Water Fuel - Boiler MMBtu 123,257 123,257 123,257 123,257 123,257 123,257
------- ------- ------- ------- ------- -------
Total Boiler Fuel MMBtu 791,717 791,717 791,717 791,717 791,717 791,717
Boiler Fuel Cost $/MMBtu $3.83 $4.04 $4.29 $4.53 $4.79 $5.07
Boiler Fuel Cost $ 3,029,000 3,201,000 3,395,000 3,583,000 3,794,000 4,016,000
</TABLE>
<PAGE>
PLANT OPERATING COSTS
<TABLE>
<CAPTION>
1995 1996
Estimated Actual Budget Escalation
---------------- ------ ----------
<S> <C> <C> <C>
Fuel Transportation Costs:
Firm Transportation - Transco $1,097,889 $1,080,316 0.00%
Less: Capacity Release Revenues [1] $0 ($132,000) 0.00%
Fuel Management Fee $240,000 $240,000 3.00%
-------- --------
Total Fuel Transportation Costs $1,337,889 $1,188,316
Operating Costs:
O&M Contract Fee $1,641,825 $681,248 [3] 3.00%
General Maintenance & Repairs $144,622 $16,083 [4] 8.00%
Planned Plant Maintenance Projects $156,972 $32,843 [4] 3.00%
Additional Maintenance Allowance $274,024 $15,500 [4] 0.00%
Parts Replacement $228,392 $16,794 [4] 3.00%
Other Plant Expenses $34,930 $10,420 [5] 3.00%
Panda Management Fee [2] $480,000 $0 0.00%
Office & Admin Expenses $231,061 $95,008 [6] 3.00%
Property Taxes $977,109 $972,000 -3.00%
Insurance $298,728 $300,000 3.00%
VEPCO Performance LOC $64,602 $66,232 Input Panda Forecast
------- -------
Total Operating Costs $4,532,265 $2,206,127
Total Plant Operating Costs $5,870,154 $3,394,442
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
[3] Cost @ 40% of base case.
[4] Cost @ 10% of base case.
[5] Cost @ 20% base case.
[6] Cost @ 50% base case.
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (132,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 240,000 247,000 255,000 262,000 270,000 278,000 287,000 295,000
O&M Contract Fee 681,000 702,000 1,807,000 1,861,000 1,917,000 1,974,000 2,034,000 2,095,000
General Maintenance & Repairs 16,000 174,000 188,000 203,000 219,000 236,000 255,000 276,000
Planned Plant Maintenanance 328,000 338,000 348,000 359,000 370,000 381,000 392,000 404,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 168,000 173,000 178,000 184,000 189,000 195,000 201,000 207,000
Other Plant Expenses 52,000 54,000 55,000 57,000 59,000 60,000 62,000 64,000
Panda Management Fee [2] 0 0 0 0 0 0 0 0
Office & Admin Expenses 190,000 196,000 202,000 208,000 214,000 220,000 227,000 234,000
Property Taxes 972,000 943,000 915,000 887,000 861,000 835,000 810,000 785,000
Insurance 300,000 309,000 318,000 328,000 338,000 348,000 358,000 369,000
VEPCO Performance LOC 66,000 66,000 66,000 66,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 5,283,000 5,173,000 5,251,000 5,334,000 5,440,000 5,530,000 5,629,000 5,732,000
Percent Change -10.00% -2.08% 1.51% 1.58% 1.99% 1.65% 1.79% 1.83%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<TABLE>
<CAPTION>
Plant Operating Costs 2004 2005 2006 2007 2008 2009 2010
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 304,000 313,000 323,000 332,000 342,000 352,000 363,000
O&M Contract Fee 2,157,000 2,222,000 2,289,000 2,358,000 2,428,000 2,501,000 2,576,000
General Maintenance & Repairs 298,000 321,000 347,000 375,000 405,000 437,000 472,000
Planned Plant Maintenanance 416,000 429,000 441,000 455,000 468,000 482,000 497,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 213,000 219,000 226,000 232,000 239,000 247,000 254,000
Other Plant Expenses 66,000 68,000 70,000 72,000 74,000 77,000 79,000
Panda Management Fee [2] 0 0 0 0 0 0 0
Office & Admin Expenses 241,000 248,000 255,000 263,000 271,000 279,000 287,000
Property Taxes 762,000 739,000 717,000 695,000 674,000 654,000 635,000
Insurance 380,000 391,000 403,000 415,000 428,000 441,000 454,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 5,840,000 5,953,00 6,074,000 6,200,000 6,332,000 6,473,000 6,620,000
Percent Change 1.88% 1.93% 2.03% 2.07% 2.13% 2.23% 2.27%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<TABLE>
<CAPTION>
Plant Operating Costs 2011 2012 2013 2014 2015
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 374,000 385,000 397,000 409,000 421,000
O&M Contract Fee 2,653,000 2,733,000 2,815,000 2,899,000 2,986,000
General Maintenance & Repairs 510,000 551,000 595,000 643,000 694,000
Planned Plant Maintenanance 512,000 527,000 543,000 559,000 576,000
Additional Maintenance 155,000 155,000 155,000 155,000 155,000
Parts Replacement 262,000 269,000 278,000 286,000 294,000
Other Plant Expenses 81,000 84,000 86,000 89,000 91,000
Panda Management Fee [2] 0 0 0 0 0
Office & Admin Expenses 296,000 305,000 314,000 323,000 333,000
Property Taxes 616,000 597,000 579,000 562,000 545,000
Insurance 467,000 481,000 496,000 511,000 526,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------
Plant Operating Costs 6,774,000 6,935,000 7,106,000 7,284,000 7,469,000
Percent Change 2.33% 2.38% 2.47% 2.50% 2.54%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (132,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 240,000 247,000 255,000 262,000 270,000 278,000 287,000
O&M Contract Fee 681,000 702,000 723,000 744,000 767,000 790,000 813,000
General Maintenance & Repairs 16,000 17,000 19,000 20,000 22,000 24,000 26,000
Planned Plant Maintenance Projects 33,000 34,000 35,000 36,000 37,000 38,000 39,000
Additional Maintenance 16,000 16,000 16,000 16,000 16,000 16,000 16,000
Parts Replacement 17,000 17,000 18,000 18,000 19,000 19,000 20,000
Other Plant Expenses 10,000 11,000 11,000 11,000 12,000 12,000 12,000
Panda Management Fee [2] 0 0 0 0 0 0 0
Office & Admin Expenses 95,000 98,000 101,000 104,000 107,000 110,000 113,000
Property Taxes 972,000 943,000 915,000 887,000 861,000 835,000 810,000
Insurance 300,000 309,000 318,000 328,000 338,000 348,000 358,000
VEPCO Performance LOC 66,000 66,000 66,000 66,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 3,394,000 3,224,000 3,241,000 3,256,000 3,297,000 3,318,000 3,342,000
Percent Change -42.18% -5.01% 0.53% 0.46% 1.26% 0.64% 0.72%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 295,000 304,000 313,000 323,000 332,000 342,000 352,000
O&M Contract Fee 838,000 863,000 889,000 916,000 943,000 971,000 1,000,000
General Maintenance & Repairs 28,000 30,000 32,000 35,000 37,000 40,000 44,000
Planned Plant Maintenance Projects 40,000 42,000 43,000 44,000 45,000 47,000 48,000
Additional Maintenance 16,000 16,000 16,000 16,000 16,000 16,000 16,000
Parts Replacement 21,000 21,000 22,000 23,000 23,000 24,000 25,000
Other Plant Expenses 13,000 13,000 14,000 14,000 14,000 15,000 15,000
Panda Management Fee [2] 0 0 0 0 0 0 0
Office & Admin Expenses 117,000 120,000 124,000 128,000 132,000 135,000 140,000
Property Taxes 785,000 762,000 739,000 717,000 695,000 674,000 654,000
Insurance 369,000 380,000 391,000 403,000 415,000 428,000 441,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------ ------
Plant Operating Costs 3,370,000 3,399,000 3,431,000 3,467,000 3,500,000 3,540,000 3,583,000
Percent Change 0.84% 0.86% 0.94% 1.05% 0.95% 1.14% 1.21%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Operating Costs 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 363,000 374,000 385,000 397,000 409,000 421,000
O&M Contract Fee 1,030,000 1,061,000 1,093,000 1,126,000 1,160,000 1,195,000
General Maintenance & Repairs 47,000 51,000 55,000 60,000 64,000 69,000
Planned Plant Maintenance Projects 50,000 51,000 53,000 54,000 56,000 58,000
Additional Maintenance 16,000 16,000 16,000 16,000 16,000 16,000
Parts Replacement 25,000 26,000 27,000 28,000 29,000 29,000
Other Plant Expenses 16,000 16,000 17,000 17,000 18,000 18,000
Panda Management Fee [2] 0 0 0 0 0 0
Office & Admin Expenses 144,000 148,000 152,000 157,000 162,000 167,000
Property Taxes 635,000 616,000 597,000 579,000 562,000 545,000
Insurance 454,000 467,000 481,000 496,000 511,000 526,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000 84,000
------ ------ ------ ------ ------ ------
Plant Operating Costs 3,628,000 3,674,000 3,724,000 3,778,000 3,835,000 3,892,000
Percent Change 1.26% 1.27% 1.36% 1.45% 1.51% 1.49%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VARIABLE PLANT COSTS
1995 1996
Actual Summary Escalation
------ ------- ----------
<S> <C> <C> <C>
Plant Electricity Usage
Hours Not Dispatched 7698 8760
Average Electric Load (kW) 1150 1150
Electric Rate ($/kWh) $0.0440 $0.0453 3.00%
------- -------
Total Plant Electricity Usage $389,519 $456,554
Water & Chemical Usage
Hours Dispatched 1062 0
Gallons per Hour Usage - Cogen 32,000 32,000
Steam/Chilled Water Production Hours 11,800 11,800
Gallons per Hour Usage - Boiler 8,000 8,000
Total Gallons (1000s) 128,384 94,400
Water & Chemical Cost ($/1000 gal) $1.34 $1.38 3.00%
----- -----
Total Water & Chemical Usage $172,035 $130,291
Water Discharge
Hours Dispatched 1062 0
Gallons per Hour Usage - Cogen 8,000 8,000
Steam/Chilled Water Production Hours 11,800 11,800
Gallons per Hour Usage - Boiler 2,000 2,000
Total Gallons (1000s) 32,096 32,600
Water Discharge Cost ($/1000 gal) $1.09 $1.12 3.00%
----- -----
Total Water Discharge $34,985 $26,496
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Variable Costs 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched 0 0 0 0 0 0 0 0 0 0
Hours Not Dispatched 8760 8760 8760 8760 8760 8760 8760 8760 8760 8760
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 457,000 470,000 484,000 499,000 514,000 529,000 545,000 562,000 578,000 596,000
Water & Chemical Usage 130,000 134,000 138,000 142,000 147,000 151,000 156,000 160,000 165,000 170,000
Water Discharge 26,000 27,000 28,000 29,000 30,000 31,000 32,000 33,000 34,000 35,000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Plant Variable Cost 613,000 631,000 650,000 670,000 691,000 711,000 733,000 755,000 777,000 801,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Plant Variable Costs 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched 0 0 0 0 0 0 0 0 0 0
Hours Not Dispatched 8760 8760 8760 8760 8760 8760 8760 8760 8760 8760
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 614,000 632,000 651,000 670,000 691,000 711,000 733,000 755,000 777,000 801,000
Water & Chemical Usage 175,000 180,000 186,000 191,000 197,000 203,000 209,000 215,000 222,000 228,000
Water Discharge 36,000 37,000 38,000 39,000 40,000 41,000 43,000 44,000 45,000 46,000
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Plant Variable Cost 825,000 849,000 875,000 900,000 928,000 955,000 985,000 1,014,000 1,044,000 1,075,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0 0 0 0 0
Winter Gas Dispatch 0 0 0 0 0 0 0 0
Winter Oil Dispatch 0 0 0 0 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0 0 0 0 0
Total Dispatch Hours 0 0 0 0 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0 0 0 0 0
Winter Start Duration 40 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0 0 0 0 0
Winter Gas Output MWh 0 0 0 0 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0 0 0 0 0
Net Generation MWh 0 0 0 0 0 0 0 0
Capacity Revenues
Capacity Rate $/kw-mo $12.49 $11.65 $11.65 $10.82 $10.82 $10.82 $10.82 $10.82
Capacity Revenues - Summer 12,363,000 11,537,000 11,537,000 10,713,000 10,713,000 10,713,000 10,713,000 10,713,000
Capacity Revenues - Winter 14,836,000 13,845,000 13,845,000 12,855,000 12,855,000 12,855,000 12,855,000 12,855,000
Total Capacity Revenues 27,199,000 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000 23,568,000 23,568,000
Energy Revenues
Summer Gas Charge $/kWh $0.0231 $0.0233 $0.0237 $0.0240 $0.0245 $0.0254 $0.0264 $0.0276
Winter Gas Charge $/kWh $0.0288 $0.0293 $0.0297 $0.0300 $0.0304 $0.0317 $0.0331 $0.0345
Winter Oil Charge $/kWh $0.0369 $0.0383 $0.0399 $0.0414 $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $0.0039 $0.0040 $0.0041 $0.0042 $0.0043 $0.0044 $0.0045 $0.0046
Variable O&M Charge $/kWh $0.0022 $0.0023 $0.0024 $0.0024 $0.0025 $0.0026 $0.0027 $0.0027
Summer Gas Revenues $ 0 0 0 0 0 0 0 0
Winter Gas Revenues $ 0 0 0 0 0 0 0 0
Winter Oil Revenues $ 0 0 0 0 0 0 0 0
VEPCO Gas Revenues $ 0 0 0 0 0 0 0 0
Total Energy Revenues $ 0 0 0 0 0 0 0 0
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 0 154,000 283,000 499,000 611,000 566,000 687,000 779,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.035 $0.035 $0.035 $0.035 $0.035 $0.040 $0.040 $0.040
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 141,000 141,000 141,000 141,000 141,000 162,000 162,000 162,000
Total Thermal Revenues $ 590,000 590,000 590,000 590,000 590,000 611,000 611,000 611,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 2004 2005 2006 2007 2008 2009 2010 2011
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0 0 0 0 0
Winter Gas Dispatch 0 0 0 0 0 0 0 0
Winter Oil Dispatch 0 0 0 0 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0 0 0 0 0
Total Dispatch Hours 0 0 0 0 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0 0 0 0 0
Winter Start Duration 40 40 40 40 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0 0 0 0 0
Winter Gas Output MWh 0 0 0 0 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0 0 0 0 0
Net Generation MWh 0 0 0 0 0 0 0 0
Capacity Revenues
Capacity Rate $/kw-mo $10.82 $10.82 $8.32 $8.32 $8.32 $8.32 $8.32 $8.32
Capacity Revenues - Summer 10,713,000 10,713,000 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000
Capacity Revenues - Winter 12,855,000 12,855,000 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000
Total Capacity Revenues 23,568,000 23,568,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Revenues
Summer Gas Charge $/kWh $ $0.0288 $0.0300 $0.0320 $0.0340 $0.0362 $0.0386 $0.0411 $0.0433
Winter Gas Charge $/kWh $ $0.0359 $0.0373 $0.0397 $0.0421 $0.0446 $0.0475 $0.0504 $0.0530
Winter Oil Charge $/kWh $ $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $ $0.0047 $0.0048 $0.0048 $0.0049 $0.0050 $0.0051 $0.0052 $0.0053
Variable O&M Charge $/kWh $ $0.0028 $0.0029 $0.0030 $0.0031 $0.0032 $0.0033 $0.0034 $0.0035
Summer Gas Revenues $ 0 0 0 0 0 0 0 0
Winter Gas Revenues $ 0 0 0 0 0 0 0 0
Winter Oil Revenues $ 0 0 0 0 0 0 0 0
VEPCO Gas Revenues $ 0 0 0 0 0 0 0 0
Total Energy Revenues $ 0 0 0 0 0 0 0 0
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 881,000 934,000 515,000 124,000 498,000 421,000 345,000 421,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.040 $0.040 $0.045 $0.045 $0.045 $0.045 $0.045 $0.050
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 162,000 162,000 182,000 182,000 182,000 182,000 182,000 202,000
Total Thermal Revenues $ 611,000 611,000 631,000 631,000 631,000 631,000 631,000 651,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REVENUE GENERATION
Dispatch Operations 2012 2013 2014 2015
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760
Summer & VEPCO Capacity 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0
Summer Dispatch 0 0 0 0
Winter Gas Dispatch 0 0 0 0
Winter Oil Dispatch 0 0 0 0
VEPCO Gas Dispatch 0 0 0 0
Total Dispatch Hours 0 0 0 0
Percentage 0.00% 0.00% 0.00% 0.00%
Winter Starts 0 0 0 0
Winter Start Duration 40 40 40 40
Net Generation
Availability Factor 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 0 0 0 0
Winter Gas Output MWh 0 0 0 0
Winter Oil Dispatch MWh 0 0 0 0
VEPCO Gas Dispatch MWh 0 0 0 0
Net Generation MWh 0 0 0 0
Capacity Revenues
Capacity Rate $/kw-mo $8.32 $8.32 $8.32 $8.32
Capacity Revenues - Summer 8,238,000 8,238,000 8,238,000 8,238,000
Capacity Revenues - Winter 9,885,000 9,885,000 9,885,000 9,885,000
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000
Energy Revenues
Summer Gas Charge $/kWh $0.0455 $0.0479 $0.0505 $0.0532
Winter Gas Charge $/kWh $0.0558 $0.0588 $0.0616 $0.0647
Winter Oil Charge $/kWh $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Chargee $/kWh $0.0054 $0.0055 $0.0057 $0.0058
Variable O&M Charge $/kWh $0.0036 $0.0037 $0.0038 $0.0039
Summer Gas Revenues $ 0 0 0 0
Winter Gas Revenues $ 0 0 0 0
Winter Oil Revenues $ 0 0 0 0
VEPCO Gas Revenues $ 0 0 0 0
Total Energy Revenues $ 0 0 0 0
Start Revenues
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 459,000 536,000 574,000 651,000
Thermal Revenues
Steam Production Hours 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000
Chilled Water Productio ktons 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.050 $0.050 $0.050 $0.050
Steam Revenues $ 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 202,000 202,000 202,000 202,000
Total Thermal Revenues $ 651,000 651,000 651,000 651,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 7/96-12/96 [1] 1997 1998 1999 2000 2001 2002
-------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 13,599,500 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000 23,568,000
Energy Charges
Summer Gas Charge 0 0 0 0 0 0 0
Winter Gas Charge 0 0 0 0 0 0 0
Winter Oil Charge 0 0 0 0 0 0 0
VEPCO Gas Charge 0 0 0 0 0 0 0
- - - - - - -
Total Energy Revenues 0 0 0 0 0 0 0
Winter Gas Start Revenues 0 0 0 0 0 0 0
Steam Sales Revenues 224,500 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 70,500 141,000 141,000 141,000 141,000 162,000 162,000
------ ------- ------- ------- ------- ------- -------
Total Thermal Revenues 295,000 590,000 590,000 590,000 590,000 611,000 611,000
Total Sales Revenues 13,894,000 25,972,000 25,972,000 24,158,000 24,158,000 24,179,000 24,179,000
Interest - D.S.R. 5.0% 194,000 371,000 354,000 336,000 335,000 333,000 330,000
------- ------- ------- ------- ------- ------- -------
Total Revenues 14,088,500 26,343,000 26,326,000 24,494,000 24,493,000 24,509,000 24,509,000
Expenses
Fuel Costs - Cogen Plant 0 0 0 0 0 0 0
Fuel Costs - Boiler 811,000 1,642,000 1,662,000 1,672,000 1,701,000 1,770,000 1,853,000
Plant Operating Costs 1,631,000 3,224,000 3,241,000 3,256,000 3,297,000 3,318,000 3,342,000
Plant Variable Costs 306,500 631,000 650,000 670,000 691,000 711,000 733,000
------- ------- ------- ------- ------- ------- -------
Total Operating Costs 2,748,500 5,497,000 5,553,000 5,598,000 5,689,000 5,799,000 5,928,000
Rev. Avail. for Debt Service 11,340,000 20,846,000 20,773,000 18,896,000 18,804,000 18,713,000 18,581,000
Debt Service
Total Interest Costs 5,175,000 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000 6,764,000
Total Principal Payments 2,753,000 5,501,000 5,922,000 5,093,000 5,473,000 5,880,000 6,294,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service 7,928,000 14,694,000 14,627,000 13,314,000 13,242,000 13,164,000 13,058,000
Operating Cashflow
Pre-Tax Cashflow from Operations 3,412,000 6,152,000 6,146,000 5,582,000 5,562,000 5,549,000 5,523,000
Overhaul Reserve Fund Additions 0 0 0 0 0 0 0
Expected Debt Service Reserve Releases 655,000 26,000 670,000 30,000 33,000 47,000 50,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0 0
- - - - - - -
Net Balance from Operations [2] 4,067,000 6,178,000 6,816,000 5,612,000 5,595,000 5,596,000 5,573,000
Debt Service Coverage
Revenue Avail. for Debt Service 11,340,000 20,846,000 20,773,000 18,896,000 18,804,000 18,713,000 18,581,000
Total Interest Costs 5,175,000 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000 6,764,000
Total Principal Payments 2,753,000 5,501,000 5,922,000 5,093,000 5,473,000 5,880,000 6,294,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service Costs 7,928,000 14,694,000 14,627,000 13,314,000 13,242,000 13,164,000 13,058,000
Times Interest Coverage 2.19 2.27 2.39 2.30 2.42 2.57 2.75
Times Total Debt Coverage 1.43 1.42 1.42 1.42 1.42 1.42 1.42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 23,568,000 23,568,000 23,568,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 0 0 0 0 0 0 0
Winter Gas Charge 0 0 0 0 0 0 0
Winter Oil Charge 0 0 0 0 0 0 0
VEPCO Gas Charge 0 0 0 0 0 0 0
- - - - - - -
Total Energy Revenues 0 0 0 0 0 0 0
Winter Gas Start Revenues 0 0 0 0 0 0 0
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 162,000 162,000 162,000 182,000 182,000 182,000 182,000
------- ------- ------- ------- ------- ------- -------
Total Thermal Revenues 611,000 611,000 611,000 631,000 631,000 631,000 631,000
Total Sales Revenues 24,179,000 24,179,000 24,179,000 18,754,000 18,754,000 18,754,000 18,754,000
Interest - D.S.R. 5.0% 328,000 325,000 272,000 219,000 215,000 210,000 205,000
------- ------- ------- ------- ------- ------- -------
Total Revenues 24,507,000 24,504,000 24,451,000 18,973,000 18,969,000 18,964,000 18,959,000
Expenses
Fuel Costs - Cogen Plant 0 0 0 0 0 0 0
Fuel Costs - Boiler 1,939,000 2,029,000 2,123,000 2,280,000 2,457,000 2,630,000 2,825,000
Plant Operating Costs 3,370,000 3,399,000 3,431,000 3,467,000 3,500,000 3,540,000 3,583,000
Plant Variable Costs 755,000 777,000 801,000 825,000 849,000 875,000 900,000
------- ------- ------- ------- ------- ------- -------
Total Operating Costs 6,064,000 6,205,000 6,355,000 6,572,000 6,806,000 7,045,000 7,308,000
Rev. Avail. for Debt Service 18,443,000 18,299,000 18,096,000 12,401,000 12,163,000 11,919,000 11,651,000
Debt Service
Total Interest Costs 6,206,000 5,610,000 4,972,000 4,418,000 4,042,000 3,647,000 3,235,000
Total Principal Payments 6,737,000 7,215,000 7,697,000 4,292,000 4,492,000 4,705,000 4,919,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service 12,943,000 12,825,000 12,669,000 8,710,000 8,534,000 8,352,000 8,154,000
Operating Cashflow
Pre-Tax Cashflow from Operations 5,500,000 5,474,000 5,427,000 3,691,000 3,629,000 3,567,000 3,497,000
Overhaul Reserve Fund Additions 0 0 0 0 0 0 0
Expected Debt Service Reserve Releases 51,000 70,000 2,034,000 85,000 87,000 96,000 100,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0 0
- - - - - - -
Net Balance from Operations [2] 5,551,000 5,544,000 7,461,000 3,776,000 3,716,000 3,663,000 3,597,000
Debt Service Coverage
Revenue Avail. for Debt Service 18,443,000 18,299,000 18,096,000 12,401,000 12,163,000 11,919,000 11,651,000
Total Interest Costs 6,206,000 5,610,000 4,972,000 4,418,000 4,042,000 3,647,000 3,235,000
Total Principal Payments 6,737,000 7,215,000 7,697,000 4,292,000 4,492,000 4,705,000 4,919,000
--------- --------- --------- --------- --------- --------- ---------
Total Debt Service Costs 12,943,000 12,825,000 12,669,000 8,710,000 8,534,000 8,352,000 8,154,000
Times Interest Coverage 2.97 3.26 3.64 2.81 3.01 3.27 3.60
Times Total Debt Coverage 1.42 1.43 1.43 1.42 1.43 1.43 1.43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL FORECAST
Revenues 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 0 0 0 0 0 0
Winter Gas Charge 0 0 0 0 0 0
Winter Oil Charge 0 0 0 0 0 0
VEPCO Gas Charge 0 0 0 0 0 0
- - - - - -
Total Energy Revenues 0 0 0 0 0 0
Winter Gas Start Revenues 0 0 0 0 0 0
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 182,000 202,000 202,000 202,000 202,000 202,000
------- ------- ------- ------- ------- -------
Total Thermal Revenues 631,000 651,000 651,000 651,000 651,000 651,000
Total Sales Revenues 18,754,000 18,774,000 18,774,000 18,774,000 18,774,000 18,774,000
Interest - D.S.R. 5.0% 201,000 196,000 191,000 185,000 169,000 79,000
------- ------- ------- ------- ------- ------
Total Revenues 18,955,000 18,970,000 18,965,000 18,959,000 18,943,000 18,853,000
Expenses
Fuel Costs - Cogen Plant 0 0 0 0 0 0
Fuel Costs - Boiler 3,029,000 3,201,000 3,395,000 3,583,000 3,794,000 4,016,000
Plant Operating Costs 3,628,000 3,674,000 3,724,000 3,778,000 3,835,000 3,892,000
Plant Variable Costs 928,000 955,000 985,000 1,014,000 1,044,000 1,075,000
------- ------- ------- --------- --------- ---------
Total Operating Costs 7,585,000 7,830,000 8,104,000 8,375,000 8,673,000 8,983,000
Rev. Avail. for Debt Service 11,370,000 11,140,000 10,861,000 10,584,000 10,270,000 9,870,000
Debt Service
Total Interest Costs 2,803,000 2,350,000 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 5,143,000 5,422,000 5,691,000 5,953,000 6,188,000 6,031,000
--------- --------- --------- --------- --------- ---------
Total Debt Service 7,946,000 7,772,000 7,565,000 7,328,000 7,042,000 6,356,000
Operating Cashflow
Pre-Tax Cashflow from Operations 3,424,000 3,368,000 3,296,000 3,256,000 3,228,000 3,514,000
Overhaul Reserve Fund Additions 0 0 0 0 0 0
Expected Debt Service Reserve Releases 82,000 99,000 115,000 139,000 476,000 3,145,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0
- - - - - -
Net Balance from Operations [2] 3,506,000 3,467,000 3,411,000 3,395,000 3,704,000 6,659,000
Debt Service Coverage
Revenue Avail. for Debt Service 11,370,000 11,140,000 10,861,000 10,584,000 10,270,000 9,870,000
Total Interest Costs 2,803,000 2,350,000 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 5,143,000 5,422,000 5,691,000 5,953,000 6,188,000 6,031,000
--------- --------- --------- --------- --------- ---------
Total Debt Service Costs 7,946,000 7,772,000 7,565,000 7,328,000 7,042,000 6,356,000
Times Interest Coverage 4.06 4.74 5.80 7.70 12.03 30.37
Times Total Debt Coverage 1.43 1.43 1.44 1.44 1.46 1.55
</TABLE>
[1] Project closing of July 1996 assumed. Reflects one-half year's operations
following refinancing.
[2] Available for capital expenditures or distributions to Project owners.
<PAGE>
<TABLE>
<CAPTION>
RESERVE FUNDS
Debt Service Reserve Fund 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 8,090,714 7,435,714 7,409,285 6,739,285 6,709,642 6,677,142 6,630,356 6,580,713
Additions 0 0 0 0 0 0 0 0
Interest 5.00% 388,000 371,000 354,000 336,000 335,000 333,000 330,000 328,000
Withdrawals (388,000) (371,000) (354,000) (336,000) (335,000) (333,000) (330,000) (328,000)
Releases (655,000) (26,429) (670,000) (29,643) (32,500) (46,786) (49,643) (51,429)
-------- ------- -------- ------- ------- ------- ------- -------
Ending Balance 7,435,714 7,409,285 6,739,285 6,709,642 6,677,142 6,630,356 6,580,713 6,529,284
Overhaul Reserve Fund
Beginning Balance 942,632 (4,207,368) (4,207,368) (4,417,368) (4,633,368) (4,859,368) (5,096,368) (5,345,368)
Additions 0 0 0 0 0 0 0 0
Interest Earnings 5.00% 0 0 (210,000) (216,000) (226,000) (237,000) (249,000) (261,000)
Turbine Overhauls 0 0 0 0 0 0 0 0
Other Withdrawals 0 0 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0 0 0
Releases (5,150,000) 0 0 0 0 0 0 0
---------- - - - - - - -
Ending Balance (4,207,368) (4,207,368) (4,417,368) (4,633,368) (4,859,368) (5,096,368) (5,345,368) (5,606,368)
Dispatch Hours 0 0 0 0 0 0 0 0
Reserve Addition 3.00% $260 $268 $276 $284 $293 $301 $310 $320
Reserve Addition 0 0 0 0 0 0 0 0
Overhaul Requirements
Frame 6 Operating Hours 4,863 4,863 4,863 4,863 4,863 4,863 4,863 4,863
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 14,056 13,714 13,714 13,714 13,714 13,714 13,714 13,714
Combustion Inspection (CI) [1]
Hot Gas Path Inspection (HGP) [2]
Major Overhaul (MO) [3]
Frame 7 Operating Hours 3,525 3,525 3,525 3,525 3,525 3,525 3,525 3,525
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 10,186 9,941 9,941 9,941 9,941 9,941 9,941 9,941
Combustion Inspection (CI) [4]
Hot Gas Path Inspection (HGP) [5]
Major Overhaul[6]
Steam Turbine Equiv. Hours 9,029 9,029 9,029 9,029 9,029 9,029 9,029 9,029
Limited ST Overhaul (LO) [7]
Major ST Overhaul (MO) [8] -
------------------------------------------------------------------------------------------------------
Total Overhaul Costs $0 $0 $0 $0 $0 $0 $0 $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Debt Service Reserve Fund 2004 2005 2006 2007 2008 2009 2010
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 6,529,284 6,458,927 4,424,641 4,339,284 4,252,141 4,156,427 4,056,070
Additions 0 0 0 0 0 0 0
Interest 5.00% 325,000 272,000 219,000 215,000 210,000 205,000 201,000
Withdrawals (325,000) (272,000) (219,000) (215,000) (210,000) (205,000) (201,000)
Releases (70,357) (2,034,286) (85,357) (87,143) (95,714) (100,357) (82,143)
------- ---------- ------- ------- ------- -------- -------
Ending Balance 6,458,927 4,424,641 4,339,284 4,252,141 4,156,427 4,056,070 3,973,927
Overhaul Reserve Fund
Beginning Balance (5,606,368) (5,880,368) (6,167,368) (6,468,368) (6,784,368) (7,115,368) (7,462,368)
Additions 0 0 0 0 0 0 0
Interest Earnings 5.00% (274,000) (287,000) (301,000) (316,000) (331,000) (347,000) (364,000)
Turbine Overhauls 0 0 0 0 0 0 0
Other Withdrawals 0 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0 0
Releases 0 0 0 0 0 0 0
- - - - - - -
Ending Balance (5,880,368) (6,167,368) (6,468,368) (6,784,368) (7,115,368) (7,462,368) (7,826,368)
Dispatch Hours 0 0 0 0 0 0 0
Reserve Addition 3.00% $329 $339 $349 $360 $371 $382 $393
Reserve Addition 0 0 0 0 0 0 0
Overhaul Requirements
Frame 6 Operating Hours 4,863 4,863 4,863 4,863 4,863 4,863 4,863
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 13,714 13,714 13,714 13,714 13,714 13,714 13,714
Combustion Inspection (CI) [1]
Hot Gas Path Inspection (HGP)
Major Overhaul (MO) [3]
Frame 7 Operating Hours 3,525 3,525 3,525 3,525 3,525 3,525 3,525
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 9,941 9,941 9,941 9,941 9,941 9,941 9,941
Combustion Inspection (CI) [4]
Hot Gas Path Inspection (HGP) [5]
Major Overhaul[6]
------------------------------------------------------------------------------------------
Steam Turbine Equiv. Hours 9,029 9,029 9,029 9,029 9,029 9,029 9,029
Limited ST Overhaul (LO) [7]
Major ST Overhaul (MO) [8]
Total Overhaul Costs $0 $0 $0 $0 $0 $0 $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Debt Service Reserve Fund 2011 2012 2013 2014 2015
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Beginning Balance 3,973,927 3,874,641 3,759,998 3,621,069 3,145,447
Additions 0 0 0 0 0
Interest 5.00% 196,000 191,000 185,000 169,000 79,000
Withdrawals (196,000) (191,000) (185,000) (169,000) (79,000)
Releases (99,286) (114,643) (138,929) (475,622) (3,145,449)
------- -------- -------- -------- ----------
Ending Balance 3,874,641 3,759,998 3,621,069 3,145,447 (2)
Overhaul Reserve Fund
Beginning Balance (7,826,368) (8,208,368) (8,609,368) (9,029,368) (9,470,368)
Additions 0 0 0 0 0
Interest Earnings 5.00% (382,000) (401,000) (420,000) (441,000) (462,000)
Turbine Overhauls 0 0 0 0 0
Other Withdrawals 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0
Releases 0 0 0 0 0
- - - - -
Ending Balance (8,208,368) (8,609,368) (9,029,368) (9,470,368) (9,932,368)
Dispatch Hours 0 0 0 0 0
Reserve Addition 3.00% $405 $417 $430 $443 $456
Reserve Addition 0 0 0 0 0
Overhaul Requirements
Frame 6 Operating Hours 4,863 4,863 4,863 4,863 4,863
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 13,714 13,714 13,714 13,714 13,714
Combustion Inspection (CI) [1]
Hot Gas Path Inspection (HGP)
Major Overhaul (MO) [3]
Frame 7 Operating Hours 3,525 3,525 3,525 3,525 3,525
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 9,941 9,941 9,941 9,941 9,941
Combustion Inspection (CI) [4]
Hot Gas Path Inspection (HGP) [5]
Major Overhaul[6]
Steam Turbine Equiv. Hours 9,029 9,029 9,029 9,029 9,029
Limited ST Overhaul (LO) [7]
Major ST Overhaul (MO) [8]
-----------------------------------------------------------------
Total Overhaul Costs $0 $0 $0 $0 $0
</TABLE>
<PAGE>
January 10, 1997
Mr. Bryan Urban
Panda Funding Corporation
Panda Interfunding Corporation
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Panda Energy International, Inc.
Panda-Rosemary Cogeneration Project
Project Condition Assessment Update Report
B&McD Project No. 94-443-4-002 PANDA
Dear Sirs:
This Project Condition Assessment Update letter report
(Update Report) summarizes Burns & McDonnell's recent
efforts to review the Panda-Rosemary Cogeneration Project
(Project) on behalf of Project lenders. These efforts have
been conducted to evaluate whether any material changes have
occurred since Burns and McDonnell's "Panda-Rosemary
Cogeneration Condition Assessment Report," dated July 26,
1996 (Condition Assessment Report). This Update Report is
prepared in condition with the offering of Pooled Project
Bonds, Series A-1 due 2012 by Panda Funding Corporation in
exchange for its Pooled Project Bonds, Series A due 2012.
This Update Report is intended to supplement the Condition
Assessment Report, and is not intended to serve as a stand-
alone document. Except as noted herein, our previous
opinions included in the Condition Assessment Report remain
applicable to the Project. To obtain the proper context,
the reader is encouraged to refer to and become familiar
with the Condition Assessment Report prior to reading this
Update Report.
A primary focus of this Update Report is to assess and
comment upon recent damage to certain Project equipment
components. The damage to the Project equipment was caused
by extraordinary weather conditions which occurred during a
recent hurricane.
Purpose
This Update Report is intended to serve the following
purposes:
- - Hurricane Damage - To review recent hurricane damage to
the Project and to assess the financial impact this damage
may have upon Project lenders.
- - Economic Dispatch - To update the anticipated economic
dispatch included in the Project pro forma and to assess the
financial impact to Project lenders.
- - Fuel Costs - To update anticipated fuel costs included
in the Project pro forma and to assess the financial impact
to Project lenders.
- - Operation and Maintenance Costs - To update anticipated
Project operation and maintenance costs included in the
Project pro forma and to assess the financial impact to
Project lenders.
- - Project Pro Forma Assumptions - To review the Project
pro forma assumptions included in the Condition Assessment
Report to confirm, given recent events, these assumptions
are reasonable.
Background
Burns & McDonnell has provided professional engineering
services for the Panda-Rosemary Cogeneration Project since
its inception in 1989. Our responsibilities in this
capacity have been to serve as independent engineer for
Project lenders. Our most recent involvement included
preparation of the Condition Assessment Report which
consisted of a review and assessment of the Project's
equipment and operating condition; its operating history;
the significant Project agreements; and projections of
revenues, expenses and debt service coverage for the Project
for the period that the First Mortgage Bonds due 2016 are
scheduled to be outstanding. Our additional past experience
with the Project is explained in more detail in the
Condition Assessment Report.
Hurricane Damage
On Friday, September 6, 1996, the Project experienced
extraordinary weather conditions caused by hurricane "Fran".
These conditions resulted in an electrical fault which
caused damage to certain electrical interconnection
equipment. Panda Energy's engineering consultant, C. H.
Guernsey & Company (Guernsey), conducted an immediate site
visit, inspected the damage due to the incident, and
consulted on recommended repairs to the damaged equipment.
A report of the incident was prepared by Guernsey.
The damage occurred to two switches and one power
transformer used to interconnect the Project with VEPCO.
The damage to the transformer is of primary concern for the
following reasons:
- - Replacement Cost - The damaged transformer is a major
component of the Project. Repair of this component is
estimated to cost $577,250.
- - Delivery Schedule - The damaged transformer is a major
component that is not kept in stock by equipment suppliers.
The delivery schedule for a replacement transformer would
most likely be several months at best. Repair to the
damaged transformer, as proposed by Panda Energy, will also
require several months with a planned in-service date of
April, 1997. A substantial cost to be incurred as a result
of this delivery schedule is rental costs for use of a
temporary transformer. Anticipated rental costs of
$1,021,680 are actually greater than anticipated repair
costs for the transformer.
Burns & McDonnell has reviewed the report prepared by
Guernsey and subsequent cost estimates prepared by Panda
Energy, Guernsey and others. These cost estimates include
price quotes from well-qualified equipment suppliers and
repair facilities. Based upon our review of this report,
these cost estimates and discussions with Panda Energy's
insurance specialist, it appears damages to the facility
will most likely be covered by insurance. Assuming this is
true, the financial impact to the Project is the insurance
deductible costs of $330,000.
A preliminary assessment of the damage to the transformer
indicates one of the three phases contained within the
transformer have been damaged. Although tests at the repair
facility could indicate the other two phases are
satisfactory, degradation of these phases may have occurred.
Considering the cost of a potential failure of this
transformer in the future, Panda Energy has indicated they
plan to repair all three phases regardless of any favorable
test results at the repair facility. The incremental cost
of repairing all three phases versus only one phase may or
may not be covered by insurance. In the event these
incremental costs are not covered by insurance, Panda Energy
will incur an additional cost of $222,225. The Project pro
forma has been modified under the assumption that Panda
incurs this cost.
The inclusion of the hurricane damage costs incurred by
Panda Energy did not affect the debt service coverage,
because it is assumed that the debt service coverage
obligations are paid before this cost.
Economic Dispatch
The projected dispatch update, as prepared by ICF Resources
Incorporated (ICF), is presented in Table A. For the
remaining Power Purchase Agreement (PPA) term covering 1997
to 2015, the updated ICF dispatch projection is
approximately 14 percent lower than the forecast presented
in the Condition Assessment Report. The Project pro forma
Contained in Exhibit A to the Condition Assessment Report
has been modified by Exhibit A to this Update Report to
reflect the updated dispatch projection.
ICF has reported the decrease in the dispatch forecast can
be attributed primarily to the following two factors:
- - ICF's updated fuel cost forecast, discussed in a
subsequent section, has resulted in a slightly lower
economic dispatch for the Project relative to competing
independent power units.
- - VEPCO has agreed as part of a recent buyout of an
independent power project, Richmond Power Enterprises (RPE),
to purchase economy energy from an Enron affiliate which is
forecasted to displace some of the Project's off-peak
dispatch.
The projection of hours dispatched under VEPCO gas has not
been modified from the Condition Assessment Report. These
estimates were provided by Panda Energy and confirmed by
ICF. Burns & McDonnell and Panda Energy believe the VEPCO
gas dispatch forecast has not materially changed from the
projection presented in the Condition Assessment Report.
Fuel Costs
ICF has provided an updated forecast of seasonal delivered
fuel costs. The updated fuel cost forecast is presented in
Table B. Burns & McDonnell has reviewed this updated
forecast and made the following observations:
- - Compared to the Condition Assessment Report, the summer
delivered gas cost forecast is increased for the 1998
through 2007 time period, and decreased during the 2009
through 2015 time period.
- - The winter delivered gas cost forecast has decreased
each year from 1997 through 2015.
- - The winter delivered fuel oil cost forecast is
essentially unchanged from the Condition Assessment Report.
The Project pro forma Contained in Exhibit A to the
Condition Assessment Report has been modified by Exhibit A
to this Update Report to reflect the updated fuel cost
forecast.
Operation and Maintenance Costs
Burns & McDonnell has reviewed the Project's 1996 year-to-
date fixed and variable operating costs and concluded that
the projections in the Condition Assessment Report remain
reasonable. Year-to-date operating costs are within three
percent of budgeted costs which formed the basis of the
projection contained in the Condition Assessment Report.
Conclusion
Burns & McDonnell has updated the Project pro forma to
reflect the financial impact of the hurricane damage, the
updated dispatch forecast, and the updated fuel cost
forecast. The updated summary of the Project pro forma is
attached.
Table C presents a summary of the debt coverage ratios of
the Project with the updated assumptions compared to the
previously projected debt service coverage ratios included
in the Condition Assessment Report.
Table C indicates the Project is expected to maintain strong
debt coverage ratios throughout the twenty-year debt
repayment period, although the updated debt service coverage
ratios are slightly lower, due to a lower ICF dispatch
projection.
Burns & McDonnell concludes the impact of the hurricane
damage, updated dispatch forecast, and updated gas cost
forecast do not significantly alter the revenue available
for debt service, which ultimately affects the risk to the
lenders.
The conclusions stated above are subject to the following
limiting conditions:
- - Burns & McDonnell has relied on operating and financial
information provided by Panda Energy and its consultants.
While we have no reason to believe that the information
provided is inaccurate in any material respect, Burns &
McDonnell has not independently verified such information
and cannot guarantee its accuracy or completeness.
- - In preparation of this Update Report and the opinions
expressed herein, Burns & McDonnell has made certain
assumptions with respect to conditions which may exist in
the future as set forth in Part I of the Condition Report.
While we believe the assumptions made are reasonable for the
purposes of this Report, Burns & McDonnell makes no
representation that the conditions assumed will, in fact,
occur. To the extent future conditions differ from those
assumed herein or from estimates and information provided by
Panda Energy and its consultants, the actual results will
vary from those projected.
O&M Agreement
As of January 1, 1997, Panda Global Services, Inc. will assume
responsibility of the O&M Agreement for the Panda Rosemary Cogeneration
Facility previously held by University Technical Services (UTECH).
Burns & McDonnell recently reviewed the executed O&M Agreement,
concluding the new agreement is consistent with the UTECH O&M Agreement
which was obtained through a competitive bid process. Burns & McDonnell
knows of no reason why Panda Global Services, Inc., would not continue to
implement the operation and maintenance of the Panda-Rosemary Facility in
accordance with good engineering practices and generally accepted industry
practices.
Confirmation and Consent
We confirm the conclusions and other information contained
in the Condition Assessment Report, as supplemented and
modified by this Update Report.
We consent to the inclusion of the Condition Assessment
Report and this Update Report in the Registration Statement
of Panda Funding Corporation relating to its Pooled Project
Bonds, Series A-1 due 2012.
We are pleased to be of service to Panda Energy. If we can
be of further assistance, please contact Greg Mack at (816)
822-3178 or Melissa Yancey at (816) 333-9400.
Sincerely,
/s/ Gregory J. Mack, P.E.
Gregory J. Mack, P.E.
Project Manager
/s/ Melissa A. Yancey
Melissa A. Yancey
Project Financial Analyst
Enclosures
update.wpd
cc: file
<TABLE>
<CAPTION>
TABLE A
UPDATED DISPTACH ASSUMPTIONS [1]
Panda-Rosemary Cogeneration Project
Summer Winter Gas Winter Oil VEPCO Gas [2] Total %
Year Dispatch Hours Dispatch Hours Dispatch Hours Dispatch Hours Dispatch Hours Percent
- ---- -------------- -------------- -------------- -------------- -------------- -------
<C> <C> <C> <C> <C> <C> <C>
1996[3] 874 3 0 400 1077 12.29
1997 511 117 3 400 1031 11.77
1998 775 183 10 500 1468 16.76
1999 1038 250 17 500 1805 20.61
2000 1453 241 19 500 2213 25.26
2001 1888 231 21 500 2620 29.91
2002 1980 272 37 500 2769 31.61
2003 2053 320 65 600 3038 34.68
2004 2149 378 114 600 3241 37.00
2005 2248 441 202 600 3491 39.85
2006 2151 428 188 600 3365 38.41
2007 2058 415 171 600 3244 37.03
2008 1969 401 158 600 3128 35.71
2009 1884 388 145 600 3017 34.44
2010 1802 375 134 600 2911 33.23
2011 1756 361 133 600 2850 32.53
2012 1710 348 132 600 2790 31.85
2013 1666 335 131 600 2732 31.19
2014 1622 322 130 600 2674 30.53
2015 1579 310 129 600 2618 29.89
</TABLE>
[1] Equivalent full load dispatch hours.
[2] VEPCO gas dispatch assumptions provided by Panda.
[3] Forecast of equivalent full dispatch hours prepared by ICF.
Reference: Condition Assessment Report Table VII-3
<TABLE>
<CAPTION>
TABLE B
UPDATED FUEL COST ASSUMPTIONS
Panda-Rosemary Cogeneration Project
Summer Winter Winter
Year Gas Cost Gas Cost Oil Cost
---- -------- -------- --------
($/MMBtu) ($/MMBtu) ($/MMTbu)
<C> <C> <C> <C>
1996 [1] 2.20 2.85 3.81
1997 2.15 2.61 3.89
1998 2.26 2.72 4.05
1999 2.38 2.84 4.21
2000 2.50 2.97 4.38
2001 2.61 3.10 4.41
2002 2.71 3.24 4.43
2003 2.84 3.37 4.48
2004 2.97 3.53 4.49
2005 3.10 3.67 4.52
2006 3.24 3.83 4.55
2007 3.38 3.97 4.58
2008 3.53 4.15 4.62
2009 3.70 4.32 4.65
2010 3.87 4.51 4.69
2011 4.02 4.68 4.72
2012 4.15 4.85 4.76
2013 4.31 5.03 4.79
2014 4.47 5.20 4.83
2015 4.84 5.36 4.86
</TABLE>
[1] Fuel cost forecast prepared by ICF.
Reference: Condition Assessment Report, Table VII-4
<TABLE>
<CAPTION>
TABLE C
UPDATED SUMMARY OF PROJECT DEBT COVERAGE RATIOS
Panda-Rosemary Cogeneration Project
7/26/96
Pre-Tax Total Debt Debt
Total Total Operating Debt-Service Coverage Coverage
Year Revenues Expenses Cashflow Costs Ratio Ratio
- ---- ---------- ---------- ---------- ------------ ----------- ---------
$ $ $ $
<C> <C> <C> <C> <C> <C> <C>
7/96-
12/96
[1] 15,680,000 4,744,000 10,936,000 7,928,000 1.38 1.38
1997 29,656,000 9,445,000 20,211,000 14,694,000 1.38 1.37
1998 31,602,000 10,942,000 20,660,000 14,627,000 1.41 1.42
1999 31,778,000 12,614,000 19,184,000 13,314,000 1.44 1.46
2000 34,081,000 14,565,000 19,516,000 13,242,000 1.47 1.50
2001 36,499,000 16,600,000 19,899,000 13,164,000 1.51 1.52
2002 37,870,000 17,855,000 20,015,000 13,058,000 1.53 1.57
2003 39,628,000 19,361,000 20,247,000 12,943,000 1.56 1.62
2004 41,635,000 21,209,000 20,426,000 12,825,000 1.59 1.68
2005 44,136,000 23,477,000 20,659,000 12,669,000 1.63 1.74
2006 38,488,000 23,667,000 14,621,000 8,710,000 1.70 1.80
2007 38,202,000 23,810,000 14,392,000 8,534,000 1.69 1.74
2008 37,925,000 23,979,000 13,946,000 8,352,000 1.67 1.77
2009 37,693,000 24,208,000 13,485,000 8,154,000 1.65 1.74
2010 37,918,000 24,484,000 13,454,000 7,946,000 1.69 1.72
2011 38,067,000 24,862,000 13,205,000 7,772,000 1.70 1.74
2012 38,147,000 25,227,000 12,920,000 7,565,000 1.71 1.77
2013 38,235,000 25,649,000 12,586,000 7,328,000 1.72 1.81
2014 38,328,000 26,086,000 12,262,000 7,042,000 1.74 1.85
2015 38,351,000 26,495,000 11,856,000 6,356,000 1.87 2.02
</TABLE>
Average coverage over the term of the Bonds is 1.50:1.
[1] Reflects one-half year of operations following the planned debt refinancing
in July 1996.
Reference: Condition Assessment Report, Table VII-5
<PAGE>
Panda Energy Corporation Alternative: Updated Corporate Page 1
Panda-Rosemary Cogen Project Refinancing Offering Base Case
*******************************************************************************
OPERATING ASSUMPTIONS
Planning Period
Base Year: 1996
PPA Final Year: 2015
PPA Remaining Term: 20 years
Planning Period: 20 years
Rounding Precision: -3
<TABLE>
<CAPTION>
Capacity Assumptions
---------------------------------------------------------------------------------------
Summer Summer Winter Winter Summer Gas
Demonstrated Capacity Contract Demonstrated Capacity Contract Dispatch
Year Capacity Degradation Capacity Capacity Degradation Capacity Hours [1]
---- ------------ ----------- -------- ------------ ----------- -------- ----------
(MW) (%) (MW) (MW) (%) (MW)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 1995 174.0 165.0 198.0 198.0 660
1 1996 174.0 0.00% 165.0 198.0 0.00% 198.0 674
2 1997 174.0 0.00% 165.0 198.0 0.00% 198.0 511
3 1998 174.0 0.00% 165.0 198.0 0.00% 198.0 775
4 1999 174.0 0.00% 165.0 198.0 0.00% 198.0 1038
5 2000 174.0 0.00% 165.0 198.0 0.00% 198.0 1453
6 2001 174.0 0.00% 165.0 198.0 0.00% 198.0 1868
7 2002 174.0 0.00% 165.0 198.0 0.00% 198.0 1960
8 2003 174.0 0.00% 165.0 198.0 0.00% 198.0 2053
9 2004 174.0 0.00% 165.0 198.0 0.00% 198.0 2149
10 2005 174.0 0.00% 165.0 198.0 0.00% 198.0 2248
11 2006 174.0 0.00% 165.0 198.0 0.00% 198.0 2151
12 2007 174.0 0.00% 165.0 198.0 0.00% 198.0 2058
13 2008 174.0 0.00% 165.0 198.0 0.00% 198.0 1969
14 2009 174.0 0.00% 165.0 198.0 0.00% 198.0 1884
15 2010 174.0 0.00% 165.0 198.0 0.00% 198.0 1802
16 2011 174.0 0.00% 165.0 198.0 0.00% 198.0 1756
17 2012 174.0 0.00% 165.0 198.0 0.00% 198.0 1710
18 2013 174.0 0.00% 165.0 198.0 0.00% 198.0 1666
19 2014 174.0 0.00% 165.0 198.0 0.00% 198.0 1622
20 2015 174.0 0.00% 165.0 198.0 0.00% 198.0 1579
<CAPTION>
Dispatch Assumptions
---------------------------------------------------------------------
Winter Gas Winter Oil VEPCO Gas
Summer Dispatch Winter Gas Dispatch Winter Gas Dispatch
Year Output [4] Hours [1] Output Hours [1] Output Hours [1],[2]
---- ---------- ---------- ---------- ---------- ---------- -------------
(MWh) (MWh) (MWh)
<S> <C> <C> <C> <C> <C> <C> <C>
0 1995 114,840 2 396 0 0 400
1 1996 117,276 3 594 0 0 400
2 1997 88,914 117 23,166 3 594 400
3 1998 134,850 183 36,234 10 1,980 500
4 1999 180,612 250 49,500 17 3,366 500
5 2000 252,822 241 47,718 19 3,762 500
6 2001 325,032 231 45,738 21 4,158 500
7 2002 341,040 272 53,856 37 7,326 500
8 2003 357,222 320 63,360 65 12,870 600
9 2004 373,926 378 74,844 114 22,572 600
10 2005 391,152 441 87,318 202 39,996 600
11 2006 374,274 428 84,744 186 36,828 600
12 2007 358,092 415 82,170 171 33,858 600
13 2008 342,606 401 79,398 158 31,284 600
14 2009 327,816 388 76,824 145 28,710 600
15 2010 313,548 375 74,250 134 26,532 600
16 2011 305,544 361 71,478 133 26,334 600
17 2012 297,540 348 68,904 132 26,136 600
18 2013 289,884 335 66,330 131 25,938 600
19 2014 282,228 322 63,756 130 25,740 600
20 2015 274,746 310 61,380 129 25,542 600
<CAPTION>
Dispatch Assumptions
----------------------------
Total
VEPCO Gas Dispatch
Year Output Hours [1] Percent
---- --------- --------- -------
(MWh) (%)
<S> <C> <C> <C> <C>
0 1995 66,000 1062 12.12%
1 1996 66,000 1077 12.29%
2 1997 66,000 1031 11.77%
3 1998 82,500 1468 16.76%
4 1999 82,500 1805 20.61%
5 2000 82,500 2213 25.26%
6 2001 82,500 2620 29.91%
7 2002 82,500 2769 31.61%
8 2003 99,000 3038 34.68%
9 2004 99,000 3241 37.00%
10 2005 99,000 3491 39.85%
11 2006 99,000 3365 38.41%
12 2007 99,000 3244 37.03%
13 2008 99,000 3128 35.71%
14 2009 99,000 3017 34.44%
15 2010 99,000 2911 33.23%
16 2011 99,000 2850 32.53%
17 2012 99,000 2790 31.85%
18 2013 99,000 2732 31.19%
19 2014 99,000 2674 30.53%
20 2015 99,000 2618 29.89%
</TABLE>
[1] Dispatch hour forecast represents equivalent full load dispatch
hours incorporating planned and forced outage factors.
[2] VEPCO gas dispatch forecast during PPA term provided by Panda.
[3] Net electrical generation heat rate including credit from thermal
production.
[4] Summer output based on demonstrated capacity.
<TABLE>
<CAPTION>
Electric Heat Rate Assumptions [3] Aux. Boiler Steam/Chilled Water Assumptions
---------------------------------- --------------------------------------------------------
Demonstrated Contract Steam C. Water Steam
Heat Heat Rate Heat Production Steam Production C. Water Heat
Year Rate Degradation Rate Hours Production Hours Production Requirement
---- ------------ ----------- -------- ---------- ---------- ---------- ---------- -----------
(Btu/kWh) (%) (Btu/kWh) (pph) (tons-hr) (Btu/lb)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 1995 8900 8900 7800 50,000 4000 1010 1714
1 1996 8900 0.00% 8900 7800 50,000 4000 1010 1714
2 1997 8900 0.00% 8900 7800 50,000 4000 1010 1714
3 1998 8900 0.00% 8900 7800 50,000 4000 1010 1714
4 1999 8900 0.00% 8900 7800 50,000 4000 1010 1714
5 2000 8900 0.00% 8900 7800 50,000 4000 1010 1714
6 2001 8900 0.00% 8900 7800 50,000 4000 1010 1714
7 2002 8900 0.00% 8900 7800 50,000 4000 1010 1714
8 2003 8900 0.00% 8900 7800 50,000 4000 1010 1714
9 2004 8900 0.00% 8900 7800 50,000 4000 1010 1714
10 2005 8900 0.00% 8900 7800 50,000 4000 1010 1714
11 2006 8900 0.00% 8900 7800 50,000 4000 1010 1714
12 2007 8900 0.00% 8900 7800 50,000 4000 1010 1714
13 2008 8900 0.00% 8900 7800 50,000 4000 1010 1714
14 2009 8900 0.00% 8900 7800 50,000 4000 1010 1714
15 2010 8900 0.00% 8900 7800 50,000 4000 1010 1714
16 2011 8900 0.00% 8900 7800 50,000 4000 1010 1714
17 2012 8900 0.00% 8900 7800 50,000 4000 1010 1714
18 2013 8900 0.00% 8900 7800 50,000 4000 1010 1714
19 2014 8900 0.00% 8900 7800 50,000 4000 1010 1714
20 2015 8900 0.00% 8900 7800 50,000 4000 1010 1714
</TABLE>
<PAGE>
Panda Energy Corporation Alternative: Updated Corporate Page 2
Panda-Rosemary Cogen Project Refinancing Offering Base Case
********************************************************************************
FUEL COST ASSUMPTIONS
<TABLE>
<CAPTION>
Summer Gas Cost
---------------------------------------------------------------------------------
SSG SGT SGT SGT SR1 SR2 SRX
Gulf Spot Transco Panda NCG Transco NCNG Swing Gas
Year Price IT Pipeline IT Mgt. Fee Retainage Retainage Retainage
---- --------- --------- ----------- -------- --------- --------- ---------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%)
--------------------------------------------- 3.79% 2.00% 3.00%
Escalation 1996-2015 ICF Forecast
---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 1995 $1.56 $0.34 $0.26 $0.04 3.79% 2.00% 3.00%
1 1996 $1.74 $0.34 $0.26 $0.04 3.79% 2.00% 3.00%
2 1997 $1.69 $0.34 $0.27 $0.04 3.79% 2.00% 3.00%
3 1998 $1.78 $0.35 $0.27 $0.04 3.79% 2.00% 3.00%
4 1999 $1.89 $0.36 $0.28 $0.04 3.79% 2.00% 3.00%
5 2000 $1.99 $0.37 $0.29 $0.04 3.79% 2.00% 3.00%
6 2001 $2.09 $0.38 $0.30 $0.04 3.79% 2.00% 3.00%
7 2002 $2.19 $0.38 $0.31 $0.04 3.79% 2.00% 3.00%
8 2003 $2.30 $0.39 $0.32 $0.04 3.79% 2.00% 3.00%
9 2004 $2.41 $0.40 $0.33 $0.04 3.79% 2.00% 3.00%
10 2005 $2.52 $0.42 $0.34 $0.04 3.79% 2.00% 3.00%
11 2006 $2.65 $0.43 $0.35 $0.04 3.79% 2.00% 3.00%
12 2007 $2.78 $0.43 $0.36 $0.04 3.79% 2.00% 3.00%
13 2008 $2.91 $0.44 $0.37 $0.04 3.79% 2.00% 3.00%
14 2009 $3.05 $0.45 $0.38 $0.04 3.79% 2.00% 3.00%
15 2010 $3.21 $0.47 $0.39 $0.04 3.79% 2.00% 3.00%
16 2011 $3.33 $0.48 $0.40 $0.04 3.79% 2.00% 3.00%
17 2012 $3.47 $0.48 $0.41 $0.04 3.79% 2.00% 3.00%
18 2013 $3.60 $0.49 $0.43 $0.04 3.79% 2.00% 3.00%
19 2014 $3.75 $0.51 $0.44 $0.04 3.79% 2.00% 3.00%
20 2015 $3.89 $0.52 $0.45 $0.04 3.79% 2.00% 3.00%
<CAPTION>
Summer Gas Cost
------------------------------------------------------
Summer Summer Summer
Gas Gas Gas
Year Charge Charge Cost Margin Margin
---- --------- ------- -------- -------- ------
($/MMBtu) ($/kWh) ($/MMBtu) ($/MMBtu) ($/kWh)
Escalation 1996-2015
<S> <C> <C> <C> <C> <C> <C>
0 1995 $2.34 $0.02082 $2.01 $0.33 $0.00290
1 1996 $2.54 $0.02256 $2.20 $0.33 $0.00295
2 1997 $2.49 $0.02213 $2.15 $0.34 $0.00300
3 1998 $2.61 $0.02320 $2.26 $0.35 $0.00310
4 1999 $2.74 $0.02441 $2.38 $0.36 $0.00322
5 2000 $2.87 $0.02557 $2.50 $0.37 $0.00333
6 2001 $3.00 $0.02667 $2.61 $0.39 $0.00344
7 2002 $3.11 $0.02770 $2.71 $0.40 $0.00356
8 2003 $3.26 $0.02899 $2.84 $0.41 $0.00368
9 2004 $3.40 $0.03022 $2.97 $0.43 $0.00381
10 2005 $3.54 $0.03150 $3.10 $0.44 $0.00394
11 2006 $3.70 $0.03295 $3.24 $0.46 $0.00408
12 2007 $3.86 $0.03434 $3.38 $0.47 $0.00422
13 2008 $4.02 $0.03578 $3.53 $0.49 $0.00436
14 2009 $4.20 $0.03741 $3.70 $0.51 $0.00452
15 2010 $4.39 $0.03911 $3.87 $0.53 $0.00467
16 2011 $4.56 $0.04057 $4.02 $0.54 $0.00483
17 2012 $4.71 $0.04194 $4.15 $0.56 $0.00498
18 2013 $4.89 $0.04351 $4.31 $0.58 $0.00515
19 2014 $5.07 $0.04514 $4.47 $0.60 $0.00531
20 2015 $5.26 $0.04682 $4.64 $0.62 $0.00549
<CAPTION>
Winter Gas Cost
-----------------------------------------------------------------------------------------------------
WSG WGT WGT Panda WGI WR1 WR2 WR2 WRX
Appalachian Transco CNG Pipeline NCG Transco CNG NCNG Swing Gas
Year Price IT IT IT Mgt. Fee Retainage Retainage Retainage Retainage
---- ----------- --------- --------- --------- -------- --------- ---------- --------- ----------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) (%)
------------------------------------------------------ 1.97% 2.28% 2.00% 3.00%
Escalation 1996-2015 ICF Forecast
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 1995 $1.72 $0.23 $0.20 $0.26 $0.04 1.97% 2.28% 2.00% 3.00%
1 1996 $2.21 $0.24 $0.21 $0.26 $0.04 1.97% 2.28% 2.00% 3.00%
2 1997 $1.98 $0.24 $0.21 $0.27 $0.04 1.97% 2.28% 2.00% 3.00%
3 1998 $2.08 $0.25 $0.21 $0.27 $0.04 1.97% 2.28% 2.00% 3.00%
4 1999 $2.19 $0.25 $0.21 $0.28 $0.04 1.97% 2.28% 2.00% 3.00%
5 2000 $2.30 $0.26 $0.22 $0.29 $0.04 1.97% 2.28% 2.00% 3.00%
6 2001 $2.40 $0.26 $0.23 $0.30 $0.04 1.97% 2.28% 2.00% 3.00%
7 2002 $2.52 $0.27 $0.23 $0.31 $0.04 1.97% 2.28% 2.00% 3.00%
8 2003 $2.63 $0.28 $0.24 $0.32 $0.04 1.97% 2.28% 2.00% 3.00%
9 2004 $2.76 $0.29 $0.25 $0.33 $0.04 1.97% 2.28% 2.00% 3.00%
10 2005 $2.88 $0.30 $0.26 $0.34 $0.04 1.97% 2.28% 2.00% 3.00%
11 2006 $3.02 $0.30 $0.25 $0.35 $0.04 1.97% 2.28% 2.00% 3.00%
12 2007 $3.16 $0.30 $0.26 $0.36 $0.04 1.97% 2.28% 2.00% 3.00%
13 2008 $3.31 $0.31 $0.26 $0.37 $0.04 1.97% 2.28% 2.00% 3.00%
14 2009 $3.45 $0.32 $0.27 $0.38 $0.04 1.97% 2.28% 2.00% 3.00%
15 2010 $3.62 $0.33 $0.28 $0.39 $0.04 1.97% 2.28% 2.00% 3.00%
16 2011 $3.75 $0.34 $0.29 $0.40 $0.04 1.97% 2.28% 2.00% 3.00%
17 2012 $3.90 $0.35 $0.30 $0.41 $0.04 1.97% 2.28% 2.00% 3.00%
18 2013 $4.05 $0.36 $0.31 $0.43 $0.04 1.97% 2.28% 2.00% 3.00%
19 2014 $4.21 $0.37 $0.30 $0.44 $0.04 1.97% 2.28% 2.00% 3.00%
20 2015 $4.37 $0.36 $0.31 $0.45 $0.04 1.97% 2.28% 2.00% 3.00%
<CAPTION>
Winter Gas Cost
-----------------------------------------------------------------
Total
Winter Winter Winter Winter
Gas Gas Gas Gas
Year Charge Charge Cost Cost Margin Margin
---- --------- ------- --------- --------- -------- -------
($/MMBtu) ($/kWh) ($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh)
Escalation 1996-2015
<S> <C> <C> <C> <C> <C> <C> <C>
0 1995 $2.61 $0.02322 $2.30 $0.02051 $0.30476 $0.00271
1 1996 $3.16 $0.02813 $2.85 $0.02533 $0.31501 $0.00280
2 1997 $2.93 $0.02605 $2.61 $0.02323 $0.31668 $0.00282
3 1998 $3.05 $0.02714 $2.72 $0.02423 $0.32729 $0.00291
4 1999 $3.18 $0.02827 $2.84 $0.02526 $0.33825 $0.00301
5 2000 $3.32 $0.02955 $2.97 $0.02643 $0.34956 $0.00311
6 2001 $3.46 $0.03076 $3.10 $0.02755 $0.36096 $0.00321
7 2002 $3.61 $0.03214 $3.24 $0.02882 $0.37303 $0.00332
8 2003 $3.76 $0.03345 $3.37 $0.03002 $0.38518 $0.00343
9 2004 $3.93 $0.03494 $3.53 $0.03140 $0.39805 $0.00354
10 2005 $4.09 $0.03636 $3.67 $0.03270 $0.41101 $0.00366
11 2006 $4.25 $0.03784 $3.83 $0.03406 $0.42474 $0.00378
12 2007 $4.41 $0.03924 $3.97 $0.03534 $0.43857 $0.00390
13 2008 $4.60 $0.04096 $4.15 $0.03693 $0.45321 $0.00403
14 2009 $4.79 $0.04261 $4.32 $0.03845 $0.46795 $0.00416
15 2010 $5.00 $0.04447 $4.51 $0.04016 $0.48356 $0.00430
16 2011 $5.18 $0.04609 $4.68 $0.04165 $0.49888 $0.00444
17 2012 $5.37 $0.04778 $4.85 $0.04320 $0.51468 $0.00458
18 2013 $5.56 $0.04952 $5.03 $0.04480 $0.53098 $0.00473
19 2014 $5.75 $0.05118 $5.20 $0.04630 $0.54780 $0.00488
20 2015 $5.94 $0.05288 $5.38 $0.04785 $0.56514 $0.00503
<CAPTION>
Winter Fuel Oil Cost
---------------------------------------------------------------------------------
Delivered Panda Winter Winter Winter
Fuel Oil Handling Oil Oil Fuel Oil Oil
Year Price Charge Charge Charge Usage Cost Margin Margin
---- ---------- --------- --------- ------- -------- -------- -------- -------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) (%) ($/MMBtu) ($/MMBtu) ($/kWh)
Escalation 1996-2015 4.00% 3.00%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 1995 $3.89 $0.09 $3.98 $0.03545 80.00% $3.57 $0.41068 $0.00366
1 1996 $4.05 $0.10 $4.14 $0.03686 80.00% $3.81 $0.33637 $0.00299
2 1997 $4.21 $0.10 $4.31 $0.03833 80.00% $3.89 $0.41867 $0.00373
3 1998 $4.38 $0.10 $4.48 $0.03985 80.00% $4.05 $0.43299 $0.00385
4 1999 $4.55 $0.11 $4.66 $0.04144 80.00% $4.21 $0.44788 $0.00399
5 2000 $4.73 $0.11 $4.84 $0.04309 80.00% $4.38 $0.46103 $0.00410
6 2001 $4.73 $0.11 $4.84 $0.04309 80.00% $4.41 $0.43601 $0.00388
7 2002 $4.73 $0.11 $4.84 $0.04309 80.00% $4.43 $0.40747 $0.00363
8 2003 $4.73 $0.11 $4.84 $0.04309 80.00% $4.46 $0.38039 $0.00339
9 2004 $4.73 $0.11 $4.84 $0.04309 80.00% $4.49 $0.34955 $0.00311
10 2005 $4.73 $0.11 $4.84 $0.04309 80.00% $4.52 $0.32026 $0.00285
11 2006 $4.73 $0.11 $4.84 $0.04309 80.00% $4.55 $0.28973 $0.00258
12 2007 $4.73 $0.11 $4.84 $0.04309 80.00% $4.58 $0.26098 $0.00232
13 2008 $4.73 $0.11 $4.84 $0.04309 80.00% $4.62 $0.22520 $0.00200
14 2009 $4.73 $0.11 $4.84 $0.04309 80.00% $4.65 $0.19112 $0.00170
15 2010 $4.73 $0.11 $4.84 $0.04309 80.00% $4.69 $0.15251 $0.00136
16 2011 $4.73 $0.11 $4.84 $0.04309 80.00% $4.72 $0.11901 $0.00106
17 2012 $4.73 $0.11 $4.84 $0.04309 80.00% $4.76 $0.08430 $0.00075
18 2013 $4.73 $0.11 $4.84 $0.04309 80.00% $4.79 $0.04835 $0.00043
19 2014 $4.73 $0.11 $4.84 $0.04309 80.00% $4.83 $0.01462 $0.00013
20 2015 $4.73 $0.11 $4.84 $0.04309 80.00% $4.86 ($0.02024) ($0.00018)
<CAPTION>
VEPCO Gas Cost
-----------------------------------------------------------------------------------------------------------
MGT Panda VEPCO VEPCO Plant FA VEPCO VEPCO VEPCO VEPCO
Management Pipeline Gas Gas Variable NCNG Nomination Gas Nomination Gas
Year Fee Charge Charge Charge O&M Costs Retainage Fee Charge Fee Cost Margin
---- ---------- --------- --------- ------- --------- --------- ---------- ------- ---------- ------- -------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/kWh) ($/kWh) (%) ($/day) ($/kWh) ($/day) ($/kWh) ($/kWh)
Escalation 1996-2015 0.00% 3.00 2.00% $450 $450
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 1995 $0.04 $0.12 $0.16 $0.00147 $0.00216 2.00% $7,500 $0.00381 $7,500 $0.00011 $0.00370
1 1996 $0.04 $0.13 $0.17 $0.00150 $0.00222 2.00% $7,500 $0.00391 $7,500 $0.00011 $0.00380
2 1997 $0.04 $0.13 $0.17 $0.00153 $0.00229 2.00% $7,500 $0.00402 $7,500 $0.00011 $0.00390
3 1998 $0.04 $0.14 $0.18 $0.00157 $0.00236 2.00% $9,375 $0.00412 $9,375 $0.00011 $0.00401
4 1999 $0.04 $0.14 $0.18 $0.00161 $0.00243 2.00% $9,375 $0.00423 $9,375 $0.00011 $0.00412
5 2000 $0.04 $0.14 $0.18 $0.00164 $0.00250 2.00% $9,375 $0.00434 $9,375 $0.00011 $0.00423
6 2001 $0.04 $0.14 $0.18 $0.00164 $0.00258 2.00% $9,375 $0.00442 $9,375 $0.00011 $0.00431
7 2002 $0.04 $0.14 $0.18 $0.00164 $0.00266 2.00% $9,375 $0.00450 $9,375 $0.00011 $0.00439
8 2003 $0.04 $0.14 $0.18 $0.00164 $0.00274 2.00% $11,250 $0.00458 $11,250 $0.00011 $0.00447
9 2004 $0.04 $0.14 $0.18 $0.00164 $0.00282 2.00% $11,250 $0.00466 $11,250 $0.00011 $0.00455
10 2005 $0.04 $0.14 $0.18 $0.00164 $0.00290 2.00% $11,250 $0.00475 $11,250 $0.00011 $0.00464
11 2006 $0.04 $0.14 $0.18 $0.00164 $0.00299 2.00% $11,250 $0.00484 $11,250 $0.00011 $0.00473
12 2007 $0.04 $0.14 $0.18 $0.00164 $0.00308 2.00% $11,250 $0.00493 $11,250 $0.00011 $0.00482
13 2008 $0.04 $0.14 $0.18 $0.00164 $0.00317 2.00% $11,250 $0.00503 $11,250 $0.00011 $0.00491
14 2009 $0.04 $0.14 $0.18 $0.00164 $0.00327 2.00% $11,250 $0.00512 $11,250 $0.00011 $0.00501
15 2010 $0.04 $0.14 $0.18 $0.00164 $0.00337 2.00% $11,250 $0.00522 $11,250 $0.00011 $0.00511
16 2011 $0.04 $0.14 $0.18 $0.00164 $0.00347 2.00% $11,250 $0.00533 $11,250 $0.00011 $0.00521
17 2012 $0.04 $0.14 $0.18 $0.00164 $0.00357 2.00% $11,250 $0.00543 $11,250 $0.00011 $0.00532
18 2013 $0.04 $0.14 $0.18 $0.00164 $0.00368 2.00% $11,250 $0.00554 $11,250 $0.00011 $0.00543
19 2014 $0.04 $0.14 $0.18 $0.00164 $0.00379 2.00% $11,250 $0.00565 $11,250 $0.00011 $0.00554
20 2015 $0.04 $0.14 $0.18 $0.00164 $0.00390 2.00% $11,250 $0.00577 $11,250 $0.00011 $0.00566
<CAPTION>
Auxiliary Boiler Steam/Chilled Water Fuel Cost
--------------------------------------------------------------------------------------
NCG Texas
Gulf Spot Transco GRI/ACA Mgt. Transco CNG Gas NCNG
Year Price Commodity Surcharge Fee Retainage Retainage Retainage Retainage
---- --------- --------- --------- -------- --------- --------- --------- ---------
($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (%) (%) (%) (%)
Escalation 1996-2015 ICF Forecast 3.00% 3.00% 0.00% 3.79% 2.28% 2.00% 1.00%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 1995 $1.56 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
1 1996 $1.74 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
2 1997 $1.69 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
3 1998 $1.78 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
4 1999 $1.89 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
5 2000 $1.99 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
6 2001 $2.09 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
7 2002 $2.19 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
8 2003 $2.30 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
9 2004 $2.41 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
10 2005 $2.52 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
11 2006 $2.65 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
12 2007 $2.78 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
13 2008 $2.91 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
14 2009 $3.05 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
15 2010 $3.21 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
16 2011 $3.33 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
17 2012 $3.47 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
18 2013 $3.60 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
19 2014 $3.75 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
20 2015 $3.89 $0.03 $0.02 $0.04 3.79% 2.28% 2.00% 1.00%
<CAPTION>
Auxiliary Boiler Steam/Chilled Water Fuel Cost
----------------------------------------------
Steam Steam
Gas Gas Steam
Year Cost Cost Charge Margin
---- ----- ----- ------ ------
($/MMBtu) ($/klbs) ($/klbs) ($/klbs)
Escalation 1996-2015 0.00%
<S> <C> <C> <C> <C> <C>
0 1995 $1.79 $3.07 $1.15 ($1.92)
1 1996 $1.99 $3.41 $1.15 ($2.26)
2 1997 $1.94 $3.32 $1.15 ($2.17)
3 1998 $2.04 $3.50 $1.15 ($2.35)
4 1999 $2.16 $3.70 $1.15 ($2.55)
5 2000 $2.27 $3.90 $1.15 ($2.75)
6 2001 $2.38 $4.07 $1.15 ($2.92)
7 2002 $2.48 $4.26 $1.15 ($3.11)
8 2003 $2.61 $4.47 $1.15 ($3.32)
9 2004 $2.73 $4.67 $1.15 ($3.52)
10 2005 $2.85 $4.88 $1.15 ($3.73)
11 2006 $2.99 $5.12 $1.15 ($3.97)
12 2007 $3.14 $5.38 $1.15 ($4.23)
13 2008 $3.28 $5.61 $1.15 ($4.46)
14 2009 $3.43 $5.89 $1.15 ($4.74)
15 2010 $3.60 $6.17 $1.15 ($5.02)
16 2011 $3.74 $6.41 $1.15 ($5.26)
17 2012 $3.89 $6.66 $1.15 ($5.51)
18 2013 $4.03 $6.92 $1.15 ($5.77)
19 2014 $4.19 $7.18 $1.15 ($6.03)
20 2015 $4.35 $7.46 $1.15 ($6.31)
</TABLE>
<PAGE>
Panda Energy Corporation Alternative: Updated Corporate Page 3
Panda-Rosemary Cogen Project Refinancing Offering Base Case
********************************************************************************
PROJECT FINANCING ASSUMPTIONS
<TABLE>
<CAPTION>
Equal
Financing Sources of Funds Annual
- -------------------------- Refinancing Debt Service
------------ ------------
<S> <C> <C>
DEBT FINANCING:
First Mortage Bonds:
Percentage Financed 85.63%
Principal Amount $111,400,000 $11,879,000
Interest Rate 8.63%
Term 20.0
Years of Interest Only 0.0
Debt Service Reserve Fund (% of Principal) 7.26%
Financing Fees 2.69%
Subordinate Debt A:
Percentage Financed 0.00%
Principal Amount $0 $0
Interest Rate 9.00%
Term 20.0
Years of Interest Only 0.0
Debt Service Reserve Fund (% of Principal) 0.00%
Financing Fees 0.00%
OTHER FINANCING SOURCES:
Existing Debt Service Reserve Fund $4,117,388
Existing Turbine Overhaul Reserve $931,032
Existing Reimbursement Obligation Account $8,247,605
Existing Pollution Control Account $5,256,983
Existing Spare Parts Account $113,737
Existing Revenue Account $27,763
------------
Total Other Financing Sources $18,694,508
TOTAL SOURCES OF FUNDS $130,094,508
Financing Uses of Funds
REFINANCING COSTS::
Operating Account $868,226
Defeasance of Taxable Revenue Bonds $103,209,600
PROJECT COSTS:
Pollution Control Reserve $5,256,983
Turbine Overhaul Reserve $942,632
FINANCING COSTS
Debt Service Reserve $8,090,714
Fees and Expenses $3,000,000
Partial Redemption of FMCC Rosemary Interest $8,726,353
------------
TOTAL USES OF FUNDS $130,094,508
</TABLE>
- -----------------------------------------------------------------------
Principal Amortization Option 4
- -----------------------------------------------------------------------
Equal Annual Principal & Interest - No Deferral 1
Equal Annual Principal & Interest - Deferral 2
Equal Annual Principal 3
Custom Principal Amortization 4
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
Principal Amortization Option 1
- -----------------------------------------------------------------------
Equal Annual Principal & Interest - No Deferral 1
Equal Annual Principal & Interest - Deferral 2
Equal Annual Principal 3
Custom Principal Amortization 4
- -----------------------------------------------------------------------
Custom Principal
Amortization Schedules
--------------------------------
First Mortgage Subordinate
Year Bonds Debt A
-------------------------------------------
1996 2,752,798 0
1997 5,500,608 0
1998 5,922,178 0
1999 5,092,966 0
2000 5,472,948 0
2001 5,879,990 0
2002 6,293,568 0
2003 6,737,102 0
2004 7,215,320 0
2005 7,696,926 0
2006 4,292,216 0
2007 4,491,704 0
2008 4,704,828 0
2009 4,919,192 0
2010 5,142,758 0
2011 5,422,034 0
2012 5,691,114 0
2013 5,952,686 0
2014 6,188,248 0
2015 6,030,816 0
-------------------------------------------
111,400,000 0
<PAGE>
Panda Energy Corporation Alternative: Updated Corporate Page 4
Panda-Rosemary Cogen Project Refinancing Offering Base Case
*******************************************************************************
DEBT SERVICE CALCULATIONS 50.00%
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 111,400,000 108,647,202 103,146,594 97,224,416 92,131,450 86,658,502 80,778,512
Interest 5,175,000 9,192,911 8,704,848 8,220,881 7,769,322 7,284,115 6,763,589
Principal 2,752,798 5,500,608 5,922,178 5,092,966 5,472,948 5,879,990 6,293,568
----------- ----------- ---------- ---------- ---------- ---------- ----------
Debt Service 7,927,798 14,693,519 14,627,026 13,313,847 13,242,270 13,164,105 13,057,157
Ending Balance 108,647,202 103,146,594 97,224,416 92,131,450 86,658,502 80,778,512 74,484,944
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0 0
Interest 0 0 0 0 0 0 0
Principal 0 0 0 0 0 0 0
----------- ----------- ---------- ---------- ---------- ---------- ----------
Debt Service 0 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 5,175,000 9,192,911 8,704,848 8,220,881 7,769,322 7,284,115 6,763,589
Principal 2,752,798 5,500,608 5,922,178 5,092,966 5,472,948 5,879,990 6,293,568
----------- ----------- ---------- ---------- ---------- ---------- ----------
Debt Service 7,927,798 14,693,519 14,627,026 13,313,847 13,242,270 13,164,105 13,057,157
<CAPTION>
8 9 10 11 12 13 14
2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 74,484,944 67,747,842 60,532,522 52,835,596 48,543,380 44,051,676 39,346,848
Interest 6,206,423 5,609,882 4,971,983 4,418,244 4,041,589 3,647,284 3,234,560
Principal 6,737,102 7,215,320 7,696,926 4,292,216 4,491,704 4,704,828 4,919,192
----------- ----------- ---------- ---------- ---------- ---------- ----------
Debt Service 12,943,525 12,825,202 12,668,909 8,710,460 8,533,293 8,352,112 8,153,752
Ending Balance 67,747,842 60,532,522 52,835,596 48,543,380 44,051,676 39,346,848 34,427,656
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0 0
Interest 0 0 0 0 0 0 0
Principal 0 0 0 0 0 0 0
----------- ----------- ---------- ---------- ---------- ---------- ----------
Debt Service 0 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 6,206,423 5,609,882 4,971,983 4,418,244 4,041,589 3,647,284 3,234,560
Principal 6,737,102 7,215,320 7,696,926 4,292,216 4,491,704 4,704,828 4,919,192
----------- ----------- ---------- ---------- ---------- ---------- ----------
Debt Service 12,943,525 12,825,202 12,668,909 8,710,460 8,533,293 8,352,112 8,153,752
<CAPTION>
15 16 17 18 19 20
2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Bonds:
Beginning Balance 34,427,656 29,284,898 23,862,864 18,171,750 12,219,064 6,030,816
Interest 2,803,049 2,350,454 1,874,100 1,374,781 853,744 325,100 94,821,859
Principal 5,142,758 5,422,034 5,691,114 5,952,686 6,188,248 6,030,816 111,400,000
----------- ----------- ---------- ---------- ---------- ----------
Debt Service 7,945,807 7,772,488 7,565,214 7,327,467 7,041,992 6,355,916
Ending Balance 29,284,898 23,862,864 18,171,750 12,219,064 6,030,816 0
Subordinated Debt A:
Beginning Balance 0 0 0 0 0 0
Interest 0 0 0 0 0 0
Principal 0 0 0 0 0 0
----------- ----------- ---------- ---------- ---------- ----------
Debt Service 0 0 0 0 0 0
Ending Balance 0 0 0 0 0 0
TOTAL DEBT SERVICE
Interest 2,803,049 2,350,454 1,874,100 1,374,781 853,744 325,100
Principal 5,142,758 5,422,034 5,691,114 5,952,686 6,188,248 6,030,816
----------- ----------- ---------- ---------- ---------- ----------
Debt Service 7,945,807 7,772,488 7,565,214 7,327,467 7,041,992 6,355,916
</TABLE>
<PAGE>
Panda Energy Corporation Alternative: Updated Corporate Page 5
Panda-Rosemary Cogen Project Refinancing Offering Base Case
*******************************************************************************
FUEL COSTS
<TABLE>
<CAPTION>
1 2 3 4 5 6 7
DISPATCH OPERATIONS 1996 1997 1998 1999 2000 2001 2002
-------- ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer Capacity 174.0 174.0 174.0 174.0 174.0 174.0 174.0
VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 674 511 775 1,038 1,453 1,868 1,960
Winter Gas Dispatch 3 117 183 250 241 231 272
Winter Oil Dispatch 0 3 10 17 19 21 37
VEPCO Gas Dispatch 400 400 500 500 500 500 500
-------- ------- ------ ------- ------- ------- -------
Total Dispatch Hours 1,077 1,031 1,468 1,805 2,213 2,620 2,769
Percentage 12.29% 11.77% 16.76% 20.61% 25.26% 29.91% 31.61%
Winter Starts 0 3 5 6 6 6 7
Winter Start Duration 40 40 40 40 40 40 40
NET GENERATION
Availability Factor [1] 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
[1] Equivalent full load dispatch hours from Dispatch Assumptions incorporate
planned outage and forced outage availability factors.
Summer Output MWh 117,276 88,914 134,850 180,612 252,822 325,032 341,040
Winter Gas Output MWh 594 23,166 36,234 49,500 47,718 45,738 53,856
Winter Oil Dispatch MWh 0 594 1,980 3,366 3,762 4,158 7,326
VEPCO Gas Dispatch MWh 66,000 66,000 82,500 82,500 82,500 82,500 82,500
-------- ------- ------ ------- ------- ------- -------
Net Generation MWh 183,870 178,674 255,564 315,978 386,802 457,428 484,722
FUEL USAGE - ELECTRICAL GENERATION
Net Electric Heat Rate Btu/kWh 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel MMBtu 1,043,756 791,335 1,200,165 1,607,447 2,250,116 2,892,785 3,035,256
Winter Gas Fuel MMBtu 5,287 206,177 322,483 440,550 424,690 407,068 479,318
Winter Oil Fuel MMBtu 0 5,287 17,622 29,957 33,482 37,006 65,201
VEPCO Gas Fuel MMBtu 587,400 587,400 734,250 734,250 734,250 734,250 734,250
--------- --------- --------- --------- --------- --------- ---------
Total Fuel Usage MMBtu 1,636,443 1,590,199 2,274,520 2,812,204 3,442,538 4,071,109 4,314,026
FUEL COST - ELECTRICAL GENERATION
Summer Gas Fuel $/MMBtu $2.20 $2.15 $2.26 $2.38 $2.50 $2.61 $2.71
Winter Gas Fuel $/MMBtu $2.85 $2.61 $2.72 $2.84 $2.97 $3.10 $3.24
Winter Oil Fuel $/MMBtu $3.81 $3.89 $4.05 $4.21 $4.38 $4.41 $4.43
VEPCO Gas Fuel $/kWh $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011
Summer Gas Fuel $ 2,300,000 1,702,000 2,710,000 3,829,000 5,624,000 7,549,000 8,231,000
Winter Gas Fuel $ 15,000 538,000 878,000 1,250,000 1,261,000 1,260,000 1,552,000
Winter Oil Fuel $ 0 21,000 71,000 126,000 147,000 163,000 289,000
VEPCO Gas Fuel $ 7,500 7,500 9,400 9,400 9,400 9,400 9,400
-------- --------- --------- --------- --------- --------- ----------
Total Fuel Cost $ 2,322,500 2,268,500 3,668,400 5,214,400 7,041,400 8,981,400 10,081,400
TOTAL FUEL COSTS - COGEN PLANT
Summer Gas Fuel $ 2,300,000 1,702,000 2,710,000 3,829,000 5,624,000 7,549,000 8,231,000
Winter Gas Fuel $ 15,000 538,000 878,000 1,250,000 1,261,000 1,260,000 1,552,000
Winter Oil Fuel $ 0 21,000 71,000 126,000 147,000 163,000 289,000
VEPCO Gas Fuel $ 7,500 7,500 9,400 9,400 9,400 9,400 9,400
Fuel Usage - Thermal MMBtu 36,774 35,735 51,113 63,196 77,360 91,486 96,944
Fuel Cost - Thermal [2] $ 73,000 69,000 104,000 137,000 176,000 217,000 241,000
-------- ------- ------ ------- ------- ------- -------
Total Fuel Costs - Cogen Plant 2,396,000 2,338,000 3,772,000 5,351,000 7,217,000 9,198,000 10,322,000
Average Fuel Cost ($/MMBtu) $1.43 $1.44 $1.62 $1.86 $2.05 $2.21 $2.34
Average Fuel Cost ($/kWh) $0.0130 $0.0131 $0.0148 $0.0169 $0.0187 $0.0201 $0.0213
[2] Boiler fuel cost estimate below used to determine fuel cost allocation of
thermal production.
STEAM/CHILLED WATER
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - Boiler 6,723 6,769 6,332 5,995 5,587 5,180 5,031
Chilled Water Production Hours - Boi 2,923 2,972 2,542 2,212 1,806 1,401 1,268
Steam Fuel - Boiler MMBtu 576,161 580,103 542,652 513,772 478,806 443,926 431,157
C. Water Fuel - Boiler MMBtu 90,070 91,580 78,330 68,161 55,651 43,171 39,073
-------- ------- ------ ------- ------- ------- -------
Total Boiler Fuel MMBtu 666,231 671,683 620,982 581,933 534,457 487,097 470,229
Boiler Fuel Cost $/MMBtu $1.99 $1.94 $2.04 $2.16 $2.27 $2.38 $2.48
Boiler Fuel Cost $ 1,327,000 1,301,000 1,267,000 1,257,000 1,215,000 1,158,000 1,168,000
<CAPTION>
8 9 10 11 12 13 14
DISPATCH OPERATIONS 2003 2004 2005 2006 2007 2008 2009
------ ------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer Capacity 174.0 174.0 174.0 174.0 174.0 174.0 174.0
VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 2,053 2,149 2,248 2,151 2,058 1,969 1,884
Winter Gas Dispatch 320 378 441 428 415 401 388
Winter Oil Dispatch 65 114 202 186 171 158 145
VEPCO Gas Dispatch 600 600 600 600 600 600 600
------ ------- ------ ------- ------- ------- -------
Total Dispatch Hour 3,038 3,241 3,491 3,365 3,244 3,128 3,017
Percentage 34.68% 37.00% 39.85% 38.41% 37.03% 35.71% 34.44%
Winter Starts 8 9 11 11 10 10 10
Winter Start Duration 40 40 40 40 40 40 40
NET GENERATION
Availability Factor [1] 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output 357,222 373,926 391,152 374,274 358,092 342,606 327,816
Winter Gas Output 63,360 74,844 87,318 84,744 82,170 79,398 76,824
Winter Oil Dispatch 12,870 22,572 39,996 36,828 33,858 31,284 28,710
VEPCO Gas Dispatch 99,000 99,000 99,000 99,000 99,000 99,000 99,000
------ ------- ------ ------- ------- ------- -------
Net Generation 532,452 570,342 617,466 594,846 573,120 552,288 532,350
FUEL USAGE - ELECTRICAL
GENERATION
Net Electric Heat Rate 8900 8900 8900 8900 8900 8900 8900
Summer Gas Fuel 3,179,276 3,327,941 3,481,253 3,331,039 3,187,019 3,049,193 2,917,562
Winter Gas Fuel 563,904 666,112 777,130 754,222 731,313 706,642 683,734
Winter Oil Fuel 114,543 200,891 355,964 327,769 301,336 278,428 255,519
VEPCO Gas Fuel 881,100 881,100 881,100 881,100 881,100 881,100 881,100
--------- --------- --------- --------- --------- ------- ---------
Total Fuel Usage 4,738,823 5,076,044 5,495,447 5,294,129 5,100,768 4,915,363 4,737,915
FUEL COST - ELECTRICAL
GENERATION
Summer Gas Fuel $2.84 $2.97 $3.10 $3.24 $3.38 $3.53 $3.70
Winter Gas Fuel $3.37 $3.53 $3.67 $3.83 $3.97 $4.15 $4.32
Winter Oil Fuel $4.46 $4.49 $4.52 $4.55 $4.58 $4.62 $4.65
VEPCO Gas Fuel $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011
Summer Gas Fuel 9,041,000 9,876,000 10,779,000 10,807,000 10,786,000 10,762,000 10,783,000
Winter Gas Fuel 1,902,000 2,350,000 2,855,000 2,886,000 2,904,000 2,932,000 2,954,000
Winter Oil Fuel 511,000 902,000 1,609,000 1,492,000 1,380,000 1,285,000 1,188,000
VEPCO Gas Fuel 11,300 11,300 11,300 11,300 11,300 11,300 11,300
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Fuel Cost 11,465,300 13,139,300 15,254,300 15,196,300 15,081,300 14,990,300 14,936,300
TOTAL FUEL COSTS -
COGEN PLANT
Summer Gas Fuel 9,041,000 9,876,000 10,779,000 10,807,000 10,786,000 10,762,000 10,783,000
Winter Gas Fuel 1,902,000 2,350,000 2,855,000 2,886,000 2,904,000 2,932,000 2,954,000
Winter Oil Fuel 511,000 902,000 1,609,000 1,492,000 1,380,000 1,285,000 1,188,000
VEPCO Gas Fuel 11,300 11,300 11,300 11,300 11,300 11,300 11,300
Fuel Usage - Thermal 106,490 114,068 123,493 118,969 114,624 110,458 106,470
Fuel Cost - Thermal [2] 278,000 311,000 352,000 356,000 360,000 362,000 366,000
---------- ---------- ---------- -- ------- --------- ------- ----------
Total Fuel Costs - 11,743,000 13,450,000 15,606,000 15,552,000 15,441,000 15,352,000 15,302,000
Average Fuel Cost ( ) $2.42 $2.59 $2.78 $2.87 $2.96 $3.05 $3.16
Average Fuel Cost ( ) $0.0221 $0.0236 $0.0253 $0.0261 $0.0269 $0.0278 $0.0287
STEAM/CHILLED WATER
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - 4,762 4,559 4,309 4,435 4,556 4,672 4,783
Chilled Water Production 1,027 873 711 821 927 1,030 1,128
Steam Fuel - Boiler 408,103 390,706 369,281 380,080 390,449 400,390 409,903
C. Water Fuel - Boiler 31,646 26,901 21,909 25,299 28,565 31,739 34,759
-------- ------- ------ ------- ------- ------- -------
Total Boiler Fuel 439,750 417,607 391,190 405,378 419,014 432,129 444,662
Boiler Fuel Cost $2.61 $2.73 $2.85 $2.99 $3.14 $3.28 $3.43
Boiler Fuel Cost 1,148,000 1,139,000 1,114,000 1,212,000 1,315,000 1,415,000 1,527,000
<CAPTION>
15 16 17 18 19 20
DISPATCH OPERATIONS 2010 2011 2012 2013 2014 2015
------ ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760
Summer Capacity 174.0 174.0 174.0 174.0 174.0 174.0
VEPCO Capacity 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 1,802 1,756 1,710 1,666 1,622 1,579
Winter Gas Dispatch 375 361 348 335 322 310
Winter Oil Dispatch 134 133 132 131 130 129
VEPCO Gas Dispatch 600 600 600 600 600 600
------ ------- ------ ------- ------- -------
Total Dispatch Hour 2,911 2,850 2,790 2,732 2,674 2,618
Percentage 33.23% 32.53% 31.85% 31.19% 30.53% 29.89%
Winter Starts 9 9 9 8 8 8
Winter Start Duration 40 40 40 40 40 40
NET GENERATION
Availability Factor [1] 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Equivalent Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output 313,548 305,544 297,540 289,884 282,228 274,746
Winter Gas Output 74,250 71,478 68,904 66,330 63,756 61,380
Winter Oil Dispatch 26,532 26,334 26,136 25,938 25,740 25,542
VEPCO Gas Dispatch 99,000 99,000 99,000 99,000 99,000 99,000
------ ------- ------ ------- ------- -------
Net Generation 513,330 502,356 491,580 481,152 470,724 460,668
FUEL USAGE - ELECTRICAL
GENERATION
Net Electric Heat Rate 8900 8900 8900 8900 8900 8900
Summer Gas Fuel 2,790,577 2,719,342 2,648,106 2,579,968 2,511,829 2,445,239
Winter Gas Fuel 660,825 636,154 613,246 590,337 567,428 546,282
Winter Oil Fuel 236,135 234,373 232,610 230,848 229,086 227,324
VEPCO Gas Fuel 881,100 881,100 881,100 881,100 881,100 881,100
---------- ---------- ---------- ---------- ---------- ----------
Total Fuel Usage 4,568,637 4,470,968 4,375,062 4,282,253 4,189,444 4,099,945
FUEL COST - ELECTRICAL
GENERATION
Summer Gas Fuel $3.87 $4.02 $4.15 $4.31 $4.47 $4.64
Winter Gas Fuel $4.51 $4.68 $4.85 $5.03 $5.20 $5.38
Winter Oil Fuel $4.69 $4.72 $4.76 $4.79 $4.83 $4.86
VEPCO Gas Fuel $0.00011 $0.00011 $0.00011 $0.00011 $0.00011 $0.00011
Summer Gas Fuel 10,796,000 10,922,000 10,997,000 11,122,000 11,240,000 11,357,000
Winter Gas Fuel 2,982,000 2,977,000 2,977,000 2,972,000 2,952,000 2,937,000
Winter Oil Fuel 1,107,000 1,107,000 1,107,000 1,106,000 1,106,000 1,105,000
VEPCO Gas Fuel 11,300 11,300 11,300 11,300 11,300 11,300
---------- ---------- ---------- ---------- ---------- ----------
Total Fuel Cost 14,896,300 15,017,300 15,092,300 15,211,300 15,309,300 15,410,300
TOTAL FUEL COSTS -
COGEN PLANT
Summer Gas Fuel 10,796,000 10,922,000 10,997,000 11,122,000 11,240,000 11,357,000
Winter Gas Fuel 2,982,000 2,977,000 2,977,000 2,972,000 2,952,000 2,937,000
Winter Oil Fuel 1,107,000 1,107,000 1,107,000 1,106,000 1,106,000 1,105,000
VEPCO Gas Fuel 11,300 11,300 11,300 11,300 11,300 11,300
Fuel Usage - Thermal 102,666 100,471 98,316 96,230 94,145 92,134
Fuel Cost - Thermal [2] 370,000 376,000 382,000 388,000 395,000 401,000
---------- ---------- ---------- ---------- ---------- ----------
Total Fuel Costs - 15,266,000 15,393,000 15,474,000 15,599,000 15,704,000 15,811,000
Average Fuel Cost ( ) $3.27 $3.37 $3.46 $3.56 $3.67 $3.77
Average Fuel Cost ( ) $0.0297 $0.0306 $0.0315 $0.0324 $0.0334 $0.0343
STEAM/CHILLED WATER
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production Hours - 4,889 4,950 5,010 5,068 5,126 5,182
Chilled Water Production 1,223 1,283 1,342 1,399 1,456 1,511
Steam Fuel - Boiler 418,987 424,215 429,357 434,328 439,298 444,097
C. Water Fuel - Boiler 37,686 39,535 41,353 43,109 44,866 46,560
---------- ---------- ---------- ---------- ---------- ----------
Total Boiler Fuel 456,673 463,750 470,710 477,437 484,164 490,658
Boiler Fuel Cost $3.60 $3.74 $3.89 $4.03 $4.19 $4.35
Boiler Fuel Cost 1,645,000 1,735,000 1,829,000 1,926,000 2,029,000 2,135,000
</TABLE>
<PAGE>
Panda Energy Corporation Alternative: Updated Corporate Page 6
Panda-Rosemary Cogen Project Refinancing Offering Base Case
*******************************************************************************
PLANT OPERATING COSTS
<TABLE>
<CAPTION>
1995 1996
ESTIMATED ACTUAL BUDGET ESCALATION
---------------- ------ ----------
<S> <C> <C> <C>
FUEL TRANSPORTATION COSTS:
Firm Transportation - Transco $1,097,889 $1,080,318 0.00%
Less: Capacity Release Revenues(1) $0 ($132,000) 0.00%
Fuel Management Fee $240,000 $240,000 3.00%
-----------------------------
Total Fuel Transportation Costs $1,337,889 $1,188,318
OPERATING COSTS:
O&M Contract Fee $1,641,825 $1,703,120 3.00%
General Maintenance & Repairs $144,622 $160,825 8.00%
Planned Plant Maintenance Projects $156,972 $328,425 3.00%
Additional Maintenance Allowance $274,024 $155,000 0.00%
Parts Replacement $228,392 $167,940 3.00%
Other Plant Expenses $34,930 $52,100 3.00%
Panda Management Fee [2] $480,000 $0 0.00%
Office & Admin Expenses $231,061 $190,015 3.00%
Property Taxes $977,109 $972,000 -3.00%
Insurance $298,728 $300,000 3.00%
VEPCO Performance LOC $64,602 $66,232 Input Panda Forecast
-----------------------------
Total Operating Costs $4,532,265 $4,095,657
Total Plant Operating Costs $5,870,154 $5,283,975
<CAPTION>
1 2 3 4 5 6 7
PLANT OPERATING COSTS 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (132,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 240,000 247,000 255,000 262,000 270,000 278,000 287,000
O&M Contract Fee 1,703,000 1,754,000 1,807,000 1,861,000 1,917,000 1,974,000 2,034,000
General Maintenance & Repairs 161,000 174,000 188,000 203,000 219,000 236,000 255,000
Planned Plant Maintenance Projects 328,000 338,000 348,000 359,000 370,000 381,000 392,000
Additional Maintenance Allowance 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 168,000 173,000 178,000 184,000 189,000 195,000 201,000
Other Plant Expenses 52,000 54,000 55,000 57,000 59,000 60,000 62,000
Panda Management Fee [2] 0 0 0 0 0 0 0
Office & Admin Expenses 190,000 196,000 202,000 208,000 214,000 220,000 227,000
Property Taxes 972,000 943,000 915,000 887,000 861,000 835,000 810,000
Insurance 300,000 309,000 318,000 328,000 338,000 348,000 358,000
VEPCO Performance LOC 66,000 66,000 66,000 66,000 84,000 84,000 84,000
Plant Operating Costs 5,283,000 5,173,000 5,251,000 5,334,000 5,440,000 5,530,000 5,629,000
----------------------------------------------------------------------------------------
Percent Change -10.00% -2.08% 1.51% 1.58% 1.99% 1.65% 1.79%
<CAPTION>
8 9 10 11 12 13 14
PLANT OPERATING COSTS 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 295,000 304,000 313,000 323,000 332,000 342,000 352,000
O&M Contract Fee 2,095,000 2,157,000 2,222,000 2,289,000 2,358,000 2,428,000 2,501,000
General Maintenance & Repairs 276,000 298,000 321,000 347,000 375,000 405,000 437,000
Planned Plant Maintenance Projects 404,000 416,000 429,000 441,000 455,000 468,000 482,000
Additional Maintenance Allowance 155,000 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 207,000 213,000 219,000 226,000 232,000 239,000 247,000
Other Plant Expenses 64,000 66,000 68,000 70,000 72,000 74,000 77,000
Panda Management Fee [2] 0 0 0 0 0 0 0
Office & Admin Expenses 234,000 241,000 248,000 255,000 263,000 271,000 279,000
Property Taxes 785,000 762,000 739,000 717,000 695,000 674,000 654,000
Insurance 369,000 380,000 391,000 403,000 415,000 428,000 441,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000 84,000 84,000
---------------------------------------------------------------------------------------
Plant Operating Costs 5,732,000 5,840,000 5,953,000 6,074,000 6,200,000 6,332,000 6,473,000
Percent Change 1.83% 1.88% 1.93% 2.03% 2.07% 2.13% 2.23%
<CAPTION>
13 14
PLANT OPERATING COSTS 2008 2009
---- ----
<S> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000)
Fuel Management Fee 342,000 352,000
O&M Contract Fee 2,428,000 2,501,000
General Maintenance & Repairs 405,000 437,000
Planned Plant Maintenance Projects 488,000 482,00
Additional Maintenance Allowance 155,000 155,000
Parts Replacement 239,000 247,000
Other Plant Expenses 74,000 77,000
Panda Management Fee [2] 0 0
Office & Admin Expenses 271,000 279,000
Property Taxes 674,000 654,000
Insurance 428,000 441,000
VEPCO Performance LOC 84,000 84,000
------------------------------
Plant Operating Costs 6,332,000 6,473,000
Percent Change 2.13% 2.23%
<CAPTION>
15 16 17 18 19 20
PLANT OPERATING COSTS 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Firm Transportation - Transco 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000
Capacity Release Revenues (316,000) (316,000) (316,000) (316,000) (316,000) (316,000)
Fuel Management Fee 363,000 374,000 385,000 397,000 409,000 421,000
O&M Contract Fee 2,576,000 2,653,000 2,733,000 2,815,000 2,899,000 2,986,000
General Maintenance & Repairs 472,000 510,000 551,000 595,000 643,000 694,000
Planned Plant Maintenance Projects 497,000 512,000 527,000 543,000 559,000 576,000
Additional Maintenance Allowance 155,000 155,000 155,000 155,000 155,000 155,000
Parts Replacement 254,000 262,000 269,000 278,000 286,000 294,000
Other Plant Expenses 79,000 81,000 84,000 86,000 89,000 91,000
Panda Management Fee [2] 0 0 0 0 0 0
Office & Admin Expenses 287,000 296,000 305,000 314,000 323,000 333,000
Property Taxes 635,000 616,000 597,000 579,000 562,000 545,000
Insurance 454,000 467,000 481,000 496,000 511,000 526,000
VEPCO Performance LOC 84,000 84,000 84,000 84,000 84,000 84,000
----------------------------------------------------------------------------
Plant Operating Costs 6,620,000 6,774,000 6,935,000 7,106,000 7,284,000 7,469,000
Percent Change 2.27% 2.33% 2.38% 2.47% 2.50% 2.54%
</TABLE>
[1] Capacity release revenues based on estimated 1800 MMBtu/d and 50% recovery
of tariff rate starting in August 1996.
[2] Panda Management Fee will be subordinated to all Project costs.
<PAGE>
Panda Energy Corporation Alternative: Updated Corporate Page 7
Panda-Rosemary Cogen Project Refinancing Offering Base Case
*******************************************************************************
VARIABLE PLANT COSTS
<TABLE>
<CAPTION>
1995 1996
Actual Summary Escalation
------ ------- ----------
<S> <C> <C> <C>
PLANT ELECTRICITY USAGE
Hours Not Dispatched 7698 7683
Average Electric Load (kW) 1150 1150
Electric Rate ($/kWh) $0.0440 $0.0453 3.00%
-------- --------
Total Plant Electricity Usage $389,519 $400,423
WATER & CHEMICAL USAGE
Hours Dispatched 1062 1077
Gallons per Hour Usage - Cogen 32,000 32,000
Steam/Chilled Water Production Hours 11,800 11,800
Gallons per Hour Usage - Boiler 8,000 8,000
Total Gallons (1000s) 128,384 128,864
Water & Chemical Cost ($/1000 gal) $1.34 $1.38 3.00%
-------- --------
Total Water & Chemical Usage $172,035 $177,858
WATER DISCHARGE
Hours Dispatched 1062 1077
Gallons per Hour Usage - Cogen 8,000 8,000
Steam/Chilled Water Production Hours 11,800 11,800
Gallons per Hour Usage - Boiler 2,000 2,000
Total Gallons (1000s) 32,096 32,216
Water Discharge Cost ($/1000 gal) $1.09 $1.12 3.00%
------- -------
Total Water Discharge $34,985 $36,169
<CAPTION>
1 2 3 4 5 6
Plant Variable Costs 1996 1997 1998 1999 2000 2001
-------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Hours Dispatched 1077 1031 1468 1805 2213 2620
Hours Not Dispatched 7683 7729 7292 6955 6547 6140
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 400,000 415,000 403,000 396,000 384,000 371,000
Water & Chemical Usage 178,000 181,000 207,000 229,000 257,000 285,000
Water Discharge 36,000 37,000 42,000 47,000 52,000 58,000
------- ------- ------- ------- ------- -------
Total Plant Variable Costs 614,000 633,000 652,000 672,000 693,000 714,000
Electricity Charge ($/kWh) $0.0453 $0.0467 $0.0481 $0.0495 $0.0510 $0.0525
Water & Chemical Charge ($/1000 gal) $1.38 $1.42 $1.46 $1.51 $1.55 $1.60
Water Discharge Cost ($/1000 gal) $1.12 $1.16 $1.19 $1.23 $1.26 $1.30
<CAPTION>
7 8 9 10 11 12 13
Plant Variable Costs 2002 2003 2004 2005 2006 2007 2008
-------------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched 2769 3038 3241 3491 3365 3244 3128
Hours Not Dispatched 5991 5722 5519 5269 5395 5516 5632
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 373,000 367,000 364,000 358,000 378,000 398,000 419,000
Water & Chemical Usage 302,000 325,000 346,000 371,000 375,000 379,000 383,000
Water Discharge 61,000 66,000 70,000 75,000 76,000 77,000 78,000
-------- -------- -------- -------- -------- -------- --------
Total Plant Variable Costs 736,000 758,000 780,000 804,000 829,000 854,000 880,000
Electricity Charge ($/kWh) $0.0541 $0.0557 $0.0574 $0.0591 $0.0609 $0.0627 $0.0646
Water & Chemical Charge ($/1000 gal) $1.65 $1.70 $1.75 $1.80 $1.85 $1.91 $1.97
Water Discharge Cost ($/1000 gal) $1.34 $1.38 $1.42 $1.46 $1.51 $1.55 $1.60
<CAPTION>
14 15 16 17 18 19 20
Plant Variable Costs 2009 2010 2011 2012 2013 2014 2015
-------------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Hours Dispatched 3017 2911 2850 2790 2732 2674 2618
Hours Not Dispatched 5743 5849 5910 5970 6028 6086 6142
Steam/Chilled Water Production Hours 11,800 11,800 11,800 11,800 11,800 11,800 11,800
Plant Electricity Usage 440,000 461,000 480,000 499,000 519,000 540,000 561,000
Water & Chemical Usage 387,000 392,000 399,000 407,000 415,000 423,000 431,000
Water Discharge 79,000 80,000 81,000 83,000 84,000 86,000 88,000
------- ------- ------- ------- --------- --------- ---------
Total Plant Variable Costs 906,000 933,000 960,000 989,000 1,018,000 1,049,000 1,080,000
Electricity Charge ($/kWh) $0.0666 $0.0686 $0.0706 $0.0727 $0.0749 $0.0772 $0.0795
Water & Chemical Charge ($/1000 gal) $2.03 $2.09 $2.15 $2.21 $2.28 $2.35 $2.42
Water Discharge Cost ($/1000 gal) $1.65 $1.70 $1.75 $1.80 $1.86 $1.91 $1.97
</TABLE>
<PAGE>
Panda Energy Corporation Alternative: Updated Corporate Page 8
Panda-Rosemary Cogen Project Refinancing Offering Base Case
*******************************************************************************
REVENUE GENERATION
<TABLE>
<CAPTION>
1 2 3 4 5 6
DISPATCH OPERATIONS 1996 1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760
Summer Demonstrated Capacity 174.0 174.0 174.0 174.0 174.0 174.0
Summer & VEPCO Contract Capacity 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 674 511 775 1,038 1,453 1,868
Winter Gas Dispatch 3 117 183 250 241 231
Winter Oil Dispatch 0 3 10 17 19 21
VEPCO Gas Dispatch 400 400 500 500 500 500
---------- ---------- ---------- ---------- ---------- ----------
Total Dispatch Hour s 1,077 1,031 1,468 1,805 2,213 2,620
Percentage 12.29% 11.77% 16.76% 20.61% 25.26% 29.91%
Winter Starts 0 3 5 6 6 6
Winter Start Duration 40 40 40 40 40 40
NET GENERATION
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 117,276 88,914 134,850 180,612 252,822 325,032
Winter Gas Output MWh 594 23,166 36,234 49,500 47,718 45,738
Winter Oil Dispatch MWh 0 594 1,980 3,366 3,762 4,158
VEPCO Gas Dispatch MWh 66,000 66,000 82,500 82,500 82,500 82,500
---------- ---------- ---------- ---------- ---------- ----------
Net Generation MWh 183,870 178,674 255,564 315,978 386,802 457,428
CAPACITY REVENUES
Capacity Rate $/kw-mo $12.49 $11.65 $11.65 $10.82 $10.82 $10.82
Capacity Revenues - Summer 12,363,000 11,537,000 11,537,000 10,713,000 10,713,000 10,713,000
Capacity Revenues - Winter 14,836,000 13,845,000 13,845,000 12,855,000 12,855,000 12,855,000
---------- ---------- ---------- ---------- ---------- ----------
Total Capacity Revenues 27,199,000 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000
ENERGY REVENUES
Summer Gas Charge $/kWh $0.0226 $0.0221 $0.0232 $0.0244 $0.0256 $0.0267
Winter Gas Charge $/kWh $0.0281 $0.0261 $0.0271 $0.0283 $0.0295 $0.0308
Winter Oil Charge $/kWh $0.0369 $0.0383 $0.0399 $0.0414 $0.0431 $0.0431
VEPCO Gas Charge $/kWh $0.0039 $0.0040 $0.0041 $0.0042 $0.0043 $0.0044
Variable O&M Charge $/kWh $0.0022 $0.0023 $0.0024 $0.0024 $0.0025 $0.0026
Summer Gas Revenue $ 2,907,000 2,172,000 3,447,000 4,849,000 7,099,000 9,506,000
Winter Gas Revenue $ 18,000 657,000 1,069,000 1,520,000 1,529,000 1,525,000
Winter Oil Revenue $ 0 24,000 84,000 148,000 172,000 190,000
VEPCO Gas Revenue $ 258,000 265,000 340,000 349,000 358,000 365,000
---------- ---------- ---------- ---------- ---------- ----------
Total Energy Revenues $ 3,183,000 3,118,000 4,940,000 6,866,000 9,158,000 11,586,000
START REVENUES
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 0 195,000 336,000 418,000 430,000 401,000
THERMAL REVENUES
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Production ktons 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.035 $0.035 $0.035 $0.035 $0.035 $0.040
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 141,000 141,000 141,000 141,000 141,000 162,000
---------- ---------- ---------- ---------- ---------- ----------
Total Thermal Revenues $ 590,000 590,000 590,000 590,000 590,000 611,000
<CAPTION>
7 8 9 10 11 12 13
DISPATCH OPERATIONS 2002 2003 2004 2005 2006 2007 2008
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer Demonstrated Capacity 174.0 174.0 174.0 174.0 174.0 174.0 174.0
Summer & VEPCO Contract Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 1,960 2,053 2,149 2,248 2,151 2,058 1,969
Winter Gas Dispatch 272 320 378 441 428 415 401
Winter Oil Dispatch 37 65 114 202 186 171 158
VEPCO Gas Dispatch 500 600 600 600 600 600 600
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Dispatch Hours 2,769 3,038 3,241 3,491 3,365 3,244 3,128
Percentage 31.61% 34.68% 37.00% 39.85% 38.41% 37.03% 35.71%
Winter Starts 7 8 9 11 11 10 10
Winter Start Duration 40 40 40 40 40 40 40
NET GENERATION
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 341,040 357,222 373,926 391,152 374,274 358,092 342,606
Winter Gas Output MWh 53,856 63,360 74,844 87,318 84,744 82,170 79,398
Winter Oil Dispatch MWh 7,326 12,870 22,572 39,996 36,828 33,858 31,284
VEPCO Gas Dispatch MWh 82,500 99,000 99,000 99,000 99,000 99,000 99,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Generation MWh 484,722 532,452 570,342 617,466 594,846 573,120 552,288
CAPACITY REVENUES
Capacity Rate $/kw-mo $10.82 $10.82 $10.82 $10.82 $8.32 $8.32 $8.32
Capacity Revenues - Summer 10,713,000 10,713,000 10,713,000 10,713,000 8,238,000 8,238,000 8,238,000
Capacity Revenues - Winter 12,855,000 12,855,000 12,855,000 12,855,000 9,885,000 9,885,000 9,885,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Capacity Revenues 23,568,000 23,568,000 23,568,000 23,568,000 18,123,000 18,123,000 18,123,000
ENERGY REVENUES
Summer Gas Charge $/kWh $0.0277 $0.0290 $0.0302 $0.0315 $0.0330 $0.0343 $0.0358
Winter Gas Charge $/kWh $0.0321 $0.0335 $0.0349 $0.0364 $0.0378 $0.0392 $0.0410
Winter Oil Charge $/kWh $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Charge $/kWh $0.0045 $0.0046 $0.0047 $0.0048 $0.0048 $0.0049 $0.0050
Variable O&M Charge $/kWh $0.0027 $0.0027 $0.0028 $0.0029 $0.0030 $0.0031 $0.0032
Summer Gas Revenues $ 10,351,000 11,334,000 12,354,000 13,456,000 13,452,000 13,400,000 13,344,000
Winter Gas Revenues $ 1,874,000 2,293,000 2,826,000 3,428,000 3,460,000 3,477,000 3,504,000
Winter Oil Revenues $ 335,000 590,000 1,036,000 1,839,000 1,697,000 1,563,000 1,447,000
VEPCO Gas Revenue $ 371,000 454,000 462,000 470,000 479,000 488,000 498,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Energy Revenues $ 12,931,000 14,671,000 16,678,000 19,193,000 19,088,000 18,928,000 18,793,000
START REVENUES
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 430,000 450,000 453,000 492,000 427,000 305,000 168,000
THERMAL REVENUES
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Production ktons 4,040 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charge $/ton $0.040 $0.040 $0.040 $0.040 $0.045 $0.045 $0.045
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 162,000 162,000 162,000 162,000 182,000 182,000 182,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Thermal Revenues $ 611,000 611,000 611,000 611,000 631,000 631,000 631,000
<CAPTION>
14 15 16 17 18 19 20
DISPATCH OPERATIONS 2009 2010 2011 2012 2013 2014 2015
---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total Hours 8,760 8,760 8,760 8,760 8,760 8,760 8,760
Summer Demonstrated Capacity 174.0 174.0 174.0 174.0 174.0 174.0 174.0
Summer & VEPCO Contract Capacity 165.0 165.0 165.0 165.0 165.0 165.0 165.0
Winter Capacity 198.0 198.0 198.0 198.0 198.0 198.0 198.0
Summer Dispatch 1,884 1,802 1,756 1,710 1,666 1,622 1,579
Winter Gas Dispatch 388 375 361 348 335 322 310
Winter Oil Dispatch 145 134 133 132 131 130 129
VEPCO Gas Dispatch 600 600 600 600 600 600 600
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Dispatch Hours 3,017 2,911 2,850 2,790 2,732 2,674 2,618
Percentage 34.44% 33.23%
Winter Starts 10 9 9 9 8 8 8
Winter Start Duration 40 40 40 40 40 40 40
NET GENERATION
Availability Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Load Factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Summer Output MWh 327,816 313,548 305,544 297,540 289,884 282,228 274,746
Winter Gas Output MWh 76,824 74,250 71,478 68,904 66,330 63,756 61,380
Winter Oil Dispatch MWh 28,710 26,532 26,334 26,136 25,938 25,740 25,542
VEPCO Gas Dispatch MWh 99,000 99,000 99,000 99,000 99,000 99,000 99,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Generation MWh 532,350 513,330 502,356 491,580 481,152 470,724 460,668
CAPACITY REVENUES
Capacity Rate $/kw-mo $8.32 $8.32 $8.32 $8.32 $8.32 $8.32 $8.32
Capacity Revenues - Summer 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000 8,238,000
Capacity Revenues - Winter 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000 9,885,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
ENERGY REVENUES
Summer Gas Charge $/kWh $0.0374 $0.0391 $0.0406 $0.0419 $0.0435 $0.0451 $0.0468
Winter Gas Charge $/kWh $0.0426 $0.0445 $0.0461 $0.0478 $0.0495 $0.0512 $0.0529
Winter Oil Charge $/kWh $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431 $0.0431
VEPCO Gas Charge $/kWh $0.0051 $0.0052 $0.0053 $0.0054 $0.0055 $0.0057 $0.0058
Variable O&M Charge $/kWh $0.0033 $0.0034 $0.0035 $0.0036 $0.0037 $0.0038 $0.0039
Summer Gas Revenues $ 13,334,000 13,317,000 13,456,000 13,542,000 13,679,000 13,808,000 13,936,000
Winter Gas Revenues $ 3,524,000 3,552,000 3,543,000 3,538,000 3,529,000 3,504,000 3,485,000
Winter Oil Revenues $ 1,331,000 1,232,000 1,226,000 1,219,000 1,213,000 1,207,000 1,200,000
VEPCO Gas Revenues $ 507,000 517,000 527,000 538,000 549,000 560,000 571,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Energy Revenues $ 18,696,000 18,618,000 18,752,000 18,837,000 18,970,000 19,079,000 19,192,000
START REVENUES
Winter Gas Start Payment $38,286 $38,286 $38,286 $38,286 $38,286 $38,286 $38,286
Winter Gas Start Revenues 38,000 345,000 345,000 345,000 306,000 306,000 306,000
THERMAL REVENUES
Steam Production Hours 7,800 7,800 7,800 7,800 7,800 7,800 7,800
Chilled Water Production Hours 4,000 4,000 4,000 4,000 4,000 4,000 4,000
Steam Production pph 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Chilled Water Production tph 1,010 1,010 1,010 1,010 1,010 1,010 1,010
Steam Production klbs 390,000 390,000 390,000 390,000 390,000 390,000 390,000
Chilled Water Production ktons 4,040 4,040 4,040 4,040 4,040 4,040 4,040
Steam Charge $/klbs $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Chilled Water Charges $/ton $0.045 $0.045 $0.050 $0.050 $0.050 $0.050 $0.050
Steam Revenues $ 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Revenues $ 182,000 182,000 202,000 202,000 202,000 202,000 202,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Thermal Revenues $ 631,000 631,000 651,000 651,000 651,000 651,000 651,000
</TABLE>
<PAGE>
Panda Energy Corporation Alternative: Updated Corporate Page 9
Panda-Rosemary Cogen Project Refinancing Offering Base Case
*******************************************************************************
FINANCIAL FORECAST
<TABLE>
<CAPTION>
1 2 3 4 5 6
REVENUES 7/96-12/96 1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 13,599,500 25,382,000 25,382,000 23,568,000 23,568,000 23,568,000
Energy Charges
Summer Gas Charge 1,453,500 2,172,000 3,447,000 4,849,000 7,099,000 9,506,000
Winter Gas Charge 9,000 657,000 1,069,000 1,520,000 1,529,000 1,525,000
Winter Oil Charge 0 24,000 84,000 148,000 172,000 190,000
VEPCO Gas Charge 129,000 265,000 340,000 349,000 358,000 365,000
---------- ---------- ---------- ---------- ---------- ----------
Total Energy Revenues 1,591,500 3,118,000 4,940,000 6,866,000 9,158,000 11,586,000
Winter Gas Start Revenues 0 195,000 336,000 418,000 430,000 401,000
Steam Sales Revenues 224,500 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 70,500 141,000 141,000 141,000 141,000 162,000
---------- ---------- ---------- ---------- ---------- ----------
Total Thermal Revenues 295,000 590,000 590,000 590,000 590,000 611,000
Total Sales Revenues 15,486,000 29,285,000 31,248,000 31,442,000 33,746,000 36,166,000
Interest - D.S.R. 5.0% 194,000 371,000 354,000 336,000 335,000 333,000
---------- ---------- ---------- ---------- ---------- ----------
Total Revenues 15,680,000 29,656,000 31,602,000 31,778,000 34,081,000 36,499,000
EXPENSES
Fuel Costs - Cogen Plant 1,198,000 2,338,000 3,772,000 5,351,000 7,217,000 9,198,000
Fuel Costs - Boiler 663,500 1,301,000 1,267,000 1,257,000 1,215,000 1,158,000
Plant Operating Costs 2,575,500 5,173,000 5,251,000 5,334,000 5,440,000 5,530,000
Plant Variable Costs 307,000 633,000 652,000 672,000 693,000 714,000
---------- ---------- ---------- ---------- ---------- ----------
Total Operating Costs 4,744,000 9,445,000 10,942,000 12,614,000 14,565,000 16,600,000
Rev. Avail. for Debt Service 10,936,000 20,211,000 20,660,000 19,164,000 19,516,000 19,899,000
Debt Service
Total Interest Costs 5,175,000 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000
Total Principal Payments 2,753,000 5,501,000 5,922,000 5,093,000 5,473,000 5,880,000
---------- ---------- ---------- ---------- ---------- ----------
Total Debt Service 7,928,000 14,694,000 14,627,000 13,314,000 13,242,000 13,164,000
OPERATING CASHFLOW
Pre-Tax Cashflow from Operations 3,008,000 5,517,000 6,033,000 5,850,000 6,274,000 6,735,000
Overhaul Reserve Fund Additions (140,000) (276,000) (405,000) (513,000) (648,000) (790,000)
Expected Debt Service Reserve Releases 655,000 26,000 670,000 30,000 33,000 47,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0
Estimated Impact of Hurricane Damage [2] (330,000) (222,225) 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Net Balance from Operations [3] 3,193,000 5,044,775 6,298,000 5,367,000 5,659,000 5,992,000
DEBT SERVICE COVERAGE
Revenue Avail. for Debt Service 10,936,000 20,211,000 20,660,000 19,164,000 19,516,000 19,899,000
Total Interest Costs 5,175,000 9,193,000 8,705,000 8,221,000 7,769,000 7,284,000
Total Principal Payments 2,753,000 5,501,000 5,922,000 5,093,000 5,473,000 5,880,000
---------- ---------- ---------- ---------- ---------- ----------
Total Debt Service Costs 7,928,000 14,694,000 14,627,000 13,314,000 13,242,000 13,164,000
Times Interest Coverage 2.11 2.20 2.37 2.33 2.51 2.73
Times Total Debt Coverage 1.38 1.38 1.41 1.44 1.47 1.51
<CAPTION>
7 8 9 10 11 12 13
REVENUES 2002 2003 2004 2005 2006 2007 2008
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 23,568,000 23,568,000 23,568,000 23,568,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 10,351,000 11,334,000 12,354,000 13,456,000 13,452,000 13,400,000 13,344,000
Winter Gas Charge 1,874,000 2,293,000 2,826,000 3,428,000 3,460,000 3,477,000 3,504,000
Winter Oil Charge 335,000 590,000 1,036,000 1,839,000 1,697,000 1,563,000 1,447,000
VEPCO Gas Charge 371,000 454,000 462,000 470,000 479,000 488,000 498,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Energy Revenues 12,931,000 14,671,000 16,678,000 19,193,000 19,088,000 18,928,000 18,793,000
Winter Gas Start Revenues 430,000 450,000 453,000 492,000 427,000 305,000 168,000
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 162,000 162,000 162,000 162,000 182,000 182,000 182,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Thermal Revenues 611,000 611,000 611,000 611,000 631,000 631,000 631,000
Total Sales Revenues 37,540,000 39,300,000 41,310,000 43,864,000 38,269,000 37,987,000 37,715,000
Interest - D.S.R. 5.0% 330,000 328,000 325,000 272,000 219,000 215,000 210,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Revenues 37,870,000 39,628,000 41,635,000 44,136,000 38,488,000 38,202,000 37,925,000
EXPENSES
Fuel Costs - Cogen Plant 10,322,000 11,743,000 13,450,000 15,606,000 15,552,000 15,441,000 15,352,000
Fuel Costs - Boiler 1,168,000 1,148,000 1,139,000 1,114,000 1,212,000 1,315,000 1,415,000
Plant Operating Costs 5,629,000 5,732,000 5,840,000 5,953,000 6,074,000 6,200,000 6,332,000
Plant Variable Costs 736,000 758,000 780,000 804,000 829,000 854,000 880,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Operating Costs 17,855,000 19,381,000 21,209,000 23,477,000 23,667,000 23,810,000 23,979,000
Rev. Avail. for Debt Service 20,015,000 20,247,000 20,426,000 20,659,000 14,821,000 14,392,000 13,946,000
DEBT SERVICE
Total Interest Costs 6,764,000 6,206,000 5,610,000 4,972,000 4,418,000 4,042,000 3,647,000
Total Principal Payments 6,294,000 6,737,000 7,215,000 7,697,000 4,292,000 4,492,000 4,705,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Debt Service 13,058,000 12,943,000 12,825,000 12,669,000 8,710,000 8,534,000 8,352,000
OPERATING CASHFLOW
Pre-Tax Cashflow from Operations 6,957,000 7,304,000 7,601,000 7,990,000 6,111,000 5,858,000 5,594,000
Overhaul Reserve Fund Additions (860,000)(1,471,000)(1,067,000)(1,184,000)(1,176,000)(1,168,000) (1,660,000)
Expected Debt Service Reserve Releases 50,000 51,000 70,000 2,034,000 85,000 87,000 96,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0 0
Estimated Impact of Hurricane Damage [2] 0 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net Balance from Operations [3] 6,147,000 5,884,000 6,604,000 8,840,000 5,020,000 4,777,000 4,030,000
DEBT SERVICE COVERAGE
Revenue Avail. for Debt Service 20,015,000 20,247,000 20,426,000 20,659,000 14,821,000 14,392,000 13,946,000
Total Interest Costs 6,764,000 6,206,000 5,610,000 4,972,000 4,418,000 4,042,000 3,647,000
Total Principal Payments 6,294,000 6,737,000 7,215,000 7,697,000 4,292,000 4,492,000 4,705,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Debt Service Costs 13,058,000 12,943,000 12,825,000 12,669,000 8,710,000 8,534,000 8,352,000
Times Interest Coverage 2.96 3.26 3.64 4.16 3.35 3.56 3.82
Times Total Debt Coverage 1.53 1.56 1.59 1.63 1.70 1.69 1.67
<CAPTION>
14 15 16 17 18 19 20
REVENUES 2009 2010 2011 2012 2013 2014 2015
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues from Electric Sales:
Total Capacity Revenues 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000 18,123,000
Energy Charges
Summer Gas Charge 13,334,000 13,317,000 13,456,000 13,542,000 13,679,000 13,808,000 13,936,000
Winter Gas Charge 3,524,000 3,552,000 3,543,000 3,538,000 3,529,000 3,504,000 3,485,000
Winter Oil Charge 1,331,000 1,232,000 1,226,000 1,219,000 1,213,000 1,207,000 1,200,000
VEPCO Gas Charge 507,000 517,000 527,000 538,000 549,000 560,000 571,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Energy Revenues 18,696,000 18,618,000 18,752,000 18,837,000 18,970,000 19,079,000 19,192,000
Winter Gas Start Revenues 38,000 345,000 345,000 345,000 306,000 306,000 306,000
Steam Sales Revenues 449,000 449,000 449,000 449,000 449,000 449,000 449,000
Chilled Water Sales Revenues 182,000 182,000 202,000 202,000 202,000 202,000 202,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Thermal Revenues 631,000 631,000 651,000 651,000 651,000 651,000 651,000
Total Sales Revenues 37,488,000 37,717,000 37,871,000 37,956,000 38,050,000 38,159,000 38,272,000
Interest - D.S.R. 5.0% 205,000 201,000 196,000 191,000 185,000 169,000 79,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Revenues 37,693,000 37,918,000 38,067,000 38,147,000 38,235,000 38,328,000 38,351,000
EXPENSES
Fuel Costs - Cogen Plant 15,302,000 15,266,000 15,393,000 15,474,000 15,599,000 15,704,000 15,811,000
Fuel Costs - Boiler 1,527,000 1,645,000 1,735,000 1,829,000 1,926,000 2,029,000 2,135,000
Plant Operating Costs 6,473,000 6,620,000 6,774,000 6,935,000 7,106,000 7,284,000 7,469,000
Plant Variable Costs 906,000 933,000 960,000 989,000 1,018,000 1,049,000 1,080,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Operating Costs 24,208,000 24,464,000 24,862,000 25,227,000 25,649,000 26,066,000 26,495,000
Rev. Avail. for Debt Service 13,485,000 13,454,000 13,205,000 12,920,000 12,586,000 12,262,000 11,856,000
Debt Service
Total Interest Costs 3,235,000 2,803,000 2,350,000 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 4,919,000 5,143,000 5,422,000 5,691,000 5,953,000 6,188,000 6,031,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Debt Service 8,154,000 7,946,000 7,772,000 7,565,000 7,328,000 7,042,000 6,356,000
OPERATING CASHFLOW
Pre-Tax Cashflow from Operations 5,331,000 5,508,000 5,433,000 5,355,000 5,258,000 5,220,000 5,500,000
Overhaul Reserve Fund Additions (1,152,000)(1,145,000)(2,154,000)(1,164,000)(2,174,000)(2,184,000) (3,694,000)
Expected Debt Service Reserve Releases 100,000 82,000 99,000 115,000 139,000 476,000 3,145,000
Debt Service Reserve Fund Additions 0 0 0 0 0 0 0
Estimated Impact of Hurricane Damage [2] 0 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net Balance from Operations [3] 4,279,000 4,445,000 3,378,000 4,306,000 3,223,000 3,512,000 4,951,000
DEBT SERVICE COVERAGE
Revenue Avail. for Debt Service 13,485,000 13,454,000 13,205,000 12,920,000 12,586,000 12,262,000 11,856,000
Total Interest Costs 3,235,000 2,803,000 2,350,000 1,874,000 1,375,000 854,000 325,000
Total Principal Payments 4,919,000 5,143,000 5,422,000 5,691,000 5,953,000 6,188,000 6,031,000
---------- ---------- ---------- ---------- ---------- ---------- -----------
Total Debt Service Costs 8,154,000 7,946,000 7,772,000 7,565,000 7,328,000 7,042,000 6,356,000
Times Interest Coverage 4.17 4.80 5.62 6.89 9.15 14.36 36.48
Times Total Debt Coverage 1.65 1.69 1.70 1.71 1.72 1.74 1.87
</TABLE>
[1] Project closing of July 1996 assumed. Reflects one-half year's operations
following refinancing
[2] Represents $330,000 Insurance Deductible and Insurance Business
Interruption, plus $222,255 as additional costs for a transformer rewind
[3] Available for capital expenditures or distributions to Project owners.
<PAGE>
Panda Energy Corporation Alternate: Updated Corporate Page 10
Panda-Rosemary Cogen Project Refinancing Offering Base Case
*******************************************************************************
<TABLE>
<CAPTION>
RESERVE FUNDS
1 2 3 4 5 6
DEBT SERVICE RESERVE FUND 1996 1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance 8,090,714 7,435,714 7,409,285 6,739,285 6,709,642 6,677,142
Additions 0 0 0 0 0 0
Interest Earnings 5.00% 388,000 371,000 354,000 336,000 335,000 333,000
Withdrawals (388,000) (371,000) (354,000) (336,000) (335,000) (333,000)
Releases (655,000) (26,429) (670,000) (29,643) (32,500) (46,786)
---------- ---------- ---------- ---------- ---------- ----------
Ending Balance 7,435,714 7,409,285 6,739,285 6,709,642 6,677,142 6,630,356
OVERHAUL RESERVE FUND
Beginning Balance 942,632 904,632 1,226,632 1,487,632 2,068,632 1,031,632
Additions 280,000 276,000 405,000 513,000 648,000 790,000
Additional Overhaul
Allowance 0 0 0 0 0 0
Interest Earnings 5.00% 46,000 53,000 68,000 89,000 78,000
Turbine Overhauls (318,000) 0 (197,000) 0 (1,774,000) (151,000)
Other Withdrawals 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0
Releases 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Ending Balance 904,632 1,226,632 1,487,632 2,068,632 1,031,632 1,748,632
Dispatch Hours [1] 1,077 1,031 1,468 1,805 2,213 2,620
Reserve Addition 3.00% $260 $268 $276 $284 $293 $301
Reserve Addition 280,000 276,000 405,000 513,000 648,000 790,000
OVERHAUL REQUIREMENTS
Frame 6 Operating Hours 4,863 5,894 7,362 9,167 11,380 14,000
Estimated Maintenance
Factor 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 14,056 16,621 20,761 25,851 32,092 39,480
Combustion Inspection (CI)[2] $59,000 $63,000
Hot Gas Path Inspection (HGP)[3]
Major Overhaul (MO)[4]
Frame 7 Operating Hours 3,525 4,556 6,024 7,829 10,042 12,662
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 10,186 12,848 16,988 22,078 28,318 35,707
Combustion Inspection (CI)[5] $85,000 $93,000
Hot Gas Path Inspection (HGP)[6] $1,711,000
Major Overhaul (MO)[7]
Steam Turbine Equiv. Hours 9,029 10,060 11,528 13,333 15,546 18,166
Limited ST Overhaul (LO)[8] $53,000 $58,000
Major ST Overhaul (MO)[9] $318,000
---------- ---------- ---------- ---------- ---------- ----------
Total Overhaul Costs $318,000 $0 $197,000 $0 $1,774,000 $151,000
<CAPTION>
7 8 9 10 11 12 13
DEBT SERVICE RESERVE FUND 2002 2003 2004 2005 2006 2007 2008
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 6,630,356 6,580,713 6,529,284 6,458,927 4,424,641 4,339,284 4,252,141
Additions 0 0 0 0 0 0 0
Interest Earnings 5.00% 330,000 328,000 325,000 272,000 219,000 215,000 210,000
Withdrawals (330,000) (328,000) (325,000) (272,000) (219,000) (215,000) (210,000)
Releases (49,643) (51,429) (70,357) (2,034,286) (85,357) (87,143) (95,714)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Ending Balance 6,580,713 6,529,284 6,458,927 4,424,641 4,339,284 4,252,141 4,156,427
OVERHAUL RESERVE FUND
Beginning Balance 1,748,632 1,069,632 35,632 958,632 852,632 1,890,632 2,938,632
Additions 860,000 971,000 1,067,000 1,184,000 1,176,000 1,168,000 1,160,000
Additional Overhaul Allowance 0 500,000 0 0 0 0 500,000
Interest Earnings 5.00% 70,000 70,000 28,000 25,000 45,000 69,000 121,000
Turbine Overhauls (1,609,000) (2,575,000) (172,000) (1,315,000) (183,000) (189,000) (4,711,000)
Other Withdrawals 0 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0 0
Releases 0 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Ending Balance 1,069,632 35,632 958,632 852,632 1,890,632 2,938,632 8,632
Dispatch Hours [1] 2,769 3,038 3,241 3,491 3,365 3,244 3,128
Reserve Addition 3.00% $310 $320 $329 $339 $349 $360 $371
Reserve Addition 860,000 971,000 1,067,000 1,184,000 1,176,000 1,168,000 1,160,000
OVERHAUL REQUIREMENTS
Frame 6 Operating Hours 16,769 19,807 23,048 26,539 29,904 33,148 36,276
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 47,289 55,856 64,995 74,840 84,329 93,477 102,298
Combustion Inspection (CI) [2] $69,000 $71,000 $75,000 $78,000
Hot Gas Path Inspection (HGP) [3] $1,211,000
Major Overhaul (MO) [4] $1,513,000 $1,806,000
Frame 7 Operating Hours 15,431 18,469 21,710 25,201 28,566 31,810 34,938
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 43,515 52,083 61,222 71,067 80,556 89,704 98,525
Combustion Inspection (CI) [5] $96,000 $101,000 $104,000 $108,000 $111,000
Hot Gas Path Inspection (HGP) [6]
Major Overhaul (MO) [7] $2,445,000 $2,834,000
Steam Turbine Equiv. Hours 20,935 23,973 27,214 30,705 34,070 37,314 40,442
Limited ST Overhaul (LO) [8] $61,000 $71,000
Major ST Overhaul (MO) [9]
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Overhaul Costs $1,609,000 $2,575,000 $172,000 $1,315,000 $183,000 $189,000 $4,711,000
<CAPTION>
14 15 16 17 18 19 20
DEBT SERVICE RESERVE FUND 2009 2010 2011 2012 2013 2014 2015
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Balance 4,156,427 4,056,070 3,973,927 3,874,641 3,759,998 3,621,069 3,145,447
Additions 0 0 0 0 0 0 0
Interest Earnings 5.00% 205,000 201,000 196,000 191,000 185,000 169,000 79,000
Withdrawals (205,000) (201,000) (196,000) (191,000) (185,000) (169,000) (79,000)
Releases (100,357) (82,143) (99,286) (114,643) (138,929) (475,622) (3,145,449)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Ending Balance 4,056,070 3,973,927 3,874,641 3,759,998 3,621,069 3,145,447 (2)
OVERHAUL RESERVE FUND
Beginning Balance 8,632 1,035,632 2,000,632 416,632 1,512,632 257,632 243,632
Additions 1,152,000 1,145,000 1,154,000 1,164,000 1,174,000 1,184,000 1,194,000
Additional Overhaul Allowance 0 0 1,000,000 0 1,000,000 1,000,000 2,500,000
Interest Earnings 5.00% 74,000 26,000 76,000 60,000 48,000 44,000 13,000
Turbine Overhauls (199,000) (206,000) (3,814,000) (128,000) (3,477,000) (2,242,000) (3,961,000)
Other Withdrawals 0 0 0 0 0 0 0
Interest Withdrawal 0 0 0 0 0 0 0
Releases 0 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Ending Balance 1,035,632 2,000,632 416,632 1,512,632 257,632 243,632 (10,368)
Dispatch Hours [1] 3,017 2,911 2,850 2,790 2,732 2,674 2,618
Reserve Addition 3.00% $382 $393 $405 $417 $430 $443 $456
Reserve Addition 1,152,000 1,145,000 1,154,000 1,164,000 1,174,000 1,184,000 1,194,000
OVERHAUL REQUIREMENTS
Frame 6 Operating Hours 39,293 42,204 45,054 47,844 50,576 53,250 55,868
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 6 Factored Hours 110,806 119,015 127,052 134,920 142,624 150,165 157,548
Combustion Inspection (CI) [2] $82,000 $85,000 $93,000
Hot Gas Path Inspection (HGP) [3] $1,446,000
Major Overhaul (MO) [4] $2,157,000
Frame 7 Operating Hours 37,955 40,866 43,716 46,506 49,238 51,912 54,530
Estimated Maintenance Factor 2.82 2.82 2.82 2.82 2.82 2.82 2.82
Frame 7 Factored Hours 107,033 115,242 123,279 131,147 138,851 146,392 153,775
Combustion Inspection (CI) [5] $117,000 $121,000 $128,000
Hot Gas Path Inspection (HGP) [6] $2,368,000 $2,665,000
Major Overhaul (MO) [7] $3,384,000
Steam Turbine Equiv. Hours 43,459 46,370 49,220 52,010 54,742 57,416 60,034
Limited ST Overhaul (LO) [8] $85,000
Major ST Overhaul (MO) [9] $1,296,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Overhaul Costs $199,000 $206,000 $3,814,000 $128,000 $3,477,000 $2,242,000 $3,961,000
</TABLE>
[1] Equivalent full load dispatch hours.
[2] CI conducted each 8,000 factored hours. Estimated cost of $56,000 (1996$)
[3] HGP conducted each 24,000 factored hours. Estimated cost of $928,000
(1996$)
[4] MO conducted each 48,000 factored hours. Estimated cost of $1,267,000
(1996$)
[5] CI conducted each 8,000 factored hours. Estimated cost of $80,000 (1996$)
[6] HGP conducted each 24,000 factored hours. Estimated cost of $1,520,000
(1996$)
[7] MO conducted each 40,000 factored hours. Estimated cost of $1,988,000
(1996$)
[8] LO conducted each 16,000 equivalent hours. Estimated cost of $50,000
(1996$)
[9] MO conducted each 50,000 equivalent hours. Estimated cost of $739,000
(1996$)
APPENDIX D
Assessment of Fuel Price,
Supply and Delivery Risks for the
Panda-RosemaryCogeneration Project
Prepared by:
Benjamin Schlesinger and Associates, Inc.
The Bethesda Gateway
7201 Wisconsin Avenue, Suite 740
Bethesda, MD 20814
Prepared for:
Panda Energy International, Inc.
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
Updated September 20, 1996
[BENJAMIN SCHLESINGER AND ASSOCIATES, INC. LETTERHEAD]
September 20, 1996
Mr. Bryan J. Urban
Vice President and Controller
Panda Energy International, Inc.
4100 Spring Valley, Suite 1001
Dallas, TX 75244
Subject: Assessment of Fuel Price, Supply and Delivery Risks for the
Panda-Rosemary Cogeneration Project (the "Project").
Dear Bryan:
I am pleased to enclose Benjamin Schlesinger and Associates, Inc.'s
updated opinion report assessing the fuel supply and delivery arrangements
for the Project and the associated risk to bondholders. As before, the
section entitled "Opinions and Conclusions" contains our principal findings
based on our analysis and evaluation of the Project's fuel supply and
delivery arrangements. Portions of the report which we have brought up to
date pertain to Panda's firm gas transportation arrangements.
Please give me a call if you have any questions about this report.
Sincerely yours,
BENJAMIN SCHLESINGER AND ASSOCIATES, INC.
/s/ Benjamin Schlesinger
__________________________________________
Benjamin Schlesinger, Ph.D.
President
Enclosure
ASSESSMENT OF FUEL PRICE, SUPPLY AND DELIVERY RISKS FOR THE
PANDA-ROSEMARY COGENERATION PROJECT (THE "PROJECT")
INTRODUCTION
Panda Energy International, Inc. (Panda) developed and owns an interest
in the Project, a 180 MW gas-fired, combined cycle cogeneration facility
located in Roanoke Rapids, NC. The Project has sold electric capacity and
energy on a fully dispatchable basis to Virginia Electric and Power Company
(VEPCO) since beginning commercial operations in late December 1990. The
Project also sells steam and chilled water to its thermal host, the Bibb
Company.
The Project facilities include an approximately 10 mile, 10 inch natural
gas pipeline that connects the plant in Roanoke Rapids to an interconnection
with the Transco and Columbia interstate pipeline systems and with the North
Carolina Natural Gas Company (NCNG) system in Pleasant Hill, NC. The Project
has contracted for firm gas supply, firm transportation, gas balancing, and
fuel management services in order to satisfy its daily fuel requirements and
is permitted to burn low sulfur distillate fuel oil (DFO) as a backup fuel
supply.
In connection with two bond offerings being undertaken by subsidiaries of
Panda, Panda has retained Benjamin Schlesinger and Associates, Inc. (BSA) to
provide a due diligence analysis and evaluation of the Project's fuel supply
and delivery arrangements, focusing on the appropriateness of the existing
fuel arrangements, the historic reliability of fuel to the Project, and the
extent to which fuel costs and energy revenues match.
OPINIONS AND CONCLUSIONS
Viability of the Fuel Supply Plan. The Project's overall fuel supply plan
remains reasonable and appropriate given the Project's record of operation and
its energy payment structure (see below). Panda's contract with Natural Gas
Clearinghouse (NGC) for fuel management services lies at the heart of the
Project's fuel supply plan. NGC sells and delivers gas on a firm basis to
satisfy the Project's baseload fuel requirements to produce steam and chilled
water for sale to Bibb. Additionally, NGC buys and delivers gas and DFO on a
best efforts basis to satisfy the Project's variable daily fuel requirements
related to VEPCO's electric dispatch requests. The fuel plan includes direct
access to two interstate pipeline systems, monthly balancing and backup gas
sales service from NCNG, and sufficient on-site DFO storage and permit
authorization to burn DFO whenever gas deliveries to the Project are
insufficient to satisfy its total fuel requirements on a daily basis. We
conclude that, provided VEPCO continues to dispatch the Project principally as
a summer peaker, the additional fixed costs required to increase the
Project's gas supply or delivery reliability are not warranted from an
economic or fuel reliability perspective.
The Project's energy revenues under its power sales agreement reflect the
Project's fuel plan. During the months of January and February, when the
Project is most likely to be forced to burn DFO due to spot gas curtailments,
the energy payments are based on delivered DFO prices, while during the rest
of the year the energy payments are based on the delivered price of Gulf Coast
spot gas in the summer months and Appalachia spot gas in the winter months.
While the Project's actual fuel consumed for dispatch operations has generally
followed the seasonal fuel availability structure assumed in the energy payment
mechanism, we note that the Project's energy payments and actual fuel costs are
not directly linked, i.e., the Project's energy payment margins are at some
risk for a mismatch between energy payments and fuel costs to produce
electricity. Specifically, given that delivered DFO prices historically have
exceeded delivered gas prices, the Project benefits if it is able to burn gas
in January and February, but could experience reduced margins on its energy
payments if forced to burn DFO in lieu of spot gas to satisfy dispatch requests
in any other month. This risk, however, is largely mitigated by a start-up fee
payable by VEPCO each time the Project is dispatched in November, December and
March, the months other than January and February during which the Project is
most likely to be forced to burn DFO. Although we believe the existing fuel
plan to be reasonable and appropriate, we recommend that Panda continue to
monitor on an annual basis the Project's actual and projected dispatch and
gas and DFO pricing for the months of November, December and March to assess
the need for modifications in the existing fuel plan.
Fuel Reliability. Although the Project buys firm gas supply and delivery
services to satisfy only its baseload fuel requirements, the Project has always
had enough fuel to satisfy VEPCO's dispatch requests. Moreover, from the start
of commercial operations through the end of 1995, the Project has been able to
secure gas sufficient to satisfy in excess of 90% of its total dispatch fuel
requirements, a record attributable to relatively low levels of winter
dispatch as well as the flexibility of its gas arrangements. We conclude that
the Project's existing gas supply and delivery arrangements provide an
appropriate degree of gas reliability for an electric peaking facility. In
addition, we conclude that the Project's two million gallon on-site DFO storage
capacity, ready access to oil terminals in four nearby locations, and
operational DFO resupply procedures with NGC that have proven to be effective
to provide an appropriate degree of backup DFO supply reliability, i.e., no
additional DFO supply or delivery contracts are necessary. However, the
Project may not be able to sustain a 90% gas reliability level in the future
under a scenario of significantly higher levels of dispatch in the months of
November, December and March and Panda should continue to monitor projected
dispatch for these months as described above.
Review of Pro Forma Fuel Costs. We have reviewed the fuel supply and
transportation pricing projections used by Burns & McDonnell in their report on
the Project (the "Independent Engineer's Report"). We have concluded from
our review that the Independent Engineer's Report employs reasonably
conservative assumptions for the costs of the Project's various gas supply and
transportation services, i.e., based on our assessment of the fuel contracts
and the cost of gas supply and transportation services, we believe that fuel
delivered to the Project is likely to cost less than the estimates contained
in the Independent Engineer's Report.
Contract Terms. The Project's fuel supply and transportation contracts have
original terms of approximately 15 years and thus will need to be extended or
replaced. We conclude that the Project should have little difficulty
extending the existing fuel arrangements or, if necessary, replacing the
current fuel contracts with alternate service arrangements that offer
comparable price, credit support and reliability provisions. We note that the
Independent Engineer's Report projects fuel costs through the year 2015 on the
basis of the existing fuel contracts and, based on the foregoing conclusion,
we believe such projection to be reasonable.
DESCRIPTION OF THE PROJECT'S FUEL SUPPLY AND DELIVERY ARRANGEMENTS
I. Fuel Management.
Panda has two agreements with Natural Gas Clearinghouse (NGC) that
together provide the Project with a full spectrum of fuel management services.
Pursuant to these agreements, NGC satisfies the Project's daily fuel
requirements for baseload and dispatch operations by procuring the most
economical combination of firm and best efforts gas supply available to the
Project and maintaining an adequate supply of DFO to backup curtailments of
best efforts gas supplies. In this section, we briefly describe the NGC
contracts:
Panda negotiated a Gas Purchase Contract with NGC in 1990 (as amended in
1993) in order to secure a firm, warranted gas supply to support its
baseload fuel requirements. As amended, the firm gas supply contract
provides for the following:
- The contract term extends through November 30, 2005, after which
either party can terminate the contract with 30 days notice (see
ANALYSIS OF POTENTIAL RISKS TO INVESTORS).
- Panda nominates each month a Minimum Daily Quantity of gas it
will buy each day in such month (the "MDQ") up to a maximum of
3,075 MMBtu/day. NGC has a firm obligation to deliver Panda's
MDQ and, provided the parties reach agreement on a sales price,
to deliver all gas nominated by Panda in excess of the MDQ up
to the 3,075 MMBtu/day maximum.
- The price for the MDQ gas delivered is a monthly Gulf Coast
spot index plus $0.04/MMBtu, with any volume delivered in
excess of the MDQ priced at NGC's actual acquisition cost plus
$0.04/MMBtu.
- NGC delivers the gas to the Project either via Panda's firm
transportation contract with Transco (see below) or via
interruptible transportation (IT) service on the Transco or
Columbia interstate pipeline systems, or alternate pipeline
routes to the extent IT service is available.
- If Panda buys less than its MDQ in any month, it must pay NGC a
deficiency fee of $0.14/MMBtu times the amount of the
deficiency. If NGC fails to deliver the volume Panda nominates
each day up to the contract maximum of 3,075 MMBtu, it is
obligated to pay damages equal to the difference, on a
delivered cost to the Project basis, between Panda's
replacement fuel cost and the applicable cost of gas pursuant
to the contract for the deficient volume. In addition, NGC is
obligated, annually, to provide any lender or lessor to the
Project with financial information sufficient to assure lenders
of NGC's continuing ability to meet its delivery obligations.
In October, 1990, Panda executed a Fuel Supply Management Agreement (FSMA)
with NGC in order to secure spot gas to satisfy the Project's dispatch
fuel requirements and to secure DFO for use as a backup fuel when the
Project's total daily fuel requirements exceed the availability of gas
under the firm gas supply and the FSMA. The FSMA has the same term as
the NGC firm gas supply contract and contains the following provisions:
- NGC buys spot gas on a best efforts basis at the lowest
available price and delivers it to Pleasant Hill on an IT basis
via either Transco or Columbia.
- NGC manages the purchase of DFO for the Project and arranges
price hedging arrangements (see DFO Supply and Delivery below).
- Panda pays NGC's actual acquisition cost of gas and oil purchased
pursuant to the FSMA plus $0.04/MMBtu for all gas and
$0.002/gallon for all DFO delivered to the Project. In addition,
NGC keeps 60% of all discounts that it negotiates on behalf of
the Project relative to a benchmark delivered gas price equal to
the sum of a published monthly spot gas index and Transco's
monthly posted rate for IT service to Pleasant Hill.
- NGC manages all communications and billings related to gas
deliveries between Panda, NCNG, the interstate pipelines and all
gas suppliers, including dispatching gas from the suppliers
through the pipelines, invoicing, and verifying flowing
Volumes.(1)
II. Gas Transportation.
In October, 1991, Panda executed a Service Agreement with Transco for firm
transportation service (the FT-NT contract). Panda negotiated this service to
assure firm deliveries of the firm gas supply purchased from NGC to satisfy its
baseload fuel requirements. Pursuant to the FT-NT contract, Panda may deliver
up to 3,075 Mcf/day of gas to Texas Gas Transmission, a Transco affiliate, at
various points in Texas and Louisiana and receive the gas from Transco at
Pleasant Hill.
In July 1996, the Project entered into separate contracts with Texas Gas
Transmission Corporation (TGT), CNG Transmission Corporation (CNG), and
Transco under which it converted its FT-NT contract with Transco into
generally-applicable Part 284 firm transportation (FT) agreements with each
pipeline.(2) The Project's FT contracts with TGT, CNG and Transco provide it
with firm, 365 day/year service from each pipeline, subject to curtailment
only in the event of force majeure as specified in the FERC-approved tariffs of
each pipeline. Moreover, the conversion to FT service has enhanced the
Project's operational flexibility since it is now able to switch receipt and
delivery points for the gas and resell its capacity to third parties when
unneeded. Transco has assured the Project that as part of its FT service it
will continue to be guaranteed gas deliveries on a backhaul basis delivered
to Transco at Leidy via TGT and CNG.
Each contract term extends through October 31, 2006 (as did the Project's
FT-NT contract) and then extend year to year thereafter unless terminated by
either party with 12 months notice (see ANALYSIS OF POTENTIAL RISKS TO
INVESTORS). Panda pays each pipeline's FERC-approved maximum rates for this
service and NGC manages all three FT contracts as agent on behalf of Panda
(see above).
- ---------------------------
(1) Panda and NGC clarified NGC's fuel management responsibilities in a
1992 General Agent Confirmation Letter that designates NGC as the Project's
agent for purpose of arranging all transportation services with interstate
pipelines and NCNG for all gas delivered to the Project. As agent, NGC is
responsible for communicating all required information between the gas
suppliers, the pipelines and the Project and in reconciling any imbalances
that may arise pursuant to Panda's firm transportation agreement with Transco
(see below). Panda is responsible for paying all transportation costs as
invoiced by NGC.
(2) Transco offers this conversion to all of its FT-NT customers pursuant
to its FERC-authorized tariff.
III. Local Delivery and Gas Balancing.
In February 1990, as amended in December 1991, Panda executed the Pipeline
Operating Agreement with NCNG. The term of this agreement extends 15 years
from the date the Project began commercial operations, i.e., December 27, 2005,
and may be extended for two additional five year periods with the consent of
both parties (see ANALYSIS OF POTENTIAL RISKS TO INVESTORS). The Pipeline
Operating Agreement provides for the following:
NCNG operates and maintains Panda's pipeline between Pleasant Hill and the
plant in Roanoke Rapids.
NCNG balances Panda's receipt of gas from Transco and Columbia with the
delivery and consumption of gas at the plant in Roanoke Rapids on a daily
and monthly basis. Panda has the right to carryover to the following
month an imbalance between its receipt of gas at Pleasant Hill and its
delivery to Roanoke Rapids in any month equal to the greater of 50,000
MMBtu or 25% of the greater of the receipt or delivery volume for that
month. Panda "cashes out" its monthly imbalance volume in excess of the
carryover amount based upon NCNG's average purchase price of gas for that
month.
To the extent Panda is unable to buy gas, NCNG will sell gas to Panda on
a best efforts basis to the extent it has gas available without
diminishing service to its other customers.
Panda pays a fixed monthly fee of $20,000 for NCNG's services.
IV. DFO Supply and Delivery.
The Project's air permit allows it to operate for up to 2,000 hours/year
on DFO. The Project facilities include on-site storage capacity sufficient to
store approximately two million gallons of DFO (eight days of Project
operation when dispatched at its rated capacity output for 24 hours/day) for
use when gas is unavailable to the Project. The Project includes two oil
unloading bays that can each unload one tank truck in approximately 30
minutes. When refilling its storage tank, the Project will typically unload
two trucks/hour but can unload three trucks/hour if necessary.
Pursuant to the FSMA, NGC is responsible for arranging DFO supply for the
Project. Panda reports that NGC has no long-term contracts for DFO supply and
delivery. Rather, Panda reports that its DFO resupply plan calls for the
Project to top off its 2,000,000 gallon tank in advance of each winter season.
If the Project burns DFO early in the winter, it typically will elect to
replenish the consumed DFO immediately. However, as the winter progresses and
the Project anticipates that gas will become increasingly reliable, it may
decide not to replenish the tank immediately after an oil burn, but wait for
late summer to top off the tank in preparation for the following winter.
Pursuant to Panda's instructions, NGC currently buys DFO on a spot basis
and does not hedge its purchase price because the Project's energy revenues are
based on a spot oil price index (for January and February only) and the Project
cannot predict in advance when or how much DFO it will burn in lieu of gas.
NGC buys DFO from major oil companies and independent jobbers with product in
storage at major terminals off the Colonial Pipeline in Richmond, VA, Selma,
NC, Greensboro, NC, and at Norfolk marine terminals. In the past, NGC has
arranged for the Project to buy 80-90% of its supply from suppliers active in
Richmond and Selma, including BP, Conoco, Amoco, Exxon, Sprague, and several
smaller jobbers. Since the suppliers either own trucks or have contracts with
local trucking firms for regional truck delivery, NGC does not independently
arrange trucking service from the terminals to the Project, i.e., the purchase
price includes delivery to the plant.
When Panda decides that it needs to purchase DFO, it notifies NGC of the
desired volume. The NGC contact person in Houston is a petroleum products
specialist who purchases products for several other power facilities as well
as the Project. The NGC specialist contacts a list of suppliers active in the
four regional terminal locations identified above and solicits price bids for
the desired volume and product quality. NGC evaluates the bids and verbally
accepts the winning bid at Panda's direction, but does not execute a written
purchase order for the DFO until it receives the results of independent
laboratory tests to confirm that the supplier's product in storage at the
terminal complies with the Project's quality specifications. NGC hires local
testing firms to take a sample of the winning supplier's product in storage at
the terminal. Within 48 hours, NGC gets confirmation of product quality from
the independent lab, executes a written purchase order, and the supplier begins
loading trucks. If the Project, typically during early winter refills,
indicates to NGC that it needs to replenish DFO quickly, NGC may skip the
independent terminal test, but Panda reserves the right to reject product
delivered to the Project that fails to meet the truck test at the plant, as
described below.
State regulation requires suppliers to seal each truck at the terminal
and Panda refuses to unload a truck and accept the product if a truck arrives
with seals broken. The drive time from Richmond and Selma is approximately
1.5 hours and the Project can receive trucks for unloading 24 hours/day.
Prior to unloading, Panda takes a sample from each truck and sends a blended
sample from all trucks unloaded each day to an independent lab for quality
testing. Panda receives the test results within 24 hours. If the test shows
that the delivered product failed to meet the Project's specifications, Panda
halts further shipments from that supplier. However, because Panda purchases
low sulfur (.05%) product in the late summer to top off its tank, it is able
to blend any low quality product received during a winter replenishment with
the high quality summer product and maintain its air permit requirement of
.2% sulfur product.
ASSESSMENT OF PRO FORMA FUEL COSTS
As part of the due diligence review of the Project's fuel arrangements,
BSA evaluated the fuel supply and transportation assumptions made by Burns &
McDonnell in the Executive Summary of and the Expected Fuel Costs section of
the Financial Assessment of the Project contained in the Independent
Engineer's Report. We have concluded from our review that the Independent
Engineer's Report employs conservative assumptions for the fixed costs of gas
transportation services to the Project and that it assumes the Project's
variable fuel costs will track those used to calculate VEPCO's energy payments
in the summt with the term of its previous FT-NT contract, i.e., through
10/31/2006. Upon contract termination, the pipelines must make the physical
capacity that they used to serve the Project available to the shipper offering
the best price, subject to their maximum Part 284 FT rates. This implies that
a conservative case is one in which, starting 11/1/2006 and extending for the
duration of the financing, the Project would cease paying the existing FT-NT
rate and begin paying the maximum Part 284 FT rate on each of the three
pipelines in order to replicate the same service that Transco currently
provides on a packaged basis.
We conservatively estimate that, since the Project has replaced its FT-NT
service rate with Part 284 FT service rates on Transco, CNG and TGT, the cost
of the Project's FT service would increase in 2006 by approximately 22% over
the level assumed in the Project's financial model, i.e., up to the projected
2006 value of the pipelines' current Part 284 FT rates. Our analysis assumes
the following:
Transco, CNG and TGT built capacity under Section 7(c) of the Natural Gas
Act to serve the Project. This capacity will be available for much longer
than the 15 year term of the FT-NT service agreement.
When the Project's Part 284 service agreements expire in 2006, the
pipelines must make the capacity available to the shipper offering the
best price, subject to their maximum Part 284 FT rates. We therefore
assume that the pipelines will sell the capacity after 2006 to the highest
bidder and that the Project's ability to retain the capacity is a matter
of the Project's opting to maintain each of its three FT contracts in
force on a year-to-year basis, with termination provisions as
characterized above.
- --------------------------
(7) We estimate that the FT-NT rate is currently higher than the Part 284
FT rate. The Engineer's Report assumes that the Project pays the FT-NT rate.
Thus, we conservatively assume that the Project would have to pay the
maximum Part 284 FT rates to retain the Transco, CNG, TGT service after 2006.
We estimate that the sum of the Part 284 FT rates, although currently about 91%
of the cost of FT-NT service on a 100% load factor basis, would not exceed
FT-NT costs until after 1999, and could be approximately 22% higher than the
projected cost of FT-NT service by 2006. We note, however, that the foregoing
increase in estimated fuel expenses, were it to transpire, would apply only to
the firm component (3,075 Dth) of the Project's gas transportation
expenditures and would affect only the final years of the loan, thus we
conclude that itwould not represent a significant or material increase the
Project's overall fuel expenditures. In summary, the switch to Part 284 FT
rates enchances theProject's operational flexibility, is likely to provide
lower gas transportationcosts at least through 1999 and, under conservative
assumptions, would result in an immaterial increase in gas costs by the year
2006.
Gas Balancing
Pursuant to the Pipeline Operating Agreement, NCNG both maintains the
Project's pipeline from Pleasant Hill to Roanoke Rapids and provides the
Project with monthly carryover balancing service for one monthly fixed price.
Many parties are qualified to provide the former service. On the other hand,
the monthly carryover service provides a critical degree of operational
flexibility for a dispatchable electric generator and can only be accomplished
through the physical gas storage capability that exists on NCNG's system or on
the interstate pipelines. Therefore, we believe that NCNG or, possibly, NGC
are the only realistic providers of the latter service. At the appropriate
time, Panda intends to negotiate to extend the term of this agreement and
believes that its mutually beneficial relationship with NCNG will continue
under its current form.
CONCLUSION
Set forth above under Opinions and Conclusions are our principal findings
based on our analysis and evaluation of the Project's fuel supply and delivery
arrangements. For a more detailed description of the estimates and
assumptions upon which these opinions and conclusions are based, this report
should be read in its entirety.
[BENJAMIN SCHLESINGER AND ASSOCIATES, INC. LETTERHEAD]
BENJAMIN SCHLESINGER AND ASSOCIATES, INC.
Officer's Certificate
I, Benjamin Schlesinger, Principal of Benjamin
Schlesinger and Associates, Inc., DO HEREBY CERTIFY that:
Since September 20, 1996, no event affecting our
report entitled "Assessment of Fuel Price, Supply and
Delivery Risks for the Panda-Rosemary Cogeneration Project"
(the "Fuel Consultant's Report") or the matters referred to
therein has occurred (i) which makes untrue or incorrect in
any material respect, as of the date hereof, any information
or statement contained in the Fuel Consultant's Report or in
the Prospectus relating to the offering of Pooled Project
Bonds, Series A-1 due 2012 by Panda Funding Corporation (the
"Prospectus") under the caption "Fuel Consultant's Report-
Rosemary" in the Prospectus Summary or (ii) which is not
reflected in the Prospectus but should be reflected therein
in order to make the statements and information contained in
the Fuel Consultant's Report or in the Prospectus under the
caption "Fuel Consultant's Report-Rosemary" in the
Prospectus Summary, in light of the circumstances under
which they were made, not misleading.
We have reviewed the fuel supply and transportation
pricing projections used by Burns & McDonnell Engineering
Company, Inc. in their report, dated July 26, 1996, and
their update report, dated January 10, 1997, regarding
the Panda-Rosemary Cogeneration Project. We have concluded
that the projections developed by Burns & McDonnell in their
July 26 report and their update report (collectively, the
"B&M Report"), employ reasonably conservative assumptions
with respect to the Panda-Rosemary Partnership's fixed gas
transportation costs and the relationship of the Panda-
Rosemary Partnership's variable fuel costs to the energy
price under the Rosemary Power Purchase Agreement, and the
B&M Report contains reasonable assumptions concerning the
revenue that the Panda-Rosemary Partnership may receive by
reselling transportation capacity that is excess to the
Panda-Rosemary Facility's average daily capacity utilization
and/or reselling gas using it excess transportation
capacity.
We have also reviewed the Amendment effective January 1,
1997 (the "Amendment") to the Service Agreement which the Panda-
Rosemary Partnership entered into with Transcontinental Gas Pipe
Line Corporation ("Transco") in July 1996. We have concluded
that the Amendment properly executes the same kind and quality
of firm backhaul transportation service which was put into place
under the FT-NT contract which the Panda-Rosemary Partnership executed
with Transco in October 1991, and which was envisioned in the
Description of the Project's Fuel Supply and Delivery Arrangements
contained in the September 20, 1996 Fuel Consultant's Report for the
Panda-Rosemary Cogeneration Project prepared by us.
WITNESS my hand this 10th day of January, 1997.
By: /s/ Banjamin Schlesinger
Name: Benjamin Schlesinger
Title: Principal
APPENDIX E
Inependent Panda-Brandywine Pro Forma Projections
Prepared for:
Panda Energy International, Inc.
Prepared by:
ICF Resources Incorporated,
a subsidiary of ICF Kaiser International
July 26, 1996
As Supplemented and Modified by an Update Report, dated January 10, 1997
TABLE OF CONTENTS
Page
TABLE OF CONTENTS E-i
EXECUTIVE SUMMARY E-1
Assumptions E-2
Conclusions E-5
INTRODUCTION E-7
Description of Brandywine E-7
ICF's Role E-7
SCHEDULE A-INCOME STATEMENT AND SCHEDULE B-CASH FLOW
STATEMENT E-9
SCHEDULE C-DEVELOPMENT ASSUMPTIONS E-9
SCHEDULE D-OPERATING ASSUMPTIONS E-10
Operating assumptions E-10
Electricity Revenues-Capacity E-10
Electricity Revenues - Energy E-12
Distilled Water Revenues and Costs E-12
Fixed Operating Expenses E-12
Turbine Overhaul and Lease Reserve E-12
SCHEDULE E-LEASE PAYMENTS AND CAPACITY ADJUSTMENTS E-13
SCHEDULE F-GAS SUPPLY INCOME STATEMENT AND
SCHEDULE G-GAS SUPPLY OPERATING ASSUMPTIONS E-13
Dispatch Hours E-13
Gas and Fuel Oil Volumes and Compensation Price E-14
Energy-Based Revenues (Gas Supply Income Statement) E-16
Fuel Costs E-16
Transportation E-17
CONCLUSIONS E-19
APPENDIX PANDA BRANDYWINE PRO FORMA E-20
This report was produced by ICF Resources
Incorporated (ICF) in accordance with an agreement
with Panda Energy International, Inc., who paid for
its services in producing the report and this report
is subject to the terms of that agreement. This report
is meant to be read as a whole and in conjunction with
this disclaimer. Any use of this report other than as a
whole and in conjunction with this disclaimer is forbidden.
Any use of this report, other than as provided for in ICF's
agreement with Panda Energy International, is forbidden.
This report may not be copied in whole or in part or
distributed to anyone outside Panda Energy International
without ICF's prior express and specific written permission.
This report and information and statements herein are
based in whole or in part on information obtained from various
sources. ICF makes no assurances as to the accuracy of any
such information or any conclusions based thereon. ICF bears
no responsibility for the results of any actions taken on the
basis of this Report.
EXECUTIVE SUMMARY
ICF Resources, Incorporated, a subsidiary of ICF Kaiser International
("ICF"), has prepared the independent pro forma projections (the "Project Pro
Forma") for the Panda-Brandywine Cogeneration Project (the "Project")
contained herein pursuant to a Consulting Agreement with Panda Energy
International, Inc. ("Panda"). In developing its projections, ICF reviewed
the Project's fuel supply and transportation contracts and its Power Purchase
Agreement, as amended ("PPA"), as well as the independent reports on the
Project prepared by the Project's independent engineer, Pacific Energy
Services, Inc. ("PES"), and its fuel consultant, C.C. Pace Resources, Inc.
("C.C. Pace").
In the preparation of this Report and the opinions that follow, we have made
certain assumptions with respect to conditions that may exist or events that
may occur in the future. Although we believe these assumptions to be
reasonable for the purpose of this Report, they are dependent on future
events, and actual conditions may differ from those assumed. In addition, we
have used and relied upon certain information provided to us by sources that
we believe to be reliable; however, we make no assurances as to the accuracy
of any such information or any conclusions based thereon. To the extent that
actual future conditions differ from those assumed herein, the actual results
will vary from those forecast. This Report summarizes our work up to the date
hereof; changed conditions occurring or becoming known after such date could
affect the material presented.
In developing the Project Pro Forma contained herein, ICF reviewed and assessed
the pro forma financial projections prepared in connection with the financial
closing of the Project (the "Closing Pro Forma") and determined that it
represented a reasonable model upon which to build its projections. We have
independently reviewed the assumptions used in the Closing Pro Forma and,
where relevant, we updated such assumptions using information that may not
have been available at the time of their preparation. This additional
information includes available macroeconomic data on the Gross National
Product ("GNP"), Gross Domestic Product ("GDP"), and Producer Price Index
("PPI") indices used in the PPA and fuel supply contracts. We also have
relied on the following sources of information in preparing the projections:
- Operating specifications and cost, construction cost and
projected completion, maintenance schedules and cost:
Pacific Energy Services' report, Independent Engineer's
Report: Panda-Brandywine Cogeneration Project (the "PES
Report"). Based on PES's expertise in undertaking similar
analyses, ICF believes that our use of PES's analysis in
preparing this Report is reasonable.
- Dispatch projections: ICF Resources Incorporated,
Independent Assessment of the Dispatchability of the Panda-
Brandywine Project, May 1996 ("the Dispatchability
Analysis").
- Fuel cost projections: the Dispatchability Analysis.
C.C. Pace has reviewed ICF's fuel cost assumptions contained
in the Dispatchability Analysis and has determined them to
be reasonable in its report, Panda-Brandywine, L.P.
Generating Facility - Fuel Consultants' Report - July 2,
1996 (the "Pace Report").
- Structure of terms in the Loan Agreement: Base pro
forma information from the Closing Pro Forma.
- Current macroeconomic escalators: Bureau of Labor
Statistics, Department of Commerce.(1)
Assumptions
The principal assumptions that we made in developing the Project Pro Forma
include:
Project Assumptions:
1. We have not evaluated the validity and enforceability of any
contract, agreement, rule or regulation applicable to the Project and have
assumed that they will be fully enforceable in accordance with their
terms and that all parties will comply with the provisions thereof.
2. Raytheon Engineers and Constructors ("the Contractor") and Ogden
Brandywine, Inc. ("the Operator") will construct and operate the Project
as required under their respective contracts with Panda-Brandywine LP,
the owner of the Project, which contracts have been reviewed by PES; and
we further assume that PES's conclusions as to those agreements contained
in the PES Report are correct.
3. Construction will be completed by the end of September, 1996, in time
for commercial operation to commence in October, 1996, as projected by
PES in the PES Report.
4. All permits and approvals necessary to construct and operate the
Project will be obtained on a timely basis, as projected by PES, and will
be maintained in full force and effect, and any changes in required
permits and approvals will not require changes in design resulting either
in material delays in achieving construction completion as scheduled or
in significant increases in the cost of constructing the facility.
5. PES's conclusion contained in the PES Report that the Project's
design will enable it to "perform at a level consistent with that
anticipated in the [Project Pro Forma]" is reasonable.
6. PES's conclusion contained in the PES Report that the construction
cost of the facility will not exceed the initial capital budget of $215
million is reasonable.
7. In projecting the energy payment, we have assumed a contractual heat
rate of 8,461 Btu/kWh (HHV), even though under many dispatch scenarios
the Project would be entitled to base the energy payment on a higher
(and therefore more favorable to the Project) contractual heat rate.
This results in a more conservative set of projections.
- ----------------------------
(1) BLS, http://stats.bls.gov. Data extracted June 28,1996.
8. Potomac Electric Power Company ("PEPCO") will fully reimburse
Panda-Brandywine, L.P. the costs associated with start-ups through the
energy payment provisions of the PPA. This is consistent with PES's
observation that the Project's energy payment is corrected for the cost
of fuel used for various startups during the month.
Operating Assumptions:
1. The Operator will employ qualified and competent personnel who will
properly operate and maintain the equipment in accordance with the
manufacturers' recommendations and good engineering practice, will make
all required renewals and replacements and will generally operate the
Project in a sound and businesslike manner.
2. Overhauls and major maintenance will be planned for and conducted in
accordance with manufacturers' recommendations and the expected cost
thereof estimated by PES using the dispatch projections contained in the
Dispatchability Analysis.
3. The Project will be dispatched as projected in our Dispatchability
Analysis.
4. Long-term fuel cost inputs will be as we have projected in our
Dispatchability Analysis, as found reasonable by C.C. Pace in the Pace
Report.
5. There is a strong linkage between changes in the Project's expected
fuel-related costs and energy revenues under the PPA, as found reasonable
by C.C. Pace in the Pace Report.
6. The fuel supply arrangements fulfill the contractual requirements of
the PPA, and variable fuel-related costs will be less than energy
payments, as found reasonable by C.C. Pace in the Pace Report.
7. The gas supply and transportation operational requirements will
satisfy electric dispatch operational requirements, as found reasonable
by C.C. Pace in the Pace Report.
8. Natural gas transportation rates will escalate at 1.5 percent
annually.
9. The Project will recover 50% of the cost of its unutilized firm
natural gas transportation in the capacity release market.
10. Operations and maintenance costs, consumables and administrative
expenses will increase at a rate equal to the GNP deflator, currently 3.5
percent per year. Insurance and purchased electricity will increase at a
rate equal to the CPI deflator, currently 3.0 percent per year. Property
taxes will decrease due to declining asset value according to a schedule
provided by Panda Brandywine, L.P.
11. Based on FERC Form 714 data and projections for generation growth in
the Mid-Atlantic Region PEPCO's peak demand will surpass 5,697 MW prior
to the end of 1997, and therefore PEPCO will not be entitled to reduce
the capacity payments to the Project pursuant to the First Amendment to
the PPA.
12. The levels of dispatch indicated in the Dispatch Analysis are
consistent with an operating pattern where the Project is dispatched only
during weekdays (i.e., approximately 260 times per year). Given the
uncertainty regarding dispatch, a possible range of 200 to 300 starts per
year is reasonable.
Steam Sales Assumptions:
1. As projected by PES in the PES Report, thermal energy in the form of
steam will be exported from the Project, operating in the cogeneration
mode, to Brandywine Water Company's distilled water plant such that the
"useful thermal energy" produced by the Project, as defined in PURPA and
the regulations promulgated thereunder, will be sufficient to meet the
operating and efficiency standards required to maintain the facility's
status as a qualifying cogeneration facility under PURPA.
2. Brandywine Water Company's distilled water plant will operate as
projected by its manufacturer.
3. The United States Navy will perform as indicated in its Purchase
Order for the purchase of the distilled water plant's total distilled
water output at a price of $1.50 per 1,000 gallons.
Financing Assumptions:
1. The total amount of the construction loan and leas commitment from
General Electric Capital Corporation ("GECC") is $215 million. The
construction loan bears interest at a Eurodollar base rate plus 250
basis points. Upon completion of construction, the construction loan
will be converted to permanent financing in the form of a single investor
lease. The fixed payment terms under the single investor lease will be
established at the time of conversion using "Basic Rent Factors" contained
in the lease agreement, subject to adjustment based on GECC's then-
applicable federal tax rate, the final cost of the Project, and a Treasury
Index Rate.
2. At the time of conversion, the applicable GECC federal tax rate will
be 35 percent and the Treasury Index Rate will be 6.83 percent.
3. The actual Project lease cost calculation will be as provided in the
Closing Pro Forma.
4. The CPI will increase at a rate of 3 percent per year, the Gross
National Product Implicit Price Deflator will increase at a rate of 3.5
percent per year, and the Producer Price Index for Oil and Gas Field
Services will increase at a rate of 3.5 percent per year.
5. The Project will maintain a lease reserve of the next two quarterly
payments consistent with the provisions of its Loan Agreement with GECC.
6. The Project will maintain a turbine overhaul reserve of $5 million,
escalated at the GNP deflator after the year 2000 consistent with the
provisions of its Loan Agreement with GECC.
7. Panda-Brandywine, L.P., as a limited partnership, will not be subject
to federal and state income tax.
Conclusions
Set forth below are the principal opinions that we have reached regarding our
review of the Project. For a complete understanding of the estimates,
assumptions and calculations upon which these opinions are based, this Report,
including the attached Project Pro Forma, should be read in its entirety.
On the basis of our review and analyses of the Project and the assumptions set
forth in this Report, we are of the opinion that:
1. The financial projections in the Project Pro Forma provide
a reasonable reflection of the Project's expected costs, revenues
and cash flows.
2. The energy and capacity revenue calculations contained in the
Project Pro Forma are appropriate and consistent with the PPA.
Expectations for capacity payment adjustments under the PPA are
reasonable given recent peak day demand on PEPCO.
3. The Project's net cash flow will average approximately $22.9
million per year, reflecting a range of $5.9 million in 1998 to
$33.8 million in 2016.
4. The estimated lease obligation coverage ratios (i.e. the ratio
of earnings before income taxes to lease payments) are presented in
Table ES-1. During the 20-year term of the GECC lease, the Project's
lease obligation coverages will range from 3.05:1.0 in 1997 to 1.61:1.0
in 2016. On average, the Project's lease coverage will be 1.84:1.0.
<TABLE>
<CAPTION>
TABLE ES-1
Summary of Panda Brandywine Debt Coverage Ratios
(Costs and Revenues in $000)
Year Total Total Total Fixed EBIT Annual Lease
Ended Revenues Variable Expenses Lease Coverages
Cost Payments
(a) (b) (c) (d) (e) = b- (f) (e)/(f)
(c+d)
<C> <C> <C> <C> <C> <C> <C>
1996 3,791 2,742 1,441 (392) 0 -
1997 44,144 14,077 8,907 21,160 6,935 3.05
1998 47,957 17,408 8,931 21,619 9,799 2.21
1999 67,472 19,572 8,953 38,948 18,214 2.14
2000 71,459 21,882 8,973 40,604 19,609 2.07
2001 82,590 22,238 8,992 51,360 26,705 1.92
2002 83,288 22,381 9,008 51,899 27,590 1.88
2003 84,898 23,413 9,022 52,462 28,140 1.86
2004 85,944 24,499 9,118 52,327 28,343 1.85
2005 88,110 26,357 9,300 52,453 28,672 1.83
2006 90,397 27,528 9.486 53,382 28,630 1.86
2007 94,741 28,362 9,661 56,718 29,534 1.92
2008 96,760 29,296 9,857 57,607 30,718 1.88
2009 99,338 30,287 10,058 58,993 31,628 1.87
2010 104,154 31,526 10,264 62,363 33,989 1.83
2011 109,688 32,367 10,476 66,845 35,665 1.87
2012 119,106 34,001 10,693 74,412 41,937 1.77
2013 123,167 35,275 10,916 76,975 43,866 1.75
2014 126,801 36,948 11,145 78,708 45,574 1.73
2015 124,948 37,758 11,380 75,810 45,401 1.67
2016 118,506 39,060 11,621 67,825 42,140 1.61
</TABLE>
INTRODUCTION
ICF was retained by Panda Energy International ("Panda") pursuant to a
Consulting Agreement develop pro forma financial projections for the Panda
Brandywine Project (the "Project"). This section describes the Project and
discusses the scope ICF's review.
Description of Brandywine
The Project is a 230 MW gas- and oil-fired power project located in Prince
George's County, Maryland being developed by Panda. The Project will sell
power under a 25-year Power Purchase Agreement with Potomac Electric Power
Company ("PEPCO") beginning on the Project's Commercial Operations Date. The
PPA was signed August 9, 1991 and was amended by the First Amendment to the
Power Purchase Agreement (the "Amendment", and collectively, the "PPA") on
September 16, 1994. The Project will also provide sufficient thermal energy
in the form of steam to enable Brandywine Water Company to sell up to 100,000
gallons of distilled water daily to a nearby naval station under a recently
completed purchase order.
The Project facility will consist of two combustion turbine generators and
one steam turbine generator producing a net electrical output of 230 MW. The
Project has a gas supply agreement with Cogen Development Company, a wholly
owned subsidiary of MCN Corporation, for up to the Project's full gas
requirements. On March 30, 1995, the Project closed a Construction Loan
Agreement and Lease Commitment (the "Loan Agreement") with General Electric
Capital Corporation ("GECC"). The Loan Agreement provides for conversion to
a Facility Lease between the Project and GECC upon the completion of
construction.
ICF's Role
Panda requested that ICF review and assess the financial projections
contained in the pro forma prepared in connection with Project's financial
closing (the "Closing Pro Forma") to determine whether it represented a
reasonable model of the Project's operations, taking into account the
Project's fuel supply, power sales and financing (i.e., lease) agreements.
After ICF determined that the Closing Pro Forma would provide a reasonable
basis for our projections, we updated assumptions where necessary based on
information from the following sources:
- Operating specifications and cost, construction cost and
projected completion, maintenance schedules and cost:
Pacific Energy Services' report, Independent Engineer's
Report: Panda-Brandywine Cogeneration Project (the "PES
Report"). Based on PES's expertise in undertaking similar
analyses, ICF believes that our use of PES's analysis in
preparing this Report is reasonable.
- Dispatch projections: ICF Resources Incorporated,,
Independent Assessment of the Dispatchability of the Panda-
Brandywine Project, May 1996 ("Dispatchability Analysis").
- Fuel cost projections: the Dispatchability Analysis.
C.C. Pace has reviewed ICF's fuel cost assumptions contained
in the Dispatchability Analysis and has determined them to
be reasonable in its report Panda-Brandywine, L.P.
Generating Facility - Fuel Consultants' Report - July 1,
1996 (the "Pace Report").
- Structure of terms in the Loan Agreement: Base pro
forma information from the Closing Pro Forma.
- Current macroeconomic escalators: Bureau of Labor
Statistics, Department of Commerce.(2)
Based on these updated assumptions, ICF prepared the attached pro forma
projections (the "Project Pro Forma"). ICF has based its work on an analysis
of the Closing Pro Forma, the Project's contracts, operational assumptions
provided by the developer and engineering firms, and conversations with
parties having specific relevant information. Statements of fact have been
obtained from sources considered reliable, but no warranty is made as to
their completeness or accuracy. ICF offers no legal opinion or interpretation
of the contracts or agreements that have been reviewed in the preparation of
this document.
The Project Pro Forma is divided into six schedules.
- Schedule A-Income Statement
- Schedule B-Cash Flow Statement
- Schedule C-Development Assumptions
- Schedule D-Operating Assumptions
- Schedule E-Lease Payments and Capacity Adjustments
- Schedule F-Gas Supply Income Statement
- Schedule G-Gas Supply Operating Assumptions
Schedules A and B provide a financial reporting of the revenues, costs, and
cash flows developed in the more detailed Schedules C through G. A copy of
the Project Pro Forma has been included as an appendix. This review focuses
on how the assumptions behind these latter schedules contribute to the
development of estimated Project earnings and cash flows.
- ------------------------
(2) BLS, http://stats.bls.gov. Data extracted June 28, 1996.
SCHEDULE A-INCOME STATEMENT AND
SCHEDULE B-CASH FLOW STATEMENT
Schedules A and B summarize the Project's revenues, costs, and cash flows as
developed in the later schedules. The calculations in Schedule A and B are
consistent with the assumptions contained in the supporting schedules. For
example;
- Contract capacity revenues are calculated as the contract
capacity price times the Project capacity. The GNP-escalated
capacity adjustment is calculated separately. The Project's
capacity price and GNP escalator are calculated separately in
Schedule D.
- The Project fuel costs are expressed in the income statement for
both "Unit #1" and "Unit #2." The section below on Schedule D
describes the distinctions between turbines while the Section on
Schedules G and F describes the fuel cost calculations.
Therefore, the reader should refer to the discussions of the relevant
supporting schedules to find descriptions of the assumptions behind the
development of the ultimate "bottom line" results and ICF's assessment
thereof.
SCHEDULE C-DEVELOPMENT ASSUMPTIONS
Schedule C contains the basic macroeconomic assumptions exogenous to the
Project as well as estimates of the overall Project costs. Many of these
assumptions are discussed more fully in the detailed review of the schedules
below.
Macroeconomic assumptions included in the Development Assumptions include the
Base and Current Treasury Index Rates for financing calculations, the 12-year
T-Bill rate for capacity price adjustments under the PPA, the GNP deflator and
tax rates.
The Estimated Project Costs in the Closing Pro Forma correspond to the
Project's Approved Budget under the Loan Agreement ($215 million). PES
reviewed this budget and found it "adequate to build the project."
This Schedule also provides the assumed Commercial Operations Date. This
assumption is used throughout the model to adjust contract year data to a
calendar year basis. The Project's Actual Commercial Operations Date is
expected to be on or before October 31, 1996. The Project Pro Forma assumes
that November 1996 is the first month of operations. PES indicates that "the
Project remains on schedule at this time with construction approximately 90
percent complete as of July 15, 1996."
SCHEDULE D-OPERATING ASSUMPTIONS
Schedule D provides the basis for calculating the costs and revenues once the
Project begins operating. It also provides some unit measures of the
Project's costs and rates.
Operating assumptions
The Project Pro Forma assumes Project capacity equals 230 MW, which corresponds
to the Project's capacity commitment under the PPA. This value is an input to
calculate capacity-based payments under the PPA in the Income Statement. PES
has provided annual estimates of expected generator performance (output and
heat rate) for the twin GE MS70001EA turbines being used by the Project in
conjunction with the Nooter Erikson Heat Recovery Steam Generator.
The Project performance factors are adjusted to reflect the expected operation
of the Project. Under average annual conditions, PES has estimated that the
two units together will not generate over 230 MW. Nevertheless, PES has
indicated that, given the limited performance standards of the PPA (i.e., the
requirement that there be two output tests conducted per year) it is
reasonable to assume that the Project will qualify for its full capacity
payment.
The Project Pro Forma distinguishes between "Unit 1" and "Unit 2" operation
and performance. When the two turbines operate concurrently, their collective
performance is somewhat below the size-adjusted performance of a single
turbine operating alone. Because operation of the Project under the terms of
the PPA can vary between single-turbine and dual-turbine, the Project Pro Forma
provides for the ability to distinguish operating conditions by differentiating
units.
Unit 1 represents the operational characteristics of a single turbine
operating alone. Unit 2 represents the residual operations of the facility
when both turbines are operating concurrently. Neither of the actual
turbines is identified as such (i.e., the Project could operate either of the
turbines during the periods when only one is dispatched).
Electricity Revenues-Capacity
The Project Pro Forma reflects the unadjusted capacity rate stated in
Appendix L of the PPA. Contractually, the capacity rate is adjusted by several
factors. The capacity rate is increased by the change in GNP from June 1, 1994
to the Actual Commercial Operation Date (PPA, Section 6.1(b) and Amendment
2.4(a)(2)). At the time of financial closing, the GNP escalator was estimated
at 3.5 percent per year. The actual escalation of the GNP between June 1, 1994
and the midpoint of the fourth quarter of 1995 equaled 3.5 percent total.(3)
Assuming a 3.5 percent annual escalator from the midpoint of the fourth quarter
of 1995 to the Actual Commercial Operation Date, the capacity rate would be
adjusted by 6.4 percent.
- -----------------------
(3) Survey of Current Business, May 1996.
The PPA also adjusts the Project's capacity rate based on the cost of
financing on the date the Project closed on its financing agreement with GECC
(PPA, Section 6.1(c)). On the "Commitment Date," the 12-year T-Bill rate was
7.72 percent, lowering the capacity rate based on a multiple of the adjustment
schedule in Appendix L.
The amendment creates two kinds of Scheduled Adjustments to capacity
payments: Section 2.4(a)(1) changes the starting date for capacity payments to
January 1, 1997. The Project Pro Forma implements this adjustment through an
equivalent offsetting adjustment derived from the income statement. In the
Amendment, the Project agreed to a scheduled adjustment of annual capacity
payments (Schedule Q). This adjustment reduces the Project's near-term
capacity revenues in return for increased revenues in years 11 through 25.
The net present value of this adjustment, at the contractual discount rate, is
approximately zero.
The capacity payment is also adjusted by what is referred to in the Project
Pro Forma as the "Contingent Adjustment." The Contingent Adjustment estimates
the net potential cost to PEPCO of having excess capacity due to the Project,
or the Cumulative Present Worth of Incremental Revenue Requirements (the
"CPWIRR") less the cost of terminating the PPA. The CPWIRR is a function of
when the Project begins commercial operation and when PEPCO's peak demand
surpasses a certain specified level (5,697 MW). The CPWIRR and the termination
costs are defined in Attachment C and D to the Amendment, respectively. If
the net potential cost is less than or equal to zero, there is no adjustment.
Because the Project's financial closing occurred in March 1995, termination
costs are set at $18.6 million dollars (Amendment, Attachment C) plus a fixed
fee of $3 million under Paragraph 2.4(g) of the Amendment. Currently, the
Project Pro Forma assumes that PEPCO reaches the 5,697 MW peak, adjusted for
weather, prior to the end of 1997, based on the Dispatchability Analysis.
Consistent with the planned Commercial Operation Date, the CPWIRR equals
approximately $15.3 million. Based on these assumptions, the net cost to
PEPCO is negative, so there is no Contingent Adjustment to the Project's
capacity revenues.
PEPCO's most recently available filings with the Federal Energy Regulatory
Commission indicate the utility's peak demand, unadjusted for weather, reached
5660 MW in the summer of 1994.(4) ICF's dispatch model of the Mid-Atlantic
region, on which the Dispatchability Analysis was based in large part,
estimates regional demand growth through 2000. This information is consistent
with the expectation that PEPCO's demand will increase sufficiently to
validate the Project Pro Forma's assumptions.
If the Contingent Adjustment were positive, the Project would owe PEPCO the NPV
of the net potential costs beginning in Contract Year 11. From Contract Year
11 through Contract Year 15, a ceiling is placed on cost recovery of no more
than the Scheduled Adjustment (Amendment, Paragraph 2.4(i)). After Year 15,
the ceiling is removed and all costs not recovered in the first five years are
recovered over the following ten years.
The Project Pro Forma expresses the capacity-based revenues on a per unit
basis based on the generation and capacity assumptions above. The capacity-
based unit costs are used to calculate capacity revenues in the Income
Statement.
- --------------------------
(4) FERC Form 714. PEPCO's filed peak demand forecasts are slightly below the
1994 summer peak: 5,483 MW in 1995, 5,524 in 1996 and 5,577 in 1997.
Electricity Revenues - Energy
Energy revenues are calculated on a per unit basis from the Income Statement.
These costs are calculated in the fuel supply and revenue schedules reviewed
below.
Distilled Water Revenues and Costs
Estimates of revenues from distilled water sales associated with the Project's
cogeneration function have been revised substantially from the Closing Pro
Forma. The Closing Pro Forma was completed prior to the execution of a
contract to sell the distilled water produced from the Project's thermal energy
output. It assumes 250 days of 80,000 gallons of water delivery per year at a
price of $2.00 per gallon. The Project has since executed a sales contract
with the U.S. Navy calling for up to 100,000 gallons of distilled water per
day at a price of $1.50 per thousand gallons. This reduces revenues from the
Closing Pro Forma from $40,000 to $30,000 per year.
The operating specifications for the distilled water unit are the
manufacturer's own. Operating costs, which are estimated to equal $200,000
escalating with the GNP, are based on operator estimates. The discharge and
chemical usage fees come from the manufacturer and the operator.
Fixed Operating Expenses
The Project's firm gas transportation costs are calculated in the fuel
schedules discussed below. Other fixed operating expenses are based on the
Project's proposed budget for financial closing. In the Project's O&M
contract with Ogden Brandywine Operations, Inc., O&M expenses begin at $1.5
million per year and are escalated by the GNP escalator for the contract's
three year term. The Project Pro Forma assumes continued escalation at the
same rate thereafter. The PES Report confirms the reasonableness of this
assumption.
Turbine Overhaul and Lease Reserve
The Loan Agreement requires that the Project maintain a Rent Reserve equal to
the greater of $2.4 million or the sum of the succeeding two rent payments.
The Project Pro Forma refers to the Rent Reserve as the "Lease Reserve." The
Lease requires that the Project maintain an O&M Reserve account with an
initial balance of $1 million increased at a rate of $125,000 per quarter over
the next two years and $375,000 per quarter for the two years thereafter until
it reaches $5 million. If the Project draws on the O&M Reserve, it must
replenish it to its required balance using up to 50 percent of the Project's
available cash flow. The Project Pro Forma refers to this reserve as the
Turbine Overhaul Reserve. PES provided this schedule.
The interest the Project earns on these reserves are credited to the Project
as income that is included in the Income Statement. This is consistent with
the terms of the Lease.
SCHEDULE E-LEASE PAYMENTS AND CAPACITY ADJUSTMENTS
The Project Lease Agreement was based on an estimated Project cost of $215
million. The Basic Rent Factors applied quarterly to the Project cost are
provided in Schedule 10 to the Loan Agreement.
Under the Project Lease Agreement, the Basic Rent Factors are subject to
change at the time of conversion based on the federal income tax to which GECC
is subject and the annual rate of U.S. Treasury Notes with constant maturaties
equal to the weighted average life of the lease for the four week period
ending on the most recent Friday which is at least 15 days prior to date of
closing for the lease ("Treasury Index Rate"). The Project Pro Forma adjusts
the base lease payment assuming that GECC's federal tax rate is 35 percent and
the Treasury Index Rate equals 6.83 percent.
The Project Pro Forma calculates annual lease payments on an operation year
basis (i.e., Year 1 begins November 1996). Lease payments are assumed to be
paid on a calendar year basis. This results in a shift of approximately one
year in the Project Pro Forma to account for the difference between calendar
years and operation years.
SCHEDULE F-GAS SUPPLY INCOME STATEMENT AND
SCHEDULE G-GAS SUPPLY OPERATING ASSUMPTIONS
In Schedules F and G reside the calculations that estimate the Project's fuel
related revenues and costs. Because the assumptions and calculations in
Schedule F ultimately determine the financial results reported in Schedule G,
it is best to consider the two together both within the Project Pro Forma and
in the context of the PPA and the GSA. C.C. Pace has reviewed the fuel-
related inputs components of the Project Pro Forma and in the Pace Report,
determined that they are reasonable.
The calculation of Project's energy payment costs are discussed below.
Dispatch Hours
The number of dispatch hours in the Closing Pro Forma were based on estimated
Project run times provided by PEPCO. These run times were allocated
seasonally consistent with the Must Run provisions of the Amendment. ICF has
provided an updated dispatch profile in the "Independent Assessment of the
Dispatchability of the Panda-Brandywine Project" based on the results of our
own model runs.(5) This dispatch profile provides the basis for the amount of
electricity sold and the amount of fuel used in the Project Pro Forma.
Dispatch hours have been designated as "Unit 1" and "Unit 2" based on the
conventions described above.
Gas and Fuel Oil Volumes and Compensation Price
As discussed in detail by C.C. Pace in the Pace Report, Project fuel supplies
can be divided conceptually into four pricing categories representing the four
different fuel recovery mechanisms in the PPA:
- the Firm Gas Reserve Rate ("FGRR")
- the Firm Gas Market Rate ("FGMR")
- the Interruptible Gas Rate ("IGR")
- the Oil Rate ("OR")
The application of each of these rates to a specific fuel price category is
described in the Pace Report.
The first category represents the 60 "Must Run" dispatch hours per week for
the first 85 percent of a single turbine's net electrical output (Amendment
2.6(a)). Under the conventions of the Project Pro Forma, this Must Run output
is defined as the first 60 hours per week of generation from Unit 1. For
calculation purposes, the ICF Dispatch Report converts the partially
dispatched Must Run generation from Unit 1 into equivalent "full load" hours
(i.e., the number of hours that the Project would have to operate at full load
to generate the same electrical output). The fuel price on which the energy
payment for the Must Run hours is based is calculated as the firm gas rate
(FGRa). The FGRa, under Appendix M in the Amendment, is equal to the Firm Gas
Reserve Rate ("FGRR") for the first 15 years of operation and the Firm Gas
Market Rate ("FGMR") thereafter.
The FGRR is defined in a fixed price stream in Appendix M subject to a one-
time adjustment based on the Producer Price Index for Oil and Gas Field
Services between June 1, 1994 and the Actual Commercial Operation Date. The
actual escalation between June 1, 1994 and May 31, 1996 was 12.2 percent (6
percent per year). Assuming an annual escalation rate of 3.5 percent
(consistent with the GNP inflator) between May 1, 1996 and November 1, 1996,
the one-time FGRR escalator in the Project Pro Forma equals 14.2 percent
providing a starting FGRR price of $2.95 in Year 1 escalating according to the
PPA to $4.36 in Year 15.
In the first four years of operation, the FGMR price is reduced by 10 percent
under the Amendment.
The initial FGMR was set at an initial June 1, 1990 price of $2.27 per MMBtu
plus the firm displacement tariff rate on Columbia LNG pipeline ($0.0231 per
MMBtu), which is now known as Cove Point LNG. This is adjusted by a weighted
average: 77 percent times the change in the cumulative cost of four gas
indices, two based on the Gulf Coast and two based in Appalachia, plus 23
percent times half the change in the Consumer Price Index, which is meant to
represent the transportation component of the price. For the commodity price
component of the FGRR, the Closing Pro Forma uses forecasted 1996 seasonal gas
prices escalated at 4.0 percent per year.
- ----------------------------
(5) For further information on the basis for ICF Resources' dispatch estimates
see ICF Resources Incorporated, Independent Assessment of the Dispatchability
of the Panda-Brandywine Project, dated May 1996.
The Project Pro Forma now uses ICF's gas price forecast to ensure consistency
with the dispatch forecast.
The actual escalation for the transportation/CPI portion of the FGMR between
June 1, 1990 and May 31, 1996 was 20.6 percent total (3.2 percent per year).
The Project Pro Forma assumes a 3.0 percent annual escalator after May 31,
1996.
The remaining (i.e., non-Must Run) hours that Unit 1 would operate are also
priced at the FGMR. These hours are calculated as the difference between the
dispatch hours and the Must Run full load equivalent hours.
The third pricing category, the Interruptible Gas Rate ("IGR") reflects the
cost of fuel to Unit 2 when it is operating on natural gas. The IGR is
calculated based on the same market basket of gas price indices and
transportation used in the FGMR. However, the IGR is weighted seasonally
71:29 commodity versus transportation March through November and 84:16
December through February.
The fourth segment, the Oil Rate ("OR"), applies to Unit 2 output when it
burns fuel oil. The Project Pro Forma assumes that Unit 2 will operate on
fuel oil for one-third of its winter hours. A more precise calculation of the
Project's fuel oil requirements is possible only with greater detail in the
expected dispatch profile. In actuality the Project will likely only burn
fuel oil on those days that its firm gas transportation capacity and balancing
capabilities are not sufficient to meet the Project's full dispatch
requirements.
The Project has a number of alternatives that enable it to shift gas supply
deliveries among days to match its constant daily firm transportation ("FT")
capacity on its transporters. This practice is known as balancing. Cove
Point LNG, previously Columbia LNG, allows for a shipper to be up to 20,000
MMBtu out of balance for any given day during any hour. Both Washington Gas
Light ("WGL") and Columbia offer balancing services for a fee - WGL under
its contract with the Project, Columbia under its Storage in Transit service.
These balancing services can be limited by the providers under circumstances
of capacity constraint on their systems.
We have estimated the number of days of constraint on Columbia LNG, the most
inexpensive of the balancing services as equal to the number of days Columbia
interrupts WGL (which between December 1995 and February 1996 equaled
48 days). During half those days (24) we have assumed WGL's service is
available. We assume the Project uses fuel oil (i.e., no balancing services
are available) during the remaining 24 days.(6) The availability of balancing
services from Cove Point LNG, WGL and Columbia as well as the Project's
dispatch profile obviate the need to use interruptible capacity.
OR equals $3.89 and is adjusted by the change in the average fuel oil price at
Baltimore, Norfolk and Philadelphia-"as reported in Platt's Oilgram Price
Report in the U.S. Tank Car/Truck Transport table"-between June 1, 1990 and
the relevant billing period (PPA, Section 6.2(b)(vi)). As of May 1, 1996 the
adjusted OR rate equaled $5.03 per MMBtu. For consistency with the dispatch
forecast, ICF has incorporated its own oil price forecast into the Project
Pro Forma. The Pace Report found the Project Pro Forma's modeling of fuel oil
prices to be reasonable.
- ------------------------------
(6) The Project may also opportunistically sell its capacity and fuel supplies
during periods when the value of gas supply and capacity exceeds its cost
and when operating on fuel oil has minimal effect on its dispatch. ICF
Resources has not accounted for this opportunity in the pro forma.
Energy-Based Revenues (Gas Supply Income Statement)
The PPA provides an elaborate series of formulas to calculate the Project's
energy payment from PEPCO. After the Project begins commercial operations,
PEPCO will pay it a Unit Commitment Payment ("UCP") and a Dispatch Payment
("DP"). The UCP is paid on the first 99 MW of each Unit's operation based on
the number of hours the Project operates, contractual heat rates for Unit 1
individually and Units 1 and 2 working together, contractual adjustments for
unit performance based on historical ambient conditions and the cost of fuel
and O&M. The UCP also provides heat rate-based payments for start-ups using
the cost of the appropriate interruptible fuel (IGR or OR). The DP provides
an incremental payment for all Project operations based on a contractually
defined relationship between level of operation and performance.
The Project Pro Forma simplifies the Project's energy payment calculation by
multiplying the four fuel segments (FGRR, FGMR, IGR, and OR) by the
appropriate hours of operation and a "contractual" heat rate of 8,461 Btu per
kWh. This simplification provides a conservative estimate of Project revenues
because:
- The heat rates implicit in the UCP and DP payments
considered together are greater than or equal to 8,461.
- The revenue calculation in the Project Pro Forma does
not include start-up payments under the UCP.
To add a more precise calculation of revenues would require adding, at least,
monthly estimates of dispatch, contractual performance and capability, and
number of hot, cold, and partial start-ups.(7) The Project Pro Forma meets
thegoal of providing a reasonable, conservative estimate of the Project's
energyrevenues without requiring additional assumptions about the details of
the Project's forecasted operations.
Fuel Costs
The cost of the Project's contracted firm supply is fixed in its gas supply
contract with MCN's Cogen Development Company at $2.33 per MMBtu escalated at
4 percent per year plus a $0.10 per MMBtu "ANR Charge" escalated at $0.005 per
year after the first five years. This cost escalation is reflected in the
Project Pro Forma.
The Project has a minimum contractual obligation to purchase 2,299,500 MMBtu
per year at a rate of between 6,000 and 8,000 per day. This gas, the
"Limited Dispatch Quantity," is applied to the delivered FGRR requirements in
the Project Pro Forma.
The FGRR volumes are delivered over 12 hours during weekdays accounting for
approximately 9,200 MMBtu per day while the contract provides that the
Limited Dispatch Quantity is delivered daily at a rate of between 6,000 and
8,000 MMBtu per day. However, the Project can avail itself to one of the
available balancing services, receiving Limited Dispatch gas over the weekend
if necessary to smooth the disparity between the rate of takes of FGRR
quantities.
- ----------------------------
(7) In essence, the Project Pro Forma assumes that start-up costs are
recovered as a pass-through in the calculation of the UCP and an
increase in the heat rate above the EPC guarantee. The ICF Resources
dispatch forecast does not estimate start-ups although in consultation
with PES, it was determined that start-ups for Unit 1 on 200 for Unit 2
were consistent with the dispatch forecast.
The Limited Dispatch Quantity has a Demand Charge of $21,292 associated with
it, escalating at $1,064 per year after the first five years. This charge is
offset, however, with a Price Credit that eliminates the demand charge during
any month in which over 7,000 MMBtu per day is purchased. This demand charge
is not represented in the Project Pro Forma, but given the Must Run
requirements of the Project and the Project's flexibility in Limited Dispatch
takes on Columbia, the Demand Charge is unlikely to be assessed.
The Project may purchase either Scheduled Dispatch Gas or Dispatchable Gas to
fuel its FGMR requirements. The Scheduled Dispatch Gas is priced at the
monthly NYMEX futures price averaged the over the three days prior to closing
plus $0.50 per MMBtu. This premium, to a certain degree, reflects the basis
differential between the NYMEX price and the price at the GSA delivery point
in Ohio. The Project is obligated to take 80 percent of the Scheduled
Dispatch Quantity that it nominates prior to the beginning of the month.
The GSA also provides interruptible gas at a $0.10 premium over the daily
price of gas into Columbia Transmission. The Project may also purchase
its interruptible requirements from Cogen Development.
The Project Pro Forma provides a variety of options to the user for
estimating gas purchase costs. The Closing Pro Forma relies on the Cogen
Development Scheduled Dispatch Gas for Winter FGMR deliveries. All other FGMR
and IGR supplies are assumed to come from the spot market in Appalachia.
These assumptions are reasonable considering the Project's transportation
arrangements. Those arrangement are described below.
Transportation
The transportation rates in the Closing Pro Forma for Columbia Transmission
and Columbia LNG were taken from their espective tariffs. Because the Closing
Pro Forma assumes that gas supply comes from Appalachia, transportation on ANR
(a Gulf Coast to Upper Midwest pipeline) is unnecessary, so its tariff rates
are not included. The transportation rate on the Washington Gas Light system
is set contractually at $0.05 per MMBtu.
Transportation rates under pipeline tariffs have tended to lag behind
inflation. Transportation rates are traditionally cost-based with a
significant portion of the costs represented in sunk capital investment. The
escalation rate of 1.5 percent applied to pipeline transportation (versus the
3 to 4 percent escalators elsewhere in the Project Pro Forma) is consistent
with this trend.
In addition to paying a monetary charge for transportation, shippers must also
pay an in-kind fuel use charge for any transportation capacity used. The
Project Pro Forma usesthe tariff fuel rates to build up the fuel purchase
requirements for the Project. For each of the three gas segments (FGRR, FGMR,
and IGR), the amount of gas purchased under the Project Pro Forma is properly
calculated as the Units' consumption plus the pipeline fuel requirements.
Transportation fuel for the Limited Dispatch Gas (the FGRR segment) is priced
under the GSA at the Scheduled Dispatch rate. In the Project Pro Forma,
however, transportation fuel for both Unit 1 gas supplies (FGRR and FGMR) is
calculated based on a weighted average of the FGRR (Limited Dispatch gas) and
the FGMR (Scheduled Dispatch gas) and spot gas. Because of the premium
associated with the FGRR, using the FGRR for FGR transportation fuel provides
a higher-than- expected, conservative estimate for that cost.
The Project Pro Forma assumes that the Project's unused firm capacity can be
resold for 50 percent of the tariff rate (Schedule A). The Project will be
most likely to resell its fir capacity during the winter when dispatch is the
lowest. This happens to be the period when interruption is most likely on
Columbia. According to U.S. Midwest Natural Gas Market Review, short term
capacity releases on Columbia between December 1995 and February 1996 were
priced from 60 to 82 percent of the Columbia tariff rate. Even adjusting for
the severity of last winter, a 50 percent recovery of transportation costs
appears reasonable.
The Project Pro Forma calculates the total cost of interruptible
transportation ("IT") based on the total IGR volumes. The IT Savings
adjustments for Commodity and Fuel reduce the Project's costs by the amount of
firm transportation used for IGR supplies. At the level of dispatch provided
in the dispatch forecast and with the available flexibility in firm
transportation utilization, IT is not used. As a result, savings in IT costs
associated with the Project using its IT offset the cost of IT used for the
IGR volumes.
C.C. Pace reviewed the transportation costs used in the Project Pro Forma and
found that the Project Pro Forma is based on a reasonable forecast of
transportation costs. C.C. Pace also concluded that both the gas
transportation volumes and amounts to be received from short-term releases of
pipeline capacity assumed for purposes of the Project Pro Forma are
reasonable.
The levels of dispatch indicated in the Dispatch Analysis are consistent with
an operating pattern where the Project is dispatched only during weekdays
(i.e., approximately 260 times per year). Given the uncertainty regarding
dispatch, a possible range of 200 to 300 starts per year is reasonable. PES
has assumed 200 start-ups for Unit 2 in estimating the Project's overhaul
schedule.
The Dispatch Analysis indicates that the Project operates at minimum load for
a number of hours each year. This is the result of the Project running under
the minimum load conditions in the PPA. Under those circumstances, only Unit
1 would be operating. It is reasonable to assume, therefore, that Unit 1 is
started more often than Unit 2. PES has assumed 225 start-ups for Unit 1 in
estimating the Project's overhaul schedule.
CONCLUSIONS
Based on our review, we find the Project Pro Forma a reasonable reflection of
the Project's expected costs, revenues and cash flows. The bases for this
assessment are as follows:
1. The financial projections in the Project Pro Forma
provide a reasonable reflection of the Project's expected
costs, revenues and cash flows.
2. The Project's net cash flow will average approximately
$22.9 million per year, reflecting a range of $5.9 million
in 1998 to $33.8 million in 2016.
3. The estimated lease coverage ratios (i.e. the ratio of
earnings before income taxes to lease payments) are
presented in Table ES-1. During the 20-year term of the
GECC lease, the Project's lease coverages will range from
3.05:1.0 in 1997 to 1.61:1.0 in 2016. On average, the
Project's lease coverage will be 1.84:1.0.
4. The energy and capacity revenue calculations are
appropriate given the PPA. Expectations for capacity
payment adjustments under the PPA are reasonable given
recent peak day demand on PEPCO.
Respectfully Submitted,
/s/ ICF Resources Incorporated
APPENDIX
PANDA BRANDYWINE PRO FORMA
Panda-Brandywine L.P.
230MW PEPCO Project
Income Statement
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity - Contract Amount $6,320,400 $38,005,200 $38,511,200 $39,067,800 $40,765,200 $47,324,800 $49,873,200
Capacity - GNP Adjustment 452,610 2,721,587 2,757,822 2,797,680 2,919,233 3,388,971 3,571,465
Capacity - Interest Rate Adjusment (139,104) (835,912) (844,928) (859,096) (866,824) (874,552) (882,280)
Capacity - Scheduled Adjustment (6,633,906) (15,000,000) (16,000,000) 0 (1,000,000) 2,000,000 0
Capacity - Contingent Adjustment 0 0 0 0 0 0 0
Energy Sales - Unit #1 1,785,251 10,161,812 11,897,405 12,832,774 13,917,801 15,134,834 15,644,569
Energy Sales - Unit #2 1,360,461 6,113,819 8,099,603 9,645,470 11,283,994 11,003,500 10,440,028
Energy - Variable O&M 405,826 2,252,437 2,804,184 3,188,760 3,594,974 3,639,736 3,606,478
Distilled Water Sales 5,000 30,000 30,000 30,000 30,000 30,000 30,000
Firm Transportation Capacity Release 72,511 467,838 331,680 250,751 166,927 195,984 236,702
Interest Income 162,347 227,334 370,123 518,227 648,146 746,457 767,928
------- ------- ------- ------- ------- ------- -------
Total Revenues 3,791,394 44,144,114 47,957,089 67,472,366 71,459,451 82,589,730 83,288,089
Cost of Sales:
Fuel Cost - Unit #1 1,518,967 8,660,634 10,291,425 11,138,397 12,037,436 12,603,086 13,133,024
Fuel Cost - Unit #2 1,081,509 4,623,765 6,186,231 7,414,754 8,736,243 8,540,172 8,166,897
Water Usage 59,497 324,078 391,614 431,521 471,506 455,830 440,133
Water Discharge & Chemical Usage 48,374 268,844 331,463 372,652 415,443 409,775 403,683
Distilled Water Operating Costs 33,333 200,000 207,000 214,245 221,744 229,505 237,537
------ ------- ------- ------- ------- ------- -------
Total Cost of Sales 2,741,681 14,077,321 17,407,734 19,571,570 21,882,372 22,238,368 22,381,273
Gross Profit 1,049,716 30,066,793 30,549,355 47,900,796 49,577,079 60,351,362 60,906,816
Fixed Expenses:
Firm Transportation 420,603 2,561,473 2,599,895 2,638,893 2,678,477 2,718,654 2,759,434
O&M Contract Costs 245,500 1,473,000 1,524,555 1,577,914 1,633,141 1,690,301 1,749,462
Consumables 125,000 750,000 776,250 803,419 831,538 860,642 890,765
Administrative Expenses 83,333 500,000 517,500 535,613 554,359 573,762 593,843
Insurance 83,333 500,000 515,000 530,450 546,364 562,754 579,637
Purchased Electricity 68,609 411,652 424,002 436,722 449,823 463,318 477,218
Letters of Credit Fee 15,000 90,000 90,000 90,000 90,000 90,000 90,000
Property Taxes 400,000 2,620,510 2,483,407 2,339,772 2,189,399 2,032,074 1,867,581
Depreciation & Amortization 0 0 0 0 0 0 0
- - - - - - -
Total Fixed Expenses 1,441,378 8,906,635 8,930,609 8,952,783 8,973,101 8,991,505 9,007,939
EBIT (391,663) 21,160,158 21,618,747 38,948,014 40,603,977 51,359,856 51,898,877
Annual Lease Payments 0 6,934,650 9,798,750 18,213,550 19,609,150 26,705,450 27,590,200
- --------- --------- ---------- ---------- ---------- ----------
Net Income ($391,663) $14,225,508 $11,819,997 $20,734,464 $20,994,827 $24,654,406 $24,308,677
========= =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity - Contract Amount $50,425,200 $50,420,600 $50,397,600 $50,784,000 $52,716,000 $52,752,800 $53,323,200
Capacity - GNP Adjustment 3,610,994 3,610,664 3,609,017 3,636,688 3,775,040 3,777,675 3,818,522
Capacity - Interest Rate Adjusment (890,008) (897,736) (906,752) (920,920) (928,648) (936,376) (944,104)
Capacity - Scheduled Adjustment 0 0 0 275,000 1,850,000 3,050,000 4,250,000
Capacity - Contingent Adjustment 0 0 0 0 0 0 0
Energy Sales - Unit #1 15,947,720 16,249,366 17,272,272 17,935,498 18,343,586 18,814,713 19,268,820
Energy Sales - Unit #2 11,028,730 11,649,928 12,577,028 13,358,688 13,572,197 13,797,423 14,013,817
Energy - Variable O&M 3,722,071 3,841,677 4,108,795 4,233,182 4,255,503 4,286,666 4,321,333
Distilled Water Sales 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Firm Transportation Capacity Release 240,186 243,406 215,526 241,268 274,759 304,464 332,215
Interest Income 782,830 795,782 806,540 823,334 852,674 882,368 924,144
------- ------- ------- ------- ------- ------- -------
Total Revenues 84,897,723 85,943,688 88,110,028 90,396,738 94,741,111 96,759,734 99,337,948
Cost of Sales:
Fuel Cost - Unit #1 13,608,860 14,102,578 15,098,073 15,646,920 16,281,692 16,963,559 17,676,584
Fuel Cost - Unit #2 8,706,472 9,280,775 10,115,976 10,708,581 10,912,119 11,166,265 11,445,052
Water Usage 440,230 440,335 445,798 451,280 440,110 429,628 419,832
Water Discharge & Chemical Usage 411,954 420,399 434,231 448,467 446,214 44,395 443,039
Distilled Water Operating Costs 245,851 254,456 263,362 272,579 282,120 291,994 302,214
------- ------- ------- ------- ------- ------- -------
Total Cost of Sales 223,413,367 24,498,543 26,357,440 27,527,827 28,362,255 29,295,841 30,286,721
Gross Profit 61,484,356 61,445,145 61,752,587 62,868,910 66,378,856 67,463,893 69,051,227
Fixed Expenses:
Firm Transportation 2,800,825 2,842,837 2,885,480 2,928,762 2,972,694 3,017,284 3,062,543
O&M Contract Costs 1,810,693 1,874,067 1,939,660 2,007,548 2,077,812 2,150,535 2,225,804
Consumables 921,941 954,209 987,607 1,022,173 1,057,949 1,094,977 1,133,301
Administrative Expenses 614,628 636,140 658,405 681,449 705,299 729,985 755,534
Insurance 597,026 614,937 633,385 652,387 671,958 692,117 712,880
Purchased Electricity 491,534 506,280 521,469 537,113 553,226 569,823 586,918
Letters of Credit Fee 90,000 90,000 90,000 90,000 90,000 90,000 90,000
Property Taxes 1,695,695 1,599,555 1,583,926 1,567,032 1,532,315 1,512,427 1,491,130
Depreciation & Amortization 0 0 0 0 0 0 0
- - - - - - -
Total Fixed Expenses 9,022,343 9,118,026 9,299,931 9,486,463 9,661,253 9,857,148 10,058,111
EBIT 52,462,013 52,327,119 52,452,656 53,382,447 56,717,603 57,606,744 58,993,116
Annual Lease Payments 28,140,300 28,343,300 28,672,450 28,629,500 29,534,450 30,717,600 31,628,350
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income $24,321,713 $23,983,819 $23,780,206 $24,752,947 $27,183,153 $26,889,144 $27,364,766
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2010 Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity - Contract Amount $55,508,200 $57,794,400 $63,158,000 $64,574,800 $64,786,400 $60,848,800
Capacity - GNP Adjustment 3,974,992 4,138,709 4,522,801 4,624,259 4,639,412 4,357,437
Capacity - Interest Rate Adjusment (950,544) (950,544) (950,544) (950,544) (950,544) (861,672)
Capacity - Scheduled Adjustment 5,450,000 6,650,000 7,850,000 9,050,000 10,250,000 11,450,000
Capacity - Contingent Adjustment 0 0 0 0 0 0
Energy Sales - Unit #1 20,002,633 21,517,421 23,559,238 24,504,792 25,971,074 26,843,104
Energy Sales - Unit #2 14,399,188 14,617,709 14,881,431 15,154,694 15,714,435 15,876,396
Energy - Variable O&M 4,412,867 4,442,955 4,489,177 4,540,719 4,680,416 4,705,291
Distilled Water Sales 30,000 30,000 30,000 30,000 30,000 30,000
Firm Transportation Capacity Release 352,351 384,341 410,331 436,021 451,619 493,653
Interest Income 973,889 1,063,079 1,155,141 1,201,907 1,228,018 1,204,820
------- --------- --------- --------- --------- ---------
Total Revenues 104,153,576 109,688,070 119,105,576 123,166,650 126,800,831 124,947,829
Cost of Sales:
Fuel Cost - Unit #1 18,495,575 19,138,672 20,454,130 21,415,036 22,525,484 23,103,617
Fuel Cost - Unit #2 11,864,581 12,061,244 12,377,243 12,686,758 13,243,122 13,467,875
Water Usage 410,720 401,811 393,506 385,794 378,665 372,113
Water Discharge & Chemical Usage 442,179 441,323 440,924 441,002 441,579 442,683
Distilled Water Operating Costs 312,791 323,739 335,070 346,797 358,935 371,498
------- ------- ------- ------- ------- -------
Total Cost of Sales 31,525,846 32,366,788 34,000,873 35,275,387 36,947,786 37,757,785
Gross Profit 72,627,730 77,321,282 85,104,703 87,891,263 89,853,046 87,190,044
Fixed Expenses:
Firm Transportation 3,108,481 3,155,109 3,202,435 3,250,472 3,299,229 3,348,717
O&M Contract Costs 2,303,707 2,384,337 2,467,789 2,554,161 2,643,557 2,736,082
Consumables 1,172,967 1,214,021 1,256,512 1,300,490 1,346,007 1,393,117
Administrative Expenses 781,978 809,347 837,674 866,993 897,338 928,745
Insurance 734,267 756,295 778,984 802,353 826,424 851,217
Purchased Electricity 604,525 622,661 641,341 660,581 680,398 700,810
Letters of Credit Fee 90,000 90,000 90,000 90,000 90,000 90,000
Property Taxes 1,468,376 1,444,116 1,418,298 1,390,870 1,361,777 1,330,965
Depreciation & Amortization 0 0 0 0 0 0
- - - - - -
Total Fixed Expenses 10,264,302 10,475,886 10,693,033 10,915,920 11,144,730 11,379,652
EBIT 62,363,428 66,845,397 74,411,671 76,975,343 78,708,316 75,810,392
Annual Lease Payments 33,989,000 35,664,950 41,937,300 43,866,450 45,574,050 45,401,250
---------- ---------- ---------- ---------- ---------- ----------
Net Income $28,374,428 $31,180,447 $32,474,371 $33,108,893 $33,134,266 $30,409,142
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Total
Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Contract Sales Revenue:
Capacity - Contract Amount $52,113,400 $52,982,800 $53,925,800 $54,896,400 $55,903,800 $47,334,000 $1,304,514,000
Capacity - GNP Adjustment 3,731,887 3,794,146 3,861,675 3,931,181 4,003,321 3,389,630 93,417,420
Capacity - Interest Rate Adjustment (417,312) (417,312) (417,312) (417,312) (417,312) (347,760) (19,775,952)
Capacity - Scheduled Adjustment 12,650,000 13,850,000 15,050,000 16,250,000 17,450,000 15,375,000 114,116,094
Capacity - Contingent Adjustment 0 0 0 0 0 0 0
Energy Sales - Unit #1 27,812,826 28,857,807 29,966,410 31,582,358 32,731,962 28,042,023 526,598,069
Energy Sales - Unit #2 16,379,325 16,910,204 17,465,719 18,298,274 18,837,999 16,427,802 342,907,861
Energy - Variable O&M 4,766,657 4,833,587 4,903,449 5,046,573 5,105,456 4,353,193 104,541,961
Distilled Water Sales 30,000 30,000 30,000 30,000 30,000 25,000 750,000
Firm Transportation Capacity Release 525,970 554,546 580,824 599,756 627,817 535,622 9,527,070
Interest Income 913,110 654,412 666,762 679,545 692,775 555,695 20,297,386
------- ------- ------- ------- ------- ------- ----------
Total Revenues 118,505,862 122,050,189 126,033,327 130,896,774 134,965,818 115,690,204 2,496,893,909
Cost of Sales:
Fuel Cost - Unit #1 24,088,518 25,151,799 26,271,823 27,553,673 28,784,756 24,745,587 460,489,906
Fuel Cost - Unit #2 13,778,331 14,206,260 14,759,158 15,554,296 16,103,082 14,055,371 281,242,133
Water Usage 365,435 359,119 353,155 347,535 342,251 282,833 10,034,329
Water Discharge & Chemical Usage 443,494 444,600 446,011 447,737 449,787 379,163 10,559,413
Distilled Water Operating Costs 384,500 397,958 411,886 426,302 441,223 380,555 7,747,194
------- ------- ------- ------- ------- ------- ---------
Total Cost of Sales 39,060,279 40,559,736 42,242,033 44,329,543 46,121,098 39,843,508 762,325,780
Gross Profit 79,445,584 81,490,453 83,791,293 86,567,231 88,844,720 75,846,696 1,734,568,129
Fixed Expenses:
Firm Transportation 3,398,948 3,449,932 3,501,681 3,554,207 3,607,520 3,051,360 76,815,945
O&M Contract Costs 2,831,844 2,930,959 3,033,543 3,139,717 3,249,607 2,802,786 57,058,082
Consumables 1,441,876 1,492,342 1,544,574 1,598,634 1,654,586 1,427,080 29,051,976
Administrative Expenses 961,251 994,894 1,029,716 1,065,756 1,103,057 951,387 19,367,984
Insurance 876,753 903,056 930,147 958,052 986,793 846,998 18,143,566
Purchased Electricity 721,835 743,490 765,794 788,768 812,431 697,337 14,937,676
Letters of Credit Fee 90,000 90,000 90,000 90,000 90,000 75,000 2,250,000
Property Taxes 1,298,375 1,263,949 1,227,626 1,189,346 1,149,042 2,140,362 41,597,925
Depreciation & Amortization 0 0 0 0 0 0 0
- - - - - - -
Total Fixed Expenses 11,620,882 11,868,622 12,123,081 12,384,478 12,653,036 11,992,309 259,223,154
EBIT 67,824,702 69,621,831 71,668,213 74,182,752 76,191,685 63,854,387 1,475,344,974
Annual Lease Payments 42,140,350 15,077,276 15,077,276 15,077,276 15,077,276 15,077,276 678,477,431
---------- ---------- ---------- ---------- ---------- ---------- -----------
Net Income $25,684,352 $54,544,555 $56,590,936 $59,105,476 $61,114,408 $48,777,111 $796,867,543
=========== =========== =========== =========== =========== =========== ============
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Cash Flow Statement
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002 Dec-2003
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income ($391,663) $14,225,508 $11,819,997 $20,734,464 $20,994,827 $24,654,406 $24,308,677 $24,321,713
+ Depreciation &
Amortization 0 0 0 0 0 0 0 0
+ Lease Payments 0 6,934,650 9,798,750 18,213,550 19,609,150 26,705,450 27,590,200 28,140,300
+ Contingency 8,750,274 0 0 0 0 0 0 0
--------- - - - - - - -
Cash Flow Available
for Lease Payment 8,358,611 21,160,158 21,618,747 38,948,014 40,603,977 51,359,856 51,898,877 52,462,013
Lease Payments 0 (6,934,650) (9,798,750) (18,213,550) (19,609,150) (26,705,450) (27,590,200) (28,140,300)
Reserves:
Net Overhaul Reserve (250,000) (1,196,000) (1,668,610) (2,245,573) (1,466,232) (3,215,936) (1,542,214) (981,563)
Lease Reserve (1,067,325) (1,432,050) (4,207,400) (697,800) (3,548,150) (442,375) (275,050) (101,500)
---------- ---------- ---------- -------- ---------- -------- -------- --------
Total Reserves (1,317,325) (2,628,050) (5,876,010) (2,943,373) (5,014,382) (3,658,311) (1,817,264) (1,083,063)
Net Cash Flow $7,041,286 $11,597,458 $5,943,987 $17,791,091 $15,980,446 $20,996,095 $22,491,413 $23,238,650
========== =========== ========== =========== =========== =========== =========== ===========
Lease Coverages 3.05 2.21 2.14 2.07 1.92 1.88 1.86
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010 Dec-2011
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income $23,983,819 $23,780,206 $24,752,947 $27,183,153 $26,889,144 $27,364,766 $28,374,428 $31,180,447
+ Depreciation &
Amortization 0 0 0 0 0 0 0 0
+ Lease Payments 28,343,300 28,672,450 28,629,500 29,534,450 30,717,600 31,628,350 33,989,000 35,664,950
+ Contingency 0 0 0 0 0 0 0 0
- - - - - - - -
Cash Flow Available
for Lease Payment 52,327,119 52,452,656 53,382,447 56,717,603 57,606,744 58,993,116 62,363,428 66,845,397
Lease Payments (28,343,300) (28,672,450) (28,629,500) (29,534,450) (30,717,600) (31,628,350) (33,989,000) (35,664,950)
Reserves:
Net Overhaul Reserve (1,079,532) (3,654,807) (3,850,870) (1,126,366) (1,895,774) (1,206,592) (2,855,006) (2,873,996)
Lease Reserve (164,575) 21,475 (452,475) (591,575) (455,375) (1,180,325) (837,975) (3,136,175)
-------- ------ -------- -------- -------- ---------- -------- ----------
Total Reserves (1,244,107) (3,633,332) (4,303,345) (1,717,941) (2,351,149) (2,386,917) (3,692,981) (6,010,171)
Net Cash Flow $22,739,712 $20,146,875 $20,449,603 $25,465,211 $24,537,995 $24,977,849 $24,681,448 $25,170,276
=========== =========== =========== =========== =========== =========== =========== ===========
Lease Coverages 1.85 1.83 1.86 1.92 1.88 1.87 1.83 1.87
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2012 Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income $32,474,371 $33,108,893 $33,134,266 $30,409,142 $25,684,352 $54,544,555 $56,590,936 $59,105,476
+ Depreciation &
Amortization 0 0 0 0 0 0 0 0
+ Lease Payments 41,937,300 43,866,450 45,574,050 45,401,250 42,140,350 15,077,276 15,077,276 15,077,276
+ Contingency 0 0 0 0 0 0 0 0
- - - - - - - -
Cash Flow Available
for Lease Payment 74,411,671 76,975,343 78,708,316 75,810,392 67,824,702 69,621,831 71,668,213 74,182,752
Lease Payments (41,937,300) (43,866,450) (45,574,050) (45,401,250) (42,140,350) (15,077,276) (15,077,276) (15,077,276)
Reserves:
Net Overhaul Reserve (1,421,537) (1,384,592) (5,878,464) (1,483,210) (5,432,032) (1,588,851) (1,747,433) (4,850,260)
Lease Reserve (964,575) (853,800) 86,400 1,630,450 13,531,537 0 0 0
-------- -------- ------ --------- ---------- - - -
Total Reserves (2,386,112) (2,238,392) (5,792,064) 147,240 8,099,505 (1,588,851) (1,747,433) (4,850,260)
Net Cash Flow $30,088,258 $30,870,501 $27,342,202 $30,556,382 $33,783,857 $52,955,704 $54,843,504 $54,255,216
=========== =========== =========== =========== =========== =========== =========== ===========
Lease Coverages 1.77 1.75 1.73 1.67 1.61 4.62 4.75 4.92
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Total
Dec-2020 Dec-2021 Contract
-------- -------- --------
<S> <C> <C> <C>
Net Income $61,114,408 $48,777,111 $796,867,543
+ Depreciation &
Amortization 0 0 0
+ Lease Payments 15,077,276 15,077,276 678,477,431
+ Contingency 6,000,000 0 14,750,274
--------- - ----------
Cash Flow Available
for Lease Payment 82,191,685 63,854,387 1,490,095,248
Lease Payments (15,077,276) (15,077,276) (678,477,431)
Reserves:
Net Overhaul Reserve (1,871,893) (4,054,055) (60,821,397)
Lease Reserve 0 7,538,638 2,400,000
- --------- ---------
Total Reserves (1,871,893) 3,484,583 (58,421,397)
Net Cash Flow $65,242,515 $52,261,694 $753,196,420
=========== =========== ============
Lease Coverages 5.45 4.24
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Development Assumptions
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Lease Financing: * Estimated Project Costs
Leased Amount $215,000,000 * Cogen Construction Costs $118,258,816
Lease Term (Years) 20 * Distilled Water Construction Costs $3,400,000
Average Life 14.9 * Electrical Transmission Line & Fiber Optics $4,411,007
Implicit rate (Pre-tax) 10.20% * Effluent Water Pipeline $10,639,600
Treasury Index Rate (Base) 7.38% * Columbia Gas Pipeline Expansion $8,838,294
Treasury Index Rate (Current) 6.83% * PEPCO - Electrical Interconnect $2,200,000
* PEPCO - RTU/AGC Communications $250,000
Other Financing Assumptions: * Sales Tax on 10% of Construction Costs $434,000
--------------------------- * Water Wells on Site $348,095
Debt Service Reserve $2,400,000 * Building Permit $200,668
Letters of Credit (PEPCO, Fuel Supplier, etc.) $6,000,000 * Builder's Risk Insurance 579,645
Annual Letter of Credit Fee 1.50% * Other Construction Costs $25,000
Interest Income Rate 4.00% * Land Purchase Costs (Including Title Insurance) $4,180,669
12 Year Treasury Bill Rate (Capacity Adjustment) 7.72% * Right-of Way Payments $714,171
Annual GNP Deflator 3.50% * Outside Engineering Costs $2,896,553
Actual Commercial Operations Date Nov-96 * Permitting & Regulatory Costs $1,670,176
Months of Operation During 1996 (1st Calendar Year) 2 * Legal Costs $2,399,413
Months of Operation During 2021 (Last Calendar Year) 10 * Public Relations $331,131
Escalator Base Month Jun-94 * Interest During Development/Construction $19,218,038
Annual CPI Deflator 3.00% * Other Financing Costs $9,256,926
* Management & Administrative Costs $4,203,858
* Natural Gas Reserves Development $3,165,981
Tax Assumptions: * Furniture & Office Equipment $102,820
---------------- * O&M Contractor $1,006,200
Federal Tax Rate 0.00% * Fuel Purchased During Construction $550,000
State Tax Rate 0.00% * General Liability Insurance $88,838
Property Tax Rate (1994) 3.32% * Spare Parts Inventory $1,750,000
Annual Property Tax Rate Increase 3.00% * Fuel Oil Inventory $1,200,000
Assessed Property Value (Real Property) 50.00% * Initial Lease Reserve (Cash) $2,400,000
Initial Assessed Value (Real Property) $77,239,983 * Initial O&M Reserve (Cash) $1,000,000
Annual Assessed Property Depreciation Rate 4.00% * Initial Warranty Reserve (Cash) $750,000
Tax Depreciation Rate (Declining Value) 150.00% * Contingency $8,750,274
Tax Depreciation Period 20 * ------------
Amortization Period - Transaction Costs 102,820 *
* Total Project Costs $215,000,000
* ============
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Operating Assumptions
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Assumptions:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 120,040 118,280 117,840 117,600 117,340 118,840 117,940
Weighted Average Energy Output - Unit #2 120,040 118,280 117,840 117,600 117,340 118,840 117,940
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 616 3,482 4,024 4,249 4,474 4,475 4,476
Hours Per Year Running Unit #2 (Full Load) 420 2,154 2,782 3,244 3,705 3,425 3,145
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 7,939 8,048 8,075 8,106 8,141 8,086 8,141
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 7,863 7,954 7,984 8,011 8,041 8,024 8,053
Actual Annual Energy - Unit #1 (MWH) 73,914 411,899 474,198 499,689 524,984 531,806 527,889
Actual Annual Energy - Unit #2 (MWH) 50,417 254,832 327,784 381,440 434,799 407,067 370,946
Annual Fuel Usage - Unit #1 (DT's) 586,804 3,314,965 3,829,146 4,050,482 4,273,892 4,300,182 4,297,542
Annual Fuel Usage - Unit #2 (DT's) 396,427 2,026,935 2,617,029 3,055,713 3,496,222 3,266,307 2,987,228
Electricity Revenues - Capacity:
Capital Costs/KW Month
(Unadjusted Contract Year) $13.74 $13.92 $14.12 $14.33 $16.97 $18.03 $18.27
Capital Costs/KW Year $27.48 $165.24 $167.44 $169.86 $177.24 $205.76 $216.84
Capital Costs Per KWH $0.04463 $0.04745 $0.04161 $0.03998 $0.03962 $0.04598 $0.04845
GNP Deflator Adjustment/KW Year $1.97 $11.83 $11.99 $12.16 $12.69 $14.73 $15.53
GNP Deflator Adjustment Per KWH $0.00320 $0.00340 $0.00298 $0.00286 $0.00284 $0.00329 $0.00347
Interest Rate Adjustment/KW Year ($0.60) ($3.63) ($3.67) ($3.74) ($3.77) ($3.80) ($3.84)
Interest Rate Adjustment Per KWH ($0.00098) ($0.00104) ($0.00091) ($0.00088) ($0.00084) ($0.00085) ($0.00086)
Scheduled Adjustment/KW Year ($28.84) ($65.22) ($69.57) $0.00 ($4.35) $8.70 $0.00
Scheduled Adjustment Per KWH ($0.04684) ($0.01873) ($0.01729) $0.00000 ($0.00097) $0.00194 $0.00000
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $0.00 $108.22 $106.19 $178.29 $181.82 $225.39 $228.53
Total Capacity Rate/KW Month $0.00 $9.02 $8.85 $14.86 $15.15 $18.78 $19.04
Total Capacity Rate Per KWH $0.00000 $0.03108 $0.02639 $0.04196 $0.04064 $0.05037 $0.05106
Electricity Revenues - Energy Escalation
----------
Energy Rate Per KWH (Weighted Average) $0.02530 $0.02441 $0.02493 $0.02551 $0.02626 $0.02784 $0.02902
Variable O&M Rate Per KWH 3.50% $0.00326 $0.00338 $0.00350 $0.00362 $0.00375 $0.00388 $0.00401
Total Energy Rate Per KWH $0.02857 $0.02779 $0.02843 $0.02913 $0.03000 $0.03172 $0.03303
Total Electricity Revenues - Capacity & Energy $0.0286 $0.0589 $0.0548 $0.0711 $0.0706 $0.0821 $0.0841
Distilled Water Revenues:
Water Delivery (Days/Year) 42 250 250 250 250 250 250
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50
Contract Fuel Rates (Energy Revenue):
FGRR - Firm Gas Reserve Rate ($/DT) $2.95 $3.06 $3.18 $3.31 $3.45 $3.58 $3.72
FGMR - Firm Gas Market Rate ($/DT) $2.75 $2.80 $2.85 $2.89 $2.94 $3.07 $3.20
IGR - Interruptible Gas Rate ($/DT) $2.53 $2.57 $2.62 $2.66 $2.75 $3.14 $3.28
OR - Oil Rate ($/DT) $4.60 $4.57 $4.73 $5.00 $5.28 $5.51 $5.75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Assumptions:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 117,690 117,450 120,000 118,120 117,760 117,530 117,270
Weighted Average Energy Output - Unit #2 117,690 117,450 120,000 118,120 117,760 117,530 117,270
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,432 4,388 4,450 4,513 4,450 4,393 4,342
Hours Per Year Running Unit #2 (Full Load) 3,184 3,222 3,247 3,271 3,133 3,002 2,877
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461 8,461 8,461
Weighted Average Heat Rate-Unit #1 (BTU/KWH) 8,174 8,209 8,166 8,051 8,085 8,119 8,153
Weighted Average Heat Rate-Unit #2 (BTU/KWH) 8,077 8,103 8,131 8,029 7,997 7,997 8,021
Actual Annual Energy - Unit #1 (MWH) 521,585 515,348 534,022 533,024 524,003 516,285 509,174
Actual Annual Energy - Unit #2 (MWH) 374,689 378,444 389,591 386,371 368,985 352,824 337,335
Annual Fuel Usage - Unit #1 (DT's) 4,263,440 4,230,492 4,360,825 4,291,374 4,236,562 4,191,718 4,151,297
Annual Fuel Usage - Unit #2 (DT's) 3,026,360 3,066,535 3,167,763 3,102,174 2,950,776 2,821,532 2,705,767
Electricity Revenues - Capacity:
Cap. Costs/KW Month -
Unadjusted Contract Year $18.27 $18.26 $18.26 $19.10 $19.10 $19.18 $20.02
Capital Costs/KW Year $219.24 $219.22 $219.12 $220.80 $229.20 $229.36 $231.84
Capital Costs Per KWH $0.04947 $0.04996 $0.04924 $0.04893 $0.05151 $0.05221 $0.05340
GNP Deflator Adjustment/KW Year $15.70 $15.70 $15.69 $15.81 $16.41 $16.42 $16.60
GNP Deflator Adjustment Per KWH $0.00354 $0.00358 $0.00353 $0.00350 $0.00369 $0.00374 $0.00382
Interest Rate Adjustment/KW Year ($3.87) ($3.90) ($3.94) ($4.00) ($4.04) ($4.07) ($4.10)
Interest Rate Adjustment Per KWH ($0.00087) ($0.00089) ($0.00089) ($0.00089) ($0.00091) ($0.00093) ($0.00095)
Scheduled Adjustment/KW Year $0.00 $0.00 $0.00 $1.20 $8.04 $13.26 18.48
Scheduled Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00026 $0.00181 $0.00302 $0.00426
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $231.07 $231.02 $230.87 $233.80 $249.62 $254.97 $262.82
Total Capacity Rate/KW Month $19.26 $19.25 $19.24 $19.48 $20.80 $21.25 $21.90
Total Capacity Rate Per KWH $0.05214 $0.05265 $0.05188 $0.05181 $0.05610 $0.05804 $0.06053
Electricity Revenues - Energy: Escalation
----------
Energy Rate Per KWH (Weighted Average) $0.03010 $0.03121 $0.03232 $0.03404 $0.03574 $0.03752 $0.03932
Variable O&M Rate Per KWH 3.50% $0.00415 $0.00430 $0.00445 $0.00460 $0.00477 $0.00493 $0.00510
Total Energy Rate Per KWH $0.03425 $0.03551 $0.03677 $0.03864 $0.04051 $0.04246 $0.04442
Total Electricity Revenues-Capacity & Energy $0.0864 $0.0882 $0.0886 $0.0905 $0.0966 $0.1005 $0.1050
Distilled Water Revenues:
Water Delivery (Days/Year) 250 250 250 250 250 250 250
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50
Contract Fuel Rates (Energy Revenue):
FGRR - Firm Gas Reserve Rate ($/DT) $3.80 $3.88 $3.95 $4.03 $4.11 $4.20 $4.28
FGMR - Firm Gas Market Rate ($/DT) $3.35 $3.49 $3.65 $3.91 $4.18 $4.46 $4.76
IGR - Interruptible Gas Rate ($/DT) $3.43 $3.58 $3.75 $4.01 $4.29 $4.59 $4.90
OR - Oil Rate ($/DT) $6.00 $6.26 $6.53 $6.81 $7.10 $7.41 $7.72
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Dec-2010 Dec-2011 Dec-2012
-------- -------- --------
<S> <C> <C> <C>
Operating Assumptions:
Capacity in Kilowatts 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 118,400 117,860 117,620
Weighted Average Energy Output - Unit #2 118,400 117,860 117,620
Firm Dispatch Energy Production 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,297 4,224 4,157
Hours Per Year Running Unit #2 (Full Load) 2,757 2,669 2,586
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461
Weighted Average Heat Rate-Unit #1 (BTU/KWH) 8,118 8,151 8,183
Weighted Average Heat Rate-Unit #2 (BTU/KWH) 8,045 8,020 8,049
Actual Annual Energy - Unit #1 (MWH) 508,800 497,854 488,986
Actual Annual Energy - Unit #2 (MWH) 326,408 314,613 304,172
Annual Fuel Usage - Unit #1 (DT's) 4,130,438 4,058,005 4,001,373
Annual Fuel Usage - Unit #2 (DT's) 2,625,953 2,523,193 2,448,281
Electricity Revenues - Capacity:
Cap. Costs/KW Month -
Unadjusted Contract Year $20.57 $22.79 $23.35
Capital Costs/KW Year $241.34 $251.28 $274.60
Capital Costs Per KWH $0.05616 $0.05949 $0.06605
GNP Deflator Adjustment/KW Year $17.28 $17.99 $19.66
GNP Deflator Adjustment Per KWH $0.00402 $0.00426 $0.00473
Interest Rate Adjustment/KW Year ($4.13) ($4.13) ($4.13)
Interest Rate Adjustment Per KWH ($0.00096) ($0.00098) ($0.00099)
Scheduled Adjustment/KW Year $23.70 $28.91 $34.13
Scheduled Adjustment Per KWH $0.00551 $0.00684 $0.00821
Contingent Adjustment/KW Year $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $278.19 $294.05 $324.26
Total Capacity Rate/KW Month $23.18 $24.50 $27.02
Total Capacity Rate Per KWH $0.06473 $0.06961 $0.07800
Electricity Revenues - Energy: Escalation
Energy Rate Per KWH (Weighted Average) $0.04119 $0.04448 $0.04847
Variable O&M Rate Per KWH 3.50% $0.00528 $0.00547 $0.00566
Total Energy Rate Per KWH $0.04647 $0.04994 $0.05413
Total Electricity Revenues-Capacity & Energy $0.1112 $0.1196 $0.1321
Distilled Water Revenues:
Water Delivery (Days/Year) 250 250 250
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50
Contract Fuel Rates (Energy Revenue):
FGRR - Firm Gas Reserve Rate ($/DT) $4.36 $4.45 $4.54
FGMR - Firm Gas Market Rate ($/DT) $5.08 $5.37 $5.68
IGR - Interruptible Gas Rate ($/DT) $5.23 $5.54 $5.86
OR - Oil Rate ($/DT) $8.05 $8.40 $8.76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Assumptions:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000 230,000 230,000
Weighted Average Energy Output- Unit #1 117,380 119,240 118,000 117,750 117,540 117,300 118,680
Weighted Average Energy Output- Unit #2 117,380 119,240 118,000 117,750 117,540 117,300 118,680
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1
(Full Load) 4,097 4,043 3,996 3,925 3,858 3,796 3,739
Hours Per Year Running Unit #2
(Full Load) 2,507 2,431 2,359 2,308 2,259 2,212 2,166
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1
(BTU/KWH) 8,216 8,134 8,053 8,085 8,118 8,148 8,091
Weighted Average Heat Rate - Unit #2
(BTU/KWH) 8,067 8,087 8,108 8,008 7,968 7,986 8,006
Actual Annual Energy - Unit #1 (MWH) 480,905 482,099 471,493 462,141 453,510 445,312 443,705
Actual Annual Energy - Unit #2 (MWH) 294,230 289,865 278,329 271,774 265,543 259,467 257,116
Annual Fuel Usage - Unit #1 (DT's) 3,951,114 3,921,394 3,796,937 3,736,407 3,681,592 3,628,399 3,590,019
Annual Fuel Usage - Unit #2 (DT's) 2,373,555 2,344,135 2,256,692 2,176,367 2,115,847 2,072,103 2,058,470
Electricity Revenues - Capacity:
Capital Costs/KW Month
(Unadjusted Contract Year) $23.63 $22.69 $18.83 $19.14 $19.48 $19.83 $20.19
Capital Costs/KW Year $280.76 $281.68 $264.56 $226.58 $230.36 $234.46 $238.68
Capital Costs Per KWH $0.06853 $0.06967 $0.06621 $0.05773 $0.05970 $0.06176 $0.06384
GNP Deflator Adjustment/KW Year $20.11 $20.17 $18.95 $16.23 $16.50 $16.79 $17.09
GNP Deflator Adjustment Per KWH $0.00491 $0.00499 $0.00474 $0.00413 $0.00428 $0.00442 $0.00457
Interest Rate Adjustment/KW Year ($4.13) ($4.13) ($3.75) ($1.81) ($1.81) ($1.81) ($1.81)
Interest Rate Adjustment Per KWH ($0.00101) ($0.00102) ($0.00094) ($0.00046) ($0.00047) ($0.00048) ($0.00049)
Scheduled Adjustment/KW Year $39.35 $44.57 $49.78 $55.00 $60.22 $65.43 $70.65
Scheduled Adjustment Per KWH $0.00960 $0.01102 $0.01246 $0.01401 $0.01561 $0.01724 $0.01890
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $336.08 $342.28 $329.54 $295.99 $305.26 $314.87 $324.61
Total Capacity Rate/KW Month $28.01 $28.52 $27.46 $24.67 $25.44 $26.24 $27.05
Total Capacity Rate Per KWH $0.08203 $0.08466 $0.08247 $0.07542 $0.07912 $0.08294 $0.08682
Electricity Revenues - Energy:
Energy Rate Per KWH (Weighted Average) $0.05116 $0.05400 $0.05697 $0.06021 $0.06365 $0.06730 $0.07117
Variable O&M Rate Per KWH $0.00586 $0.00606 $0.00628 $0.00649 $0.00672 $0.00696 $0.00720
Total Energy Rate Per KWH $0.05702 $0.06006 $0.06325 $0.06671 $0.07037 $0.07426 $0.07838
Total Electricity Revenues -
Capacity & Energy $0.1391 $0.1447 $0.1457 $0.1421 $0.1495 $0.1572 $0.1652
Distilled Water Revenues:
Water Delivery (Days/Year) 250 250 250 250 250 250 250
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50
Contract Fuel Rates (Energy Revenue):
FGRR - Firm Gas Reserve Rate ($/DT) $4.63 $4.73 $4.82 $4.91 $5.00 $5.09 $5.18
FGMR - Firm Gas Market Rate ($/DT) $6.01 $6.35 $6.71 $7.09 $7.49 $7.92 $8.38
IGR - Interruptible Gas Rate ($/DT) $6.20 $6.56 $6.93 $7.33 $7.75 $8.19 $8.67
OR - Oil Rate ($/DT) $9.14 $9.53 $9.94 $10.37 $10.81 $11.28 $11.77
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Dec-2020 Dec-2021
-------- --------
<S> <C> <C>
Operating Assumptions:
Capacity in Kilowatts 230,000 230,000
Weighted Average Energy Output- Unit #1 117,950 117,740
Weighted Average Energy Output- Unit #2 117,950 117,740
Firm Dispatch Energy Production 99,000 99,000
Hours Per Year Running Unit #1
(Full Load) 3,685 3,008
Hours Per Year Running Unit #2
(Full Load) 2,123 1,785
Contract Heat Rate (BTU/KWH) 8,461 8,461
Weighted Average Heat Rate - Unit #1
(BTU/KWH) 8,139 8,167
Weighted Average Heat Rate - Unit #2
(BTU/KWH) 8,026 8,002
Actual Annual Energy - Unit #1 (MWH) 434,671 354,213
Actual Annual Energy - Unit #2 (MWH) 250,352 210,123
Annual Fuel Usage - Unit #1 (DT's) 3,537,787 2,892,855
Annual Fuel Usage - Unit #2 (DT's) 2,009,322 1,681,408
Electricity Revenues - Capacity:
Capital Costs/KW Month
(Unadjusted Contract Year) $20.58 $0.00
Capital Costs/KW Year $243.06 $205.80
Capital Costs Per KWH $0.06596 $0.06841
GNP Deflator Adjustment/KW Year $17.41 $14.74
GNP Deflator Adjustment Per KWH $0.00472 $0.00490
Interest Rate Adjustment/KW Year ($1.81) ($1.51)
Interest Rate Adjustment Per KWH ($0.00049) ($0.00050)
Scheduled Adjustment/KW Year $75.87 $66.85
Scheduled Adjustment Per KWH $0.02059 $0.02222
Contingent Adjustment/KW Year $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000
Total Capacity Rate/KW Year $334.52 $285.87
Total Capacity Rate/KW Month $27.88 $23.82
Total Capacity Rate Per KWH $0.09077 $0.09502
Electricity Revenues - Energy:
Energy Rate Per KWH (Weighted Average) $0.07528 $0.07880
Variable O&M Rate Per KWH $0.00745 $0.00771
Total Energy Rate Per KWH $0.08274 $0.08651
Total Electricity Revenues -
Capacity & Energy $0.1735 $0.1815
Distilled Water Revenues:
Water Delivery (Days/Year) 250 208
Daily Distilled Water Sales Volume (Gal) 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50
Contract Fuel Rates (Energy Revenue):
FGRR - Firm Gas Reserve Rate ($/DT) $5.27 $5.37
FGMR - Firm Gas Market Rate ($/DT) $8.86 $9.37
IGR - Interruptible Gas Rate ($/DT) $9.17 $9.70
OR - Oil Rate ($/DT) $12.27 $12.80
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Operating Assumptions
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit #1 - Fuel Cost:
FGRR (Reserves) % 78% 75% 65% 62% 59% 58% 59%
FGMR (Market) % 22% 25% 35% 38% 41% 42% 41%
Blended Unit #1 Rate ($/DT) $2.84 $2.92 $2.97 $3.04 $3.14 $3.37 $3.51
Blended Unit #1 Rate ($/KWH) $0.02256 $0.02353 $0.02397 $0.02463 $0.02553 $0.02723 $0.02855
Unit #2 - Fuel Cost:
IGR (Spot Gas) % 80% 95% 94% 94% 93% 93% 93%
OR (Fuel Oil) % 20% 5% 6% 6% 7% 7% 7%
Blended Unit #2 Rate ($/DT) $3.11 $2.89 $2.96 $3.02 $3.10 $3.23 $3.37
Blended Unit #2 Rate ($/KWH) $0.02444 $0.02296 $0.02363 $0.02421 $0.02489 $0.02592 $0.02715
Water Usage:
Gallons Per Hour - Cooling
Towers & Distilled Water 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Gallons Per Hour -
Boiler Makeup 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Charles County Waste
Water Rate 0.00% $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00
WSSC Water Usage Rate
($/000 Gallons) 2.00% $3.26 $3.32 $3.39 $3.46 $3.53 $3.60 $3.67
Water Discharge & Chemical Usage:
Gallons Per Hour - Cooling
Towers & Distilled Water 16,000 16,000 16,000 16,000 16,000 16,000 16,000
Gallons Per Hour - Boiler Makeup 120 120 120 120 120 120 120
WSSC Water Discharge Rate
($/000 Gallons) 2.00% $5.12 $5.22 $5.32 $5.43 $5.54 $5.65 $5.76
Chemical Usage Rate
($/000 Gallons) 3.00% $0.68 $0.70 $0.72 $0.74 $0.76 $0.79 $0.81
Distilled Water Costs:
Annual Operating Costs 3.50% $33,333 $200,000 $207,000 $214,245 $221,744 $229,505 $237,537
Fixed Operating Expenses:
Firm Transportation $420,603 $2,561,473 $2,599,895 $2,638,893 $2,678,477 $2,718,654 $2,759,434
O&M Contract Costs 3.50% $245,500 $1,473,000 $1,524,555 $1,577,914 $1,633,141 $1,690,301 $1,749,462
Consumables 3.50% $125,000 $750,000 $776,250 $803,419 $831,538 $860,642 $890,765
Administrative Expenses 3.50% $83,333 $500,000 $517,500 $535,613 $554,359 $573,762 $593,843
Insurance 3.00% $83,333 $500,000 $515,000 $530,450 $546,364 $562,754 $579,637
Purchased Electricity 3.00% $68,609 $411,652 $424,002 $436,722 $449,823 $463,318 $477,218
Property Taxes 3.00% $400,000 $2,620,510 $2,483,407 $2,339,772 $2,189,399 $2,032,074 $1,867,581
Turbine Overhaul Reserve:
Overhaul Reserve -
Beginning of Year
($5,000,000 Required Balance) $1,000,000 $1,250,000 $1,750,000 $2,750,000 $4,250,000 $5,000,000 $5,175,000
Additions to Reserve
($0 Per Turbine Hour) $250,000 $1,196,000 $1,668,610 $2,245,573 $1,466,232 $3,215,936 $1,542,214
Turbine Overhauls
(100.00% of Contract Amount) $0 ($696,000) ($668,610) ($745,573) ($716,232) ($3,040,936) ($1,361,089)
Reserve Disbursement $0 $0 $0 $0 $0 $0 $0
Overhaul Reserve - End of Year $1,250,000 $1,750,000 $2,750,000 $4,250,000 $5,000,000 $5,175,000 $5,356,125
Lease Reserve:
Lease Reserve - Beginning
of Year $2,400,000 $3,467,325 $4,899,375 $9,106,775 $9,804,575 $13,352,725 $13,795,100
Additions to Reserve $1,067,325 $1,432,050 $4,207,400 $697,800 $3,548,150 $442,375 $275,050
Reserve Disbursement $0 $0 $0 $0 $0 $0 $0
Lease Reserve - End of Year $3,467,325 $4,899,375 $9,106,775 $9,804,575 $13,352,725 $13,795,100 $14,070,150
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit #1 - Fuel Cost:
FGRR (Reserves) % 59% 60% 58% 58% 59% 60% 61%
FGMR (Market) % 41% 40% 42% 42% 41% 40% 39%
Blended Unit #1 Rate ($/DT) $3.62 $3.73 $3.83 $3.98 $4.14 $4.31 $4.48
Blended Unit #1 Rate ($/KWH) $0.02956 $0.03060 $0.03124 $0.03206 $0.03349 $0.03501 $0.03650
Unit #2 - Fuel Cost:
IGR (Spot Gas) % 93% 93% 93% 92% 92% 92% 93%
OR (Fuel Oil) % 7% 7% 7% 8% 8% 8% 7%
Blended Unit #2 Rate ($/DT) $3.52 $3.68 $3.86 $4.13 $4.40 $4.69 $4.98
Blended Unit #2 Rate ($/KWH) $0.02846 $0.02983 $0.03138 $0.03318 $0.03520 $0.03747 $0.03997
Water Usage:
Gallons / Hour - Cooling
Towers & Dst. Water 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Gallons Per Hour - Boiler Makeup 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Charles Cty Waste Water Rate
($/000 Gallons) $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00
WSSC Water Usage Rate
($/000 Gallons) $3.74 $3.82 $3.89 $3.97 $4.05 $4.13 $4.21
Water Discharge & Chemical Usage:
Gallons / Hour-Cooling Towers
& Dst. Water 16,000 16,000 16,000 16,000 16,000 16,000 16,000
Gallons Per Hour - Boiler Makeup 120 120 120 120 120 120 120
WSSC Water Discharge Rate
($/000 Gallons) $5.88 $5.99 $6.11 $6.24 $6.36 $6.49 $6.62
Chemical Usage Rate
($/000 Gallons) $0.84 $0.86 $0.89 $0.91 $0.94 $0.97 $1.00
Distilled Water Costs:
Annual Operating Costs $245,851 $254,456 $263,362 $272,579 $282,120 $291,994 $302,214
Fixed Operating Expenses:
Firm Transportation $2,800,825 $2,842,837 $2,885,480 $2,928,762 $2,972,694 $3,017,284 $3,062,543
O&M Contract Costs $1,810,693 $1,874,067 $1,939,660 $2,007,548 $2,077,812 $2,150,535 $2,225,804
Consumables $921,941 $954,209 $987,607 $1,022,173 $1,057,949 $1,094,977 $1,133,301
Administrative Expenses $614,628 $636,140 $658,405 $681,449 $705,299 $729,985 $755,534
Insurance $597,026 $614,937 $633,385 $652,387 $671,958 $692,117 $712,880
Purchased Electricity $491,534 $506,280 $521,469 $537,113 $553,226 $569,823 $586,918
Property Taxes $1,695,695 $1,599,555 $1,583,926 $1,567,032 $1,532,315 $1,512,427 $1,491,130
Turbine Overhaul Reserve:
Overhaul Reserve -
Beginning of Year $5,356,125 $5,543,589 $5,737,615 $5,938,432 $6,146,277 $6,361,396 $6,584,045
Additions to Reserve $981,563 $1,079,532 $3,654,807 $3,850,870 $1,126,366 $1,895,774 $1,206,592
Turbine Overhauls ($794,099) ($885,506) ($3,453,990) ($3,643,025) ($911,247) ($1,673,125) ($976,150)
Reserve Disbursement $0 $0 $0 $0 $0 $0 $0
Overhaul Reserve -
End of Year $5,543,589 $5,737,615 $5,938,432 $6,146,277 $6,361,396 $6,584,045 $6,814,487
Lease Reserve:
Lease Reserve - Beginning
of Year $14,070,150 $14,171,650 $14,336,225 $14,314,750 $14,767,225 $15,358,800 $15,814,175
Additions to Reserve $101,500 $164,575 $0 $452,475 $591,575 $455,375 $1,180,325
Reserve Disbursement $0 $0 ($21,475) $0 $0 $0 $0
Lease Reserve - End of Year $14,171,650 $14,336,225 $14,314,750 $14,767,225 $15,358,800 $15,814,175 $16,994,500
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Dec-2010 Dec-2011 Dec-2012
-------- -------- --------
<S> <C> <C> <C>
Unit #1 - Fuel Cost:
FGRR (Reserves) % 61% 26% 0%
FGMR (Market) % 39% 74% 100%
Blended Unit #1 Rate ($/DT) $4.65 $5.16 $5.72
Blended Unit #1 Rate ($/KWH) $0.03776 $0.04203 $0.04679
Unit #2 - Fuel Cost:
IGR (Spot Gas) % 93% 93% 93%
OR (Fuel Oil) % 7% 7% 7%
Blended Unit #2 Rate ($/DT) $5.30 $5.59 $5.90
Blended Unit #2 Rate ($/KWH) $0.04262 $0.04483 $0.04746
Water Usage:
Gallons / Hour - Cooling
Towers & Dst. Water 55,000 55,000 55,000
Gallons Per Hour - Boiler Makeup 1,500 1,500 1,500
Charles Cty Waste Water Rate
($/000 Gallons) $2.00 $2.00 $2.00
WSSC Water Usage Rate
($/000 Gallons) $4.30 $4.38 $4.47
Water Discharge & Chemical Usage:
Gallons / Hour-Cooling Towers
& Dst. Water 16,000 16,000 16,000
Gallons Per Hour - Boiler Makeup 120 120 120
WSSC Water Discharge Rate
($/000 Gallons) $6.75 $6.88 $7.02
Chemical Usage Rate
($/000 Gallons) $1.03 $1.06 $1.09
Distilled Water Costs:
Annual Operating Costs $312,791 $323,739 $335,070
Fixed Operating Expenses:
Firm Transportation $3,108,481 $3,155,109 $3,202,435
O&M Contract Costs $2,303,707 $2,384,337 $2,467,789
Consumables $1,172,967 $1,214,021 $1,256,512
Administrative Expenses $781,978 $809,347 $837,674
Insurance $734,267 $756,295 $778,984
Purchased Electricity $604,525 $622,661 $641,341
Property Taxes $1,468,376 $1,444,116 $1,418,298
Turbine Overhaul Reserve:
Overhaul Reserve -
Beginning of Year $6,814,487 $7,052,994 $7,299,849
Additions to Reserve $2,855,006 $2,873,996 $1,421,537
Turbine Overhauls ($2,616,498) ($2,627,141) ($1,166,043)
Reserve Disbursement $0 $0 $0
Overhaul Reserve -
End of Year $7,052,994 $7,299,849 $7,555,343
Lease Reserve:
Lease Reserve - Beginning
of Year $16,994,500 $17,832,475 $20,968,650
Additions to Reserve $837,975 $3,136,175 $964,575
Reserve Disbursement $0 $0 $0
Lease Reserve - End of Year $17,832,475 $20,968,650 $21,933,225
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Unit #1 - Fuel Cost:
FGRR (Reserves) % 0% 0% 0% 0% 0% 0% 0%
FGMR (Market) % 100% 100% 100% 100% 100% 100% 100%
Blended Unit #1 Rate ($/DT) $6.05 $6.39 $6.76 $7.15 $7.56 $7.99 $8.45
Blended Unit #1 Rate ($/KWH) $0.04969 $0.05202 $0.05443 $0.05777 $0.06133 $0.06511 $0.06839
Unit #2 - Fuel Cost:
IGR (Spot Gas) % 93% 94% 94% 94% 93% 93% 93%
OR (Fuel Oil) % 7% 6% 6% 6% 7% 7% 7%
Blended Unit #2 Rate ($/DT) $6.22 $6.56 $6.91 $7.30 $7.71 $8.15 $8.61
Blended Unit #2 Rate ($/KWH) $0.05017 $0.05303 $0.05605 $0.05848 $0.06146 $0.06510 $0.06897
Water Usage:
Gallons Per Hour - Cooling Towers
& Distilled Water 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Gallons Per Hour - Boiler Makeup 1,500 1,500 1,500 1,500 1,500 1,500 1,500
Charles County Waste Water Rate
($/000 Gallons) $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00
WSSC Water Usage Rate
($/000 Gallons) $4.56 $4.65 $4.75 $4.84 $4.94 $5.04 $5.14
Water Discharge & Chemical Usage:
Gallons Per Hour - Cooling Towers
& Distilled Water 16,000 16,000 16,000 16,000 16,000 16,000 16,000
Gallons Per Hour - Boiler Makeup 120 120 120 120 120 120 120
WSSC Water Discharge Rate
($/000 Gallons) $7.16 $7.31 $7.45 $7.60 $7.75 $7.91 $8.07
Chemical Usage Rate
($/000 Gallons) $1.12 $1.16 $1.19 $1.23 $1.26 $1.30 $1.34
Distilled Water Costs:
Annual Operating Costs $346,797 $358,935 $371,498 $384,500 $397,958 $411,886 $426,302
Fixed Operating Expenses:
Firm Transportation $3,250,472 $3,299,229 $3,348,717 $3,398,948 $3,449,932 $3,501,681 $3,554,207
O&M Contract Costs $2,554,161 $2,643,557 $2,736,082 $2,831,844 $2,930,959 $3,033,543 $3,139,717
Consumables $1,300,490 $1,346,007 $1,393,117 $1,441,876 $1,492,342 $1,544,574 $1,598,634
Administrative Expenses $866,993 $897,338 $928,745 $961,251 $994,894 $1,029,716 $1,065,756
Insurance $802,353 $826,424 $851,217 $876,753 $903,056 $930,147 $958,052
Purchased Electricity $660,581 $680,398 $700,810 $721,835 $743,490 $765,794 $788,768
Property Taxes $1,390,870 $1,361,777 $1,330,965 $1,298,375 $1,263,949 $1,227,626 $1,189,346
Turbine Overhaul Reserve:
Overhaul Reserve - Beginning
of Year $7,555,343 $7,819,780 $8,093,473 $8,376,744 $8,669,930 $8,973,378 $9,287,446
Additions to Reserve $1,384,592 $5,878,464 $1,483,210 $5,432,032 $1,588,851 $1,747,433 $4,850,260
Turbine Overhauls ($1,120,155) ($5,604,772) ($1,199,938) ($5,138,846) ($1,285,404) ($1,433,364) ($4,525,199)
Reserve Disbursement $0 $0 $0 $0 $0 $0 $0
Overhaul Reserve - End of Year $7,819,780 $8,093,473 $8,376,744 $8,669,930 $8,973,378 $9,287,446 $9,612,507
Lease Reserve:
Lease Reserve - Beginning
of Year $21,933,225 $22,787,025 $22,700,625 $21,070,175 $7,538,638 $7,538,638 $7,538,638
Additions to Reserve $853,800 $0 $0 $0 $0 $0 $0
Reserve Disbursement $0 ($86,400) ($1,630,450)($13,531,537) $0 $0 $0
Lease Reserve - End of Year $22,787,025 $22,700,625 $21,070,175 $7,538,638 $7,538,638 $7,538,638 $7,538,638
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Dec-2020 Dec-2021
-------- --------
<S> <C> <C>
Unit #1 - Fuel Cost:
FGRR (Reserves) % 0% 0%
FGMR (Market) % 100% 100%
Blended Unit #1 Rate ($/DT) $8.94 $9.46
Blended Unit #1 Rate ($/KWH) $0.07278 $0.07728
Unit #2 - Fuel Cost:
IGR (Spot Gas) % 93% 94%
OR (Fuel Oil) % 7% 6%
Blended Unit #2 Rate ($/DT) $9.10 $9.57
Blended Unit #2 Rate ($/KWH) $0.07307 $0.07656
Water Usage:
Gallons Per Hour - Cooling Towers
& Distilled Water 55,000 55,000
Gallons Per Hour - Boiler Makeup 1,500 1,500
Charles County Waste Water Rate
($/000 Gallons) $2.00 $2.00
WSSC Water Usage Rate
($/000 Gallons) $5.24 $5.34
Water Discharge & Chemical Usage:
Gallons Per Hour - Cooling Towers
& Distilled Water 16,000 16,000
Gallons Per Hour - Boiler Makeup 120 120
WSSC Water Discharge Rate
($/000 Gallons) $8.23 $8.39
Chemical Usage Rate
($/000 Gallons) $1.38 $1.42
Distilled Water Costs:
Annual Operating Costs $441,223 $380,555
Fixed Operating Expenses:
Firm Transportation $3,607,520 $3,051,360
O&M Contract Costs $3,249,607 $2,802,786
Consumables $1,654,586 $1,427,080
Administrative Expenses $1,103,057 $951,387
Insurance $986,793 $846,998
Purchased Electricity $812,431 $697,337
Property Taxes $1,149,042 $2,140,362
Turbine Overhaul Reserve:
Overhaul Reserve - Beginning
of Year $9,612,507 $9,948,944
Additions to Reserve $1,871,893 $4,054,055
Turbine Overhauls ($1,535,456) ($3,705,842)
Reserve Disbursement $0 $0
Overhaul Reserve - End of Year $9,948,944 $10,297,157
Lease Reserve:
Lease Reserve - Beginning
of Year $7,538,638 $7,538,638
Additions to Reserve $0 $0
Reserve Disbursement $0 ($7,538,638)
Lease Reserve - End of Year $7,538,638 $0
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Lease Payments and Capacity Adjustments
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1995 Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Lease Payments: Average Pymt
GECC Base Case (1997 PEPCO Peak) 31,054,050 7,637,000 10,742,000 19,049,000 20,548,000 27,630,000
GECC Case #2 (1998 PEPCO Peak) 31,054,050 7,637,000 10,742,000 19,049,000 20,548,000 27,630,000
GECC Case #3 (1999 PEPCO Peak) 31,054,050 7,637,000 10,742,000 19,049,000 20,548,000 27,630,000
GECC T-Bill Adj.
(100 bp increase) (A) 32,836,600 8,646,000 12,108,000 20,591,000 22,128,000 29,350,000
GECC T-Bill Adj.
(100 bp decrease) (B) 29,418,600 6,360,000 9,027,000 17,530,000 18,841,000 25,949,000
GECC Base Case Annual
Lease Payment Pre-Tax Yield 10.20% 215,000,000 7,637,000 10,742,000 19,049,000 20,548,000 27,630,000
Lease Payment
Adjustment (per 100
basis pts) Base Rate 7.38% 13.21% 12.72% 8.09% 7.69% 6.23%
Interest Adjustment
(14.9 Yr T-Bill Rate) Current Rate 6.83% (702,350) (943,250) (835,450) (938,850) (924,550)
GECC Base Case Annual
Lease Payment Pre-Tax Yield 9.78% 215,000,000 6,934,650 9,798,750 18,213,550 19,609,150 26,705,450
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Dec-2001 Dec-2002
-------- --------
<S> <C> <C>
Lease Payments:
GECC Base Case (1997 PEPCO Peak) 28,611,000 29,050,000
GECC Case #2 (1998 PEPCO Peak) 28,611,000 29,050,000
GECC Case #3 (1999 PEPCO Peak) 28,611,000 29,050,000
GECC T-Bill Adj.
(100 bp increase) (A) 30,314,000 30,883,000
GECC T-Bill Adj.
(100 bp decrease) (B) 26,755,000 27,396,000
GECC Base Case Annual
Lease Payment 28,611,000 29,050,000
Lease Payment
Adjustment (per 100
basis pts) 5.95% 6.31%
Interest Adjustment
(14.9 Yr T-Bill Rate) (1,020,800) (909,700)
GECC Base Case Annual
Lease Payment 27,590,200 28,140,300
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Lease Payments:
GECC Base Case (1997 PEPCO Peak) 29,275,000 29,619,000 29,592,000 30,503,000 31,690,000 32,609,000
GECC Case #2 (1998 PEPCO Peak) 29,275,000 29,619,000 29,592,000 30,503,000 31,690,000 32,609,000
GECC Case #3 (1999 PEPCO Peak) 29,275,000 29,619,000 29,592,000 30,503,000 31,690,000 32,609,000
GECC T-Bill Adj. (100 bp increase) (A) 31,035,000 31,417,000 31,409,000 32,350,000 33,574,000 34,510,000
GECC T-Bill Adj. (100 bp decrease) (B) 27,581,000 27,898,000 27,842,000 28,742,000 29,922,000 30,826,000
GECC Base Case Annual Lease Payment 29,275,000 29,619,000 29,592,000 30,503,000 31,690,000 32,609,000
Lease Payment Adjustment (per 100 basis pts) 6.01% 6.07% 6.14% 6.06% 5.95% 5.83%
Interest Adjustment (14.9 Yr T-Bill Rate) (931,700) (946,550) (962,500) (968,550) (972,400) (980,650)
GECC Base Case Annual Lease Payment 28,343,300 28,672,450 28,629,500 29,534,450 30,717,600 31,628,350
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
Dec-2009 Dec-2010 Dec-2011 Dec-2012
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Lease Payments:
GECC Base Case (1997 PEPCO Peak) 34,979,000 36,639,000 42,902,000 44,813,000
GECC Case #2 (1998 PEPCO Peak) 34,979,000 36,639,000 42,902,000 44,813,000
GECC Case #3 (1999 PEPCO Peak) 34,979,000 36,639,000 42,902,000 44,813,000
GECC T-Bill Adj. (100 bp increase) (A) 36,942,000 38,631,000 45,009,000 46,955,000
GECC T-Bill Adj. (100 bp decrease) (B) 33,179,000 34,868,000 41,148,000 43,092,000
GECC Base Case Annual Lease Payment 34,979,000 36,639,000 42,902,000 44,813,000
Lease Payment Adjustment (per 100 basis pts) 5.61% 5.44% 4.91% 4.78%
Interest Adjustment (14.9 Yr T-Bill Rate) (990,000) (974,050) (964,700) (946,550)
GECC Base Case Annual Lease Payment 33,989,000 35,664,950 41,937,300 43,866,450
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lease Payments:
GECC Base Case (1997 PEPCO Peak) 46,514,000 46,339,000 42,340,000 15,527,025 15,527,025 15,527,025 15,527,025 15,527,025
GECC Case #2 (1998 PEPCO Peak) 46,514,000 46,339,000 42,340,000 15,527,025 15,527,025 15,527,025 15,527,025 15,527,025
GECC Case #3 (1999 PEPCO Peak) 46,514,000 46,339,000 42,340,000 15,527,025 15,527,025 15,527,025 15,527,025 15,527,025
GECC T-Bill Adj.
(100 bp increase) (A) 48,688,000 48,501,000 43,691,000 16,418,300 16,418,300 16,418,300 16,418,300 16,418,300
GECC T-Bill Adj.
(100 bp decrease) (B) 44,805,000 44,634,000 41,977,000 14,709,300 14,709,300 14,709,300 14,709,300 14,709,300
GECC Base Case Annual
Lease Payment 46,514,000 46,339,000 42,340,000 15,527,025 15,527,025 15,527,025 15,527,025 15,527,025
Lease Payment Adjustment
(per 100 basis pts) 4.67% 4.67% 3.19% 5.74% 5.74% 5.74% 5.74% 5.74
Interest Adjustment
(14.9 Yr T-Bill Rate) (939,950) (937,750) (199,650) (449,749) (449,749) (449,749) (449,749) (449,749
GECC Base Case Annual
Lease Payment 45,574,050 45,401,250 42,140,350 15,077,276 15,077,276 15,077,276 15,077,276 15,077,276
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Calendar Year Lease Payments: 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1st Quarter Lease Payment (Jan 31st) 0 1,733,663 2,449,688 4,553,388 4,902,288 6,676,363 6,897,550
2nd Quarter Lease Payment (April 30th) 0 1,733,663 2,449,688 4,553,388 4,902,288 6,676,363 6,897,550
3rd Quarter Lease Payment (July 31st) 0 1,733,663 2,449,688 4,553,388 4,902,288 6,676,363 6,897,550
4th Quarter Lease Payment (October 31st) 0 1,733,663 2,449,688 4,553,388 4,902,288 6,676,363 6,897,550
- --------- --------- --------- --------- --------- ---------
Total Annual Lease Pymts (Calendar Years) 0 6,934,650 9,798,750 18,213,550 19,609,150 26,705,450 27,590,200
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Calendar Year Lease Payments: 2003 2004 2005 2006 2007 2008 2009
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1st Quarter Lease Payment (Jan 31st) 7,035,075 7,085,825 7,168,113 7,157,375 7,383,613 7,679,400 7,907,088
2nd Quarter Lease Payment (April 30th) 7,035,075 7,085,825 7,168,113 7,157,375 7,383,613 7,679,400 7,907,088
3rd Quarter Lease Payment (July 31st) 7,035,075 7,085,825 7,168,113 7,157,375 7,383,613 7,679,400 7,907,088
4th Quarter Lease Payment (October 31st) 7,035,075 7,085,825 7,168,113 7,157,375 7,383,613 7,679,400 7,907,088
--------- --------- --------- --------- --------- --------- ---------
Total Annual Lease Pymts (Calendar Years) 28,140,300 28,343,300 28,672,450 28,629,500 29,534,450 30,717,600 31,628,350
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Calendar Year Lease Payments: 2010 2011 2012 2013 2014 2015
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1st Quarter Lease Payment (Jan 31st) 8,497,250 8,916,238 10,484,325 10,966,613 11,393,513 11,350,313
2nd Quarter Lease Payment (April 30th) 8,497,250 8,916,238 10,484,325 10,966,613 11,393,513 11,350,313
3rd Quarter Lease Payment (July 31st) 8,497,250 8,916,238 10,484,325 10,966,613 11,393,513 11,350,313
4th Quarter Lease Payment (October 31st) 8,497,250 8,916,238 10,484,325 10,966,613 11,393,513 11,350,313
--------- --------- ---------- ---------- ---------- ----------
Total Annual Lease Pymts (Calendar Years) 33,989,000 35,664,950 41,937,300 43,866,450 45,574,050 45,401,250
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Calendar Year Lease Payments: 2016 2017 2018 2019 2020 2021
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1st Quarter Lease Payment (Jan 31st) 10,535,088 3,769,319 3,769,319 3,769,319 3,769,319 3,769,319
2nd Quarter Lease Payment (April 30th) 10,535,088 3,769,319 3,769,319 3,769,319 3,769,319 3,769,319
3rd Quarter Lease Payment (July 31st) 10,535,088 3,769,319 3,769,319 3,769,319 3,769,319 3,769,319
4th Quarter Lease Payment (October 31st) 10,535,088 3,769,319 3,769,319 3,769,319 3,769,319 3,769,319
---------- --------- --------- --------- --------- ---------
Total Annual Lease Pymts (Calendar Years) 42,140,350 15,077,276 15,077,276 15,077,276 15,077,276 15,077,276
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000
- ------------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) (6,633,906) (15,000,000) (16,000,000) 0 (1,000,000)
Contract Year Adj (Appendix Q - Column 4) 0 0 0 0 0
- - - - -
Net Calendar Year Adjustment (6,633,906) (15,000,000) (16,000,000) 0 (1,000,000)
Contingent Adjustment Peak Yr
Levelized Adjustment - Contract Yr 1997 CPWIRR 11,571,429 0 0 0 0 0
Maximum Adjustment Cap - Contract Yr TC 21,600,000 0 0 0 0 0
Unrecovered Amount - Contract Yr PC 0 0 0 0 0 0
Carry Over Adjustment - Contract Yr 0 0 0 0 0
Contingent Adjustment - Contract Yr PV/Uncov 0 0 0 0 0 0
- - - - - -
Net Calendar Year Adjustment 0 0 0 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-2001 Dec-2002
- ------------------------------------ -------- --------
<S> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) 2,000,000 0
Contract Year Adj (Appendix Q - Column 4) 0 0
Net Calendar Year Adjustment 2,000,000 0
Contingent Adjustment
Levelized Adjustment - Contract Yr 0 0
Maximum Adjustment Cap - Contract Yr 0 0
Unrecovered Amount - Contract Yr 0 0
Carry Over Adjustment - Contract Yr 0 0
Contingent Adjustment - Contract Yr 0 0
Net Calendar Year Adjustment 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010
- ------------------------------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) 0 0 0 0 0 0 0 0
Contract Year Adj (Appendix Q - Column 4) 0 0 0 1,650,000 2,850,000 4,050,000 5,250,000 6,450,000
Net Calendar Year Adjustment 0 0 0 275,000 1,850,000 3,050,000 4,250,000 5,450,000
Contingent Adjustment:
Levelized Adjustment - Contract Yr 0 0 0 0 0 0 0 0
Maximum Adjustment Cap - Contract Yr 0 0 0 0 0 0 0 0
Unrecovered Amount - Contract Yr 0 0 0 0 0 0 0 0
Carry Over Adjustment - Contract Yr 0 0 0 0 0 0 0 0
Contingent Adjustment - Contract Yr 0 0 0 0 0 0 0 0
Net Calendar Year Adjustment 0 0 0 0 0 0 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-2011 Dec-2012
- ------------------------------------ -------- --------
<S> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) 0 0
Contract Year Adj (Appendix Q - Column 4) 7,650,000 8,850,000
Net Calendar Year Adjustment 6,650,000 7,850,000
Contingent Adjustment:
Levelized Adjustment - Contract Yr 0 0
Maximum Adjustment Cap - Contract Yr 0 0
Unrecovered Amount - Contract Yr 0 0
Carry Over Adjustment - Contract Yr 0 0
Contingent Adjustment - Contract Yr 0 0
Net Calendar Year Adjustment 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019
- ------------------------------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) 0 0 0 0 0 0 0
Contract Year Adj (Appendix Q - Column 4) 10,050,000 11,250,000 12,450,000 13,650,000 14,850,000 16,050,000 17,250,000
Net Calendar Year Adjustment 9,050,000 10,250,000 11,450,000 12,650,000 13,850,000 15,050,000 16,250,000
Contingent Adjustment:
Levelized Adjustment - Contract Yr 0 0 0 0 0 0 0
Maximum Adjustment Cap - Contract Yr 0 0 0 0 0 0 0
Unrecovered Amount - Contract Yr 0 0 0 0 0 0 0
Carry Over Adjustment - Contract Yr 0 0 0 0 0 0 0
Contingent Adjustment - Contract Yr 0 0 0 0 0 0 0
Net Calendar Year Adjustment 0 0 0 0 0 0 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended
Capacity Adjustments - Amendment #1: Dec-2020 Dec-2021
- ------------------------------------ -------- --------
<S> <C> <C>
Scheduled Adjustment:
Calendar Year Adj (Appendix Q - Column 2) 0 0
Contract Year Adj (Appendix Q - Column 4) 18,450,000 0
Net Calendar Year Adjustment 17,450,000 15,375,000
Contingent Adjustment:
Levelized Adjustment - Contract Yr 0 0
Maximum Adjustment Cap - Contract Yr 0 0
Unrecovered Amount - Contract Yr 0 0
Carry Over Adjustment - Contract Yr 0 0
Contingent Adjustment - Contract Yr 0 0
Net Calendar Year Adjustment 0 0
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Gas Supply Income Statement
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
FGRR (Unit #1) 1,443,217 8,017,460 8,346,535 8,675,610 9,034,600 9,393,591 9,752,582
FGMR (Unit #1) 342,036 2,144,352 3,550,871 4,157,164 4,883,200 5,741,242 5,891,987
IGR (Unit #2) 977,048 5,610,397 7,311,509 8,605,254 9,962,288 9,728,765 9,246,406
OR (Unit #2) 383,413 503,422 788,094 1,040,216 1,321,706 1,274,735 1,193,623
Firm Transportation Demand 420,603 2,561,473 2,599,895 2,638,893 2,678,477 2,718,654 2,759,434
3,566,316 18,837,104 22,596,903 25,117,136 27,880,271 28,856,987 28,844,031
Fuel Costs:
Firm Gas-Reserves(Unit #1) 1,117,283 6,289,569 6,553,093 6,831,337 7,125,181 7,362,630 7,711,235
Firm Gas - Market (Unit #1) 300,775 1,803,627 3,065,345 3,581,847 4,132,509 4,436,609 4,598,046
Interruptible Gas (Unit #2) 725,195 4,150,509 5,442,567 6,429,862 7,480,146 7,331,276 7,030,832
Delivered Fuel Oil (Unit #2) 356,314 473,256 743,664 984,892 1,256,097 1,208,896 1,136,065
Firm Transportation - Demand 420,603 2,561,473 2,599,895 2,638,893 2,678,477 2,718,654 2,759,434
Firm Transportation - Commodity 50,446 286,807 333,432 354,994 377,017 381,823 384,103
Firm Transportation - Fuel 47,785 277,891 326,339 353,351 382,020 400,493 418,044
Interruptible Transportation - Commodity 118,986 637,498 836,728 991,682 1,150,747 1,084,434 999,661
Interruptible Transportation - Fuel 23,729 145,740 189,830 223,516 259,327 254,469 244,445
IT Savings From FT Utilization - Commodity (118,986) (637,498) (836,728) (991,682) (1,150,747) (1,084,434) (999,661)
IT Savings From FT Utilization - Fuel (23,729) (145,740) (189,830) (223,516) (259,327) (254,469) (244,445)
Fuel Management Fee - Firm Gas 0 0 0 0 0 0 0
Fuel Management Fee - Interruptible Gas 0 0 0 0 0 0 0
WGL Balancing 2,678 2,740 13,216 16,868 20,709 21,532 21,595
Storage-In-Transit 0 0 0 0 0 0 0
Total Fuel Costs 3,021,079 15,845,872 19,077,551 21,192,044 23,452,156 23,861,913 24,059,354
</TABLE>
Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005
Revenues:
FGRR (Unit #1) 9,961,993 10,171,404 10,350,900
FGMR (Unit #1) 5,985,727 6,077,962 6,921,373
IGR (Unit #2) 9,756,260 10,294,127 11,012,758
OR (Unit #2) 1,272,469 1,355,802 1,564,270
Firm Transportation Demand 2,800,825 2,842,837 2,885,480
29,777,275 30,742,132 32,734,781
Fuel Costs:
Firm Gas-Reserves(Unit #1) 8,053,712 8,412,742 8,703,927
Firm Gas - Market (Unit #1) 4,716,555 4,835,720 5,490,970
Interruptible Gas (Unit #2) 7,491,753 7,982,339 8,612,716
Delivered Fuel Oil (Unit #2) 1,214,719 1,298,436 1,503,260
Firm Transportation - Demand 2,800,825 2,842,837 2,885,480
Firm Transportation - Commodity 383,579 383,149 397,597
Firm Transportation - Fuel 433,330 449,187 481,233
Interruptible Transportation - Commodity 1,029,801 1,060,968 1,104,258
Interruptible Transportation - Fuel 259,582 275,668 297,038
IT Savings From FT Utilization - Commodity(1,029,801) (1,060,968) (1,104,258)
IT Savings From FT Utilization - Fuel (259,582) (275,668) (297,038)
Fuel Management Fee - Firm Gas 0 0 0
Fuel Management Fee - Interruptible Gas 0 0 0
WGL Balancing 21,684 21,780 24,345
Storage-In-Transit 0 0 0
Total Fuel Costs 25,116,157 26,226,190 28,099,529
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010 Dec-2011 Dec-2012
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
FGRR (Unit #1) 10,560,311 10,769,722 11,009,049 11,218,461 11,427,872 4,852,276 0
FGMR (Unit #1) 7,375,187 7,573,864 7,805,664 8,050,360 8,574,761 16,665,144 23,559,238
IGR (Unit #2) 11,623,707 11,867,190 12,118,426 12,366,332 12,753,366 13,017,889 13,320,978
OR (Unit #2) 1,734,980 1,705,007 1,678,997 1,647,485 1,645,822 1,599,820 1,560,453
Firm Transportation Demand 2,928,762 2,972,694 3,017,284 3,062,543 3,108,481 3,155,109 3,202,435
34,222,948 34,888,477 35,629,420 36,345,181 37,510,302 39,290,239 41,643,104
Fuel Costs:
Firm Gas - Reserves (Unit #1) 8,924,606 9,320,286 9,732,854 10,163,042 10,522,178 4,568,567 0
Firm Gas - Market (Unit #1) 5,805,077 6,026,694 6,275,816 6,536,904 6,969,248 13,550,687 19,406,924
Interruptible Gas (Unit #2) 9,062,185 9,300,614 9,579,344 9,883,242 10,299,679 10,544,808 10,892,775
Delivered Fuel Oil (Unit #2) 1,646,396 1,611,505 1,586,921 1,561,810 1,564,903 1,516,435 1,484,468
Firm Transportation - Demand 2,928,762 2,972,694 3,017,284 3,062,543 3,108,481 3,155,109 3,202,435
Firm Transportation - Commodity 393,897 391,495 389,984 388,862 389,565 385,375 382,633
Firm Transportation - Fuel 499,529 520,448 542,853 566,252 592,892 613,778 645,162
Interruptible Transportation - Commodity 1,089,220 1,049,387 1,016,244 987,316 970,195 944,700 928,812
Interruptible Transportation - Fuel 311,864 319,707 328,961 339,092 353,114 361,526 373,482
IT Savings From FT Utilization - Commodity(1,089,220) (1,049,387) (1,016,244) (987,316) (970,195) (944,700) (928,812)
IT Savings From FT Utilization - Fuel (311,864) (319,707) (328,961) (339,092) (353,114) (361,526) (373,482)
Fuel Management Fee - Firm Gas 0 0 0 0 0 0 0
Fuel Management Fee - Interruptible Gas 0 0 0 0 0 0 0
WGL Balancing 23,811 22,769 22,052 21,524 21,692 20,265 19,411
Storage-In-Transit 0 0 0 0 0 0 0
Total Fuel Costs 29,284,264 30,166,505 31,147,108 32,184,179 33,468,638 34,355,024 36,033,808
</TABLE>
Year Ended Year Ended Year Ended
Dec-2013 Dec-2014 Dec-2015
Revenues:
FGRR (Unit #1) 0 0 0
FGMR (Unit #1) 24,504,792 25,971,074 26,843,104
IGR (Unit #2) 13,630,192 14,195,335 14,407,781
OR (Unit #2) 1,524,503 1,519,100 1,468,615
Firm Transportation Demand 3,250,472 3,299,229 3,348,717
42,909,958 44,984,738 46,068,217
Fuel Costs:
Firm Gas - Reserves (Unit #1) 0 0 0
Firm Gas - Market (Unit #1) 20,339,719 21,414,415 21,984,360
Interruptible Gas (Unit #2) 11,233,246 11,791,171 12,060,532
Delivered Fuel Oil (Unit #2) 1,453,512 1,451,951 1,407,343
Firm Transportation - Demand 3,250,472 3,299,229 3,348,717
Firm Transportation - Commodity 380,462 380,247 370,772
Firm Transportation - Fuel 676,343 712,213 731,260
Interruptible Transportation - Commodity 912,275 912,622 890,225
Interruptible Transportation - Fuel 385,201 404,399 413,707
IT Savings From FT Utilization - Commodity (912,275) (912,622) (890,225)
IT Savings From FT Utilization - Fuel (385,201) (404,399) (413,707)
Fuel Management Fee - Firm Gas 0 0 0
Fuel Management Fee - Interruptible Gas 0 0 0
WGL Balancing 18,513 18,610 17,225
Storage-In-Transit 0 0 0
Total Fuel Costs 37,352,266 39,067,835 39,920,209
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Total Contract
Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
FGRR (Unit #1) 0 0 0 0 0 0 144,985,582
FGMR (Unit #1) 27,812,826 28,857,807 29,966,410 31,582,358 32,731,962 28,042,023 381,612,487
IGR (Unit #2) 14,840,357 15,307,895 15,786,471 16,514,233 16,988,630 15,139,871 306,383,464
OR (Unit #2) 1,538,967 1,602,309 1,679,248 1,784,041 1,849,369 1,287,931 36,524,398
Firm Transportation Demand 3,398,948 3,449,932 3,501,681 3,554,207 3,607,520 3,051,360 76,815,945
47,591,098 49,217,943 50,933,810 53,434,838 55,177,481 47,521,185 946,321,876
Fuel Costs:
Firm Gas - Reserves (Unit #1) 0 0 0 0 0 0 121,392,244
Firm Gas - Market (Unit #1) 22,942,666 23,975,877 25,063,498 26,305,665 27,500,916 23,646,003 314,706,469
Interruptible Gas (Unit #2) 12,321,760 12,697,314 13,174,183 13,866,194 14,348,793 12,837,308 246,570,344
Delivered Fuel Oil (Unit #2) 1,456,571 1,508,946 1,584,975 1,688,102 1,754,289 1,218,062 34,671,789
Firm Transportation - Demand 3,398,948 3,449,932 3,501,681 3,554,207 3,607,520 3,051,360 76,815,945
Firm Transportation - Commodity 367,445 364,631 361,933 360,679 358,000 294,863 9,293,790
Firm Transportation - Fuel 763,141 797,517 833,705 875,035 914,805 793,646 14,648,250
Interruptible Transportation - Commodity 868,602 854,842 847,029 851,387 841,388 710,795 23,689,799
Interruptible Transportation - Fuel 422,189 434,556 450,385 473,536 489,482 441,264 8,475,810
IT Savings From FT Utilization - Commodity (868,602) (854,842) (847,029) (851,387) (841,388) (710,795) (23,689,799)
IT Savings From FT Utilization - Fuel (422,189) (434,556) (450,385) (473,536) (489,482) (441,264) (8,475,810)
Fuel Management Fee - Firm Gas 0 0 0 0 0 0 0
Fuel Management Fee - Interruptible Gas 0 0 0 0 0 0 0
WGL Balancing 15,267 13,775 12,687 12,294 11,036 11,076 449,153
Storage-In-Transit 0 0 0 0 0 0 0
Total Fuel Costs 41,265,798 42,807,991 44,532,662 46,662,176 48,495,357 41,852,318 818,547,984
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Gas Supply Assumptions
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Dispatch Hours:
Unit #1
Summer Hours (Jun-Sept) 0 1,297 1,435 1,476 1,516 1,514
Shoulder Hours (Mar-May & Oct-Nov) 338 1,353 1,465 1,618 1,771 1,788
Winter Hours (Dec-Feb) 277 832 1,123 1,155 1,187 1,173
Total Unit #1 Hours 616 3,482 4,024 4,249 4,474 4,475
Unit #2
Summer Hours (Jun-Sept) 0 1,020 1,135 1,213 1,292 1,294
Shoulder Hours (Mar-May & Oct-Nov) 111 722 1,020 1,245 1,470 1,270
Winter Hours (Dec-Feb) 309 412 627 785 944 861
420 2,154 2,782 3,244 3,705 3,425
Gas & Fuel Oil Volumes (DT's):
Firm Transportation Fuel % Daily Yr 1
Demand Volumes at Wellhead - 24,824 1,510,138 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 0.00% 24,824 1,510,138 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 2.41% 24,240 1,474,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 1.00% 24,000 1,460,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000
Unit #1 - FGRR Supply 78% 75% 65% 62% 59% 58%
FGRR Volumes at Wellhead - 7,064 475,577 2,578,297 2,586,947 2,596,878 2,608,091 2,590,471
FGRR Volumes through ANR 0.00% 7,064 475,577 2,578,297 2,586,947 2,596,878 2,608,091 2,590,471
FGRR Volumes through Columbia Gas 2.41% 6,898 464,385 2,517,622 2,526,069 2,535,766 2,546,715 2,529,510
FGRR Volumes through CLNG & WGL 1.00% 6,829 459,787 2,492,696 2,501,058 2,510,660 2,521,500 2,504,465
Unit #1 - FGMR Supply 22% 25% 35% 38% 41% 42%
FGMR Volumes at Wellhead - 2,330 131,379 850,507 1,373,695 1,592,701 1,812,570 1,857,384
FGMR Volumes through ANR 0.00% 2,330 131,379 850,507 1,373,695 1,592,701 1,812,570 1,857,384
FGMR Volumes through Columbia Gas 2.41% 2,275 128,287 830,492 1,341,368 1,555,220 1,769,915 1,813,674
FGMR Volumes through CLNG & WGL 1.00% 2,253 127,017 822,270 1,328,087 1,539,822 1,752,391 1,795,717
Unit #2 - IGR Supply 80% 95% 94% 94% 93% 93%
IGR Volumes Dlvd Columbia - 5,451 329,985 1,989,501 2,544,385 2,956,990 3,370,350 3,151,621
IGR Volumes Dlvd to CLNG 2.41% 5,322 322,220 1,942,682 2,484,508 2,887,404 3,291,036 3,077,455
IGR Volumes Dlvd to Wash Gas 1.00% 5,270 319,030 1,923,447 2,459,909 2,858,816 3,258,452 3,046,985
IGR Volumes Dlvd to Brandywine 0.00% 5,270 319,030 1,923,447 2,459,909 2,858,816 3,258,452 3,046,985
Unit #2 - OR Supply 20% 5% 6% 6% 7% 7%
OR Volumes Delivered to Plant 77,398 103,488 157,119 196,898 237,770 219,322
</TABLE>
<PAGE>
Year Ended
Dec-2002
--------
Dispatch Hours:
Unit #1
Summer Hours (Jun-Sept) 1,511
Shoulder Hours (Mar-May & Oct-Nov) 1,806
Winter Hours (Dec-Feb) 1,159
Total Unit #1 Hours 4,476
Unit #2
Summer Hours (Jun-Sept) 1,297
Shoulder Hours (Mar-May & Oct-Nov) 1,070
Winter Hours (Dec-Feb) 778
3,145
Gas & Fuel Oil Volumes (DT's):
Firm Transportation
Demand Volumes at Wellhead 9,060,827
Demand Volumes through ANR 9,060,827
Demand Volumes through Columbia Gas 8,847,600
Demand Volumes through CLNG & WGL 8,760,000
Unit #1 - FGRR Supply 59%
FGRR Volumes at Wellhead 2,608,091
FGRR Volumes through ANR 2,608,091
FGRR Volumes through Columbia Gas 2,546,715
FGRR Volumes through CLNG & WGL 2,521,500
Unit #1 - FGMR Supply 41%
FGMR Volumes at Wellhead 1,837,033
FGMR Volumes through ANR 1,837,033
FGMR Volumes through Columbia Gas 1,793,802
FGMR Volumes through CLNG & WGL 1,776,042
Unit #2 - IGR Supply 93%
IGR Volumes Dlvd Columbia 2,885,476
IGR Volumes Dlvd to CLNG 2,817,572
IGR Volumes Dlvd to Wash Gas 2,789,676
IGR Volumes Dlvd to Brandywine 2,789,676
Unit #2 - OR Supply 7%
OR Volumes Delivered to Plant 197,552
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2003 Dec-2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Dispatch Hours:
Unit #1
Summer Hours (Jun-Sept) 1,475 1,439 1,483 1,527 1,504 1,484 1,465
Shoulder Hours (Mar-May & Oct-Nov) 1,791 1,776 1,786 1,797 1,772 1,749 1,727
Winter Hours (Dec-Feb) 1,166 1,173 1,181 1,189 1,174 1,161 1,149
Total Unit #1 Hours 4,432 4,388 4,450 4,513 4,450 4,393 4,342
Unit #2
Summer Hours (Jun-Sept) 1,227 1,157 1,198 1,238 1,205 1,172 1,141
Shoulder Hours (Mar-May & Oct-Nov) 1,159 1,247 1,163 1,078 1,026 976 928
Winter Hours (Dec-Feb) 798 818 886 955 903 854 808
3,184 3,222 3,247 3,271 3,133 3,002 2,877
Gas & Fuel Oil Volumes (DT's):
Firm Transportation
Demand Volumes at Wellhead 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000
Unit #1 - FGRR Supply 59% 60% 58% 58% 59% 60% 61%
FGRR Volumes at Wellhead 2,618,663 2,629,876 2,616,100 2,579,258 2,590,151 2,601,043 2,611,936
FGRR Volumes through ANR 2,618,663 2,629,876 2,616,100 2,579,258 2,590,151 2,601,043 2,611,936
FGRR Volumes through Columbia Gas 2,557,039 2,567,987 2,554,536 2,518,561 2,529,197 2,539,833 2,550,469
FGRR Volumes through CLNG & WGL 2,531,721 2,542,562 2,529,244 2,493,625 2,504,156 2,514,686 2,525,217
Unit #1 - FGMR Supply 41% 40% 42% 42% 41% 40% 39%
FGMR Volumes at Wellhead 1,791,187 1,745,896 1,894,480 1,859,486 1,791,899 1,734,623 1,681,921
FGMR Volumes through ANR 1,791,187 1,745,896 1,894,480 1,859,486 1,791,899 1,734,623 1,681,921
FGMR Volumes through Columbia Gas 1,749,035 1,704,810 1,849,897 1,815,727 1,749,731 1,693,802 1,642,341
FGMR Volumes through CLNG & WGL 1,731,718 1,687,931 1,831,582 1,797,749 1,732,407 1,677,032 1,626,080
Unit #2 - IGR Supply 93% 93% 93% 92% 92% 92% 93%
IGR Volumes Dlvd Columbia 2,920,862 2,957,248 3,038,369 2,958,563 2,817,359 2,696,773 2,589,507
IGR Volumes Dlvd to CLNG 2,852,125 2,887,655 2,966,868 2,888,940 2,751,058 2,633,310 2,528,569
IGR Volumes Dlvd to Wash Gas 2,823,886 2,859,065 2,937,493 2,860,336 2,723,820 2,607,238 2,503,533
IGR Volumes Dlvd to Brandywine 2,823,886 2,859,065 2,937,493 2,860,336 2,723,820 2,607,238 2,503,533
Unit #2 - OR Supply 7% 7% 7% 8% 8% 8% 7%
OR Volumes Delivered to Plant 202,474 207,470 230,270 241,838 226,956 214,294 202,234
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Dec-2010 Dec-2011 Dec-2012
-------- -------- --------
<S> <C> <C> <C>
Dispatch Hours:
Unit #1
Summer Hours (Jun-Sept) 1,450 1,434 1,420
Shoulder Hours (Mar-May & Oct-Nov) 1,708 1,678 1,651
Winter Hours (Dec-Feb) 1,140 1,112 1,086
Total Unit #1 Hours 4,297 4,224 4,157
Unit #2
Summer Hours (Jun-Sept) 1,110 1,101 1,093
Shoulder Hours (Mar-May & Oct-Nov) 883 852 821
Winter Hours (Dec-Feb) 764 717 672
2,757 2,669 2,586
Gas & Fuel Oil Volumes (DT's):
Firm Transportation
Demand Volumes at Wellhead 9,060,827 9,060,827 9,060,827
Demand Volumes through ANR 9,060,827 9,060,827 9,060,827
Demand Volumes through Columbia Gas 8,847,600 8,847,600 8,847,600
Demand Volumes through CLNG & WGL 8,760,000 8,760,000 8,760,000
Unit #1 - FGRR Supply 61% 26% 0%
FGRR Volumes at Wellhead 2,600,723 1,086,012 0
FGRR Volumes through ANR 2,600,723 1,086,012 0
FGRR Volumes through Columbia Gas 2,539,520 1,060,455 0
FGRR Volumes through CLNG & WGL 2,514,377 1,049,956 0
Unit #1 - FGMR Supply 39% 74% 100%
FGMR Volumes at Wellhead 1,671,559 3,111,349 4,138,784
FGMR Volumes through ANR 1,671,559 3,111,349 4,138,784
FGMR Volumes through Columbia Gas 1,632,222 3,038,130 4,041,387
FGMR Volumes through CLNG & WGL 1,616,062 3,008,049 4,001,373
Unit #2 - IGR Supply 93% 93% 93%
IGR Volumes Dlvd Columbia 2,515,142 2,423,102 2,357,074
IGR Volumes Dlvd to CLNG 2,455,953 2,366,079 2,301,605
IGR Volumes Dlvd to Wash Gas 2,431,637 2,342,653 2,278,817
IGR Volumes Dlvd to Brandywine 2,431,637 2,342,653 2,278,817
Unit #2 - OR Supply 7% 7% 7%
OR Volumes Delivered to Plant 194,316 180,540 169,463
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021
-------- -------- -------- -------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dispatch Hours:
Unit #1
Summer Hours (Jun-Sept) 1,406 1,392 1,379 1,361 1,344 1,327 1,311 1,295 1,295
Shoulder Hours (Mar-May &
Oct-Nov) 1,627 1,607 1,589 1,552 1,519 1,489 1,462 1,439 1,079
Winter Hours (Dec-Feb) 1,064 1,044 1,027 1,011 995 980 965 951 634
Total Unit #1 Hours 4,097 4,043 3,996 3,925 3,858 3,796 3,739 3,685 3,008
Unit #2
Summer Hours (Jun-Sept) 1,084 1,076 1,068 1,046 1,024 1,002 981 960 960
Shoulder Hours (Mar-May &
Oct-Nov) 792 763 736 705 676 647 620 594 446
Winter Hours (Dec-Feb) 631 591 555 557 560 563 565 568 379
2,507 2,431 2,359 2,308 2,259 2,212 2,166 2,123 1,785
Gas & Fuel Oil Volumes (DT's):
Firm Transportation
Demand Volumes at Wellhead 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 7,550,689
Demand Volumes through ANR 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 9,060,827 7,550,689
Demand Volumes through
Columbia Gas 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 8,847,600 7,373,000
Demand Volumes through
CLNG & WGL 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 8,760,000 7,300,000
Unit #1 - FGRR Supply 0% 0% 0% 0% 0% 0% 0% 0% 0%
FGRR Volumes at Wellhead 0 0 0 0 0 0 0 0 0
FGRR Volumes through ANR 0 0 0 0 0 0 0 0 0
FGRR Volumes through
Columbia Gas 0 0 0 0 0 0 0 0 0
FGRR Volumes through
CLNG & WGL 0 0 0 0 0 0 0 0 0
Unit #1 - FGMR Supply 100% 100% 100% 100% 100% 100% 100% 100% 100%
FGMR Volumes at Wellhead 4,086,799 4,056,059 3,927,327 3,864,719 3,808,022 3,753,002 3,713,304 3,659,278 2,992,198
FGMR Volumes through ANR 4,086,799 4,056,059 3,927,327 3,864,719 3,808,022 3,753,002 3,713,304 3,659,278 2,992,198
FGMR Volumes through
Columbia Gas 3,990,625 3,960,608 3,834,906 3,773,771 3,718,408 3,664,683 3,625,919 3,573,165 2,921,784
FGMR Volumes through
CLNG & WGL 3,951,114 3,921,394 3,796,937 3,736,407 3,681,592 3,628,399 3,590,019 3,537,787 2,892,855
Unit #2 - IGR Supply 93% 94% 94% 94% 93% 93% 93% 93% 94%
IGR Volumes Dlvd Columbia 2,290,522 2,267,044 2,187,728 2,105,782 2,044,168 1,997,922 1,980,760 1,930,468 1,640,723
IGR Volumes Dlvd to CLNG 2,236,620 2,213,694 2,136,245 2,056,227 1,996,063 1,950,905 1,934,147 1,885,039 1,602,112
IGR Volumes Dlvd to Wash Gas 2,214,475 2,191,776 2,115,094 2,035,868 1,976,300 1,931,589 1,914,997 1,866,375 1,586,250
IGR Volumes Dlvd to Brandywine 2,214,475 2,191,776 2,115,094 2,035,868 1,976,300 1,931,589 1,914,997 1,866,375 1,586,250
Unit #2 - OR Supply 7% 6% 6% 6% 7% 7% 7% 7% 6%
OR Volumes Delivered to Plant 159,080 152,358 141,598 140,498 139,547 140,514 143,473 142,947 95,158
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Gas Supply Assumptions
<TABLE>
<CAPTION>
Year Ended
Dec1996 Dec1997 Dec1998 Dec1999 Dec2000 Dec2001 Dec-2002
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fuel Compensation Price:
FGRR - PPI Oil and Gas Field Services
Fixed Contract Price Jun-94 May-96 Nov-96 $2.58 $2.68 $2.79 $2.90 $3.02 $3.14 $3.26
Adjusted Contract Price 103.20 115.80 117.81 $2.95 $3.06 $3.18 $3.31 $3.45 $3.58 $3.72
FGMR - Base Yr May-96
Commodity Index - Summer 6.46 0.00 4.00% 7.40 7.54 7.68 7.77 7.91 8.33 8.76
Commodity Index - Shoulder 6.46 0.00 4.00% 7.89 8.03 8.18 8.29 8.43 8.88 9.34
Commodity Index - Winter 6.46 0.00 4.00% 8.37 8.53 8.69 8.80 8.96 9.42 9.91
Transportation Index 129.9 156.6 3.00% 159.3 164.1 169.0 174.1 179.3 184.7 190.2
Contract Discount 1.206 90% 90% 90% 90% 92% 100% 100%
Calculated FGMR - Summer $2.29 $0.58 $2.35 $2.39 $2.44 $2.47 $2.56 $2.91 $3.05
Calculated FGMR - Shoulder $2.29 $0.58 $2.47 $2.51 $2.56 $2.59 $2.69 $3.06 $3.20
Calculated FGMR - Winter $2.29 $0.58 $2.59 $2.63 $2.68 $2.72 $2.82 $3.21 $3.36
IGR -
Calculated FGMR - Summer $2.29 $0.73 $2.61 $2.65 $2.70 $2.74 $2.79 $2.90 $3.03
Calculated FGMR - Shoulder $2.29 $0.73 $2.73 $2.78 $2.83 $2.87 $2.92 $3.04 $3.17
Calculated FGMR - Winter $2.29 $0.40 $2.90 $2.96 $3.01 $3.05 $3.11 $3.25 $3.41
OR -
Oil Index 151 179 178 184 195 206 215 224
Calculated OR $3.89 $4.60 $4.57 $4.73 $5.00 $5.28 $5.51 $5.75
Fuel Costs: Escalation
Firm Gas - Contract Price (Unit #1) 4.00% $2.43 $2.52 $2.62 $2.72 $2.83 $2.94 $3.06
Firm Gas - Market Price (Unit #1) Index Cost Options Option
Spot Price - Summer 1 - NGC - Columbia Gas 7 $1.90 $1.94 $1.98 $2.00 $2.04 $2.14 $2.25
Spot Price - Shoulder 2 - NGC - Tenn Gas 7 $2.05 $2.09 $2.13 $2.16 $2.20 $2.31 $2.43
Spot Price - Winter 3 - NGI - Columbia Gas 2 $1.99 $2.02 $2.06 $2.08 $2.12 $2.23 $2.35
FGMR Premium - Summer 4 - NGW - Columbia Gas $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Shoulder 5 - Blended (Gulf & Appl) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Winter 6 - Gulf Coast Avg $0.55 $0.55 $0.55 $0.55 $0.55 $0.56 $0.56
Firm Gas Market Cost - Weighted Avg 7 - Appalachian Avg $2.12 $2.16 $2.20 $2.22 $2.26 $2.37 $2.49
Interruptible Gas (Unit #2) Option
Spot Price - Summer 7 $1.90 $1.94 $1.98 $2.00 $2.04 $2.14 $2.25
Spot Price - Shoulder 7 $2.05 $2.09 $2.13 $2.16 $2.20 $2.31 $2.43
Spot Price - Winter 7 $2.20 $2.24 $2.28 $2.31 $2.36 $2.48 $2.61
IGR Premium - Summer $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Shoulder $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Winter $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Interruptible Gas Cost - Weighted Average $2.09 $2.13 $2.17 $2.19 $2.23 $2.35 $2.47
Delivered Fuel Oil (Unit #2) $4.60 $4.57 $4.73 $5.00 $5.28 $5.51 $5.75
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
Dec-2003 Dec2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010 Dec-2011 Dec-2012
-------- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fuel Compensation Price:
FGRR -
Fixed Contract Price $3.33 $3.40 $3.46 $3.53 $3.60 $3.68 $3.75 $3.82 $3.90 $3.98
Adjusted Contract Price $3.80 $3.88 $3.95 $4.03 $4.11 $4.20 $4.28 $4.36 $4.45 $4.54
FGMR -
Commodity Index - Summer 9.22 9.70 10.20 11.05 11.96 12.91 13.92 14.98 15.96 17.00
Commodity Index - Shoulder 9.82 10.33 10.86 11.77 12.72 13.73 14.79 15.92 16.96 18.05
Commodity Index - Winter 10.43 10.96 11.52 12.48 13.49 14.55 15.67 16.85 17.95 19.11
Transportation Index 195.9 201.8 207.9 214.1 220.5 227.2 234.0 241.0 248.2 255.7
Contract Discount 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Calculated FGMR - Summer $3.18 $3.32 $3.47 $3.72 $3.98 $4.25 $4.54 $4.85 $5.13 $5.43
Calculated FGMR - Shoulder $3.35 $3.50 $3.65 $3.91 $4.19 $4.48 $4.78 $5.10 $5.40 $5.72
Calculated FGMR - Winter $3.51 $3.67 $3.84 $4.11 $4.40 $4.70 $5.02 $5.36 $5.67 $6.01
IGR -
Calculated FGMR - Summer $3.16 $3.29 $3.43 $3.67 $3.91 $4.17 $4.44 $4.72 $4.99 $5.27
Calculated FGMR - Shoulder $3.31 $3.45 $3.60 $3.85 $4.10 $4.37 $4.66 $4.96 $5.24 $5.54
Calculated FGMR - Winter $3.57 $3.74 $3.91 $4.21 $4.52 $4.84 $5.19 $5.55 $5.89 $6.24
OR -
Oil Index 234 244 254 265 276 288 301 313 327 341
Calculated OR $6.00 $6.26 $6.53 $6.81 $7.10 $7.41 $7.72 $8.05 $8.40 $8.76
Fuel Costs:
- -----------
Firm Gas - Contract Price (Unit #1) $3.18 $3.31 $3.44 $3.58 $3.72 $3.87 $4.02 $4.18 $4.35 $4.53
Firm Gas - Market Price (Unit #1)
Spot Price - Summer $2.37 $2.49 $2.62 $2.84 $3.07 $3.31 $3.56 $3.83 $4.08 $4.34
Spot Price - Shoulder $2.55 $2.68 $2.82 $3.05 $3.29 $3.55 $3.82 $4.10 $4.37 $4.65
Spot Price - Winter $2.47 $2.60 $2.74 $2.97 $3.22 $3.48 $3.76 $4.05 $4.32 $4.60
FGMR Premium - Summer $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Shoulder $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Winter $0.57 $0.57 $0.58 $0.58 $0.59 $0.59 $0.60 $0.60 $0.61 $0.61
Firm Gas Market Cost - Weighted Average $2.61 $2.74 $2.88 $3.11 $3.35 $3.60 $3.87 $4.15 $4.41 $4.69
Interruptible Gas (Unit #2)
Spot Price - Summer $2.37 $2.49 $2.62 $2.84 $3.07 $3.31 $3.56 $3.83 $4.08 $4.34
Spot Price - Shoulder $2.55 $2.68 $2.82 $3.05 $3.29 $3.55 $3.82 $4.10 $4.37 $4.65
Spot Price - Winter $2.74 $2.88 $3.02 $3.27 $3.52 $3.79 $4.08 $4.38 $4.66 $4.96
IGR Premium - Summer $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Shoulder $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Winter $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Interruptible Gas Cost - Weighted Average $2.59 $2.72 $2.85 $3.08 $3.33 $3.58 $3.85 $4.13 $4.40 $4.67
Delivered Fuel Oil (Unit #2) $6.00 $6.26 $6.53 $6.81 $7.10 $7.41 $7.72 $8.05 $8.40 $8.76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December
2013 2014 2015 2016 2017 2018 2019 2020 2021
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fuel Compensation Price:
FGRR -
Fixed Contract Price $4.06 $4.14 $4.22 $4.30 $4.38 $4.46 $4.54 $4.62 $4.70
Adjusted Contract Price $4.63 $4.73 $4.82 $4.91 $5.00 $5.09 $5.18 $5.27 $5.37
FGMR -
Commodity Index - Summer 18.09 19.23 20.44 21.71 23.07 24.51 26.05 27.68 29.41
Commodity Index - Shoulder 19.21 20.42 21.69 23.04 24.48 26.00 27.62 29.35 31.18
Commodity Index - Winter 20.32 21.60 22.94 24.37 25.88 27.49 29.20 31.02 32.95
Transportation Index 263.3 271.2 279.4 287.8 296.4 305.3 314.4 323.9 333.6
Contract Discount 100% 100% 100% 100% 100% 100% 100% 100% 100%
Calculated FGMR - Summer $5.74 $6.07 $6.42 $6.78 $7.17 $7.58 $8.02 $8.49 $8.98
Calculated FGMR - Shoulder $6.05 $6.39 $6.76 $7.15 $7.56 $7.99 $8.45 $8.94 $9.46
Calculated FGMR - Winter $6.35 $6.72 $7.10 $7.51 $7.94 $8.40 $8.88 $9.40 $9.95
IGR -
Calculated FGMR - Summer $5.57 $5.87 $6.20 $6.54 $6.91 $7.29 $7.70 $8.14 $8.60
Calculated FGMR - Shoulder $5.85 $6.17 $6.51 $6.88 $7.26 $7.67 $8.10 $8.56 $9.04
Calculated FGMR - Winter $6.62 $7.01 $7.42 $7.86 $8.32 $8.81 $9.33 $9.89 $10.48
OR -
Oil Index 356 371 387 404 421 439 458 478 498
Calculated OR $9.14 $9.53 $9.94 $10.37 $10.81 $11.28 $11.77 $12.27 $12.80
Fuel Costs:
Firm Gas - Contract Price (Unit #1) $4.71 $4.89 $5.09 $5.29 $5.51 $5.73 $5.95 $6.19 $6.44
Firm Gas - Market Price (Unit #1)
Spot Price - Summer $4.61 $4.90 $5.21 $5.53 $5.87 $6.24 $6.63 $7.04 $7.48
Spot Price - Shoulder $4.94 $5.25 $5.57 $5.91 $6.28 $6.67 $7.08 $7.51 $7.98
Spot Price - Winter $4.90 $5.21 $5.54 $5.89 $6.26 $6.65 $7.07 $7.52 $7.99
FGMR Premium - Summer $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Shoulder $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
FGMR Premium - Winter $0.62 $0.62 $0.63 $0.63 $0.64 $0.64 $0.65 $0.65 $0.66
Firm Gas Market Cost - Weighted Average $4.97 $5.28 $5.60 $5.94 $6.30 $6.68 $7.09 $7.52 $7.98
Interruptible Gas (Unit #2)
Spot Price - Summer $4.61 $4.90 $5.21 $5.53 $5.87 $6.24 $6.63 $7.04 $7.48
Spot Price - Shoulder $4.94 $5.25 $5.57 $5.91 $6.28 $6.67 $7.08 $7.51 $7.98
Spot Price - Winter $5.27 $5.59 $5.93 $6.30 $6.68 $7.09 $7.53 $7.99 $8.48
IGR Premium - Summer $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Shoulder $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
IGR Premium - Winter $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Interruptible Gas Cost - Weighted Average $4.96 $5.27 $5.59 $5.93 $6.30 $6.68 $7.09 $7.52 $7.99
Delivered Fuel Oil (Unit #2) $9.14 $9.53 $9.94 $10.37 $10.81 $11.28 $11.77 $12.27 $12.80
</TABLE>
<PAGE>
Panda-Brandywine L.P.
230MW PEPCO Project
Gas Supply Assumptions
<TABLE>
<CAPTION>
Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000 Dec-2001 Dec-2002
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation:
ANR Tariff Rates 1996 Rate Escalation
Demand $0.0000 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Commodity $0.0000 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand $0.2632 1.50% $0.26 $0.27 $0.27 $0.28 $0.28 $0.28 $0.29
Commodity $0.0267 1.50% $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only $0.0222 1.50% $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.02
Commodity - CLNG & WGL $0.0590 0.25% $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Interruptible Transportation:
- -----------------------------
Columbia Gas Tarriff Rates 1996 Rate
Commodity - Summer $0.221 1.50% $0.22 $0.22 $0.23 $0.23 $0.23 $0.24 $0.24
Commodity - Shoulder $0.271 1.50% $0.27 $0.27 $0.28 $0.28 $0.29 $0.29 $0.30
Commodity - Winter $0.310 1.50% $0.31 $0.31 $0.32 $0.32 $0.33 $0.33 $0.34
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
Columbia (Cove Point)
LNG Tarriff Rates
Commodity - Summer $0.023 1.50% $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.03
Commodity - Shoulder $0.023 1.50% $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.03
Commodity - Winter $0.023 1.50% $0.02 $0.02 $0.02 $0.02 $0.02 $0.02 $0.03
Fuel % 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer $0.050 0.00% $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Shoulder $0.050 0.00% $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Winter $0.050 0.00% $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Management Fee & SIT:
- ---------------------
Fuel Management Fee -
Firm Gas $0.000 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel Management Fee -
Interruptible Gas $0.000 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
WGL Balancing $0.050 2.50% $0.05 $0.05 $0.05 $0.05 $0.06 $0.06 $0.06
Storage-In-Transit $0.050 2.50% $0.05 $0.05 $0.05 $0.05 $0.06 $0.06 $0.06
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
Dec-2003 Dec2004 Dec-2005 Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010 Dec-2011 Dec-2012
-------- ------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation:
ANR Tariff Rates
Demand $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Commodity $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand $0.29 $0.30 $0.30 $0.31 $0.31 $0.31 $0.32 $0.32 $0.33 $0.33
Commodity $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only $0.02 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - CLNG & WGL $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer $0.25 $0.25 $0.25 $0.26 $0.26 $0.26 $0.27 $0.27 $0.28 $0.28
Commodity - Shoulder $0.30 $0.30 $0.31 $0.31 $0.32 $0.32 $0.33 $0.33 $0.34 $0.34
Commodity - Winter $0.34 $0.35 $0.35 $0.36 $0.36 $0.37 $0.38 $0.38 $0.39 $0.39
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41
Columbia (Cove Point) LNG Tarriff Rates
Commodity - Summer $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - Shoulder $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - Winter $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Shoulder $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Winter $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Management Fee & SIT:
Fuel Management Fee - Firm Gas $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel Management Fee - Interruptible Gas $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
WGL Balancing $0.06 $0.06 $0.06 $0.06 $0.07 $0.07 $0.07 $0.07 $0.07 $0.07
Storage-In-Transit $0.06 $0.06 $0.06 $0.06 $0.07 $0.07 $0.07 $0.07 $0.07 $0.07
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended
Dec-2013 Dec-2014 Dec-2015 Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021
-------- ----------------------------------- ----------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Firm Transportation:
ANR Tariff Rates
Demand $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Commodity $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Columbia Gas Tarriff Rates
Demand $0.34 $0.34 $0.35 $0.35 $0.36 $0.37 $0.37 $0.38 $0.38
Commodity $0.03 $0.03 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04 $0.04
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
CLNG & WGL Contract Rates
Demand - CLNG Only $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - CLNG & WGL $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06 $0.06
Fuel % - CLNG Only 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Interruptible Transportation:
Columbia Gas Tarriff Rates
Commodity - Summer $0.28 $0.29 $0.29 $0.30 $0.30 $0.31 $0.31 $0.32 $0.32
Commodity - Shoulder $0.35 $0.35 $0.36 $0.36 $0.37 $0.38 $0.38 $0.39 $0.39
Commodity - Winter $0.40 $0.40 $0.41 $0.42 $0.42 $0.43 $0.44 $0.44 $0.45
Fuel % 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41% 2.41%
Columbia (Cove Point)
LNG Tarriff Rates
Commodity - Summer $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - Shoulder $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Commodity - Winter $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
Fuel % 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Washington Gas Contract Rates
Commodity - Summer $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Shoulder $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Commodity - Winter $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05 $0.05
Fuel % 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Management Fee & SIT:
Fuel Management Fee -
Firm Gas $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Fuel Management Fee -
Interruptible Gas $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
WGL Balancing $0.08 $0.08 $0.08 $0.08 $0.08 $0.09 $0.09 $0.09 $0.09
Storage-In-Transit $0.08 $0.08 $0.08 $0.08 $0.08 $0.09 $0.09 $0.09 $0.09
</TABLE>
<PAGE>
January 10, 1997
Panda Funding Corporation
Panda Interfunding Corporation
4100 Spring Valley, Suite 1001
Dallas, TX 75244
SUBJECT: Independent Panda-Brandywine Pro Forma Projections
Dear Sirs:
On July 26, 1996, ICF Resources issued the report
Independent Panda-Brandywine Pro Forma Projections (the "July
Brandywine Pro Forma Report"). Between July 26, 1996 and January
10, 1997, certain events have occurred that have affected the
assumptions on which the pro forma projections in July Brandywine
Pro Forma Report were based.
This Update Report describes how certain assumptions bearing
on the Panda-Brandywine pro forma projections have been updated
and provides the results of the updated pro forma model. This
Update Report discusses only those assumptions that have been
changed since the completion of the July Brandywine Pro Forma
Report. We refer the reader to that report for a full
description of the assumptions in the pro forma model.
In the preparation of this Update Report and the opinions
that follow, we have made certain assumptions with respect to
conditions that may exist or events that may occur in the future.
Although we believe these assumptions to be reasonable for the
purpose of this Update Report, they are dependent on future
events, and actual conditions may differ from those assumed. In
addition, we have used and relied upon certain information
provided to us by sources that we believe to be reliable;
however, we make no assurances as to the accuracy of any such
information or any conclusions based thereon. To the extent
that actual future conditions differ from those assumed herein,
the actual results will vary from those forecast. This Update
Report summarizes our work up to the date hereof; changed
conditions occurring or becoming known after such date could
affect the material presented.
Updated Assumptions
Project Assumptions
1. Brandywine's capacity payments are fixed at 5.54 percent
above the schedule provided in the PPA, Appendix L, based on the
actual escalation of the Gross National Product ("GNP") between
June 1, 1994 and the Actual Commercial Operation Date.
2. The capacity payment adjustment factor based upon 12-year T-
Bill rates is fixed at 7.94 percent using the 12-year T-Bill rate
on October 6, 1994, GECC's initial commitment date for permanent
financing. Brandywine is currently in a dispute with PEPCO over
the T-Bill rate which should be used for this adjustment factor.
PEPCO's position on this issue designates a T-Bill rate of 6.40
percent which was the effective rate on the closing date of the
conversion to permanent financing in the form of a leveraged
lease. If the rate was established in favor of PEPCO ("the PEPCO
Scenario") it would have a material adverse effect on the amount
of capacity payments received by the project and the net cash
flow from the Project (see conclusion).
3. Commercial operations under the Brandywine Construction
Contract with Raytheon occurred on September 30, 1996. Under
such assumptions bonuses paid during 1997 will be $2.12 million
greater than in the July 26, 1996 report; however, Raytheon would
not be entitled to the early completion bonus of $880,000 that it
claims and Brandywine disputes which would be payable during
1997.
4. PEPCO's system peak load exceeds the threshold level of
5,697 MW in 1997. PEPCO's (unadjusted) system peak load was
5,732 MW in August 1995. It should be noted that PEPCO's
forecasted weather-normalized peak load does not reach the
threshold level until the year 2000.
5. Changes associated with the proposed PEPCO/Baltimore Gas &
Electric merger for the purposes of determining PEPCO's peak
capacity, will not affect the pro forma's assumptions regarding
the capacity payment adjustment.
Operating Assumptions
1. Brandywine will be dispatched as projected in the updated
ICF Resources Dispatchability Analysis.
2. Brandywine's fuel costs will be consistent with those used
in our updated ICF Resources Dispatchability Analysis.
3. Balancing costs and capacity release revenues will be
consistent with those described in Panda-Brandywine, L.P.
Generating Facility Fuel Consultant's Report dated July 2, 1996
with a Supplement Update dated January 10, 1997, prepared by: C C
Pace Resources, Inc.
4. Brandywine's Firm Gas Reserve Rate ("FGRR") has been fixed
at 8.53 percent above the fixed price stream provided in Appendix
M of the PPA based on the actual escalation of the Producer Price
Index ("PPI") for Oil and Gas Field Services between June 1, 1994
and the October 1996.
5. Unit availability will be consistent with the availability
estimates confirmed in the PES Report, Independent Engineer's
Report: Panda-Brandywine Cogeneration Project dated July 22,
1996, and supplemented by an Update Report dated January 10,
1997 (as so supplemented the "Brandywine Engineering Report").
6. The Consumer Price Index escalator used for the
transportation portion of Brandywine's Firm Gas Market Rate
("FGMR") and Interruptible Gas Rate ("IGR") is 158.3 as of
October 1, 1996 (versus 129.9 in June 1990). The Project Pro
Forma assumes a 3.0 percent annual escalator after May 31, 1996.
7. Brandywine operating expenses will be consistent with its
updated 1996-1997 operating budget, inflated annually, where
appropriate, by the change in the GNP escalator.
8. Brandywine will maintain an additonal $1 million in spare
parts inventory purchased in 1997, consistent with the
recommendations of PES.
Steam Sales Assumptions
1. Brandywine Water Company's sales will occur on average 150
days per year.
Financing Assumptions
1. The lease payments reflect the closing of the leveraged
lease transaction with GE Capital effective December 30, 1996 and
the schedule of lease payments included in the lease agreement.
2. The interest rate on Brandywine's reserve balances will be 5
percent.
Conclusions
Set forth below are the principal opinions that we have
reached regarding our review of the Project. For a complete
understanding of the estimates, assumptions and calculations upon
which these opinions are based, this letter, including the
attached Project Pro Forma, and the July Brandywine Pro Forma
Report should be read in their entirety. On the basis of our
review and analyses of the Project and the assumptions set forth
in this Report, we are of the opinion that:
1. The financial projections in the Project Pro Forma provide a
reasonable reflection of the Project's expected costs, revenues
and cash flows.
2. The energy and capacity revenue calculations contained in
the Project Pro Forma are appropriate and consistent with the
PPA., and are not dependent upon the outcome of the current
dispute between Brandywine and PEPCO regarding the basis for the
determination of PEPCO's system peak load.
3. The Project's net cash flow will average approximately $24.4
million per year, reflecting a range of $6.6 million in 1998 to
$43.0 million in 2016. Under the PEPCO Scenario, the Project's
net cash flow will average approximately $19.6 million per year,
reflecting a range of $1.7 million in 1998 to $40.5 million in
2016.
4. The estimated lease obligation coverage ratios (i.e., the
ratio of earnings before income taxes to lease payments) are
presented in Table ES-1 (such lease obligation coverages under
the PEPCO Scenario are presented in Table ES-2). During the 20-
year term of the GECC lease, the Project's lease obligation
coverages will range from 2.23:1.0 in 1998 to 1.88:1.0 in 2015.
On average, the Project's lease coverage will be 1.95:1.0. Under
the PEPCO Scenario, the Project's lease coverage will range from
1.76 :1 in 1997 to 2.08 : 1 in 2016 with an average coverage
ratio of 1.77 : 1.
<PAGE>
TABLE ES-1
SUMMARY PRO FORMA PROJECTIONS
<TABLE>
=========================================================================================================
Other
Year Total Fuel Operating Annual Lease Lease
Ended Revenues Expenses Expenses EBIT Payments Coverages
(a) (b) (c) (d) (e) = b - (c+d) (f) (e)/(f)
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1996 4,201 3,482 1,030 (311) 0 -
- ---------------------------------------------------------------------------------------------------------
1997 50,598 19,697 7,736 23,166 10,442 2.22
- ---------------------------------------------------------------------------------------------------------
1998 52,009 21,054 7,777 23,179 10,412 2.23
- ---------------------------------------------------------------------------------------------------------
1999 69,711 21,881 7,774 40,056 19,976 2.01
- ---------------------------------------------------------------------------------------------------------
2000 71,766 22,725 7,768 41,274 20,660 2.00
- ---------------------------------------------------------------------------------------------------------
2001 85,699 24,969 7,837 52,894 27,265 1.94
- ---------------------------------------------------------------------------------------------------------
2002 89,241 27,219 7,905 54,116 27,938 1.94
- ---------------------------------------------------------------------------------------------------------
2003 88,515 26,574 7,784 54,158 27,907 1.94
- ---------------------------------------------------------------------------------------------------------
2004 87,055 25,816 7,738 53,501 27,456 1.95
- ---------------------------------------------------------------------------------------------------------
2005 90,038 28,345 7,944 53,750 27,602 1.95
- ---------------------------------------------------------------------------------------------------------
2006 92,803 29,829 8,155 54,820 28,188 1.94
- ---------------------------------------------------------------------------------------------------------
2007 96,772 30,331 8,260 58,180 30,071 1.93
- ---------------------------------------------------------------------------------------------------------
2008 98,337 30,925 8,387 59,024 30,529 1.93
- ---------------------------------------------------------------------------------------------------------
2009 100,470 31,553 8,518 60,398 31,285 1.93
- ---------------------------------------------------------------------------------------------------------
2010 104,917 32,427 8,654 63,836 33,212 1.92
- ---------------------------------------------------------------------------------------------------------
2011 108,926 31,542 8,775 68,609 35,922 1.91
- ---------------------------------------------------------------------------------------------------------
2012 116,747 31,304 8,902 76,541 40,437 1.89
- ---------------------------------------------------------------------------------------------------------
2013 119,555 31,475 9,036 79,044 41,855 1.89
- ---------------------------------------------------------------------------------------------------------
2014 121,746 31,967 9,177 80,602 42,739 1.89
- ---------------------------------------------------------------------------------------------------------
2015 118,458 31,805 9,326 77,327 41,168 1.88
- ---------------------------------------------------------------------------------------------------------
2016 111,118 32,900 9,521 68,697 31,934 2.15
- ---------------------------------------------------------------------------------------------------------
2017 114,483 34,158 9,723 70,602 14,584 4.84
- ---------------------------------------------------------------------------------------------------------
2018 118,291 35,552 9,930 72,809 14,584 4.99
- ---------------------------------------------------------------------------------------------------------
2019 122,827 37,269 10,144 75,415 14,584 5.17
- ---------------------------------------------------------------------------------------------------------
2020 126,739 38,757 10,364 77,618 14,584 5.32
- ---------------------------------------------------------------------------------------------------------
2021 107,868 33,030 8,983 65,855 10,938 6.02
=========================================================================================================
</TABLE>
<PAGE>
TABLE ES-2
SUMMARY PRO FORMA PROJECTIONS-PEPCO SCENARIO
<TABLE>
=========================================================================================================
Other
Year Total Fuel Operating Annual Lease Lease
Ended Revenues Expenses Expenses EBIT Payments Coverages
(a) (b) (c) (d) (e) = b - (c+d) (f) (e)/(f)
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1996 4,201 3,482 1,030 (311) 0 -
- ---------------------------------------------------------------------------------------------------------
1997 45,777 19,697 7,736 18,344 10,442 1.76
- ---------------------------------------------------------------------------------------------------------
1998 47,138 21,054 7,777 18,307 10,412 1.76
- ---------------------------------------------------------------------------------------------------------
1999 64,759 21,881 7,774 35,104 19,976 1.76
- ---------------------------------------------------------------------------------------------------------
2000 66,771 22,725 7,768 36,279 20,660 1.76
- ---------------------------------------------------------------------------------------------------------
2001 80,660 24,969 7,837 47,855 27,265 1.76
- ---------------------------------------------------------------------------------------------------------
2002 84,156 27,219 7,905 49,032 27,938 1.76
- ---------------------------------------------------------------------------------------------------------
2003 83,380 26,574 7,784 49,023 27,907 1.76
- ---------------------------------------------------------------------------------------------------------
2004 81,868 25,816 7,738 48,314 27,456 1.76
- ---------------------------------------------------------------------------------------------------------
2005 84,804 28,345 7,944 48,516 27,602 1.76
- ---------------------------------------------------------------------------------------------------------
2006 87,493 29,829 8,155 49,509 28,188 1.76
- ---------------------------------------------------------------------------------------------------------
2007 91,416 30,331 8,260 52,824 30,071 1.76
- ---------------------------------------------------------------------------------------------------------
2008 92,936 30,925 8,387 53,623 30,529 1.76
- ---------------------------------------------------------------------------------------------------------
2009 95,024 31,553 8,518 54,952 31,285 1.76
- ---------------------------------------------------------------------------------------------------------
2010 99,433 32,427 8,654 58,352 33,212 1.76
- ---------------------------------------------------------------------------------------------------------
2011 103,440 31,542 8,775 63,124 35,922 1.76
- ---------------------------------------------------------------------------------------------------------
2012 111,259 31,304 8,902 71,053 40,437 1.76
- ---------------------------------------------------------------------------------------------------------
2013 114,066 31,475 9,036 73,555 41,855 1.76
- ---------------------------------------------------------------------------------------------------------
2014 116,254 31,967 9,177 75,110 42,739 1.76
- ---------------------------------------------------------------------------------------------------------
2015 113,478 31,805 9,326 72,347 41,168 1.76
- ---------------------------------------------------------------------------------------------------------
2016 108,707 32,900 9,521 66,285 31,934 2.08
- ---------------------------------------------------------------------------------------------------------
2017 112,072 34,158 9,723 68,192 14,584 4.68
- ---------------------------------------------------------------------------------------------------------
2018 115,882 35,552 9,930 70,400 14,584 4.83
- ---------------------------------------------------------------------------------------------------------
2019 120,419 37,269 10,144 73,006 14,584 5.01
- ---------------------------------------------------------------------------------------------------------
2020 124,332 38,757 10,364 75,211 14,584 5.16
- ---------------------------------------------------------------------------------------------------------
2021 105,862 33,030 8,983 63,850 10,938 5.84
=========================================================================================================
</TABLE>
<PAGE>
1/3/97 PANDA-BRANDYWINE L.P. BRANDY-1.XLS-SCHEDULE A
230MW PEPCO PROJECT Page 1 of 3
INCOME STATEMENT
<TABLE>
<CAPTION>
1 2 3 4 5
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity Revenue (1) $0 $26,878,878 $26,418,245 $43,020,081 $43,883,932
Energy Sales - Unit #1 2,247,247 12,335,863 13,063,601 13,467,031 13,978,187
Energy Sales - Unit #2 1,390,760 7,973,892 8,738,588 9,165,628 9,603,410
Energy - Variable O&M 501,742 2,921,953 3,104,449 3,188,704 3,273,583
Distilled Water Sales 3,000 18,000 18,000 18,000 18,000
Firm Transportation Capacity
Release 29,005 210,937 186,426 187,346 188,326
Interest Income 28,854 258,899 479,848 664,205 820,944
--------------------------------------------------------------
Total Revenues 4,200,608 50,598,422 52,009,156 69,710,995 71,766,383
Fuel Expenses:
Fuel Cost - Unit #1 1,960,982 10,839,710 11,514,019 11,920,797 12,329,220
Fuel Cost - Unit #2 1,086,253 6,210,345 6,853,239 7,233,568 7,628,071
Firm Transportation 434,618 2,646,824 2,686,526 2,726,824 2,767,727
--------------------------------------------------------------
Total Fuel Expenses 3,481,854 19,696,879 21,053,784 21,881,189 22,725,017
Operating Expenses:
Water Usage 115,284 671,437 705,609 715,662 725,617
Water Discharge & Chemical Usage 79,801 468,400 496,083 507,091 518,181
Distilled Water Operating Costs 56,553 339,316 349,495 359,980 370,780
O&M Contract Costs 254,800 1,581,190 1,628,626 1,677,484 1,727,809
Consumables 27,364 587,352 604,973 623,122 641,815
Administrative Expenses 39,700 403,200 415,296 427,755 440,588
Insurance 95,733 488,600 503,258 518,356 533,906
Purchased Electricity 77,350 470,888 485,015 499,565 514,552
Letters of Credit Fee 17,500 105,000 105,000 105,000 105,000
Property Taxes 266,000 2,620,500 2,483,407 2,339,772 2,189,399
Depreciation & Amortization 0 0 0 0 0
--------------------------------------------------------------
Total Operating Expenses 1,030,085 7,735,884 7,776,762 7,773,788 7,767,647
EBIT (311,331) 23,165,659 23,178,610 40,056,018 41,273,718
Annual Lease Payments 0 10,442,037 10,411,906 19,975,918 20,660,454
--------------------------------------------------------------
Net Income ($311,331) $12,723,623 $12,766,704 $20,080,100 $20,613,264
--------------------------------------------------------------
--------------------------------------------------------------
UNDER PEPCO SCENARIO
(1) Capacity Revenue $0 $22,057,384 $21,546,894 $38,068,287 $38,888,920
<CAPTION>
6 7 8 9 10
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2001 Dec-2002 Dec-2003 Dec-2004 Dec-2005
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity Revenue (1) $54,129,836 $54,955,411 $55,625,567 $55,709,532 $55,622,785
Energy Sales - Unit #1 16,043,523 17,404,168 17,309,925 17,178,247 18,232,421
Energy Sales - Unit #2 10,808,443 11,903,802 10,720,713 9,435,532 11,139,565
Energy - Variable O&M 3,621,366 3,912,660 3,718,100 3,510,789 3,850,304
Distilled Water Sales 18,000 18,000 18,000 18,000 18,000
Firm Transportation Capacity
Release 134,091 87,041 161,379 237,628 192,410
Interest Income 943,792 959,428 961,243 965,509 982,980
---------------------------------------------------------------
Total Revenues 85,699,050 89,240,510 88,514,927 87,055,237 90,038,466
Fuel Expenses:
Fuel Cost - Unit #1 13,549,824 14,802,309 14,977,419 15,135,711 16,158,953
Fuel Cost - Unit #2 8,609,867 9,565,222 8,702,096 7,742,292 9,203,946
Firm Transportation 2,809,242 2,851,381 2,894,152 2,937,564 2,981,627
--------------------------------------------------------------
Total Fuel Expenses 24,968,934 27,218,912 26,573,667 25,815,568 28,344,527
Operating Expenses:
Water Usage 781,032 837,913 786,318 733,157 775,511
Water Discharge & Chemical Usage 562,144 607,843 574,927 540,310 576,068
Distilled Water Operating Costs 381,903 393,360 405,161 417,316 429,835
O&M Contract Costs 1,779,643 1,833,033 1,888,024 1,944,664 2,003,004
Consumables 661,070 680,902 701,329 722,369 744,040
Administrative Expenses 453,805 467,419 481,442 495,885 510,762
Insurance 549,924 566,421 583,414 600,916 618,944
Purchased Electricity 529,989 545,888 562,265 579,133 596,507
Letters of Credit Fee 105,000 105,000 105,000 105,000 105,000
Property Taxes 2,032,074 1,867,581 1,695,695 1,599,555 1,583,926
Depreciation & Amortization 0 0 0 0 0
---------------------------------------------------------------
Total Operating Expenses 7,836,584 7,905,360 7,783,574 7,738,306 7,943,597
EBIT 52,893,533 54,116,237 54,157,685 53,501,364 53,750,342
Annual Lease Payments 27,265,071 27,938,252 27,906,988 27,456,191 27,602,191
---------------------------------------------------------------
Net Income $25,628,463 $26,177,985 $26,250,698 $26,045,172 $26,148,152
---------------------------------------------------------------
---------------------------------------------------------------
UNDER PEPCO SCENARIO
(1) Capacity Revenue $49,090,875 $49,871,035 $50,490,985 $50,521,911 $50,388,637
</TABLE>
<PAGE>
1/3/97 PANDA-BRANDYWINE L.P. BRANDY-1.XLS-SCHEDULE A
230MW PEPCO PROJECT Page 2 of 3
INCOME STATEMENT
<TABLE>
<CAPTION>
11 12 13 14 15
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity Revenue (1) $56,267,003 $59,983,960 $61,229,005 $63,065,410 $66,689,832
Energy Sales - Unit #1 18,679,732 18,752,137 18,883,190 18,979,218 19,340,994
Energy Sales - Unit #2 12,563,328 12,672,731 12,800,534 12,919,888 13,229,399
Energy - Variable O&M 4,062,009 4,063,946 4,074,169 4,087,597 4,153,451
Distilled Water Sales 18,000 18,000 18,000 18,000 18,000
Firm Transportation Capacity
Release 190,915 220,600 246,986 271,927 290,338
Interest Income 1,022,412 1,060,490 1,084,750 1,127,659 1,195,268
---------------------------------------------------------------
Total Revenues 92,803,400 96,771,863 98,336,634 100,469,698 104,917,281
Fuel Expenses:
Fuel Cost - Unit #1 16,519,819 16,887,439 17,295,205 17,712,082 18,216,727
Fuel Cost - Unit #2 10,283,142 10,372,200 10,512,376 10,676,801 10,997,895
Firm Transportation 3,026,352 3,071,747 3,117,823 3,164,591 3,212,060
---------------------------------------------------------------
Total Fuel Expenses 29,829,313 30,331,386 30,925,404 31,553,474 32,426,682
Operating Expenses:
Water Usage 819,069 809,994 801,772 794,457 787,908
Water Discharge & Chemical Usage 613,274 611,327 609,971 609,262 609,107
Distilled Water Operating Costs 442,730 456,012 469,693 483,783 498,297
O&M Contract Costs 2,063,094 2,124,987 2,188,737 2,254,399 2,322,031
Consumables 766,361 789,352 813,033 837,424 862,546
Administrative Expenses 526,085 541,867 558,123 574,867 592,113
Insurance 637,512 656,638 676,337 696,627 717,526
Purchased Electricity 614,402 632,834 651,819 671,374 691,515
Letters of Credit Fee 105,000 105,000 105,000 105,000 105,000
Property Taxes 1,567,032 1,532,315 1,512,427 1,491,130 1,468,376
Depreciation & Amortization 0 0 0 0 0
---------------------------------------------------------------
Total Operating Expenses 8,154,560 8,260,327 8,386,911 8,518,323 8,654,419
EBIT 54,819,527 58,180,150 59,024,319 60,397,900 63,836,180
Annual Lease Payments 28,188,414 30,071,266 30,528,635 31,284,930 33,212,359
---------------------------------------------------------------
Net Income $26,631,113 $28,108,884 $28,495,684 $29,112,971 $30,623,822
---------------------------------------------------------------
---------------------------------------------------------------
UNDER PEPCO SCENARIO
(1) Capacity Revenue $50,956,347 $54,628,214 $55,828,128 $57,619,330 $61,205,964
<CAPTION>
16 17 18 19 20
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity Revenue (1) $70,441,722 $77,606,660 $80,403,019 $81,867,003 $78,751,619
Energy Sales - Unit #1 19,821,007 20,665,931 20,885,543 21,560,181 21,776,725
Energy Sales - Unit #2 12,916,275 12,640,803 12,384,800 12,352,001 12,006,864
Energy - Variable O&M 4,103,535 4,071,895 4,049,422 4,109,050 4,074,948
Distilled Water Sales 18,000 18,000 18,000 18,000 18,000
Firm Transportation Capacity
Release 329,986 363,393 395,328 418,023 460,250
Interest Income 1,295,514 1,379,908 1,419,220 1,421,486 1,369,882
---------------------------------------------------------------
Total Revenues 108,926,038 116,746,590 119,555,333 121,745,743 118,458,288
Fuel Expenses:
Fuel Cost - Unit #1 17,553,643 17,436,740 17,727,164 18,151,375 18,185,087
Fuel Cost - Unit #2 10,728,017 10,558,168 10,389,253 10,406,250 10,159,351
Firm Transportation 3,260,240 3,309,144 3,358,781 3,409,163 3,460,300
---------------------------------------------------------------
Total Fuel Expenses 31,541,901 31,304,052 31,475,198 31,966,788 31,804,738
Operating Expenses:
Water Usage 770,618 755,077 741,487 729,883 720,780
Water Discharge & Chemical Usage 600,551 593,205 587,258 582,772 580,200
Distilled Water Operating Costs 513,246 528,643 544,503 560,838 577,663
O&M Contract Costs 2,391,692 2,463,442 2,537,346 2,613,466 2,691,870
Consumables 888,423 915,075 942,528 970,803 999,927
Administrative Expenses 609,876 628,172 647,018 666,428 686,421
Insurance 739,051 761,223 784,060 807,581 831,809
Purchased Electricity 712,260 733,628 755,637 778,306 801,655
Letters of Credit Fee 105,000 105,000 105,000 105,000 105,000
Property Taxes 1,444,116 1,418,298 1,390,870 1,361,777 1,330,965
Depreciation & Amortization 0 0 0 0 0
---------------------------------------------------------------
Total Operating Expenses 8,774,833 8,901,765 9,035,705 9,176,854 9,326,290
EBIT 68,609,304 76,540,773 79,044,429 80,602,101 77,327,260
Annual Lease Payments 35,922,147 40,437,452 41,855,210 42,739,415 41,168,222
---------------------------------------------------------------
Net Income $32,687,157 $36,103,321 $37,189,220 $37,862,686 $36,159,038
---------------------------------------------------------------
---------------------------------------------------------------
UNDER PEPCO SCENARIO
(1) Capacity Revenue $64,956,064 $72,119,042 $74,913,344 $76,375,068 $73,770,910
</TABLE>
<PAGE>
1/3/97 PANDA-BRANDYWINE L.P. BRANDY-1.XLS-SCHEDULE A
230MW PEPCO PROJECT Page 3 of 3
INCOME STATEMENT
<TABLE>
21 22 23 24 25 26
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Total
Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021 Contract
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Revenue:
Capacity Revenue (1) $70,338,312 $72,477,742 $74,697,153 $76,946,583 $79,235,876 $67,684,934 $1,553,930,099
Energy Sales - Unit #1 22,335,104 22,934,808 23,550,046 24,536,466 25,130,212 21,412,060 480,503,567
Energy Sales - Unit #2 12,705,511 13,463,457 14,276,427 15,348,777 16,215,493 13,795,743 303,172,364
Energy - Variable O&M 4,205,986 4,347,556 4,495,983 4,717,294 4,866,079 4,162,468 99,249,036
Distilled Water Sales 18,000 18,000 18,000 18,000 18,000 15,000 450,000
Firm Transportation Capacity
Release 466,355 469,212 469,724 463,130 463,916 389,552 7,524,224
Interest Income 1,049,092 771,791 784,007 796,589 809,549 408,062 24,061,379
----------------------------------------------------------------------------------------------
Total Revenues 111,118,361 114,482,566 118,291,338 122,826,839 126,739,125 107,867,819 4,022,820,767
Fuel Expenses:
Fuel Cost - Unit #1 18,760,524 19,377,851 20,005,903 20,732,878 21,394,956 18,274,862 417,421,199
Fuel Cost - Unit #2 10,627,669 11,215,058 11,927,892 12,862,987 13,634,071 11,601,748 249,787,780
Firm Transportation 3,512,205 3,564,888 3,618,361 3,672,637 3,727,726 3,153,035 79,375,540
----------------------------------------------------------------------------------------------
Total Fuel Expenses 32,900,398 34,157,797 35,552,156 37,268,502 38,756,753 33,029,645 746,584,519
Operating Expenses:
Water Usage 734,680 749,686 765,553 782,336 800,180 675,713 19,086,734
Water Discharge & Chemical Usage 596,228 613,397 631,531 650,696 671,040 571,358 14,662,028
Distilled Water Operating Costs 594,993 612,842 631,228 650,165 669,669 574,800 12,312,804
O&M Contract Costs 2,772,626 2,855,805 2,941,479 3,029,724 3,120,615 2,678,528 57,368,119
Consumables 1,029,925 1,060,823 1,092,648 1,125,427 1,159,190 994,971 21,242,792
Administrative Expenses 707,014 728,224 750,071 772,573 795,750 683,019 14,603,472
Insurance 856,763 882,466 908,940 936,208 964,294 827,686 17,744,192
Purchased Electricity 825,705 850,476 875,990 902,270 929,338 797,682 17,086,044
Letters of Credit Fee 105,000 105,000 105,000 105,000 105,000 87,500 2,625,000
Property Taxes 1,298,375 1,263,949 1,227,626 1,189,346 1,149,042 1,091,590 40,415,143
Depreciation & Amortization 0 0 0 0 0 0 0
----------------------------------------------------------------------------------------------
Total Operating Expenses 9,521,308 9,722,668 9,930,066 10,143,744 10,364,120 8,982,846 217,146,327
EBIT 68,696,655 70,602,101 72,809,116 75,414,592 77,618,252 65,855,328 3,059,089,921
Annual Lease Payments 31,933,556 14,583,866 14,583,866 14,583,866 14,583,866 10,937,900 656,273,975
----------------------------------------------------------------------------------------------
Net Income $36,763,099 $56,018,234 $58,225,250 $60,830,726 $63,034,386 $54,917,428 $2,402,815,946
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
UNDER PEPCO SCENARIO
(1) Capacity Revenue $67,927,123 $70,067,562 $72,288,012 $74,538,467 $76,828,783 $65,679,242 $1,553,930,099
</TABLE>
<TABLE>
1/3/97 PANDA-BRANDYWINE L.P. BRANDY-1.XLS-Schedule B
230MW PEPCO PROJECT Page 1 of 3
CASH FLOW STATEMENT
1 2 3 4 5
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Income $ (311,331) $12,723,623 $12,766,704 $20,080,100 $20,613,264
+ Depreciation & Amortization 0 0 0 0 0
+ Lease Payments 0 10,442,037 10,411,906 19,975,918 20,660,454
----------- ----------- ----------- ----------- -----------
Cash Flow Available for
Lease Payment (311,331) 23,165,659 23,178,610 40,056,018 41,273,718
Lease Payments 0 (10,442,037) (10,411,906) (19,975,918) (20,660,454)
Reserves:
Overhaul Reserve/Cap Ex (125,000) (2,615,000) (1,418,610) (2,245,573) (1,841,232)
Lease Reserve 0 (2,805,953) (4,782,006) (342,268) (3,302,308)
+ Contingency/Raytheon (3) 7,986,000 1,091,000 0 0 0
----------- ----------- ----------- ----------- -----------
Total Reserves 7,861,000 (4,329,953) (6,200,616) (2,587,840) (5,143,540)
NET CASH FLOW (1)(3) $7,549,669 $7,513,670 $6,566,088 $17,492,259 $15,469,724
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
LEASE COVERAGES (2)(3) 2.22 2.23 2.01 2.00
UNDER PEPCO SCENARIO
(1) Net Cash Flow $7,549,669 $3,572,177 $1,694,736 $12,540,465 $10,474,712
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
(2) Lease Coverages 1.76 1.76 1.76 1.76
(3) In the event Raytheon receives the full disputed amount of its bonus,
additions to reserves could be $0.88 million more in 1997, resulting in Net
Cash Flow of $6,613,670 for Year Ended Dec-1997. The size of the Raytheon
Bonus does not affect Lease Coverages.
<CAPTION>
6 7 8 9 10
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2001 Dec-2002 Dec-2003 Dec-2004 Dec-2005
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Income $25,628,463 $26,177,985 $26,250,698 $26,045,172 $26,148,152
+ Depreciation & Amortization 0 0 0 0 0
+ Lease Payments 27,265,071 27,938,252 27,906,988 27,456,191 27,602,191
----------- ----------- ----------- ----------- -----------
Cash Flow Available for
Lease Payment 52,893,533 54,116,237 54,157,685 53,501,364 53,750,342
Lease Payments (27,265,071) (27,938,252) (27,906,988) (27,456,191) (27,602,191)
Reserves:
Overhaul Reserve/Cap Ex (2,190,936) (1,515,589) (953,234) (1,049,415) (3,622,816)
Lease Reserve (336,591) 15,632 225,398 (73,000) (293,111)
+ Contingency/Raytheon (3) 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total Reserves (2,527,527) (1,499,956) (727,836) (1,122,415) (3,915,928)
NET CASH FLOW (1) $23,100,936 $24,678,029 $25,522,862 $24,922,757 $22,232,224
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
LEASE COVERAGES (2) 1.94 1.94 1.94 1.95 1.95
UNDER PEPCO SCENARIO
(1) Net Cash Flow $18,061,975 $19,593,654 $20,388,280 $19,735,137 $16,998,075
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
(2) Lease Coverages 1.76 1.76 1.76 1.76 1.76
</TABLE>
<PAGE>
<TABLE>
1/3/97 PANDA-BRANDYWINE L.P. BRANDY-1.XLS-Schedule B
230MW PEPCO PROJECT Page 2 of 3
CASH FLOW STATEMENT
11 12 13 14 15
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Income $26,631,113 $28,108,884 $28,495,684 $29,112,971 $30,623,822
+ Depreciation & Amortization 0 0 0 0 0
+ Lease Payments 28,188,414 30,071,266 30,528,635 31,284,930 33,212,359
----------- ----------- ----------- ----------- -----------
Cash Flow Available for
Lease Payment 54,819,527 58,180,150 59,024,319 60,397,900 63,836,180
Lease Payments (28,188,414) (30,071,266) (30,528,635) (31,284,930) (33,212,359)
Reserves:
Overhaul Reserve/Cap Ex (3,816,916) (1,090,355) (1,857,606) (1,166,166) (2,812,214)
Lease Reserve (941,426) (228,685) (378,147) (963,714) (1,354,894)
+ Contingency/Raytheon (3) 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total Reserves (4,758,342) (1,319,039) (2,235,754) (2,129,880) (4,167,108)
NET CASH FLOW (1) $21,872,771 $26,789,845 $26,259,930 $26,983,090 $26,456,713
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
LEASE COVERAGES (2) 1.94 1.93 1.93 1.93 1.92
UNDER PEPCO SCENARIO
(1) Net Cash Flow $16,562,115 $21,434,099 $20,859,053 $21,537,010 $20,972,846
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
(2) Lease Coverages 1.76 1.76 1.76 1.76 1.76
<CAPTION>
16 17 18 19 20
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Income $32,687,157 $36,103,321 $37,189,220 $37,862,686 $36,159,038
+ Depreciation & Amortization 0 0 0 0 0
+ Lease Payments 35,922,147 40,437,452 41,855,210 42,739,415 41,168,222
----------- ----------- ----------- ----------- -----------
Cash Flow Available for
Lease Payment 68,609,304 76,540,773 79,044,429 80,602,101 77,327,260
Lease Payments (35,922,147) (40,437,452) (41,855,210) (42,739,415) (41,168,222)
Reserves:
Overhaul Reserve/Cap Ex (2,828,729) (1,373,678) (1,334,019) (5,825,052) (1,426,826)
Lease Reserve (2,257,653) (708,879) (442,103) 785,597 1,725,718
+ Contingency/Raytheon (3) 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
Total Reserves (5,086,381) (2,082,557) (1,776,122) (5,039,455) 298,892
NET CASH FLOW (1) $27,600,776 $34,020,764 $35,413,098 $32,823,230 $36,457,930
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
LEASE COVERAGES (2) 1.91 1.89 1.89 1.89 1.88
UNDER PEPCO SCENARIO
(1) Net Cash Flow $22,115,118 $28,533,145 $29,923,422 $27,331,295 $31,477,220
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
(2) Lease Coverages 1.76 1.76 1.76 1.76 1.76
</TABLE>
<PAGE>
<TABLE>
1/3/97 PANDA-BRANDYWINE L.P. BRANDY-1.XLS-Schedule B
230MW PEPCO PROJECT Page 3 of 3
CASH FLOW STATEMENT
21 22 23 24 25 26
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Total
Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021 Contract
----------- ----------- ----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income $36,763,099 $56,018,234 $58,225,250 $60,830,726 $63,034,386 $54,917,428 $2,402,815,946
+ Depreciation & Amortization 0 0 0 0 0 0 0
+ Lease Payments 31,933,556 14,583,866 14,583,866 14,583,866 14,583,866 10,937,900 656,273,975
----------- ----------- ----------- ----------- ----------- ----------- --------------
Cash Flow Available for
Lease Payment 68,696,655 70,602,101 72,809,116 75,414,592 77,618,252 65,855,328 3,059,089,921
Lease Payments (31,933,556) (14,583,866) (14,583,866) (14,583,866) (14,583,866) (10,937,900) (656,273,975)
Reserves:
Overhaul Reserve/Cap Ex (5,372,541) (1,526,110) (1,681,291) (4,780,564) (1,798,482) 5,324,714 (50,943,239)
Lease Reserve 11,566,460 0 0 0 0 7,291,933 2,400,000
+ Contingency/Raytheon (3) 0 0 0 0 7,000,000 0 16,077,000
----------- ----------- ----------- ----------- ----------- ----------- --------------
Total Reserves 6,193,919 (1,526,110) (1,681,291) (4,780,564) 5,201,518 12,616,647 (32,466,239)
NET CASH FLOW (1) $42,957,018 $54,492,125 $56,543,959 $56,050,162 $68,235,905 $67,534,075 $2,370,349,707
----------- ----------- ----------- ----------- ----------- ----------- --------------
----------- ----------- ----------- ----------- ----------- ----------- --------------
LEASE COVERAGES (2) 2.15 4.84 4.99 5.17 5.32 6.02
UNDER PEPCO SCENARIO
(1) Net Cash Flow $40,545,829 $52,081,945 $54,134,818 $53,642,046 $65,828,812 $65,528,383 $2,143,742,565
----------- ----------- ----------- ----------- ----------- ----------- --------------
----------- ----------- ----------- ----------- ----------- ----------- --------------
(2) Lease Coverages 2.08 4.68 4.83 5.01 5.16 5.84
</TABLE>
<PAGE>
1/3/97 BRANDY-1.XLS-Schedule C
Page 1 of 1
PANDA-BRANDYWINE L.P.
230MW PEPCO PROJECT
DEVELOPMENT ASSUMPTIONS
LEASE FINANCING:
Leased Amount $215,000,000
Lease Term (Years) 20
Average Life 14.9
Implicit rate (Pre-tax) 10.20%
Treasury Bond Rate (Base) 7.38%
Treasury Bond Rate (Current) 6.40%
OTHER FINANCING ASSUMPTIONS:
Debt Service Reserve $2,400,000
Letters of Credit (PEPCO, Fuel Supplier, etc.) $7,000,000
Annual Letter of Credit Fee 1.50%
Interest Income Rate 5.00%
12 Year Treasury Bill Rate (Capacity Adjustment) (1) 7.94%
Annual GNP Deflator 3.00%
Actual Commercial Operations Date Oct-96
Months of Operation During 1996 (1st calendar year) 2
Months of Operation During 2021 (last calendar year) 10
Escalator Base Month Jun-94
Annual CPI Deflator 3.00%
TAX ASSUMPTIONS:
Federal Tax Rate 35.00%
State Tax Rate 5.00%
Tax Depreciation Rate (Declining Value) 150.00%
Tax Depreciation Period 20
Amortization Period - Transaction Costs 20
UNDER PEPCO SCENARIO
(1) 12 Year Treasury Bill Rate (Capacity Adjustment) 6.40%
PROJECT COSTS
Cogen Construction Costs 119,884,197
Distilled Water Construction Costs 3,400,000
Electrical Transmission Line & Fiber Optics 4,005,843
Effluent Water Pipeline 9,791,490
Columbia Gas Pipeline Expansion 9,058,249
PEPCO - Electrical Interconnect 2,785,269
PEPCO - RTU/AGC Communications 92,403
Sales Tax on 10% of Construction Costs 156,033
Water Wells on Site 401,825
Building Permit 287,297
Builder's Risk Insurance 594,645
Other Construction Costs 58,682
Land Purchase Costs (Including Title Insurance) 3,914,213
Right-of Way Payments 1,020,270
Outside Engineering Costs 2,505,267
Permitting & Regulatory Costs 1,654,055
Legal Costs 2,732,018
Public Relations 326,076
Interest During Development/Construction 17,564,142
Other Financing Costs 10,141,274
Management & Administrative Costs 4,203,859
Natural Gas Reserves Development 3,165,981
Furniture & Office Equipment 419,879
O&M Contractor 1,079,261
Fuel Purchased During Construction (272,413)
General Liability Insurance 91,338
Spare Parts Inventory 1,369,672
Fuel Oil Inventory 1,516,187
Initial Lease Reserve (Cash) 2,400,000
Initial O&M Reserve (Cash) 1,000,000
Initial Warranty Reserve (Cash) 750,000
Contingency 8,902,988
-----------
Total Project Costs 215,000,000
-----------
-----------
<PAGE>
1/3/97 PANDA-BRANDYWINE LP. BRANDY-1.XLS-SCHEDULE D
230MW PEPCO PROJECT Page 1 of 6
OPERATING ASSUMPTIONS
<TABLE>
1 2 3 4 5
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ASSUMPTIONS:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000
Weighted Average Energy Output - Unit #1 120,040 118,280 117,840 117,600 117,340
Weighted Average Energy Output - Unit #2 120,040 118,280 117,840 117,600 117,340
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 809 4,565 4,664 4,624 4,581
Hours Per Year Running Unit #2 (Full Load) 491 2,895 3,061 3,094 3,129
Availability Factor 96.5% 96.5% 96.4% 96.4% 96.4%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 7,939 8,048 8,075 8,106 8,141
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 7,863 7,954 7,984 8,011 8,041
Actual Annual Energy - Unit #1 (MWH) 97,149 539,966 549,547 543,799 537,563
Actual Annual Energy - Unit #2 (MWH) 58,921 342,452 360,677 363,899 367,155
Annual Fuel Usage - Unit #1 (DT's) 771,263 4,345,650 4,437,592 4,408,031 4,376,297
Annual Fuel Usage - Unit #2 (DT's) 463,298 2,723,860 2,879,648 2,915,191 2,952,292
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $13.74 $13.92 $14.12 $14.33 $16.97
Capital Costs/KW Year $27.48 $165.24 $167.44 $169.86 $177.24
Capital Costs Per KWH $0.03396 $0.03620 $0.03590 $0.03673 $0.03869
GNP Deflator Adjustment/KW Year $1.52 $9.16 $9.28 $9.42 $9.83
GNP Deflator Adjustment Per KWH $0.00188 $0.00201 $0.00199 $0.00204 $0.00215
Interest Rate Adjustment/KW Year(1) ($0.13) ($0.78) ($0.79) ($0.80) ($0.81)
Interest Rate Adjustment Per KWH(1) ($0.00016) ($0.00017) ($0.00017) ($0.00017) ($0.00018)
Scheduled Adjustment/KW Year ($30.30) ($65.22) ($69.57) $0.00 ($4.35)
Scheduled Adjustment Per KWH ($0.03744) ($0.01429) ($0.01492) $0.00000 ($0.00095)
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year ($1.42) $108.41 $106.37 $178.48 $181.91
Total Capacity Rate/KW Month ($0.12) $9.03 $8.86 $14.87 $15.16
Total Capacity Rate Per KWH ($0.00176) $0.02375 $0.02281 $0.03860 $0.03971
ELECTRICITY REVENUES - ENERGY: ESCALATION
Energy Rate Per KWH (Weighted Average) $0.02331 $0.02302 $0.02395 $0.02493 $0.02607
Variable O&M Rate Per KWH 3.00% $0.00321 $0.00331 $0.00341 $0.00351 $0.00362
Total Energy Rate Per KWH $0.02652 $0.02633 $0.02736 $0.02845 $0.02968
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.02477 $0.05007 $0.05017 $0.06704 $0.06939
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 25 150 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $2.80 $2.91 $3.03 $3.15 $3.28
FGMR - Firm Gas Market Rate ($/DT) $2.62 $2.69 $2.81 $2.93 $3.06
IGR - Interruptible Gas Rate ($/DT) $2.41 $2.49 $2.60 $2.72 $2.89
OR - Oil Rate ($/DT) $4.28 $4.19 $4.31 $4.43 $4.55
<CAPTION>
6 7 8 9 10
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2001 Dec-2002 Dec-2003 Dec-2004 Dec-2005
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ASSUMPTIONS:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000
Energy Production Capacity - Unit #1 118,840 117,940 117,690 117,450 120,000
Energy Production Capacity - Unit #1 118,840 117,940 117,690 117,450 120,000
Energy Production Capacity - Unit #1 118,840 117,940 117,690 117,450 120,000
Weighted Average Energy Output - Unit #1 118,840 117,940 117,690 117,450 120,000
Energy Production Capacity - Unit #2 118,840 117,940 117,690 117,450 120,000
Energy Production Capacity - Unit #2 118,840 117,940 117,690 117,450 120,000
Energy Production Capacity - Unit #2 118,840 117,940 117,690 117,450 120,000
Weighted Average Energy Output - Unit #2 118,840 117,940 117,690 117,450 120,000
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,841 5,098 4,920 4,742 4,791
Hours Per Year Running Unit #2 (Full Load) 3,336 3,544 3,070 2,598 2,859
Availability Factor 96.4% 96.4% 96.5% 96.7% 96.6%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461
Actual Unit #1 Heat Rate (BTU/KWH) 8,086 8,141 8,174 8,209 8,166
Actual Unit #1 Heat Rate (BTU/KWH) 8,086 8,141 8,174 8,209 8,166
Actual Unit #1 Heat Rate (BTU/KWH) 8,086 8,141 8,174 8,209 8,166
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,086 8,141 8,174 8,209 8,166
Actual Unit #2 Heat Rate (BTU/KWH) 8,024 8,053 8,077 8,103 8,131
Actual Unit #2 Heat Rate (BTU/KWH) 8,024 8,053 8,077 8,103 8,131
Actual Unit #2 Heat Rate (BTU/KWH) 8,024 8,053 8,077 8,103 8,131
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 8,024 8,053 8,077 8,103 8,131
Actual Annual Energy - Unit #1 (MWH) 575,269 601,249 579,052 556,957 574,883
Actual Annual Energy - Unit #2 (MWH) 396,414 418,016 361,319 305,119 343,023
Summer Fuel Usage - Unit #1 (DT's) 1,443,222 1,575,031 1,450,050 1,325,449 1,445,682
Shoulder Fuel Usage - Unit #1 (DT's) 2,077,245 2,121,548 2,116,196 2,111,134 1,989,633
Winter Fuel Usage - Unit #1 (DT's) 1,131,162 1,198,186 1,166,923 1,135,476 1,259,181
Annual Fuel Usage - Unit #1 (DT's) 4,651,629 4,894,765 4,733,169 4,572,059 4,694,496
Summer Fuel Usage - Unit #2 (DT's) 1,011,912 1,091,110 990,297 889,913 980,521
Shoulder Fuel Usage - Unit #2 (DT's) 1,491,837 1,504,765 1,225,460 946,416 972,888
Winter Fuel Usage - Unit #2 (DT's) 677,074 770,412 702,613 636,048 835,714
Annual Fuel Usage - Unit #2 (DT's) 3,180,823 3,366,286 2,918,370 2,472,377 2,789,122
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $18.03 $18.27 $18.27 $18.26 $18.26
Capital Costs/KW Year $205.76 $216.84 $219.24 $219.22 $219.12
Capital Costs Per KWH $0.04251 $0.04253 $0.04456 $0.04623 $0.04574
GNP Deflator Adjustment/KW Year $11.41 $12.02 $12.16 $12.16 $12.15
GNP Deflator Adjustment Per KWH $0.00236 $0.00236 $0.00247 $0.00256 $0.00254
Interest Rate Adjustment/KW Year(1) ($0.81) ($0.82) ($0.83) ($0.84) ($0.84)
Interest Rate Adjustment Per KWH(1) ($0.00017) ($0.00016) ($0.00017) ($0.00018) ($0.00018)
Scheduled Adjustment/KW Year $8.70 $0.00 $0.00 $0.00 $0.00
Scheduled Adjustment Per KWH $0.00180 $0.00000 $0.00000 $0.00000 $0.00000
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $225.05 $228.04 $230.57 $230.54 $230.43
Total Capacity Rate/KW Month $18.75 $19.00 $19.21 $19.21 $19.20
Total Capacity Rate Per KWH $0.04649 $0.04473 $0.04686 $0.04862 $0.04810
Contract Capacity Rate $18.03 $18.27 $18.27 $18.26 $18.26
GNP Deflator Adjustment (Monthly) $1.00 $1.01 $1.01 $1.01 $1.01
GNP Adjusted Capacity Rate $19.03 $19.28 $19.28 $19.27 $19.27
T-Bill Adjustment ($0.07) ($0.07) ($0.07) ($0.07) ($0.07)
T Bill Adjusted Capacity Rate $18.96 $19.21 $19.21 $19.20 $19.20
Treasury Bill Adjustment per Schedule $1.14 $1.15 $1.16 $1.17 $1.19
ELECTRICITY REVENUES - ENERGY:
Energy Rate Per KWH (Weighted Average) $0.02763 $0.02875 $0.02981 $0.03087 $0.03200
Variable O&M Rate Per DT $0.44 $0.45 $0.47 $0.48 $0.50
Variable O&M Rate Per KWH $0.00373 $0.00384 $0.00395 $0.00407 $0.00419
Total Energy Rate Per KWH $0.03136 $0.03259 $0.03376 $0.03494 $0.03619
TOTAL ELECTRICITY REVENUES - CAPACITY & ENERGY $0.07785 $0.07733 $0.08062 $0.08356 $0.08429
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $3.41 $3.54 $3.61 $3.69 $3.76
FGMR - Firm Gas Market Rate ($/DT) $3.18 $3.31 $3.45 $3.59 $3.74
IGR - Interruptible Gas Rate ($/DT) $3.28 $3.42 $3.55 $3.70 $3.85
OR - Oil Rate ($/DT) $4.73 $4.91 $5.10 $5.30 $5.50
</TABLE>
<PAGE>
1/3/97 PANDA-BRANDYWINE LP. BRANDY-1.XLS-SCHEDULE D
230MW PEPCO PROJECT Page 2 of 6
OPERATING ASSUMPTIONS
<TABLE>
1 2 3 4 5
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-1996 Dec-1997 Dec-1998 Dec-1999 Dec-2000
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UNIT #1 - FUEL COST:
FGRR (Reserves) % 80% 57% 56% 57% 58%
FGMR (Market) % 20% 43% 44% 43% 42%
Blended Unit #1 Rate ($/DT) $2.71 $2.70 $2.81 $2.93 $3.08
Blended Unit #1 Rate ($/KWH) $0.02150 $0.02170 $0.02266 $0.02372 $0.02504
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 92% 94% 94% 94% 95%
OR (Fuel Oil) % 8% 6% 6% 6% 5%
Blended Unit #2 Rate ($/DT) $2.74 $2.78 $2.90 $3.02 $3.14
Blended Unit #2 Rate ($/KWH) $0.02158 $0.02215 $0.02316 $0.02419 $0.02526
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0 0 0
Charles County Waste Water Rate ($/000 Gallons) $1.97 $2.00 $2.03 $2.06 $2.09
WSSC Water Usage Rate ($/000 Gallons) $0.00 $0.00 $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) $5.12 $5.22 $5.32 $5.43 $5.54
Chemical Usage Rate ($/000 Gallons) $2.10 $2.16 $2.22 $2.29 $2.36
DISTILLED WATER COSTS:
Annual Operating Costs $56,553 $339,316 $349,495 $359,980 $370,780
FIXED OPERATING EXPENSES:
Firm Transportation $434,618 $2,646,824 $2,686,526 $2,726,824 $2,767,727
O&M Contract Costs $254,800 $1,581,190 $1,628,626 $1,677,484 $1,727,809
Consumables $27,364 $587,352 $604,973 $623,122 $641,815
Administrative Expenses $39,700 $403,200 $415,296 $427,755 $440,588
Insurance $95,733 $488,600 $503,258 $518,356 $533,906
Purchased Electricity $77,350 $470,888 $485,015 $499,565 $514,552
Property Taxes $266,000 $2,620,500 $2,483,407 $2,339,772 $2,189,399
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $1,000,000 $1,125,000 $1,625,000 $2,375,000 $3,875,000
Additions to Reserve $125,000 $1,500,000 $1,418,610 $2,245,573 $1,841,232
Turbine Overhauls $0 ($1,000,000) ($668,610) ($745,573) ($716,232)
Reserve Disbursement $0 $0 $0 $0 $0
Overhaul Reserve - End of Year $1,125,000 $1,625,000 $2,375,000 $3,875,000 $5,000,000
LEASE RESERVE:
Lease Reserve - Beginning of Year $2,400,000 $2,400,000 $5,205,953 $9,987,959 $10,330,227
Additions to Reserve $0 $2,805,953 $4,782,006 $342,268 $3,302,308
Reserve Disbursement $0 $0 $0 $0 $0
Lease Reserve - End of Year $2,400,000 $5,205,953 $9,987,959 $10,330,227 $13,632,535
(1) See Schedules A and B for the effect of the PEPCO
Scenario on Capacity Revenue, Net Cash Flow and
Lease Coverage Ratios
<CAPTION>
6 7 8 9 10
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2001 Dec-2002 Dec-2003 Dec-2004 Dec-2005
------------------------------------------------------------------
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UNIT #1 - FUEL COST:
FGRR (Reserves) % 54% 52% 53% 56% 54%
FGMR (Market) % 46% 48% 47% 44% 46%
Blended Unit #1 Rate ($/DT) $3.30 $3.43 $3.54 $3.65 $3.75
Blended Unit #1 Rate ($/KWH) $0.02670 $0.02791 $0.02891 $0.02993 $0.03060
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 94% 94% 93% 93% 92%
OR (Fuel Oil) % 6% 6% 7% 7% 8%
Blended Unit #2 Rate ($/DT) $3.27 $3.42 $3.56 $3.71 $3.88
Blended Unit #2 Rate ($/KWH) $0.02626 $0.02752 $0.02876 $0.03008 $0.03158
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0 0 0
Charles County Waste Water Rate ($/000 Gallons) $2.12 $2.15 $2.19 $2.22 $2.25
WSSC Water Usage Rate ($/000 Gallons) $0.00 $0.00 $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) $5.65 $5.76 $5.88 $5.99 $6.11
Chemical Usage Rate ($/000 Gallons) $2.43 $2.50 $2.58 $2.66 $2.74
DISTILLED WATER COSTS:
Annual Operating Costs $381,903 $393,360 $405,161 $417,316 $429,835
FIXED OPERATING EXPENSES:
Firm Transportation $2,809,242 $2,851,381 $2,894,152 $2,937,564 $2,981,627
O&M Contract Costs $1,779,643 $1,833,033 $1,888,024 $1,944,664 $2,003,004
Consumables $661,070 $680,902 $701,329 $722,369 $744,040
Administrative Expenses $453,805 $467,419 $481,442 $495,885 $510,762
Insurance $549,924 $566,421 $583,414 $600,916 $618,944
Purchased Electricity $529,989 $545,888 $562,265 $579,133 $596,507
Property Taxes $2,032,074 $1,867,581 $1,695,695 $1,599,555 $1,583,926
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,000,000 $5,150,000 $5,304,500 $5,463,635 $5,627,544
Additions to Reserve $2,190,936 $1,515,589 $953,234 $1,049,415 $3,622,816
Turbine Overhauls ($2,040,936) ($1,361,089) ($794,099) ($885,506) ($3,453,990)
Reserve Disbursement $0 $0 $0 $0 $0
Overhaul Reserve - End of Year $5,150,000 $5,304,500 $5,463,635 $5,627,544 $5,796,370
Hours of Operation 4,088 4,321 3,995 3,670 3,825
Effective Hours (Adj for Starts) 5,792 6,025 5,699 5,374 5,529
Cumulative Hours 28,849 34,874 40,573 45,947 51,476
Maintenance Requirements 40,000 48,000 56,000 64,000 72,000
Maintenance Dollars $0 $0 $0 $0 $0
Amount Per Turbine Hour $0 $0 $0 $0 $0
Maintenance Costs ($000) per PES $2,041 $1,361 $794 $886 $3,454
Contract Reserve Requirements $0 $0 $0 $0 $0
Inflated Reserve Requirements $0 $0 $0 $0 $0
LEASE RESERVE:
Lease Reserve - Beginning of Year $13,632,535 $13,969,126 $13,953,494 $13,728,096 $13,801,095
Additions to Reserve $336,591 $0 $0 $73,000 $293,111
Reserve Disbursement $0 ($15,632) ($225,398) $0 $0
Lease Reserve - End of Year $13,969,126 $13,953,494 $13,728,096 $13,801,095 $14,094,207
(1) See Schedules A and B for the effect of the PEPCO
Scenario on Capacity Revenue, Net Cash Flow and
Lease Coverage Ratios
</TABLE>
<PAGE>
1/3/97 PANDA-BRANDYWINE LP. BRANDY-1.XLS-SCHEDULE D
230MW PEPCO PROJECT Page 3 of 6
OPERATING ASSUMPTIONS
<TABLE>
11 12 13 14 15
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ASSUMPTIONS:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000
Energy Production Capacity - Unit #1 118,120 117,760 117,530 117,270 118,400
Energy Production Capacity - Unit #1 118,120 117,760 117,530 117,270 118,400
Energy Production Capacity - Unit #1 118,120 117,760 117,530 117,270 118,400
Weighted Average Energy Output - Unit #1 118,120 117,760 117,530 117,270 118,400
Energy Production Capacity - Unit #2 118,120 117,760 117,530 117,270 118,400
Energy Production Capacity - Unit #2 118,120 117,760 117,530 117,270 118,400
Energy Production Capacity - Unit #2 118,120 117,760 117,530 117,270 118,400
Weighted Average Energy Output - Unit #2 118,120 117,760 117,530 117,270 118,400
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,838 4,728 4,626 4,531 4,443
Hours Per Year Running Unit #2 (Full Load) 3,121 3,027 2,937 2,852 2,771
Availability Factor 96.5% 96.5% 96.5% 96.5% 96.5%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461
Actual Unit #1 Heat Rate (BTU/KWH) 8,051 8,085 8,119 8,153 8,118
Actual Unit #1 Heat Rate (BTU/KWH) 8,051 8,085 8,119 8,153 8,118
Actual Unit #1 Heat Rate (BTU/KWH) 8,051 8,085 8,119 8,153 8,118
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,051 8,085 8,119 8,153 8,118
Actual Unit #2 Heat Rate (BTU/KWH) 8,029 7,997 7,997 8,021 8,045
Actual Unit #2 Heat Rate (BTU/KWH) 8,029 7,997 7,997 8,021 8,045
Actual Unit #2 Heat Rate (BTU/KWH) 8,029 7,997 7,997 8,021 8,045
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 8,029 7,997 7,997 8,021 8,045
Actual Annual Energy - Unit #1 (MWH) 571,503 556,780 543,639 531,401 526,078
Actual Annual Energy - Unit #2 (MWH) 368,668 356,443 345,215 334,409 328,056
Summer Fuel Usage - Unit #1 (DT's) 1,497,696 1,425,555 1,360,148 1,302,162 1,253,764
Shoulder Fuel Usage - Unit #1 (DT's) 1,779,450 1,765,273 1,753,892 1,741,968 1,735,750
Winter Fuel Usage - Unit #1 (DT's) 1,324,025 1,310,741 1,299,766 1,288,378 1,281,191
Annual Fuel Usage - Unit #1 (DT's) 4,601,171 4,501,569 4,413,806 4,332,509 4,270,705
Summer Fuel Usage - Unit #2 (DT's) 1,020,207 951,841 892,545 839,412 799,219
Shoulder Fuel Usage - Unit #2 (DT's) 948,143 924,867 908,132 893,073 889,247
Winter Fuel Usage - Unit #2 (DT's) 991,689 973,764 960,010 949,813 950,747
Annual Fuel Usage - Unit #2 (DT's) 2,960,039 2,850,472 2,760,688 2,682,297 2,639,213
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $19.10 $19.10 $19.18 $20.02 $20.57
Capital Costs/KW Year $220.80 $229.20 $229.36 $231.84 $241.34
Capital Costs Per KWH $0.04564 $0.04848 $0.04959 $0.05116 $0.05432
GNP Deflator Adjustment/KW Year $12.24 $12.71 $12.72 $12.86 $13.38
GNP Deflator Adjustment Per KWH $0.00253 $0.00269 $0.00275 $0.00284 $0.00301
Interest Rate Adjustment/KW Year (1) ($0.86) ($0.87) ($0.87) ($0.88) ($0.89)
Interest Rate Adjustment Per KWH (1) ($0.00018) ($0.00018) ($0.00019) ($0.00019) ($0.00020)
Scheduled Adjustment/KW Year $1.20 $8.04 $13.26 $18.48 $23.70
Scheduled Adjustment Per KWH $0.00025 $0.00170 $0.00287 $0.00408 $0.00533
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $233.38 $249.09 $254.47 $262.29 $277.53
Total Capacity Rate/KW Month $19.45 $20.76 $21.21 $21.86 $23.13
Total Capacity Rate Per KWH $0.04824 $0.05268 $0.05501 $0.05788 $0.06246
Contract Capacity Rate $19.10 $19.10 $19.18 $20.02 $20.57
GNP Deflator Adjustment (Monthly) $1.06 $1.06 $1.06 $1.11 $1.14
GNP Adjusted Capacity Rate $20.16 $20.16 $20.24 $21.13 $21.71
T-Bill Adjustment ($0.07) ($0.07) ($0.07) ($0.07) ($0.07)
T Bill Adjusted Capacity Rate $20.09 $20.09 $20.17 $21.06 $21.64
Treasury Bill Adjustment per Schedule $1.20 $1.21 $1.22 $1.23 $1.23
ELECTRICITY REVENUES - ENERGY:
Energy Rate Per KWH (Weighted Average) $0.03323 $0.03441 $0.03565 $0.03684 $0.03813
Variable O&M Rate Per DT $0.51 $0.53 $0.54 $0.56 $0.57
Variable O&M Rate Per KWH $0.00432 $0.00445 $0.00458 $0.00472 $0.00486
Total Energy Rate Per KWH $0.03755 $0.03886 $0.04023 $0.04156 $0.04300
Total Electricity Revenues - Capacity & Energy $0.08579 $0.09154 $0.09524 $0.09945 $0.10546
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $3.83 $3.91 $3.99 $4.07 $4.15
FGMR - Firm Gas Market Rate ($/DT) $3.89 $4.05 $4.22 $4.39 $4.58
IGR - Interruptible Gas Rate ($/DT) $4.01 $4.18 $4.36 $4.53 $4.72
OR - Oil Rate ($/DT) $5.72 $5.93 $6.16 $6.40 $6.64
<CAPTION>
16 17 18 19 20
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015
------------------------------------------------------------------
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OPERATING ASSUMPTIONS:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000
Energy Production Capacity - Unit #1 117,860 117,620 117,380 119,240 118,000
Energy Production Capacity - Unit #1 117,860 117,620 117,380 119,240 118,000
Energy Production Capacity - Unit #1 117,860 117,620 117,380 119,240 118,000
Weighted Average Energy Output - Unit #1 117,860 117,620 117,380 119,240 118,000
Energy Production Capacity - Unit #2 117,860 117,620 117,380 119,240 118,000
Energy Production Capacity - Unit #2 117,860 117,620 117,380 119,240 118,000
Energy Production Capacity - Unit #2 117,860 117,620 117,380 119,240 118,000
Weighted Average Energy Output - Unit #2 117,860 117,620 117,380 119,240 118,000
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 4,324 4,218 4,126 4,050 3,992
Hours Per Year Running Unit #2 (Full Load) 2,628 2,492 2,366 2,246 2,134
Availability Factor 96.5% 96.6% 96.6% 96.6% 96.7%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461
Actual Unit #1 Heat Rate (BTU/KWH) 8,151 8,183 8,216 8,134 8,053
Actual Unit #1 Heat Rate (BTU/KWH) 8,151 8,183 8,216 8,134 8,053
Actual Unit #1 Heat Rate (BTU/KWH) 8,151 8,183 8,216 8,134 8,053
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,151 8,183 8,216 8,134 8,053
Actual Unit #2 Heat Rate (BTU/KWH) 8,020 8,049 8,067 8,087 8,108
Actual Unit #2 Heat Rate (BTU/KWH) 8,020 8,049 8,067 8,087 8,108
Actual Unit #2 Heat Rate (BTU/KWH) 8,020 8,049 8,067 8,087 8,108
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 8,020 8,049 8,067 8,087 8,108
Actual Annual Energy - Unit #1 (MWH) 509,582 496,163 484,358 482,917 471,025
Actual Annual Energy - Unit #2 (MWH) 309,709 293,132 277,719 267,858 251,833
Summer Fuel Usage - Unit #1 (DT's) 1,234,799 1,220,663 1,206,592 1,199,357 1,162,166
Shoulder Fuel Usage - Unit #1 (DT's) 1,700,948 1,673,550 1,651,282 1,637,417 1,587,162
Winter Fuel Usage - Unit #1 (DT's) 1,217,859 1,165,886 1,121,610 1,091,273 1,043,836
Annual Fuel Usage - Unit #1 (DT's) 4,153,606 4,060,098 3,979,484 3,928,047 3,793,163
Summer Fuel Usage - Unit #2 (DT's) 772,930 753,942 734,798 729,585 705,312
Shoulder Fuel Usage - Unit #2 (DT's) 830,729 783,583 738,614 707,933 661,867
Winter Fuel Usage - Unit #2 (DT's) 880,205 821,898 766,945 728,649 674,686
Annual Fuel Usage - Unit #2 (DT's) 2,483,864 2,359,423 2,240,357 2,166,167 2,041,865
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month (Unadjusted Contract Year) $22.79 $23.35 $23.63 $22.69 $18.83
Capital Costs/KW Year $251.28 $274.60 $280.76 $281.68 $264.56
Capital Costs Per KWH $0.05812 $0.06510 $0.06804 $0.06955 $0.06628
GNP Deflator Adjustment/KW Year $13.93 $15.23 $15.57 $15.62 $14.67
GNP Deflator Adjustment Per KWH $0.00322 $0.00361 $0.00377 $0.00386 $0.00368
Interest Rate Adjustment/KW Year(1) ($0.89) ($0.89) ($0.89) ($0.89) ($0.80)
Interest Rate Adjustment Per KWH(1) ($0.00020) ($0.00021) ($0.00021) ($0.00022) ($0.00020)
Scheduled Adjustment/KW Year $28.91 $34.13 $39.35 $44.57 $49.78
Scheduled Adjustment Per KWH $0.00669 $0.00809 $0.00954 $0.01100 $0.01247
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $293.24 $323.07 $334.79 $340.98 $328.21
Total Capacity Rate/KW Month $24.44 $26.92 $27.90 $28.41 $27.35
Total Capacity Rate Per KWH $0.06782 $0.07659 $0.08113 $0.08419 $0.08222
Contract Capacity Rate $22.79 $23.35 $23.63 $22.69 $18.83
GNP Deflator Adjustment (Monthly) $1.26 $1.29 $1.31 $1.26 $1.04
GNP Adjusted Capacity Rate $24.05 $24.64 $24.94 $23.95 $19.87
T-Bill Adjustment ($0.07) ($0.07) ($0.07) ($0.07) ($0.03)
T Bill Adjusted Capacity Rate $23.98 $24.57 $24.87 $23.87 $19.84
Treasury Bill Adjustment per Schedule $1.23 $1.23 $1.23 $1.23 $0.54
ELECTRICITY REVENUES - ENERGY:
Energy Rate Per KWH (Weighted Average) $0.03996 $0.04220 $0.04366 $0.04517 $0.04674
Variable O&M Rate Per DT $0.59 $0.61 $0.63 $0.65 $0.67
Variable O&M Rate Per KWH $0.00501 $0.00516 $0.00531 $0.00547 $0.00564
Total Energy Rate Per KWH $0.04497 $0.04736 $0.04897 $0.05064 $0.05237
Total Electricity Revenues - Capacity & Energy $0.11279 $0.12394 $0.13010 $0.13484 $0.13460
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150 150 150
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $4.23 $4.32 $4.41 $4.49 $4.58
FGMR - Firm Gas Market Rate ($/DT) $4.74 $4.91 $5.09 $5.27 $5.45
IGR - Interruptible Gas Rate ($/DT) $4.89 $5.06 $5.24 $5.43 $5.62
OR - Oil Rate ($/DT) $6.89 $7.16 $7.43 $7.72 $8.02
</TABLE>
<PAGE>
1/3/97 PANDA-BRANDYWINE LP. BRANDY-1.XLS-SCHEDULE D
230MW PEPCO PROJECT Page 4 of 6
OPERATING ASSUMPTIONS
<TABLE>
11 12 13 14 15
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UNIT #1 - FUEL COST:
FGRR (Reserves) % 54% 56% 57% 58% 59%
FGMR (Market) % 46% 44% 43% 42% 41%
Blended Unit #1 Rate ($/DT) $3.86 $3.98 $4.10 $4.21 $4.33
Blended Unit #1 Rate ($/KWH) $0.03108 $0.03214 $0.03326 $0.03432 $0.03515
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 91% 90% 90% 90% 90%
OR (Fuel Oil) % 9% 10% 10% 10% 10%
Blended Unit #2 Rate ($/DT) $4.06 $4.23 $4.41 $4.59 $4.79
Blended Unit #2 Rate ($/KWH) $0.03262 $0.03386 $0.03528 $0.03683 $0.03852
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0 0 0
Charles County Waste Water Rate ($/000 Gallons) $2.29 $2.32 $2.36 $2.39 $2.43
WSSC Water Usage Rate ($/000 Gallons) $0.00 $0.00 $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) $6.24 $6.36 $6.49 $6.62 $6.75
Chemical Usage Rate ($/000 Gallons) $2.82 $2.90 $2.99 $3.08 $3.17
DISTILLED WATER COSTS:
Annual Operating Costs $442,730 $456,012 $469,693 $483,783 $498,297
FIXED OPERATING EXPENSES:
Firm Transportation $3,026,352 $3,071,747 $3,117,823 $3,164,591 $3,212,060
O&M Contract Costs $2,063,094 $2,124,987 $2,188,737 $2,254,399 $2,322,031
Consumables $766,361 $789,352 $813,033 $837,424 $862,546
Administrative Expenses $526,085 $541,867 $558,123 $574,867 $592,113
Insurance $637,512 $656,638 $676,337 $696,627 $717,526
Purchased Electricity $614,402 $632,834 $651,819 $671,374 $691,515
Property Taxes $1,567,032 $1,532,315 $1,512,427 $1,491,130 $1,468,376
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $5,796,370 $5,970,261 $6,149,369 $6,333,850 $6,523,866
Additions to Reserve $3,816,916 $1,090,355 $1,857,606 $1,166,166 $2,812,214
Turbine Overhauls ($3,643,025) ($911,247) ($1,673,125) ($976,150) ($2,616,498)
Reserve Disbursement $0 $0 $0 $0 $0
Overhaul Reserve - End of Year $5,970,261 $6,149,369 $6,333,850 $6,523,866 $6,719,582
Hours of Operation 3,980 3,877 3,781 3,692 3,607
Effective Hours (Adj for Starts) 5,684 5,581 5,485 5,396 5,311
Cumulative Hours 57,160 62,741 68,226 73,622 78,933
Maintenance Requirements 80,000 88,000 96,000 104,000 112,000
Maintenance Dollars $0 $0 $0 $0 $0
Amount Per Turbine Hour $0 $0 $0 $0 $0
Maintenance Costs ($000) per PES $3,643 $911 $1,673 $976 $2,616
Contract Reserve Requirements $0 $0 $0 $0 $0
Inflated Reserve Requirements $0 $0 $0 $0 $0
LEASE RESERVE:
Lease Reserve - Beginning of Year $14,094,207 $15,035,633 $15,264,318 $15,642,465 $16,606,179
Additions to Reserve $941,426 $228,685 $378,147 $963,714 $1,354,894
Reserve Disbursement $0 $0 $0 $0 $0
Lease Reserve - End of Year $15,035,633 $15,264,318 $15,642,465 $16,606,179 $17,961,073
(1) See Schedules A and B for the effect of the PEPCO
Scenario on Capacity Revenue, Net Cash Flow and
Lease Coverage Ratios
<CAPTION>
16 17 18 19 20
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2011 Dec-2012 Dec-2013 Dec-2014 Dec-2015
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UNIT #1 - FUEL COST:
FGRR (Reserves) % 25% 0% 0% 0% 0%
FGMR (Market) % 75% 100% 100% 100% 100%
Blended Unit #1 Rate ($/DT) $4.63 $4.93 $5.10 $5.29 $5.48
Blended Unit #1 Rate ($/KWH) $0.03770 $0.04033 $0.04194 $0.04301 $0.04410
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 90% 90% 90% 91% 91%
OR (Fuel Oil) % 10% 10% 10% 9% 9%
Blended Unit #2 Rate ($/DT) $4.96 $5.13 $5.31 $5.50 $5.69
Blended Unit #2 Rate ($/KWH) $0.03976 $0.04130 $0.04285 $0.04446 $0.04613
WATER USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 90,000 90,000 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0 0 0
Charles County Waste Water Rate ($/000 Gallons) $2.46 $2.50 $2.54 $2.58 $2.61
WSSC Water Usage Rate ($/000 Gallons) $0.00 $0.00 $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers & Distilled Water 17,000 17,000 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) $6.88 $7.02 $7.16 $7.31 $7.45
Chemical Usage Rate ($/000 Gallons) $3.27 $3.37 $3.47 $3.57 $3.68
DISTILLED WATER COSTS:
Annual Operating Costs $513,246 $528,643 $544,503 $560,838 $577,663
FIXED OPERATING EXPENSES:
Firm Transportation $3,260,240 $3,309,144 $3,358,781 $3,409,163 $3,460,300
O&M Contract Costs $2,391,692 $2,463,442 $2,537,346 $2,613,466 $2,691,870
Consumables $888,423 $915,075 $942,528 $970,803 $999,927
Administrative Expenses $609,876 $628,172 $647,018 $666,428 $686,421
Insurance $739,051 $761,223 $784,060 $807,581 $831,809
Purchased Electricity $712,260 $733,628 $755,637 $778,306 $801,655
Property Taxes $1,444,116 $1,418,298 $1,390,870 $1,361,777 $1,330,965
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $6,719,582 $6,921,169 $7,128,804 $7,342,669 $7,562,949
Additions to Reserve $2,828,729 $1,373,678 $1,334,019 $5,825,052 $1,426,826
Turbine Overhauls ($2,627,141) ($1,166,043) ($1,120,155) ($5,604,772) ($1,199,938)
Reserve Disbursement $0 $0 $0 $0 $0
Overhaul Reserve - End of Year $6,921,169 $7,128,804 $7,342,669 $7,562,949 $7,789,837
Hours of Operation 3,476 3,355 3,246 3,148 3,063
Effective Hours (Adj for Starts) 5,180 5,059 4,950 4,852 4,767
Cumulative Hours 84,113 89,172 94,122 98,974 103,741
Maintenance Requirements 120,000 128,000 136,000 144,000 152,000
Maintenance Dollars $0 $0 $0 $0 $0
Amount Per Turbine Hour $0 $0 $0 $0 $0
Maintenance Costs ($000) per PES $2,627 $1,166 $1,120 $5,605 $1,200
Contract Reserve Requirements $0 $0 $0 $0 $0
Inflated Reserve Requirements $0 $0 $0 $0 $0
LEASE RESERVE:
Lease Reserve - Beginning of Year $17,961,073 $20,218,726 $20,927,605 $21,369,707 $20,584,111
Additions to Reserve $2,257,653 $708,879 $442,103 $0 $0
Reserve Disbursement $0 $0 $0 ($785,597) ($1,725,718)
Lease Reserve - End of Year $20,218,726 $20,927,605 $21,369,707 $20,584,111 $18,858,393
(1) See Schedules A and B for the effect of the PEPCO
Scenario on Capacity Revenue, Net Cash Flow and
Lease Coverage Ratios
</TABLE>
<PAGE>
1/3/97 PANDA-BRANDYWINE LP. BRANDY-1.XLS-SCHEDULE D
230MW PEPCO PROJECT Page 5 of 6
OPERATING ASSUMPTIONS
<TABLE>
21 22 23 24 25 26
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021
-------------------------------------------------------------------------------
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OPERATING ASSUMPTIONS:
Capacity in Kilowatts 230,000 230,000 230,000 230,000 230,000 230,000
Energy Production Capacity - Unit #1 117,750 117,540 117,300 118,680 117,950 117,740
Energy Production Capacity - Unit #1 117,750 117,540 117,300 118,680 117,950 117,740
Energy Production Capacity - Unit #1 117,750 117,540 117,300 118,680 117,950 117,740
Weighted Average Energy Output - Unit #1 117,750 117,540 117,300 118,680 117,950 117,740
Energy Production Capacity - Unit #2 117,750 117,540 117,300 118,680 117,950 117,740
Energy Production Capacity - Unit #2 117,750 117,540 117,300 118,680 117,950 117,740
Energy Production Capacity - Unit #2 117,750 117,540 117,300 118,680 117,950 117,740
Weighted Average Energy Output - Unit #2 117,750 117,540 117,300 118,680 117,950 117,740
Firm Dispatch Energy Production 99,000 99,000 99,000 99,000 99,000 99,000
Hours Per Year Running Unit #1 (Full Load) 3,961 3,935 3,909 3,886 3,866 3,206
Hours Per Year Running Unit #2 (Full Load) 2,190 2,250 2,314 2,379 2,447 2,046
Availability Factor 96.6% 96.6% 96.6% 96.5% 96.5% 96.5%
Contract Heat Rate (BTU/KWH) 8,461 8,461 8,461 8,461 8,461 8,461
Actual Unit #1 Heat Rate (BTU/KWH) 8,085 8,118 8,148 8,091 8,139 8,167
Actual Unit #1 Heat Rate (BTU/KWH) 8,085 8,118 8,148 8,091 8,139 8,167
Actual Unit #1 Heat Rate (BTU/KWH) 8,085 8,118 8,148 8,091 8,139 8,167
Weighted Average Heat Rate - Unit #1 (BTU/KWH) 8,085 8,118 8,148 8,091 8,139 8,167
Actual Unit #2 Heat Rate (BTU/KWH) 8,008 7,968 7,986 8,006 8,026 8,002
Actual Unit #2 Heat Rate (BTU/KWH) 8,008 7,968 7,986 8,006 8,026 8,002
Actual Unit #2 Heat Rate (BTU/KWH) 8,008 7,968 7,986 8,006 8,026 8,002
Weighted Average Heat Rate - Unit #2 (BTU/KWH) 8,008 7,968 7,986 8,006 8,026 8,002
Actual Annual Energy - Unit #1 (MWH) 466,466 462,470 458,482 461,164 455,980 377,437
Actual Annual Energy - Unit #2 (MWH) 257,906 264,476 271,386 282,326 288,622 240,948
Summer Fuel Usage - Unit #1 (DT's) 1,172,594 1,185,264 1,198,900 1,217,005 1,231,816 1,233,853
Shoulder Fuel Usage - Unit #1 (DT's) 1,557,338 1,528,810 1,499,177 1,475,378 1,445,130 1,158,016
Winter Fuel Usage - Unit #1 (DT's) 1,041,446 1,040,254 1,037,632 1,038,895 1,034,276 690,658
Annual Fuel Usage - Unit #1 (DT's) 3,771,378 3,754,328 3,735,708 3,731,278 3,711,223 3,082,527
Summer Fuel Usage - Unit #2 (DT's) 723,491 747,664 778,717 822,110 852,151 848,091
Shoulder Fuel Usage - Unit #2 (DT's) 681,441 707,405 739,792 784,744 816,949 650,445
Winter Fuel Usage - Unit #2 (DT's) 660,380 652,276 648,780 653,448 647,378 429,529
Annual Fuel Usage - Unit #2 (DT's) 2,065,312 2,107,345 2,167,289 2,260,302 2,316,479 1,928,064
ELECTRICITY REVENUES - CAPACITY:
Capital Costs/KW Month
(Unadjusted Contract Year) $19.14 $19.48 $19.83 $20.19 $20.58 $0.00
Capital Costs/KW Year $226.58 $230.36 $234.46 $238.68 $243.06 $205.80
Capital Costs Per KWH $0.05720 $0.05855 $0.05999 $0.06142 $0.06287 $0.06420
GNP Deflator Adjustment/KW Year $12.56 $12.77 $13.00 $13.23 $13.48 $11.41
GNP Deflator Adjustment Per KWH $0.00317 $0.00325 $0.00333 $0.00341 $0.00349 $0.00356
Interest Rate Adjustment/KW Year(1) ($0.39) ($0.39) ($0.39) ($0.39) ($0.39 ($0.32)
Interest Rate Adjustment Per KWH(1) ($0.00010) ($0.00010) ($0.00010) ($0.00010) ($0.00010 ($0.00010)
Scheduled Adjustment/KW Year $55.00 $60.22 $65.43 $70.65 $75.87 $66.85
Scheduled Adjustment Per KWH $0.01388 $0.01530 $0.01674 $0.01818 $0.01963 $0.02085
Contingent Adjustment/KW Year $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Contingent Adjustment Per KWH $0.00000 $0.00000 $0.00000 $0.00000 $0.00000 $0.00000
Total Capacity Rate/KW Year $293.75 $302.96 $312.51 $322.18 $332.02 $283.74
Total Capacity Rate/KW Month $24.48 $25.25 $26.04 $26.85 $27.67 $23.64
Total Capacity Rate Per KWH $0.07415 $0.07700 $0.07995 $0.08291 $0.08588 $0.08851
Contract Capacity Rate $19.14 $19.48 $19.83 $20.19 $20.58 $0.00
GNP Deflator Adjustment (Monthly) $1.06 $1.08 $1.10 $1.12 $1.14 $0.00
GNP Adjusted Capacity Rate $20.20 $20.56 $20.93 $21.31 $21.72 $0.00
T-Bill Adjustment ($0.03) ($0.03) ($0.03) ($0.03) ($0.03 $0.00
T Bill Adjusted Capacity Rate $20.17 $20.53 $20.90 $21.28 $21.69 ($0.09)
Treasury Bill Adjustment per Schedule $0.54 $0.54 $0.54 $0.54 $0.54 $1.54
ELECTRICITY REVENUES - ENERGY:
Energy Rate Per KWH (Weighted Average) $0.04837 $0.05007 $0.05183 $0.05365 $0.05553 $0.05694
Variable O&M Rate Per DT $0.69 $0.71 $0.73 $0.75 $0.77 $0.80
Variable O&M Rate Per KWH $0.00581 $0.00598 $0.00616 $0.00634 $0.00654 $0.00673
Total Energy Rate Per KWH $0.05418 $0.05605 $0.05799 $0.05999 $0.06206 $0.06367
Total Electricity Revenues - Capacity & Energy $0.12833 $0.13305 $0.13794 $0.14290 $0.14795 $0.15218
DISTILLED WATER REVENUES:
Water Delivery (Days/Year) 150 150 150 150 150 125
Daily Distilled Water Sales Volume (Gal) 80,000 80,000 80,000 80,000 80,000 80,000
Distilled Water Sales Price ($/000 Gal) $1.50 $1.50 $1.50 $1.50 $1.50 $1.50
CONTRACT FUEL RATES (ENERGY REVENUE):
FGRR - Firm Gas Reserve Rate ($/DT) $4.67 $4.75 $4.84 $4.93 $5.01 $5.10
FGMR - Firm Gas Market Rate ($/DT) $5.65 $5.85 $6.06 $6.27 $6.50 $6.73
IGR - Interruptible Gas Rate ($/DT) $5.83 $6.03 $6.25 $6.47 $6.71 $6.95
OR - Oil Rate ($/DT) $8.32 $8.64 $8.98 $9.32 $9.68 $10.05
</TABLE>
<PAGE>
1/3/97 PANDA-BRANDYWINE LP. BRANDY-1.XLS-SCHEDULE D
230MW PEPCO PROJECT Page 6 of 6
OPERATING ASSUMPTIONS
<TABLE>
21 22 23 24 25 26
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
Dec-2016 Dec-2017 Dec-2018 Dec-2019 Dec-2020 Dec-2021
-----------------------------------------------------------------------------
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UNIT #1 - FUEL COST:
FGRR (Reserves) % 0% 0% 0% 0% 0% 0%
FGMR (Market) % 100% 100% 100% 100% 100% 100%
Blended Unit #1 Rate ($/DT) $5.67 $5.88 $6.09 $6.31 $6.53 $6.77
Blended Unit #1 Rate ($/KWH) $0.04586 $0.04770 $0.04960 $0.05103 $0.05318 $0.05530
UNIT #2 - FUEL COST:
IGR (Spot Gas) % 91% 91% 92% 92% 92% 94%
OR (Fuel Oil) % 9% 9% 8% 8% 8% 6%
Blended Unit #2 Rate ($/DT) $5.89 $6.09 $6.30 $6.52 $6.75 $6.94
Blended Unit #2 Rate ($/KWH) $0.04714 $0.04853 $0.05033 $0.05221 $0.05416 $0.05554
WATER USAGE:
Gallons Per Hour - Cooling Towers &
Distilled Water 90,000 90,000 90,000 90,000 90,000 90,000
Gallons Per Hour - Boiler Makeup 0 0 0 0 0 0
Charles County Waste Water Rate ($/000 Gallons) $2.65 $2.69 $2.73 $2.78 $2.82 $2.86
WSSC Water Usage Rate ($/000 Gallons) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
WATER DISCHARGE & CHEMICAL USAGE:
Gallons Per Hour - Cooling Towers &
Distilled Water 17,000 17,000 17,000 17,000 17,000 17,000
Gallons Per Hour - Boiler Makeup 21 21 21 21 21 21
WSSC Water Discharge Rate ($/000 Gallons) $7.60 $7.75 $7.91 $8.07 $8.23 $8.39
Chemical Usage Rate ($/000 Gallons) $3.79 $3.90 $4.02 $4.14 $4.26 $4.39
DISTILLED WATER COSTS:
Annual Operating Costs $594,993 $612,842 $631,228 $650,165 $669,669 $574,800
FIXED OPERATING EXPENSES:
Firm Transportation $3,512,205 $3,564,888 $3,618,361 $3,672,637 $3,727,726 $3,153,035
O&M Contract Costs $2,772,626 $2,855,805 $2,941,479 $3,029,724 $3,120,615 $2,678,528
Consumables $1,029,925 $1,060,823 $1,092,648 $1,125,427 $1,159,190 $994,971
Administrative Expenses $707,014 $728,224 $750,071 $772,573 $795,750 $683,019
Insurance $856,763 $882,466 $908,940 $936,208 $964,294 $827,686
Purchased Electricity $825,705 $850,476 $875,990 $902,270 $929,338 $797,682
Property Taxes $1,298,375 $1,263,949 $1,227,626 $1,189,346 $1,149,042 $1,091,590
TURBINE OVERHAUL RESERVE:
Overhaul Reserve - Beginning of Year $7,789,837 $8,023,532 $8,264,238 $8,512,165 $8,767,530 $9,030,556
Additions to Reserve $5,372,541 $1,526,110 $1,681,291 $4,780,564 $1,798,482 $3,976,759
Turbine Overhauls ($5,138,846) ($1,285,404) ($1,433,364) ($4,525,199) ($1,535,456) ($3,705,842)
Reserve Disbursement $0 $0 $0 $0 $0 ($9,301,473)
Overhaul Reserve - End of Year $8,023,532 $8,264,238 $8,512,165 $8,767,530 $9,030,556 $0
Hours of Operation 3,076 3,092 3,111 3,132 3,156 2,626
Effective Hours (Adj for Starts) 4,780 4,796 4,815 4,836 4,860 4,330
Cumulative Hours 108,521 113,317 118,133 122,969 127,829 132,159
Maintenance Requirements 160,000 168,000 176,000 184,000 192,000 200,000
Maintenance Dollars $0 $0 $0 $0 $0 $0
Amount Per Turbine Hour $0 $0 $0 $0 $0 $0
Maintenance Costs ($000) per PES $5,139 $1,285 $1,433 $4,525 $1,535 $3,706
Contract Reserve Requirements $0 $0 $0 $0 $0 $0
Inflated Reserve Requirements $0 $0 $0 $0 $0 $0
LEASE RESERVE:
Lease Reserve - Beginning of Year $18,858,393 $7,291,933 $7,291,933 $7,291,933 $7,291,933 $7,291,933
Additions to Reserve $0 ($0) $0 $0 $0 $0
Reserve Disbursement ($11,566,460) $0 $0 $0 $0 ($7,291,933)
Lease Reserve - End of Year $7,291,933 $7,291,933 $7,291,933 $7,291,933 $7,291,933 $0
(1) See Schedules A and B for the effect of the PEPCO
Scenario on Capacity Revenue, Net Cash Flow and
Lease Coverage Ratios
</TABLE>
APPENDIX G
PANDA-BRANDYWINE COGENERATION PROJECT
INDEPENDENT ENGINEER'S REPORT
Dated July 22, 1996
Updated January 10, 1997
Prepared for
PANDA-BRANDYWINE L.P.
Prepared by
PACIFIC ENERGY SYSTEMS, INC.
Portland, Oregon
PREFACE
Panda Energy International, Inc., retained Pacific Energy Systems, Inc., to
independently review available technical information on the design,
construction, and expected operation of the Panda-Brandywine Cogeneration
Project (the Project). The Project is being developed by Panda Energy
International through its affiliate, Panda-Brandywine Limited Partnership, and
is being designed and constructed by Raytheon Engineers & Constructors.
This report is intended for use in the Offering Circular for the issuance of
Pooled Project Bonds offered by Panda Funding Corporation for the Project.
Pacific Energy Systems understands that ICF Resources, Inc., will use the
technical information in this report to develop project projections. Pacific
Energy Systems, Inc., has not examined and makes no representations with
respect to any other document contained in the Offering Circular.
This review is intended to determine whether the Project is technically
feasible and based on competent engineering and construction practices. It is
not intended to check the detailed design nor to identify engineering design
errors. The review includes a number of documents prepared by others. Pacific
Energy Systems, Inc., cannot guarantee the accuracy of the information
contained in them. The ultimate success of the Project will depend not only
on the engineering design and construction, but also on the subsequent
operation, maintenance, management, and renewal of equipment as required in
the completed plant. Pacific Energy Systems, Inc., has no control over design,
construction, startup, operation, or maintenance of the plant and provides no
warranty, express or implied, concerning its success.
TABLE OF CONTENTS
Page
Section 1 INTRODUCTION. . . . . . . . . . . . . . . . . G-1
Section 2 EXECUTIVE SUMMARY AND CONCLUSIONS . . . . . . G-4
Introduction. . . . . . . . . . . . . . . . . G-4
Current Assessment of Project Status. . . . . G-5
Summary of Due Diligence. . . . . . . . . . . G-8
Facility Description. . . . . . . . . . . . . G-13
Facility Performance. . . . . . . . . . . . . G-15
Permits and Licenses. . . . . . . . . . . . . G-17
Construction Status . . . . . . . . . . . . . G-17
Ancillary Facilities. . . . . . . . . . . . . G-17
Section 3 ENGINEERING . . . . . . . . . . . . . . . . . G-19
Overall Plant Description . . . . . . . . . . G-19
Design Concepts and Technology Assessment . . G-20
Major Equipment Selection and
Vendor/Supplier Qualifications. . . . . . . G-22
Specifications. . . . . . . . . . . . . . . . G-22
Systems and Equipment Descriptions. . . . . . G-23
Civil/Structural/Architectural. . . . . . . . G-31
Section 4 ANCILLARY FACILITIES. . . . . . . . . . . . . G-31
Effluent Water Supply Line. . . . . . . . . . G-32
230-kV Electrical Transmission Line . . . . . G-32
Natural Gas Line. . . . . . . . . . . . . . . G-32
Distilled-Water Plant . . . . . . . . . . . . G-34
Betty Boulevard . . . . . . . . . . . . . . . G-34
Section 5 COST AND SCHEDULE ESTIMATES . . . . . . . . . G-35
Capital Costs . . . . . . . . . . . . . . . . G-35
Startup Costs . . . . . . . . . . . . . . . . G-36
ICF Projections . . . . . . . . . . . . . . . G-40
Schedule. . . . . . . . . . . . . . . . . . . G-45
Section 6 PERMITS AND LICENSES. . . . . . . . . . . . . G-45
Federal Approvals . . . . . . . . . . . . . . G-45
State Approvals . . . . . . . . . . . . . . . G-47
Right-of-Way Easements. . . . . . . . . . . . G-48
Section 7 CONTRACTS & AGREEMENTS. . . . . . . . . . . . G-50
Power Purchase Agreement. . . . . . . . . . . G-50
Engineering, Procurement, and Construction
Contract . . . . . . . . . . . . . . . . . . G-57
Treated Effluent Water Purchase Agreement . . G-62
Steam Sales Agreement . . . . . . . . . . . . G-63
Natural Gas Agreements. . . . . . . . . . . . G-65
Owner's Engineer. . . . . . . . . . . . . . . G-67
Effluent Line Construction. . . . . . . . . . G-68
Transmission Line Construction. . . . . . . . G-68
Section 8 OPERATIONS AND MAINTENANCE. . . . . . . . . . G-68
Operating Experience. . . . . . . . . . . . . G-68
Operations and Maintenance Costs. . . . . . . G-69
O&M Agreement . . . . . . . . . . . . . . . . G-71
Termination . . . . . . . . . . . . . . . . . G-73
Other Provisions. . . . . . . . . . . . . . . G-73
Section 9 PERFORMANCE GUARANTEES AND TESTING. . . . . . G-76
Completion Guarantees . . . . . . . . . . . . G-76
Performance Guarantees. . . . . . . . . . . . G-76
Plant Performance Testing . . . . . . . . . . G-79
Liquidated Damages and Bonuses. . . . . . . . G-80
Appendix A DOCUMENT LIST . . . . . . . . . . . . . . . . G-83
Appendix B PROJECT DRAWINGS. . . . . . . . . . . . . . . G-98
Appendix C LIST OF ABBREVIATIONS . . . . . . . . . . . . G-101
Appendix D PANDA GATECYCLE SUMMARY . . . . . . . . . . . G-105
List of Tables 1-1 Project Relationships . . . . . . . . . G-3
5-1 Capital Budget Details. . . . . . . . . G-38
5-2 Similar Gas Turbine Projects. . . . . . G-39
5-3 Commissioning Budget. . . . . . . . . . G-40
5-4A Unit 1. . . . . . . . . . . . . . . . . G-42
5-4B Unit 2. . . . . . . . . . . . . . . . . G-43
5-5 Maintenance Requirement . . . . . . . . G-44
7-1 PEPCO Dispatch Segments . . . . . . . . G-53
8-1 Operations and Maintenance Costs. . . . G-70
8-2 Comparisons of O&M Budgets for Gas
Turbine Projects. . . . . . . . . . . G-71
9-1 Performance Guarantees. . . . . . . . . G-76
9-2 Design Base Conditions for Plant
Operation . . . . . . . . . . . . . . G-77
9-3 Summary of Raytheon's Liquidated
Damages and Bonuses . . . . . . . . . G-81
List of Figures 8-1 Organization Chart. . . . . . . . . . . G-75
Section 1
INTRODUCTION
At the request of Panda Energy International (Panda), Pacific Energy Systems,
Inc., reviewed the Panda-Brandywine Cogeneration Project, which is located
south of Brandywine, Maryland, in Prince George's County. The Project is to
be built on industrialzoned property by the owner, Panda-Brandywine, L.P. It
is being developed by Panda Energy International, Inc. (Panda), of Dallas,
Texas, an affiliate of the owner. Steam from the cogeneration project will
be supplied to the adjacent distilled-water plant owned by Brandywine Water
Company, an affiliate of Panda Energy. The review included:
An examination of the available Project documents (listed in
Appendix A) and the Project drawings (listed in Appendix B)
Construction monitoring since April 1995,including monthly site
inspections and approval of funding draws
Several meetings at GE Capital in Stamford, Connecticut, to discuss
Project details, contract issues, pro forma development, and permit
issues
A detailed list of Project participants and their relationships to the Project
is presented in Table 1-1. An engineering, procurement, and construction (EPC)
contractor, Raytheon Engineers & Constructors (Raytheon), is responsible for
the Project design, engineering, procurement, and construction. The
cogeneration plant and the distilled-water plant will be operated by Ogden
Brandywine Operations, Inc. (operator), a subsidiary of Ogden Power
Corporation.
Panda Energy hired Gilbert/Commonwealth, Inc., as the owner's engineer to
review the engineering and design work performed by Raytheon. C.H. Guernsey
and Companyreviewed the electrical interconnect of the plant and will assist
Panda-Brandywine in the startup and testing of the facility.
General Electric Capital Corporation (GE Capital) has provided a $215 million
construction loan to the Project and has committed to provide long-term
financing under a single-investor lease with the owner.
The power plant is designed to deliver 230,000 kilowatts (kW)(1) of
electricity to Potomac Electric Power Company (PEPCO). The plant is a
combined-cycle cogeneration facility that, in addition to its electrical
output, will also provide up to 34,000 pounds per hour (lb/hr) of steam to
Brandywine Water for use in the distilled-water process. The primary fuel is
natural gas, but the plant will also be capable of burning oil during gas
curtailment periods.
Pacific Energy Systems has independently reviewed the areas of Project
engineering, cost, schedule, permits, contracts, operations and maintenance,
and performance estimates for completeness, risk, variation from practices
typical in the industry, and the ability of the Project to perform as
intended.
Because Panda-Brandywine is a partnership with no employees, Panda Energy
International (the developer) is supplying a project manager, project
engineer, and other key individuals on behalf of Panda-Brandywine. In order
to make this report easier to read, the term "Panda" is used in a generic
sense to mean both owner and developer. Where clarification is important,
specific terms or "owner" and "developer" will be used.
- -----------------------------
(1) A list of technical abbreviations used in this report may be found in
Appendix C.
Table 1-1
PROJECT RELATIONSHIPS
Party Project Remarks
Affiliation
- -------------------------------------------------------------------------------
Panda-Brandywine Project name Project is located south of
Cogeneration Brandywine, Maryland, in
Prince George's County.
Panda-Brandywine, L.P. Owner The limited partnership set
up to hold all project
assets.
Panda Energy International Developer The principal developer of
the project and an affiliate
of the owner.
Brandywine Water Steam host An affiliate of Panda Energy
International. Will
purchase steam to distill
water and sell it to local
users of highly pure water.
Ogden Brandywine Operator Will operate and maintain
Operations, Inc. the project under contract
with Panda-Brandywine, L.P.,
and is a subsidiary of
Ogden Power Corporation.
Gilbert/Commonwealth, Inc. Owner's Has responsibility for
engineer detailed design review and
construction quality
control on behalf of the
owner.
Raytheon Engineers EPC United Engineers &
Constructors contractor Constructors, Inc., dba
Raytheon Engineers &
Constructors, has a turnkey
contract for engineering,
procurement, and
construction of the
cogeneration facility.
General Electric Lender GE Capital has provided a
Capital Corporation $215 million construction
loan and a 20-year lease
commitment for long-term
financing.
Potomac Electric Power PEPCO has contracted to
Power Company purchaser purchase up to 230 MW of
dispatchable capacity and
associated energy from the
cogeneration plant.
Mattawoman Wastewater Cooling MWWTP will supply water for
Treatment Plant (MWWTP) water supply cooling tower makeup and
will operate the 17-mile
pipeline and pumping plant.
The MWWTP is part of the
Washington Suburban Sanitary
Commission (WSSC) and
provides treatment
requirements for Prince
George's County and Charles
County.
Public Service Permitting The Maryland Public Service
Commission (PSC) agency Commission has the primary
and exclusive right to
permit the project under a
Certificate of Public
Convenience and Necessity.
Power Plant Research Permitting The PPRP is part of the
Program (PPRP) support Maryland Department of
Natural Resources (DNR),
which provided key analysis
for the PSC during the
permitting process and
will have broad reporting
and review rights over the
operating plant.
Air and Radiation Permitting The ARMA is part of the
Management Administration support Maryland Department of
(ARMA) Environment, which
provided key analysis for
the PSC during the
permitting process and will
have broad reporting and
review rights over the
operating plant.
Southern Maryland Local SMECO will supply power for
Electrical Coop (SMECO) utility construction and for
operation of auxiliaries
during shutdown periods.
Section 2
EXECUTIVE SUMMARY AND CONCLUSIONS
INTRODUCTION
PROJECT BACKGROUND
The Panda-Brandywine Cogeneration Project is located on industrial-zoned
property south of Brandywine, Maryland, in Prince George's County. The Project
is a combined-cycle cogeneration facility designed to deliver 230,000 kilowatts
(kW) of electricity to Potomac Electric Power Company (PEPCO), and will supply
up to 34,000 lb/hr of steam to Brandywine Water for distilling water. Natural
gas is the primary fuel, but fuel oil may be used during gas curtailments. The
distilled-water plant is necessary as a steam host to ensure the Project's
status as a qualifying facility (QF).
Panda-Brandywine, L.P., is the project owner and Panda Energy, an affiliate of
the owner, is the developer. Ogden Brandywine Operations, Inc., a subsidiary
of Ogden Power Corporation, will operate both the cogeneration facility and
the distilled-water plant. Raytheon is responsible for the design,
engineering, procurement, and construction of the Project. GE Capital
provided construction financing to the Project and will provide long-term
financing under a single-investor lease with the owner. A list of Project
participants and their relationships to the Project appears in Table 1-1.
INDEPENDENT ENGINEER'S WORK
Pacific Energy Systems was retained by GE Capital to perform a due diligence
review of the Project. The review culminated in a Technical Review dated March
1995. The Technical Review included:
- An examination of the available Project documents (see listing
in Appendix A) and the Project drawings (listed in Appendix B)
- A visit to the proposed Project site
- Several meetings at GE Capital in Stanford, Connecticut to discuss
Project details, contract issues, pro forma development, and
permit issues
- Several conference calls among GE Capital, Panda Energy, Pacific
Energy Systems, and various legal counsels
Since March 1995, Pacific Energy Systems has monitored construction of the
Project. The latest visit to the Project site by Pacific Energy Systems
occurred June 19, 1996 (see photographs in Appendix F).
INDEPENDENT ENGINEER'S QUALIFICATIONS
Pacific Energy Systems has provided engineering services to approximately 50
power plants over the last seven years. Services included technical review,
construction monitoring, performance testing and certification, and operation
and maintenance audits. Approximately half of these plants utilized
combined-cycle combustion turbine technology with cogeneration, as does the
Panda-Brandywine Cogeneration Project.
Pacific Energy Systems served as the independent engineer on the Panda-
Brandywine Project for GE Capital. David G. Young and John R. Martin, who
performed that work, have over 50 years combined experience in power plant
design, siting, permitting, review, and evaluation.
STRUCTURE OF THIS REPORT
This report is based on the due diligence activities previously completed by
Pacific Energy Systems, as well as its ongoing construction monitoring of the
Project. The Executive Summary follows the format of the scope of work provided
by Panda Energy. Details and relevant documents are attached as appropriate.
CURRENT ASSESSMENT OF PROJECT STATUS
CONCLUSIONS AND RECOMMENDATIONS
On the basis of Pacific Energy Systems' review of available information,
Pacific Energy Systems concludes that the Panda-Brandywine Cogeneration
Project is technically feasible and that its design is similar to that of
several successfully operated combined-cycle gas turbine plants. The design
appears to be adequate to meet the contractual commitments specified in the
Power Purchase Agreement (PPA) with PEPCO and Steam Sales Agreement (SSA)
with Brandywine Water Company, environmental permit conditions, and qualifying
facility requirements.
The majority of the equipment components can be considered commercially
available and are widely used in similar utility and industrial applications.
If constructed, operated, and maintained according to the design criteria and
manufacturers' recommendations; and if critical parts are properly renewed and
replaced, the plant will perform as anticipated and with a projected life that
exceeds the 25-year primary term of the PPA.
CONSTRUCTION SCHEDULE
In the Construction Agreement, Raytheon guarantees that commercial operation
of the plant will occur no later than the Guaranteed Completion Date of October
31, 1996. Based on this completion date, construction is ahead of schedule.
As of July 15, 1996, construction was approximately 90 percent complete.
It is reasonable to expect commercial operation by the end of September 1996.
Final acceptance, is expected in April 1997, as scheduled.
CONSTRUCTION BUDGET
The budget for development of the Project is $215 million. This total includes
plant construction by Raytheon, the construction of a water supply line and
transmission line, and work performed by others. The $215 million budget also
includes interest during construction and other financing costs. Details of
the original budget are shown in Table 5-1. Cost overruns have occurred in
some budget items while other items have been completed under budget.
Overall, construction is expected to be completed at approximately $200,000 to
$300,000 below the original Project budget which included approximately $8.7
million for contingencies. As shown in Table 5-1, almost all the contingency
remains unspent.
Panda Energy budgeted $5.8 million for its expenses during startup and
commissioning. This budget is consistent with experience at other projects.
TECHNICAL PERFORMANCE
After its 1994-95 review of the Project design and the selected equipment,
Pacific Energy Systems concluded that all performance standards required under
the Construction Contract, including power and heat rate, could be met. The
guaranteed net power output is 230,000 kW. The guaranteed heat rate is 7,124
Btu/kWh (LHV). That conclusion remains valid.
AIR EMISSIONS
In the Construction Agreement, Raytheon guarantees air emissions from the plant
will meet the emission limits of the U.S. Environmental Protection Agency
(EPA), Prevention of Significant Deterioration (PSD) permit, the Certificate of
Public Convenience and Necessity (CPCN), and Maryland Public Services
Commission (PSC).
The Project, as originally designed, was capable of meeting the air emission
standards of the EPA and the Maryland PSC. Nothing has changed since the
design phase that would diminish this capability. General Electric Power
Systems has provided a letter guaranteeing that the turbines will meet CPCN
standards. Other projects that use similar GE turbines have complied with air
emission standards similar to those required of this Project.
POWER PURCHASE AGREEMENT
The PPA provides for a monthly capacity payment and a monthly energy payment.
Pacific Energy Systems has reviewed the sample calculations in the PPA for the
respective payments and found them to be correct based on the assumptions used
in the PPA. However, the actual payments will be based on the actual operation
of the plant in the future.
A "Joint Operating Procedure" has been agreed to by Panda and PEPCO. It
provides for coordination of dispatching and provides procedures for resolving
disagreements that may arise under the PPA during operation.
QUALIFYING FACILITY STATUS
To be a Qualifying Facility under PURPA, five percent of the useful energy
(i.e., the sum of the generated electrical energy plus the thermal energy sent
to a host) from a power plant must serve a thermal load. The thermal load for
this Project is a water distillation plant that is being constructed by
Raytheon under the Construction Agreement. Raytheon is contractually
committed to have the distilled-water plant ready for commercial operation
at the time the power plant begins commercial operation. The quantity of
steam exported to the distilled water plant is to average 34,000 lb/hr which
will ensure the five percent requirement is met.
The distilled water also must be used beneficially. The U.S. Navy, at its
Indian Head Naval Facility, has signed a purchase order for all the distilled
water produced by the plant.
A QF must also meet an efficiency standard that requires the net electric
energy plus half of the useful thermal energy to equal or exceed 45 percent of
the energy in the fuel. For this Project, the guaranteed heat rate limit of
7,124 Btu/kWh (LHV) equates to an efficiency of 48 percent. The efficiency
standard for QF status is, therefore, satisfied regardless of the thermal load.
SUMMARY OF DUE DILIGENCE
CONTRACTS
Pacific Energy Systems reviewed the six agreements described below in the
course of its due diligence work.
Power Purchase Agreement
Under the PPA, PEPCO has agreed to purchase all of the electricity generated by
the Project. The PPA places several restrictions and requirements on Panda and
allows for extensive monitoring of the Project before and during its operation.
If Panda fails to meet the requirements of the PPA, the agreement allows for
reduced payments or cancellations.
The plant will be fully dispatchable to meet PEPCO's requirements except for
the production of 99 MW for 60 hours per week which PEPCO must take from the
plant.
Under the PPA, the following deposits and reserves are required. All are in
place through letters of credit provided by GE Capital:
- Development Security ensures the Commercial Operation Date is met.
- Interconnection Security ensures PEPCO is paid for costs associated
with the interconnection facilities between the Project and the
PEPCO system.
- Performance Security covers damages resulting from termination of
the PPA after the Commercial Operation Date.
- Maintenance Reserve covers major overhaul costs incurred by the
Project.
Construction Agreement
The Amended and Restated Turnkey Cogeneration Facility Agreement between
Panda-Brandywine, L.P. and Raytheon is also referred to as the Construction
Agreement or the EPC Contract. The EPC contract is for a fixed fee of $118
million. It includes design, engineering, project management, labor, equipment,
and materials to construct, start up, and carry out performance tests (for
the power plant and distilled-water plant only) of the following project
components.
- The power plant and supporting facilities within the main fence
area
- A section of Betty Boulevard (an access road to the industrial
park)
- The distilled-water plant
- The fuel-oil storage tank
Utility support systems outside the fence (including the electric transmission
lines, effluent pipeline, and the gas supply line) are outside of Raytheon's
scope of work. The transmission line was constructed by C.W. Wright
Construction Company, Inc., and is complete. PEPCO has issued a letter stating
it will accept the line.
The effluent pipeline and the gas supply line are complete. The associated
pump station is 85 percent complete and is expected to be operational by the
anticipated commercialization date.
Completion of the plant and acceptance by Panda have the following two key
milestone dates:
- Commercial operation is scheduled to occur by October 31, 1996.
It occurs when the plant has passed the 48-hour test outlined
in Section 19.5.1 of Raytheon's scope of work. Penalties apply
for not passing the test on schedule. It is anticipated that
Raytheon will begin commercial operation by the end of September
1996.
- Final acceptance is anticipated by the end of April 1997.
In order to meet final acceptance, Raytheon must complete the
following:
- Pass performance tests and correct deficiencies
- Build the plant to final specifications
- Synchronize the plant to the PEPCO grid
- Complete all work affecting normal plant operation
- Ensure that punchlist work will not interrupt plant
operations
- Ensure that steam is going to the steam host
- Obtain a completion certificate from the owner
- Certify that construction is in accordance with
governmental requirements
The Construction Contract is a fixed turnkey agreement that provides for
liquidated damages to ensure Raytheon meets all performance guarantees and
bonuses if performance exceeds guarantees by specified amounts. It is expected
that guaranteed completion date of October 31, 1996, will be met and the
project will be completed within budget. Performance guarantees under the
Construction Contract are discussed in the sub-section entitled "Facility
Performance" in Section 2 of this report.
Liquidated damages are provided to ensure Raytheon's diligence in meeting all
guarantees. The contract provides for an $80,000 per day penalty for delay of
completion after October 31, 1996, up to a maximum penalty of $14.4 million.
The contract provides for performance bonuses if performance exceeds guarantees
by specified amounts.
The Construction Contract commits Raytheon to provide or obtain limited spare
parts, building occupancy permits, limited warranties against deficiencies, and
manuals and training for O&M personnel. Provisions are made for the
arbitration of disputes arising under the Construction Contract.
Operation and Maintenance Agreement
Panda-Brandywine, L.P. and Ogden Brandywine Operations, Inc., signed an
Operation and Maintenance Agreement on November 21, 1994. Ogden Brandywine
Operations is a wholly-owned subsidiary of Ogden Power Corporation which is a
subsidiary of Ogden Environmental and Energy Services of Fairfax, Virginia,
which is a wholly- owned subsidiary of Ogden Corporation (Ogden).
Ogden is a technical services company with more than $2 billion in annual sales
and more than 1,300 employees who operate and maintain power projects including
waste-to-energy, hydroelectric, and geothermal projects. Gas turbine operation
is relatively new to Ogden, but it has hired sufficiently skilled home-office
personnel to support the Project. Local hiring has been completed and the
experience level is substantially higher than Pacific Energy Systems has seen
in most other facilities.
The annual O&M budget for the Project is approximately 20 percent lower than
budgets for other recently-constructed gas turbine projects with which Pacific
Energy Systems is familiar. However, the budget is reasonable. Economies of
scale might explain, in part, its magnitude in comparison to other projects.
After the Actual Commercial Operation Date, operator compensation is fixed at
$117,750 per month, adjusted for performance, plus all reimbursable costs
incurred under the agreement. Performance adjustments are allowed for the
equivalent availability factor (EAF) and for the capacity performance.
The O&M Agreement provides for termination under several conditions Pacific
Energy Systems believes are reasonable. It also contains reasonable provisions
for force majeure, arbitration, renegotiation in case of substantial changes to
the facilities, and Owner oversight over unbudgeted purchase orders in excess
of $1,000.
Steam Sales Agreement
A steam sales agreement was entered into on March 30, 1995 between Panda-
Brandywine, L.P. and Brandywine Water Company. Panda will sublease the
distilled-water plant to Brandywine Water Co. Panda will sell steam (thermal
energy), cooling water, and feed water to Brandywine Water Co. Panda also will
provide operating, maintenance, and wastewater disposal services for the
distilled-water plant. Brandywine Water Co. will sell distilled water and must
purchase enough steam to maintain the Project's QF status. Panda has not
guaranteed any specific amounts or periods of time for thermal energy delivery.
Pacific Energy Systems believes that the SSA is sufficient to ensure the
continued QF status of the Project.
Water Purchase Agreement
A Treated Effluent Water Purchase Agreement between the county commissioners of
Charles County, Maryland, and Panda-Brandywine, L.P. was signed September 13,
1994. It allows the project to receive 2.7 million gallons of treated effluent
per day (mgd). The Agreement commits Panda to construct the 17-mile pipeline at
its own expense. The Project budget contains approximately $10.6 million for
this purpose. Upon completion, the portion of the pipeline in Charles County
is to be turned over to the county. The capacity of the line is to be 3.0 mgd.
Effluent not needed by the Project may be provided to other customers with
which the county may contract.
The Water Purchase Agreement is for a term of 25 years with options for three
5-year extensions. Panda will pay $1.00 per thousand gallons of effluent used
for the first 10 years with escalation occurring thereafter in accordance with
the Consumer PriceIndex. Panda must also pay certain fixed expenses associated
with maintaining the pipeline and its right-of-way. The effluent pipeline was
built by Flippo Construction Company. It has been completed from the wastewater
treatment plant to the cooling tower.
The pump station for pumping effluent through the pipeline is being built at
the sewage treatment plant by J.L.W. Construction. It is 85 percent complete.
Completion is expected by early August.
Natural Gas Agreements
A detailed study of the gas contracts has not been a part of Pacific Energy
Systems' past due diligence activities on the Project. C.C. Pace Resources,
Inc., conducted an independent review of the Project's fuel supply plan.
The required gas transmission line for the Project, which interconnects into
the Washington Gas and Light (WGL) system, is complete.
DESIGN FEASIBILITY
The basic plant design, gas-fired combined-cycle, has been used in numerous
similar installations and is well established in the utility industry.
PROJECT COSTS
The capital budget for the Project was $215 million including a contingency of
approximately $8.7 million. Details of the budget are shown in Table 5-1.
Actual capital expenditures are expected to be $200,000 to $300,000 less than
the budgeted amount. Cost overruns on some budgeted items have been more than
compensated for through savings on other cost items.
The ICF projections appear to reflect reasonable expectations of Project
expenses. Agreements for operating and maintaining the plant; for purchasing
fuel and water; and for selling electricity are structured to provide for
contingencies in a manner that is consistent with good practice in this
industry.
PERMITS
All required permits and licenses either have been obtained or are reasonably
expected to be obtained within a time frame that will not delay the planned
operation of the Project.
FACILITY DESCRIPTION
SITE
The Project is located in an industrial park south of Brandywine, Maryland in
Prince George's County. The site is located 2,000 feet east of Highway 301 on
Cedarville road, adjacent to the Conrail railroad tracks on the east, bounded
on the west by Betty Boulevard, which will be built as part of the Project.
Some of the site is in a wetland. All appropriate permits for use of that
area have been obtained.
FACILITY COMPONENTS
Mechanical Systems and Steam Generators
The project will use two GE-supplied PG7111EA combustion turbinegenerators,
each matched with its own three-pressure-level heat recovery steam generator
(HSRG). Each turbine-generator will have an output of 81.3 MW. The steam
from the two HSRGs will be used in a single GE steam turbine with a capacity
of 83.7 MW. The steam turbine can operate using steam from either of the HRSGs
individually or from both HSRGs. The combustion turbine-generators will fire
on natural gas with No. 2 fuel oil as an auxiliary fuel. The balance of plant
equipment includes a condenser, four-cell evaporative cooling tower, water
treatment system and fuel oil handling system.
Process steam to the distilled-water plant will be supplied from the low-
pressure section of the HRSGs and can be supplemented with steam turbine
extraction steam.
The exhaust steam from the steam turbine is condensed in a surface condenser.
Cooling tower makeup water will be supplied via a 17 mile pipeline from the
Mattawoman Wastewater Treatment Plant. Well water is available onsite as a
backup.
The gross plant electrical capacity is 246.3 MW during steam export to the
distilled-water plant at the rate of 34,000 pounds per hour (lb/hr) (i.e.,
two times 81.3 MW plus 83.7 MW). The guaranteed net output is 230 MW which
accounts for in-plant use of electric power and derating due to hot and humid
atmospheric conditions.
Gas will be supplied via a pipeline. Backup fuel oil will be stored in a tank
located adjacent to the site.
The design of the plant is proven in the electric utility industry. Design
features such as redundancy and backup that are in accordance with industry
practice have been included.
One notable feature of the plant is that it is highly dispatchable and will be
started and stopped frequently. Several features could be added to the plant
now or after startup that would make the cycling of the plant more reliable
and less costly. The current design, however, is sufficient to achieve the
performance assumed in the pro forma.
The plant is expected to be heavily dispatched by PEPCO from a minimum
guarantee dispatch of 99 MW on a 12-hour daily cycle, 5day week to full load at
230 MW.
Environmental Controls
The major air pollutant of concern is NOx. The turbines use dry, low-NOx
technology. Water injection will be required only when the plant is operating
on oil. No duct burners, gas compressors, or selective catalytic reduction
(SCR) is required now, but it can be added later if needed.
The project has obtained a CPCN from the Maryland PSC. To obtain a CPCN,
emissions were reviewed in accordance with PSD requirements. All associated
approvals have been obtained.
In developing the CPCN, the Maryland PSC included input from all other state
agencies and local governments that deal with environmental regulation, and
all permits required to date have been received. It is anticipated there will
be no problems obtaining other required permits.
Electrical Intertie
The interconnection of the Project to the PEPCO system is included in the PPA.
At Panda's expense, PEPCO will provide all required interconnection equipment,
safety devices, and metering at its Burches Hill Substation.
C. W. Wright has constructed a 7-mile long 230 kV transmission line from the
plant to the Burches Hill Substation. Ownership of the line will be
transferred to PEPCO. The transmission line has been completed and is
energized, and it is backfeeding the switch gear at the power plant. PEPCO
has issued a letter stating it will accept the transmission line.
FACILITY PERFORMANCE
POWER AND HEAT RATE
Under Article 5.0 of the EPC contract, Raytheon guarantees a net power output of
230,000 kW and a net heat rate of 7,124 Btu/kWh (LHV). These performance
parameters are to be met under a set of conditions including the export of
34,000-lb/hr steam. Pacific Energy Systems evaluated the plant using
"Gatecycle," a power plant design and performance software package. The
evaluation predicts the guarantees can be met. Nothing has changed during
construction to alter this conclusion.
The heat rate of 7,124 Btu/kWh (LHV) and capacity of 230,000 kW are for a new,
clean plant. Performance degrades during operation until the prime equipment
is overhauled and key parts are repaired or replaced. This is common for all
mechanical systems. As discussed in Section 5, Pacific Energy Systems provided
ICF with our estimates of the heat rate and plant output capacity for each
year from 1996 through 2021 for use in its Project projections. Pacific
Energy Systems' estimates are based on dispatch estimates provided by ICF
Resources and on performance degradation curves provided by General Electric
Power Systems. Our estimates are consistent with common industry practice.
However, they are dependent on the information provided by others and on
operating conditions and maintenance practices.
EMISSIONS
The turbines use dry, low- NOx control technology which is stateof-the-art for
this type of application. The Project has undergone review for PSD standards
and has been duly permitted.
Under the Construction Agreement, Raytheon guarantees that air emissions from
the plant will meet the emissions limits of the U.S. EPA PSD permit and the
permits by the Maryland CPCN proceedings. General Electric Power Systems has
issued a letter guaranteeing its turbines will meet these emission limits.
Emission limits for some power plants necessitate the use of SCR to control
NOx. SCR is not required for this project and is not included in the current
design. However, if needed in the future it can be added to the HRSGs.
RELIABILITY
Net power output, heat rate, emissions, and noise limits are guaranteed by
Raytheon and are achievable with the Project's technology and construction
standards.
The following plant performance tests for the Project will be completed before
final acceptance:
- 48-hour net electrical output performance test
- Net plant heat rate test
- 200-hour capacity test
- Stack test
- Noise test
The Operation and Maintenance Agreement promotes reliability by providing for
a full-time owner's representative to administer Panda-Brandywine's
responsibilities, to monitor the operation of the plant, and to direct
economic and financial matters.
Raytheon warrants, under the Construction Agreement, that the plant will be
free from defects or deficiencies until the later of: (a) one year from
commercial operation; or (b) one year from discovery or repair of defect or
deficiency, but no later than the second anniversary of final acceptance.
Furthermore, for any item that is repaired, replaced, or renewed more than
once, Raytheon will undertake a technical analysis of the problem and clear
the "root cause" of the problem. GE-supplied equipment is exempted from this
warranty and is the responsibility of Panda.
The factors given above and the soundness of the Project design lead Pacific
Energy Systems to conclude that the Project will perform as assumed in the pro
forma and with a reliability that is typical of similar successful plants of
its type.
AVAILABILITY
The PPA is based on a target availability in the range of 88 percent to 92
percent. Based on the design of the Project, Pacific Energy Systems believes
this is a reasonable target. The PPA provides for an increase in monthly
payments if the actual availability, as measured by the EAF is greater than 92
percent.
The PPA provides for a decrease in monthly payments if the EAF is less than 88
percent. Likewise, the O&M contract provides for bonuses and penalties if the
EAF falls outside of the targeted range.
The review of the Gas Supply Agreement by C.C. Pace presents a generally
favorable conclusion regarding the security of the gas supply.
USEFUL LIFE
The term of the PPA is 25 years. The anticipated useful life of projects
similar to this project is often 25 years or longer. If the plant is operated,
maintained, and renewed according to manufacturers' recommendations and
standard industry practices, Pacific Energy Systems expects it to have a
useful life of at least 25 years.
PERMITS AND LICENSES
All necessary permits and licenses have been obtained or can be obtained on a
schedule that will not delay commercial operation of the Project.
CONSTRUCTION STATUS
Construction is expected to be completed on time and within budget.
Construction is approximately 90 percent complete as of July 15, 1996. The
plant is in the preliminary startup phase. The expected completion date is the
end of September 1996.
Based on the construction progress report dated June 30, 1996 the construction
status of major components is as follows:
- Piping - 98.2 percent complete
- Control cable terminations - 94.1 percent complete
- Instrument installation - 94.7 percent complete
ANCILLARY FACILITIES
Five ancillary, or offsite, facilities either have been built or are under
construction. They are described in Section 4 of this report. A summary of
the current status of each follows.
Effluent Water Supply Line
A 16-inch-diameter 17-mile long pipeline will carry effluent from the
Mattawoman Wastewater Treatment Plant to the Facility. The treated wastewater
will be used as cooling water for the power plant and as feed water for the
distilled-water plant. The pipeline is currently complete from the wastewater
treatment plant to the cooling tower of the power plant.
The pump station that is being constructed at the wastewater treatment plant
is 85 percent complete.
230-kV Electrical Transmission Line
A 230-kV transmission line is needed to connect the project's dead-end tower to
PEPCO's Burches Hill Substation. The transmission line is complete and
energized.
Natural Gas Line
Washington Gas Light Company (WGL) is obligated to provide gas distribution
facilities from the interstate pipeline at Cove Point to the power plant. The
provision of metering, regulating, and appurtenant facilities required on the
project site are included in WGL's commitments.
The WGL pipeline is currently complete to the plant meter. Work on controls
is in progress and is expected to be finished by July 1, 1996.
One section of pipeline is being built by Columbia Pipeline Company at a cost
of $6.8 million. Completion is expected prior to commercialization of the
plant. However, if it is not complete by that time, gas is available from
other sources. Delays on this section of pipeline will not delay startup of
the Project.
Distilled-Water Plant
To maintain status as a QF, at least 5 percent of the useful energy output
from a power plant must be used by a thermal host. The thermal host for the
Project is a distilled-water plant owned by Brandywine Water, an affiliate of
Panda Energy. The distilledwater plant will start up with the power plant.
Raytheon is committed to accomplish this and Pacific Energy Systems believes
it is a reasonable expectation.
Betty Boulevard
Prince George's County requires Panda to construct the section of Betty
Boulevard that fronts the Project site. Construction is included in the EPC
contract and will be completed some time after commercialization of the
plant. Completion of Betty Boulevard is not crucial to the operation of the
plant and no major problems are anticipated.
Section 3
ENGINEERING
OVERALL PLANT DESCRIPTION
The Panda-Brandywine Cogeneration Project is a combined-cycle power plant
located south of Brandywine, Maryland, in Prince George's County, 2,000 feet
east of Highway 301 on Cedarville Road. The plant is adjacent to the Conrail
railroad tracks on the east and will be bounded on the west by Betty
Boulevard, which is to be built as part of the project.
The EPC contractor has guaranteed a net electrical output of 230 MW from the
plant, corrected to 92 degrees F dry bulb, 50 percent relative humidity, with
34,000 lb/hr saturated process steam at 15 pounds per square inch gauge (psig)
at the point of interconnection with 80 percent of the condensate returned and
no boiler blowdown. The plant will be dispatched daily by PEPCO at a minimum
of 12 hours per day during weekdays. There will be substantial additional
dispatch during high demand periods. Partial load operation of each gas turbine
will not drop below 80 percent of rated output.
The plant will use GE-supplied PG7111EA combustion turbinegenerators, equipped
with dry, low-NOx combusters as the plant's prime movers. It is capable of
being fired with either natural gas or No. 2 fuel oil. The Frame 7 has an
output of 81.3 MW at 59 degrees F ambient temperature without inlet
conditioning. The combustion turbine exhaust is routed from each unit through
separate three-pressure-level, unfired HRSGs. Each HRSG will have its own
stack.
A single steam turbine-generator, supplied by General Electric, will take steam
from the two HRSGs to produce an additional 83.7 MW. Process steam to the
distilled-water plant will be supplied from the low-pressure section of the
HRSGs, supplemented with steam turbine extraction steam. The exhaust steam
from the steam turbine is condensed in a surface condenser. Cooling tower
makeup will be from the MWWTP effluent and will require a 17-milelong pipeline.
Electricity from the plant will be transmitted over a 7.1-mile, 230-kV
transmission line built by the project and tying into the PEPCO system at the
Burches Hill Substation. The plant does not have black-starting capabilities
but receives startup power from backfeed through the 230-kV transmission line.
SMECO will provide auxiliary and startup power through the backfeed during
periods when the gas turbines are not operating. The maintenance and
administration buildings will be connected to SMECO by a feed from its local
distribution system at all times.
DESIGN CONCEPTS AND TECHNOLOGY ASSESSMENT
The Panda-Brandywine facility is being designed as a dispatchable
combined-cycle power plant. The GE frame units have very successfully met
utility needs for peaking in simple-cycle configuration and in base-loaded
combined-cycle configuration. The GE Frame 7s to be used at Panda-Brandywine
are heavy-duty, industrial-grade, packaged combustion turbine-generators
with a proven record of reliability in electric generation service. Overall,
it is Pacific Energy Systems' opinion that, if the plant is built as specified
in the EPC scope document, it will be capable of meeting all operating and
dispatch requirements. However, Pacific Energy Systems also believes that,
because of the daily cycling of the combustion and steam turbines, additional
design modifications could be made to enhance the operation and reliability of
the plant while lowering long-term operation and maintenance costs.
Pacific Energy Systems representatives have observed the use of several of the
following design modifications to enhance combinedcycle plants that are started
and stopped on a daily basis:
- Dampers in the HRSG stack to hold temperature in the HRSG overnight
- Sealing steam provided to the steam turbine from a small
auxiliary boiler
- Increased insulation on the HRSG outlet duct and stack to
where the damper is located
- Mechanical vacuum pump for condenser to pull vacuum quicker
and hold vacuum overnight
- Steam sparger to the condenser to assist in pulling vacuum
and warming up
- Auxiliary circulating water pump to hold vacuum on condenser
when plant is down
- Drainable superheater coils
- Steam or electric heat on steam turbine casing
- Use of more 100 percent capacity redundant pumps and
auxiliary equipment
Pacific Energy Systems believes that some or all of the above changes would
make operation and maintenance of a daily-cycled plant easier, less expensive,
and more reliable. If Panda decides after startup (as others have) that
installation of these items is cost effective in fuel savings, most of them can
be added at a later time.
The gas turbines are being equipped with GE's dry, low-NOx burners, which are
state of the art for primary emissions control technology. Early reports from
plants using these burners on similar Frame 7 units indicate that the gas
turbine can meet the permit requirements for NOx and carbon monoxide (CO)
emissions of 35 lb/hr [9 parts per million by volume, dry (ppmvd)] and 50
lb/hr, respectively. Oil firing requires some water injection to keep NOx
emissions at or under the 239 lb/hr (54 ppmvd) limit. The fuel oil burned in
the combustion turbines shall contain no more than 0.05 percent sulfur by
weight. All emissions are controlled without the use of an SCR system or
ammonia injection.
In order to prevent depletion of groundwater in Prince George's and Charles
Counties, Panda Energy has elected to use effluent from the MWWTP for cooling
tower makeup. While this is not a common practice throughout the industry, it
is done frequently enough that no major problems are anticipated with the use
of wastewater effluent. If setbacks at the MWWTP prevent use of the effluent
for periods of time, the plant has sufficient onsite well water capacity.
Most of the remaining plant equipment at Panda-Brandywine shows proper
redundancy and a conservative design philosophy. Most pump applications are
designed with three 50 percent capacity units, and critical applications, such
as the boiler feedwater, have two 100 percent capacity units. Contrary to
common practice in most combined-cycle cogeneration plants, no standby diesel
generator is included. Since auxiliary power will normally come from the
Southern Maryland Electrical Coop (SMECO) while the plant is off-line, it can
be backfed through the 230-kV intertie with PEPCO; therefore, a standby diesel
generator is not an important issue for redundancy. The design criteria for the
uninterruptible power supply (UPS) and battery system appear satisfactory to
meet any safety concerns required to shut down the plant safely should a total
loss of power (transmission line outage) occur. A modification in the design,
made shortly before financial closing, removed the alternate connection from
SMECO to the UPS. This could potentially hamper reclosing to the transmission
system if the batteries were to run down during the shutdown. Panda is
reviewing this and will correct it.
Overall, the Panda-Brandywine plant appears to have an adequate design
philosophy, uses technology and equipment that are consistent with most
combined-cycle cogeneration plants, and can be expected to operate as intended
to meet contract requirements. The design modifications discussed above would
improve the plant's operability and maintainability, but if they are not
implemented, the plant can still perform at a level consistent with that
anticipated in the ICF projections.
MAJOR EQUIPMENT SELECTION AND VENDOR/SUPPLIER QUALIFICATIONS
The suppliers of major equipment components are as follows:
Gas turbine(s) General Electric
Steam turbine General Electric
HRSG Nooter/Ericksen
Cooling tower Hamon Cooling
Distributed control system Westinghouse Electric Corp.
Water treatment system EMCO Engineering
Boiler feed, condensate and
circulating water pumps Byron Jackson Pumps
Main step-up transformer Schneider Canada (Federal Pioneer
Division)
All of the above suppliers are well recognized in the industry for supplying
reliable and high-quality equipment.
SPECIFICATIONS
Pacific Energy Systems reviewed several key specifications for equipment to be
supplied on the Panda-Brandywine project and found them to be adequate to
obtain the required equipment. Specification information and filled-in
manufacturers' data were used as the basis for the mass and energy balance
model of the plant, which is discussed in greater detail in Appendix D.
SYSTEMS AND EQUIPMENT DESCRIPTIONS
MECHANICAL SYSTEMS AND EQUIPMENT
Combustion Turbine
As previously stated, the Panda-Brandywine plant uses two GE PG7111EA
(Frame 7) combustion turbines as the prime movers. The Frame 7 is a
heavy-duty, single-shaft, simple-cycle gas turbine with a nominal capacity
of 84.6 MW.
The turbine uses natural gas as its primary fuel and No. 2 fuel oil as an
auxiliary fuel. Dry, low-NOx combusters are included to minimize NOx emissions
when firing natural gas. Water injection is used to reduce NOx emissions when
the gas turbine is operating on No. 2 fuel oil. The gas turbine-generator has
the capability to switch fuels while synchronized to the transmission system,
but not necessarily at full load. The natural gas fuel conditioning skid and
fuel oil system with dual fuel oil filters are included as part of the turbine.
Several similar installations using GE's dry, low-NOx combusters have had
serious combustion damage when transferring from gas to oil firing. GE has
traced these problems to a primary liquid purge air check valve that has stuck
in the open position during long periods of operation on gas prior to the
switch to oil. GE has proceeded to make a number of hardware, software, and
operational changes to units with the dry, low-NOx combuster. Pacific Energy
Systems does not consider this to be a major risk to the project. GE has
upgraded the check valve in all operating units, but is continuing to pursue
(with check valve suppliers) a lasting and durable check valve design.
A specific concern is that GE is requesting dual-fueled units with dry, low-
NOx combusters to switch to oil at least weekly for a short run on oil. This
may have an affect on a number of items at Panda-Brandywine, including
emission limits, hours available to operate on oil, and operating schedules.
The GE gas turbine-generator is furnished as a complete, packaged unit. It
includes a closed, force-fed lubricating and hydraulic oil system; electric
motor starting system; off-line compressor wash system; complete control
system; and an automatic, selfcleaning, inlet air filtration system in an
up-and-over orientation. Inlet evaporative coolers are provided on each gas
turbine.
Under normal conditions, the gas turbines will be operated in a cyclic mode,
being dispatched on and off daily, or more frequently if required by PEPCO.
Hourly dispatches between 80 and 100 percent full load on each gas turbine are
also expected.
Heat Recovery Steam Generators
Two HRSGs produce steam for use in the steam turbine-generator and for the
thermal host, using the waste heat in the gas turbine exhaust. A single HRSG
is matched to a single gas turbine. Each HRSG is a three-pressure-level,
water tube, natural circulation boiler. Each HRSG includes a high-pressure
superheater, evaporator steam drum, and economizer; an intermediate-pressure
evaporator, steam drum, and high-pressure/intermediate-pressure (HP/IP)
economizer; a low-pressure (LP) evaporator and steam drum; inlet and outlet
duct; interconnecting piping; and a stack. A spool for future SCR installation
is also included.
The HRSG has wall boxes and provisions for future installation of soot blowers
or a high-pressure water wash system. Sampling ports for the continuous
emissions monitoring system (CEMS) are included in the stack. The exhaust
gases from the HRSG exit through a 15-foot-diameter, free-standing stack that
is 165 feet above grade level.
The control of the HRSG is completely integrated with the distributed control
system.
Steam Turbine
One GE steam turbine with a nominal design output of 84 MW is used. The steam
turbine is an axial flow, base-mounted condensing steam turbine with two
uncontrolled admissions and one uncontrolled extraction designed for normal
inlet throttle steam conditions of 1,215 pounds per square inch (psia),
965 degrees F, exhausting to 2.9 inches mercury absolute (Hga).
The turbine is packaged complete with lube and hydraulic oil system, local
gauge board, gland seal system with condenser and exhauster, and a GE Mark V
Simplex control system.
Condenser
The condenser, supplied by Ecolaire Corporation, is designed to meet Heat
Exchange Institute (HEI) standards and American Society of Mechanical Engineers
(ASME) Boiler and Pressure Vessel Code. The water boxes are full-access,
bolted cover-plate type with inspection access provided to inlet and outlet
water boxes. The condenser is designed to maintain backpressure required by
the steam turbine guarantee rating (2.9 inches HgA) while operating with
circulating water temperatures based on cooling tower performance at design
ambient conditions of 92 degrees F dry bulb and 78 degrees F wet bulb.
The condenser also is capable of condensing full steam production from the HRSG
HP, IP, and LP sections (with steam turbine offline) while maintaining the
condenser pressure and temperature within the turbine manufacturer's limits for
operation. The system is designed for a steam turbine bypass as well as for
meeting startup and shutdown requirements.
The condenser system includes a single steam surface condenser and
accessories, such as 304SS-22 BWG condenser tubes, steam jet air ejectors for
normal operation, and hogging ejectors for startup with inter- and after-
condensers.
Cooling Tower and Closed Cooling System
The cooling tower provides the means for rejecting waste heat from the steam
turbine cycle and servicing plant equipment cooling loads. The cooling tower
is a four-cell, induced-draft, counterflow evaporation tower. It is designed
to operate under winter freezing conditions and to minimize the impact of
fogging and drift emissions on the adjacent roadways. The cooling tower will
operate on treated wastewater effluent. Circulating water is pumped by three
50 percent circulating water pumps.
The closed cooling system serves equipment cooling loads, such as lube oil
coolers, gas compressor intercooler, generator coolers, pump-bearing coolers,
and other equipment coolers. The closed cooling water system uses makeup
water from the condensate system and is pumped by two 100 percent capacity
cooling water pumps. Two 100 percent capacity heat exchangers are used for
heat rejection to the circulating water system.
Condensate-Feedwater System
The condensate-feedwater system consists of a single external deaerator and
six (three per train) boiler feed pumps.
The deaerator unit is a pressure-type, spray-tray deaerator with a horizontal
storage tank. The storage tank is sized to contain, at 85 percent level, a
volume of water to operate without makeup for a minimum of 10 minutes at
maximum design feedwater rate.
The feed pumps are horizontal, centrifugal, multistage, horizontally split
type. Each pump has an intermediate-pressure feedwater tap. One pump in each
train is arranged to supply feedwater to either HRSG.
Raw Water System
The raw water system consists of two deep wells and a 420,000gallon combined
raw water storage/fire protection tank. Each well has the capacity to provide
sufficient water to operate the entire plant, including cooling tower makeup.
The project is permitted to remove 64,000 gallons per day (gpd) from the ground
for non-cooling tower process needs, and it may use up to 1,322,000 gpd for
short-term periods if the MWWTP pipeline is unavailable. Of the raw water
storage capacity, 312,000 gallons are reserved for the fire protection system.
Boiler Water Makeup System
Raw water from the raw water tank is transferred to two 100 percent makeup
demineralizer trains by two 100 percent capacity makeup water pumps. The
demineralizer treats the raw water to achieve a purity level acceptable for use
in the HRSG. The demineralizer contains several components that perform the
water treatment process, including arbon filter units, cation units, anion
units, and mix-bed units. After treatment in the demineralizer, the water is
routed to and stored in a 100,000gallon demineralized water tank. Two 100
percent capacity demineralized water transfer pumps pump water to the deaerator
for boiler makeup, provide regeneration water for the demineralizer, and
provide dilution water for neutralization in the wastewater neutralization
process. Two 100 percent capacity condensate polishers remove iron, copper,
and residual hardness from condensate returned from the steam host.
Wastewater Disposal System
Boiler blowdown, boiler drains, neutralization tank effluent, washdown,
miscellaneous building waste, and sample lines are all routed to the cooling
tower basin through an oil/water separator. Blowdown from the cooling tower and
sanitary waste are disposed of through the tie to the local sewer
interconnection, which is tied to the MWWTP. Drainage from outdoor paved areas
is treated in a separate oil/water separator and disposed of through the
sanitary sewer. Local drainage is routed to a settlement pond and then to an
adjacent wetland area.
Fuel Gas Compressors
No fuel gas compressors are required for this project.
Auxiliary Systems
Fire Protection System. The fire protection system for the Panda-Brandywine
facility consists of a main fire loop, an automatic sprinkler system, two 100
percent capacity pumps, 312,000 gallons of deaerated water storage, and a
carbon dioxide (CO2) system. Each hydrant is rated at 500 gallons per minute
(gpm), and the system is sized to provide maximum demand to any fixture,
supplemented with 500 gpm from the nearest hydrant.
The automatic sprinkler system is supplied from the main fire loop. Areas
protected by the automatic sprinkler system include all buildings, areas of
building, and individual equipment systems, as required by NFPA 850. This
includes all transformers, lube oil equipment and piping, steam turbine
bearings, cooling tower, fire pump building, control room, maintenance
building, and fuel oil storage tank.
Pressure for the main fire loop is maintained by a single, electrically driven
jockey pump. One diesel-driven fire pump and one electrically driven pump
maintain the firewater flow rate during system use. The pumps are located in a
separate pumphouse adjacent to the raw water tank.
Two automatically activated CO2 fire suppression systems are part of the fire
protection system. One CO2 system protects the electrical and control
cabinets in the distributed control system (DCS) equipment room. The other
protects each of the gas turbinegenerators.
Fuel Oil Facilities. The No. 2 fuel oil facilities store and transfer fuel
oil to the gas turbines. Fuel oil is stored in a 2,000,000-gallon tank. The
tank is surrounded by a concrete containment dike designed to hold one and
one-half times the volume of the tank. A tanker-truck unloading station is
provided that is capable of unloading twice the maximum hourly fuel consumption
of the gas turbine. The fuel oil transfer and unloading pumps are located
inside the containment dike.
Miscellaneous. The plant includes other necessary auxiliary systems, such as
building heating, ventilating, and air conditioning (HVAC) and service and
instrument air systems; a 5,000-square-foot maintenance shop; and an
administration building containing approximately 15 offices, conference rooms,
and other support facilities, such as the control room, battery room, UPS room,
and other areas.
ELECTRICAL SYSTEMS AND EQUIPMENT
Generators
A combustion turbine-generator (CTG) is included as part of each GE PG7111EA
package. It has a synchronous machine enclosure for outdoor installation and
an open-ventilated air cooling system, and is rated at 13.8 kV, three-phase, 60
hertz (Hz), 3,600 revolutions per minute (rpm). The gross output of the
turbine-generator is 81.3 MW under International Standards Organization (ISO)
conditions.
The steam turbine-generator (STG) is also supplied by GE. It is a 13.8-kV,
three-phase synchronous machine with brushless excitation, neutral resistance
grounding, and surge protection. The generator is rated 96 MVA at 0.85 power
factor lagging. The generator rating is sufficient to support the steam
turbine rating of 47.1 MW.
Both generators are capable of producing rated megawatts at power factors
ranging from 0.85 lagging to 0.95 leading.
Both the CTG and the STG may be synchronized automatically or manually to the
PEPCO system from the control room.
High-Voltage System
The substation at the plant interconnects the 230-kV high-side windings of
each of the three generator transformers through separate 230-kV circuit
breakers and 230-kV air break switches to a common bus. From there one
230-kV circuit breaker connects the plant generators through a new 230-kV
airbreaker switch to a new 230-kV transmission line to PEPCO.
During normal operation, the plant auxiliary load will be supplied through the
two-unit auxiliary transformer with a 13.8kV primary and 4.16-kV secondary.
Exceptions are the maintenance and administration building which will be
supplied directly from SMECO. Standby power from SMECO will be backfed from
the PEPCO substation through the 230-kV transmission line.
Switchgear and Motor Control Centers
Auxiliary power will be distributed through 4,160-V metalclad switchgear and
4,160-V motor control centers. All large motors will be 4,160 V, including
boiler feed pumps and circulating water pumps. 480-V secondary unit
substations will supply the 480-V motor control centers. Both 4,160-V and
480-V systems will contain spare parts and provisions for future expansion.
Battery UPS System
A 125-V, direct current (dc) system and UPS will be provided to power circuits
required for startup, shutdown, emergency shutdown, and normal plant operation.
The batteries will be capable of safely shutting down the plant under emergency
conditions without a source of auxiliary power or station service power and of
continuing to operate critical systems for 1 hour following emergency shutdown.
The UPS will be sized to supply power for 110 percent of the plant's critical
120-V alternating current (ac) loads.
As previously described, Panda will receive standby and startup power from
SMECO via the PEPCO transmission line to the auxiliary power transformers,
and SMECO will supply the maintenance and administration buildings directly.
There is no backup to the UPS or battery charger. Therefore, if the plant
comes off-line because of a problem associated with the transmission line,
the balance of the plant has no power. Once the batteries are pulled down,
the plant has no way to recharge the 125-kV breaker system. This could cause
several problems, including the inability to reclose the 230-kV breakers in
the plant's switchyard.
Instrumentation and Control Systems
The integrated control of all plant systems is accomplished using a
distributed control system (DCS) that is designed to keep the number of plant
operators to a minimum (normally two), while providing sufficient monitoring
and control capabilities for continued safe and reliable plant operation.
The DCS alerts the operator to any abnormal conditions or situations that
require timely manual intervention; and its interlocks and safety systems
precipitate preplanned actions for those cases where unsafe conditions develop
faster than the modulating controls or the operator can be expected to
respond.
All instrumentation and control equipment is of recent proven design, selected
to achieve the highest level of plant availability, ease of maintenance, and
standardization throughout the project. The DCS is designed to provide
automatic supervisorycontrol of the combined-cycle cogeneration plant and the
distilled-water plant, as well as to initiate manual commands. The primary
functions of the DSC are as follows:
- Manage supervisory controls
- Monitor plant process operations
- Monitor plant operating conditions
- Advise (by display) operating personnel of plant's current
operating status
- Enable operators to operate plant manually from control room
The DCS will interface with package equipment to perform some or all of the
above functions for the gas turbines, steam turbine, HRSG, air compressor,
sampling and chemical injection, condensate polisher, and water treatment as
well as for the distilled-water plant, which in most cases will have local
control panels or control panels in the control room.
The project has a continuous emissions monitoring system (CEMS) for NOx and
oxygen (O2) installed, certified, and operational within 180 days of plant
startup. Installation, operation, and testing procedures must be submitted to
the Maryland Air and Radiation Management Administration (ARMA) and the
Maryland Power Plant Research Program (PPRP) at least 180 days before purchase
of the CEMS.
TELECOMMUNICATIONS
The Power Purchase Agreement requires telecommunications, such as an automatic
generation control (AGC) between the plant and PEPCO's control center. The
AGC will allow PEPCO to send a "desired generation" signal directly to the
plant's coordinated control system. Volt ampere reactive (VAR) loads will
also be sent by the AGC, which will monitor a number of other plant systems
as well.
ELECTRIC AND MAGNETIC FIELDS
In order to minimize Radio Frequency Interference (RFI) impact of the U.S. Air
Force's Globecom communication facility, which is located nearby, Panda had Met
Laboratories, Inc., review various systems within the plant that might be
modified to lower the potential for RFI. No modifications were required.
The use of bundled conductors on the transmission line is expected to minimize
RFI on the 230-kV transmission line even though it passes within 1000 feet of
the Globecom facility.
CIVIL/STRUCTURAL/ARCHITECTURAL
The project is located in a designated industrial park in Prince George's
County southeast of Washington, D.C. The facility will be served by a new
county road, to be built by the project along the project frontage.
Major buildings are the administration/maintenance building, gas turbine
enclosure, and steam turbine building. The remaining structures on the site
will include several small buildings such as the fire pumphouse and fuel oil
pumphouse, large tanks, distilled-water plant, and cooling tower. Building
siding will be steel wall panels with insulation between the exterior surface
panel and the interior surface panel. All buildings will have circulating
air ventilation fans and be fully heated during the winter. Administration
areas and offices also will be air conditioned and heated.
A security fence will be built along the perimeter of the main plant site and
around the switchyard. Motorized gates, video cameras, and a two-way voice
communication system will be at each of the two main entrances to the plant.
Freeze protection is designed to prevent water from freezing in pipes down to
minus 25 degrees C (-13 degrees F) with wind blowing at 15 miles per hour and
the plant completely shut down. Freeze protection will be by electric, self-
limiting, parallel heat-tracing cable along the pipes to be protected.
A cathodic protection system has been provided for underground carbon steel,
stainless steel, brass, and copper piping; the bottoms of bed-mounted steel
tanks; and the surface of the condenser and auxiliary cooling water heat
exchangers on the circulating water side.
Landscaping is provided to enhance the visual appearance of the site from
Betty Boulevard and to provide sound and visual protection for nearby
residences on the south and east.
Section 4
ANCILLARY FACILITIES
The Panda-Brandywine site was chosen because of the availability of the
property within a designated industrial zone more than because of its
convenience to water, fuel, power lines, or a steam host. Therefore, the
facilities required to sustain the project have taken on more importance.
Permitting, engineering, construction, operation, and budget are more
significant for these ancillary facilities than they might be for similar
cogeneration plants.
This section of the report will look at each of the five ancillary facilities:
effluent water supply line, electrical transmission line, natural gas line,
distilled-water plant, and Betty Boulevard. In this way, each facility can be
analyzed independently of the cogeneration facility for risks, alternatives,
and potential mitigation.
EFFLUENT WATER SUPPLY LINE
Cooling water and raw water for the distilled-water plant will be supplied to
the project through a 16-inch-diameter, ductile-iron pipe approximately 17
miles (91,000 feet) long. The line will carry treated effluent water from the
Mattawoman Wastewater Treatment Plant to the cogeneration plant's cooling
tower basin. The agreement between the project and the Charles County
commissioners requires the pipeline to be designed and sized to supply 3.0
million gallons per day (mgd). The project is entitled to use 2.7 mgd of
effluent. The mass and energy balance indicates that about 1.8 mgd is
actually required under continuous 230 MW production.
Quality control of the effluent will be closely monitored by both the county
and the Project. An intermediate chlorination point is planned near the end of
the pipeline. Control of the pipeline will be by telemetry to the
county-owned facility. A low pressure signal will start up the pumps as the
valves are opened at the cooling tower.
The project is responsible for permitting, design, and construction of the
pumping station at MWWTP, the 17-mile pipeline, the chlorination station, and
the intermediate pumping plants. Charles County will operate and maintain the
pipeline and associated facilities.
The Pipeline route follows the Navy railroad right-of-way east for about 10
miles, where it interconnects with the Conrail railroad and proceeds north to
the project site.
230-kV ELECTRICAL TRANSMISSION LINE
The project has built 7.1 miles of 230-kV transmission line from the project's
dead-end tower to PEPCO's Burches Hill Substation. The transmission line
facility was designed by Gilbert/Commonwealth, Inc., and constructed by C.W.
Wright. The line was permitted as part of the Phase II CPCN for the Project
(see Section 6). PEPCO has established general requirements for the line under
the PPA and has the right to review and approve the final design and
construction.
PEPCO will assume title to the transmission line upon the Schedule Commencement
Date (first energy generation by the plant) provided Panda has demonstrated
that the line meets all of PEPCO's requirements. These requirements include:
that its construction is consistent with prudent utility practices, all permits
have been received, and all rights-of-way have been obtained.
Only 4.3 miles of the line require new right-of-way, and nearly all of that is
along the Conrail railroad right-of-way. For the remainder of the 7.1 miles,
the transmission line will be added to towers on PEPCO's Burches Hill-Talbot
270-kV transmission line, which was designed for a double circuit but has one
side open. The transmission line was examined during the CPCN hearing process
to determine the impact it might have on homes, schools, and businesses along
the right-of-way. By raising the singlepole structures carrying the line along
the railroad right-of-way by 10 feet, Panda was able to demonstrate that
electric and magnetic fields at the edge of the right-of-way were reduced to
levels of one-fourth to one-fifth of any state regulations. The transmission
line was found to have little or no impact on wetlands and property values.
C. W. Wright's budget to build the transmission line was $3,425,807. The
transmission line was completed within that budget. Although it is not part of
the transmission line, SMECO will interconnect with the Project in several
places. It will provide construction power to Raytheon during the
construction period. SMECO will also interconnect with the cogeneration
facility to supply power to the administration/maintenance building during
normal operation. The distilled-water plant will also be directly
interconnected to SMECO for all electric power needs. Finally, all startup
and standby power requirements will be met by SMECO through a wheeling
agreement with PEPCO to backfeed the plant through the main transmission line.
NATURAL GAS LINE
In order to provide natural gas to the project site, Panda-Brandywine will
cause the construction of several looped sections of Columbia Gas'
transmission line and the local connection to the site by WGL.
Columbia Gas will loop three sections of their existing gas transmission line
in West Virginia. The new gas pipeline, 3 sections will total about
6.8 miles. Columbia Gas is presently building these sections, which are more
than 60 percent complete. The line should be completed by August 1996.
Startup gas to the project is not dependent on completion of the gas pipeline
by Columbia Gas.
WGL has completed the connection between its main transmission line and the
project site. Presently it is completing the metering controls and adding a
return line to its systems. WGL will complete the balance of its work by
July 1, 1996, several weeks before Raytheon will need gas for first fire.
DISTILLED-WATER PLANT
The steam host for the Panda-Brandywine project is a distilled-water plant
that will provide high-quality distilled water for use in industrial processes.
The distilled-water facility will be owned by Brandywine Water, an affiliate
of Panda Energy.
The heart of the distilled-water plant is a spray film evaporator, which uses
spray nozzles to uniformly distribute the makeup feed over a horizontal steam
tube bundle. Evaporation takes place as the steam inside the tubes condenses.
The vapor is condensed in a water-cooled condenser. The equipment and process
are used in a number of applications, including making distilled water. This
is a standard industrial process and represents no technological risk. Water
from the circulating water system will be used as makeup feed to the system.
The 220,000-gallon distilled-water tank provided has approximately 72 hours of
storage. A truck fill station will fill 6,000- to 8,000-gallon tanker trucks
in 20 to 30 minutes. Operation of the distilled-water plant will be through
the DCS in the main control room of the cogeneration plant. Ogden
Brandywine, the operator, will make daily checks on the equipment. The truck
fill station will be operated by the truck drivers.
The U.S. Navy has signed a purchase order for the entire output of the
distilled water plant. The distilled water will be used at the Indian Head
Naval Facility.
BETTY BOULEVARD
As part of the development process of the industrial park in which the project
is located, Prince George's County requires that each participant set aside
money for building an access road through the industrial park. Panda,
instead, arranged to build the section of Betty Boulevard that fronts the
project property. This allows the plant to complete its access road early and
provide for the trucks required to bring fuel oil to the site and to ship
ultra-pure water from the distilled-water plant.
Betty Boulevard will be built under the EPC contract according to Prince
George's County plans and specifications. In order to prevent mud and dust
problems and to ease congestion, the county required that the Project build a
temporary access road to the site. This temporary access road has become part
of the intersection of Cedarville Road and Betty Boulevard.
Section 5
COST AND SCHEDULE ESTIMATES
The project capital and startup budgets were reviewed for completeness and
accuracy and, where possible, were compared with those of similar projects.
The project schedule was reviewed to identify areas that were too optimistic
and areas where float requires close monitoring for changes that could affect
the required completion dates.
CAPITAL COSTS
The total project capital budget for permitting, design, construction,
startup, and financing is $215 million. A detailed budget breakdown is
presented in Table 5-1. On the basis of the project design guarantee of
230 MW, the cost is approximately $935 per kilowatt.
A comparison of similar gas turbine projects' costs is shown in Table 5-2.
Because there are so many variables associated with each project, a true
comparison of projects is virtually impossible. Pacific Energy Systems has
attempted only limited adjustments to correct these numbers for differences.
However, Table 5-2 does give a reasonable picture of the costs to build
similar projects. All costs in Table 5-1 were escalated at 3.5 percent
annually from the on-line date of the Panda-Brandywine project. Where
practical, the EPC scopes of all projects are nearly the same and include
adjustments for preliminary engineering, interconnection costs, and gas
pipelines.
The price per kilowatt for the EPC cost and project cost is the lowest of any
similar plant studied in this review, primarily for three reasons. First,
this is a two-gas-turbine plant, while plants A through D are all
single-gas-turbine plants. The savings in scale comes from making some of the
major equipment larger, rather than duplicating it. This includes the steam
turbine, cooling tower, water treatment plant, and support facilities.
Second, the other two-gas-turbine plant, E, is very complex and includes
several large diesel generator sets, an auxiliary boiler, and dry cooling
instead of a cooling tower. All of these items add substantially to the
capital and construction costs of Plant E.
Third, much of the Panda-Brandywine equipment was committed early and may have
missed some of the escalation in cost that has been used to bring the numbers
in Table 5-2 to a common year.
Nevertheless, the cost of developing Panda-Brandywine is low, whether it is
compared with similar projects or with any new power plant. This low cost
will give Panda-Brandywine an advantage in the future when PEPCO makes
economic dispatch decisions.
Pacific Energy Systems believes that the Panda-Brandywine capital budget is
adequate to build the project, and careful administration of the Raytheon
contract has held change orders to a minimum.
The contingency of $8,760,000 is about 4 percent of the overall project cost.
Again, through careful administration of the project, Panda has been able to
hold the contingency about the same. With nearly 81 percent of the budget
expended, there are no areas foreseen at this time that would be significant to
draw this number down.
STARTUP COSTS
The EPC contractor, Raytheon, is required to supply all labor, equipment, and
materials to test, start up, and commission the plant. The exceptions to this
include the operator's labor cost (O&M employees are available to assist and
receive training during startup, not to replace EPC contractor labor) and the
cost of natural gas and fuel oil starting with the first actual or attempted
performance test. All fuel needed in connection with the installation,
adjustment, and testing of the plant after the initial actual or attempted
performance test, will be paid for by Raytheon under terms of the EPC contract.
Operator training is to be provided by Raytheon, along with all O&M manuals.
The operator takes over care, custody, and control of the plant when the plant
reaches commercial operation (when it passes the 48hour test, not the
electrical output test).
The owner has established a budget for its expenses during commissioning, as
shown in Table 5-3. These costs appear to be consistent with other projects
similar in size and type of equipment.
<PAGE>
<TABLE>
<CAPTION>
Table 5-1
CAPITAL BUDGET DETAIL
Original Budget Current Budget 1
<S> <C> <C>
Raytheon - Cogeneration Facility 71,499,816 72,060,000
Raytheon - GE Equipment 46,759,000 46,759,000
Raytheon - Distilled Water Facility 3,400,000 3,400,000
Raytheon - Change Orders 0 0
Electrical Transmission Line &
Fiber Optics 4,411,007 4,026,000
Effluent Water Pipeline 10,639,600 10,327,000
Columbia Gas Pipeline Expansion 8,560,725 9,020,952
PEPCO - Electrical Interconnect 2,200,000 2,650,000
PEPCO - RTU/AGC Communications 250,000 87,500
Sales Tax on 10% of Construction Costs 434,000 234,000
Water Wells on Site 348,095 413,437
Building Permit 180,668 299,999
Builder's Risk Insurance 579,645 611,948
Other Construction Costs 50,000 23,142
------------ -----------
Construction Costs 149,312,556 149,966,465
Land Purchase Costs 4,620,883 4,914,810
Gilbert - Owner's Engineer 1,476,067 1,326,067
Gilbert - Transmission Line Design 103,392 103,392
Eagleton - Gas & Water Pipeline Design 317,079 317,079
Greenhorne - Surveying & Pipeline Design 773,081 841,970
Environ - Site Environmental Engineering 41,061 41,061
Met Labs - RFI Engineering Review 22,500 22,500
Others Engineering Costs 163,374 163,374
----------- -----------
Engineering Costs 2,896,553 2,815,443
Permitting & Regulatory Costs 1,670,176 1,670,176
Project Legal Costs 2,380,914 2,576,168
Public Relations Costs 331,131 331,132
Construction Loan Interest 18,103,841 16,849,669
GE Capital Commitment &
Financing Fees 5,534,370 5,555,359
Closing Costs 2,066,757 2,227,340
Mortgage, Recording Tax 2,832,000 2,984,269
------------ ------------
Financing Costs 28,536,968 27,738,522
Project Management &
Development Costs 4,227,576 4,203,859
PEPCO Security Deposits 0 0
Natural Gas Reserves Development 3,165,981 3,165,981
Furniture & Office Equipment 102,820 121,831
O&M Contractor During Construction 1,006,200 1,006,200
Fuel Purchase During Construction, net 550,000 550,000
General Liability Insurance 88,838 88,838
Initial Spare Parts Purchases 2,000,000 1,700,000
Initial Fill of Fuel Oil Tank 1,200,000 1,200,000
Initial Lease Reserve 2,400,000 2,400,000
Initial O&M Reserve 1,000,000 1,000,000
Initial Warranty Reserve 750,000 250,000
Contingency 8,759,404 8,700,274
----------- ----------
Other Project Costs 21,023,243 20,283,125
TOTAL PROJECT COST 215,000,000 215,000,000
</TABLE>
1. Budget estimate as of June 2, 1996, with 81 percent actual expended.
<PAGE>
<TABLE>
<CAPTION>
Table 5-2
SIMILAR GAS TURBINE PROJECTS
Plant Unit Cycle Number MW On- EPC Cost EPC Project Project
Type Type of Gas Line ($1996x000's) Cost Cost Cost
Turbines Date Escalated $/kW ($1996x $/kW
at 3.5% 000's)
Escalated
at 3.5%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A Frame 7 Combined 1 117 1992 79,122 676 123,733 1,058
B Frame 7 Combined 1 137 1993 96,892 707 150,786 1,101
C Frame 7 Combined 1 120.6 1994 86,387 716 140,166 1,162
D Frame 7 Combined 1 126 1995 85,660 679 144,900 1,150
E Frame 7 Combined 2 240 1994 163,561 682 348,150 1,451
Brandy-
wine Frame 7 Combined 2 230 1996 118,800 517 215,000 935
</TABLE>
Table 5-3
COMMISSIONING BUDGET
Furniture and office equipment $ 102,820
O&M Contractor 1,006,200
Fuel purchased during construction 1,500,000
Spare parts inventory 2,000,000
Fuel oil inventory 1,200,000
-----------
Total commissioning costs $5,809,020
ICF PROJECTIONS
Pacific Energy Systems reviewed the technical assumptions used in the ICF
Projections and as noted below, found them to be consistent with those of
similar projects and reflective of the equipment being used and the
requirements of the PPA. Because the project uses equipment that is similar to
that used in many other projects, estimates for capital costs, availabilities,
capacities, and operation and maintenance can be made with a relatively high
degree of confidence. Pacific Energy Systems' analyses of various assumptions
that went into the ICF Projections follow:
- Since the plant is dispatched, availability becomes a concern only if
the plant fails to meet PEPCO's dispatch requirements. While
starting and stopping equipment frequently will have a long-term
impact on the equipment, under PEPCO's dispatch plans there is
sufficient downtime for routine maintenance. Pacific Energy Systems
anticipates that the Panda-Brandywine project will have a high
availability in meeting the dispatch requirements of PEPCO. Pacific
Energy Systems believes the availability projected by ICF is a
reasonable assumption.
- Capacity payments are tied to twice-yearly demonstrated output
testing. On the basis of the results of Pacific Energy Systems'
modeling (see Appendix D), if the plant is operated and maintained as
specified by the equipment manufacturers and according to normal
industry practices, the project will have no difficulty meeting the
twice-yearly capacity test at the full 230 MW or more.
- Our estimate of the heat rate uses weighted averages based on a
model that considers the facility as a new, clean design that is
free of manufacturing and erection errors. Our estimate is also
based on average weather conditions and on the implementation of
operation and maintenance practices recommended by manufacturers and
typical of good industrial practice. Actual year-to-year heat rates
and capacities may vary from the model performance if operating
conditions are different from the assumptions used.
- For the purposes of this report, Pacific Energy Systems has
developed an estimate of the heat rate and capacity for each year
from 1996 through 2021. These are shown in Tables 5-4A and 5-4B.
Pacific Energy Systems, in the past, has employed the methodology of
converting each start cycle to an equivalent number of operating
hours with degradation, inspections, and maintenance intervals based
on the equivalent hours. General Electric no longer supports this
approach, but has developed a methodology based on independent
counts of starts and hours.
Because GE is the original equipment manufacturer (OEM) and will be
the primary advisor and technical support group to Panda during the
operation of the Brandywine units, Pacific Energy Systems has
chosen to use GE's methodology in determining the degradation and
maintenance schedules for the Panda-Brandywine gas turbines. The
anticipated maintenance schedules are shown in Table 5-5.
Notes on Tables 5-4A, 5-4B, and 5-5:
1. Assume 200 hours of oil firing per year on Unit 2 only
2. Uses GE's methodology on determining equivalent hours
3. Uses the greater of equivalent hours based on GE's
calculation of starts or hours
4. Assumes 5 forced outages per year
5. Steam turbine maintenance based on time, not hours of
operation
<PAGE>
<TABLE>
<CAPTION>
Table 5-4A
UNIT 1
Dispatched* Equivalent Annual Annual
Year Hours Fired Hours Average Average
Heat Rate Power
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 650 790 7,939 120,040
1997 3,869 4,769 8,048 118,280
1998 4,227 5,127 8,075 117,840
1999 4,434 5,334 8,106 117,600
2000 4,494 5,394 8,141 117,340
2001 4,653 5,553 8,086 118,840
2002 4,665 5,565 8,141 117,940
2003 4,616 5,516 8,174 117,690
2004 4,566 5,466 8,209 117,450
2005 4,646 5,546 8,166 120,000
2006 4,723 5,623 8,051 118,120
2007 4,671 5,571 8,085 117,760
2008 4,624 5,524 8,119 117,530
2009 4,584 5,484 8,153 117,270
2010 4,553 5,453 8,118 118,400
2011 4,489 5,389 8,151 117,860
2012 4,433 5,333 8,183 117,620
2013 4,384 5,284 8,216 117,380
2014 4,341 5,241 8,134 119,240
2015 4,308 5,208 8,053 118,000
2016 4,243 5,143 8,085 117,750
2017 4,184 5,084 8,118 117,540
2018 4,129 5,029 8,148 117,300
2019 4,079 4,979 8,091 118,680
2020 4,033 4,933 8,139 117,950
2021 3,400 4,300 8,167 117,740
</TABLE>
* Based on Table ES-1 from ICF Resources Incorporated, May 1996 report
"Independent Assessment of the Dispatchability of the Panda-Brandywine
Project."
<PAGE>
<TABLE>
<CAPTION>
Table 5-4B
UNIT 2
Dispatched* Equivalent Annual Annual
Year Hours Fired Hours Average Average
Heat Rate Power
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 450 778 7,863 120,040
1997 2,295 3,303 7,954 118,280
1998 2,973 3,961 7,984 117,840
1999 3,472 4,498 8,011 117,600
2000 3,972 4,980 8,041 117,340
2001 3,661 4,660 8,024 118,840
2002 3,353 4,361 8,053 117,940
2003 3,401 4,409 8,077 117,690
2004 3,450 4,458 8,103 117,450
2005 3,485 4,493 8,131 120,000
2006 3,484 4,492 8,029 118,120
2007 3,195 4,203 7,997 117,760
2008 3,195 4,203 7,997 117,530
2009 3,061 4,069 8,021 117,270
2010 2,933 3,941 8,045 118,400
2011 2,839 3,847 8,020 117,860
2012 2,751 3,759 8,049 117,620
2013 2,665 3,673 8,067 117,380
2014 2,584 3,592 8,087 119,240
2015 2,507 3,515 8,108 118,000
2016 2,452 3,460 8,008 117,750
2017 2,398 3,406 7,968 117,540
2018 2,347 3,355 7,986 117,300
2019 2,297 3,305 8,006 118,680
2020 2,250 3,258 8,026 117,950
2021 1,900 2,908 8,002 117,740
</TABLE>
* Based on Table ES-1 from ICF Resources Incorporated, May 1996 report
"Independent Assessment of the Dispatchability of the Panda-Brandywine
Project."
<PAGE>
<TABLE>
<CAPTION>
Table 5-5
MAINTENANCE REQUIREMENTS
Required
Unit 1 Unit 2 Steam Balance of
Year Required Required Turbine Plant
Maintenance Maintenance Maintenance Maintenance
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 NO
1997 CI CI VI YES
1998 CI CI YES
1999 CI CI VI YES
2000 CI CI YES
2001 HS HS VI YES
2002 CI CI MO YES
2003 CI CI YES
2004 CI CI VI YES
2005 MO CI YES
2006 CI MO VI YES
2007 CI CI YES
2008 CI CI MO YES
2009 CI CI YES
2010 HS CI VI YES
2011 CI HS YES
2012 CI CI VI YES
2013 CI CI YES
2014 MO CI MO YES
2015 CI CI YES
2016 CI MO VI YES
2017 CI CI YES
2018 CI CI VI YES
2019 HS CI MO YES
2020 CI CI YES
2021 CI HS VI YES
</TABLE>
VI = valve inspection, MO = major overhaul, CI - combustion inspection,
HS = hot section
Pacific Energy Systems believes that the heat rate and capacity estimates are
reasonable, consistent with common industry practice, and, when used in light
of the limitations given above, are properly reflected in the pro forma
provided by ICF Resources.
SCHEDULE
According to the PPA, the project must be completed before June 1, 1997, but
not before June 1, 1996. Both Raytheon and Panda have provided bar-chart
schedules (dated March 21, 1995, and March 27, 1995, respectively) that
indicate the project will become commercial on October 31, 1996. Some
initial activities were delayed between December 31, 1994, and April 10, 1995,
because of permitting and financing issues.
The project remains on schedule at this time with construction about 90 percent
complete as of July 15, 1996. Raytheon is presently targeting late September
1996 for commercial operation. This is approximately 5 to 6 weeks ahead of
schedule.
Section 6
PERMITS AND LICENSES
This section reviews the status and content of key environmental and regulatory
permits, licenses, approvals, rights-of-way, and authorizations required for
construction and operation of the Panda-Brandywine cogeneration project.
FEDERAL APPROVALS
FEDERAL ENERGY REGULATORY COMMISSION (FERC)
Qualifying Facilities (QF)
Initially, the Project filed for self-certification on December 1, 1993. In
order to enhance financing, FERC was later asked to certify the project.
Panda-Brandywine, L.P., received a FERC order granting its application for
certification as a qualifying cogeneration facility on May 23, 1994. Pacific
Energy Systems has reviewed the calculation on which certification was granted
and is of the opinion that, as long as the plant is operated in a manner
consistent with its design and that of the steam host, there should be little
problem in maintaining the Project's QF status.
Pipeline Permits
Because of the complex nature of the gas supply and transportation agreements,
a number of FERC approvals are required. Some of these approvals are for the
pipeline expansion project and are related only indirectly to the Panda-
Brandywine project; others require interconnection agreements and tariff
adjustments between utilities; still others relate to the takeover of a
pipeline from another utility. All applicable permits now have been applied
for and received. These permits include the required FERC approvals and
several state and county permits.
U.S. DEPARTMENT OF ENERGY (DOE)
Panda-Brandywine, L.P., has applied for and has received certification of
Compliance with the Power Plant and Industrial Fuel Use Act.
FEDERAL AVIATION ADMINISTRATION (FAA)
The project received FAA approval for stack height and location on September
16, 1993. A modification to the permit was required as a result of lowering
the baseline grade at the site. The top of the stack will be at the same
location, but the length of the stack will be greater.
U.S. ARMY CORPS OF ENGINEERS (COE)
On December 23, 1994, the U.S. Army Corps of Engineers authorized all proposed
work on the Panda-Brandywine project by a Nationwide Permit as required by
Section 10 of the Rivers and Harbors Act and Section 404 of the Clean Water
Act. This includes construction activities at the plant site and work on the
effluent water supply pipeline and electrical transmission line.
The permit contains all standard conditions for such work and operation, and
specifically ties all work and operation to all conditions required under the
state authorization as described below. Pacific Energy Systems finds the
conditions to be consistent with normal practices and does not believe that
project construction will be unduly affected by these conditions.
U.S. NAVY CATEGORICAL EXCLUSION
Panda has built a large portion of the effluent water supply pipeline along a
Navy-owned railroad. Approval by the U.S. Navy was required for the right-of-
way. As part of this approval, the Navy determined that the use of the right-
of-way was within National Environmental Policy Act (NEPA) limits in meeting
the criteria for Categorical Exclusion. The Categorical Exclusion was
obtained on November 28, 1994. It contains several recommendations to be
included in the right-of-way easement between the Navy and Panda. These are
discussed later in this section under Right-of-Way Easements.
STATE APPROVALS
CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY (CPCN)
Unlike many states, Maryland has placed the environmental and social/economic
permitting of power plants under the authority of its Public Service Commission
(PSC) rather than allow various state agencies to handle permitting in a
fractured manner. The Maryland PSC has been empowered to issue a Certificate
of Public Convenience and Necessity (CPCN) to allow for the construction and
operation of power plants and transmission lines.
The PSC divided the permitting for Panda-Brandywine into two parts. Phase I
covers the air emission control and Prevention of Significant Deterioration
(PSD). Phase II covers the remaining social/economic aspects, including
groundwater use, noise impacts, endangered species, and other relevant areas.
The Phase I and Phase II CPCNs were issued on October 6 and October 27, 1994,
respectively.
Panda requested an amendment to the CPCN to correct some inconsistencies and
to allow for the fact that the gas pipeline permitted under the CPCN was no
longer being built by Panda or along the route it had permitted. These permit
changes appear to be consistent with Pacific Energy Systems' understanding of
present construction and operation plans. Pacific Energy Systems believes
that the changes are favorable to the project overall and that they lessen
the direct requirements on Panda. The amendment to the CPCN was granted on
December 15, 1994.
The original CPCN contains 65 licensing conditions. While many of the
conditions set operating limits and reporting procedures on the operation of
the plant, a large number require Panda to submit construction plans and
procedures to various state agencies before starting construction.
In developing the CPCN, the Maryland PSC included the input of all other state
agencies and local governments in such a way that many of the approvals
required before starting construction are primarily administrative and depend
on Panda to supply sufficient details for approval. Pacific Energy Systems
believes that Panda and its EPC contractor (and other subcontractors) have
obtained all necessary approvals in a timely manner to support construction
and operation.
PREVENTION OF SIGNIFICANT DETERIORATION
A review of PSD requirements and approval that the project meets PSD
requirements are contained in the Phase I approval of the CPCN.
STATE WETLAND PERMIT
The Department of Natural Resources (DNR) for the State of Maryland approved a
Conditional Letter of Authorization on December 23, 1994, for construction of
the plant, utility lines, and stormwater outfall. This permit contains a number
of "conditions," including:
- The U.S. Army Corps of Engineers standards
- The requirement to meet Best Management Practices for
Working on Non-Tidal Wetlands
- Filing plans with the state
- Obtaining a sediment control permit from the Prince George's
and Charles Conservation District
Pacific Energy Systems' review of all the conditions did not identify any
requirements that would cause undue delay in starting or completing the project
or any ancillary facilities.
RIGHT-OF-WAY EASEMENTS
A number of right-of-way easements are required before construction of the
various pipelines and transmission facilities. Because of their significance
to the project, two of these easements are discussed briefly below.
CONRAIL EASEMENTS
There are two easements, under two separate agreements, in the Conrail
right-of-way: one for the transmission line and one for the effluent water
supply line.
The agreement to build and operate the 230-kV transmission line in the Conrail
right-of-way is dated September 6, 1994. Under the terms of the easement,
Panda can occupy the space for 25 years (with a 15-year possible extension)
for a total price of $686,700. Panda assumes all responsibility for project
risk and indemnifies Conrail.
The agreement to build and operate the effluent water supply line in the
Conrail right-of-way is dated November 9, 1994. Under the terms of this
easement, Panda can occupy the space for 25 years (with a 15-year possible
extension) for a total price of $253,755. Again, Panda assumes all
responsibility for project risk and indemnifies Conrail.
The remaining terms and conditions in both easement agreements appear to be
consistent with those of other railroad easements and represent no major risk
to the project.
U.S. NAVY EASEMENT
Panda has completed negotiations on the U.S. Navy easement for the effluent
pipeline along a section of railroad owned by the Navy. Several unique items
pertaining to this easement should be noted and are discussed below.
Since the pipeline will be owned by Charles County after it is built, the
county will become a co-grantee with Panda on the easement. This will allow
the county to assume the agreement without renegotiating it.
Under the terms of the easement, the Navy also requires that the grantee (Panda
or the County) maintain the right-of-way. This includes annual cleanup and
semi-annual cutting of grass, weeds, and brush. Pacific Energy Systems
believes that Panda should turn this activity over to the county, with the
cost included in the maintenance fee Panda will be paying to the county. The
county is better equipped to perform this work since it performs similar
activities along road rights-of-way.
Where Panda's contractor cannot reach the right-of-way areas for construction
(or future maintenance) on existing roads, the Navy is requesting the railroad
be used. In addition, the Navy wants those sections of rail repaired to
facilitate Panda's use. Panda has not provided an estimate for the cost of
rail repair.
Section 7
CONTRACTS AND AGREEMENTS
This section of the report reviews the dominant contracts and agreements
associated with the Panda-Brandywine Cogeneration Project that have been
identified by Pacific Energy Systems as having a direct impact on the
construction, operation, and technical performance of the completed power
plant. These documents were reviewed from a technical standpoint to assess the
sufficiency of their terms, conditions, and scopes to meet the desired outcome
of the project.
Contracts were evaluated, in comparison with contracts for similar projects, to
determine their consistency with acceptable industry standards and good
engineering practices. Several of these contracts, including the EPC contract,
were modified during the due diligence period to make them more consistent with
acceptable standards and practices. The following discussion is based on
contract documents that exist as of June 28, 1996. Contracts reviewed include
the Power Purchase Agreement, EPC contract, Treated Effluent Water Purchase
Agreement, Natural Gas Supply and Transportation Agreements, Steam Sales
Agreement, Owner's Engineer Agreement, Effluent Line Construction Contract, and
Transmission Line Construction Contract.
POWER PURCHASE AGREEMENT
Under terms of this contract, PEPCO has agreed to purchase all the electricity
generated by the Panda-Brandywine cogeneration plant. Except for electric
production of 99 MW between 8:00 a.m. and 8:00 p.m. on weekdays, the plant will
be fully dispatched by PEPCO. The plant will be interconnected to the PEPCO
system by a 7-mile-long, 230-kV transmission line that will be built by Panda
and turned over to PEPCO to own and operate. PEPCO will dispatch the plant on
an as-needed basis according to the utility's economic dispatch regulations.
In its original form, the PPA was more restrictive than is typical. It placed
a number of requirements on the Project that required extensive monitoring and
reporting before, during, and after construction. It contains punitive damages
for failure to perform under the contract terms. The contract requires PEPCO
to be very proactive in all aspects of the development, construction, and
operation of the Panda-Brandywine facility. If Panda fails to perform, the
agreement allows for reduced payments, cancellations, or, as a last resort,
assumption of the project by PEPCO. However, many of the concerns expressed in
this paragraph have been made less onerous through an Operating Agreement
between Panda and PEPCO. The Operating Agreement provides for means of
resolving disagreements and for preventing disputes before they occur.
CONDITIONS AND OBLIGATIONS
In addition to PSC approval, the agreement requires Panda to obtain all
appropriate permits and government approvals. This was somewhat simplified by
the Maryland PSC when it ruled that Panda-Brandywine, L.P., was an electric
company and, therefore, required to obtain a CPCN before starting construction
of the facilities. (The CPCN is discussed in greater detail in Section 6 of
this report.)
PEPCO's obligation to purchase capacity and electric nergy from the Project
under this agreement is predicated on Panda meeting a number of conditions
precedent. The conditions precedent require submittal of a number of permits,
agreements, engineering reviews, plans, designs, drawings, schedules, and
other proofs that Panda is capable of moving ahead and is making progress
toward the contract completion date.
The agreement requires Panda to make several security deposits to assure PEPCO
that Panda is proceeding with a project that meets PEPCO's needs (including
schedule, capacity, and reliability). These security deposits represent some
financial assurances to PEPCO that, if Panda fails to perform, money would be
available to purchase replacement power from other sources. Also, the
security deposits are large enough to give Panda the incentive to meet PEPCO's
contract requirements. These security deposits are or three different
events, as follows:
- Development Security is to ensure that the Commercial Operation Date
is met as agreed upon in the contract. This deposit takes the form of
a series of payments that equal $3.45 million, or the equivalent of
$15/kW for the 230,000kW facility.
- Interconnection Security is to ensure that PEPCO is paid for costs
associated with the study, planning, engineering, procurement, and
construction of the interconnection facilities between the Panda-
Brandywine facility and the PEPCO system. Panda has made payments to
PEPCO for the interconnection in the amount of $2,650,000 to date.
- Performance Security is to cover damages resulting from termination of
the agreement after the Commercial Operation Date. This security
amounts to $2 million.
All three of these security deposits have been made through an irrevocable
letter of credit, as allowed under the terms of the PPA.
PEPCO has the right to interrupt or suspend deliveries from the plant under
emergency conditions if the interconnection and protective equipment is found
to be unsafe, poorly maintained, lacking in maintenance records, or in
noncompliance with PEPCO guidelines and performance standards for parallel
operation.
In addition, PEPCO has the right to declare two other types of emergency
conditions. During a minimum generation emergency, light load period, PEPCO
can suspend delivery from Panda for a cumulative 200 hours per year during the
limited dispatch portions in a year. This is nearly 6.5 percent of the time
PEPCO is required to operate at least one combustion turbine in combined-cycle
mode, first dispatch segment. The other emergency condition is referred to as
a maximum generation emergency. When such a condition is declared by PEPCO,
Panda is required to use all reasonable efforts to deliver the maximum
attainable net electrical output from the plant without exceeding
manufacturers' recommended operating limits. Failure to do so is considered
a default under the contract.
COMPENSATION AND PAYMENT
Calculation of the capacity and energy payments made under the terms of the
contract is very complicated because of all the correction factors that have
been used. Pacific Energy Systems' scope of work does not include
identification of the need for, the reasoning behind, and source of some
corrections. The PPA provides for a monthly capacity payment and a monthly
energy payment. Pacific Energy Systems has reviewed sample calculations for
the payments as provided in the PPA and has found them to be correct based on
the assumptions used in the PPA. However, actual payments will be based on the
actual operation of the plant in the future. The capacity and energy payments
are described briefly below.
ICF has used a single heat rate of 8,461 Btu kWh (HHV) as an effective minimum
to simplify the projected energy payments. Pacific Energy Systems believes
that this is a reasonable value based on its review of the PPA.
Capacity Payment
PEPCO is to pay the project monthly for the dependable capacity (230 MW) at an
annual rate set forth in Appendix L of the PPA. The capacity is corrected for
the facility's equivalent availability compared with a target availability.
Capacity payments will be increased if availability is above 92 percent or
decreased if it falls below 88 percent.
The capacity rate, as set for each year of operation in Appendix L of the
agreement, is then adjusted by the gross national product (GNP) deflator based
on the change between June 1, 1994, and the actual Commercial Operation Date
and is also adjusted by the Treasury Bond rate. In addition to the above
adjustments, PEPCO has included two additional modifications to the capacity
payment. These were made under Amendment No. 1 and appear to reflect PEPCO's
concern for overpayment of capacity should PEPCO's load growth be less than
initially assumed. The first is a capacity payment adjustment, as stated in
Appendix Q of the agreement, which is based on the year of initial operation.
The second is a modification of potential costs and is tied to PEPCO reaching
a specific load level by 1997.
Energy Payment
PEPCO will pay the project for startup energy based on a simple formula tied
to the interruptible fuel rate and an assumed heat rate of 8,461 Btu/kWh.
Test energy will be calculated in basically the same way as the monthly
energy payment.
The monthly energy payment is composed of two parts: the unit commitment
payment and the dispatch payment. In calculating the monthly energy payment,
the net electrical output will be assigned on an hourly basis among the
dispatch segments shown in Table 7-1.
<PAGE>
<TABLE>
<CAPTION>
Table 7-1
PEPCO DISPATCH SEGMENTS
Number of Combustion Cumulative MW
Dispatch Turbines Operating With (at 59
Segment the Steam Turbine Also degrees F
Operating Description and 50%
Relative
Humidity)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
First 1 Up to minimum load 0 to 99 MW
Second 1 From minimum load to
full load 99 to 117 MW
Third 2 From full load with
one combustion turbine
operating to minimum
load with two combustion
turbines operating 117 to 199 MW
Fourth 2 From minimum load to
full load with two
combustion turbines
operating 199 to 237 MW
</TABLE>
The unit commitment payment associated with the first and third dispatch
segments is to be calculated using a formula that includes service hours in
both dispatch segments multiplied by the adjusted firm gas rate and
interruptible gas rate, respectively, and a variable operation and maintenance
rate. Service hours are corrected no-load and minimum-load fuel use and a heat
input adjustment is made based on average historical ambient conditions for
each billing period. The unit commitment payment is corrected for the cost of
fuel used for various startups during the month.
PEPCO will make a dispatch payment for the net electrical output associated
with the second and fourth dispatch segments. This payment is based on the
number of megawatt-hours generated above the first or third segments multiplied
by the incremental heat rate and the sum of the fuel cost for that segment and
the variable O&M costs.
The agreement provides formulas for the calculation of various correction
factors, firm and interruptible gas rates, and variable O&M rates as well as
sample calculations. As stated earlier, Pacific Energy Systems' scope of work
does not include the determination of how every correction factor was obtained
and its individual reasonableness. Taken as a whole, the formulas and the
results presented in the sample calculations appear to be reasonable.
COMMENCEMENT OF CONSTRUCTION AND OPERATION
Under the terms of the contract, Panda commenced construction onsite prior to
October 9, 1995, but actual commercial operation can be no sooner than June 1,
1996. During the construction and startup period, Panda provided additional
documentation to PEPCO, including schedules, design details, equipment
capability curves, and relay settings. PEPCO has the right to review the
plant design and to monitor plant construction, startup, testing, and
operation. The generation of electricity from the plant in parallel with
PEPCO will not take place until all interconnection safety devices specified
by PEPCO have been installed, inspected, and approved by PEPCO.
After the Actual Commercial Operation Date has been established, the contract
requires a Net Capability to be set semiannually (summer and winter). It is to
be based on temperature and humidity records for the last 15 years. Net
Capability sets the capacity payment for that period and can be less than or
equal to (but not greater than) 230,000 kW.
GENERATION DISPATCH
PEPCO is required to dispatch the limited-dispatch portion of the facility for
60 hours Monday through Friday (initially 8:00 a.m. to 8:00 p.m.). The
remaining block of power, the dispatchable portion of the project, will be
controlled at the sole discretion of the PEPCO dispatcher. PEPCO has made no
guarantee for any hourly generation levels beyond the 60 hours in the first
dispatch segment (see Table 7-1).
Through its operator, Panda-Brandywine must schedule maintenance outages with
PEPCO as well as meet certain notification requirements to support PEPCO's
system planning for routine maintenance and forced outages.
MAINTENANCE RESERVE
The project is required to establish a maintenance fund to pay for any repairs
or replacements that are necessary or appropriate to ensure that the facility
will continue to be operated and maintained in accordance with the performance
standards set forth in the agreement.
The lease requires that the project fund the maintenance reserve with an
initial payment of $1 million and increase at a rate of $125,000 per quarter
over the next two years and $375,000 per quarter for two years thereafter until
it reaches $5 million. If the project draws on the O&M reserve, it must also
replenish it to its required balance using up to 50 percent of the project's
available cash flow.
GE will provide, at a cost, a letter of credit to cover the minimum $5 million
required maintenance reserve under the PPA.
On Panda's request, Pacific Energy Systems has developed a model of expected
expenditures from the maintenance reserve account. Our estimate is to be
incorporated into the pro forma. It is based on "equivalent fired hours."
Equivalent fired hours accounts for time the plant is dispatched plus time
expended in starting and stopping equipment.
INTERCONNECTION
The interconnection of the plant to the PEPCO system is included in the PPA and
not in a separate agreement, which is more typical of the industry. The
agreement also covers the transmissionfacilities.
At Panda's expense, PEPCO will provide all required interconnection equipment,
safety devices, and metering at its Burches Hill Substation. Panda will
construct (to PEPCO's specifications) a transmission facility between the plant
and the Burches Hill Substation. Prior to the Actual Commercial Operation
Date, ownership of this transmission facility will be transferred to PEPCO.
Through the agreement and its appendixes, PEPCO has provided basic equipment,
safety, and meteringspecifications for the project. In addition, PEPCO has
the right of design review and testing to ensure that the plant, transmission
facility, and interconnections are safe to operate in parallel to the PEPCO
system.
OTHER CONDITIONS
Overall, the PPA appears to be complete in stating technical requirements,
administrative requirements, legal actions available, and general terms for
compliance. In addition to the agreement requirements already discussed,
several additional items should be highlighted. These are discussed below.
Default: There are more than a dozen ways for the Panda-Brandywine, L.P.,
plant to default under the agreement. Several important ways are as follows:
- Sale of any Dependable Capacity to any party except PEPCO
- Reduction of the Equivalent Availability below 50 percent or an
increase in the forced outage rate above 20 percent
- Closing date does not occur by October 1, 1995
- Failure to provide any of the security accounts or maintenance
reserves
- Failure to use supplemental methods or equipment to meet Dependable
Capacity.
Operating Committee: The agreement requires that an Operating Committee be
established, with one representative from each party, to facilitate
coordination and interaction between the two parties. The Operating Committee
must act only by unanimous agreement or consent.
Dispute Resolution: If a dispute arises under the agreement that cannot be
resolved by the Operating Committee, then the dispute shall be deferred to a
senior officer from each organization. Issues still unresolved are then to be
referred to the Maryland PSC.
Purchase Option: PEPCO has the right to purchase the project should Panda wish
to sell. If a third party wishes to purchase it, Panda must first give PEPCO
the option to purchase the project under the same terms being offered by the
third party.
Qualifying Facility: PEPCO is required to continue to make payments under the
contract if QF status is lost for less than 540 days. After 540 days, PEPCO
can terminate the contract. During the period that QF status is lost, PEPCO
will dispatch the full plant capacity under the Dispatch Portion requirement.
For that period, the Limited Dispatch Portion (60 hours per week) will not
exist. The four dispatch segments' pricing formulas will remain in effect.
Term: The term of the agreement is for 25 years from the Actual Commercial
Operation Date.
ENGINEERING, PROCUREMENT, AND CONSTRUCTION CONTRACT
The amended and restated EPC contract was signed on December 1, 1994, by
Panda-Brandywine, L.P., and Raytheon Engineers & Constructors, Inc. (The
original contract was signed on December 2, 1993, by Panda-Brandywine, L.P.,
and United Engineers & Constructors Inc., doing business as Raytheon Engineers
& Constructors, Inc.).
Raytheon has been around for many years, primarily as an engineer/constructor
in the petrochemicals field. In recent years, Raytheon has purchased several
engineering firms (EBASCO and United Engineers & Constructors) with well-known
track records in the power industry. The Panda-Brandywine project is being
engineered in Raytheon's Houston office.
The amended and restated EPC contract will be satisfactory for this project.
Following is a brief summary of the EPC contract as it now exists.
SCOPE
This is a turnkey, lump-sum, fixed-price contract with the EPC contractor
responsible for that part of the project which is considered to be within the
main fence area. Utility support systems outside the fence (including the
transmission lines, effluent pipeline, and gas line) do not fall within
Raytheon's scope. For convenience, the county road going past the plant, the
oil storage tank (which is outside the main plant area), and the distilled-
water plant have been added to Raytheon's scope. Raytheon is to supply the
design, engineering, project management, labor, equipment, and materials to
construct, start up, and carry out the performance tests on the power plant
and the distilled-water plant.
Raytheon is to perform all work in a proper, safe, and secure manner to
prevent loss, injury, or damage. All design, construction, operation, and
maintenance must be performed according to prudent utility practices. The
contractor is responsible for all risk of damage to or destruction of the
plant until commercial operation. Upon commercial operation, care, custody,
and control of the facility will pass to the owner.
Pacific Energy Systems has found that the responsibilities and scope of the
EPC contractor and those of the owner, as stated in the EPC contract, are
typical of similar combined-cycle cogeneration plants.
COMPENSATION AND PAYMENT
The work of the EPC contract is being performed on a turnkey basis for a fixed
fee of $118,258,816. This does not include the steam host distilled-water
plant, estimated at $3.4 million. The fixed fee also does not include other
construction contracts issued by Panda to build the transmission line intertie
with the utility, the 17-mile-long effluent water line, or the gas supply
pipeline.
The contractor is paid monthly for work completed during the preceding month
according to the milestone payment schedule (Exhibit D of the EPC contract).
The owner's and lender's independent engineers will review the documents
submitted to ensure that the invoice amount reflects the value of the work
indicated by the milestone payment schedule.
The contractor will provide a letter of credit equal to 10 percent of the
contract price. Panda will have the right to draw down on that letter 10
percent of the total milestone payments actually made at the time of the
drawdown. This replaces the retainage used in most construction contracts.
The value of the letter of credit may be reduced as specific milestones, such
as commercial operation and final acceptance, are reached.
Because of the nature of the milestone payment, the schedule allows for some
overpayment during the initial 9 months of the project. Raytheon has agreed
either to allow the drawdown to exceed 10 percent of the milestone schedule by
$3 million or to post a separate letter of credit for $3 million during this
period.
PERFORMANCE GUARANTEES
A detailed discussion of the plant performance, testing, and guarantees is
contained in Section 8 of this report. The performance guarantees are covered
by liquidated damages and performance bonuses. The liquidated damages are
sufficient to ensure the EPC contractor's diligence in meeting all guarantees.
Raytheon and the owner have elected to use a dead band tolerance of 4 percent
of the net plant heat rate guarantee. This is a plus or minus 2 percent
uncertainty band. If the actual corrected heat rate falls within the band,
neither a bonus nor liquidated damages will be paid. Bonuses or liquidated
damages will be calculated from the edge of the band not from the guaranteed
points. Instrument uncertainties will not be used.
The contractor has guaranteed that commercial operation of the plant will occur
no later than the Guaranteed Completion Date which is currently October 31,
1996. The contractor will pay a penalty of $80,000 per day for each day that
commercial operation of the plant occurs after the guaranteed completion date,
or a maximum of $14,400,000.
ACCEPTANCE
Completion of the plant by the EPC contractor and acceptance by Panda have two
key milestone dates as follows:
- Commercial operation occurs when the plant has passed the 48-hour
net electrical output performance test, as outlined in Section
19.5.1 of the scope of work and discussed in Section 8 of this
report. If the plant fails the 48-hour test, the contractor can
declare commercial operation by electing to make a contract
discount of $1,000 for each kilowatt that the test is below the net
power output guarantee. The net power output must exceed 210,000
kW in order for the contractor to declare commercial operation.
- Final acceptance occurs when:
- The performance test and other required tests have been
completed and all defects and deficiencies have been
corrected
- The plant has been built to the final plans and
specifications
- The plant has been synchronized to the PEPCO electrical
grid
- No work remains that would affect normal plant operation
or performance
- Punchlist work will not interrupt normal operation of
the plant
- Thermal energy is going to the steam host
- The owner issues a completion certificate
- The contractor has certified that the plant has been
constructed in accordance with all governmental
requirements identified either by the owner or the
contractor pursuant to the contract
OTHER CONTRACT CONDITIONS
Spare Parts
The EPC contractor is required to obtain an agreement with General Electric
that spare parts will be available for all GEsupplied equipment for a period of
at least 5 years. Raytheon must also attempt to obtain similar agreements from
other equipment suppliers or locate replacement part sources for those that do
not agree.
During construction, startup, and testing, the contractor is responsible for
obtaining and paying for all spare parts used. The contractor has the right
to use and replace any operating spare parts Panda may have on hand. The
current budget includes $1.7 million for the initial purchase of spare parts
(see Table 51).
The EPC contract requires the owner to have available at the plant, by the
commencement of plant startup operations, all spare parts that are required for
normal operation. Pacific Energy Systems has expressed a strong opinion that
this should be changed for two reasons:
- Failure by the owner to have any spare part needed by the
contractor during startup would allow the contractor to
declare a default and demand an extension of the Guaranteed
Completion Date until the replacement part can be obtained.
This is inconsistent with all other EPC contracts reviewed
by Pacific Energy Systems.
- Operating spare parts take time to evaluate, order, and receive.
It is not unusual for some spare parts to take a year to obtain
under normal circumstances. The O&M contractor will not have
sufficient employees onsite to order spare parts until near
commencement of startup.
Building Permits
The contractor is responsible for obtaining the standard building occupancy
permits. Panda will reimburse the EPC contractor for obtaining these permits
and for assisting in obtaining any of the owner-required permits.
Project Labor
The contract price reflects the use of union labor and the contractor, even
though required by the contract to use only workers in good standing with
their union, cannot seek a change order because of the use of union labor.
Warranties
The contractor warrants that the plant will be free from defects or
deficiencies until the later of: (a) 1 year from commercial operation or
(b) 1 year from discovery or repair of defect or deficiency, but no later than
the second anniversary of final acceptance. Furthermore, for any item that is
repaired, replaced, or renewed more than once, the contractor will undertake a
technical analysis of the problem and clear the "root cause" of the problem.
The contractor will promptly correct, repair, or replace such defect or
deficiency unless it occurs in the GE-supplied combustion turbine-generator
or steam turbinegenerator components, which will be at the owner's expense.
The GE exemption appears to result from the cost of a 1-year warranty from GE;
apparently, the owner decided the price was too high and elected to cover it.
Upon financial closing, GE Capital will establish an escrow account to hold
funds earmarked to cover any costs that might arise from a component failure.
There is no time limit on the Raytheon (not GE equipment) design and
engineering warranty.
Termination for Convenience
The owner may terminate the EPC contract, without cause, for convenience. As
mutually agreed upon andverified by supporting documents, the contractor will
be reimbursed for work completed under the milestone schedule, reasonable
demobilization costs, and cancellation costs for equipment and materials on
order.
Arbitration
Under the terms of the contract, all disputes or claims that cannot be resolved
must be submitted to binding arbitration. The disputes will be awarded on a
"winner takes all" basis. The losing party shall pay all costs, including the
winning party's attorneys' fees and arbitration expenses.
Manuals and Training
The contractor is responsible for supplying a complete set of O&M manuals for
each major piece of plant equipment and plant system. In addition, the
contractor is to provide a training program for O&M personnel that includes
classroom and field training, manuals, drawings, and other educational
materials necessary or desirable for the adequate training of O&M personnel.
Quality controls will be established to ensure that personnel are suitably
trained and capable of operating and maintaining the plant after commercial
operation.
TREATED EFFLUENT WATER PURCHASE AGREEMENT
On September 13, 1994, Panda-Brandywine, L.P., signed an agreement with the
county commissioners of Charles County for the Project to receive up to 2.7 mgd
of treated wastewater effluent from the Mattawoman Wastewater Treatment Plant.
Under terms of the agreement, Panda is required to:
- Build the 17-mile-long effluent pipeline and all related
facilities at its own expense
- Obtain all permits and rights-of-way, reimbursing the county
for any direct cost it might incur
- Design and size the pipeline to supply up to 3.0 mgd
- Upon completion of the pipeline, turn over to the county
(for operation at no cost) only that portion of the line
that is in Charles County, and retain ownership of the rest
of the line
The county will have the right to connect other customers and sell effluent,
provided it is at no cost to the operation of the Panda-Brandywine project and
in no way diminishes the amount of effluent transported to the Project.
WATER USAGE FEE
The project will pay a fee of $1.00 per 1,000 gallons of effluent used during
the initial 10 years of the project. Beginning in the 11th year, the price
will escalate according to the consumer price index, but no greater than 3
percent per year. In addition, the Project will make quarterly payments of all
actual and reasonable fixed expenses and variable expenses associated with
conveying the effluent to the project site. This does not include the cost of
conveying effluent to other users along the pipeline but does include
maintaining the U.S. Navy right-of-way as required in the Navy easement.
TERM
The term of the contract is parallel to the PEPCO PPA with an initial period of
25 years. Panda has the right to extend the agreement with 30 days written
notice for up to three successive 5-year terms.
WATER USAGE
Effluent supplied under this agreement will be closely monitored and must
comply with maximum discharge pollutant levels. Panda is to install a bypass
at the plant to return any effluent that does not meet minimum standards. The
bypass will be via the nearby sewer line that the project will use for all
wastewater and sewage from the plant.
Panda has developed a Risk Management Plan which addresses maintenance and
repair issues. The plan must be approved by the county commissioners.
STEAM SALES AGREEMENT
A Steam Sales Agreement was entered into as of March 30, 1995, between Panda-
Brandywine, L.P., and Brandywine Water Company. The purpose of this agreement
is to allow for the sale of thermal energy, cooling water, and feed water to
Brandywine Water from the project. A description of the distilled-water
facility can be found in Section 4 of the report.
SCOPE
As part of the EPC contract, Raytheon designed andis constructing a
distilled-water facility adjacent to the cogeneration facility which Panda will
lease to Brandywine Water. Panda will sell thermal energy, cooling water, and
feed water to Brandywine water as well as provide operating, maintenance, and
wastewater disposal services for the distilled-water plant. Raytheon is
committed to put the distilled-water plant into commercial operation before or
concurrent with the commercial operation of the power plant.
Brandywine Water is responsible for water sales and delivery from the onsite
storage tank to the customer. Brandywine Water must purchase enough steam to
maintain the cogeneration plant's QF status. Panda has not guaranteed any
specific amounts or periods of time for thermal energy delivery. At least one
of the HRSGs must be operating in order for Panda to deliver thermal energy to
the distilled-water plant.
As part of its agreement for the operation of the cogeneration plant, Ogden is
responsible for the day-to-day operation of the plant. No additional manpower
is expected to be required beyond the normal cogeneration staff.
Term
The sales agreement is for a term of 25 years eginning from the date of the
ontract. Panda can extend the term for additional 5year periods by notifying
Brandywine Water 30 days before the expiration of the prior term.
Price
Panda is responsible for metering all thermal energy, feed water, cooling
water, and wastewater quantities. Meters will be calibrated and maintained by
Ogden according to general practices. Brandywine Water will pay $1.00 per
1,000 pounds of thermal energy and $1.00 per 1,000 gallons of feed water and
cooling water. Brandywine Water will take title to all fluids at the intertie
point of the distilled water plant.
Other Contract Conditions
The SSA contains a number of terms and conditions covering various aspects such
as government approvals, insurance and indemnification, termination, default,
force majeure, and warranties. These terms and conditions are for the benefit
of GE Capital if it needs to take over operation of the distilled-water plant
or the power plant.
STEAM LEASE
Panda-Brandywine, L.P., and Brandywine Water will also enter into a sublease
allowing Panda to sublease the distilled-water facility to Brandywine Water.
(GE Capital will be leasing the entire project, including the distilled-water
plant, to Panda Brandywine, L.P., after construction and startup.) The term of
the Steam Lease expires on the earlier to occur of the expiration or
termination of the Facility Lease, the Site Sublease (as defined in the Steam
Lease, and the SSA.
NATURAL GAS AGREEMENTS
A detailed study of the gas contracts is not part of Pacific Energy Systems'
scope of work on this project. As part of Pacific Energy Systems' due
diligence, it is necessary to determine that gas can and will be delivered to
the project in sufficient quantities and at qualities (including pressures)
that will allow the project to meet its obligations under the PPA and SSA.
In addition to the scope described above, Pacific Energy Systems includes in
this section a brief description of the gas contracts to enhance the future use
of this report. Details of the Gas Agreements were evaluated for Panda by
C.C. Pace.
FUEL SUPPLY PLAN
Panda's fuel supply plan is to purchase natural gas from Cogen Development
Company under a Gas Sales Agreement (GSA) and transport that gas to the project
site via transportation agreements with Columbia Gas Transmission (CGT), Cove
Point LNG, L.P., and WGL. The GSA between Panda and Cogen Development Company
allows the flexibility needed in the fuel supply to meet the specific fuel
requirements of the dispatch plant. Panda can purchase up to 24,240 MMBtu per
day of "maximum daily firm quantity," or up to 24,240 MMBtu per day of
"maximum daily interruptible quantity."
Panda also has developed a Fuel Supply Management Agreement that stipulates
that Cogen Development will manage the purchase of the 8 million MMBtu per year
of natural gas, as well as the transportation of it to the project site as
needed. In addition, as fuel manager, Cogen Development will handle all
administrative services related to gas purchases and delivery; verify
quantities and qualities; advise on price hedging, marketing, and sale of
excess gas; and attempt to negotiate discount rates where available.
WGL can provide spot market merchant services and has the right to purchase
Panda's gas supply during peak periods to serve WGL's other loads.
TRANSPORTATION
Gas will be transported to the site under three pipeline transportation
contracts, with CGT, Cove Point LNG, L.P., and WGL. These contracts are
discussed below.
Columbia Gas Transmission
Panda has contracted CGT to transport up to 24,240 MMBtu/day of natural gas
between the Cogen Development delivery point and Cove Point LNG's pipeline.
This contract is for firm transportation services. In addition to
transportation costs, Panda will pay CGT a Contribution-in-Aid-of-Construction
of $6,772,590 per an amending agreement dated March 24, 1995, plus the
applicable gross-up for income tax.
This contribution will help CGT to parallel or rebuild three sections of its
pipeline to allow the increased flow for Panda. FERC has approved the pipeline
expansion, and CGT is currently obtaining local permits to start construction.
Cove Point LNG, L.P.
Panda has contracted Cove Point LNG, L.P., to transport Panda gas from the CGT
pipeline to the WGL pipeline.
Washington Gas Light Company
Panda has signed a 25-year agreement with WGL that has an initial term of 25
years from the Actual Commercial Operation Date under the PPA. This agreement
is for both gas transportation and gas supply. Under terms of the contract,
WGL will supplythe following services:
- It will construct a gas line from its interstate pipeline along
Highway 301 to the project site, a distance of less than 1 mile.
The line will contain all metering, regulating, and appurtenant
facilities necessary to serve the Panda plant.
- WGL will transport the daily nominated quantities of gas from
Cove Point LNG to the site on a firm basis.
- During peak gas use periods (as defined in the contract), WGL has
the right to use Panda's gas and the plant can run on oil. Various
cost adjustments are available to Panda.
- Panda can nominate a daily merchant quantity of gas from WGL,
which will then sell that gas to Panda at the agreedupon price.
- The final service that WGL supplies to Panda is a balancing
service. When Panda nominates for delivery too much or too little
gas to meet its needs, WGL will run an imbalance account, either
positive or negative. Its costs are resolved monthly by cash, by
making up volumes, or by carrying over portions of the balance as
agreed upon.
Gas supply arrangements for the Panda project are complex. It is our
understanding that C.C. Pace has provided a due diligence report on the
viability of the gas supplies, gas transmission, and management agreements.
Pacific Energy Systems believes that Panda has access to an adequate supply of
gas to meet the daily maximum full-load operation requirements and has
adequate flexibility to arrange for lesser quantities for periods that the
project is dispatched offline or operating only under the first dispatch
segment.
OWNER'S ENGINEER
During the course of developing this project, the owner used a number of
engineering and specialty firms. Pacific Energy Systems was not provided any
of these contracts for review or comment. While most of the work of these
various firms has been completed, the owner's engineer, Gilbert/Commonwealth,
Inc., has played and will continue to play a key role in the project.
Originally hired to review Raytheon's work as an "owner's engineer," Gilbert/
Commonwealth's activities have increased to include design of the transmission
line and a proactive role in the effluent pipeline design, estimate, and bid.
Gilbert/ Commonwealth also has provided a number of detailed design analyses
on behalf of Panda in negotiation change orders for the EPC contract.
Pacific Energy Systems believes that Gilbert/Commonwealth is a creditable,
well-established engineering firm that is capable of performing the services
it is supplying to Panda at a professional level.
EFFLUENT LINE CONSTRUCTION
The effluent line was designed by several firms, including Greenhorne & O'Mara
and Gilbert/Commonwealth. Pacific Energy Systems has received and reviewed
the sample construction contract that went out with the request for bids to
construct the pipeline and pumphouse.
TRANSMISSION LINE CONSTRUCTION
Panda has awarded the contract for construction of the 230-kV transmission
line to C. W. Wright Construction Company, Inc. The line was designed by
Gilbert/Commonwealth. The transmission line is complete and energized.
PEPCO has issued a letter of acceptance.
Section 8
OPERATIONS AND MAINTENANCE
Panda-Brandywine, L.P. (the owner) and Ogden Brandywine Operations, Inc. (the
operator) signed an Operation and Maintenance Agreement on November 21, 1994.
This section discusses Ogden Brandywine's experience, plant staffing, the O&M
Agreement, compensation and payments, and the term and termination of the
agreement.
OPERATING EXPERIENCE
Ogden Brandywine Operations, Inc., is a wholly owned subsidiary of Ogden Power
Corporation. Ogden Power is a subsidiary of Ogden Environmental and Energy
Services of Fairfax, Virginia, a wholly owned subsidiary of Ogden
Corporation. Ogden Corporation (Ogden) is a technical services company with
more than $2 billion in annual sales and more than 1,300 employees who operate
and maintain power projects, including waste energy, hydroelectric, and
geothermal projects.
Overall, Pacific Energy Systems believes that Ogden has an adequate base of
personnel experienced in heavy-frame, gas turbine dispatchable plants to
reliably operate and maintain the Panda-Brandywine project. Ogden plans to
use these experienced headquarters staff members to assist during the later
stages of construction and startup. Since theorganization is relatively
small, a key requirement is that the core staff be able to effectively hire,
train, and develop the additional personnel required to operate this plant.
PLANT STAFFING
Figure 8-1 is an overview of the management organization that will operate and
maintain the project. The plant staff consists of the following positions:
plant manager
1 operation supervisor
1 plant technician
1 maintenance supervisor
4 control room operators
4 equipment operators
1 relief operator
1 water plant technician
1 instrumentation and control (I&C) technician
1 mechanic
1 electrician
----
17 Total O&M staff members
Pacific Energy Systems believes that this level of staffing is adequate, with
the understanding that Panda also will be supplying a full-time owner's
representative and administrative assistant. The Panda personnel will be
responsible for purchasing and for other project administrative functions.
OPERATIONS AND MAINTENANCE COSTS
The annual pro forma O&M budget for the Panda-Brandywine Project is shown in
Table 8-1. The O&M costs shown are for 1997, which is the first full year of
operation.
Table 8-1
OPERATIONS AND MAINTENANCE COSTS
Fixed Costs 1997 $000
- --------------------------------------------------------------
O&M Agreement costs 1,473
Consumables 750
Administrative expenses 500
Insurance 500
Letter of Credit 90
Electricity purchase 411
Property taxes 2,621
VARIABLE COSTS
- --------------------------------------------------------------
Water usage 1,038
Water discharge & chemical usage 861
Distilled-water plant operating costs 200,000
PRO FORMA TOTAL $8,033
All of the O&M costs in Table 8-1 are annualized costs that increase according
to the assumed inflation rate, with the exception of the turbine overhaul
reserve. The annual contribution to the turbine overhaul reserve varies from
year to year. The cumulative reserve is projected to increase to approximately
$5 million by the year 2001 and remains at or above that level throughout the
life of the Project. The annualized equivalent of the annual reserve
contribution is about $1,585,000, assuming a 4 percent inflation rate.
Table 8-2 compares the O&M costs of Panda-Brandywine with those of other
gas-fired, combined-cycle power plants. Panda's overall O&M costs, while at
the low end of the range, appear to be reasonable for a plant of this scale.
<PAGE>
<TABLE>
<CAPTION>
Table 8-2
COMPARISONS OF O&M BUDGETS FOR GAS TURBINE PROJECTS
Number of On-Line Annualized Annualized
Gas Unit Cycle MW Date O&M O&M
Plant Turbines Type Type ($1997x000) ($19997/kW)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A 1 LM250 Combined 34.5 1990 2,369 69
B 2 LM600 Combined 90.0 1993 5,319 59
C 2 LM600 Combined 106. 1994 5,924 56
D 2 LM600 Combined 95.1 1996 6,299 66
E 1 LM600 Combined 56.7 1996 4,810 85
F 1 LM600 Combined 49.9 1996 4,307 86
G 2 Frame7E Combined 240. 1994 12,629 53
H 1 Frame7E Combined 120. 1995 6,082 50
I 1 Frame7E Combined 126. 1995 6,266 50
J (Panda-
Brandywine) 2 Frame7E Combined 230. 1996 9,976 43
</TABLE>
O&M AGREEMENT
The O&M Agreement is for full-service operation and maintenance of the plant
on a cost-reimbursable-plus-fee basis for a 3-year term. Under the agreement,
Ogden Brandywine will provide O&M services during several phases of the
project, including: preparation of the facility for commercial operation;
testing and acceptance; startup; and operation and maintenance following
commercial operation.
SERVICES PROVIDED
Ogden Brandywine is responsible for hiring, training, and providing a plant
manager; full-time, onsite staff; and additional engineering support,
maintenance, and management personnel as needed to perform the requirements of
the agreement. OgdenBrandywine is responsible for operating and maintaining
the facility 7 days per week and 24 hours per day. Under the agreement, it
also will develop maintenance and safety plans and procedures, and will
prepare and keep O&M records for the project. Ogden Brandywine also is
required to prepare and furnish a monthly operations report to the owner.
Panda will provide an initial inventory of tools, spare parts, equipment,
consumables, and other materials. Panda is responsible for reimbursing Ogden
Brandywine for the replacement of tools that deteriorate from normal use,
replacing spare parts as necessary, purchasing additional spare parts as
approved, repairing or replacing equipment, purchasing and installing
additional equipment, and purchasing consumables. Panda also will reimburse
Ogden Brandywine for purchased parts, for the services of factory personnel or
personnel trained and qualified to perform manufacturers' recommended service
procedures, and for third-party contracts to clean up and remove hazardous and
solid waste (accepted as a result of negligence or fault of the operator).
The agreement provides for a full-time owner's representative to administer
Panda-Brandywine's responsibilities, to monitor the operation of the plant,
and to direct economic and financial matters.
COMPENSATION AND PAYMENT
Before the Actual Commercial Operation Date, Ogden Brandywine will be
compensated in three ways: a fixed monthly payment in accordance with a set
schedule; a reimbursement for all reimbursable costs under the agreement; and a
reimbursement for the compensation and actual expenses of all Ogden Brandywine
personnel who are permanently assigned full-time to the facility, or the home
office, or who perform service in direct support of the site personnel as
approved by the owner. The fixed monthly payment ranges from $5,000 per month
through June 1995 to $10,000 per month until the ActualCommercial Operation
Date.
After the Actual Commercial Operation Date, operator compensation is a fixed
price of $117,750 per month as adjusted for performance, plus all reimbursable
costs incurred under the agreement. There are two performance adjustments to
the contract price. One is for the EAF, and one is for capacity performance.
The maximum increase or decrease for the EAF is $3,000 per month. If the EAF
is greater than or equal to 92 percent, Ogden Brandywine's monthly fixed fee
is adjusted by the amount of $100,000 x (EAF - 0.92). There is no adjustment
to the fixed fee if the EAF is greater than 88 percent but less than or equal
to 92 percent. If the EAF is less than 88 percent, the contract price is
decreased by the amount of $50,000 x (0.88 minus EAF) per month.
The second performance adjustment, the capacity performance contract price
adjustment, compares the lant's actual or tested Net Capability with its
Dependable Capacity. If Net Capability is greater than Dependable Capacity,
Ogden Brandywine's fixed fee is increased by $2,000 per month for the term of
the applicable summer-winter period. If the Net Capability is less than the
required Dependable Capacity, the fixed fee is decreased by $2,000 per month.
Compensation is on a calendar-month basis.
TERMINATION
In the event the owner chooses to terminate the O&M Agreement without cause,
the agreement requires that Panda pay Ogden Brandywine for outstanding costs
under the agreement, reasonable costs incurred by the operator to support
termination, and reasonable severance costs. If the lender should terminate
the agreement, compensation is to be provided to the operator based on a fixed
schedule ranging from $25,000 to $50,000 per month.
Panda-Brandywine may terminate the agreement for cause on the basis of a
number of specific conditions, including:
- Failure of the operator to provide adequate qualified personnel;
failure to produce adequate thermal and electrical energy
- Failure to perform material service or obligation
- Appointment of a receiver, liquidator, or trustee for the
operator
- Failure to maintain the project's QF status
- Failure to maintain an equivalent availability factor of at
least 80 percent; failure to maintain an equivalent forced
outage rate of less than 10 percent
- Continuance of a force majeure for more time than allowed
- Failure to reach agreement by renegotiation as provided by
the O&M Agreement
OTHER PROVISIONS
Other, miscellaneous provisions of the O&M Agreement that should be noted are
as follows:
- The agreement contains a number of force majeure provisions that
are typical for a project of this type.
- Unresolved disputes are to be settled by arbitration.
- Ogden Brandywine may request a retrospective and/or prospective
renegotiation of the monthly fees if the owner's actions make a
substantive, material, and adverse change to the configuration
or operational ability of the project, and which have a
demonstrable effect of increasing Ogden Brandywine's direct onsite
labor, overhead, payroll, and other related costs.
- Ogden Brandywine is required to receive written authorization from
Panda-Brandywine's representative before issuing purchase orders in
excess of $1,000 or for any items not in the authorized budget.
Figure 8-1
Organization Chart
Section 9
PERFORMANCE GUARANTEES AND TESTING
The purpose of this section is to evaluate and summarize the plant performance
guarantees and the proposed performance testing program. This section also
reviews the liquidated damages that result from failure of the plant to meet
the performance guarantees and the bonuses that result when it exceeds the
guarantees.
COMPLETION GUARANTEES
Raytheon guarantees that commercial operation of the plant will occur no later
than the Guaranteed Completion Date, October 31, 1996, or as may be adjusted
in accordance with terms of the EPC contract.
PERFORMANCE GUARANTEES
Table 9-1 summarizes the plant performance guarantees required of Raytheon
under Article 5.0 of the EPC contract. These guarantees are based on the
specific design conditions as shown in Table 92.
<PAGE>
<TABLE>
<CAPTION>
Table 9-1
PERFORMANCE GUARANTEES
Conditions
-------------------------------------------------
Host Boiler
Ambient Steam Condensate Blowdown
Parameter Value (Degrees F/%RH) (lb/hr) Return (%) (%)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Declaration of
Commercial 92 degrees not not not
Operation(1) 230,000 kW /50 applicable applicable applicable
Plant Net Power 92 degrees
Output - gas 230,000 kW /50 34,000 80 0
Plant Net Heat Rate - 92 degrees
gas (LHV) 7,124 Btu/kWh /50 34,000 80 0
Plant Net Power 92 degrees
Output - oil 230,000 kW /50 34,000 80 0
</TABLE>
Emissions compliance
Noise compliance(2)
(1) In accordance with the test procedure in Appendix D of the Power Purchase
Agreement.
(2) Compliance required "under all normal operating conditions in accordance
with Section 20.5 of the Scope of Work."
Table 9-2
DESIGN BASIS CONDITIONS FOR PLANT OPERATION
DESCRIPTION DESIGN CONDITIONS
- -----------------------------------------------------------------------------
Dry Bulb Temperature 92 degrees F
Wet Bulb Temperature 76.5 degrees F
Fuel Natural gas
Export Power - MW (net) 230 (minimum)
Process Condensate Return 80 percent
Export Steam 40,000 lb/hr
Boiler Blowdown 2 percent
Waterwell Makeup Water Tempature 45 degrees F
Graywater Temperature 80 degrees F
Barometric Pressure 14.68 psi
Site Elevation 215 feet above sea level
Average Annual Rainfall Per Asheville, NC, National
Climatic Center Standards for
the area
Basic Wind Load Per ASCE 7-88, 70 mph, 50-year
mean recurrence @ 10 meters
Seismic Factor Zone 0
Frost Penetration 13 inches
Snow Load ANSI, Ground - 25 lb/sf
Roof Live Load 20 lb/sf maximum
Winter Design Conditions +5 degrees F
NET POWER OUTPUT GUARANTEE
Raytheon guarantees that it will be able to declare commercial operation. As
defined by the PPA, commercial operation may be declared when the plant
establishes a Dependable Capacity of 230,000 kW under summer ambient
conditions of 92 degrees F and 50 percent relative humidity (RH).
Establishment of Dependable Capacity must be done in accordance with the test
procedures in Appendix D of the PPA which require a 12-hour test.
Raytheon also guarantees that the net power output of the plant will be
230,000 kW at commercial operation, corrected to 92 degrees F dry bulb and
50 percent relative humidity, with 34,000 lb/hr of saturated steam at 15 psig
at the process interface, with 80 percent of condensate returned, and with no
boiler blowdown.
NET PLANT HEAT RATE GUARANTEE
The net plant heat rate is guaranteed at 7,124 Btu/kWh (LHV) when firing
design basis natural gas, as determined by the net plant heat rate test,
corrected to 92 degrees F dry bulb and 50 percent relative humidity, with
34,000 lb/hr of saturated steam at 15 psig at the process interface, with
80 percent of condensate returned, and with no boiler blowdown.
EMISSIONS GUARANTEE
Raytheon guarantees that air emissions from the plant will meet the emissions
limits of the U.S. EPA PSD permit and the permits granted by the CPCN
proceeding.
NOISE GUARANTEE
Raytheon guarantees that, under all normal operating conditions for the plant,
noise levels at the property line will not exceed the requirements of the
state of Maryland and Prince George's County.
FUEL OIL NET POWER OUTPUT
Raytheon must demonstrate that the net power output when firing No. 2 fuel oil
is greater than or equal to the net power output under the same conditions
when firing on natural gas. The demonstration shall be a 6-hour test during
which the net power output is corrected to 92 degrees F dry bulb and 50
percent relative humidity, with 34,000 lb/hr of saturated steam at the
process interface, with 80 percent of condensate returned, and with no boiler
blowdown.
GUARANTEE EVALUATION
The net power output, heat rate, emissions, and noise guarantees described
above appear to be consistent with those of similar plants and should be
achievable. The guarantees provide adequate assurance that the plant will
operate as required by the PPA and are backed by a corporate guarantee from
Raytheon.
PLANT PERFORMANCE TESTING
The performance testing program for the Panda-Brandywine Cogeneration Project
consists of the following tests:
- 48-hour net electrical output performance test
- Net plant heat rate test
- 200-hour capacity test
- Stack test
- Noise test
These tests are described below.
48-HOUR NET ELECTRICAL OUTPUT PERFORMANCE TEST
This test will be performed to demonstrate the plant's net electrical output
for the following guarantees:
- Declaration of commercial operation
- Plant net power output - gas
- Plant net power output - oil
The tested net power output must be corrected to the guarantee conditions of
Article 5.04a of the EPC contract: ambient conditions of 92 degrees F dry bulb
and 50 percent relative humidity, with 34,000 lb/hr of saturated steam at the
process interface, with 80 percent of condensate returned, and with no boiler
blowdown. During this 48-hour test, Raytheon must maintain a net heat rate of
less than or equal to 7,836 Btu/kWh (LHV), corrected to the guarantee
conditions. In addition, the stack emissions must satisfy the requirements of
the applicable Maryland CPCN Permit for Air Emissions.
NET PLANT HEAT RATE TEST
The net plant heat rate will be tested during a 6-hour period while the plant
is being operated in its designed normal manner and in accordance with prudent
utility practices. The test results are to be corrected to the guarantee
conditions.
200-HOUR CAPACITY TEST
The 200-hour capacity test will be performed to demonstrate the plant's
ability to produce at least 42,782,000 kWh during a 200consecutive-hour
period. This corresponds to an output of 230,000 kW during 93 percent of the
test period. The plant is required to be tested in its normal manner and
mode, and in accordance with prudent utility practices, while maintaining a
heat rate of 7,836 Btu/kWh (LHV) corrected to guarantee conditions, and while
satisfying the requirements of the Maryland CPCN Permit for Air Emissions.
STACK TEST
Raytheon is to perform a stack emissions test using a certified
subcontractor. The emissions are not toexceed the requirements of the
Maryland CPCN Permit for Air Emissions. The emissions test protocol is to
be submitted to Panda forreview before the test.
NOISE TEST
The noise test will be performed to demonstrate compliance with the noise
abatement guarantee. As baseline reference data, Panda will provide Raytheon
with ambient background noise surveys taken before construction of the
facility. The noise test requires that Raytheon perform additional noise
surveys to determine the actual acoustical behavior of the facility under all
normal and abnormal operating conditions. Raytheon is required to provide, at
its own expense, any acoustic treatment required to bring the noise level of
the facility to within the specified levels.
LIQUIDATED DAMAGES AND BONUSES
The liquidated damages and bonuses specified in the EPC contract are
summarized in Table 9-3.
<PAGE>
<TABLE>
<CAPTION>
Table 9-3
SUMMARY OF RAYTHEON LIQUIDATED DAMAGES AND BONUSES
Guarantees Liquidated Damages Bonuses
- ------------------------------------------------------------------------------
<S> <C> <C>
Completion
Commercial Operation by $80,000/day to a None
the Completion Guaranteed maximum of
Date (June 1, 1996, or as $14,400,000.
adjusted)
Performance
Net Power Output - Gas $1,000/kW, $300/kW
210,000-kW minimum
Net Power Output - Oil $1,000/kW None
Net Plant Heat Rate - Gas $45,000/Btu/kWh if $22,500/Btu/kWh
more than 2% greater if more than
than the guarantee 2% less than
than the
guarantee
</TABLE>
COMPLETION
Raytheon is required to pay liquidated damages of $80,000 per day for each day
that commercialoperation of the plant occurs after the Guaranteed Completion
Date. This payment for late completion shall not exceed $14,400,000. Panda
has the right to offset this payment against any milestone payments, or to
draw upon the letter of credit. The Guaranteed Completion Date is June 1,
1996, or as adjusted. Raytheon earns no bonus for successful completion
before the Guaranteed Completion Date.
PERFORMANCE
Raytheon pays $1,000/kW for failure to achieve the guaranteed net power
output, whether firing on natural gas or No. 2 fuel oil. When firing on
natural gas, Raytheon must achieve a minimum net power output of 210,00 kW.
That is, buydown is only permitted to a minimum of 210,000 kW. In addition,
Raytheon must have achieved commercial operation. There is no bonus for
exceeding net power output on either natural gas or fuel oil.
Raytheon pays liquidated damages for failure to achieve the guaranteed net
plant heat rate. The amount is $44,000 per Btu/kWh when firing on natural
gas in excess of the net plant heat rate guarantee plus the dead-band
tolerance. The dead-band tolerance is defined as plus or minus 2 percent of
the guarantee. Raytheon earns a bonus on net plant heat rate in the amount
of $22,500/Btu/kWh that the net plant heat rate is less than the guarantee,
less the dead-band tolerance.
Appendix A
DOCUMENT LIST
GENERAL CORRESPONDENCE AND SUPPORT MATERIALS
CONTRACTS, AGREEMENTS, AND AMENDMENTS
Power Purchase Agreements
Constructio Agreements
Interconnection Agreements
Steam Supply Agreements
O&M Agreements
Fuel Supply Contracts
Other Contracts
PERMITS
Federal
State
Local
TECHNICAL
Scope of Work
Specifications
Heat Balance
DRAWINGS
GENERAL CORRESPONDENCE
- Letter August 29, 1994, (Hollon to Lorusso) re: transmitting
Brandywine permit schedule.
- G.E. letter of September 26, 1994, (Johnson to Lorusso) re:
GE gas turbine emission guarantees.
- Raytheon letter of October 12, 1994, (Jacobsohn to Hollon)
re: milestone payment schedule.
- Raytheon letter of November 15, 1994, (Jacobsohn to Hollon)
re: major sub-contractors and suppliers.
- Raytheon letter of November 15, 1994, (Jacobsohn to Hollon)
re: financial closing project schedule and approved budget.
- December 20, 1994, letter of transmittal of project summary
bar chart.
- Letter of transmittal of pro forma dated January 9, 1995,
from G.E. Capital.
- Letter January 12, 1995, (Jon Pawlow to various legal
counsels) re: transmitting updated Brandywine list of permits
and schedule-of-disclosure items on environmental matters.
- Pro formas dated - January 12, 1994
- January 14, 1994
- September 14, 1994
- January 6, 1995
- G.E. letter of January 10, 1995, (Johnson to Jacobsohn) re:
GE gas turbine emission guarantees.
- Project budgets with dates running through closing.
- Test case, increased capacity income statement, March 2, 1995.
- Owner's schedule with several updates through closing.
- Raytheon's Monthly Reports:
August 1994; issued September 27, 1994
October 1994; issued November 14, 1994
November 1994; issued December 12, 1995.
- Various issues of the Panda-Brandywine, L.P., 230-MW combined-cycle
power plant (BC-03 schedule) project activity scheduled.
- Various issues of the Raytheon Engineers & Constructors' project
milestone schedule.
- Various issues of the Raytheon milestones and schedule of values.
- Various issues of capital budget and pro formas.
CONTRACTS, AGREEMENTS AND AMENDMENTS
PPA AND INTERCONNECTION
- Order No. 70017, State of Maryland Public Service Commission, dated
July 21, 1992.
- Order No. 10077, State of Maryland Public Service Commission, dated
August 14, 1992.
- Order No. 10155, State of Maryland Public Service Commission, dated
February 1, 1993.
- Memo from Ted Hollon, May 11, 1993, listing all the PEPCO contract key
dates and payments.
- Power Purchase Agreement between Potomac Electric Power Company and
Panda-Brandywine, L.P., dated August 9, 1991.
- PEPCO letter of September 30, 1993, to Robert Carter re: confirmation of
scheduled deliverables to PEPCO from Panda.
- Operations and Maintenance Review by North American Energy Services dated
November 1993.
- First amendment to Power Purchase Agreement dated September 16, 1994.
- Operations and Maintenance Review update by North American Energy Services
dated October 1994.
- Panda letter October 19,1994, to Brian Ward re: available capacity
calculations.
- Letter from Ted Hollon to Mike Lorusso, December 9, 1994, re: PEPCO's
acceptance of the O&M Agreement with Ogden Brandywine Operations.
- PEPCO letter of December 8, 1994, as above.
- PEPCO letter December 26, 1994, re: Pacific Energy Systems' supplement to
Operations and Maintenance Review-update.
- PEPCO letter of November 1, 1995, re: North American's Operations and
Maintenance Review update.
- Power Purchase Agreement Appendixes:
Appendix A - Description of Facility and Site
Appendix B - Sample Calculations
Appendix C - Guidelines and Performance Standards for Parallel
Operation of Customer Generation Equipment on the
PEPCO system
Appendix D - Testing Procedures for Determining Net Capability
Appendix E - Metering Equipment
Appendix F - Interconnection and Communication Specification and
Revision A, July 22, 1993
Appendix G - Procedures for Determination of Fair Market Value of
Facility
Appendix H - Requirements with Respect to Fuel Supply Arrangements
Appendix I - Generating Unit Event Reporting
Appendix J - Summary Specification for 230-kV Overhead Transmission
Lines
Appendix K - Contributions to Maintenance Reserve Pursuant to
Subsection 8.7(b)(ii)
Appendix L - Capacity Rate
Appendix M - Natural Gas Reserve Commitment and Price
Appendix N - Equivalent Availability Factor ("EAF")
Appendix O - Equivalent Forced Outage Rate ("EFOR")
Appendix P - Valuation Procedures for PEPCO's Buy-out Right under
Subsection 18.6(b)(ii), including: Agreement with
respect to transfers of interests in Panda-Brandywine,
L.P., between Potomac Electric Power Company and Panda
Energy Company, and Panda-Brandywine Corporation,
dated August 8, 1991, with Appendix A.
CONSTRUCTION AGREEMENTS
EPC Contract
- Turnkey Cogeneration Facility Agreement between Panda-Brandywine, L.P.,
and United Engineers & Constructors, Inc.; dba Raytheon Engineers &
Constructors, date as of December 2, 1993. Includes Exhibit A through O.
- Simpson Thatcher & Bartlett EPC Contract markup of March 23, 1994; May, 12,
1994; May 16, 1994.
- GE Capital EPC contract word changes of April 15, 1994, and April 20, 1994.
- Panda word changes to Amendment No. 1 dated June 30, 1994.
- Raytheon letter August 2, 1994, to Ted Hollon, re: drafts of suggested
language changes to EPC contract.
- September 16, 1994, draft copy of the first amendment to the turnkey
Cogeneration Facility Agreement.
- EPC word changes from Raytheon dated September 16, 1994.
- Memo September 22, 1994, from Brian Dietz to Hollon, DeVoss, Young, and
Jacobsohn re: New York Technical meeting.
- EPC word changes from Raytheon dated October 6, 1994.
- Raytheon's October 13, 1994, Exhibit P, Scope of Work for Distilled-Water
Plant.
- Amended and Restated Turnkey Cogeneration Facility Agreement between
Panda-Brandywine, L.P., and Raytheon Engineers & Constructors, Inc., dated
as of December 1, 1994. Includes Exhibits A through R.
- Memo February 24, 1995, from Ted Hollon to Darrel DeVoss re: 16 pages of
changes to Raytheon EPC contract.
STEAM SUPPLY AGREEMENTS
- Letter of October 22, 1993 (Carter to Colonel Celmer), re: sales of water
to base for boiler makeup.
- Draft Steam Sales Agreements dated from May 26, 1994, to December 30,
1994, nine revisions in all.
- Brandywine Water Company Business Plan, January 4, 1995.
O&M AGREEMENTS
- ASME paper by William R. Alkema, "Operation of a Large Combined-Cycle
Facility as a Dispatchable Unit," 1991.
- Request for Proposal: Facility Operations and Maintenance Services, dated
July 22, 1994.
- Qualifications of Ogden Power, dated October 19, 1994.
- Operation and Maintenance Agreement between Panda-Brandywine, L.P., and
Ogden Brandywine Operations, Inc., dated November 21, 1994.
- Preliminary Operating Plan, December 16, 1994.
- Resumes of proposed plant manager dated December 22, 1994.
FUEL SUPPLY CONTRACTS
- Fuel Plan dated July 15, 1994, by Panda Energy Corporation for Panda-
Brandywine, L.P.
- Fuel Management Plan dated November 23, 1994.
- Gas Transportation and Supply Agreement between Panda-Brandywine, L.P.,
and Washington Gas Light Company dated November 1994.
- Letter of December 2, 1994, to Daniel Grahagan PSC of Maryland requesting
changes to the CPCN because of the Washington gas line extension replacing
Panda's approved gas line.
- Letter of December 2, 1994, to Daniel Grahagan PSC of Maryland from
Washington Gas Light Company requesting approval of the Gas Transportation
and Supply Agreement.
- Carmen D. Legato letter of December 6, 1994, re: burning LNG from Cove
Point.
- Simpson Thatcher & Bartlett memo of January 5,1995, re: consent and
agreement submitted to gas contractors.
- Ted Johnson (GE) letter dated January 17, 1995, re: burning out-of-spec
gas.
- Simpson Thatcher & Bartlett memo of February 17, 1995, updating January 5,
1995, memo.
- Precedent Agreement between Columbia Gas Transmission Corporation and
Panda-Brandywine, L.P., dated February 25, 1995.
- Gas Sales Agreements between Cogen Development Company and Panda-
Brandywine, L.P., dated March 1995.
- Fuel Supply Management Agreement between Cogen Development Company and
Panda-Brandywine, L.P., dated March 1995.
- Carmen D. Legato letter of March 19, 1995, re: use of gasified LNG.
- Prehm & Associates letter of March 22, 1995, re: gas processing plant for
LNG.
- C. C. Pace letter of March 24, 1995, re: Cover Point gas quality follow
up.
- Ted Johnson (GE) letter of March 30, 1995, re: thoughts on (out-of-spec)
LNG fuel.
OTHER CONTRACTS
Transmission Line
- Conrail Occupation Agreement dated September 6, 1994, for 230-kV
transmission line.
- Request for Proposal for furnishing and installing 230-kV transmission line
and alternate communications circuit for Panda-Brandywine, L.P.
- Gilbert/Commonwealth bid evaluation dated October 26, 1994.
- Contract dated November 17, 1994, with C. W. Wright Construction Company to
furnish and erect 230-kV transmission line.
Effluent Pipeline
- Treat Effluent Water Purchase Agreement between the County Commissioners of
Charles County, Maryland, and Panda-Brandywine, L.P.
- Conrail Occupancy Agreement, effluent pipeline, dated November 9, 1994.
- Panda letter of November 14, 1994, (Hollon to Lorusso) re: effluent line
right-of-way, Highway 301.
- Panda letter November 15, 1994, (Hollon to Lorusso) re: metes and bounds
description for Navy easement.
- Gilbert/Commonwealth February 28, 1995, conference notes/cost estimate.
- Panda letter of March 20, 1995, (Hollon to DeVoss) re: effluent line
budget.
- Draft Easement of pipeline right-of-way between Navy and Panda-Brandywine,
L.P., received March 21, 1995.
PERMITS
FEDERAL
- Wetlands Report by ECT, February 1993.
- Application for qualifying cogeneration facility dated December 28, 1993.
- FERC Notice of Application for QF status dated January 26, 1994.
- U.S. Army Corps of Engineers verification of delineation of wetlands,
April 29, 1994.
- Order granting certification as a qualifying cogeneration facility issued
May 23, 1994.
- Joint federal/state application for the alteration of any flood plain,
waterway, tidal, or nontidal wetland in Maryland, October 1994.
- Federal Notice of Qualification for Nationwide Permit #12, November 16,
1994.
- Categorical Exclusion for Easement and Installation of Effluent Wastewater
Pipeline along Naval Surface Warfare Center (NSWC) Indian Head Rail Line
Right-of-Way in Maryland, Navy memo November 28, 1994.
STATE
- Application for approval of a Prevention of Significant Deterioration
Source, September 1992.
- Letter of February 16, 1993, (ECT to DNR) re: wetland assessment.
- Letter of May 19, 1993, (DNR to ECT) re: wetland impact issues.
- Environmental Review Document for the Brandywine Cogeneration Facility
(application for CPCN) Volume 1 and Volume 2, August 1993.
- Letter to Joe Brinson from ECT, September 23, 1993, re: site walkover of
Jasper and Gemeny Properties.
- Phase I environmental site assessment of Gemeny site, October 18, 1993.
- Letter ECT to Joe Brinson, January 3, 1994, re: Phase I assessment efforts
at Jasper property.
- State recommendations for Panda-Brandywine's CPCN, June 17, 1994.
- Proposed order for CPCN Phase I, July 15, 1994.
- Proposed order for CPCN Phase II, August 3, 1994.
- Environmental Site Assessment of Conrail and military railroad right-
of-way, ECT September 1994.
- Phase II Reply Memorandum of Panda-Brandywine, L.P., September 21, 1994.
- Public Service Commission order approving the CPCN, Phase I, October 6,
1994.
- Public Service Commission order approving the CPCN, Phase II, October 27,
1994.
- Letter of December 6, 1994, (DNR to Brinson) re: eliminating several
license conditions as a result of Washington Gas to build & operate gas
line.
- Letter of December 14, 1994 (Brinson to DNR) re: erosion and sediment
control plans.
- State of Maryland Conditional Letter of Authorization to Construct
Utility Lines and Stormwater Outfall, December 23, 1994.
LOCAL
- Prince George's County approval of wetland delineations of site.
- Letter of June 15, 1993 (Thomas Haller to Joe Brinson) re: State and
County Noise Control regulations.
- Letter of August 6, 1993, (Thomas Haller to Joe Brinson) re: local
permitting requirements.
- Letter of November 2, 1993, (County to Carter) re: environmental concerns.
- Letter of November 10, 1993 (County to Brinson) re: additional data
request.
- Draft WSSC Discharge Application by ECT dated October 1994.
- Letter of October 19, 1994, (Hollon to Lorusso) transmitting soil
recycling certificate.
- Letter of November 10, 1994, Prince George's County Government, re: sewer
system capacity.
- Washington Suburban Sanitary Commission approval of 8,000 mg/1 maximum
daily limit date November 17, 1994.
- Application for Discharge Authorization Permit Application for Industrial
users, December 1994.
TECHNICAL
SCOPE OF WORK
- Exhibit A of the Turnkey Contract Agreement "Scope of Work" with
Appendixes A through J: various issues were received with dates between
December 1993 and March 1995.
- Change Order Requests for:
A-1 Agreement Amendment 04/11/94 Approved
001 RFI study 07/29/94 Approved
002 CTG lube oil reservoir and
transfer system 02/03/94 Voided
003 Differing subsurface conditions 05/09/94 Voided
004R2 Host facility guarantee impacts 10/10/94 Approved
005 Iron pretreatment 06/98/94 Approved
006R1 Increase cooling tower basin 06/27/94 Approved
007 Revise HRSG crossover walkway 07/12/94 Approved
008 Gas & gray water interface 09/30/94 Approved
009 Potable water supply source revised 08/29/94 Open
010 Schedule delay claim 08/09/94 Voided
011 PEPCO/SMECO interface 02/09/95 Approved
012 Clearing and grubbing 09/30/94 Approved
013 Temporary access road 11/16/94 Approved
014 Betty Boulevard upgrade 10/94 Open
015 Sample system changes 10/21/94 Approved
016 Circulation water intake screens 12/01/94 Approved
017 Fire protection changes 01/16/94 Approved
018 Well pump capacity 04/25/94 Open
019 PEPCO interfaces --- Open
020 Owner caused delay 03/22/95 Approved
SPECIFICATIONS
- GE Performance Specification for steam turbine-generator unit, July 1993.
- Contract Specification "Effluent Force Main," received October 12, 1994.
- Contract Specification "Effluent Pump Station and Secondary Chlorination,
" received October 12, 1994.
- Specification for "Heat Recovery Steam Generators," received October 12,
1994.
- Specification for "Deaerator," received October 12, 1994.
- Specification for a "Steam Turbine-Generator," received October 12, 1994.
- Specification for a "Cooling Tower," received October 12, 1994.
- Specification for a "Condenser and Accessories," received October 12, 1994.
- Specification for a "Combustion Turbine-Generator and accessories,"
received October 12, 1994.
GENERAL
- Technical Report on Feasibility Evaluation of Effluent for Cooling Water,
dated December 1993, by Greenhorne & O'Mara, Inc.
- Letter of February 17, 1994 (Brinson to SMECO), re: construction and
permanent power requirements.
- Subsurface exploration and geotechnical recommendations, dated March 1994.
- Panda letter of November 11, 1994, (Hollon to DeVoss) re: effluent line
routing.
- Panda letter of November 15, 1994, (Hollon to Lorusso) re: estimate for
zero discharge facility for Panda-Brandywine, L.P.
- November 18, 1994, Betz revised cooling tower blowdown waste
characterizations.
- PEPCO dispatch information, December 1994.
- The Prince George's County Government (DER) letter of December 9, 1994,
re: conditional acceptance of solid waste from a zero discharge system.
<PAGE>
<TABLE>
<CAPTION>
DRAWINGS
Number Rev Description Date
<S> <C> <C> <C>
17-SKE-003 - Water plant --
SK-12-01-01-301 - Betty Boulevard temporary
construction --
26-10-223 - P&ID distilled water plant --
SK11-10-302 - General arrangements distilled
water plant --
D00234-1 2 Nooter/Eriksen HP system P&ID 7/28/94
D00234-2 2 Nooter/Eriksen IP system P&ID 7/28/94
D00234-3 2 Nooter/Eriksen LP system P&ID 7/28/94
--- - Boundary survey of Jasper property 12/17/92
11-10-202 A General arrangement, steam turbine-
generator building --
11-10-301 A General arrangement, site plan 6/01/94
12-01-01-001 1 Civil, plot plan 7/08/94
17-01-20-001 P One-line diagram, 230 kV and 13.8 kV --
26-10-101 A Water balance --
26-10-102 P Process flow diagram, Sheet 1 of 3 --
26-10-103 A Process flow diagram, Sheet 2 of 3 --
26-10-104 A Process flow diagram, Sheet 3 of 3 --
26-10-201 A P&ID, symbol & nomenclature 5/26/94
26-10-202 A P&ID, high-pressure steam 5/26/94
26-10-203 A P&ID, intermediate-pressure steam 5/26/94
26-10-204 A P&ID, low-pressure & extraction steam 5/26/94
26-10-205 A P&ID, steam turbine & auxiliaries 5/26/94
26-10-206 A P&ID, condensate 5/25/94
26-10-207 A P&ID, feedwater 5/25/94
26-10-208 A P&ID, combustion turbine-generator A,
Sheet 1 5/25/94
26-10-209 A P&ID, combustion turbine-generator A,
Sheet 2 5/25/94
26-10-210 A P&ID, combustion turbine-generator B,
Sheet 1 5/25/94
26-10-211 A P&ID, combustion turbine-generator B,
Sheet 2 5/25/94
26-10-212 A P&ID, fuel gas and fuel oil 5/25/94
26-10-213 A P&ID, HRSG A vents & drains 5/25/94
26-19-214 A P&ID, HRSG B vents & drains 5/25/94
26-10-215 A P&ID, plant water 5/26/94
26-10-216 A P&ID, fire protection, Sheet 1 5/27/94
26-10-217 A P&ID, fire protection, Sheet 2 5/27/94
26-10-218 A P&ID, circulating & cooling water,
Sheet 1 5/26/94
26-19-219 A P&ID, circulating & cooling water,
Sheet 2 5/26/94
26-10-220 A P&ID, closed cooling water 5/27/94
26-10-221 A P&ID, condensate stor & transfer &
sampling 5/26/94
26-10-222 A P&ID, makeup water treatment 5/25/94
26-10-224 A P&ID, chemical feed 5/27/94
26-10-225 A P&ID, plant drains, Sheet 1 5/25/94
26-10-226 A P&ID, plant drains, Sheet 2 5/25/94
26-10-227 A P&ID, compressed air 5/25/94
54-DR-001 A Project Schedule, Sheets 1-8, (2 sets) 2/17/94
</TABLE>
Appendix B
PROJECT DRAWINGS
<PAGE>
<TABLE>
<CAPTION>
DRAWINGS
Number Rev Description Date
<S> <C> <C> <C>
17-SKE-003 - Water Plant --
SK-12-01-01-301 - Betty Boulevard temporary construction --
26-10-223 - P&ID distilled water plant --
SK11-10-302 - General arrangements distilled water
plant --
DOO234-1 2 Nooter/Eriksen HP system P&ID 07/28/94
DOO234-2 2 Nooter/Eriksen IP system P&ID 07/28/94
DOO234-3 2 Nooter/Eriksen LP system P&ID 07/28/94
--- - Boundary survey of Jasper property 12/17/92
11-10-202 A General arrangement, steam turbine-
generator building --
11-10-301 A General arrangement, site plan 06/01/94
12-01-01-001 1 Civil, plot plan 07/08/94
17-01-20-001 P One-line diagram, 230 kV and 12.8 kV --
26-10-101 A Water balance --
26-10-102 P Process flow diagram, Sheet 1 of 3 --
26-10-103 A Process flow diagram, Sheet 2 of 3 --
26-10-104 A Process flow diagram, Sheet 3 of 3 --
26-10-201 A P&ID, symbol & nomenclature 05/26/94
26-10-202 A P&ID, high-pressure steam 05/26/94
26-10-203 A P&ID, intermediate-pressure steam 05/26/94
26-10-204 A P&ID, low-pressure & extraction steam 05/26/94
26-10-205 A P&ID, steam turbine & auxiliaries 05/26/94
26-10-206 A P&ID, condensate 05/25/94
26-10-207 A P&ID, feedwater 05/25/94
26-10-208 A P&ID, combustion turbine-generator A,
Sheet 1 05/25/94
26-10-209 A P&ID, combustion turbine-generator A,
Sheet 2 05/25/94
26-10-210 A P&ID, combustion turbine-generator B,
Sheet 1 05/25/94
26-10-211 A P&ID, combustion turbine-generator B,
Sheet 2 05/25/94
26-10-212 A P&ID, fuel gas and fuel oil 05/25/94
26-10-213 A P&ID, HRSG A vents & drains 05/25/94
26-10-214 A P&ID, HRSG B vents & drains 05/25/94
26-19-215 A P&ID, plant water 05/26/94
26-10-216 A P&ID, fire protection, Sheet 1 05/27/94
26-10-217 A P&ID, fire protection, Sheet 2 05/27/94
26-10-218 A P&ID, circulating & cooling water,
Sheet 1 05/26/94
26-10-219 A P&ID, circulating & cooling water,
Sheet 2 05/26/94
26-19-220 A P&ID, closed cooling water 05/27/94
26-10-221 A P&ID, condensate store & transfer
& sampling 05/26/94
26-10-222 A P&ID, makeup water treatment 05/25/94
26-10-224 A P&ID, chemical feed 05/27/94
26-10-225 A P&ID, plant drains, Sheet 1 05/25/94
26-10-226 A P&ID, plant drains, Sheet 2 05/25/94
26-10-227 A P&ID, compressed air 05/25/94
54-DR-001 A Project Schedule, Sheets 1-8, (2 sets) 02/17/94
</TABLE>
Appendix C
LIST OF ABBREVIATIONS
LIST OF ABBREVIATIONS
ac alternating current
AGC automatic generation control
ARMA Air and Radiation Management Administration
ASCE American Society of Civil Engineers
ASME American Society of Mechanical Engineers
Btu British thermal unit
degrees C degree Centigrade
CEMS continuous emissions monitoring system
CO carbon monoxide
CO2 carbon dioxide
CPCN Certificate of Public Convenience and Necessity
CRT cathode ray tube
CT combustion turbine
CTG combustion turbine-generator
dBA decibel
dc direct current
DCS distributed control system
DNR Department of Natural Resources
EAF equivalent availability factor
EPC engineering/procurement/construction
EPA Environmental Protection Agency (U.S. unless noted)
degrees F degree Fahrenheit
FAA Federal Aviation Administration
FERC Federal Energy Regulatory Commission
gal gallon
GNP Gross National Product
gpd gallons per day
gpm gallons per minute
Hga mercury absolute
HHV higher heating value
HP high pressure
hp horsepower
hr hour(s)
HRSG heat recovery steam generator
HVAC heating, ventilating and air conditioning
Hz hertz
I&C instrumentation and control
in inch(es)
IP intermediate pressure
ISO International Standards Organization
kV kilovolt(s)
kVA kilovoltampere(s)
kW kilowatt(s)
kWh kilowatt-hour(s)
lb pound(s)
lb/hr pounds per hour
LHV lower heating value
LNG liquid natural gas
LP low pressure
mA milliampere(s)
MCC motor control center
MCR maximum continuous rating
mgd million gallons per day
MMBtu million British thermal units
MVA megavoltampere
MW megawatt(s)
MWa megawatt(s) average
MWe megawatt(s) electrical
MWh megawatt-hour
MWWTP Mattawoman Wastewater Treatment Plant
NO2 nitrogen dioxide
NEPA National Environmental Policy Act
NFPA National Fire Protection Association
NOx oxides of nitrogen
NSPS new source performance standards
O2 oxygen
O&M operation and maintenance
pf power factor
PM particulate matter
PM-10 particulate matter below 10 microns
ppm parts per million
ppmvd parts per million by volume, dry
PPRP Power Plant Research Program
PSC Public Service Commission
PSD Prevention of Significant Deterioration
psi pounds per square inch
psia pounds per square inch absolute
psig pounds per square inch gauge
PURPA Public Utility Regulatory Policy Act
QF qualifying facility
RH relative humidity
rpm revolutions per minute
scf standard cubic feet
SCR selective catalytic reduction
sf square foot
SMECO Southern Maryland Electrical Coop
SO2 sulfur dioxide
STG steam turbine-generator
TSP total suspended particulates
UL Underwriters Laboratory
UPS uninterruptible power supply
V volt
VAR volt ampere reactive
VOC volatile organic compounds
Appendix D
PANDA GATECYCLE SUMMARY
Appendix D
PANDA GATECYCLE SUMMARY
GATE CYCLE PROGRAM
Gate Cycle is a power plant design and analysis software package. It is used to
perform detailed steady-state design and off-design analysis of gas turbine,
combined-cycle, and conventional fossil fuel power systems. Gate Cycle can
be used to prepare complete plant heat and mass balances, perform
analytical checks on individual plant components, and predict the
effect of enhancements to existing plant systems.
DEVELOPMENT OF PANDA-BRANDYWINE GATE CYCLE MODEL
To use the Gate Cycle program for analysis of the Panda-Brandywine
cogeneration plant, a model of the plant was developed and entered into the
Gate Cycle program. The model includes all major plant components, such as
the gas turbines, HRSGs, steam turbine, condenser, and cooling tower. These
components are connected to represent the mass flows between them as in the
actual plant. Then, for each component, the design parameters are entered
into the model. From these, the Gate Cycle program develops the performance
of each component and mass flow relationships around the plant cycle. The
program then performs an iterative calculation process to achieve a complete
mass and energy balance for the plant model.
The design parameters used as inputs to the Gate Cycle model were obtained from
component specifications supplied by various vendors, and from the EPC
contract, project scope document and drawings by Raytheon, the project EPC
contractor.
The reference model developed for the Panda-Brandywine plant uses the guarantee
point conditions listed below:
Ambient Conditions
- 92 degrees F dry bulb temperature
- 14.59 psia barometric pressure
- 50 percent relative humidity
40,000 lb/hr process steam to host
80 percent condensate return
Natural gas fuel 20,845 Btu/lb (LHV)
CASE STUDIES
Three case studies were performed on the Panda-Brandywine plant using the Gate
Cycle program:
1. The first was the reference model-the plant modeled at the guarantee
conditions. The purpose was to check the plant net output and heat rate
at the guarantee point and compare these calculated results with the EPC
contract guarantees. This also serves as the basis for further off-design
case studies.
2. The first off-design case study was run to check the maximum power output
of the facility. The gas turbine exhaust temperature was allowed to rise
to 1,050 degrees F, approximately 40 degrees F above the base-load
condition. All other operating parameters remained unchanged.
3. The second off-design case study involved shutting down one of the two gas
turbines and checking the facility output and heat rate under this
operating scenario. The single operating gas turbine was run at 80
percent of rated load by modulating the inlet guide vanes. Two of the
cooling tower fans were operated at half speed because the condenser load
was only half of the reference case value. No other operating parameters
were changed.
SUMMARY OF RESULTS
The results of the three Gate Cycle case studies are presented below. The
reference case results, depicted graphically in Figure D-1, are compared with
the guarantee point results in Table D-1 below.
Table D-1
REFERENCE CASE RESULTS
Performance Measurements EPC Guarantee Gate Cycle Results
-------------------------------------------------------------------------------
Net Plant Output (MW) 230.0 238.27
Net Plant Heat Rate 7,124 7,041.6
(Btu/kWh) (LHV)
1. The reference model for the GateCycle calculation shows a margin of 3.5
percent in plant output over the guaranteed output. The calculated
results also show a margin of 1.2 percent below (favorable) the guaranteed
plant heat rate.
2. The first off-design case study (maximum power case) investigated the
potential maximum power output of the facility. At the elevated gas
turbine firing rate, the plant achieved 251.0 MW with a heat rate of
6,911.4 Btu/kWh (LHV). These calculated results can be considered
preliminary because no checks were made to see whether any component had
reached its maximum operating limit. This could be generator temperature
rise limits, STG steam flow rate limits, condenser limits, or a variety of
other component limits. This case study merely shows the plant to be
capable of elevated power output. The maximum power case results are
shown in Figure D-2.
3. Finally, the second off-design case study was performed with only a single
gas turbine operating at 80 percent of its base-load rating. At this
point, the combined-cycle plant output was 98.5 MW and a heat rate of
7,255 Btu/kWh (LHV). The single gas turbine 80 percent load case results
are shown in Figure D-3.
Figure D-1
PANDA-BRANDWYINE COGENERATION PLANT
DIAGRAM
Figure D-2
PANDA-BRANDWYINE COGENERATION PLANT
DIAGRAM
Figure D-3
PANDA-BRANDWYINE COGENERATION PLANT
DIAGRAM
January 10, 1997
Panda Funding Corporation
Panda Interfunding Corporation
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Ladies and Gentlemen:
This document has been prepared by Pacific Energy Systems, Inc.,
as an update to the July 22, 1996, Independent Engineer's Report
for the Panda-Brandywine Cogeneration Project. That report was
prepared in support of the Pooled Project Bonds, Series A due
2012, issued by Panda Funding Corporation on July 31, 1996. This
update is provided in connection with the offering by Panda
Funding Corporation of its Pooled Project Bonds, Series A-1 due
2012 in exchange for its Pooled Project Bonds, Series A due 2012.
Pacific Energy Systems' review, assessment, and update are based
on previously completed due diligence work, periodic construction
monitoring of the Panda-Brandywine facility, review of
significant project agreements, and witness of performance tests
conducted by others. This update was not written to stand on its
own but as part of the July 22 Independent Engineer's Report;
interested parties should read that report before this update.
PROJECT STATUS
The Panda-Brandywine Cogeneration Project, since the end of July,
has reached a number of key milestones and is now in Commercial
Operation. While final completion has not been declared because
of remaining punch list items, the facility is fully operational.
Ogden Brandywine Operations, Inc. (Ogden), has assumed its role
as operator and is responsible for day-to-day operation and
maintenance. Raytheon Engineering & Constructors (Raytheon)
employees remain onsite working on punchlist, completion, and
minor warranty items. Permanent financing through a
sale/leaseback pursuant to the Construction Loan Agreement and
Lease Commitment with General Electric Capital Corporation (GE
Capital) and Credit Suisse has taken place.
Panda-Brandywine, L.P. (Panda), declared the Actual Commercial
Operation Date under the Power Purchase Agreement to be October
31, 1996, and turned the plant over to Potomac Electric Power
Company (PEPCO) for dispatch at midnight on
October 30, 1996. PEPCO has dispatched the unit at the minimum
requirement of one gas turbine online, with the steam turbine
producing a combined net output of 99 MW 12 hours per day, on
weekdays. In late November, the plant suffered the loss of one
of the gas turbine-generator rotors. It was repaired and Panda
returned the unit to service Christmas Day so that it was
available for PEPCO's dispatch on December 26, 1996.
PLANT ASSESSMENT
On the basis of our review of the design, construction, and
performance tests, Pacific Energy Systems believes that the Panda-
Brandywine Cogeneration Project has been built and tested
consistent with industry standards and, with proper operation and
maintenance, is capable of meeting the contractual operating
requirements specified in the Power Purchase Agreement and Steam
Sales Agreement. The plant has a nominal rated capacity of 230
MW at 92 degrees Fahrenheit ( DEGREES F) and 50 percent relative
humidity. In the opinion of Pacific Energy Systems, the Panda-
Brandywine plant has been subjected to a reasonable testing
program. The results of this program indicate that the plant
meets its contract guarantees.
All equipment components are widely used in similar utility and
industrial applications. The gas turbine is a field-proven
member of the General Electric Company (GE) line of gas turbines.
If operated and maintained according to design criteria and
manufacturers' recommendations, and if critical parts are
properly renewed and replaced, the plant will perform as
anticipated and last for its projected life.
CONSTRUCTION COMPLETION
As of mid-December, Raytheon has reduced its construction force
to about three or four people (supervisory, labor, and support
staff). Primary areas of work remaining are punch list items and
a few construction completion items. The punchlist has several
hundred items on it but is being reduced daily. Warranty items
are being handled as they occur. A few offsite items remain at
the effluent pumping plant, as well as some cleanup along the
pipeline right-of-way. Except for a few punchlist items, the
bulk of the remaining work should be completed in early January
and will not require any scheduled outages to complete.
As part of the loan conversion, a completion account of about
$5.3 million has been established to cover the remaining
construction, legal, and engineering costs. It will be managed
in the same way as the original construction loan, with monthly
draws certified by the Lender's engineer.
SPECIFIC ISSUES, CONCERNS, AND RESOLUTIONS
With any project of this size, a number of issues and concerns
tend to accumulate toward the end of the job. This section
describes such issues and concerns at Panda-Brandywine, including
how some were resolved and how Panda is likely to resolve the
remaining few issues. Pacific Energy Systems believes that none
of these issues represents any major impact (technically or
financially) to the future operation of the plant. These issues
and concerns are described below:
- - Combustion liner change
- - Steam turbine bearing and oil cooling
- - Disputed punchlist items
- - Substantial completion date, Raytheon's claim
- - Effluent line
- - Transmission line trees
- - Qualifying Facility status
- - Base-load operation
Combustion Liner Change
During the initial plant testing, the gas turbines failed to meet
guaranteed emissions. GE Power Systems corrected this by
modifying the firing curves which, in turn, lowered the units'
output. Although the units were then able to meet output, heat
rate, and emission guarantees, GE Power Systems, Panda, and
Raytheon all agreed that under normal wear, the units might not
pass PEPCO's net capability test in the future. GE Power Systems
agreed to install new combustion liners in the gas turbines if
Panda would buy the liners. Liners were scheduled for purchase
in August 1997 and GE deferred payment until that date.
Therefore, Panda had no out-of-pocket costs for the updated
design in liners. The liners were, therefore, installed during
October with subsequent testing confirming that the new liners
more than met the expected increase in output and decrease in
heat rate and emissions.
Steam Turbine Bearing and Oil Cooling
During initial operation, the steam turbine developed a vibration
that was considered excessive in the number one bearing, although
it was well below GE Power Systems' defined limits. During the
outage for the liner change, GE Power Systems installed a newly
designed bearing, which appears to have helped. The vibration on
the old bearing was made worse by high-temperature oil. During
cooler weather, it appears that this is easily controlled, but
warm temperatures next summer may cause additional problems. GE
Power Systems has stated that the hot oil is still within limits
and should not cause any problems. GE Power Systems has admitted
that the oil cooler is undersized and is developing a proposed
fix. This issue has not been resolved. Pacific Energy Systems
does not anticipate any short-term effects on plant operation but
does recommend resolution of this design deficiency, for which
Raytheon and GE Power Systems are both responsible.
Disputed Punchlist Items
At present, Raytheon disputes about 150 to 175 items on Panda's
punchlist, a number of which appear to be disputed because of
misunderstanding or a lack of communication. Panda and Raytheon
are working to resolve all of these items. Pacific Energy
Systems believes that most of the disputed punchlist items
ultimately will be performed by Raytheon. The remaining few will
be done by Raytheon under change orders or by Panda as betterment
items if Panda feels they are required. Funds are available in
the completion account to cover these items.
Substantial Completion Date, Raytheon Claims
As a result of the initial emission problems with the gas
turbines, an improperly installed continuous emissions monitoring
system (CEMS), and the timing of various tests, Panda and
Raytheon disagree on the specific date Substantial Completion and
Commercial Operation were reached. The disputed amount is
$880,000 in bonuses to Raytheon. If found to be payable, this
money would be paid in three equal installments from
distributable cash from operations, starting next spring. On the
basis of the 1997 budget and pro forma, there appears to be
sufficient cash available from distributable cash to cover these
bonuses if Raytheon prevails.
Raytheon has three outstanding claims: a force majeure for severe
winter storms; an owner-caused delay for effluent line flushing;
and an owner-caused delay for low gas pressure. These claims are
for a total of $124,093 and 11 schedule days.
Money has been retained in the completion account to cover the
monetary amount if Raytheon prevails. Pacific Energy Systems
believes that these claims are minor and should be resolved
without going to arbitration.
Effluent Line Problems, Claims, and Suits
A number of claims and lawsuits have resulted from the effluent
pipeline construction because of poor engineering and performance
by several subcontractors. Drilling under Highway 301 was the
catalyst for many of the problems. The drilling contractor, a
subcontractor to the pipeline contractor, had a number of
drilling problems. He ultimately terminated the casing outside
the right-of-way, which had been improperly surveyed. Poor
construction practices caused part of the highway's center median
to collapse. The owner of the adjacent property filed suit for
damages to his property outside the right-of-way, and the drilling
contractor was forced to redrill the line under the highway. The
contractor believes that the incorrect survey marks caused his problems
and wants to be paid for redrilling under the highway.
It is beyond Pacific Energy Systems' scope of work to assess any
specific responsibilities or the reasonableness of the various
claims. Funds have been set aside in the completion account for
this issue.
On the basis of tests and observations, the State Highway
Department believes that no further subsidence is expected in or
around Highway 301. Pacific Energy Systems sees no further
technical risk to the pipeline in this area, and nothing appears
to be hampering its operation to date.
Right-of-way restoration is being redone in several areas to meet
landowner and county requirements. One landowner has refused re-
access to her property to make repairs and may file some type of
legal action. Panda has repeatedly tried to resolve this
problem.
Transmission Line Trees
PEPCO has taken exception to several trees adjacent to the
transmission line right-of-way and Panda was unable to obtain
permission from the property owner to remove the trees. Panda
and PEPCO have worked out an agreement concerning responsibility
if these trees fall into the line at a later date. Pacific
Energy Systems believes the overall risk here is small and that
PEPCO is being overly cautious.
Qualifying Facility Status
Pacific Energy Systems has been informed by Ogden that the Panda-
Brandywine facility met the minimum Qualifying Facility (QF)
requirements of 5 percent useful thermal and 45 percent
efficiency in 1996. While Pacific Energy Systems has not had the
opportunity to review the data and calculations, it was
recognized that the plant did have the potential to overcome
initial problems associated with acid injection at the distilled-
water plant and sell enough steam to meet minimum QF
requirements. If Panda-Brandywine had not met these minimum
requirements, it had until August 1997 to make up the difference:
thereafter, the plant must be in compliance during each calendar
year. Pacific Energy Systems is of the opinion that the Panda-
Brandywine should be in QF compliance and should be able to
provide steam in sufficient quantities to remain in compliance.
Base-Load Operation
Pacific Energy Systems does not consider base-load operation a
problem at this time because of the dispatch arrangement with
PEPCO. If the plant were operated at base load (above 90 percent
capacity), however, the following three areas would need to be
monitored closely or corrected:
- - The present permit for water use from onsite wells is not
sufficient to maintain the boiler feedwater makeup at base load
year round. This could be corrected with a permit change; well
water conservation measures, such as changing the evaporation
coolers over to effluent water; or extending the Washington
Suburban Sanitary Commission (WSSC) industrial water supply line
to the site from Cedarville Road, a distance of about 1,500 feet.
Cooling tower needs are more than adequately met by the effluent
pipeline at any load, including base load.
- - The distilled-water plant is designed to use 40,000 lb/hr of
steam. At full load, the plant must sell about 42,000 lb/hr to
meet QF requirements. During the performance testing, it was
demonstrated that the distilled-water plant could use 42,000
lb/hr of steam. While this is sufficient, at base load there
would be no room for distilled-water plant outages without
reducing plant load. Monitoring of QF status will be very
important at base load.
- - Because output would nearly double under base-load
operation, the additional quantity of distilled water would
require Panda to upgrade its distilled-water sales program.
RECOMMENDATIONS
Although the previous section points out several issues that have
arisen over the last few months during startup, Pacific Energy
Systems believes them to be consistent with similar startups of
large power plants. It should be possible to resolve all issues
within the budget limits contained in the completion account.
Pacific Energy Systems also recommends the following changes to
improve plant operation. While the plant can operate without
these changes, they will improve the quality of operation and
likely will reduce long-term maintenance costs. Our
recommendations are as follows:
- - Ogden should prepare a written plan to protect the heat
recovery steam generators (HRSGs) from freezing if one or both
fail to operate during freezing weather. Panda needs to ensure
that necessary equipment and monitoring are in place to implement
the freeze protection plan.
- - Panda should purchase and install an online heat rate
program as part of the distributed control system (DCS). This
will ensure that optimal efficiencies and maximum income are
maintained at all times.
- - In the July 1996 Independent Engineer's Report, Pacific
Energy Systems made a number of suggestions for improved cyclic
operation; these should be reviewed to determine the cost
effectiveness of each. All can be readily retrofitted.
- - To improve distilled-water production, a recycle line should
be added. This will make the product more pure and likely
increase its value and market.
- - Panda needs to pursue (with GE Power Systems) the need to
replace the oil cooler on the steam turbine, as discussed earlier
in this document.
PLANT OPERATION
In order to strengthen its onsite staff, Ogden made several
changes to its supervisory staff just before Commercial
Operation; these changes were supported by Panda. Ogden was
fortunate to hire people from the local labor pool who have a
great deal of operation and maintenance experience in power
plants. This has made training easier and more thorough, which
will reduce the time needed for operators to become experienced
in the specific day-to-day operation of this particular plant.
Pacific Energy Systems has observed Ogden's operators during
plant checkout and testing and believes that they can safely
operate the facility. Time and ongoing training, including
annual reviews, will further sharpen these skills.
Ogden has the plant's maintenance support software (Datastream,
MP-2) on-line and functional. All spare parts and small tools
were ordered through this program. The completion punch list
items have been entered as work order items and are being tracked
as if they were normal work orders, saving both time and effort.
Panda-Brandywine has placed initial orders for spare parts
totaling approximately $1.2 million. Another $500,000 has been
spent on tools, vehicles, and other maintenance support
equipment. In addition, Panda has budgeted another $2 million in
combustion replacement parts to be delivered before the first
scheduled outage in September 1997. Additional funds remain in
the completion account if Panda or Ogden determine that other
spare parts or tools are needed during the next 6 months.
The operating plan for Panda-Brandywine is simple: Except for
electricity production of 99 MW between 8:00 a.m. and 8:00 p.m.
on weekdays, the plant will be fully dispatched by PEPCO. PEPCO
will dispatch the plant on an as-needed basis according to the
utility's economic dispatch regulations. Initial studies
indicate that Panda-Brandywine can expect about 4,000 to 5,000
fired hours per year for each of the two gas turbine-generators.
PEPCO and Panda have worked together to develop a joint operating
procedure and a joint performance procedure. These two documents
help clarify how the plant will respond under specific dispatch
requirements, when notification must be given, and how fuel needs
will be coordinated. Panda has also provided PEPCO with a fuel
management plan.
It should be noted that PEPCO is in the process of merging with
Baltimore Gas and Electric. While regional needs will remain the
same (PJM System electrical requirements), the new company will
have a different relationship with Panda than PEPCO does today.
Pacific Energy Systems cannot determine how that might affect the
operating plan.
FINANCES
The Panda-Brandywine Cogeneration Project was constructed with
funds provided by GE Capital under a conventional project
construction loan. The construction loan has been converted to
permanent financing through a sale/leaseback pursuant to the
Construction Loan Agreement and Lease Commitment. The purchase
price agreed to in advance was $217.5 million. Panda was able to
build the project and all ancillary facilities for less than the
capital budget of $215 million. Excess funds will ultimately be
distributed to Panda.
Pacific Energy Systems has reviewed the operating budget details
for the Panda-Brandywine 1996-97 budget and finds that it is
consistent with similar budgets of other plants. This budget
(upon which the pro forma is based) appears adequate to operate
and maintain the project according to the operating plan.
Pacific Energy Systems has also reviewed the various technical
assumptions used to develop the pro forma projections and
believes that such items as output, heat rate, degradation,
availability, startup times, fuel, water, chemical quantities,
maintenance reserves and schedules, and other expenses are
reasonable for the assumed hours of operation.
PERMITS
Like all power plants, the Panda-Brandywine Cogeneration Project
was required to obtain a substantial number of governmental
approvals before, during, and after construction. On the basis
of available information, Pacific Energy Systems believes that
Panda has carefully tracked government requirements, made timely
submittals, and obtained all permits, consents, approvals, and
actions needed to date. Remaining permits are primarily
administrative in nature and should be issued after timely
submittal of required data and information.
ACCEPTANCE TESTING
The Panda-Brandywine Cogeneration Project has been thoroughly
tested in accordance with the appropriate codes, standards, and
contract specifications. It is Pacific Energy Systems' opinion
that the project has demonstrated that it has been engineered,
designed, and constructed properly and is capable of meeting
guarantees under specified conditions.
Acceptance testing of Panda-Brandywine can be divided into three
types: construction, startup, and performance testing. These
are discussed below:
Construction Testing
Construction testing is generally aligned with quality assurance
rather than actual testing. Raytheon has provided routine
testing throughout the construction period to ensure that the
plant was built to meet the codes and standards specified in the
scope of work and in its detailed design. Construction testing
ranged from checking soil compaction and concrete strength to
boiler hydros.
Although Pacific Energy Systems' representatives were not present
throughout the entire construction period, they were onsite
enough to observe both construction and testing methods and are
satisfied that Raytheon demonstrated that codes and standards
were met.
Startup Testing
Startup testing is the checking, testing, and turnover of various
plant systems and pieces of equipment. The primary goal of
startup testing is to ensure that each system works the way it
should. Testing is performed with equipment both on-line and off-
line. Most startup testing is related to electrical and control
activities.
PEPCO has played an active role with Raytheon's startup group in
checking the transmission line, switchyard, and interconnection
equipment.
Pacific Energy Systems has monitored the ongoing efforts of the
startup group and is satisfied that Raytheon has properly checked
out and tested the Panda facility.
Performance Testing
For the purposes of this document, performance testing is
described in three categories:
- - Demonstration of dependable capacity
- - Guaranteed performance
- - Compliance testing
Dependable Capacity Test: To fulfill a PEPCO requirement before
PEPCO can accept energy and capacity from the Panda-Brandywine
cogeneration plant, Panda was required to demonstrate that the
plant could produce 230,000 kW continuously during a 2-hour
period. Output was to be corrected (by GE-supplied gas turbine
and steam turbine curves) to ambient conditions of 92 DEGREES F dry bulb
and 50 percent relative humidity, with 34,000 lb/hr of saturated
steam at 15 psig going to process (distilled-water plant) and 80
percent condensate returned.
This test was run on September 12, 1996, between 9:00 a.m. and
11:00 a.m. The corrected output during this period was 232,085
kW. While it was later determined that the plant was out of
compliance in nitrous oxides (NOx) emission by several parts per
million, tests on September 30 and October 30 demonstrated the
plant could produce more than the required 230 MW (corrected to
92 DEGREES F on 50 percent relative humidity and meet emission limits.
As a result of this test, Panda-Brandywine has met PEPCO's
Dependable Capacity Test as required under Article VIII
subsection 8.2(a) of the Power Purchase Agreement. Panda staff
completed the PEPCO-supplied PJM forms in accordance with the Net
Capability Test and supplied copies to the PEPCO engineers who
witnessed the test. In the future, the Dependable Capacity Test
will be run during the winter and summer peak seasons. Pacific
Energy Systems believes the facility should be able to meet
future tests, assuming proper operation and maintenance of the
facility.
Guaranteed Performances: The engineering, procurement, and
construction (EPC) contract guarantees the Panda-Brandywine
project will comply with a number of performance variables.
Output, efficiency, and reliability are the three most important
of these variables. These were tested in accordance with the EPC
Contract and Scope Document as a 48-hour net electrical output
test, a net plant heat rate test, and a 200-hour capacity test.
For a number of reasons, the initial performance testing at Panda-
Brandywine, performed in mid-September, did not provide adequate
results. The prescribed testing had to be modified to meet the
design condition of no boiler blowdown during the determination
of capacity and heat rate. Although a 48-hour test was run,
capacity and heat rate were determined by a 6-hour test during
the 48-hour test without boiler blowdown. GE Power Systems
supplied several sets of correction curves based on various
operating curves in the gas turbine control logic. Problems with
the CEM produced unreliable emission data during the 48-hour test
and actual emissions were determined to be out of compliance on
the basis of stack testing. In general, the 48-hour test run on
September 12, 1996, was not reliable. Raytheon will continue to
claim differently with Panda, since the earlier completion of
testing is worth about $720,000 in completion bonus to Raytheon.
After GE Power Systems made adjustments to the gas turbine firing
curves and Raytheon (with the help of the vendor) got the CEM to
operate correctly, a new test was run on September 30, 1996, that
demonstrated the plant could operate at or better than the
guaranteed output and heat rate.
A third test was run on October 30, 1996, after GE Power Systems
installed new combustion liners in the gas turbines and made
additional modifications to the firing curves. The results of
this test show that the net power output is 236,393 kW and the
net plant heat rate is 7,035 Btu/kWh (LHV) [7,804 Btu/kWh (HHV)]
when correct to design conditions and for degradation.
Compliance Testing: The EPC contract guarantees the Panda-
Brandywine project must be in compliance with a number of
conditions of the Certificate of Public Convenience and Necessity
(CPCN), including stack emission and noise, and must meet
specific performance guarantees and CPCN conditions while burning
oil.
Pacific Energy Systems has witnessed many of these tests, has
reviewed the final reports on most, and is of the opinion that
the plant is in compliance with CPCN requirements.
Raytheon has made no attempt to run the noise test to date.
Preliminary readings by Panda show the plant to be in compliance
during normal operation.
CONCLUSION
It is Pacific Energy Systems' opinion that the Panda-Brandywine
Cogeneration Project is substantially complete, capable of
meeting all commercial operating requirements under the Power
Purchase Agreement and Steam Sales Agreement, and has received or
is expected to receive all necessary operating permits. There is
no reason to believe that any necessary operation permit not yet
received will not be obtained.
Pacific Energy Systems has witnessed most key testing and is of
the opinion that the plant meets or exceeds all guarantees or
design conditions based on the information supplied during
testing by Raytheon, GE Power Systems, and others.
Pacific Energy Systems has independently reviewed the project
engineering, costs, construction, permits, contract, operation
and maintenance, and performance for completeness, risk,
variation from practices typical in the industry, and the ability
of the Panda-Brandywine facility to perform as intended.
Provided future operation and maintenance are performed according
to standard industry practices, Pacific Energy Systems can find
no technical constraints to prevent the facility from being able
to perform at a level consistent with that anticipated in Panda's
pro forma.
CONFIRMATION AND CONSENT
We confirm the accuracy of the information contained in our
Independent Engineer's Report dated July 22, 1996, as
supplemented by this letter.
We consent to the inclusion of the Independent Engineer's Report
dated July 22, 1996, and this update letter in the Registration
Statement of Panda Funding Corporation relating to its Pooled
Project Bonds, Series A-1 due 2012.
Sincerely,
David G. Young
Project Manager
DGY:lmt
APPENDIX H
CC PACE
R E S O U R C E S
PANDA-BRANDYWINE, L.P.
GENERATING FACILITY
FUEL CONSULTANT'S REPORT
Dated July 2, 1996
With a Supplemental Update
Dated January 10, 1997
Prepared by:
C.C. Pace Resources, Inc.
Legal Notice
This report is meant to be read as a whole. In preparing this report, Pace
relied on information and statements obtained from various sources, including
Pacific Energy Systems, Inc., and ICF Resources, Inc. Pace makes no
assurances as to the accuracy of any such information or any conclusions based
thereon. Additionally, neither Pace, nor any Pace employee, a) makes any
warranty, expressed or implied, with respect to the use of any information
or methods disclosed in this report; or b) assumes any liability with
respect to the use of any information or methods disclosed in this report.
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY H-1
INTRODUCTION H-1
FUEL PLAN OVERVIEW H-1
KEY CHARACTERISTICS H-3
POWER PURCHASE AGREEMENT H-4
GAS SUPPLY H-6
GAS TRANSPORTATION H-9
BACKUP FUEL OIL H-11
FUEL MANAGEMENT H-12
II. PPA REQUIREMENTS H-13
OPERATIONAL REQUIREMENTS H-13
PAYMENTS H-16
PPA SECTION 11.2 H-21
AVAILABILITY REQUIREMENTS H-22
III. NATURAL GAS SUPPLY H-23
FUEL REQUIREMENTS H-23
GAS SUPPLY CONTRACT TERMS H-25
GAS SUPPLY SECURITY H-28
GAS COST LINKAGE WITH PPA ENERGY PAYMENTS H-34
PRO FORMA MODEL H-39
IV. NATURAL GAS TRANSPORTATION H-40
CONTRACTUAL ARRANGEMENTS H-40
SUFFICIENCY OF CONTRACTED CAPACITY H-43
TRANSPORTATION COSTS H-44
OPERATIONAL ISSUES H-46
PEAK PERIOD RELEASE H-48
PRO FORMA MODEL H-49
V. BACK-UP FUEL OIL H-52
FUEL OIL REQUIREMENTS H-52
FUEL OIL AVAILABILITY H-54
AIR PERMIT H-53
FUEL OIL PRICING H-53
PRO FORMA MODEL H-54
VI. FUEL MANAGEMENT H-55
FUEL MANAGEMENT AGREEMENT AND PLAN H-55
EXPERTISE OF CDC FUEL MANAGEMENT H-58
EXHIBIT A: STATISTICAL ANALYSIS OF GSA AND
PPA FUELRELATED INDICES H-59
PRICE DIFFERENTIAL BETWEEN LOUISIANA AND
APPALACHIA SUPPLY H-60
FGMR REVENUE VERSUS TIER 2 GAS COST H-62
EXHIBIT B: LNG GAS QUALITY ISSUES H-68
EXHIBIT C: PEAK PERIOD RELEASE DETAILS H-70
SUPPLEMENTAL UPDATE LETTER
DATED JANUARY 10, 1997 H-supp. 1
I. EXECUTIVE SUMMARY
Introduction
This report is an independent description by C.C. Pace Resources, Inc.
("Pace") of the fuel supply and transportation arrangements of an electric and
steam generating facility located near Brandywine, MD ("the Facility").(1)
Pace was retained to provide this report by Panda Energy International, Inc.
for Panda-Brandywine, L.P. ("Panda") in connection with a planned offering of
securities.
Currently under construction, the Facility is expected to commence
commercial operation in the Fall of 1996. The Facility consists of two
combustion turbine generators ("Unit 1" and "Unit 2"), two heat recovery
steam generators, and one steam turbine generator arranged in combined cycle
configuration with process steam being exported for off-site use.(2) Total
generating capacity will be 230 megawatts ("MW").
Electricity will be sold to Potomac Electric Power Company ("PEPCO")
according to the terms and conditions of a Power Purchase Agreement dated
August 9, 1991, and as amended by a First Amendment dated September 16, 1994
(the "PPA"). The PPA has a term of 25 years from the date of the start of
commercial operation.
Fuel Plan Overview
Figure I-1 provides a schematic representation of the basic fuel plan as
developed by Panda. The Facility will be fueled primarily by natural gas,
with No. 2 fuel oil as backup supply. Unit 1, which the PPA specifies will
be dispatched at certain times, will be fueled with firm gas supply and
transportation as required by the PPA. Unit 2 is dispatchable under the PPA
and will be fueled with gas purchased at short-term market rates.
Interruptible transportation arrangements for Unit 2 fuel are in place to be
used, if required. Due to the expected hours and frequency of Facility
operation, Panda expects to deliver gas to Unit 2 using pipeline balancing
services and provisions available under Unit 1's firm transportation
arrangements.
Firm gas supply will be provided by Cogen Development Company ("CDC"),the
fuel supply subsidiary of MCN Corporation ("MCN") under a long-term Gas Supply
- ----------------------------
(1) This report describes only portions of the relevant contracts and
documents as neededfor the discussion at hand. A complete description or
legal evaluation of the contracts and documents related to the Facility is
beyond the scope of this report. Additionally, electric market evaluation is
beyond the scope of this report and is not included in the scope of Pace's
engagement with Panda.
(2) Steam will be sold to a distilled water plant.
Agreement ("GSA"). CDC also has a long-term contract with Panda to be the fuel
manager for the Facility. The GSA includes a corporate warranty from MCN.
Gas will be priced in tiers which are intended to correspond to the fixed and
market based energy payment pricing under the PPA. A portion of the firm gas
supply is provided under a fixed price schedule, with the volumes designed to
match the portion of the energy payments under the PPA which are subject to a
fixed price schedule. The contract has a minimum term of 15 years, which
matches the time during which the PPA provides a fixed-price energy payment.
Required volumes of interruptible supply can be purchased from CDC or another
supplier.
Panda has executed 25-year firm transportation contracts with three
pipelines: Columbia Gas Transmission Corporation ("TCO"), Cove Point LNG
Limited Partnership ("CLNG"), and Washington Gas Light Company ("WGL"). These
contracts provide sufficient pipeline capacity rights to serve 100% of the
requirements of Unit 1. Commencement of service under the TCO contract is
subject to completion of construction that has commenced. Interruptible
transportation arrangements are in place for service to Unit 2, if required.(3)
Backup fuel oil will be used to operate the Facility during periods of
gas service interruption. A 2 million gallon on-site storage tank will
provide 6 days of supply at full dispatch of both units. Panda plans to
contract for firm supply and transportation of fuel oil before the start of
the winter heating season and ensure that on-site storage levels are kept full
during winter.
FIGURE I-1
BASIC FUEL PLAN
DIAGRAM
- ---------------------------
(3) Interruptible transportation service contracts have been executed with TCO
and with CLNG sufficient for Unit 2 volumes. The WGL agreement provides
volumes for both Unit 1 and Unit 2.
Key Characteristics
Pace has identified a number of fuel-related risks associated with the
Facility. These risks are summarized within the Executive Summary and
discussed fully in the body of this report.
Certain statements below in this section and elsewhere in the report are
forward-looking statements are based on current expectations and consequently
involve risks and uncertainties. Consequently, Panda's actual results could
differ materially from the expectations expressed in the forward-looking
statements. The various factors that could cause Panda's actual results to
differ materially from the expected results are discussed in the body of the
report and should be carefully considered.
Pace has observed the following key characteristics concerning the fuel
plan, which must be considered in conjunction with the full report:
1. CDC, an experienced gas supplier with reserves sufficient to support the
fixed-price portion of the GSA, is required annually under the GSA to
ensure that its reserves continue to be adequate to meet that obligation,
and has ongoing gas marketing operations more than sufficient to support
the remaining contractual obligations with Panda. MCN also has
substantial assets backing its corporate warranty of CDC's gas supply
obligations.
2. The market-based pricing provided under the PPA corresponds to the
pricing at which gas supplies are generally available, and is similar
to the pricing at which gas supplies are available from CDC.
3. Gas transportation arrangements are in place for firm transportation for
100% of the fuel supply requirements for Unit 1 for the PPA term, subject
to the obligation of Panda under limited circumstances to release to WGL
all of Panda's firm gas supply. The regulatory approvals for these
arrangements have been received. Construction is completed on CLNG and
WGL. On TCO, the required pipeline construction has commenced and should
be completed before commencement of commercial operations of the Facility,
according to information from TCO.
4. There is a strong linkage between changes in the Facility's expected
variable fuel-related costs and revenues.(4) Several potential
delinkages re mitigated by significant initial positive margins in
energy payment components.
- ----------------------------
(4) Variable fuel costs do not include pipeline reservation charges.
5. PEPCO has approved the fuel supply arrangements as fulfilling the
contractual requirements of the PPA at this time. Under reasonable
assumptions (including reasonable and prudent action by Panda), the fuel
supply arrangements should continue to fulfill the contractual
requirements of the PPA. This includes the requirements that Panda
maintain a reliable fuel supply and that the fuel supply arrangements can
reasonably be expected to result in variable fuel-related costs that are
less than energy payments under the PPA.
6. The gas supply and transportation operational requirements are flexible
enough to satisfy electric dispatch operational requirements, provided
sound fuel management is employed. CDC and its affiliates have fuel
management experience, and CDC's fuel management performance is backed by
a corporate warranty from MCN.
7. The backup fuel plan provides Panda the capability to meet dispatch
requirements, assuming firm fuel oil supply and transportation contracts
are in place before each heating season and the Facility's air permit
allows use of fuel oil.
8. The pro forma modeling of Facility reflects the Facility's fuel supply
arrangements, using the gas and oil price projections of ICF Resources,
Inc. ("ICF"). ICF is a recognized forecaster of gas and oil prices and
reports that it used the same forecasts in ICF's dispatch study of the
Facility. As a consequence of the expected dispatch of the Facility
projected by ICF, the pro forma modeling reflects significant benefits of
certain pipeline balancing provisions under the assumption that these
provisions will continue over the term of the PPA. These balancing
provisions are not contractual rights and there is no guarantee that these
provisions will continue over the entire pro forma modeling term.
Power Purchase Agreement
Dispatch Segments
The PPA partitions the capacity of the Facility into four Dispatch
Segments as summarized in Table I-1. PEPCO must dispatch the Facility in
sequence from Segment 1 to Segment 4. These Dispatch Segments are used to
determine the operational requirements and level of payment for the Facility.
<TABLE>
<CAPTION>
Table I-1. Dispatch Segments
- ------------------------------------------------------------------------------
SEGMENT UNIT OUTPUT DISPATCH
<S> <C> <C> <C>
Segment 1 Unit 1 0 - 99 MW Limited Dispatch*
Segment 1 Unit 1 0 - 99 MW Dispatchable
Segment 2 Unit 1 99 - 117 MW Dispatchable
Segment 3 Unit 1 & Unit 2 117 - 199 MW Dispatchable
Segment 4 Unit 1 & Unit 2 199 - 237 MW Dispatchable
</TABLE>
- ----------------------------------------
*For Segment 1 (Limited Dispatch), the PPA establishes 60 hours per week as
"must-run" hours of plant operation, from 8 a.m. - 8 p.m. on the days Monday
through Friday.
Monthly Energy Payment
Payments from PEPCO to the Facility include a Monthly Energy Payment
("MEP") for electric generation. The MEP is a calculated based on the
dispatch segment under which the power was generated as shown in Table I-2.(5)
During contract years 1-15, the payment for certain portions of Unit 1
generation is based on fixed prices (the Firm Gas Reserve Rate or "FGRR"),
while at other times the payment is based on prices adjusted by a market index
(the Firm Gas Market Rate or "FGMR"). Unit 2 generation is paid for based on
prices adjusted by either a gas market index (the Interruptible Gas Rate or
"IGR") or an oil market index (the Oil Rate or "OR"). After the 15th year the
payment for all generation from the Facility is solely based on the FGMR for
Unit 1 and IGR or OR for Unit 2.
<TABLE>
<CAPTION>
Table I-2. Dispatch Segment Energy Payment
- ------------------------------------------------------------------------------
SEGMENT UNIT ENERGY PAYMENT
<S> <C> <C>
Segment 1-Limited Dispatch Unit 1 year 1-15 FGRR, year 16-25 FGMR
Segment 1-Dispatchable Unit 1 FGMR
Segment 2 Unit 1 FGMR
Segment 3 Unit 2 IGR or OR
Segment 4 Unit 2 IGR or OR
</TABLE>
The FGRR is $2.58 per MMBtu in the first contract year and escalates
annually tospecified prices. The prices will be adjusted one time for
inflation at the start of commercial operations.
The FGMR is comprised of an initial commodity price of $1.62/MMBtu
indexed by four monthly reported published natural gas spot prices, two from
Appalachia and two from the Gulf Coast, and an initial transportation price of
$0.65/MMBtu adjusted each month by one-half the change in an inflation index.
The cost of transportation on CLNG, calculated on a 100% load factor basis, is
passed-through by the Facility by adding this charge to the FGMR.
- -----------------------
(5) A special rate applies if the steam turbine is not in operation.
The IGR is based on a market price index similar to the FGMR.
The OR is based on an index using No. 2 fuel oil prices in the Facility's
geographic area. Under certain conditions, the OR is used in place of the IGR
if oil is used for electric generation in Unit 2.
PPA Section 11.2
Generally speaking, PPA Section 11.2 requires Panda to maintain a
reliable fuel supply that includes firm gas supply and transportation
arrangements for Unit 1, interruptible supply and transportation for Unit 2,
and fuel arrangements that will enable Panda to recover its variable fuel costs
from the MEP. PEPCO has approved the fuel plan under the arrangements
described in this report and has provided in a Consent and Agreement dated
April 10, 1995, additional restrictions on the impact of any notice by PEPCO
in the future that it believes Panda is not meeting the requirements of
Section 11.2. In light of these PEPCO actions and under a reasonable
implementation related to Section 11.2, the Facility's fuel arrangements
should continue to meet the requirements of Section 11.2.
Gas Supply
Delivery Obligations
Under the GSA, CDC is obligated to provide up to 24,240 MMBtu of gas per
day (plus fuel use on TCO) on a firm basis and up to an additional 24,240
MMBtu of gas per day (plus fuel use on TCO) on an interruptible basis into
TCO at an interconnect with ANR Pipeline Company ("ANR").(6)
Based on information from Pacific Energy Systems, Inc., ("Pacific
Energy") each turbine requires a maximum of 961 MMBtu per hour when operating
at full load and Panda would require 23,064 MMBtu for each turbine for a full
day at maximum dispatch. This is 1,176 MMBtu per turbine less than Panda's
maximum quantity under the CDC contract.
- ----------------------------
(6) MCN has executed a firm transportation agreement with ANR providing
sufficient firm capacity to deliver the 24,240 MMBtu of gas per day into TCO.
GSA Tiers
The GSA divides quantities into four volume and pricing tiers:
1) Limited Dispatch Gas.
2) Scheduled Dispatch Gas.
3) Dispatchable Gas.
4) Interruptible Gas.
For clarity, we will refer to Limited Dispatch Gas as Tier 1, Scheduled
Dispatch Gas as Tier 2, Dispatchable Gas as Tier 3 and Interruptible Gas as
Tier 4.
Tier 1 volumes are the first 6,000-8,000 MMBtu/day of firm scheduled gas.
Panda must take or pay for an average of 6,300 MMBtu per day. The Tier 1
price is comprised of a fixed commodity charge, a demand charge, an "ANR"
charge, and a price credit. The total charge for Tier 1 volumes as of June 1,
1996, was $2.43/MMBtu.
Tier 2 volumes are a firm quantity of scheduled gas up to 24,240 MMBtu
less the Tier 1 quantity. Panda must take or pay for 80% of the beginning of
the month nominated quantity of Tier 2 gas. Price is set monthly on a
market-based index comprised of a price based on NYMEX natural gas futures
contract prices for the delivery month and a price ceiling based on three
published natural gas spot prices for Louisiana into ANR pipeline. The 1995
average of the Tier 2 price was $2.13/MMBtu.
Tier 3 volumes are a quantity of firm gas up to 24,240 MMBtu less the
Tier 1 and Tier 2 volumes. A quantity of interruptible gas up to 24,240 MMBtu
can be obtained at Tier 4 prices. The price for Tier 3 and Tier 4 volumes is
set by CDC when gas is purchased based on current market conditions. At
Panda's option, Tier 3 volumes may be bought at a market index of the average
of that day's published price for natural gas in Appalachia on TCO. Panda may
also obtain Tier 3 and 4 volumes from another supplier.
Energy Payment Linkage
The GSA tiers are intended to correspond with the fixed and market-based
pricing under the PPA. Table I-3 shows the intended correspondence.
<TABLE>
<CAPTION>
Table I-3. GSA Tiers and PPA Payment Categories
GSA PPA
Tiers Description Dispatch Payment Description
- ------- ----------- -------- ------- -----------
<S> <C> <C> <C> <C>
Tier 1 fixed price Limited Dispatch FGRR fixed price
Tier 2 market price Dispatchable FGMR market price
Tier 3 market price Dispatchable FGMR market price
Tier 4 market price Dispatchable IGR market price
</TABLE>
Statistical analysis reveals that the pricing structures and indices
under the GSA are strongly linked with the pricing structures and indices under
the PPA. However, there are variances between the GSA pricing tiers and PPA
terms. The pricing tiers under the GSA operate based on the amount of volume
taken, while the pricing tiers of the PPA operate on the basis of specified
time periods and megawatts of electric output. This difference creates a
potential for delinkage in terms of gas supply volumes and price with the
revenue mechanisms of the PPA.
To satisfy Limited Dispatch requirements, Pace estimates the Facility
needs a maximum of 9,957 MMBtu Monday through Friday and 0 MMBtu on the
weekend. Under the GSA, Tier 1 gas is designated as the first 6,000-8,000
MMBtu taken per day. Additionally, on weekends, the first 6,000 MMBtu per day
(at a minimum) will be priced at the fixed rate while all weekend dispatch
will be compensated at market-based gas rates.
From this potential volume delinkage a potential price delinkage occurs.
After the first 8,000 MMBtu is taken during a day, the remaining volumes will
be priced at a market rate. Additionally, on weekends the first 6,000 MMBtu
(at a minimum will be priced at the fixed rate while all weekend dispatch will
be compensated at a market-based rate. The market prices of Tier 2 and Tier 3
may not correspond with the FGRR.
Sound fuel management using the flexibility in the transportation
arrangements will be required to keep Tier 1 synchronized with the Limited
Dispatch portion of the PPA.
Performance by CDC
CDC currently has sufficient producing reserves to support its fixed-
priced volume commitments under the GSA. The GSA obligates CDC to continue to
maintain sufficient reserves to service its fixed price contracts over the
term of the GSA. The GSA provides for a dedication of a portion of CDC's
reserves if necessary to ensure CDC can meet its supply obligations.
Additionally, CDC's exploration and production prospects appear excellent in
Michigan and CDC is pursuing these prospects.
CDC's gas supply obligations are backed by a corporate warranty. Pace
has reviewed available public information and finds MCN to be well ps
unavailable. Utilizing Option 3 would save the project from burning fuel
oil in this case, actually allowing the project to come out ahead due to
providing 1.5 times the banked quantity.
Option 1
There is little or no linkage between the rates under Option 1 and the
rates Panda will pay for gas supply. The Commodity Fee is determined at least
five days before the month through mutual negotiation by Panda and WGL. The
alternative to the Commodity Fee is a price index set at the start of the month
for Louisiana supplies into Columbia Gulf plus interruptible maximum rates on
Columbia Gulf, TCO Gas, and CLNG.
This option may be of value, depending on the relationship of gas and
No. 2 low sulfur oil prices.
Although Pace has found a historical link between the prices of natural
gas and oil, short term delinkages are possible due to temporary market
changes. The recent drop in gas prices is illustrative. The price under the
alternative gas index would have been $2.10/MMBtu in December 1994, making
Option 1 unattractive (1.5 times $2.01 = $3.02, $0.58 less than the price of
No. 2 low sulfur oil in the Washington/Baltimore market).
Option 2
Option 2 ensures that Panda will recover fuel oil based costs for running
on fuel oil due to a peak period release. Pace believes some logistical
problems remain to be settled with this option as Panda may use fuel oil from
storage and not purchase fuel oil on a day of a peak period release. It is
unclear whether the cost to replace the fuel oil used during the day would be
used or how this cost would be determined.
Option 3
This option provides Panda with the ability to substitute gas in Unit 2
for fuel oil in the event that Unit 2 is dispatched and transportation is
interrupted or gas supply is unavailable. However, as is the case with Option
1, it does not directly tie WGL payments to Panda's costs. Option 3 is also
restricted as detailed below.
According to the GSA, Panda must take a minimum 6,000 MMBtu every day,
one fourth of the maximum daily firm quantity. While not specifically stated
in the contract, the wording of Option 3 implies that the entire banked
quantity must be taken in one day. Adding to the daily minimum take a
quantity 1.5 times the banked quantity would likely result in more gas than
Panda could burn on a day for Unit 1. By using this option, Panda may create
a positive imbalance in a segment of its transportation or would sell the
excess gas supply. Only if Unit 2 was dispatched and transportation or gas
supply was unavailable would Panda be likely to use the entire quantity.
Option 3 also includes a provision that it can only be exercised on a day
above 21 degrees F, making it unavailable on days when Panda is most likely to
need supply due to IT transportation and gas supply interruption.
Historically, transportation capacity becomes constrained, even when the
temperature is in the 30s. There may be opportunities then, for Panda to use
Option 3 when the temperature is above 21 degrees F.
SUPPLY FAILURE DURING PEAK PERIOD RELEASE
In the event of a Peak Period Release, Panda's account with WGL is
credited for the quantity of gas taken by WGL during such release. The supply
intended for use by WGL may not arrive due to nonperformance by CDC or a
transporter. There would be no "banked quantity" in such a case because there
would be no gas supply for WGL to take. Figure F-1 presents a flow chart
description of the possible outcomes under such a scenario and is discussed
below.
FIGURE F-1. PEAK PERIOD RELEASE
CHART
Without a banked quantity, Panda will not recover costs of running on
fuel il through the resolution options in section 5.2 of the WGL agreement.
Panda may look to CDC to make up the additional cost of operating on fuel oil
through the liquidated damages provisions in the gas supply contract in the
case where CDC's failure to deliver is unexcused. However, Panda's recovery
may be partially or totally subordinated to damages WGL incurs due to the
provision in the WGL agreement in Section 5.1(b). The limitation on damages
under the supply contract may limit Panda's recovery.
Nonperformance could be due to an event of force majeure. Since
Panda was anticipating being without its gas supply due to the Peak Period
Release, Panda possibly could not declare a force majeure event under the PPA,
and would therefore run if dispatched, incurring additional costs for fuel
oil. Restrictions on when a peak period release under the WGL agreement
can be called limit the possibility of such occurrences.
January 10, 1997
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, TX 75244
RE: Supplemental Update to the Panda-Brandywine, L.P. Generating
Facility Fuel Consultant's Report Dated July 2, 1996.
Ladies and Gentlemen:
This letter is a supplemental update by C.C. Pace Resources, Inc.
("Pace") of material changes that have occurred since issuance of
our July 2, 1996 "Panda-Brandywine, L.P. Generating Facility
Fuel Consultant's Report" (the "Report") used in the Prospectus
of Panda Funding Corporation relating to the offering of Pooled
Project Bonds, Series A-1 due 2012 by Panda Funding Corporation.
Unless otherwise noted, capitalized terms used herein are defined
as in the Report.
Pace confirms the information in the Report and that Pace's
fundamental findings contained in the Report have not changed, as
supplemental and updated by this letter. The rest of this letter
provides discussion of material changes since issuance of the
Report, organized as follows:
1. Completion of firm natural gas transportation construction.
2. Completion of a Final Fuel Management Plan.
3. Potomac Electric Power Corporation ("PEPCO") approval of Final Fuel
Management Plan.
4. Firm fuel oil supply and transportation contracts for the winter
heating season.
5. Pro forma modeling issues.
6. Payments from PEPCO.
Completion of Firm Natural Gas Transportation Construction
Pace observed in the Report that appropriate firm transportation
contractual arrangements were in place and that required
construction remained for one pipeline, Columbia Gas Transmission
Corporation ("TCO"). Since the Report, all pipeline construction
including TCO construction has been completed and all of the firm
natural gas transportation contracts of Panda-Brandywine, L.P.
("Panda") are in effect.
Completion Of A Final Fuel Management Plan
In the Report, Pace reviewed a draft Fuel Management Plan and found
it generally sound at that stage of development. Pace has since
reviewed Panda's Final Fuel Management Plan dated October 24,
1996 ("the Final Fuel Management Plan") and finds it to be sufficient,
if followed, to assure that the Project will operate in a manner
to meet PEPCO electric dispatch orders while maintaining compliance
with all fuel supply contract and tariff obligations.
PEPCO Approval Of Final Fuel Management Plan
In the Report, Pace reported that PEPCO had approved Panda's fuel
supply arrangements as fulfilling the contractual requirements of
the PPA, at that time. Since the Report, PEPCO has approved the
Final Fuel Management Plan.
Firm Fuel Oil Supply and Transportation Contracts For The Winter
Heating Season
In the Report, Pace observed that Panda's backup fuel plan
provided Panda the capability to meet dispatch requirements,
assuming firm fuel oil supply and transportation contracts are in
place before each winter heating season (November-March).
Since the Report, Panda has developed sufficient fuel oil
procurement procedures which are included in its Final Fuel
Management Plan. Under the Final Fuel Management Plan, Panda will
execute firm fuel oil supply and transportation contracts by
October 10 of each year for the next Winter Heating Period
(November - March). In terms of fuel oil contracts for the 1996-1997
Winter Heating Period, Panda has executed the following:
1. Fuel Oil Coordinator Agreement.
2. Fuel Oil Sales and Storage Agreement.
3. Fuel Oil Trucking Agreement.
Fuel Oil Coordinator Agreement
This is a best efforts contract for fuel oil procurement services
from ERK Energy, Inc. ("ERK"). ERK expertise may provide Panda
additional ability to obtain fuel oil as needed on a spot basis
(without prearranged contracts). Panda can at any time replace
ERK or purchase oil in any quantity from any other source.
Fuel Oil Sales and Storage Agreement
This is an agreement with Koch Refining Company, LP, ("Koch") for
storage of 1,000,000 gallons of low sulfur #2 fuel oil December
1, 1996 - February 28, 1997 at a Baltimore terminal with certain
requirements for Koch to refill the storage.
This agreement provides Panda access to an additional 1 million
gallons of fuel oil to supplement its 2 million gallon on-site
storage tank. The total of 3 million gallons corresponds to the
worst case oil usage scenario discussed by Pace in the Report of
a two week period of maximum PEPCO dispatch, constant curtailment
of IT service to Unit 2, and maximum Peak Period Release activity
by Washington Gas Light ("WGL") (2 days of WGL recall each week).
The term of the Koch agreement corresponds to the months in which
WGL may call a Peak Period Release.
Fuel Oil Trucking Agreement
This is a one year agreement effective October 1, 1996, with
Hardesty & Son ("Hardesty") providing Panda firm rights to a
maximum of 10 truckloads of oil per day March - November and 20
truckloads of oil per day December - February. Panda's maximum
requirements are for 40 truckloads per day for operating both
units or 20 truckloads per day for operating only Unit 2 on oil.
Hardesty is under best efforts to supply Panda with additional
truckloads.
This agreement provides firm rights to oil transportation to
enable Panda to keep pace with maximum oil consumption of one
turbine during December - February. Combined with the on-site
and off-site Koch storage and with the procurement assistance of
the Fuel Oil Coordinator, Panda should be able to meet all oil
needs at the Facility for the 1996-1997 Winter Heating Season.
Pro Forma Modeling Issues
Pace observed in the Report that the pro forma modeling of the Facility
reflected the Facility's fuel supply arrangements. Since the Report,
several changes have occurred which are reflected in the current pro
forma modeling of the Facility. The fuel-related pro forma changes
concern the following: 1) FGRR index adjustment, and 2) Market prices
of natural gas and No. 2 fuel oil.
FGRR Index Adjustment
More recent data is now available to forecast the one-time inflation
adjustment to the FGRR. The latest available data shows a 8.5% inflation
adjustment, a decrease from the assumption used previously in the pro forma
model. Table 1 provides the revised FGRR figures.
Table 1. Unit 1 Fixed Price Gas Rate
- -----------------------------------------
Unadjusted Estimated
Contract FGRR Adjusted FGRR
Year ($/MMBtu) ($/MMBtu)
- --------- ---------- -------------
1 2.58 2.80
2 2.68 2.91
3 2.79 3.03
4 2.90 3.14
5 3.02 3.27
6 3.14 3.41
7 3.26 3.54
8 3.33 3.61
9 3.40 3.69
10 3.46 3.75
11 3.53 3.83
12 3.60 3.91
13 3.68 3.99
14 3.75 4.07
15 3.82 4.15
- -----------------------------------------
Note: The adjusted FGRR rates are estimated using preliminary data for
October 1996. The actual adjusted FGRR will be calculated using final
data through the start of commercial operations.
Market Prices of Natural Gas and No. 2 Fuel Oil
In the Report, Pace found that the gas commodity costs used in the pro forma
model accurately reflect the Facility's gas prices based on forecasts by ICF
Resources, Inc. ("ICF"). Since the Preport, ICF has revised its commodity
price forecasts, lowering the annual average rate of real price increase to
near 1% for natural gas and the 1996 start price of natural gas by several
cents per MMBtu.
Pace finds that the market prices of natural gas and No. 2 fuel oil in the
model for 1996 do not reflect actual historical 1996 market prices. However,
for the following reasons, we find the pro forma model commodity prices
reasonable for long-term pro forma modeling purposes:
1. ICF is a recognized forecaster of energy prices.
2. ICF reports that it used the same forecasts in ICF's dispatch study
of the Facility.
3. The pro forma model is designed to "pass-through" gas commodity costs
to energy payments.
4. Changing the prices for 1996 would only affect 2 months of Facility
operations, since the Facility's declaration of commercial operation
occured on October 31, 1996.
Payments from PEPCO
Panda has received one payment invoice from PEPCO for commercial
operation of the Project (November 1996). In such invoice, PEPCO's
calculation of the November 1996 FGRR is $2.65/MMBtu compared to the rate
of $2.80/MMBtu calculated by Pace in the Report and supplemented in this
letter. A FGRR of $2.65/MMBtu could have a material adverse effect on the
financial results of the Project.
Panda has informed Pace that they do not agree with the FGRR used by
PEPCO and are currently investigating the discrepancy. Pace is not aware
of any reason why the FGRR determined by Pace should not match that
calculated by PEPCO in actual energy payment calculations. Pace has not
seen the underlying details of PEPCO's fuel rate calculations.
Respectfully Submitted,
/s/
C.C. PACE RESOURCES, INC.
No dealer, salesman or other
person has been authorized to
give any information or to make
any representations not
contained in this Prospectus,
and, if given or made, such
information or representations
must not be relied upon as
having been authorized by the $105,525,000
Company or the Issuer. This
does not constitute an offer to [logo]
sell, or a solicitation of an
offer to buy, the securities
offered hereby in any OFFER TO EXCHANGE
jurisdiction where, or to any
person to whom, it is unlawful 11-5/5% Pooled Project Bonds,
to make such offer or Series A-1 due 2012
solicitation. The delivery of which have been registered under
this Prospectus at any time and the Securities Act
any sale made hereunder does
not imply that the information for any and all outstanding
contained herein is correct as
of any time subsequent to the 11-5/8% Pooled Project Bonds,
date hereof. Series A due 2012
TABLE OF CONTENTS
of
Defined Terms i
Presentation of Financial
Information i PANDA FUNDING CORPORATION
Available Information i
Disclosure Regardig Forward- Unconditionally Guaranteed By
Looking Statements ii
Prospectus Summary 1 PANDA INTERFUNDING CORPORATION
Risk Factors 27
The Company, the Issuer and
Panda International 38
Use of Proceeds 42 PROSPECTUS
Capitalization 43
Unaudited Pro Forma Combined
Financial Data 44
Selected Combined Financial The Exchange Agent is:
Data 47
Management's Discussion and
Analysis of Financial Banker's Trust Company
Condition and Results of
Operations 48 By Facsimile:
The Exchange Offer 53 (212) 250-6392
Certain U.S. Federal Income
Tax Considerations of the Confirmation by Telephone:
Exchange Offer 61 (212) 250-6657
Business 62
Description of the Projects 65
Legal Proceedings 85 By Registered Mail/Hand Delivery/
United States Regulations 87 Overnight Courier:
Management 93
Description of Outstanding Bankers Trust Company
Project-Level Debt 95 4 Albany Street
Description of the Exchange New York, New York 10006
Bonds 103
Old Bond Registration Rights 127
Plan of Distribution 128 Attention: Mr. Matthew Seeley
Legal Matters 129
Experts 129
Index to Financial Statements F-1
Defined Terms A-1
Consolidated Pro Forma Report B-1
Rosemary Engineering Report C-1
Rosemary Fuel Consultant's ______________, 1997
Report D-1
Brandywine Pro Forma Report E-1
Brandywine Engineering Report G-1
Brandywine Fuel Consultant's
Report H-1
Until _______ (90 days after the
date of this Prospectus), all
dealers effecting transactions in
the securities offered hereby,
whether or not participating in
this distribution, may be required
to deliver a Prospectus. This
delivery requirement is in
addition to the obligations to
dealers to deliver a Prospectus
when acting as underwriters with
respect to their unsold allotments
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following is a statement of estimated expenses to be
incurred in connection with the offering of the 11-5/8% Pooled
Project Bonds, Series A-1 due 2012 of Panda Funding Corporation
(the "Registrant") covered by this Registration Statement, all of
which will be paid by the Registrant and Panda Interfunding
Corporation (the "Co-Registrant"):
Securities and Exchange Commission Registration Fee $31,978
Accounting Fees and Expenses 50,000
Legal Fees and Expenses 50,000
Exchange Agent and Trustee Fees and Expenses 7,000
Independent Engineers' Fees and Expenses 25,000
Fuel Consultants' Fees and Expenses 15,000
Miscellaneous 11,022
--------
Total $190,000
========
Item 14. Indemnification of Directors and Officers.
The Certificate of Incorporation of the Registrant and the
Amended and Restated Certificate of Incorporation of the Co-
Registrant provide that to the fullest extent permitted by the
Delaware General Corporation Law, a director thereof shall not be
liable to such corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. The
Registrant's and the Co-Registrant's Bylaws provide for mandatory
indemnification to directors (including independent directors)
and officers of the corporation, except to the extent prohibited
by law, if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. No person shall be indemnified in
respect of any claim or matter as to which such person has been
adjudged to be liable to the corporation, unless otherwise
adjudged by the court.
Item 15. Recent Sales of Unregistered Securities
Information regarding the securities sold by the Registrant
and the Co-Registrant during the last three years is set forth
below. None of such securities have been registered under the
Securities Act of 1933, as amended (the "Securities Act").
Common Stock
On July 25, 1996, the Registrant issued 1,000 shares of its
common stock to the Co-Registrant for the consideration of $10.
Exemption from registration of the such shares of common stock is
claimed under Section 4(2) of the Securities Act.
On July 25, 1996, the Co-Registrant issued 1,000 shares of its
common stock to Panda Energy Corporation for the consideration of
$10. Exemption from registration of the such shares of common
stock is claimed under Section 4(2) of the Securities Act.
Series A Bonds and Guaranty
On July 31, 1996, the Registrant issued and sold for cash, at
par, to Jefferies & Company, Inc. $105,525,000 aggregate
principal amount of its 11-5/8% Pooled Project Bonds, Series A
due 2012 (the "Series A Bonds"). Jefferies & Company, Inc.
placed the Series A Bonds with qualified institutional buyers and
institutional accredited investors. The Series A Bonds are
unconditionally guaranteed by the Co-Registrant. The Registrant
and Co-Registrant paid total commissions and underwriting
discounts equal to $2,110,500 to Jefferies & Company, Inc. in
connection with such transaction. Exemption from the registration
of the Series A Bonds and the guaranty thereof is claimed under
Section 4(2) of the Securities Act and Rule 144A promulgated
thereunder.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
Exhibit
Number Exhibit Description
3.01 Certificate of Incorporation of Panda Funding
Corporation. (1)
3.02 Bylaws of Panda Funding Corporation. (1)
3.03 Specimen of Panda Funding Corporation Common Stock
Certificate. (1)
3.04 Amended and Restated Certificate of Incorporation of
Panda Interfunding Corporation. (1)
3.05 Bylaws of Panda Interfunding Corporation. (1)
3.06 Specimen of Panda Interfunding Corporation Common Stock
Certificate. (1)
4.01 Trust Indenture dated July 31, 1996, among Panda
Funding Corporation, Panda Interfunding Corporation and
Bankers Trust Company, as Trustee. (1)
4.02 First Supplemental Indenture to Trust Indenture, dated
July 31, 1996, among Panda Funding Corporation, Panda
Interfunding Corporation and Bankers Trust Company, as
Trustee. (1)
4.03 Second Supplemental Indenture to Trust Indenture, dated
January 6, 1997, among Panda Funding Corporation, Panda
Interfunding Corporation and Bankers Trust Company, as
Trustee. (2)
4.04 Form of 11-5/8% Pooled Project Bonds, Series A due 2012
of Panda Funding Corporation. (1)
4.05 Form of 11-5/8% Pooled Project Bonds, Series A-1 due
2012 of Panda Funding Corporation. (1)
4.06 Registration Rights Agreement, dated July 31, 1996,
among Panda Funding Corporation, Panda Interfunding
Corporation and Jefferies & Company Inc. (1)
4.07 Collateral Agency Agreement, dated July 31, 1996, among
Panda Interfunding Corporation, Panda Funding
Corporation and Bankers Trust Company, as Trustee and
Collateral Agent. (1)
4.08 Subrogation and Contribution Agreement, dated July 31,
1996, among Panda Interfunding Corporation, Panda
Funding Corporation and Panda Interholding Corporation
and each PIC U.S. Entity that is a signatory thereto.
(1)
4.09 Guaranty Agreement (PIC U.S. Entity Subsidiaries),
dated July 31, 1996 by Panda Interholding Corporation
in favor of Bankers Trust Company, as Collateral Agent
for the benefit of the Secured Parties. (1)
5.00 Legal Opinion of Chadbourne & Parke LLP, counsel for
the Registrant and Co-Registrant. (2)
10.01 PIC Loan Agreement, dated July 31, 1996, between Panda
Funding Corporation, as Lender, and Panda Interfunding
Corporation, as Borrower. (1)
10.02 Loan Agreement, dated July 31, 1996, between Panda
Interfunding Corporation, as Lender, and Panda Cayman
Interfunding Company, as Borrower. (1)
10.03 Promissory Note issued by Panda Interfunding
Corporation on July 31, 1996 to Panda Funding
Corporation in the original principal amount of
$105,525,000, endorsed to Bankers Trust Company, as
Collateral Agent. (1)
10.04 Security Agreement, dated July 31, 1996, between Panda
Interfunding Corporation and Bankers Trust Company, as
Collateral Agent. (1)
10.05 Security Agreement, dated July 31, 1996, between Panda
Funding Corporation and Bankers Trust Company, as
Collateral Agent. (1)
10.06 Security Agreement, dated July 31, 1996, between Panda
Cayman Interfunding Company, as Debtor, and Panda
Interfunding Corporation, as Secured Party. (1)
10.07 Stock Pledge Agreement (Panda Interfunding Corporation
Stock), dated July 31, 1996, between Panda Energy
Corporation and Bankers Trust Company, as Collateral
Agent. (1)
10.08 Stock Pledge Agreement (Panda Funding Corporation and
PIC Entity Stock), dated July 31, 1996, between Panda
Interfunding Corporation and Bankers Trust Company, as
Collateral Agent. (1)
10.09 Trust Indenture dated July 31, 1996, among Panda-
Rosemary Funding Corporation, Panda-Rosemary, L.P. and
Fleet National Bank, As Trustee. (1)
10.10 First Supplemental Indenture to Trust Indenture, dated
July 31, 1996, among Panda-Rosemary Funding
Corporation, Panda-Rosemary, L.P. and Fleet National
Bank, as Trustee. (1)
10.11 Form of 8-5/8% First Mortgage Bonds due 2016 of Panda-
Rosemary Funding Corporation. (1)
10.12 Deposit and Disbursement Agreement, dated July 31,
1996, among Panda-Rosemary Funding Corporation, Panda-
Rosemary, L.P., Fleet National Bank, as Collateral
Agent, and Fleet National Bank, as Depositary Agent.
(1)
10.13 Collateral Agency and Intercreditor Agreement, dated
July 31, 1996, among Panda Rosemary Funding
Corporation, Panda-Rosemary, L.P., The L/C Issuer, The
Trustee Under The Trust Indenture, The Depositary
Agent, The Collateral Agent and The Other Secured
Parties Named therein. (1)
10.14 Deed of Trust and Security Agreement, dated July 31,
1996, by Panda-Rosemary, L.P., Grantor, Ross J. Smyth,
Trustee, and Fleet National Bank, as Collateral Agent,
the Beneficiary. (1)
10.15 Security Agreement, dated July 31, 1996, by Panda-
Rosemary, L.P. to Fleet National Bank, as Collateral
Agent. (1)
10.16 Security Agreement, dated July 31, 1996, by Panda-
Rosemary Funding Corporation to Fleet National Bank, as
Collateral Agent. (1)
10.17 General Partner Pledge and Security Agreement, dated
July 31, 1996, by Panda-Rosemary Corporation to Fleet
National Bank, as Collateral Agent. (1)
10.18 Limited Partner Pledge and Security Agreement, dated
July 31, 1996, by PRC II Corporation to Fleet National
Bank, as Collateral Agent. (1)
10.19 Stock Pledge and Security Agreement, dated July 31,
1996, by Panda Interholding Corporation to Fleet
National Bank, as Collateral Agent. (1)
10.20 Stock Pledge and Security Agreement, dated July 31,
1996, by Panda-Rosemary, L.P. to Fleet National Bank,
as Collateral Agent. (1)
10.21 Partnership Guaranty, dated July 31, 1996, by Panda-
Rosemary, L.P. in favor of Fleet National Bank, as
Trustee. (1)
10.22 Reimbursement Agreement, dated July 31, 1996, between
Panda-Rosemary, L.P., Panda-Rosemary Funding
Corporation and Bayerische Vereinsbank AG, New York
Branch. (1)
10.23 Irrevocable Direct Pay Letter of Credit issued by
Bayerische Vereinsbank AG. (1)
10.24 Construction Loan Agreement and Lease Commitment, dated
March 30, 1996, between Panda-Brandywine, L.P. and
General Electric Capital Corporation. (1)
10.24.1 Participation Agreement, dated December 18, 1996, among
Panda-Brandywine, L.P., Panda Brandywine Corporation,
General Electric Capital Corporation, Fleet National
Bank, First Security Bank, National Association, and
Credit Suisse. (2)
10.24.2 Letter of Credit Reimbursement Agreement, dated
December 18, 1996, among Panda-Brandywine, L.P., Panda
Brandywine Corporation and General Electric Capital
Corporation. (2)
10.24.3 Equity Loan Facility Letter Agreement, dated December
18, 1996, among Panda Brandywine Corporation, Panda
Energy Corporation and General Electric Capital
Corporation. (2)
10.25 Bill of Sale and Severance Agreement, dated December
30, 1996, between Panda-Brandywine, L.P., as Seller,
and Fleet National Bank, Owner Trustee, as Buyer. (2)
10.26 Facility Lease, dated December 18, 1996, between Fleet
National Bank, as Owner Trustee, and Panda-Brandywine,
L.P. (2)
10.27 Steam Lease, dated as of December 18, 1996, between
Panda-Brandywine, L.P. and Brandywine Water Company.
(2)
10.28 Amended and Restated Security Deposit Agreement, dated
December 18, 1996, among Panda-Brandywine, L.P., Panda
Brandywine Corporation, General Electric Capital
Corporation, Fleet National Bank, Credit Suisse and
First Security Bank, National Association. (2)
10.29 Amended and Restated Deed of Trust and Security
Agreement, dated December 18, 1996, by Panda-
Brandywine, L.P. to Chicago Title Insurance Company,
Trustee for the benefit of Fleet National Bank, as
Security Agent, Beneficiary. (2)
10.30 Amended and Restated Steam Lessee Security Agreement,
dated December 18, 1996, by Brandywine Water Company in
favor of Fleet National Bank, as Security Agent. (2)
10.31 Amended and Restated Security Agreement, dated December
18, 1996, by Panda-Brandywine, L.P. in favor of Fleet
National Bank, as Security Agent. (2)
10.32 Amended and Restated Trust Agreement, dated December
18, 1996, between General Electric Capital Corporation,
as Owner Participant, and Fleet National Bank, as Owner
Trustee. (2)
10.33 Amended and Restated General Partner Pledge Agreement,
dated December 18, 1996, by Panda Brandywine
Corporation to Fleet National Bank, as Security Agent.
(2)
10.34 Amended and Restated Limited Partner Pledge Agreement,
dated December 18, 1996, by Panda Energy Corporation
to Fleet National Bank, as Security Agent. (2)
10.35 Amended and Restated Stock Pledge Agreement, dated
December 18, 1996, by Panda Interholding Corporation to
Fleet National Bank, as Security Agent. (2)
10.36 Assumption Agreement and Release, dated July 31, 1996,
by Panda Interholding Corporation in favor of General
Electric Capital Corporation and Fleet National Bank.
(1)
10.37 Power Purchase and Operating Agreement, dated January
24, 1989, between Panda Energy Corporation and Virginia
Electric and Power Company. (1)
10.38 Amendment No. 1 to Power Purchase and Operating
Agreement, dated October 24, 1989, between Panda Energy
Corporation and Virginia Electric and Power Company.
(1)
10.39 Amendment No. 2 to Power Purchase and Operating
Agreement, dated July 30, 1993, between Panda-Rosemary,
L.P. and Virginia Electric and Power Company. (1)
10.40 Fuel Supply Management Agreement, dated October 10,
1990, between Panda-Rosemary Corporation and Natural
Gas Clearinghouse. (1)
10.41 Amendment No. 1 to Fuel Supply Management Agreement,
dated March 5, 1991, between Panda-Rosemary Corporation
and Natural Gas Clearinghouse. (1)
10.42 Gas Purchase Contract, dated April 12, 1990, between
Panda-Rosemary Corporation and Natural Gas
Clearinghouse. (1)
10.43 Amendment of Gas Purchase Contract between Panda-
Rosemary Corporation and Natural Gas Clearinghouse. (1)
10.44 Pipeline Operating Agreement, dated February 14, 1990,
between Panda Energy Corporation, Panda-Rosemary
Corporation and North Carolina Natural Gas Corporation.
(1)
10.45 Amendment No. 1 to Pipeline Operating Agreement, dated
May 7, 1990, between Panda Energy Corporation, Panda-
Rosemary Corporation and North Carolina Natural Gas
Corporation. (1)
10.46 Assignment Agreement, dated June 15, 1990, between
Panda Energy Corporation and Panda-Rosemary
Corporation. (1)
10.47 Amendment No. 2 to Pipeline Operating Agreement, dated
November 19, 1991, among Panda Energy Corporation,
Panda-Rosemary Corporation and North Carolina Natural
Gas Corporation. (1)
10.48 Real Property Lease and Easement Agreement, dated June
9, 1989, between The Bibb Company and Panda-Rosemary
Corporation. (1)
10.49 First Amendment to Real Property Lease and Easement
Agreement, dated October 1, 1989, between The Bibb
Company and Panda-Rosemary Corporation. (1)
10.50 Second Amendment to Real Property Lease and Easement
Agreement, dated January 31, 1990, between The Bibb
Company and Panda-Rosemary Corporation. (1)
10.51 Leasehold and Real Property Assignment and Assumption
Agreement, dated January 6, 1992, between Panda-
Rosemary Corporation and Panda-Rosemary, L.P. (1)
10.52 Third Amendment to Real Property Lease and Easement
Agreement, dated March 15, 1996, between The Bibb
Company and Panda-Rosemary, L.P. (1)
10.53 Cogeneration Energy Supply Agreement, dated January 12,
1989, between Panda Energy Corporation and The Bibb
Company. (1)
10.54 First Amendment to Cogeneration Energy Supply
Agreement, dated October 1, 1989, between Panda Energy
Corporation, Panda-Rosemary Corporation and The Bibb
Company. (1)
10.55 Service Agreement, dated July 26, 1996, between
Transcontinental Gas Pipe Line Corporation and Panda-
Rosemary, L.P. (1)
10.55.1 Form of Amendment to Service Agreement, effective
January 1, 1997, between Transcontinental Gas Pipe Line
Corporation and Panda-Rosemary, L.P. (2)
10.56 Service Agreement Applicable to Transportation of
Natural Gas Under Rate Schedule FT, dated August 20,
1996, between CNG Transmission Corporation and Panda-
Rosemary, L.P. (1)
10.57 Gas Transportation Agreement, dated August 1, 1996,
between Texas Gas Transmission Corporation and Panda-
Rosemary, L.P. (1)
10.58 Assignment and Assumption Agreement, dated May 15,
1989, between Panda Energy Corporation and Panda-
Rosemary Corporation. (1)
10.59 Bill of Sale and Assignment and Assumption Agreement,
dated January 6, 1992, between Panda-Rosemary
Corporation and Panda-Rosemary, L.P. (1)
10.60 Assignment and Assumption Agreement, dated January 6,
1992, between Panda Energy Corporation and Panda-
Rosemary Corporation. (1)
10.61 Power Purchase Agreement, dated August 9, 1991, between
Panda-Brandywine, L.P. and Potomac Electric Power
Company. (1)
10.62 First Amendment to Power Purchase Agreement, dated
September 16, 1994, between Panda-Brandywine, L.P. and
Potomac Electric Power Company. (1)
10.62.1 Present Assignment of Power Purchase Agreement, dated
December 18, 1996, by Panda-Brandywine, L.P. to Fleet
National Bank, as Owner Trustee, for the benefit of
General Electric Capital Corporation, as Owner
Participant. (2)
10.62.2 Amended and Restated Consent and Agreement, dated
December 30, 1996, among Potomac Electric Power
Company, Panda-Brandywine, L.P., Fleet National Bank,
as Security Agent and Owner Trustee, General Electric
Capital Corporation, as the issuer of the Letters of
Credit, the Interest Hedging Counterparty and Owner
Participant, First Security Bank, National
Association, as Indenture Trustee, and Credit Suisse,
as Administrative Agent. (2)
10.63 Amended and Restated Turnkey Cogeneration Facility
Agreement, dated March 30, 1995, between Panda-
Brandywine, L.P. and Raytheon Engineers & Constructors,
Inc. (2)
10.64 Raytheon Parent Guaranty, dated May 18, 1994, between
Raytheon Company and Panda-Brandywine, L.P. (1)
10.65 Steam Sales Agreement, dated March 30, 1995, between
Panda-Brandywine, L.P. and Brandywine Water Company.
(1)
10.66 Gas Sales Agreement, dated March 30, 1995, between
Cogen Development Company and Panda Brandywine, L.P.
(2)
10.67 Precedent Agreement, dated February 25, 1994, between
Columbia Gas Transmission Corporation and Panda-
Brandywine, L.P. (1)
10.68 Amending Agreement, dated March 24, 1995, between
Columbia Gas Transmission Corporation and Panda-
Brandywine, L.P. (1)
10.69 Amended and Restated FTS Service Agreement, dated March
23, 1995, between Columbia Gas Transmission Corporation
and Panda-Brandywine, L.P. (1)
10.70 FTS Service Agreement, dated of as March 30, 1995,
between Cove Point LNG Limited Partnership and Panda-
Brandywine, L.P. (1)
10.71 Gas Transportation and Supply Agreement, dated November
10, 1994, between Panda-Brandywine, L.P. and Washington
Gas Light Company. (1)
10.72 Amended and Restated Site Lease, dated December 18,
1996, between Panda-Brandywine, L.P. and Fleet National
Bank, as Owner Trustee. (2)
10.73 Amended and Restated Site Sublease, dated December 18,
1996, between Fleet National Bank, Owner Trustee, as
Sublessor, and Panda-Brandywine, L.P., as Sublessee .
(2)
10.74 Purchase Agreement, dated July 26, 1996, between Panda
Funding Corporation and Jefferies & Company, Inc. (1)
10.75 Additional Projects Contract, dated July 31, 1996,
among Panda Energy International, Inc., Panda Energy
Corporation, and Panda Interfunding Corporation. (1)
10.76 Non-Petition Agreement, dated July 31, 1996, among
Panda Interfunding Corporation, Panda Interholding
Corporation, Panda-Rosemary Corporation, PRC II
Corporation, Panda-Rosemary Funding Corporation and
Panda-Rosemary, L.P. (1)
10.77 Non-Petition Agreement, dated July 31, 1996, among
Panda Funding Corporation, Panda Interholding
Corporation, Panda Interfunding Corporation and Panda
(Cayman) Interfunding Company. (1)
12.00 Computation of Ratio of Earnings to Fixed Charges. (2)
16.00 Price Waterhouse LLP Letter, dated January 10, 1997,
Regarding Change in Independent Accountants. (2)
21.00 Subsidiaries of Panda Interfunding Corporation. (1)
23.01 Consent of Deloitte & Touche LLP. (2)
23.02 Consent of Chadbourne & Parke LLP (contained in their
Legal Opinion filed as Exhibit 5.00). (2)
23.03 Consent of ICF Resources, Incorporated. (2)
23.04 Consent of Burns & McDonnell Engineering Company, Inc.
(2)
23.05 Consent of Benjamin Schlesinger and Associates, Inc.
(2)
23.06 Consent of Pacific Energy Systems, Inc. (2)
23.07 Consent of C.C. Pace Resources, Inc. (2)
24.00 Powers of Attorney. (1)
25.00 Statement of Eligibility of Trustee under Indenture on
Form T-1. (1)
27.00 Financial Data Schedule. (2)
99.01 Form of Transmittal Letter. (2)
99.02 Form of Notice of Guaranteed Delivery. (2)
(1) Previously filed.
(2) Filed herewith.
(b) Financial Statement Schedules: None.
Item 17. Undertakings
(a) The undersigned Registrant and Co-Registrant
hereby undertake:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
Registration Statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement; and
(iii) to include any material information with respect
to the plan of distribution previously disclosed in the
Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned Registrant and Co-Registrant
hereby undertake that, insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers, and controlling persons of the Registrant
and the Co-Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant and Co-Registrant have been advised
that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant or Co-Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant or
Co-Registrant, as the case may be, in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant and the Co-Registrant will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Pre-Effective
Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Dallas, State of Texas on January 10, 1997.
PANDA FUNDING CORPORATION
(Registrant)
By: /s/ Robert W. Carter
Robert W. Carter, President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Pre-Effective Amendment No. 1 to Registration
Statement has been signed by the following persons in the
capacities indicated on the dates indicated.
Signature Title Date
Chairman of the Board, Chief
/s/Robert W. Carter Executive Officer and President January 10, 1997
Robert W. Carter (Principal Executive Officer)
Senior Vice President and
/s/Marjean Henderson Chief Financial Officer January 10, 1997
Marjean Henderson (Principal Financial and
Accounting Officer)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Co-Registrant has duly caused this Pre-Effective
Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Dallas, State of Texas on January 10, 1997.
PANDA INTERFUNDING CORPORATION
(Co-Registrant)
By: /s/Robert W. Carter
Robert W. Carter, President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Pre-Effective Amendment No. 1 to Registration
Statement has been signed by the following persons in the
capacities indicated on the dates indicated.
Signature Title Date
Chairman of the Board, Chief
/s/Robert W. Carter Executive Officer and President January 10, 1997
Robert W. Carter (Principal Executive Officer)
Senior Vice President and
/s/Marjean Henderson Chief Financial Officer January 10, 1997
Marjean Henderson (Principal Financial and
Accounting Officer)
EXHIBIT 4.03
SECOND SUPPLEMENTAL INDENTURE
dated as of January 6, 1997
to
TRUST INDENTURE
dated as of July 31, 1996
among
PANDA FUNDING CORPORATION,
PANDA INTERFUNDING CORPORATION
and
BANKERS TRUST COMPANY, AS TRUSTEE
SECOND SUPPLEMENTAL INDENTURE, dated as of January 6, 1997
(this "Second Supplemental Indenture"), to the Trust Indenture
dated as of July 31, 1996 (the "Original Indenture") among PANDA
FUNDING CORPORATION, a Delaware corporation ("Panda Funding"),
its executive office and mailing address being at 4100 Spring
Valley Road, Suite 1001, Dallas, Texas 75244, PANDA INTERFUNDING
CORPORATION, a Delaware corporation ("PIC"), its executive office
and mailing address being at 4100 Spring Valley Road, Suite 1001,
Dallas, Texas 75244, and BANKERS TRUST COMPANY, a New York state
banking corporation (the "Trustee"), its corporate trust office
and mailing address being at 4 Albany Street, New York, New York
10006.
WHEREAS, Panda Funding, PIC and the Trustee have heretofore
executed and delivered the Original Indenture to provide for the
issuance by Panda Funding of Bonds (as defined in the Original
Indenture) to be issued in one or more series; and
WHEREAS, Section 12.1 of the Original Indenture provides
that Panda Funding, PIC and the Trustee may enter into indentures
supplemental to the Original Indenture without the consent of the
holders of the Bonds for, among other things, the purpose of
complying with requirements to qualify the Indenture under the
Trust Indenture Act; and
WHEREAS, Panda Funding has requested the Trustee and PIC to
enter into this Second Supplemental Indenture for the purpose of
adding certain provisions to the Original Indenture in connection
with qualifying the Indenture under the Trust Indenture Act;
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE
WITNESSETH:
That, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
AGREEMENT
Section 1.1 Definitions. Terms used herein and not
otherwise defined herein shall have the respective meanings
assigned thereto in the Original Indenture or in Appendix A
thereto. All rules of construction set forth in the Original
Indenture (including Article I of the Original Indenture) shall
apply to this Second Supplemental Indenture.
Section 1.2 Execution of Supplemental Indenture. This
Second Supplemental Indenture is executed and shall be construed
as an indenture supplemental to the Original Indenture and, as
provided in the Original Indenture, this Second Supplemental
Indenture forms a part thereof.
Section 1.3 Concerning the Trustee. The recitals
contained herein shall be taken as the statements of Panda
Funding and PIC and the Trustee assumes no responsibility for the
correctness of same. The Trustee makes no representation as to
the validity or sufficiency of the Second Supplemental Indenture.
Section 1.4 Compliance with Trust Indenture Act.
(a) Section 7.1(c) of the Original Indenture is hereby
amended in its entirety to read as follows:
(c) within 15 days after the time of filing
with the SEC, all reports required to be filed by
Panda Funding or PIC with the SEC under Section 13
or 15(d) of the Exchange Act. In addition, Panda
Funding and PIC shall file with the Trustee and
the SEC and transmit to Holders of Bonds, such
information, documents and other reports, and such
summaries thereof, as may be required pursuant to
the Trust Indenture Act at the times and in the
manner provided pursuant to such Act;
(b) Section 10.1(l) of the Original Indenture is hereby
renamed "Section 10.1(n)".
(c) The following new Sections 10.1(l) and 10.1(m) are
hereby added to the Original Indenture:
(l) The rights of the Holders to communicate
with other Holders with respect to their rights
under this Indenture or under the Bonds, and the
corresponding rights and privileges of the
Trustee, shall be as provided by the Trust
Indenture Act.
(m) Every Holder of Bonds or coupons, by
receiving and holding the same, agrees with Panda
Funding, PIC and the Trustee that neither Panda
Funding, PIC nor the Trustee nor any agent of any
of them shall be held accountable by reason of any
disclosure of information as to names and
addresses of Holders made pursuant to the Trust
Indenture Act and that the Trustee shall not be
held accountable by reason of mailing any material
pursuant to a request under Section 10.1(l).
Section 1.5 Counterparts. This Second Supplemental
Indenture may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, but all
such counterparts shall together constitute but one and the same
instrument.
Section 1.6 GOVERNING LAW. THIS SECOND SUPPLEMENTAL
INDENTURE AND EACH SECOND BOND (INCLUDING THE RELATED PIC
GUARANTY THEREON) CREATED HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICTS OF LAW RULES THEREOF (OTHER THAN
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAWS).
IN WITNESS WHEREOF, the parties have caused this Second
Supplemental Indenture to be duly executed by their respective
officers thereunto duly authorized as of the day and year first
above written.
PANDA FUNDING CORPORATION
By: /s/ William C. Nordlund
William C. Nordlund,
Senior Vice President
and General Counsel
PANDA INTERFUNDING CORPORATION
By: /s/ William C. Nordlund
William C. Nordlund,
Senior Vice President
and General Counsel
BANKERS TRUST COMPANY, AS TRUSTEE
By: /s/ Scott Thiel
Scott Thiel,
Assistant Vice President
EXHIBIT 5.0
January 10, 1997
Panda Funding corporation
Panda Interfunding Corporation
4100 Spring Valley Road
Suite 1001
Dallas, TX 75244
Dear Sirs:
We have acted as counsel for Panda Interfunding Corporation,
a Delaware corporation (the "Company"), and Panda Interfunding
Corporation, a Delaware Corporation, in connection with the
proposed issuance and sale by the Company of up to $105,525,000
in aggregate principal amount of 11 5/8% Pooled Project Bonds,
Series A-1 due 2012 (the "Bonds"), which are being registered
with the Securities and Exchange Commission on Form S-1
(Registration No. 333-14495) under the Securities Act of 1933,
as amended (the "Act"), and Amendment No. 1 thereto which is
proposed to be filed on January 13, 1997 (collectively, the
"Registration Statement"). The Bonds are to be issued pursuant
to a Trust Indenture, dated as of July 31, 1996, among the Company,
Panda Interfunding Corporation and Bankers Trust Company, as trustee,
as amended and supplemented by a First Supplemental Indenture dated
as of July 31, 1996 and a Second Supplemental Indenture dated as of
January 6, 1997 (such Indenture, together with such Supplemental
Indentures, the "Indenture"), and are to be exchanged for the
Company's 11 5/8% Pooled Project Bonds, Series A due 2012 (the
"Old Bonds").
As such counsel, we have examined originals or copies
certified or otherwise identified to our satisfaction of the
Certificate of Incorporation and By-Laws of the Company, as
amended to the date hereof, the Indenture and resolutions
adopted by the Company's Board of Directors in connection
with the authorization, registration, issuance and sale of
the Bonds. We also have examined originals, or copies
certified or otherwise identified to our satisfaction, of
such corporate records of the Company and other instruments,
certificates of appropriate public officials and
certificates of officers and representatives of the Company,
and other documents as we have deemed necessary as a basis
for the opinions hereinafter expressed. In such
examination, we have assumed the authenticity of all
documents submitted to us as originals, the conformity with
the originals of all documents submitted to us as copies,
the genuineness of all signatures and the legal capacity of
natural persons.
On the basis of the foregoing, we are of the opinion
that, when the Registration Statement with respect to the
Bonds filed pursuant to the Act has become effective under
the Act, the Indenture has been qualified under the Trust
Indenture Act of 1939, as amended, and the Bonds have been
duly executed, authenticated and delivered in exchange for
the Old Bonds, the Bonds will be legally and validly issued
and will constitute the valid and binding obligations of the
Company.
We are members of the bar of the State of New York and
with your approval do not herein express any opinion as to
any matters governed by any law other than the laws of the
State of New York, the General Corporation Law of the State
of Delaware and the federal laws of the United States.
We hereby consent to the filling of this opninion as an
exhibit to the Registration Statement and to the reference made
to this firm under the capiton "Legal Matters" in the
prospectus constituting part of the Registration Statement.
Very truly yours,
/s/ Chadbourne & Parke LLP
PARTICIPATION AGREEMENT
Dated as of December 18, 1996
among
PANDA-BRANDYWINE, L.P.,
as Lessee,
PANDA BRANDYWINE CORPORATION,
as General Partner,
GENERAL ELECTRIC CAPITAL CORPORATION,
as Owner Participant,
FLEET NATIONAL BANK,
as Owner Trustee and Security Agent,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Indenture Trustee,
CREDIT SUISSE,
as Administrative Agent,
and
THE OTHER ENTITIES LISTED ON SCHEDULE I HERETO,
as Loan Participants
(Leveraged Lease Financing of a
230 MW Natural Gas-Fired Qualifying Cogeneration Facility
located in Brandywine, Maryland)
TABLE OF CONTENTS
Page
Section 1. DEFINITIONS 3
1.1 Defined Terms 3
1.2 Other Definitional Provisions 3
Section 2. CERTAIN ACTIONS 4
2.1 Participation in Purchase Price 4
2.2 Actions by the Owner Participant on the
Lease Closing Date 4
2.3 Application of the Purchase Price;
Termination of Construction Loan 4
2.4 Lease of Facility 5
2.5 Time and Place of Closing 5
2.6 Concurrent Transactions 5
Section 3. REPRESENTATIONS AND WARRANTIES OF THE
PARTNERSHIP AND GENERAL PARTNER 5
3.1 Financial Statements 5
3.2 Partnership Existence and Business;
Partners 6
3.3 Compliance With Law 6
3.4 Power and Authorization; Enforceable
Obligations 6
3.5 Governmental Actions and Other Consents
and Approvals 8
3.6 No Legal Bar 9
3.7 No Proceeding or Litigation 10
3.8 No Default or Event of Loss 10
3.9 Ownership of Property; Liens 10
3.10 Taxes 10
3.11 Federal Regulations 11
3.12 ERISA 11
3.13 Investment Company Act; etc. 11
3.14 Collateral Security Documents; Lease
Documents 11
3.15 Full Disclosure 12
3.16 Property Rights, Utilities, etc 12
3.17 Compliance with Building Codes, Zoning
Laws, etc. 13
3.18 Principal Place of Business, etc. 13
3.19 Description of Property 13
3.20 Public Utility Status 13
3.21 Material Agreement and Licenses 14
3.22 Sufficiency of Project Documents 15
3.23 Representations and Warranties 15
3.24 Location of Site 15
3.25 Environmental Matters 15
3.26 Fuel Supply 19
3.27 Qualifying Facility 19
Section 4. OTHER PARTIES' REPRESENTATIONS, WARRANTIES
AND COVENANTS 19
4.1 Representations and Warranties of Loan
Participants and Owner Participant 19
(a) Loan Participants 19
(b) Owner Participant 20
4.2 Representations, Warranties and Covenants
of Owner Participant 20
(a) Representations, Warranties and
Covenants 20
(b) Lessor's Liens 22
(c) Reimbursement 23
(d) Assignment of Interests of Owner
Participant 23
(e) Actions with Respect to Lessor's
Estate, Etc. 25
4.3 Representations, Covenants and Warranties
of the Owner Trustee 25
(a) 25
(b) Lessor's Liens 27
(c) Indemnity for Lessor's Liens 27
(d) Securities Act 27
(e) Public Utility Status 27
(f) Defaults 28
4.4 Representations, Warranties and Covenants
of the Indenture Trustee 28
4.5 ERISA Representations of the Loan Participants;
Agreement of Loan Participants 29
4.6 Indenture Trustee's Notice of Default 29
4.7 [Intentionally Left Blank] 30
4.8 Covenant of Quiet Enjoyment 30
4.9 Survival of Representations, Warranties
and Covenants 30
4.10 Indebtedness of Owner Trustee 30
4.11 Compliance with Trust Agreement 30
Section 5. CONDITIONS PRECEDENT 31
5.1 Conditions Precedent to Obligations of
Owner Participant and the Loan Participants 31
(a) Substantial Completion 31
(b) Closing Notice; Certificate of
Lessor's Cost 31
(c) Lease Documents and Amended and
Restated Agreements 31
(d) Legal Opinions 32
(e) Title 33
(f) Requirements under the Power Purchase
Agreement 34
(g) Operating Budget 34
(h) Title Insurance; Survey 34
(i) Authorizing Actions 34
(j) Filings and Recordings 35
(k) Insurance Coverage 35
(l) Governmental Actions and Other
Consents and Approvals 36
(m) Qualifying Facility 36
(n) No Change in Law 36
(o) No Material Adverse Change, etc. 36
(p) Representations and Warranties 36
(q) No Default or Event of Default; Event
of Loss; Event of Regulation 37
(r) No Force Majeure, Cancellation,
Suspension, Termination, etc. 37
(s) Tax Opinion 37
(t) Lien Searches 37
(u) Appraisal 38
(v) Project Costs 38
(w) Experts' Report 38
(x) Reserve Account 38
(y) Working Capital 38
(z) Transfer and Recordation Taxes 38
(aa) Payment of Project Costs 38
(bb) Distilled Water Facility Business Plan 38
(cc) Fuel Management Plan 38
(dd) Loan Certificates 39
5.2 Conditions Precedent to the Obligations
of the Partnership 39
(a) Lease Documents 39
(b) No Change in Law 39
Section 6. AFFIRMATIVE COVENANTS OF THE PARTNERSHIP 39
6.1 [Intentionally Left Blank] 39
6.2 Conduct of Business, Maintenance of
Existence, etc. 39
6.3 Payment of Obligations 40
6.4 Performance Under Other Agreements 40
6.5 General Partner 40
6.6 Insurance Coverage 40
6.7 Inspection of Property; Books and
Records; Independent Engineer; Discussions 45
6.8 Compliance With Laws 45
6.9 Financial Statements 45
6.10 Certificates; Other Information 47
6.11 Taxes 49
6.12 Maintenance of Property 49
6.13 Notices 50
6.14 Assignments of Additional Project
Documents; Maintenance of Liens of the
Collateral Security Documents; Future
Mortgages 52
6.15 Annual Opinion of Counsel 53
6.16 Employee Plans 53
6.17 Management Letters 53
6.18 [Intentionally Left Blank.] 54
6.19 [Intentionally Left Blank.] 54
6.20 [Intentionally Left Blank.] 54
6.21 Easements 54
6.22 [Intentionally Left Blank.] 54
6.23 Further Assurances 54
6.24 Storage of Materials 54
6.25 Hazardous Substances 55
6.26 [Intentionally Left Blank.] 55
6.27 Distilled Water Facility Business Plan 55
6.28 Fuel Management Plan 55
6.29 [Intentionally Left Blank.]
6.30 Qualifying Facility Status Certificates 56
6.31 Final Completion 56
6.32 Additional Oil Requirement 56
6.33 LNG Reserve 57
6.34 [Intentionally Left Blank 57
6.35 Fuel Oil Arrangements 57
6.36 Operation and Maintenance Agreement 57
6.37 Noise Study 58
6.38 Operating Permits 58
6.39 Reaffirmations of Consents to Assignment 58
Section 7. NEGATIVE COVENANTS OF THE PARTNERSHIP 58
7.1 Merger, Sale of Assets, Purchases, etc 59
7.2 Indebtedness 59
7.3 Distributions, etc 59
7.4 Liens 60
7.5 Nature of Business 60
7.6 Amendment of Contracts, etc 60
7.7 Investments 61
7.8 Qualifying Facility 61
7.9 Leases 61
7.10 Change of Office 62
7.11 Change of Name 62
7.12 Compliance With ERISA 62
7.13 Transactions With Affiliates and Others 62
7.14 Acceptance of Facility 62
7.15 [Intentionally Left Blank.]
7.16 Approval of Additional Project Documents 63
7.17 Alteration of the Site or Project 63
7.18 [Intentionally Left Blank.] 63
7.19 Capital Expenditures 63
7.20 Hazardous Substances and Compliance with
Environmental Law 63
7.21 Sale of Electricity 64
7.22 O&M Letter of Credit 64
7.23 Intentionally Left Blank 64
7.24 Washington Gas Balancing 64
7.25 Capacity Releases 64
Section 8. INDEMNITIES 65
8.1 General Indemnity 65
8.2 General Tax Indemnity 67
8.3 Contests 70
8.4 Payments 72
8.5 Reports 72
Section 9. SUCCESSOR OWNER TRUSTEE 73
9.1 Appointment of Successor Owner Trustee 73
(a) Resignation and Removal 73
(b) Condition to Appointment 73
Section 10. LIABILITIES AND INTERESTS OF THE OWNER
PARTICIPANT AND THE LOAN PARTICIPANTS 74
10.1 Liabilities of the Owner Participant and
Loan Participants 74
10.2 Interest of Holders of Loan Certificates 75
Section 11. REFINANCING 75
11.1 Refinancing 75
Section 12. THE ADMINISTRATIVE AGENT 76
12.1 Appointment of Administrative Agent, Etc 76
Section 13. MISCELLANEOUS 76
13.1 Amendments and Waivers 76
13.2 Notices 76
13.3 [Intentionally Left Blank.] 77
13.4 Survival 78
13.5 Transaction Costs 78
13.6 Successors and Assigns 79
13.7 Severability 79
13.8 Headings 79
13.9 Counterparts 79
13.10 GOVERNING LAW 79
13.11 SUBMISSION TO JURISDICTION; WAIVERS 79
13.12 Limitation of Liability 80
13.13 Certain Limitations on Reorganization. 81
13.14 Personal Property 82
13.15 Special Exculpation 82
13.16 No Proceedings 82
13.17 Certain Rights of Power Purchaser 83
13.18 Rights of Owner Participant 83
13.19 Adjustments 83
ANNEX A Definitions
SCHEDULES
Schedule I Loan Participants and Commitments
Schedule II The Administrative Agent
Schedule 1 Intentionally Left Blank
Schedule 2 Governmental Actions
Schedule 3 Recordings and Filings
Schedule 4 Operating Projections
Schedule 5 Environmental Matters
Schedule 6 Basic Rent Factors and Stipulated Loss Value
Schedule 7 Fuel Management Plan
Schedule 8 Distilled Water Facility Business Plan
Schedule 9 Refinancing/Leverage Option Adjustment
Schedule 10 Assumptions
Schedule 11 Description of the Site
EXHIBITS
Exhibit A Form of Assignment
Exhibit B Form of Consent
Exhibit C Form of Lease Closing Notice
Exhibit D Form of Certificate of Lessor's Cost
Exhibit E Form of Final Completion Certificate
Exhibit F Form of Bill of Sale and Severance Agreement
Exhibit G Form of Present Assignment
Exhibit H Form of Reimbursement Agreement
Exhibit I Form of Trust Indenture and Security Agreement
Exhibit J Form of Facility Lease
Exhibit K Form of Tax Indemnity Agreement
Exhibit L Form of Steam Lease
Exhibit M Form of Amended and Restated General Partner
Pledge Agreement
Exhibit N Form of Amended and Restated Limited Partner
Pledge Agreement
Exhibit O Form of Amended and Restated Security
Agreement
Exhibit P Form of Amended and Restated Steam Lessee
Security Agreement
Exhibit Q Form of Amended and Restated Stock Pledge
Agreement
Exhibit R Form of Amended and Restated Ascending
Letter of Credit Pledge Agreement
Exhibit S Form of Amended and Restated Security
Deposit Agreement
Exhibit T Form of Amended and Restated Deed of Trust and
Security Agreement
Exhibit U Intentionally Left Blank
Exhibit V-1 Form of Opinion of Chadbourne & Parke
Exhibit V-2 Form of Opinion of Gibbs & Haller
Exhibit V-3 Form of Opinion of Venable Baetjer, Howard &
Civiletti
Exhibit V-4 Form of Opinion of Shipman & Goodwin
Exhibit V-5 Form of Opinion of Ray, Quinney & Nebeker
Exhibit V-6A Form of Opinion of Internal Counsel to Owner
Participant
Exhibit V-6B Form of Opinion of Simpson Thacher & Bartlett
Exhibit V-7 Form of Opinion of Piper & Marbury
Exhibit W Intentionally Left Blank
Exhibit X Intentionally Left Blank
Exhibit Y Form of Amended and Restated Site Lease
Exhibit Z Form of Amended and Restated Site Sublease
Exhibit AA Form of Amended and Restated Trust Agreement
Exhibit BB Form of Reaffirmation
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (this "Agreement") dated as of
December 18, 1996, among PANDA-BRANDYWINE, L.P., a limited
partnership organized under the laws of Delaware (the "Lessee" or
the "Partnership"); PANDA BRANDYWINE CORPORATION, a Delaware
corporation, and the sole general partner of the Partnership (the
"General Partner"); GENERAL ELECTRIC CAPITAL CORPORATION, a New
York corporation in its individual capacity ("GE Capital") and as
Owner Participant (the "Owner Participant"); FLEET NATIONAL BANK
(formerly known as Shawmut Bank Connecticut, National Association),
a national banking association, not in its individual capacity but
solely as owner trustee (in such capacity, the "Owner Trustee")
under the Trust Agreement (as defined below) and as security agent
(the "Security Agent") under the Security Deposit Agreement (as
defined below); FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity but solely as
indenture trustee (in such capacity, the "Indenture Trustee") under
the Indenture (as defined below); CREDIT SUISSE, a bank organized and
existing under the laws of Switzerland, acting by and through its New York
branch ("Credit Suisse"), as administrative agent for the Loan
Participants (in such capacity, the "Administrative Agent"); and
the ENTITIES LISTED ON SCHEDULE I HERETO as "Loan Participants".
W I T N E S S E T H :
WHEREAS, the Partnership, the General Partner and GE
Capital entered into the Construction Loan Agreement and Lease
Commitment dated as of March 30, 1995 (the "Construction Loan
Agreement") pursuant to which GE Capital (i) provided
construction financing for the Project (as defined below) and
(ii) issued the Letters of Credit as collateral security for
certain obligations of the Partnership under the Power Purchase
Agreement (as defined below);
WHEREAS, the Partnership and the Security Agent, for
the benefit of GE Capital and the Owner Trustee, entered into the
Deed of Trust and Security Agreement, the Security Agreement and
the other Collateral Security Documents to which the Partnership
is a party to secure the payment and performance by the
Partnership of all of its obligations to GE Capital and the Owner
Trustee;
WHEREAS, the Owner Trustee and the Partnership entered
into the Site Lease pursuant to which the Owner Trustee leased
the Site from the Partnership;
WHEREAS, the Owner Trustee and the Partnership entered
into the Site Sublease pursuant to which the Owner Trustee
subleased the Site back to the Partnership;
WHEREAS, Panda Energy Corporation, a Delaware
corporation and the sole limited partner of the Partnership (the
"Limited Partner") entered into the Limited Partner Pledge
Agreement providing for the collateral assignment by the Limited
Partner to the Security Agent of its interest in the Partnership
to secure its and the Partnership's obligations to GE Capital and
the Owner Trustee;
WHEREAS, the General Partner entered into the General
Partner Pledge Agreement providing for the collateral assignment
by the General Partner to the Security Agent of its interest in
the Partnership to secure its and the Partnership's obligations
to GE Capital and the Owner Trustee;
WHEREAS, Panda Interholding Corporation, a Delaware
corporation ("Holdings"), entered into the Stock Pledge
Agreement, as amended, providing for the collateral assignment by
Holdings to the Security Agent of the capital stock of the
General Partner and the Limited Partner to secure the obligations
of the Partnership to GE Capital and the Owner Trustee;
WHEREAS, the Partnership, the General Partner, GE
Capital, the Owner Participant, the Owner Trustee and the
Security Agent entered into the Security Deposit Agreement to,
among other things, establish accounts for the receipt of Project
Revenues and to provide for the payment of the obligations of the
Partnership to GE Capital and the Owner Trustee;
WHEREAS, the construction of the Facility has been
substantially completed and the Date of Substantial Completion
has occurred;
WHEREAS, the Partnership has requested that the Owner
Participant cause the Owner Trustee to purchase the Facility from
the Partnership and lease the same to the Partnership as provided
in the Construction Loan Agreement;
WHEREAS, the Partnership and the Owner Trustee are
entering into the Facility Lease and the other Lease Documents
pursuant to which, among other things, the Owner Trustee will
lease the Facility to the Partnership;
WHEREAS, the Partnership and GE Capital are entering
into the Reimbursement Agreement to provide for the continued
issuance by GE Capital to the Power Purchaser of the PEPCO
Letters of Credit;
WHEREAS, the Owner Participant has elected to fund the
Facility Lease with non-recourse indebtedness as a leveraged
lease pursuant to Section 5.8 of the Construction Loan Agreement
and, in connection therewith, on the Lease Closing Date (i) each
Loan Participant will participate in the debt financing of a
portion of the Owner Trustee's payment of the Purchase Price for
the Facility, as hereafter described and (ii) the Owner
Participant will participate in the Owner Trustee's payment of
the Purchase Price by making an equity investment in the Owner
Trustee, as hereafter described, (iii) the Partnership has
directed that the Purchase Price for the Facility be paid to GE
Capital as repayment for the loans made by it under the
Construction Loan Agreement and (iv) Owner Trustee has subjected
the Project Documents, the Site, the Facility, and all the Trust
Estate to the mortgage, security interest and assignment created
by the Indenture; and
WHEREAS, in order to set forth the rights and
obligations of the Owner Participant, the Owner Trustee, the
Partnership, the Loan Participants, the Administrative Agent,
the Indenture Trustee and the other parties hereto in connection
with the foregoing transactions and to describe and provide for
the transactions contemplated hereby, (i) the parties hereto are
entering into this Participation Agreement, (ii) the Owner
Trustee and the Indenture Trustee are entering into the
Indenture, (iii) certain of the Lessee Security Documents are
being amended and restated pursuant to the Amended and Restated
Agreements and (iv) the Construction Loan Agreement is being
terminated.
NOW, THEREFORE, it is agreed:
Section 1. DEFINITIONS
1.1 Defined Terms. Capitalized terms used in this
Agreement shall, unless otherwise defined herein, have the
respective meanings assigned thereto in Annex A.
1.2 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have
the defined meanings when used herein or in any certificate or
other document made or delivered pursuant hereto.
(b) As used herein and in any certificate or other
document made or delivered pursuant hereto, accounting terms not
defined in Annex A, and accounting terms partly defined in
Annex A, to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and section, schedule and exhibit references
are to this Agreement unless otherwise specified.
(d) Any term defined by reference to an agreement,
instrument or other document shall have the meaning so assigned
to it whether or not such agreement, instrument or document is in
effect.
Section 2. CERTAIN ACTIONS
2.1 Participation in Purchase Price. Subject to the
terms and conditions of this Agreement, on the Lease Closing
Date, (i) each Loan Participant agrees severally and not jointly
to participate in the debt financing of a portion of the Owner
Trustee's payment of the Purchase Price by making a loan to the
Owner Trustee, repayable in an amount equal to that percentage of
the Purchase Price set forth opposite such Loan Participant's
name on Schedule I hereto (each such amount a "Commitment");
provided, however, that GFC's obligation to make a loan to the
Owner Trustee shall be at GFC's option and, in the event GFC
elects not to make funds available to the Owner Trustee, Credit
Suisse shall make such funds available, (ii) the Owner
Participant agrees to participate in the Owner Trustee's payment
of the Purchase Price by making an investment in the beneficial
ownership of the Lessor's Estate in an amount equal to that
percentage of the Purchase Price set forth opposite the Owner
Participant's name on Schedule I hereto, (iii) pursuant to the
Bill of Sale, the Partnership shall sell the Facility to the
Owner Trustee and (iv) pursuant to the Indenture, the Owner
Trustee shall create a security interest in and assign to
Indenture Trustee, for the benefit of the Loan Participants, all
of the properties held in trust by the Owner Trustee under the
Trust Agreement as security for its obligations to the Loan
Participants.
2.2 Actions by the Owner Participant on the Lease
Closing Date. Subject to the terms and conditions of this
Agreement, on the Lease Closing Date, the Owner Participant shall
(a) cause the Owner Trustee to pay the Purchase Price to the
Partnership in the manner set forth in subsection 2.3 below, (b)
cause the Owner Trustee to execute and deliver the Facility
Lease, the Indenture, the Amended and Restated Agreements, the
Loan Certificates and the other Lease Documents to which it is or
is to be a party and (c) enter into, and cause the Owner Trustee
to enter into, the Financing Documents to which it is a party.
2.3 Application of the Purchase Price; Termination of
Construction Loan. The Partnership hereby directs that the
Purchase Price payable to it pursuant to the Bill of Sale be paid
directly to GE Capital at its address set forth in the
Construction Loan Agreement to discharge the principal amount of
and accrued interest on the loans made to the Partnership
thereunder and any other payments due to GE Capital under the
Construction Loan Agreement. Upon such payment, and the
execution and delivery by the Partnership of the Reimbursement
Agreement simultaneously therewith, the Construction Loan
Agreement shall terminate and duly executed instruments of
discharge shall be delivered to the Administrative Agent on the
Lease Closing Date.
2.4 Lease of Facility. On the Lease Closing Date, the
Owner Trustee and the Partnership will enter into the Facility
Lease pursuant to which the Owner Trustee will lease to the
Partnership and the Partnership will lease from the Owner
Trustee, subject to all of the terms and conditions hereof and of
the Facility Lease, the Facility for the Basic Term, and subject
to the exercise by the Partnership of its renewal option as
provided in Sections 12 and 13 of the Facility Lease, for one or
more renewal terms.
2.5 Time and Place of Closing. The transactions
contemplated to occur on the Lease Closing Date shall take place
at the offices of Simpson Thacher & Bartlett, 425 Lexington
Avenue, New York, New York 10017, or at such other place as the
parties hereto may agree. The Lease Closing Date specified in
the Lease Closing Notice may be adjourned from time to time as
the parties hereto may agree.
2.6 Concurrent Transactions. All of the transactions
which are to occur on the Lease Closing Date in accordance with
the terms of the Transaction Documents shall be deemed to occur
simultaneously and no such transaction shall be deemed to have
been completed until all such transactions have been completed.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE
PARTNERSHIP AND GENERAL PARTNER
Each of the Partnership and the General Partner
represents and warrants to the Owner Participant, each Loan
Participant, the Owner Trustee, the Administrative Agent, the
Indenture Trustee and the Security Agent that, as of the Lease
Closing Date:
3.1 Financial Statements. Since the respective dates
of the balance sheets of the Partnership, the General Partner and
PEII delivered on September 30, 1996 (copies of which have been
furnished to each Loan Participant), no material adverse change
has occurred in (i) the financial condition of the Partnership,
the General Partner or PEII, (ii) the properties, business,
prospects, operations or financial condition of the Partnership,
the General Partner, PEII or the Project, or (iii) the
Partnership's ability to perform its obligations under this
Agreement, the Reimbursement Agreement, the Facility Lease and
the other Transaction Documents to which it is a party or will
become a party. Such balance sheets are complete and correct in
all material respects.
3.2 Partnership Existence and Business; Partners.
(a) The Partnership is a limited partnership duly organized
and validly existing under the laws of the State of Delaware and is
duly qualified to do business in the States of Delaware and
Maryland, the only jurisdictions in which the conduct of its
business or the ownership or lease of its assets requires such
qualification. The Certificate of Limited Partnership of the
Partnership has been duly filed in the office of the Secretary of
State of Delaware and no other filing, recording, publishing or
other act is necessary or appropriate in connection with the
existence or the business of the Partnership except those which
have been duly made or performed. Prior to the date hereof, the
Partnership has engaged in no business other than the development
of the Project, and the negotiation, execution, delivery and
performance of the Development Loan Agreement, the Construction
Loan Agreement, the documents related thereto and the Transaction
Documents to which it is a party or will become a party, and the
Partnership has no obligations or liabilities other than those
directly related to the conduct of such business. The
Partnership is and will be engaged solely in the business of,
leasing and operating the Project and activities reasonably
incidental thereto.
(b) Each of the General Partner and the Limited
Partner is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware, the
General Partner is duly qualified to do business and is in good
standing in the State of Maryland and each of the General Partner
and the Limited Partner is qualified to do business in each other
jurisdiction in which the nature of its business requires it to
be so qualified. The General Partner is the sole general partner
of the Partnership, and is engaged solely in the business of
being the general partner of the Partnership. The Limited
Partner is the sole limited partner of the Partnership, and is
engaged solely in the business of being the limited partner of
the Partnership.
(c) The only partners of the Partnership are the
General Partner, as the sole general partner, and the Limited
Partner as the sole limited partner.
(d) None of the Partnership, the General Partner nor
the Limited Partner has any Subsidiaries.
3.3 Compliance With Law. Each of the Partnership and
the General Partner is in compliance with all Applicable Laws
except to the extent that the failure to comply therewith would
not, in the aggregate, have a Material Adverse Effect.
3.4 Power and Authorization; Enforceable Obligations.
(a) The Partnership has full power and authority and the
legal right to hold under lease and operate the Project, to conduct
its business as now conducted and as proposed to be conducted by it,
to execute, deliver and perform this Agreement, the Reimbursement
Agreement, the Facility Lease, the Collateral Security Documents,
the other Financing Documents and the Project Documents to which
it is or is to become a party, to take all action as may be
necessary to complete the transactions contemplated hereunder and
thereunder and to grant the liens and security interests provided
for in the Collateral Security Documents to which it is a party
and to borrow under the Reimbursement Agreement. The Partnership
has taken all necessary partnership and legal action to authorize
the borrowings under the Reimbursement Agreement and to take the
other actions contemplated by the terms of this Agreement, the
Reimbursement Agreement, the Facility Lease, and the other
Transaction Documents to which it is a party, to grant the liens
and security interests provided for in the Collateral Security
Documents to which it is a party and to authorize the execution,
delivery and performance of this Agreement, the Reimbursement
Agreement, the Facility Lease, the other Financing Documents and
the Project Documents to which it is a party or is to become a
party. No consent or authorization of, filing with, or other act
by or in respect of any other Person is required in connection
with the borrowings under the Reimbursement Agreement or with the
execution, delivery or performance by the Partnership or the
validity or enforceability as to the Partnership of this
Agreement, the Reimbursement Agreement, the Facility Lease, the
other Financing Documents or the Project Documents except the
Governmental Actions and other consents and approvals referred to
in Section 3.5. Each of this Agreement and the other Transaction
Documents to which the Partnership is a party has been duly
executed and delivered by the Partnership and constitutes, and
each of the other Transaction Documents to which the Partnership
is to become a party will, upon execution and delivery thereof by
the Partnership and the other parties thereto (if any),
constitute, a legal, valid and binding obligation of the
Partnership enforceable against the Partnership in accordance
with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and by
general principles of equity. None of the Project Documents to
which the Partnership is a party has been amended or modified
except for amendments or modifications, including all change
orders under the Construction Contract, that have been delivered
to the Owner Participant and the Administrative Agent, and all
such Project Documents are in full force and effect.
(b) Each of the General Partner and the Limited
Partner has full power and authority and the legal right to own
its properties and to conduct its business as now conducted and
proposed to be conducted by it, to execute, deliver and perform
the Transaction Documents to which it is or is to become a party,
to take all action as may be necessary to complete the
transactions contemplated thereunder, and, in the case of the
General Partner, to act as the general partner of the
Partnership. Each of the General Partner and the Limited Partner
has taken all necessary corporate action to authorize the
execution, delivery and performance of the Transaction Documents
to which it is or is to become a party. No consent or
authorization of, filing with, or other act by or in respect of
any other Person (including any stockholder of the General
Partner or the Limited Partner) is required in connection with
the execution, delivery or performance by the General Partner or
the Limited Partner, or the validity or enforceability as to the
General Partner or the Limited Partner, of the Transaction
Documents to which it is a party or is to become a party except
the Governmental Actions and other consents and approvals
referred to in Section 3.5. Each of the Transaction Documents to
which the General Partner or the Limited Partner is a party has
been duly executed and delivered by the General Partner or the
Limited Partner, as the case may be, and constitutes, and each of
the other Transaction Documents to which the General Partner or
the Limited Partner is to become a party will upon execution and
delivery thereof by the General Partner or the Limited Partner,
as the case may be, and the other parties thereto (if any),
constitute, a legal, valid and binding obligation of the General
Partner or the Limited Partner, as the case may be, enforceable
against the General Partner or the Limited Partner, as the case
may be, in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights
of creditors generally and by general principles of equity.
(c) The Partnership Agreement has been duly
authorized, executed and delivered by each of the Partners and
constitutes a legal, valid and binding obligation of each of the
Partners enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the rights of creditors generally and by general principles of
equity.
3.5 Governmental Actions and Other Consents and
Approvals. No Governmental Actions or other consents or
approvals are required in connection with (a) the participation
by the Partnership or the Partners in the transactions
contemplated by this Agreement and the other Transaction
Documents, (b) the construction, use, ownership, lease or
operation of the Project in accordance with the applicable
provisions of the Transaction Documents and in compliance with
all applicable Environmental Laws, (c) the validity and
enforceability of this Agreement, the Reimbursement Agreement,
the Facility Lease, the Power Purchase Agreement, the Gas
Contracts and the other Transaction Documents, (d) the use of the
Fuel for operation of the Facility, (e) the grant by the
Partnership, the Partners and Holdings or the Owner Trustee of
the Liens created pursuant to the Collateral Security Documents
and the validity and enforceability thereof and the perfection of
and the exercise by the Security Agent or the Indenture Trustee
of their respective rights and remedies thereunder or (f) the
participation by GE Capital, the Owner Participant, the Loan
Participants, the Administrative Agent, the Indenture Trustee,
the Security Agent or the Owner Trustee in the transactions
contemplated by this Agreement, the Reimbursement Agreement, the
Lease Documents and the other Transaction Documents (other than
any Governmental Actions under any law, rule or regulation of (or
administered by) any federal or state regulatory body primarily
responsible for regulating the activities of such party) to which
either is a party, except in each case for those Governmental
Actions and other consents and approvals which are set forth in
Schedule 2. Each of the Governmental Actions and other consents
and approvals listed in Part A of Schedule 2 has, as of the Lease
Closing Date, been duly obtained or made, is in full force and
effect, is final and is not subject to appeal or judicial,
governmental or other review. The Partnership reasonably
believes that each of the Governmental Actions and other consents
and approvals listed in Part B of Schedule 2 will be duly
obtained or made on or prior to the date required therefor in
Schedule 2, will be in full force and effect, will be final and
will not then be subject to appeal or judicial, governmental or
other review. The Partnership has no reason to believe that any
of the Governmental Actions and other consents and approvals
listed in Part B of Schedule 2 cannot or will not be obtained or
made in the normal course of business as and when required
hereunder. There is no (i) action, suit, investigation or
proceeding pending, or to the best knowledge of the Partnership
or the General Partner, threatened, against the Partnership, any
Participant or the Project, (ii) condition that could reasonably
be expected to result in an action, suit, investigation or
proceeding referred to in clause (i) above, nor (iii) any other
action, suit, investigation or proceeding not involving the
Partnership, any Participant or the Project, that, in the case of
clause (i) or (ii), could result in (or, in the case of clause
(iii), could reasonably be expected to result in) the
modification, rescission, termination, or suspension of any
Governmental Action referred to in Schedule 2 obtained prior to
the date this representation is made or deemed made.
3.6 No Legal Bar. The execution, delivery and
performance of this Agreement, the Reimbursement Agreement, the
Facility Lease and the other Transaction Documents (i) will not
violate any Applicable Law applicable to, or any Contractual
Obligation of, the Partnership, the General Partner or the
Limited Partner or any Affiliate of any thereof, (ii) will not
result in, or require, the creation or imposition of any Lien on
any of the properties or revenues of the Partnership or the
General Partner pursuant to any Applicable Law or Contractual
Obligation, except for Permitted Liens, (iii) will not violate
any provision of the Certificate of Limited Partnership of the
Partnership or the Partnership Agreement of the Partnership or
the Certificate of Incorporation or Bylaws of the General Partner
or the Limited Partner, or any other organizational documents of
the Partnership, the General Partner or the Limited Partner.
3.7 No Proceeding or Litigation. No litigation,
investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the best knowledge of
the Partnership, threatened against or affecting the Partnership
or the General Partner or against or affecting any of their
respective properties, rights, revenues or assets, or the
Project, which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
3.8 No Default or Event of Loss. Neither the
Partnership nor the General Partner is in default in any material
respect under or with respect to any Contractual Obligation,
including without limitation, any Transaction Document; and no
notice of default has been given to the Partnership or the
General Partner under any of the Project Documents. To the best
knowledge of the Partnership and the General Partner, no other
party to a Project Document is in default thereunder. No Event
of Loss has occurred and no Event of Regulation has occurred.
3.9 Ownership of Property; Liens. The Partnership has
good, marketable and indefeasible title to the Site and all other
Collateral purported to be owned by it, in each case free and
clear of all Liens except Permitted Liens. No mortgage or
financing statement or other instrument or recordation covering
all or any part of the Collateral which has been executed by, or
with the permission of, the Partnership or the General Partner is
on file in any recording office, except as such has been filed in
favor of GE Capital, the Owner Trustee, the Indenture Trustee or
the Security Agent (and the Memorandum of Agreement, as amended,
filed in favor of the Power Purchaser in the Registry of Deeds).
3.10 Taxes.
(a) Each of the Partnership and the General Partner has
filed or caused to be filed all tax returns which are required to be
filed by it, and has paid or caused to be paid all taxes shown to be
due and payable on such returns (and such amounts thereon adequately
reflect the respective tax liability of the Partnership and the General
Partner) or on any assessments made against it or any of its property
and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority, except taxes, fees and other
charges arising after the date hereof which are subject to a Contest.
(b) Except for (i) transfer taxes and registration,
recordation and other fees and taxes payable in connection with
the recordation of the Deed of Trust and Security Agreement on
the Initial Loan Closing Date and the filing of financing
statements required to perfect the Security Agent's and the
Indenture Trustee's rights under the Collateral Security
Documents, all of which taxes and fees will have been paid in
full by the Partnership on or before the Lease Closing Date, and
(ii) income, capital, receipts or franchise taxes imposed with
respect to the Owner Participant or any Loan Participant (or the
Owner Trustee or the Security Agent) by the federal government or
the jurisdiction in which the Owner Participant or such Loan
Participant (or the Owner Trustee or the Security Agent) is
organized or in which an office of the Owner Participant, such
Loan Participant (or the Owner Trustee or the Security Agent) is
located or any political subdivision or taxing authority thereof
or therein, neither the execution and delivery of this Agreement,
the Facility Lease, the Reimbursement Agreement or any other
Financing Document, nor the consummation of any of the
transactions contemplated hereby or thereby, will result in any
tax, levy, impost, duty, charge or withholding imposed by the
United States or any agency or taxing authority thereof, or by
the State of Delaware or any political subdivision or taxing
authority thereof or therein, on or with respect to such
execution, delivery or consummation, or upon or with respect to
the Owner Participant, any Loan Participant, the Owner Trustee,
the Indenture Trustee or the Security Agent.
3.11 Federal Regulations. Neither the Partnership nor
the General Partner is engaged or will engage in the business of
extending credit for the purpose of "purchasing" or "carrying"
any "margin stock" within the respective meanings of each of the
quoted terms under Regulations G, U and X of the Board of
Governors of the Federal Reserve System as now and from time to
time hereafter in effect.
3.12 ERISA. The Partnership is not in violation of
applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to any Plan. Neither the
Partnership nor the General Partner maintains, or is required
under ERISA to maintain, any Plan.
3.13 Investment Company Act; etc. None of the
Partnership, the General Partner, the Limited Partner, Panda or
Holdings is (i) an "investment company" or a company "controlled"
by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended, (ii) subject to regulation under
the Holding Company Act as a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of either a
"holding company" or a "subsidiary company" of a "holding
company", or (iii) subject to any other Law which purports to
restrict or regulate its ability to borrow money.
3.14 Collateral Security Documents; Lease Documents.
The Collateral Security Documents are effective to create, in
favor of the Security Agent, for the benefit of the Owner Trustee
(and, by collateral assignment, the Indenture Trustee) and
GE Capital, and in favor of the Indenture Trustee, for the
benefit of the Loan Participants, legal, valid and enforceable
liens on and security interests in all right, title, estate and
interest of the Partnership, the Partners, Holdings, the Steam
Host, or the Owner Trustee, as the case may be, in and to the
Collateral and the liens and security interests created by each
of the Collateral Security Documents constitute perfected first
liens on and prior perfected security interests in all right,
title, estate and interest of the Partnership, the Partners,
Holdings, the Steam Host, or the Owner Trustee (except to the
extent discussed in the opinions of counsel delivered in
connection herewith), as the case may be, in and to the
Collateral described therein prior and superior to all other
Liens, existing or future, except Permitted Liens. The
recordings and filings shown on Part A of Schedule 3 are all the
recordings, filings and other action necessary and appropriate to
establish, protect and perfect (except to the extent discussed in
the opinions of counsel delivered in connection herewith) the
Security Agent's Lien on and security interest in and to the
Collateral for the benefit of the Owner Trustee (and, by
collateral assignment, the Indenture Trustee) and GE Capital and
the Indenture Trustee's Lien on and security interest in and to
the Collateral for the benefit of the Loan Participants.
3.15 Full Disclosure. No representation, warranty or
other statement made by the Partnership or the General Partner in
any Project Document or in any certificate, written statement or
other document furnished to the Owner Participant or any Loan
Participant or the Independent Engineer by or on behalf of the
Partnership, or the General Partner, contains, at the time made,
any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which they
were made, and at the time so made, not misleading, unless such
misstatement or omission has been corrected or disclosed to the
Owner Participant and the Administrative Agent prior to the Lease
Closing Date. There is neither any fact known to the Partnership
or the General Partner which it has not disclosed to the Owner
Participant and the Loan Participants in writing prior to the
Lease Closing Date nor any Contractual Obligation which
materially adversely affects, or which could reasonably be
expected in the future to affect, materially and adversely, the
Project or the properties, business, prospects, operations or
financial condition of the Partnership or the General Partner or
the ability of the Partnership or the General Partner to perform
its obligations under any Transaction Document to which it is or
is to become a party. The Operating Projections were prepared by
the Partnership in good faith based on reasonable assumptions
consistently applied.
3.16 Property Rights, Utilities, etc. All utility
services, means of transportation, facilities and other materials
that can reasonably be expected to be necessary for the
construction and operation of the Facility (including, without
limitation, gas, electrical, water and sewage services and
facilities) are available to the Facility and, to the extent
appropriate, arrangements have been made on commercially
reasonable terms for such services, means of transportation,
facilities and other materials.
3.17 Compliance with Building Codes, Zoning Laws,
etc. The Project is in all material respects in compliance with
all applicable zoning, environmental protection, use and building
codes, laws, regulations and ordinances. The Partnership has no
knowledge of any material violations of any laws, ordinances,
codes, requirements or orders of any Governmental Authority
affecting the Project.
3.18 Principal Place of Business, etc. The principal
place of business and chief executive office of each of the
Partnership and the General Partner and the office where each of
the Partnership and the General Partner keeps its records
concerning the Project and all contracts relating thereto is
located at 4100 Spring Valley, Suite 1001, Dallas, Texas 75244;
provided that certain records concerning the Project and certain
contracts relating thereto are kept at the Partnership's office
at the Site.
3.19 Description of Property. The descriptions set
forth in the Deed of Trust and Security Agreement of the Site,
the Easements and the Facility are true and accurate in all
material respects, and are adequate for the purpose of
establishing, preserving, protecting and perfecting the interests
and rights, and the first priority of the Liens (subject only to
Permitted Liens), intended to be created and provided in such
property by the Deed of Trust and Security Agreement.
3.20 Public Utility Status.
(a) As long as the Facility is a Qualifying Facility,
neither the Partnership nor the General Partner nor the Limited
Partner will, solely by reason of (i) the ownership, leasing,
operation or maintenance of the Project by the Partnership (including
operation or maintenance by an agent of the Partnership) or (ii) any
other transaction contemplated by this Agreement or any other of the
Transaction Documents, be: (i) subject to regulation under Part
II or III of the Federal Power Act, except for Sections 202(c),
210, 211, 212, 213, 214 and 305(c) of the Federal Power Act (16
U.S.C. Ss. 824a(c), 824i, 824j, 824k, 824l, 824m and 825d(c),
respectively) and the enforcement provisions of Part III of the
Federal Power Act relating thereto; (ii) an "electric utility
company" for purposes of the Holding Company Act; (iii) subject
to state law or regulation respecting the rates of electric
utilities or state law or regulation respecting the financial and
organizational regulation of electric utilities (except for state
law or regulation implementing Subpart C of 18 C.F.R. Part 292);
or (iv) subject to regulation as a "steam heating company" under
Article 78, Public Service Commission Law, of the Annotated Code
of Maryland.
(b) As long as the Facility is a Qualifying Facility,
none of the Owner Trustee, the Owner Participant, the Indenture
Trustee, Administrative Agent, the Security Agent, any Loan
Participant or any Affiliate of any thereof will be a Public
Utility solely by reason of (i) the ownership, leasing, operation
or maintenance of the Project by the Partnership (including
operation or maintenance by an agent of the Partnership), (ii)
the securing of the Lessee Obligations, Special Lessee
Obligations or the Owner Trustee Obligations by Liens on the
Collateral, (iii) the Owner Trustee's ownership of the Facility
or (iv) any other transaction contemplated by this Agreement, the
Facility Lease, or any other Transaction Document (other than any
transaction described in Section 3.20(c) hereof).
(c) None of the Owner Trustee, the Security Agent,
Administrative Agent, any Loan Participant, the Owner
Participant, the Indenture Trustee or any Affiliate of any
thereof will, solely by reason of any such party's ownership or
operation of the Project upon the exercise of remedies under the
Collateral Security Documents or by reason of any transaction
contemplated by this Agreement or the other Transaction
Documents, be: (i) subject to regulation under Part II or III of
the Federal Power Act, except for Sections 202(c), 210, 211, 212,
213, 214 and 305(c) of the Federal Power Act (16 U.S.C. Ss.
824a(c), 824i, 824j, 824k, 824l, 824m and 825d(c), respectively)
and the enforcement provisions of Part III of the Federal Power
Act relating thereto; (ii) an "electric utility company" for
purposes of the Holding Company Act; (iii) subject to state law
or regulation respecting the rates of electric utilities or state
law or regulation respecting the financial and organizational
regulation of electric utilities (except for state law or
regulation implementing Subpart C of 18 C.F.R. Part 292); or (iv)
subject to regulation as a "steam heating company" under Article
78, Public Service Commission Law, of the Annotated Code of
Maryland; provided, that (x) (as a result of any transaction
other than the transactions contemplated by the Transaction
Documents) none of the Owner Trustee, the Security Agent,
Administrative Agent, any Loan Participant, the Indenture Trustee
or the Owner Participant or any such Affiliate owning or
operating the Project is for purposes of the PURPA Regulations an
"electric utility" or an "electric utility holding company" or a
wholly or partially-owned direct or indirect subsidiary of an
"electric utility" or "electric utility holding company" and (y)
the Facility is operated in compliance with the requirements set
forth in the PURPA Regulations for the Facility to be a
Qualifying Facility.
3.21 Material Agreement and Licenses. No licenses,
trademarks, patents or agreements with respect to the usage of
technology (other than any thereof which have been obtained and
are in full force and effect and have been assigned to the
Security Agent) are necessary for the construction, ownership,
operation and maintenance of the Project.
3.22 Sufficiency of Project Documents. The services
to be performed, the materials to be supplied and the leasehold
and other property interests, license agreement(s), easement(s)
and other rights granted pursuant to the Project Documents and
the Easement Agreements:
(a) comprise substantially all of the services,
materials and property interests required for the
acquisition, development, construction, installation,
completion, operation and maintenance of the Project in
accordance with all Applicable Laws and the Project
Documents; and
(b) provide adequate ingress and egress from the Site
for any reasonable purpose in connection with the
construction, operation and maintenance of the Facility
(including, without limitation, access for transportation of
Fuel and water to, and electricity, water and steam from,
the Site).
There are no services, materials or rights required for the
construction, operation or maintenance of the Facility in
accordance with the Project Documents, other than (x) those
granted by or to be provided by or on behalf of the Partnership
pursuant to the Project Documents or (y) those that can
reasonably be expected to be commercially available at the Site
when required.
3.23 Representations and Warranties. The
representations and warranties of the Reporting Participants
contained in the Transaction Documents other than this Agreement
are true and correct, and the Partnership and the General Partner
hereby confirm each such representation and warranty with the
same effect as if set forth in full herein.
3.24 Location of Site. Except as disclosed in
Schedule 8, the Site and the Easements do not lie within an area
of "special flood hazard" as that term is defined in 44 Code of
Federal Regulations Section 59.1.
3.25 Environmental Matters. (a) Except as disclosed
in Schedule 5 or in the Environmental Audit on or prior to the
execution and delivery of this Agreement:
(i) no Environmental Proceeding, notice,
notification, demand, request for information, citation,
summons or order has been issued, no complaint has been
filed, no penalty has been assessed, and to the actual or
constructive knowledge of the Partnership, no investigation
or review is pending or threatened by any Governmental
Authority or other Person:
(A) with respect to any violation or alleged
violation of any Environmental Law in connection with
the property, operations or conduct of business of the
Partnership or of the Project; or
(B) with respect to any failure to have any
Governmental Action relating to Hazardous Substances or
any Environmental Law required in connection with the
property, operations or conduct of the business of the
Partnership or of the Project in violation of any
Environmental Law; or
(C) with respect to the presence, use,
handling generation, treatment, storage, recycling,
transportation, emission, spill, leak, seepage,
discharge, release, threatened release or disposal of
any Hazardous Substance generated by the operations or
business of the Partnership or the Project or located
on, under or at any property of the Partnership or the
Project.
(ii) neither the Partnership nor the businesses
conducted by the Partnership has committed any material
violation of any applicable Environmental Law or engaged in
any conduct which would give rise to any material liability
to the Project, any Participant, the Owner Trustee, the
Owner Participant, the Indenture Trustee, the Administrative
Agent or any Loan Participant under any applicable
Environmental Law and there are no circumstances which could
reasonably be expected to prevent or interfere with material
compliance by the Partnership or the Project with any
applicable Environmental Law in the future;
(iii) no Person has committed any violation of any
applicable Environmental Law or engaged in any conduct which
would give rise to any material liability to the
Partnership, any Participant, the Owner Trustee, the
Administrative Agent, the Owner Participant, the Indenture
Trustee or any Loan Participant or the Project under any
applicable Environmental Law while owning, operating,
leasing or occupying the Project;
(iv) neither the Partnership nor the businesses
conducted by the Partnership, nor any other Person, has
placed, held, located, released or disposed of any Hazardous
Substance on, under or at any property now or previously
owned, operated, leased, occupied or otherwise used by the
Partnership (including the Project) in such quantities or
conditions so as to require any material investigation,
study, sampling, testing, removal, response, remediation or
other action of any kind which has not yet been taken, or
result in any material liability to the Partnership, any
Participant, the Owner Participant, the Indenture Trustee,
the Administrative Agent, the Owner Trustee, any Loan
Participant or the Project under any applicable
Environmental Law and none of such properties has been used
by the Partnership, or any other Person, as a site for the
material dumping or other disposal of any kind of any
Hazardous Substance or in material violation of any
applicable Law or Environmental Law, including, without
limitation, any such law relating to use of a property as a
storage site (whether permanent or temporary) for any
Hazardous Substance;
(v) no Hazardous Substance is or has been present
at any property now or previously owned, operated, leased,
occupied or otherwise used by the Partnership (including the
Project) in such quantities or conditions so as to require
any material investigation, study, sampling, testing,
removal, response, remediation or other material action of
any kind which has not yet been taken or result in any
material liability to the Partnership, any Participant, the
Owner Participant, the Indenture Trustee, the Administrative
Agent, the Owner Trustee, any Loan Participant or the
Project under any applicable Environmental Law;
(vi) there are no underground storage tanks,
active or abandoned or removed, which have been used to
store or have contained any Hazardous Substance at any
property now or previously owned, operated, leased or
occupied by the Partnership (including the Project);
(vii) no Hazardous Substance has been released at,
on or under any property now or previously owned, operated,
leased, occupied or otherwise used by the Partnership
(including the Project) in such quantities or conditions so
as to require any material investigation, study, sampling,
testing, removal, response, remediation or other material
action of any kind which has not yet been taken or result in
any material liability to the Partnership, any Participant,
the Owner Participant, the Indenture Trustee, the
Administrative Agent, the Owner Trustee, any Loan
Participant or the Project under any applicable
Environmental Law; and
(viii) no Hazardous Substance is present in a
reportable or threshold planning quantity, where such a
quantity has been established by Applicable Law as a
quantity sufficient to require any reporting or notification
to any Governmental Authority, investigation, study,
sampling, testing, removal, response, remediation or other
action of any kind at, or result in any material liability
to the Partnership, any Participant, the Owner Participant,
the Indenture Trustee, the Administrative Agent, the Owner
Trustee, any Loan Participant or the Project under any
applicable Environmental Law, on or under any property now
or previously owned, operated, leased, occupied or otherwise
used by the Partnership (including the Project).
(b) Neither the Partnership nor any business conducted
by it has generated, transported, disposed or arranged for the
transportation or disposal (directly or indirectly) of any
Hazardous Substance to any location which is listed or proposed
for listing under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") National
Priorities List ("NPL"), the Comprehensive Environment Response,
Compensation and Liability Information System ("CERCLIS") or any
similar state list or which is the subject of federal, state or
local enforcement actions or other investigations or to any other
location or in any manner that could result in material liability
to the Partnership under any applicable Environmental Law.
(c) No property now or previously owned, operated,
leased, occupied or otherwise used by the Partnership (including
the Project) is listed or, to the knowledge of the Partnership,
proposed for listing on the NPL promulgated pursuant to CERCLA,
or CERCLIS, or any similar state list of sites requiring
investigation or cleanup, nor does the Partnership know of any
facts or circumstances which would support any such listing of
any such property.
(d) There are no environmental liens on the
Partnership's interest in any property owned or leased by the
Partnership (including the Project) and the Partnership has not
received any written notice of any actions taken by any
Governmental Authority which could subject any of such properties
to such liens.
(e) Notwithstanding the foregoing, the disclosure, if
any, in any Environmental Audit of any fact or circumstance which
would render any of the foregoing representations untrue shall
not otherwise relieve the Partnership of its obligations under
Sections 6.24, 6.25 and 7.20.
(f) The Partnership has not assumed, contractually or
by operation of Law (other than pursuant to Subsection 16.1(c) of
the Power Purchase Agreement, in connection with the transfer to
PEPCO of the Transmission Facilities and the Partnership's rights
in the Transmission Facilities Site pursuant to Section 7.3(a)(v)
of the Power Purchase Agreement, in connection with the transfer
of the Effluent Pipeline to Charles County, Maryland, and
pursuant to certain of the other Project Documents), any
liabilities or obligations under any Environmental Law.
(g) There are no past or present actions, activities,
events, conditions or circumstances relating to the Partnership,
the Site or the Project, including without limitation the
release, threatened release, emission, discharge, generation,
treatment, storage or disposal of Hazardous Substances, that
could give rise to any material liability under any Environmental
Law or any contract or agreement.
3.26 Fuel Supply. The amount and quality of natural
gas which the Gas Supplier is obligated to deliver to the
Facility pursuant to the Gas Supply Contract satisfy the
requirements of Subsection 11.2 of the Power Purchase Agreement
and are sufficient to permit the operation of the Facility in
accordance with the obligations of the Partnership under the
Power Purchase Agreement for a period of at least 15 years.
3.27 Qualifying Facility. On August 4, 1995 FERC
issued an order in Docket No. QF94-31-003, 72 FERC 62,087
(1995) (the "QF Certification Order") granting the Partnership's
application filed on June 20, 1995 (the "QF Certification
Application") for recertification of the Facility as a Qualifying
Facility, and the QF Certification Order is in full force and
effect and is not the subject of any pending or, to the
Partnership's knowledge, threatened administrative or judicial
proceedings. The Facility, when constructed, owned and operated
in the manner contemplated by the Transaction Documents, the QF
Certification Order and the QF Certification Application, will be
a Qualifying Facility and will be eligible for the benefit of the
exemptions provided by 18 C.F.R. 292.601(c), 292.602(b) and
292.602(c). The manner in which the QF Certification Order and
the QF Certification Application contemplate that the Facility
will be constructed, owned and operated does not differ in any
material respect from the manner in which the Transaction
Documents contemplate that the Facility will be constructed,
owned and operated, including without limitation, the Owner
Trustee's ownership of the Facility as contemplated hereby.
The Partnership and the General Partner shall make (or
be deemed to have made) the representations and warranties set
forth in this Section 3 as of the Lease Closing Date and on the
Date of Final Completion.
Section 4. OTHER PARTIES' REPRESENTATIONS, WARRANTIES
AND COVENANTS
4.1 Representations and Warranties of Loan
Participants and Owner Participant. (a) Loan Participants. (i)
Each of the Loan Participants (other than Credit Suisse)
represents and warrants that each Loan Certificate to be acquired
by it pursuant to this Agreement and the Indenture is being
acquired by it for its own account or as trustee, custodian,
agent or investment manager for other institutional investors in
the ordinary course of its business and not with a view to any
resale or distribution; provided, however, that the disposition
by any Loan Participant of its Loan Certificates shall at all
times be within its control. Subject to this Section 4.1(a) and
Section 2.7 of the Indenture, each Loan Participant may assign
any of its Loan Certificates.
(ii) In addition to the assignments and
participations permitted under the foregoing provisions of this
Section 4.1(a) and Section 2.7 of the Indenture, any Loan
Participant may assign and pledge all or a portion of its Loan
Certificates to any Federal Reserve Bank as collateral security
pursuant to Regulation A of the Board of Governors of the Federal
Reserve System and any operating circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning
Loan Participant from its obligations hereunder.
(iii) Anything in this Section 4.1(a) to the
contrary notwithstanding, no Loan Participant may assign or
participate any interest in any Loan Certificate held by it to
the Lessee, the Owner Participant or any of their respective
Affiliates without the prior written consent of the Owner
Participant and the Administrative Agent.
(iv) Credit Suisse agrees that during the initial
syndication of the Loan Certificates, if any, it intends to
assign Loan Certificates to prospective Loan Participants such
that each Loan Participant shall have a minimum hold of at least
$10,000,000.
(b) Owner Participant. The Owner Participant
represents and warrants that its interest in the Lessor's Estate
and the Trust Agreement is being acquired by it for its own
account and not with a view to resale or distribution thereof;
provided, however, that the disposition by the Owner Participant
of its interest in the Lessor's Estate and the Trust Agreement
shall, subject to the terms and provisions of Section 4.2(d)
hereof, at all times be within its control and the foregoing
representation shall not limit the Owner Participant's right to
transfer or sell such interests pursuant to the terms of this
Agreement. The Owner Participant further represents and warrants
that neither it nor anyone authorized to act on its behalf has
made or will make any offer, solicitation or sale of the Loan
Certificates or any interest in the Lessor's Estate or the Trust
Agreement in violation of the provisions of Section 5 of the
Securities Act of 1933, as amended.
4.2 Representations, Warranties and Covenants of Owner
Participant. (a) Representations, Warranties and Covenants. In
addition to and without limiting its other representations and
warranties provided for in this Section 4, the Owner Participant
represents and warrants that:
(i) it is a corporation duly incorporated and
validly existing in good standing under the laws of the
State of New York and it has full corporate power, authority
and legal right to carry on its present business and
operations, to own or lease its properties and to enter into
and to carry out the transactions contemplated by this
Agreement and the other Transaction Documents to which it is
or is to be a party;
(ii) the execution, delivery and performance by it
of this Agreement and the other Transaction Documents to
which it is or is to be a party have been duly authorized by
all necessary corporate action on its part and do not
require any governmental approvals that would be required to
be obtained by the Owner Participant;
(iii) neither the execution, delivery or
performance by the Owner Participant of this Agreement or
any other Transaction Document to which it is or is to be a
party nor compliance with the terms and provisions hereof or
thereof, conflicts or will conflict with or results or will
result in a breach or violation of any of the terms,
conditions or provisions of, or will require any consent or
approval under any law, governmental rule or regulation
applicable to the Owner Participant or the charter
documents, as amended, or bylaws, as amended, of the Owner
Participant or any order, writ, injunction or decree of any
court or governmental authority against the Owner
Participant or by which it or any of its properties is bound
or any indenture, mortgage or contract or other agreement or
instrument to which the Owner Participant is a party or by
which it or any of its properties is bound, or constitutes
or will constitute a default thereunder or results or will
result in the imposition of any Lien upon any of its
properties;
(iv) this Agreement and the other Transaction
Documents to which it is or is to be a party have been or on
the Lease Closing Date will be duly executed and delivered
by the Owner Participant and constitute or on the Lease
Closing Date will constitute the legal, valid and binding
obligations of the Owner Participant enforceable against it
in accordance with their terms except as such enforceability
may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws or equitable principles
of general application to or affecting the enforcement of
creditors' rights (regardless of whether enforceability is
considered in a proceeding in equity or at law);
(v) it is not in default under any mortgage, deed
of trust, indenture, lease or other instrument or agreement
to which the Owner Participant is a party or by which it or
any of its properties may be bound, or in violation of any
applicable law, which default or violation would have a
material adverse effect on the financial condition, business
or operations of the Owner Participant or an adverse effect
on the ability of the Owner Participant to perform its
obligations under this Agreement and the other Transaction
Documents to which it is or is to be a party;
(vi) there are no pending or, to the knowledge of
the Owner Participant, threatened actions, suits,
investigations or proceedings against the Owner Participant
before any court, administrative agency or tribunal which
are expected to materially adversely affect the ability of
the Owner Participant to perform its obligations under any
of the Transaction Documents to which it is or is to be a
party, and the Owner Participant knows of no pending or
threatened actions or proceedings before any court,
administrative agency or tribunal involving it in connection
with the transactions contemplated by the Transaction
Documents;
(vii) neither the execution and delivery by it of
this Agreement, the other Transaction Documents to which it
is or is to be a party nor the performance of its
obligations hereunder or thereunder requires the consent or
approval of or the giving of notice to, the registration
with, or the taking of any other action in respect of, any
governmental authority or agency that would be required to
be obtained or taken by the Owner Participant except for
filings contemplated by this Agreement;
(viii) no part of the funds to be used by it to
acquire the interests to be acquired by the Owner
Participant under this Agreement constitutes assets (within
the meaning of ERISA and any applicable rules and
regulations) of any employee benefit plan subject to Title I
of ERISA or of any plan or individual retirement account
subject to Section 4975 of the Code;
(ix) it has a consolidated net worth of not less
than $50,000,000; and
(b) Lessor's Liens. The Owner Participant
further represents, warrants and covenants that there are no
Lessor's Liens attributable to it (or an Affiliate thereof)
against, on or with respect to the Facility or the Lessor's
Estate or the Trust Estate, and that there will not be any
Lessor's Lien attributable to it (or an Affiliate thereof)
against, on or with respect to the Facility or the Lessor's
Estate or the Trust Estate attributable to it (or an
Affiliate thereof) on the Lease Closing Date. The Owner
Participant agrees with and for the benefit of the Lessee,
the Owner Trustee, the Indenture Trustee, the Administrative
Agent and the Loan Participants that Owner Participant will,
at its own cost and expense, take such action as may be
necessary (by bonding or otherwise, so long as neither the
Lessee's operation and use of the Facility nor the validity
and priority of the Lien of the Indenture is impaired) to
duly discharge and satisfy in full, promptly after the same
first becomes known to the Owner Participant, any Lessor's
Lien against, on or with respect to the Facility or the
Lessor's Estate or the Trust Estate attributable to the
Owner Participant (or an Affiliate thereof); provided,
however, that the Owner Participant shall not be required to
discharge or satisfy such Lessor's Lien which is being
contested by the Owner Participant in good faith and by
appropriate proceedings so long as such proceedings do not
involve any material danger of the sale, forfeiture or loss
of the Facility or the Lessor's Estate or the Trust
Indenture Estate or any interest in any thereof, do not
impair the Lessee's operation and use of the Facility or
otherwise materially adversely affect the validity or
priority of the Lien of the Indenture. The Owner
Participant further agrees that it will take such action as
is necessary to cause the Owner Trustee to comply with its
obligations under Sections 4.3(b) and 4.3(c) of this
Agreement and Section 3.11 of the Indenture.
(c) Reimbursement. Without limiting any other rights
the parties hereto may have as a result of any breach by the
Owner Participant of its obligations in Section 4.2(b) hereof,
the Owner Participant agrees to reimburse each other party hereto
for all reasonable legal fees and expenses of counsel that may be
incurred by any such party as a result of the failure of the
Owner Participant to comply with its obligations in Section
4.2(b) hereof.
(d) Assignment of Interests of Owner Participant. The
Owner Participant may at any time, subject to the conditions set
forth in this Section 4.2(d), assign, convey or otherwise
transfer (i) to an Affiliate thereof, all of the Owner
Participant Interest or (ii) to one or more institutional
investors all or part of the Owner Participant Interest; provided
that the Owner Participant gives the Lessee and the Indenture
Trustee written notice of such assignment, conveyance or other
transfer within 5 Business Days of the occurrence thereof; and
provided further that the Owner Participant shall remain liable
for all obligations of the Owner Participant under the Trust
Agreement and the other Financing Documents to which the Owner
Participant is a party to the extent (but only to the extent)
relating to the period on or before the date of such transfer and
provided that the transferee agrees to assume primary liability
for all obligations as an Owner Participant under the Trust
Agreement and the other Financing Documents to which such Owner
Participant is a party relating to the period after the date of
transfer; and provided further that (unless a Lease Default or
Lease Event of Default shall have occurred and be continuing) the
Lessee's consent shall be required to the extent any such
transferee which is not a financial institution shall then be in
an adversarial business relationship with the Lessee (it being
understood that being a competitor of the Lessee alone shall not
be deemed to constitute such an adversarial relationship). Any
such transferee shall (a) be (i) a bank, savings institution,
finance company, leasing company or trust company, national
banking association acting for its own account or in a fiduciary
capacity as Trustee or agent under any pension, retirement,
profit sharing or similar trust or fund, insurance company,
fraternal benefit society or corporation acting for its own
account having a combined capital and surplus (or, if applicable,
consolidated net worth or its equivalent) of not less than
$50,000,000, (ii) a subsidiary of any Person described in clause
(i) where such Person provides (A) support for the obligations
assumed by such transferee subsidiary reasonably satisfactory to
the Lessee, the Owner Trustee and the Indenture Trustee or (B) an
unconditional guaranty of such transferee subsidiary's
obligations, or (iii) an Affiliate of the transferring Owner
Participant, so long as such Affiliate has a combined capital and
surplus (or, if applicable, consolidated net worth or its
equivalent) of not less than $50,000,000, (b) be legally capable
of binding itself to the obligations of the Owner Participant and
shall expressly agree to assume all obligations of the Owner
Participant under the Trust Agreement and this Agreement and (c)
provide representations substantially similar to those contained
in Section 4.2(a) hereof. In the event of any such assignment,
conveyance or transfer, the transferee shall become a party to
the Trust Agreement and shall agree to be bound by all the terms
of and will undertake all of the obligations of the Owner
Participant contained in the Trust Agreement and the other
Financing Documents. A transferee hereunder shall not be, and in
acquiring the Owner Participant Interest shall not use the assets
of, an employee benefit plan subject to Title I of ERISA or an
individual retirement account or a plan subject to Section 4975
of the Code. The Owner Trustee and the Security Agent shall not
be on notice of or otherwise bound by any such assignment,
conveyance or transfer unless and until it shall have received an
executed counterpart of the instrument of such assignment,
conveyance or transfer. Upon any such disposition by the Owner
Participant to a transferee as above provided, the transferee
shall be deemed the "Owner Participant" for all purposes of the
Transaction Documents, and shall be deemed to have made all the
payments previously made by its transferor and to have acquired
the same interest in the Lessor's Estate as theretofore held by
its transferor; and each reference therein to the "Owner
Participant" shall thereafter be deemed a reference to such
transferee. The Lessee agrees that it will reasonably cooperate
with the Owner Participant (at the expense of the Owner
Participant, except in the case of a transfer while a Lease Event
of Default or an Event of Regulation (other than a Special QF
Loss Event) shall have occurred, which shall be at the expense of
the Lessee) in effecting an assignment of the Owner Participant's
interests including, without limitation, providing letters to any
successor Owner Participant permitting such successor Owner
Participant to rely on any opinions provided by the Lessee on the
Lease Closing Date. Notwithstanding anything contained in this
Section 4.2(d) to the contrary, the Owner Participant shall
remain liable for the obligations of the Owner Participant set
forth in the last sentence of Section 4.2(b) if such transferee
is not a Highly Qualified Transferee at the time of such
transfer.
(e) Actions with Respect to Lessor's Estate, Etc. The
Owner Participant agrees that it will not take any action to
subject the Lessor's Estate or the trust established by the Trust
Agreement, as debtor, to the reorganization or liquidation
provisions of the Bankruptcy Code or any other applicable
bankruptcy or insolvency statute.
4.3 Representations, Covenants and Warranties of the
Owner Trustee. (a) In addition to and without limiting its
other representations and warranties provided for in this Section
4, the Owner Trustee represents and warrants, in its individual
capacity with respect to items (i), (ii), (iii)(A), (iv), (v) and
(vi) below, and as the Owner Trustee with respect to items
(iii)(B) and (iv) that:
(i) it is a national banking association duly
organized and validly existing in good standing under the
laws of the United States of America with its principal
corporate trust office located at 777 Main Street, Hartford,
Connecticut 06115 and its chief executive office (as such
terms are used in Article 9 of the Uniform Commercial Code)
located at One Federal Street, Boston, Massachusetts 02211
and has full corporate power and authority, in its
individual capacity or (assuming the Trust Agreement has
been duly authorized, executed and delivered by the Owner
Participant) as the Owner Trustee, as the case may be, to
carry on its business as now conducted, and to execute,
deliver and perform the Transaction Documents to which it is
or is to be a party;
(ii) the execution, delivery and performance by
the Owner Trustee, either in its individual capacity or as
the Owner Trustee, as the case may be, of the Transaction
Documents to which it is or is to be party have been duly
authorized by all necessary corporate action on its part,
and do not contravene its certificate of incorporation or
by-laws; each of this Agreement and the other Transaction
Documents to which it is or is to be a party has been duly
authorized, executed and delivered by the Owner Trustee,
either in its individual capacity or as the Owner Trustee,
as the case may be, and neither the execution and delivery
thereof nor the Owner Trustee's performance of or compliance
with any of the terms and provisions thereof will violate
any Federal, Connecticut or Massachusetts law or regulation
governing its banking or trust powers;
(iii) (A) assuming due authorization, execution
and delivery by each other party thereto, each of the
Transaction Documents to which it is or is to be party when
duly executed and delivered will, to the extent each such
document is entered into by the Owner Trustee in its
individual capacity, constitute the legal, valid and binding
obligation of the Owner Trustee in its individual capacity
enforceable against it in such capacity in accordance with
its respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or other
similar laws or equitable principles of general application
to or affecting the enforcement of creditors' rights
(regardless of whether enforceability is considered in a
proceeding in equity or at law), and the performance by the
Owner Trustee in its individual capacity of any of its
obligations thereunder does not contravene any lease,
regulation or contractual restriction binding on the Owner
Trustee in its individual capacity;
(B) assuming due authorization, execution and delivery
by each other party thereto, if any, each of this Agreement,
the Facility Lease, the Indenture, the Loan Certificates,
and each of the other Transaction Documents to which it is
or is to be party when duly executed and delivered will, to
the extent each such document is entered into by the Owner
Trustee in its trust capacity, constitute the legal, valid
and binding obligation of the Owner Trustee enforceable
against it in such capacity in accordance with its
respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or other
similar laws or equitable principles of general application
to or affecting the enforcement of creditors' rights
(regardless of whether enforceability is considered in a
proceeding in equity or at law), and the performance by the
Owner Trustee of any of its obligations thereunder does not
contravene any lease, regulation or contractual restriction
binding on the Owner Trustee;
(iv) there are no pending or, to its knowledge,
threatened actions or proceedings against the Owner Trustee
before any court or administrative agency which would
materially and adversely affect the ability of the Owner
Trustee, either in its individual capacity or as the Owner
Trustee, as the case may be, to perform its obligations
under the Transaction Documents to which it is or is to be a
party;
(v) it shall use its best efforts to give the
Lessee, the Indenture Trustee, the Administrative Agent and
the Owner Participant at least thirty (30) days' prior
written notice in the event of any change in its chief
executive office or name and, in any event, shall notify
such parties of such change within thirty (30) days after
such change; and
(vi) neither the execution and delivery by it,
either in its individual capacity or as the Owner Trustee,
as the case may be, of any of the Transaction Documents to
which it is or is to be a party, requires on the part of the
Owner Trustee in its individual capacity or any of its
Affiliates the consent or approval of or the giving of
notice to, the registration with, or the taking of any other
action in respect of, any Federal, Connecticut or
Massachusetts governmental authority or agency governing its
banking or trust powers.
(b) Lessor's Liens. The Owner Trustee, in its
individual capacity, further represents, warrants and covenants
that there are no Lessor's Liens attributable to it in its
individual capacity against, on or with respect to the Facility
or the Lessor's Estate or the Trust Estate, and that there will
not be any such Lessor's Liens against, on or with respect to the
Facility or the Lessor's Estate or the Trust Estate on the Lease
Closing Date. The Owner Trustee, in its trust capacity, and at
the cost and expense of the Lessee, covenants that it will in its
trust capacity promptly and timely, take such action as may be
necessary to discharge duly any Lessor's Liens attributable to it
in its trust capacity. The Owner Trustee, in its individual
capacity, covenants and agrees that it will at its own expense
take such action as may be necessary to duly discharge and
satisfy in full, promptly and timely, any Lessor's Liens against,
on or with respect to the Facility or the Lessor's Estate or the
Trust Estate attributable to it in its individual capacity or the
consolidated group of taxpayers of which it (in such capacity) is
a part which may arise at any time after the date of this
Agreement.
(c) Indemnity for Lessor's Liens. The Owner Trustee,
in its individual capacity, agrees to indemnify and hold harmless
the Lessee, the Indenture Trustee, the Administrative Agent, each
Loan Participant, the Owner Participant and the Owner Trustee
from and against any loss, cost, expense or damage which may be
suffered by such party as a result of the failure of the Owner
Trustee to discharge and satisfy any Lessor's Liens attributable
to it in its individual capacity, as described in Section 4.3(b)
hereof.
(d) Securities Act. None of the Owner Trustee or any
Person authorized by it to act on its behalf has directly or
indirectly offered or sold or will directly or indirectly offer
or sell any interest in the Lessor's Estate, or in any similar
security relating to the Lessor's Estate, or in any security the
offering of which for purposes of the Securities Act of 1933, as
amended, would be deemed to be part of the same offering as the
offering of the aforementioned securities to, or solicited any
offer to acquire any of the same from, any Person.
(e) Public Utility Status. Fleet National Bank, in
its individual capacity, is not "a person primarily engaged in
the generation or sale of electric power (other than electric
power solely from cogeneration facilities or small power
production facilities)" within the meaning of 18 C.F.R.
292.206.
(f) Defaults. To the best knowledge of Owner Trustee,
no Indenture Default or Indenture Event of Default has occurred
and is continuing. Fleet National Bank, in its individual
capacity, is not in violation of any of the terms of this
Agreement, the Trust Agreement or any other Transaction Document
to which it is a party.
4.4 Representations, Warranties and Covenants of the
Indenture Trustee. (a) The Indenture Trustee in its individual
capacity represents as follows:
(i) it is a national banking association duly
organized and validly existing in good standing under the
laws of the United States of America and has the power and
authority to enter into and perform its obligations under
the Indenture and this Agreement and the other Transaction
Documents to which it is or is to be a party and to
authenticate the Loan Certificates to be delivered on the
Lease Closing Date;
(ii) the Indenture and this Agreement and the
other Transaction Documents to which it is or is to be a
party, and the authentication of the Loan Certificates to be
delivered on the Lease Closing Date have been duly
authorized by all necessary corporate action on its part,
and neither the execution and delivery thereof nor its
performance of any of the terms and provisions thereof will
violate any federal or Utah law or regulation relating to
its banking or trust powers or contravene or result in any
breach of, or constitute any default under, its articles of
association or by-laws;
(iii) each of the Indenture and this Agreement and
the other Transaction Documents to which it is or is to be a
party has been duly executed and delivered by it and,
assuming that each such agreement is the legal, valid and
binding obligation of each other party thereto, is the
legal, valid and binding obligation of the Indenture
Trustee, enforceable against the Indenture Trustee in
accordance with its terms except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or
other similar laws or equitable principles of general
application to or affecting the enforcement of creditors'
rights (regardless of whether enforceability is considered
in a proceeding in equity or at law); and
(iv) neither the execution and delivery by it of
this Agreement and the other Transaction Documents to which
it is or is to be a party, nor the performance by it of any
of the transactions contemplated hereby or thereby, requires
the consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in
respect of, any Federal or state governmental authority or
agency governing its banking and trust powers.
(b) Indenture Trustee's Liens. The Indenture Trustee,
in its individual capacity, further represents, warrants and
covenants that there are no Indenture Trustee's Liens
attributable to it in its individual capacity against, on or with
respect to the Facility or the Lessor's Estate or the Trust
Estate, and that there will not be any Indenture Trustee's Liens
against, on or with respect to the Facility or the Lessor's
Estate or the Trust Estate on the Lease Closing Date. The
Indenture Trustee, in its individual capacity, covenants and
agrees that it will at its own expense take such action as may be
necessary to duly discharge and satisfy in full, promptly, and in
any event within 30 days, after the same shall first become known
to it, any Indenture Trustee's Liens against, on or with respect
to the Facility or the Lessor's Estate or the Trust Estate.
(c) Indemnity for Indenture Trustee's Liens. The
Indenture Trustee, in its individual capacity, agrees to
indemnify and hold harmless the Lessee, the Owner Participant,
the Loan Participants, the Owner Trustee and any subsequent
Holders of Loan Certificate, from and against any loss, cost,
expense or damage which may be suffered by the Lessee, the
Indenture Trustee, the Owner Participant, the Loan Participants,
the Owner Trustee or any such subsequent Holder of Loan
Certificates as a result of the failure of the Indenture Trustee
to discharge and satisfy any Indenture Trustee's Liens
attributable to it in its individual capacity, as described in
Section 4.4 hereof.
4.5 ERISA Representations of the Loan Participants;
Agreement of Loan Participants. (a) Each Loan Participant named
in Schedule I hereto represents and warrants that either (i)(a)
it is not an employee benefit plan subject to Title I of ERISA,
or an individual retirement account plan subject to Section 4975
of the Code (hereinafter collectively referred to as an "ERISA
Plan"), and (b) no part of the funds to be used by it to acquire
any Loan Certificate (or any funded participation interest
therein) under this Agreement constitutes assets of an ERISA Plan
(within the meaning of ERISA and any applicable rules and
regulations); or (ii) if it is using, directly or indirectly, the
assets of any ERISA Plan to acquire any Loan Certificate (or any
funded participation interest therein) that neither such
acquisition nor holding shall result in a nonexempt prohibited
transaction under Section 406 of ERISA or Section 4975 of the
Code.
4.6 Indenture Trustee's Notice of Default. The
Indenture Trustee agrees to give the Owner Participant notice of
any Indenture Default or Indenture Event of Default promptly upon
the Indenture Trustee having knowledge thereof.
4.7 [Intentionally Left Blank.]
4.8 Covenant of Quiet Enjoyment. The Owner
Participant, each Loan Participant, the Indenture Trustee, the
Administrative Agent and the Owner Trustee covenants and agrees
as to itself only that, so long as no Lease Event of Default has
occurred and is continuing, neither the Owner Participant, such
Loan Participant, the Administrative Agent, the Owner Trustee or
the Indenture Trustee, as the case may be, nor any Person
lawfully claiming through the Owner Participant, such Loan
Participant, the Administrative Agent, the Owner Trustee or the
Indenture Trustee, as the case may be, shall interfere with the
Lessee's right quietly to enjoy the Facility during the Term
without hindrance or disturbance by such Person.
4.9 Survival of Representations, Warranties and
Covenants. The representations, warranties and covenants of the
Owner Participant, each Loan Participant, the Owner Trustee and
the Indenture Trustee provided for in this Section 4, and their
respective obligations under any and all of them, shall survive
the making available by the Loan Participants of their respective
Commitments, the Lease of the Facility and the expiration or
other termination of this Agreement, and the other Transaction
Documents.
4.10 Indebtedness of Owner Trustee. So long as the
Indenture is in effect, the Owner Trustee, not in its individual
capacity, but solely as trustee under the Trust Agreement, shall
not incur any indebtedness for borrowed money except as expressly
contemplated herein or in any other Transaction Document
(excluding the Tax Indemnity Agreement) and shall not engage in
any business or other activity other than the transactions
contemplated herein or in any other Transaction Document
(excluding the Tax Indemnity Agreement) and all necessary or
appropriate activity related thereto.
4.11 Compliance with Trust Agreement. Each of the
Owner Participant and the Owner Trustee agrees with each Loan
Participant and the Indenture Trustee that so long as the Lien of
the Indenture shall be in effect it will (i) comply with all of
the terms of the Trust Agreement applicable to it in its
respective capacity, the noncompliance with which would
materially adversely affect any such party and (ii) not take any
action, or cause any action to be taken, to amend, modify or
supplement any provision of the Trust Agreement in a manner that
would materially adversely affect any such party without the
prior written consent of such party. Notwithstanding anything
else to the contrary in the Trust Agreement, so long as the
Facility Lease remains in effect, the Owner Participant agrees
not to terminate or revoke the trust created by the Trust
Agreement without the consent of the Lessee. If and so long as
the Indenture shall not have been discharged the consent of the
Indenture Trustee shall also be required prior to any termination
or revocation of such trust and in addition, the Owner
Participant will, at the Lessee's expense, promptly and duly
execute and deliver to the Indenture Trustee such documents and
assurances including, without limitation, conveyances, financing
statements and continuation statements with respect to financing
statements and take such further action as the Indenture Trustee
may from time to time reasonably request and furnish in order to
protect the rights and remedies created or intended to be created
in favor of the Indenture Trustee under the Indenture and the
other Collateral Security Documents and to create for the benefit
of the Loan Participants a valid Lien with respect to, and a
first and prior perfected (except to the extent discussed in the
opinions of counsel delivered in connection herewith) security
interest in, the Trust Estate.
Section 5. CONDITIONS PRECEDENT
5.1 Conditions Precedent to Obligations of Owner
Participant and the Loan Participants. The obligations of (i)
the Owner Participant to (x) make the investment contemplated by
Section 2.1 and (y) cause the Owner Trustee to purchase the
Facility from the Partnership and lease the same to the
Partnership and (ii) the Loan Participants to make the
investments contemplated by Section 2.1 hereof shall be subject
to the fulfillment to the satisfaction of, or waiver by, the
Owner Participant or such Loan Participant, respectively, of the
following conditions precedent on or prior to the Lease Closing
Date:
(a) Substantial Completion. The Date of Substantial
Completion shall have occurred, and the Partnership shall
have executed and delivered the Substantial Completion Certificate.
(b) Closing Notice; Certificate of Lessor's Cost. The
Owner Participant, the Administrative Agent and the Owner
Trustee shall have received the Lease Closing Notice and the
Certificate of Lessor's Cost.
(c) Lease Documents and Amended and Restated
Agreements. The following documents shall have been duly
authorized, executed and delivered by the respective parties
thereto, and an executed counterpart of each thereof shall
have been delivered to the Owner Participant and each Loan
Participant:
(i) Bill of Sale;
(ii) Present Assignment;
(iii) Facility Lease;
(iv) Steam Lease;
(v) Tax Indemnity Agreement (to be
delivered only to the Owner Participant and the
Lessee);
(vi) Participation Agreement;
(vii) Reimbursement Agreement;
(viii) [Intentionally Left Blank]
(ix) Amended and Restated Deed of Trust and Security
Agreement;
(x) Amended and Restated Security Agreement;
(xi) Amended and Restated GeneralPartner Pledge Agreement;
(xii) Amended and Restated Limited Partner Pledge Agreement;
(xiii) Amended and Restated Stock Pledge Agreement;
(xiv) Amended and Restated Security Deposit Agreement;
(xv) Amended and Restated Ascending Letter of Credit Pledge
Agreement;
(xvi) Amended and Restated Steam Lessee Security Agreement;
(xvii) Amended and Restated Site Lease;
(xviii) Amended and Restated Site Sublease;
(xix) Amended and Restated Trust Agreement; and
(xx) Indenture.
(d) Legal Opinions. The Owner Participant and each of
the Loan Participants shall have received the following
opinions of counsel, each dated the Lease Closing Date:
(i) the opinion of Chadbourne &
Parke, counsel to the Partnership, the General Partner,
the Limited Partner and Holdings, substantially in the
form of Exhibit V-1;
(ii) the opinion of Gibbs & Haller, special Maryland
counsel to the Partnership and the General Partner, substantially
in the form of Exhibit V-2;
(iii) the opinion of Venable, Baetjer, Howard & Civiletti,
special Maryland counsel to the Partnership and the General Partner,
substantially in the form of Exhibit V-3;
(iv) the opinion of Shipman & Goodwin, counsel to the Owner
Trustee, substantially in the form of Exhibit V-4;
(v) the opinion of Ray, Quinney & Nebeker, counsel to the
Indenture Trustee, substantially in the form of Exhibit V-5;
(vi) (A) the opinion of internal counsel to the Owner
Participant, substantially in the form of Exhibit V-6A and (B)
the opinion of Simpson Thacher & Bartlett, special counsel to
the Owner Participant, substantially in the form of Exhibit V-6B;
and
(vii) the opinion of Piper and Marbury, special Maryland
counsel to the Owner Participant, substantially in the form of
Exhibit V-7.
Such opinions also shall cover such other matters incident
to the transactions contemplated by this Agreement, the
Lease Documents and the other Transaction Documents as each
recipient may reasonably request, including with respect to
the opinions of counsel set forth in clauses (i) and (iii),
an opinion that none of the Owner Participant (nor any
Affiliate of the Owner Participant), the Owner Trustee, the
Administrative Agent or the Loan Participants would be or
become a Public Utility as a result of the execution,
delivery and performance of the Lease Documents and, with
respect to the opinions of counsel set forth in clauses (iv)
and (vii) opinions confirming the validity and perfection of
all interests of the Owner Trustee and the Indenture Trustee
and the payment of all applicable filing and recordation taxes.
(e) Title. The Owner Trustee shall have received from
the Partnership good, valid and indefeasible title in and to
the Facility under the Bill of Sale and shall have been
conveyed a valid leasehold interest in the Site and the
Easements pursuant to the Site Lease (except for those
Easements which have been transferred to PEPCO or the County
Commissioners of Charles County, Maryland), in all cases
free and clear of all Liens except Permitted Liens.
(f) Requirements under the Power Purchase Agreement.
The "Actual Commercial Operation Date" shall have occurred
under the Power Purchase Agreement and the operation of the
Project shall comply in all other material respects with all
requirements set forth in the Power Purchase Agreement.
(g) Operating Budget. The Owner Participant and each
Loan Participant shall have received the Operating Budget
for the Project, which shall be in form and substance
reasonably satisfactory to each recipient.
(h) Title Insurance; Survey. (i) The Owner
Participant shall have received a policy of title insurance
issued by the Title Company, in form and substance
satisfactory to the Owner Participant, with such
endorsements and affirmative coverage as the Owner
Participant may reasonably request and with such reinsurance
(with direct access provisions) and/or coinsurance as the
Owner Participant may request, insuring the Security Agent
for the benefit of the Owner Trustee and GE Capital, in an
amount equal to the maximum secured amount of the Deed of
Trust and Security Agreement, that the Owner Trustee has a
valid leasehold interest in the Site and the Easements
pursuant to the Site Lease, subject only to Permitted Liens;
(ii) the Administrative Agent shall have received a policy
of title insurance issued by the Lender's Title Company, in
form and substance satisfactory to the Administrative Agent,
with such endorsements and affirmative coverage as the
Administrative Agent may reasonably request and with such
reinsurance (with direct access provisions) and/or
coinsurance as the Administrative Agent may request,
insuring the Loan Participants, in an amount equal to the
maximum secured amount of the Deed of Trust and Security
Agreement, that the Owner Trustee (and, by collateral
assignment, the Indenture Trustee) has a valid leasehold
interest in the Site and the Easements pursuant to the Site
Lease, subject only to Permitted Liens; and (iii) the Owner
Participant and the Administrative Agent shall have received
an as-built survey of the Site by a licensed surveyor
satisfactory to the Owner Participant, Administrative Agent,
the Lender's Title Company and the Title Company, certified
to the Owner Participant, Administrative Agent and the Title
Company, showing no state of facts which the Owner
Participant or the Administrative Agent reasonably
determines to have a materially adverse effect on the value
of the Owner Trustee's leasehold interest in the Site and
the Easements. The Owner Participant and the Administrative
Agent shall have received evidence that the premium in
respect of such policy has been paid.
(i) Authorizing Actions. All partnership, corporate
and other proceedings in connection with the transactions
contemplated by this Agreement and the other Transaction
Documents, and all documents and instruments incident
thereto, shall be satisfactory in form and substance to the
Owner Participant and the Loan Participants and their
respective counsel; and the Owner Participant and the Loan
Participants and their respective counsel shall have
received such counterpart originals or certified or other
copies of all such documents and instruments and of all
records of partnership and corporate proceedings in
connection with such transactions, and such incumbency and
signature certificates of officers of the Participants, as
the Owner Participant or the Loan Participants or their
respective counsel may reasonably request.
(j) Filings and Recordings. All filings, recordings
and other actions that are necessary or desirable in order
to establish, protect, preserve and perfect the Security
Agent's, the Owner Trustee's and (to the extent discussed in
the opinions of counsel delivered in connection herewith)
the Indenture Trustee's right, title, estate and interest in
and to the Facility and the other Collateral shall have been
duly made or taken (including, without limitation, the
Facility Lease, the Site Lease, the Site Sublease, or
memoranda thereof) and all fees, taxes (including transfer
and recordation taxes) and other charges relating to such
filings and recordings and other actions shall have been
paid by the Partnership. The Security Agent, for the
benefit of the Owner Trustee (and, by collateral assignment,
the Indenture Trustee) and GE Capital shall have a first
lien on and prior perfected security interest in all right,
title, estate and interest of the Partnership in and to the
Collateral prior and superior to all other Liens including
existing mechanics' and materialmens' liens, except
Permitted Liens. The Owner Trustee and the Administrative
Agent shall have received authenticated copies or other
evidence of all filings, recordings and other actions
obtained or made in order to create and perfect such first
lien on and perfected security interest in the right, title,
estate and interest of the Partnership in and to the Collateral.
(k) Insurance Coverage. The Owner Participant and the
Administrative Agent shall have received (i) certified
copies of all policies evidencing the insurance required to
be maintained pursuant to the provisions of this Agreement,
the Facility Lease, the Deed of Trust and Security
Agreement, the Security Agreement, the Power Purchase
Agreement and the other Project Documents and (ii) evidence
(including certificates of insurers and independent brokers)
of the payment of all premiums due thereon and that such
insurance complies in all material respects with the
requirements of this Agreement, the Facility Lease, the Deed
of Trust and Security Agreement, the Security Agreement, the
Power Purchase Agreement and the other Project Documents.
(l) Governmental Actions and Other Consents and
Approvals. All Governmental Actions and other consents and
approvals referred to in Section 3.5 and listed on Part A of
Schedule 2, shall have been duly obtained or made, shall be
in full force and effect and shall be final and no longer
subject to appeal, and a copy of each such Governmental
Action, consent and approval (except where specifically
indicated on Schedule 2) shall have been delivered to the
Owner Participant and the Administrative Agent.
(m) Qualifying Facility. PURPA shall be in full force
and effect on the Lease Closing Date without modification in
any respect materially adverse to the Owner Participant or
the Loan Participants; and the Facility, upon acquisition by
the Owner Trustee and operation as contemplated by the
Transaction Documents, shall be a Qualifying Facility.
(n) No Change in Law. No change shall have occurred
after the Initial Loan Funding Date in any Applicable Law or
in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof
(i) which, in the reasonable judgment of the Owner
Participant or the Administrative Agent, would make the
Owner Participant's, the Loan Participants' or the Owner
Trustee's participation in the transactions contemplated
hereby illegal or subject the Owner Participant, the Loan
Participants or the Owner Trustee or any of their respective
Affiliates to any material incremental governmental
regulation in connection with such transactions or (ii)
which, in the reasonable judgment of the Owner Participant
or the Administrative Agent, would require the cancellation,
suspension or termination of any of the Transaction
Documents, which cancellation, suspension or termination, in
the reasonable judgment of the Owner Participant or the
Administrative Agent, could reasonably be expected to have a
Material Adverse Effect.
(o) No Material Adverse Change, etc. In the
reasonable judgment of the Owner Participant and the
Administrative Agent, (i) no material adverse change in the
financial condition, business, operations or prospects of
the Partnership or the General Partner or the Project
(including without limitation, no material adverse change in
the Operating Projections) shall have occurred since
September 30, 1996 and (ii) no other event (including,
without limitation, a material adverse change in the
financial condition, business or operations of any Specified
Participant) shall have occurred since September 30, 1996
which could reasonably be expected to have a Material
Adverse Effect.
(p) Representations and Warranties. The
representations and warranties made by (i) the Partnership
herein or by the Partnership or any other Reporting
Participant in any other Transaction Document to which it is
a party, or which are contained in any certificate,
document, financial or other statement furnished by the
Partnership or any other Reporting Participant hereunder or
thereunder or in connection herewith or therewith and (ii)
each Affiliate of the Partnership, and to the best knowledge
of the Partnership, each other Specified Participant, in any
other Transaction Document or in any other certificate,
document, financial or other statement furnished by such
Affiliate or Specified Participant in connection with the
transactions herein contemplated, shall be true and correct
in all material respects, on and as of the Lease Closing
Date as if made on and as of such date, except to the extent
that such representations and warranties relate solely to an
earlier date. The Partnership shall deliver an Officer's
Certificate as to matters set forth in clauses (i) and (ii)
above.
(q) No Default or Event of Default; Event of Loss;
Event of Regulation. No Lease Default or Lease Event of
Default shall be in existence. No Event of Loss shall have
occurred. No Event of Regulation shall have occurred.
(r) No Force Majeure, Cancellation, Suspension,
Termination, etc. The Project Documents shall be in full
force and effect. No event of force majeure or other event
or condition shall exist which permits or requires any party
to any of the Project Documents to cancel, suspend or
terminate its performance thereunder in accordance with the
terms thereof or which could excuse any such party from
liability for non-performance thereunder, unless (i) the
parties to such Project Document shall have effectively
waived such right or requirement with respect to such
cancellation, suspension, termination or release from
liability or (ii) in the reasonable judgment of the Owner
Participant and the Administrative Agent, such cancellation,
suspension, termination or release from liability would not
have a Material Adverse Effect.
(s) Tax Opinion. In the case of the Owner
Participant, the Owner Participant shall have received an
opinion, dated the Lease Closing Date, from Simpson Thacher
& Bartlett, special tax counsel for the Owner Participant,
as to such tax matters as the Owner Participant may
reasonably request.
(t) Lien Searches. The Owner Participant and the
Administrative Agent shall have received UCC and other lien
searches relating to the Project and the Collateral, showing
no Liens other than Permitted Liens and Liens discharged
concurrently with the closing of the transactions
contemplated by the Lease Documents.
(u) Appraisal. The Owner Participant shall have
received the final written appraisal of a firm chosen by the
Owner Participant, which appraisal shall be in form and
substance satisfactory to it.
(v) Project Costs. Project Costs shall not have
exceeded $217,172,931.
(w) Experts' Report. The Owner Participant and the
Administrative Agent (with a copy for each Loan Participant)
shall have received an engineer's report from the
Independent Engineer, a fuel report from the Fuel
Consultant, an environmental report and an insurance report,
each satisfactory in form and substance to the Owner
Participant and the Administrative Agent, in respect of the
Facility.
(x) Reserve Account. Each Reserve Account shall have
been funded in the amount required pursuant to Section 7 of
the Facility Lease.
(y) Working Capital. Each of the Owner Participant
and the Administrative Agent shall have received evidence
satisfactory to it that the Partnership has on hand
sufficient cash necessary to meet the working capital and
debt service needs of the Project during the period from the
Basic Term Commencement Date through the initial Basic Rent
Payment Date.
(z) Transfer and Recordation Taxes. Each of the Owner
Participant and the Administrative Agent shall have received
evidence satisfactory to it that the Partnership has paid
all applicable Maryland sales, transfer, filing and
recordation taxes.
(aa) Payment of Project Costs. All Project Costs
shall have been paid in full, or escrow arrangements which
are satisfactory to the Owner Participant and the
Administrative Agent shall have been made for the payment
thereof.
(bb) Distilled Water Facility Business Plan. The
Owner Participant and the Administrative Agent shall have
received the updated Distilled Water Facility Business Plan,
satisfactory in form and substance to the Owner Participant
and the Administrative Agent.
(cc) Fuel Management Plan. The Owner Participant and
the Administrative Agent shall have received an updated Fuel
Management Plan, which plan shall be in form and substance
satisfactory to the Owner Participant, the Power Purchaser
and the Administrative Agent.
(dd) Loan Certificates. In the case of the Loan
Participants, concurrently with making their respective
Commitments available to the Owner Trustee, the
Administrative Agent, on behalf of each Loan Participant,
shall have received one or more duly issued, executed and
authenticated Loan Certificates, in proper form, in the
aggregate amount of such Loan Participant's Commitment.
5.2 Conditions Precedent to the Obligations of the
Partnership. The obligations of the Partnership to sell the
Facility to the Owner Trustee and to lease the Facility from the
Owner Trustee shall be subject to the fulfillment to the
satisfaction of, or waiver by, the Partnership of the following
conditions precedent on or prior to the Lease Closing Date:
(a) Lease Documents. Each of the Lease Documents
shall have been duly authorized, executed and delivered by
the party or parties thereto (other than the Partnership)
and shall be in full force and effect on the Lease Closing
Date, and the Partnership shall have received an executed
counterpart of each such Lease Document.
(b) No Change in Law. No change shall have occurred
after the date hereof in any Applicable Law or regulation or
in the interpretation thereof by a Governmental Authority
charged with the administration or interpretation thereof
which would make the Partnership's participation in the
transactions contemplated hereby illegal.
Section 6. AFFIRMATIVE COVENANTS OF THE PARTNERSHIP
So long as any Loan Certificate remains outstanding and
unpaid, any Letter of Credit remains outstanding, any obligations
are owing to the Owner Trustee under the Facility Lease or any
other amount is owing to the Owner Participant, any Loan
Participant or the Owner Trustee hereunder or under the
Collateral Security Documents, each of the Partnership and the
General Partner hereby agrees, for the benefit of the other
parties hereto, that:
6.1 [Intentionally Left Blank.]
6.2 Conduct of Business, Maintenance of Existence,
etc. The Partnership shall at all times (i) engage solely in the
business of developing, constructing, financing and leasing and
operating the Project, and activities incident thereto, (ii)
preserve and maintain in full force and effect its existence as a
limited partnership under the laws of the State of Delaware, its
qualification to do business in the States of Delaware and
Maryland and in each other jurisdiction in which the conduct of
its business requires such qualification and all of its rights,
privileges and franchises necessary for the construction, leasing
and operation of the Project, (iii) obtain and maintain in full
force and effect all Governmental Actions and other consents and
approvals required at any time in connection with the
construction, ownership or operation of the Project, and (iv)
maintain the Facility as a Qualifying Facility. Each of the
Partnership and the General Partner agrees that the General
Partner will (i) engage solely in the business of being the sole
general partner of the Partnership, and (ii) preserve and
maintain its existence as a validly existing corporation and in
good standing under the laws of the State of Delaware and its
qualification to do business in the States of Delaware and
Maryland and in each other jurisdiction in which the conduct of
its business requires such qualification.
6.3 Payment of Obligations. The Partnership will pay,
discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, all of its
obligations under the Transaction Documents and all of its
Indebtedness and other obligations of whatever nature, except in
the case of such other obligations, those obligations which are
subject to a Contest.
6.4 Performance Under Other Agreements. The
Partnership shall duly perform and observe all of the covenants,
agreements and conditions on its part to be performed and
observed hereunder and under the Facility Lease, the
Reimbursement Agreement and the other Financing Documents, and
shall duly perform and observe in all material respects all of
the covenants, agreements and conditions on its part to be
performed and observed under the Project Documents and the
Easement Agreements to which it is a party. The Partnership
shall diligently enforce all of its rights under each Assigned
Contract.
6.5 General Partner. The General Partner shall remain
at all times the sole general partner of the Partnership.
6.6 Insurance Coverage. Without limiting any of the
other obligations or liabilities of the Partnership under this
Agreement, the Partnership shall at all times carry and maintain
or cause to be carried and maintained at its own expense such
insurance as is customarily maintained by constructors, owners,
operators, and lessees of electric generating facilities and in
all events shall carry and maintain at least the minimum
insurance coverage set forth in this Section relating to the
operation or construction of the Facility. The Partnership shall
also carry and maintain any other insurance that the Owner
Participant or the Administrative Agent may reasonably require
from time to time. All insurance carried pursuant to this
Section shall be with such insurers, in such amounts and in such
form and with deductibles as shall be reasonably satisfactory to
the Owner Participant and the Administrative Agent.
(a) From and after the Commercial Operation Date, the
Partnership shall maintain or cause to be maintained all-risk
property and boiler and machinery insurance, covering physical
loss or damage to the Facility and the transmission lines related
to the interconnection facilities, including, but not limited to,
fire and extended coverage, collapse, liquid damage, earthquake,
flood and comprehensive boiler and machinery (including
electrical malfunction and mechanical breakdown). Such insurance
shall cover each and every component of the Facility and the
interconnection facilities. The all-risk property and boilers
and machinery coverage shall not contain an exclusion for
resultant damage caused by faulty workmanship, design or
materials. Coverage shall be written on a replacement cost basis
and in an amount acceptable to the Owner Participant and the
Administrative Agent, but in no event less than the replacement
cost of the Project; sublimits of not less than $75,000,000 are
acceptable for loss or damage due to flood or earthquake. Such
policy shall contain a valid agreed amount endorsement waiving
any coinsurance penalty. The policy may be subject to
deductibles not to exceed $100,000 per occurrence, except for
deductibles of $150,000 on the 86 MW steam turbine/generator and
the 125 MVA transformers and $300,000 on the 78 MW combustion
turbine/generator. At the time when and to the extent that, the
sum of (i) the face amount of outstanding Letters of Credit, and
(ii) the Stipulated Loss Value exceeds the limits of coverage
under the property and boiler and machinery policy specified in
this Section 6.6(a), the Partnership shall include as a part of
this policy or procure a special policy known as a "Lender's
Single Interest Excess of Loss Coverage" or "Stipulated Loss
Coverage" covering all the perils provided by the property and
boiler and machinery policy. Such policy shall provide limits
equal to the difference between (A) the sum of the amounts
specified in clauses (i) and (ii) of the immediately preceding
sentence and (B) the property and boiler and machinery limits, or
equal to such other amount as may be mutually agreed between the
Partnership, the Owner Participant and the Administrative Agent.
The insureds and loss payees under this "Lender's Single Interest
Excess of Loss Coverage" or "Stipulated Loss Coverage" policy
shall be the Owner Participant and the Owner Trustee. In the
event that the property and the boiler machinery policies are
written by separate carriers, each policy shall be endorsed to
include a joint loss provision.
(b) As an extension of the policy referred to in
Section 6.6(a) or as a separate policy, the Partnership shall
maintain or cause to be maintained business interruption
insurance in an amount equal to 18 months projected net operating
profits of the Partnership and contingent business interruption
insurance in an amount equal to 18 months projected net operating
profits of the Partnership. This extension or separate policy
shall include coverage for (i) business interruption arising from
loss or damage to the Project, including a service interruption
endorsement with a limit of $5,000,000 and a deductible period of
not more than 72 hours and (ii) contingent business interruption
arising from damage to the property and equipment of customers
and suppliers of the Project, which is not covered by the
insurance specified in Section 6.6(a). Such customers and
suppliers shall include but not be limited to the purchasers of
steam and electricity and the suppliers of natural gas. This
extension or separate policy shall also include coverage for
expediting expenses and extra expense with a sublimit of
$1,000,000. This extension or separate policy shall have a
deductible not to exceed 30 days' business interruption and extra
expense.
(c) The Partnership shall maintain or cause to be
maintained comprehensive (or commercial) general liability
insurance written on an occurrence basis and with a combined
single limit of not less than $1,000,000. Such coverage shall
include premises/operations, explosion, collapse and underground
hazards, broad form contractual, independent contractors,
products/completed operations, broad form property damage and
personal injury. Such policy shall be written on a project
specific basis and shall apply solely to the construction, use,
operation and maintenance of the Facility. It shall also contain
a drop down provision in the event of exhaustion of underlying
limits or aggregates and apply on a following form basis.
(d) The Partnership shall maintain or cause to be
maintained (i) Workers' Compensation insurance with statutory
limits and (ii) employers liability insurance coverage with
limits of not less than $1,000,000 including occupational disease
coverage.
(e) The Partnership shall maintain or cause to be
maintained comprehensive (or business) automobile liability
insurance for owned (if any), nonowned, hired and borrowed
vehicles with combined single limits of not less than $1,000,000.
(f) The Partnership shall maintain or cause to be
maintained excess (or umbrella) liability insurance written on an
occurrence basis and providing coverage limits in excess of the
insurance required to be maintained pursuant to Sections 6.6(c),
(d)(ii) and (e). The limits of such insurance and such excess
insurance (or umbrella) coverage, when combined, shall be not
less than $25,000,000 on a project-specific basis or shall be not
less than $50,000,000 over all with not less than $10,000,000 on
a project-specific basis. Such policy shall be written on a
project-specific basis naming the Partnership as the insured and
each Indemnitee as additional named insureds and shall apply
solely to the construction, use, operation and maintenance of the
Facility.
(g) The Partnership shall maintain such insurance as
the Partnership is required to maintain pursuant to the
provisions of any Project Document.
(h) The Partnership shall cause (i) the Contractor to
obtain and maintain in full force and effect such insurance as
the Contractor is required to maintain pursuant to Sections 3.08
and 4.16 of the Construction Contract and (ii) the Operator to
obtain and maintain such insurance as the Operator is required to
maintain pursuant to Section 9.01 of the Operation and
Maintenance Agreement.
(i) The insurance carried in accordance with this
subsection 6.6 shall be endorsed as follows:
(i) the Partnership shall be the named insured
and each Insurance Indemnitee shall be additional named
insureds with respect to the insurance required to be
maintained pursuant to Sections 6.6(a) and (b). The
Partnership shall be the named insured and each Insurance
Indemnitee shall be additional insureds with respect to the
insurance required to be maintained pursuant to Sections
6.6(c), (d)(ii), (e) and (f). The Partnership and each
Insurance Indemnitee shall be additional insureds with
respect to insurance maintained pursuant to Section 6.6(h)
(in respect of any liability policy);
(ii) the interest of each Insurance Indemnitee
shall not be invalidated by any action or inaction of the
Partnership or any other Person and of any breach or
violation by the Partnership or any other Person of any
warranties, declarations or conditions in such policies;
(iii) the insurer thereunder shall waive all rights
of subrogation against each Insurance Indemnitee, any right
of setoff or counterclaim and any other right to deduction,
whether by attachment or otherwise;
(iv) such insurance shall be primary without right
of contribution of any other insurance carried by or on
behalf of any Insurance Indemnitee with respect to their
respective interests as such in the Facility;
(v) if such insurance is canceled for any reason
whatsoever, including nonpayment of premium, or any
substantial change is made in the coverage which affects the
interest of any Insurance Indemnitee, such cancellation or
change shall not be effective as to such Insurance
Indemnitee, for 60 days, except for nonpayment of premium
which shall be 10 days, after receipt by such Insurance
Indemnitee of written notice sent by registered mail from
such insurer of such cancellation or change;
(vi) any insurance carried in accordance with
Sections 6.6(c), (d)(ii), (e), (f) and (h) (in respect of
any liability policy) shall be endorsed to provide that,
inasmuch as the policy is written to cover more than one
insured, all terms, conditions, insuring agreements and
endorsements, with the exception of limits of liability,
shall operate in the same manner as if there were a separate
policy covering each insured; and
(vii) any insurance carried in accordance with
Sections 6.6(a) and (b) shall include a standard lender's
loss payable endorsement naming the Administrative Agent as
first loss payee and the Owner Participant as second loss
payee with all loss insurance proceeds made payable to the
Insurance and Condemnation Proceeds Account and disbursed in
accordance with the provisions of the Security Deposit
Agreement; provided, however, that upon the discharge of the
Lien of the Indenture, the Owner Participant shall be named
as sole loss payee. Deductibles or self insured retentions
shall be subject to approval by the Owner Participant and
the Administrative Agent.
(j) The Partnership shall deliver to the Owner
Participant and the Administrative Agent on or prior to the
expiration date of each insurance policy required to be
maintained by it pursuant to this Section 6.6, a certificate
executed by the insurer or its duly authorized agent evidencing
the continuance of such insurance policy (or, upon request, a
certified copy of such insurance policy).
(k) All payments received by any Insurance Indemnitee
or the Partnership from any insurer with respect to loss or
damage to the Facility or other Collateral shall promptly be
deposited in the Insurance and Condemnation Proceeds Account for
application in accordance with the provisions of Section 4.11 of
the Security Deposit Agreement.
(l) No provision of this Section 6.6 or any provision
of any other Transaction Document shall impose on any Indemnitee
any duty or obligation to verify the existence or adequacy of the
insurance coverage maintained by the Partnership, nor shall any
Insurance Indemnitee be responsible for any representations or
warranties made by or on behalf of the Partnership to any
insurance company or underwriter.
(m) Concurrently with the furnishing of all
certificates referred to in paragraph (j), the Partnership shall
furnish the Owner Participant and the Administrative Agent with
an opinion of an independent insurance broker stating that all
premiums then due have been paid and that, in the opinion of such
broker, the insurance then carried and maintained is in
accordance with Section 6.6. Furthermore, the Partnership shall
cause each insurer or such broker to advise the Owner Participant
and the Administrative Agent promptly in writing of any default
in the payment of any premiums or any other act or omission on
the part of the Partnership or the Contractor which might
invalidate or render unenforceable, in whole or part, any
insurance provided hereunder. Any Insurance Indemnitee may, at
its sole option, obtain such insurance if not provided by the
Partnership and in such event the Partnership shall reimburse
such Insurance Indemnitee upon presentation of a certificate of
insurance setting forth the cost thereof.
6.7 Inspection of Property; Books and Records;
Independent Engineer; Discussions. The Partnership shall keep
proper books of records and accounts in which full, true and
correct entries shall be made of all of its transactions in
accordance with sound accounting practice. The Partnership
agrees that the Independent Engineer (at the expense of the
Partnership in the event a Lease Default or a Lease Event of
Default has occurred and is continuing or if such visit is to
ensure compliance with any Governmental Action or Applicable Law,
based on invoices for the reasonable actual costs thereof) may,
in accordance with Section 8(b) of the Facility Lease, visit the
Facility and the other properties of the Partnership at any and
all times during normal business hours. The Partnership shall
permit a representative of each of the Owner Participant and the
Loan Participants and the Independent Engineer to examine its
books of records and accounts and to discuss its affairs,
finances and accounts with its principal officers, engineers and
independent accountants, all at such reasonable times during
business hours and at such reasonable intervals as such Person
may request.
6.8 Compliance With Laws. The Partnership shall
comply with all Applicable Laws including, without limitation,
all applicable Environmental Laws, and shall from time to time
obtain and comply with all applicable Governmental Actions as
shall now or hereafter be necessary under all Applicable Laws, in
connection with the construction, ownership (and, after the Lease
Closing Date, leasing), operation or maintenance of the Project,
except if such non-compliance would not have a Material Adverse
Effect.
6.9 Financial Statements. The Partnership shall
furnish or cause to be furnished to the Owner Participant and the
Administrative Agent:
(a) as soon as available, but in any event within 120
days after the end of each fiscal year of each of the
Partnership, the General Partner, Holdings and PEII, a copy
of the unaudited balance sheet of the Partnership, Holdings
and the General Partner and the audited balance sheet of
PEII as of the end of such fiscal year and the related
statements of income, retained earnings (or partners'
capital) and changes in cash flows of the Partnership, the
General Partner, Holdings and PEII (and audited in the case
of PEII), for such fiscal year, setting forth in each case
in comparative form the figures for the previous fiscal year
(provided, that during the Lease Term, all of the financial
statements required to be furnished pursuant to this Section
6.9(a) other than for Holdings shall be audited) and each of
the audited financial statements delivered pursuant to this
Section 6.9(a) shall be certified without qualification or
exception as to the scope of its audit by Price Waterhouse,
Deloitte & Touche or other independent public accountants of
national standing reasonably acceptable to the Owner
Participant and the Administrative Agent;
(b) as soon as available, but in any event within
60 days after the end of each quarterly period of each
fiscal year of each of the Partnership, the General Partner,
Holdings and PEII (other than the last quarterly period of
each such fiscal year), the unaudited balance sheet of each
of the Partnership, the General Partner, Holdings and PEII
as of the end of such quarterly period and the related
unaudited statements of income and retained earnings (or
partners' capital) and changes in cash flows of the
Partnership, the General Partner, Holdings and PEII for such
quarterly period and for the portion of the fiscal year then
ended, setting forth in each case in comparative form the
figures for the previous period, certified by the chief
accounting officer or chief financial officer of the
Partnership, the General Partner, Holdings and PEII (subject
to normal year-end audit adjustments); and
(c) to the extent and within 30 days after becoming
publicly available, a copy of the audited, yearly balance
sheet and unaudited quarterly balance sheet of each
Specified Participant (or any successor) other than the
Partnership and its Affiliates, in such form as the same
have been made publicly available (except that such
financial statements of the Contractor shall not be required
after the Date of Final Completion);
(d) as soon as practicable, but in any event within 30
days after the end of each calendar month, an operating
report of the Partnership as at the end of such period and
for the period of such fiscal year then ended, containing
such information as shall be agreed to by the Owner
Participant, the Administrative Agent and the Partnership
and setting forth in comparative form the corresponding
figures for the corresponding periods in the preceding
fiscal year (and in the then current Operating Budget),
certified by the chief accounting officer or chief financial
officer of the Partnership and the General Partner;
(e) as soon as available, but in any event 60 days
prior to the end of each fiscal year of the Partnership
during the Lease Term, an annual operating budget (the
"Operating Budget") for the Project, satisfactory in form
and substance to the Owner Participant and the
Administrative Agent, setting forth projected operating
expenses and cash flow for the Project for the upcoming
fiscal year;
all such financial statements (other than those
required to be furnished pursuant to subsection (c) hereof) to
be complete and correct in all material respects and to be prepared
in reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein (except for changes
approved or required by the independent public accountants
certifying such statements and disclosed therein).
6.10 Certificates; Other Information. The Partnership
shall furnish or cause to be furnished to the Owner Participant
and the Administrative Agent.
(a) concurrently with the delivery of the financial
statements of the Partnership referred to in Section 6.9(a),
a certificate of the independent public accountants which
certified such financial statements (which certificate may
be limited to accounting matters and may disclaim
responsibility for legal interpretations) stating that in
making the examination necessary for the audit thereof no
knowledge was obtained of any Reimbursement Default,
Reimbursement Event of Default, Lease Default or Lease Event
of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial
statements of the Partnership referred to in Sections 6.9(a)
and 6.9(b), a certificate of an Authorized Officer of the
General Partner stating that, to the best of such officer's
knowledge after due inquiry, each of the Partnership and the
General Partner, during the period covered by such financial
statements has observed and performed all of its covenants
and other agreements hereunder, and satisfied every
condition, contained in this Agreement and the other
Transaction Documents to be observed, performed or satisfied
by it, and that such Authorized Officer has obtained no
knowledge of any Lease Default, Lease Event of Default,
Reimbursement Default or Reimbursement Event of Default
hereunder at any time during such period or on the date of
such certificate and no knowledge of any default or event
which with the giving of notice or the lapse of time or both
would constitute a default under any of the other
Transaction Documents at any time during such period or on
the date of such certificate (or, if any such Lease Default,
Lease Event of Default, Reimbursement Default or
Reimbursement Event of Default or default or event shall
have occurred, a statement setting forth the nature thereof
and the steps being taken by the Partnership to remedy the
same);
(c) promptly after the same are sent, copies of all
financial statements and reports which the Partnership sends
to its Partners;
(d) promptly after the filing thereof, the "Annual
Returns" (Form 5500 series) and attachments filed annually
with the Internal Revenue Service with respect to each
Single Employer Plan, if any, of the Partnership;
(e) with respect to any Single Employer Plan adopted
or amended by the Partnership or the General Partner or any
Commonly Controlled Entity on or after the date of the first
borrowing under the Construction Loan Agreement, any
determination letters received from the Internal Revenue
Service with respect to the qualification of such Plan, as
initially adopted or amended under Section 401(a) of the
Code;
(f) promptly after delivery or receipt thereof, a copy
of each material notice, demand or other communication
delivered by or received by the Partnership pursuant to any
Project Document;
(g) copies of each Governmental Action or other
consent or approval obtained or made by the Partnership or
the General Partner, or obtained or made by any EPC
Contractor and delivered to the Partnership pursuant to each
EPC Contract;
(h) fifteen days prior to each Basic Rent Payment
Date, a certificate of an Authorized Officer of the General
Partner, in form and substance satisfactory to the Owner
Participant and the Administrative Agent, stating the
Available Cash Flow, the Distributable Cash Flow, Cash
Available for Distributions and the Operating Cash Flow
Ratio for the 3-month period ending on the date 30 days
prior to such Basic Rent Payment Date (each such quarterly
period, a "Quarterly Measurement Period") and setting forth
reasonably sufficient information to permit the Owner
Participant and the Administrative Agent to confirm the
accuracy of such amounts;
(i) promptly after any material interruption in the
supply of natural gas to the Facility (other than any (A)
normal interruptions caused by a Gas Transporter with
respect to that portion of the natural gas supply for which
firm transportation capacity has not been arranged or (B)
occasional interruptions caused by a supplier providing for
the delivery of natural gas on an interruptible basis), a
notice describing the circumstances of such interruption;
provided that such notice shall be delivered with respect to
any interruption (whether or not excused or whether or not
material) that results in the Partnership using fuel oil to
operate the Facility or that could give rise to a "Fuel
Default" (as defined in the Consent of the Power Purchaser);
(j) fifteen days prior to each Basic Rent Payment
Date, a report for the 3-month period ending on the date 30
days prior to such Basic Rent Payment Date setting forth the
amount of distilled water produced by the Steam Host during
such period and the amount of distilled water sold by the
Steam Host during such period;
(k) promptly, notice of any failure by the Partnership
to deliver Net Electrical Output (as defined in the Power
Purchase Agreement) in satisfaction of the dispatch
requirements of the Power Purchaser under the Power Purchase
Agreement and a report describing the circumstances of such
failure; and
(l) promptly, such additional financial and other
information with respect to the Partnership, the General
Partner or the Project as the Owner Participant or the
Administrative Agent may from time to time reasonably
request.
6.11 Taxes. The Partnership shall pay and discharge
all taxes, assessments and governmental charges or levies imposed
on it or on its income or profits or on any of its property,
including, without limitation, any property that it leases prior
to the date on which penalties attach thereto, and all lawful
claims which, if unpaid, might become a Lien upon the property of
the Partnership, except to the extent the payment of any such
tax, assessment, charge or levy is subject to a Contest. The
Partnership will promptly pay or cause to be paid any valid,
final judgment enforcing any such tax, assessment, charge, levy
or claim and cause the same to be satisfied of record.
6.12 Maintenance of Property. (a) The Partnership,
at its expense, shall keep the Facility in good working order and
condition and make all repairs, replacements and renewals with
respect thereto and additions and betterments thereto which are
necessary for the Facility to operate in strict compliance with
the terms of the Power Purchase Agreement and in material
compliance with all Applicable Laws affecting the Project.
(b) If, after any loss, destruction or damage with
respect to the Project referred to in the definition of "Event of
Loss", the conditions specified in clause (i) of Section 9(c) of
the Facility Lease are satisfied, the Partnership at all times
thereafter will proceed diligently with all work necessary to
correct such loss, destruction or damage to the extent of the
insurance proceeds or other funds received by it.
6.13 Notices. The Partnership will, promptly upon
obtaining knowledge of any of the following, give notice to the
Owner Participant and the Administrative Agent:
(a) of the occurrence of any Reimbursement Default,
Reimbursement Event of Default, Lease Default or Lease Event
of Default;
(b) of any default or event of default under any
Assigned Contract;
(c) of any litigation, investigation or proceeding
which may exist (or, to the best knowledge of the
Partnership or the General Partner, which may be threatened)
at any time between the Partnership and any Governmental
Authority;
(d) of any litigation or proceeding against the
Partnership or affecting the Project of which the
Partnership is aware in which the amount involved is $50,000
or more or in which injunctive or similar relief is sought;
(e) of the following events, as soon as possible and
in any event within 30 days after the Partnership knows or
has reason to know thereof: (i) the occurrence or expected
occurrence of any Reportable Event with respect to any Plan,
or (ii) the institution of proceedings or the taking or
expected taking of any other action by PBGC or the
Partnership to terminate, withdraw or partially withdraw
from any Plan, or (iii) the reorganization or insolvency of
any Multiemployer Plan, and, in addition to such notice,
deliver to the Owner Participant and the Administrative
Agent whichever of the following may be applicable: (A) a
certificate of the chief financial officer of the
Partnership setting forth details as to such Reportable
Event and the action that the Partnership proposes to take
with respect thereto, together with a copy of any notice of
such Reportable Event that may be required to be filed with
PBGC, or (B) any notice delivered by PBGC evidencing its
intent to institute such proceedings or any notice to PBGC
that such Plan is to be terminated, or (C) any notice of the
reorganization or insolvency of a Multiemployer Plan
received by the Partnership;
(f) of any change, event or condition (including any
actual or prospective change of law, rule or regulation)
which has or could have a Material Adverse Effect;
(g) of any loss or damage to the Facility or the other
Collateral in excess of $50,000;
(h) [Intentionally Left Blank];
(i) of any event or condition which would change any
matter represented to in subsection 3.27;
(j) of the proposed execution and delivery of any
Additional Project Document;
(k) of any material event constituting force majeure
under any of the Project Documents or any claim by any party
to any Project Document alleging that a force majeure event
thereunder has occurred;
(l) of any litigation, investigation or proceeding
affecting any Affiliate of the Partnership or, to the best
knowledge of the Partnership or the General Partner, any
Specified Participant which, if adversely determined, would
have a Material Adverse Effect;
(m) of any material violation of any applicable
Environmental Law, or any event or condition that could be
reasonably expected to result in a material liability under
any applicable Environmental Law or any litigation or
proceeding relating to environmental matters concerning the
Partnership or the Project and affecting the Partnership or
any other Person on or in connection with the assets of the
Partnership or any part thereof (including, but not limited
to, receipt by Partnership of any notice of any
Environmental Proceeding or any Reportable Spill);
(n) of any assertion by any Governmental Authority or
other Person that the Work does not comply with any
Applicable Law;
(o) of the institution of any Adverse Proceeding;
(p) of any material delays for any reason in the
delivery of materials or equipment to be supplied under any
EPC Contract;
(q) [Intentionally Left Blank];
(r) [Intentionally Left Blank];
(s) of any requested or required change in the Plans
and Specifications;
(t) of the cancellation or expiration (without renewal
or replacement) of any insurance required to be maintained
under this Agreement or any other Transaction Document;
(u) of the initiation of any condemnation proceedings
against any of the Collateral;
(v) of any Lien or claim against any Collateral other
than Permitted Liens;
(w) [Intentionally Left Blank];
(x) of any order, notice or declaration by a
Governmental Authority that could result in the Facility
ceasing to be a Qualifying Facility; and
(y) of any order, notice or declaration by any
Governmental Authority that could result in Owner
Participant, the Owner Trustee or any of their respective
Affiliates becoming a Public Utility.
Each notice pursuant to this subsection shall be accompanied by a
statement of an Authorized Officer of the General Partner setting
forth details of the occurrence referred to therein and stating
what action the Partnership proposes to take with respect thereto
and, with respect to a notice given pursuant to clause (j), shall
be accompanied by a copy of the Additional Project Document. For
all purposes of clause (e) of this subsection, the Partnership
shall be deemed to have all knowledge or knowledge of all facts
attributable to the administrator of such Plan.
6.14 Assignments of Additional Project Documents;
Maintenance of Liens of the Collateral Security Documents; Future
Mortgages. The Partnership will:
(a) after the execution and delivery of any Additional
Project Document and promptly upon the request of the Owner
Participant or the Administrative Agent, execute and deliver
an Assignment with respect to such Additional Project
Document and cause the other party or parties to such
Additional Project Document to execute and deliver a Consent
to Assignment with respect to such Assignment;
(b) promptly upon the request of the Owner Participant
or the Administrative Agent, and at the Partnership's
expense, execute and deliver, or cause the execution and
delivery of, and thereafter register, file or record in each
appropriate governmental office, any document or instrument
supplemental to or confirmatory of the Collateral Security
Documents or otherwise deemed by the Owner Participant or
the Administrative Agent to be necessary or desirable for
the creation or perfection of the liens and security
interests purported to be created by the Collateral Security
Documents; and
(c) if the Partnership shall at any time acquire any
real property or leasehold or other interests therein not
covered by the Deed of Trust and Security Agreement,
promptly upon such acquisition execute, deliver and record a
supplement to the Deed of Trust and Security Agreement,
satisfactory in form and substance to the Administrative
Agent and the Owner Participant, subjecting such real
property or leasehold or other interests to the loan and
security interest created by the Deed of Trust and Security
Agreement.
6.15 Annual Opinion of Counsel. The Partnership shall
furnish to the Owner Participant and the Administrative Agent
within 90 days after the end of each calendar year, beginning
with the calendar year ending December 31, 1997, an opinion of
counsel addressed to the Owner Participant and the Administrative
Agent (a) stating that such action has been taken with respect to
the filing, recording, re-filing and re-recording of (i) the
Collateral Security Documents and/or financing statements and
continuation statements with respect thereto as is necessary to
protect and preserve the rights and interests of the Partnership
(or any Partner or Holdings, as the case may be) in and to the
Collateral and the liens on and security interests in the rights
and interests of the Partnership (or any Partner or Holdings, as
the case may be) in and to the Collateral created by the
Collateral Security Documents and (ii) the Lease Documents and/or
financing statements and continuation statements with respect
thereto as is necessary to protect and preserve the rights and
interests of the Owner Trustee in and to the Facility, and in the
case of clauses (i) and (ii) above, reciting the details of such
action or referring to prior opinions of counsel in which such
details are given and (b) stating what, if any, action of the
foregoing nature may reasonably be expected to become necessary
during the next succeeding twelve months in order to protect and
preserve the rights and interests of (i) the Partnership (or any
Partner or Holdings, as the case may be) in and to the Collateral
and the liens on and security interests in the Collateral created
by the Collateral Security Documents and (ii) the Owner Trustee
in and to the Facility.
6.16 Employee Plans. For each Plan adopted by the
Partnership, the Partnership shall (a) use its best efforts to
seek and receive determination letters from the Internal Revenue
Service to the effect that such Plan is qualified within the
meaning of Section 401(a) of the Code; and (b) from and after the
date of adoption of any Plan, cause such Plan to be qualified
within the meaning of Section 401(a) of the Code and to be
administered in all material respects in accordance with the
requirements of ERISA and Section 401(a) of the Code.
6.17 Management Letters. The Partnership shall
promptly deliver to the Owner Participant and the Administrative
Agent a copy of each report delivered to the Partnership by its
independent public accountants in connection with any annual or
interim audit of its books, including, without limitation, any
letters or reports addressed to the Partnership or to the General
Partner or any of its officers relating to internal controls,
adequacy of records or the like.
6.18 [Intentionally Left Blank.]
6.19 [Intentionally Left Blank.]
6.20 [Intentionally Left Blank.]
6.21 Easements. The Partnership agrees to submit to
the Owner Participant and the Administrative Agent for approval
copies of all prospective Easement Agreements, easements,
licenses, restrictive covenants or other similar agreements
affecting the Site and the Easements (including all reciprocal
easement agreements with parties interested in the Site and the
Easements or with parties interested in adjacent property) prior
to their execution, together with a drawing or survey showing the
location thereof.
6.22 [Intentionally Left Blank.]
6.23 Further Assurances. The Partnership shall cause
to be promptly and duly taken, executed, acknowledged and
delivered all such further acts, documents and assurances as may
be necessary or the Owner Participant or the Administrative Agent
from time to time may reasonably request in order to carry out
more effectively the intent and purposes of this Agreement and
the other Transaction Documents, and the transactions
contemplated hereby and thereby. The Partnership shall cause the
financing statements (and continuation statements with respect
thereto) and the documents enumerated and described in Schedule
3, and all other documents necessary in that connection, to be
recorded or filed at such places and times, and in such manner,
and shall take, or shall cause to be taken, all such other action
as may be necessary or reasonably requested by the Owner
Participant in order to establish, preserve, protect and perfect
the title of the Owner Trustee to the Project and the interests
of the Owner Trustee in the Site and the Liens of the Security
Agent, for the benefit of GE Capital and the Owner Trustee (and,
by collateral assignment, the Indenture Trustee, for the benefit
of the Loan Participants) on the Collateral.
6.24 Storage of Materials. The Partnership will cause
all materials owned or controlled by the Partnership and supplied
for, or intended to be utilized in, the construction of the
Project, but not affixed to or incorporated into the Project, to
be suitably stored on the Site (or stored in the proximity of
construction of the Transmission Facilities or the Effluent
Pipeline) after delivery to the vicinity of the Site (or such
other construction site) or at such other location as may be
approved by the Owner Participant and the Administrative Agent in
writing, with adequate safeguards as required by the Owner
Participant or the Administrative Agent, to prevent loss, theft,
damage or commingling with other materials.
6.25 Hazardous Substances. (a) The Partnership
agrees to manage, handle, store, transport, label and provide
information as reasonably requested by the Owner Participant or
the Administrative Agent about all Hazardous Substances which may
exist at the Site and which are involved in the Project, and to
store, contain, label and provide information about, and provide
for the removal and disposition of all Hazardous Substances which
may exist at the Site and which are involved in the Project in
accordance in all material respects with any Applicable Law
including, but not limited to, any applicable Environmental Law.
(b) The Partnership shall cause the transportation
and/or disposal of Hazardous Substances (whether with its own
employees or through the services of third-party independent
contractors) to comply in all material respects with any
Applicable Law including, but not limited to, any applicable
Environmental Law. The Partnership shall retain only those third-
party independent contractors who are properly licensed by each
applicable Governmental Authority and any other applicable
licensing authority to provide the services they are retained to
perform.
(c) The Partnership shall comply in all material
respects with all Applicable Laws including, but not limited to,
all applicable Environmental Laws in connection with the
generation, management, handling, labeling, containing,
treatment, storage, transportation or disposal of Hazardous
Substances, including without limitation, proper and complete
preparation of any required manifests, maintenance of Material
Safety Data Sheets, preparation of a hazardous materials business
plan if required by any Applicable Law including, but not limited
to, any applicable Environmental Law and maintenance of safe
working conditions. The Partnership shall establish a regular
schedule for transfer of all Hazardous Substances off the Site as
soon as practicable after its generation and, in any event, the
Partnership shall not allow any Hazardous Substance to be
maintained at the Site for a period exceeding that permitted by
any Applicable Law including, but not limited to, any applicable
Environmental Law. The Partnership shall monitor the disposition
of all Hazardous Waste by contractors engaged in connection with
the transportation and disposal thereof.
6.26 [Intentionally Left Blank.]
6.27 Distilled Water Facility Business Plan. The
Partnership shall comply, and shall cause the Steam Host to
comply, in all material respects with the Distilled Water
Facility Business Plan. The Partnership will itself operate the
Distilled Water Facility if the Steam Lease is terminated.
6.28 Fuel Management Plan. The Partnership shall
comply in all material respects with the Fuel Management Plan.
6.29 [Intentionally Left Blank.]
6.30 Qualifying Facility Status Certificates. (a)
Within five days after the last day of each calendar month during
the Initial QF Standards Measurement Period, the Partnership
shall furnish or cause to be furnished to the Owner Participant
and the Administrative Agent a Monthly QF Status Certificate
covering the period beginning on the first day of the Initial QF
Standards Measurement Period and ending on the last day of such
calendar month.
(b) No later than 25 days prior to the last day of the
Initial QF Standards Measurement Period, the Partnership shall
furnish or cause to be furnished to the Owner Participant and the
Administrative Agent an Annual QF Status Certificate covering the
period beginning on the first day of the Initial QF Standards
Measurement Period and ending on the day that is 30 days prior to
the last day of the Initial QF Standards Measurement Period.
(c) Within five days after the last day of each
calendar month of each QF Standards Measurement Period, the
Partnership shall furnish or cause to be furnished to the Owner
Participant and the Administrative Agent a Monthly QF Status
Certificate covering the period beginning on the first day of
such QF Standards Measurement Period and ending on the last day
of such calendar month.
(d) No later than 25 days prior to the last day of
each QF Standards Measurement Period, the Partnership shall
furnish or cause to be furnished to the Owner Participant and the
Administrative Agent an Annual QF Status Certificate covering the
period beginning on the first day of such QF Standards
Measurement Period and ending on the day that is 30 days prior to
the last day of such QF Standards Measurement Period.
Each Monthly QF Status Certificate and Annual QF Status
Certificate furnished to the Owner Participant and the
Administrative Agent pursuant to this Section 6.30 shall contain
sufficient data and calculations necessary to verify the
statements made in such certificate.
6.31 Final Completion. The Partnership shall cause
the Date of Final Completion to occur no later than April 30, 1997.
6.32 Additional Oil Requirement. If the Power
Purchaser shall deliver a notice of Fuel Default to the
Partnership, the Partnership shall thereafter at all times
maintain as much oil as practicable (but never less than
1,300,000 gallons) in storage at the Facility until the Power
Purchaser agrees, in writing, that such Fuel Default and any
related Fuel/Performance Failure has been cured ("Fuel Default"
and "Fuel/Performance Failure" shall have the meanings given such
terms in the Consent of the Power Purchaser).
6.33 LNG Reserve. If at any time CLNG shall file with
a Governmental Authority for authorization to import and/or ship
LNG, the Partnership will promptly notify the Owner Participant
and the Administrative Agent and take such action with respect to
such filing as the Owner Participant or the Administrative Agent
shall reasonably request, including, without limitation, opposing
such filing and/or petitioning FERC to establish specifications
in CLNG's tariff for such LNG that are satisfactory to the Owner
Participant and the Administrative Agent (the "Requested
Specifications"). At the time of such filing by CLNG, there
shall be established a reserve account (the "LNG Account") under
the Security Deposit Agreement, and all Cash Available for
Distributions shall be deposited in the LNG Account until the LNG
Account contains such amount as the Independent Engineer
reasonably advises as being required to acquire and install
monitoring and processing equipment necessary for the Facility to
safely and efficiently burn gas from LNG. At such time as CLNG's
request to import LNG is denied by a final non-appealable order
from the appropriate Governmental Authority or FERC establishes
the Requested Specifications as part of CLNG's tariff, the Owner
Participant or the Administrative Agent shall instruct the
Security Agent to release all funds in the LNG Account as Cash
Available for Distributions. If CLNG obtains permission to
import and/or ship LNG and FERC does not establish the Requested
Specifications as part of CLNG's tariff, the Partnership shall
acquire and install the monitoring and processing equipment
recommended by the Independent Engineer and may use funds in the
LNG Account to pay for the cost (or a portion thereof) of such
equipment and installation.
6.34 [Intentionally Left Blank.]
6.35 Fuel Oil Arrangements. By October 10 of each
year, the Partnership will have signed contracts satisfactory to
the Owner Participant and the Administrative Agent (which may be
a pre-approved standard form) providing for the firm supply and
transportation of fuel oil for the Facility for the period
commencing on November 1 of such year through March 30 of the
following year (the "Winter Heating Period"). Such contracts
shall contain a provision confirming that they are assigned to
the Security Agent as Collateral. At all times during the Winter
Heating Period the Partnership shall use its best efforts to
maintain the oil storage tank at its maximum level, but in any
event it shall maintain at least 1,300,000 gallons at all times.
6.36 Operation and Maintenance Agreement. The
Partnership shall, no later than two (2) months prior to the
expiration of the terms of the Operation and Maintenance
Agreement between the Partnership and Ogden Brandywine
Operations, Inc. dated as of November 21, 1994 and amended as of
December 7, 1994 (and each replacement or renewal operation and
maintenance agreement approved pursuant to the terms of this
Section) provide Owner Participant and Administrative Agent with
a proposed replacement or renewal operation and maintenance
agreement for the Facility, which replacement or renewal
operation and maintenance agreement shall be on terms and
conditions reasonably satisfactory to Owner Participant and
Administrative Agent (who shall not unreasonably withhold or
delay their approval or disapproval) (and to the extent required
by the Power Purchase Agreement, the Power Purchaser).
6.37 Noise Study. On or before March 30, 1997, the
Partnership shall provide Owner Participant and Administrative
Agent with a scope of work for a study of ambient noise levels in
the vicinity of the Facility to ensure compliance with applicable
noise levels and to assess the impact of maximum noise emissions
(the "Noise Study"). The Partnership shall provide Owner
Participant and Administrative Agent with a copy of the result of
such Noise Study promptly upon the completion thereof.
6.38 Operating Permits.
(a) On or before September 30, 1997, the Partnership
shall provide Owner Participant and Administrative Agent with a
proposed application for an operating permit under Title V of the
Federal Clean Air Act, as amended, 42 U.S.C. 7401 et seq. The
Partnership shall file such application with the Maryland
Department of the Environment on or before October 31, 1997, and
shall provide Owner Participant and Administrative Agent with a
copy of such application and, upon issuance, such permit.
(b) On or before January 31, 1997, the Partnership
shall provide Owner Participant and Administrative Agent with a
copy of the final Permit to Operate (or an extension of that
certain Temporary Permit to Operate #16-02200-05-0844) for the
Facility.
6.39 Reaffirmations of Consents to Assignment. In the
event that on or before the Lease Closing Date the Partnership
has not obtained from each of the parties to the Consents to
Assignment a reaffirmation of each such Consent to Assignment
substantially in the form of Exhibit BB to this Agreement (a
"Reaffirmation"), the Partnership agrees that it shall provide
reasonable assistance in obtaining such Reaffirmation(s) promptly
after the Lease Closing Date.
Section 7. NEGATIVE COVENANTS OF THE PARTNERSHIP
So long as any Loan Certificate remains outstanding and
unpaid, the Letter(s) of Credit remain outstanding, any
obligations are owing to the Owner Trustee under the Lease
Documents or any other amount is owing to the Owner Participant,
any Loan Participant or the Owner Trustee hereunder or under the
Collateral Security Documents, each of the General Partner and
the Partnership hereby agrees, for the benefit of other parties
hereto that:
7.1 Merger, Sale of Assets, Purchases, etc. The
Partnership shall not merge into or consolidate with any other
Person, change its form of organization or its business, or
liquidate or dissolve itself (or suffer any liquidation or
dissolution), or sell, lease, transfer or otherwise dispose of
any assets other than sales of electric power or steam pursuant
to the Power Purchase Agreement or the Steam Sales Agreement,
sales of natural gas permitted by the Fuel Management Plan, the
sale of the Facility to the Owner Trustee and sales, transfers
and other dispositions of assets permitted by Section 8(f) of the
Facility Lease. The Partnership will not purchase or acquire any
assets other than (x) the purchase of assets in connection with
the completion of the Project, (y) the purchase of assets in the
ordinary course of business reasonably required in connection
with the operation and maintenance of the Project and
(z) Permitted Investments. The Partnership will not create any
Subsidiaries.
7.2 Indebtedness. The Partnership shall not create,
incur, assume or suffer to exist any Indebtedness, except
Indebtedness incurred in respect of the Reimbursement Agreement
or otherwise under the Transaction Documents as in effect on the
Lease Closing Date (or as amended in accordance with the terms
hereof).
7.3 Distributions, etc. The Partnership shall not
make any distributions to the Partners or to any other Person in
respect of any interests of the Partners in the Partnership,
whether in cash or other property, or redeem, purchase or
otherwise acquire any interests of the Partners in the
Partnership, or permit any Partner to withdraw any capital from
the Partnership, except after delivery to the Owner Participant
and the Administrative Agent of the certificate referred to in
Section 6.10(h), on each Basic Rent Payment Date, the making of
cash distributions to the Partners in accordance with the
Partnership Agreement and the Security Deposit Agreement out of
Cash Available for Distributions for the immediately preceding
Quarterly Measurement Period to the extent there is cash
available in the Partnership Security Account and if (i) all
amounts then required to be deposited in the Rent Reserve
Account, the Operation and Maintenance Reserve Account and the
Warranty Maintenance Reserve Account (or any other account
maintained under the Security Deposit Agreement other than the
Interest Hedging Account) shall have been deposited therein,
(ii) all Supplemental Rent then due and owing shall have been
paid, (iii) the Operating Cash Flow Ratio for the immediately
preceding Quarterly Measurement Period shall be greater than 1.2
to 1.0 and (iv) at the time of such distribution, and immediately
after giving effect thereto, no Lease Default, Lease Event of
Default, Reimbursement Default or Reimbursement Event of Default
shall have occurred and be continuing.
7.4 Liens. The Partnership shall not create or suffer
to exist any Lien on any of its properties or assets securing any
Indebtedness or other obligation of the Partnership or any other
Person, other than Permitted Liens. Notwithstanding the
foregoing, the Partnership shall protect and defend (a) its
interest in, and the Security Agent's Liens on the Collateral and
(b) the right, title and interest of the Owner Trustee in and to
the Facility against any Lien for the performance of work or the
supply of materials filed against the Collateral or the Facility,
as the case may be.
The Partnership will promptly pay or cause to be paid
any valid, final judgment enforcing any item, cause the Lien
relating thereto to be removed and otherwise cause such item to
be satisfied of record. The Partnership hereby indemnifies and
holds each Indemnitee harmless from and against any loss, costs,
expense or damages which may be suffered by any of them as the
result of the failure of the Partnership to discharge and satisfy
any such Lien.
7.5 Nature of Business. The Partnership shall not
engage in any business other than the development, construction
and operation of the Project (and activities incidental thereto),
and the General Partner shall not engage in any business other
than the business of being the managing general partner of the
Partnership.
7.6 Amendment of Contracts, etc. The Partnership will
not, without the prior written consent of the Majority Loan
Participants (or the Administrative Agent if in the opinion of
the Administrative Agent such cancellation, suspension,
termination, assignment or amendment is not material) and the
Owner Participant (and, to the extent required by the Power
Purchase Agreement, the Power Purchaser), agree to or permit (a)
the cancellation, suspension or termination of any Project
Document or Easement Agreement (except upon the expiration of the
stated term thereof), (b) the assignment of the rights or
obligations of any party to any Project Document or Easement
Agreement except (i) as contemplated by this Agreement or the
Collateral Security Documents or (ii) as permitted without the
consent of the Partnership by the terms of such Project Document
or Easement Agreement, or (c) any amendment, supplement or
modification of, or waiver with respect to any of the provisions
of, the CPCN or any Easement Agreement or Project Document to
which the Partnership or the General Partner is a party or with
respect to which the consent of the Partnership or the General
Partner is required (other than any amendment or modification to
a tariff on file with and approved by a Governmental Authority
which sets forth rates, terms and conditions of utility service
and which is incorporated by reference into a Project Document);
provided, however, that the Partnership or the General Partner
may, upon prior written notice to the Owner Participant and the
Administrative Agent (but without their consent), amend,
supplement, waive or otherwise modify any agreement to which it
is a party (other than the Construction Contract, any other EPC
Contract, the Power Purchase Agreement, any Gas Contract or any
other Assigned Contract) in any manner which does not alter in
any material respect the rights or obligations of the respective
parties thereto. The Partnership shall not, without the prior
written approval of the Owner Participant and the Administrative
Agent (which approval or disapproval shall not be unreasonably
delayed), exercise any election or option, or give any approval
or material notice or demand with respect to any obligation of
any Participant under any Project Document.
7.7 Investments. The Partnership shall not make any
investments (whether by purchase of stock, bonds, notes or other
securities, loan, advance or otherwise) other than Permitted
Investments.
7.8 Qualifying Facility. Neither the Partnership nor
the General Partner nor the Limited Partner shall take or omit to
take any action, or permit any Person to take or omit to take any
action, which action or omission could foreseeably result in
(i) the Owner Participant, the Owner Trustee, the Indenture
Trustee, the Administrative Agent or any Loan Participant or any
of their respective Affiliates becoming a Public Utility,
(ii) the Project ceasing to be a Qualifying Facility or (iii) the
Partnership, the General Partner or the Limited Partner becoming
(A) subject to regulation under Part II or III of the Federal
Power Act to which such Person would not otherwise be subject,
(B) an "electric utility company" for purposes of the Holding
Company Act, (C) subject to state law or regulation respecting
the rates of electric utilities or state law or regulation
respecting the financial and organizational regulation of
electric utilities (except for state law or regulation
implementing Subpart C of 18 C.F.R. Part 292), (D) subject to
regulation as a "steam heating company" under Article 78, Public
Service Commission Law, of the Annotated Code of Maryland, or (E)
subject under any Law to financial, organizational or rate
regulation (except for state law or regulation implementing
Subpart C of 18 C.F.R. Part 292) related to electric utilities or
steam utilities.
7.9 Leases. The Partnership shall not enter into, or
be or become liable under, any agreement for the lease, hire or
use of any real property or of any personal property, except for
(i) the Facility Lease, the Site Lease, the Site Sublease, the
Steam Lease and the Easements and (ii) other leases of personal
property which are not Capital Leases, the aggregate annual
rental under which shall not exceed $150,000 in any fiscal year
of the Partnership.
7.10 Change of Office. The Partnership shall not
change the location of its chief executive office or principal
place of business or the offices where it keeps its records
concerning the Project and all contracts relating thereto from
that existing on the date of this Agreement and specified in
Section 3.18, unless the Partnership shall have given the Owner
Participant and the Administrative Agent at least 30 days' prior
written notice thereof and all action necessary or advisable in
the Owner Participant's or the Administrative Agent's opinion to
protect and perfect the Liens and security interests with respect
to the right, title, estate and interest of the Partnership in
and to the Collateral shall have been taken, and the Owner
Participant and the Administrative Agent shall have confirmed the
same in writing.
7.11 Change of Name. The Partnership shall not change
its name without the prior written consent of the Owner
Participant and the Administrative Agent.
7.12 Compliance With ERISA. The Partnership shall not
(a) terminate any Single Employer Plan so as to result in any
material liability to PBGC, (b) engage in or permit any Affiliate
to engage in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any
Plan which would subject the Partnership to any material tax,
penalty or other liability, (c) incur or suffer to exist any
material "accumulated funding deficiency" (as defined in Section
302 of ERISA), whether or not waived, involving any Plan subject
to Section 412 of the Code or Part 3 of Title I(b) of ERISA, (d)
allow or permit to exist any event (including a Reportable Event)
or condition which represents a material risk of incurring a
material liability to PBGC, or (e) permit the present value of
all benefits vested under all Single Employer Plans subject to
Title IV of ERISA, based on those assumptions used to fund the
Plans, as of any valuation date with respect to such Plans to
exceed the value of the assets of the Plans allocable to such
benefits.
7.13 Transactions With Affiliates and Others. The
Partnership shall not, directly or indirectly, purchase, acquire,
exchange or lease any property from, or sell, transfer or lease
any property to, or borrow any money from, or enter into any
management or similar fee arrangement with, any Affiliate or any
officer, director or employee of the Partnership or the General
Partner, except for (a) the transactions specifically
contemplated by the Project Documents and the Fuel Management
Plan and (b) transactions in the ordinary course of business and
upon fair and reasonable terms no less favorable than the
Partnership could obtain, or could become entitled to, in an
arm's length transaction with a Person which is not an Affiliate.
7.14 Acceptance of Facility. The Partnership shall
not, without the prior written consent of the Owner Participant
and Administrative Agent, which shall not be unreasonably
withheld or delayed, issue to the Contractor the "Completion
Certificate" (as defined in the Construction Contract) for the
Facility. The Partnership will promptly forward to the Owner
Participant and the Administrative Agent any notice it receives
from the Contractor pursuant to the Construction Contract
requesting that the Facility be accepted as complete.
7.15 [Intentionally Left Blank.]
7.16 Approval of Additional Project Documents. The
Partnership shall not enter into any Additional Project Document
without the prior written approval (which shall not be
unreasonably withheld or delayed) of the Owner Participant and
the Administrative Agent and, to the extent required under the
Power Purchase Agreement, the Power Purchaser.
7.17 Alteration of the Site or Project. Except as
permitted or required by the Facility Lease, the Partnership
shall not, without the prior written consent of the Owner
Participant and the Administrative Agent, alter, remodel, add to,
reconstruct, improve or demolish any material part of the Project
or Site or any other Collateral covered by the Collateral
Security Documents, except as contemplated by or in accordance
with the Plans and Specifications (including any permitted
amendments thereto).
7.18 [Intentionally Left Blank.]
7.19 Capital Expenditures. Except as permitted or
required by the Facility Lease, the Partnership shall not
directly or indirectly make or commit to make any expenditure in
respect of the purchase or other acquisition (including
installment purchases or financing leases) of fixed or capital
assets (excluding normal replacements and maintenance which are
properly charged to current operations), except for expenditures
covered by the current Operating Budget.
7.20 Hazardous Substances and Compliance with
Environmental Law. The Partnership shall not cause or permit the
location, production, handling, treatment, generation, recycling,
transportation, incorporation, discharge, emission, release,
storage, deposit or disposal of any Hazardous Substance in, upon,
under, over or from any part of the Project, or permit or engage
in any other conduct or permit the existence of any condition
except in material compliance with all Applicable Laws including,
without limitation, all applicable Environmental Laws. At any
time after the Lease Closing Date when a material liability under
applicable Environmental Laws to the Partnership or the Project
could reasonably be expected to result from any activity, event
or condition, the Partnership, upon request by the Owner
Participant or the Administrative Agent, shall have additional
Environmental Audits and other reports related to environmental
issues, including, but not limited to, Governmental Actions,
prepared by a consultant acceptable to the Owner Participant and
the Administrative Agent relating to the Project or any issue
relating to the Project in such detail as the Owner Participant
or the Administrative Agent shall reasonably specify, all at the
cost of the Partnership. The Partnership acknowledges and agrees
that the Owner Participant and the Administrative Agent shall not
have any liability or responsibility for either:
(i) costs, liabilities, expenses, penalties,
damage, loss or injury to human health, property, the
environment or natural resources caused by the presence of
Hazardous Substances on any part of the Site or the Project,
or any violation of any applicable Environmental Law related
in any way to the Partnership, the Site or the Project, or
(ii) abatement and/or clean-up required under any
applicable Environmental Law, including, without limitation,
CERCLA, of any Hazardous Substances located at or in any way
related to the Project, whether by virtue of the interest of
the Owner Trustee in the Site, the Easements, the Facility
or the other Collateral or as the result of the enforcement
of its rights or remedies hereunder with respect to the
Project (including, but not limited to, becoming the owner
thereof by foreclosure or conveyance in lieu of foreclosure)
or for any other reason.
7.21 Sale of Electricity. The Partnership will not
sell any electricity generated by the Facility to any Person
other than the Power Purchaser.
7.22 O&M Letter of Credit. The Partnership shall not
draw upon, or request the Power Purchaser to draw upon, the O&M
Letter of Credit.
7.23 Intentionally Left Blank.
7.24 Washington Gas Balancing. The Partnership will
only exercise its rights to incur a "Daily Negative Imbalances"
pursuant to Section 5.1(f) of the Washington LDC Agreement when
Columbia pipeline and CLNG pipeline balancing services are not
available.
7.25 Capacity Releases. The Partnership shall not
release any of its firm transportation capacity for periods
greater than specified in the Fuel Management Plan without the
prior written consent of the Owner Participant and the
Administrative Agent (which shall not be unreasonably withheld or
delayed). At the same time that the Partnership is obligated to
furnish the financial statements pursuant to Section 6.9 hereof,
the Partnership shall furnish an annual report on transportation
management, specifically focusing on the use of the Partnership's
gas transportation capacity. The Partnership shall immediately
report to the Owner Participant and the Administrative Agent any
adverse impact on its ability to meet Power Purchaser's dispatch
orders due to any gas transportation capacity release.
7.26 Sale of Steam. The Partnership shall not sell
any thermal energy or steam generated by the Facility to any
Person other than the Steam Host unless and until the Partnership
provides to the Owner Participant and the Administrative Agent an
opinion of counsel, in form and substance reasonably satisfactory
to the Owner Participant and the Administrative Agent, stating
that such sale shall not cause, or result in, the Partnership
being regulated as a public service company, public utility or a
steam heating company or otherwise subject the Partnership to any
material adverse regulation under any Applicable Law.
Section 8. INDEMNITIES
8.1 General Indemnity. The Lessee agrees, whether or
not any of the transactions contemplated hereby are consummated,
to indemnify on an After-Tax Basis each Indemnitee against, and
to protect, save and keep harmless each Indemnitee from, any and
all Expenses that may be imposed on, incurred by or asserted
against such Indemnitee in any way relating to or arising out of:
(a) the Facility, the Site or any part thereof or interest
therein; (b) the Facility Lease, any of the Transaction Documents
or any of the transactions contemplated thereby or the exercise
of remedies under any Transaction Document; and (c) the
construction, financing, preparation, installation, inspection,
acquisition, delivery, nondelivery, acceptance, rejection,
purchase, ownership, possession, lease, rental, sublease,
maintenance, repair, storage, transfer of title, redelivery, use,
operation, condition, sale, return or other application or
disposition of all or any part of or interest in the Facility or
the Site or the imposition of any Lien (or incurrence of any
liability to refund or pay over any amount as a result of any
Lien) thereon, including, without limitation, (i) claims or
penalties arising from any violation of Law (including any
Environmental Law) or in tort (strict or otherwise), (ii)
environmental claims arising out of the management, use, control,
ownership or operation of property or assets by the Lessee or any
of its Affiliates, including, without limitation, all on-site and
off-site activities involving Hazardous Substances, (iii) loss of
or damage to any property or the environment (including, without
limitation, clean-up costs, response costs, costs of corrective
action, costs of financial assurance and natural resource
damages), or death or injury to any Person, (iv) latent or other
defects, whether or not discoverable and (v) any claim for
patent, trademark or copyright infringement, provided, however,
that the foregoing indemnity shall not extend to any Expense
imposed on, incurred by or asserted against an Indemnitee to the
extent the same:
(1) is the result of the willful misconduct or gross
negligence of such Indemnitee or of its agents, officers,
directors or employees;
(2) is a voluntary disposition during the Lease Term
by such Indemnitee, of all or any part of such Indemnitee's
or the Lessor's interest in the Facility or the Site, other
than pursuant to the Transaction Documents or while a Lease
Event of Default or Event of Regulation shall have occurred
and be continuing;
(3) is a Tax, whether or not the Lessee is required to
indemnify for such Tax pursuant to Section 8.2 hereof or the
Tax Indemnity Agreement (it being understood that Section
8.2 hereof, the Tax Indemnity Agreement and Section
3(b)(iii) of the Facility Lease exclusively provide for the
Lessee's liability with respect to Taxes); or
(4) is attributable to the Facility with respect to
any period after the surrender of possession of the Facility
and the Site in accordance with the terms of the Facility
Lease (other than the Expenses referred to in Section 5(d)).
Without limitation of the foregoing, the Lessee shall
pay all the reasonable costs and expenses incurred by the Lessor,
the Owner Participant, the Security Agent, the Indenture Trustee
and the Administrative Agent in connection with (i) the entering
into or giving or withholding of any proposed amendment,
modification, supplement, waiver, termination, approval or
consent, (ii) any Event of Loss or Event of Regulation or (iii)
the exercise of remedies under the Facility Lease and the
Collateral Security Documents following a Lease Event of Default.
If the Lessee shall obtain knowledge of any Expense
indemnified against under this Section 8.1, the Lessee shall give
prompt notice thereof to the appropriate Indemnitee or
Indemnitees, and if any Indemnitee shall obtain any such
knowledge, such Indemnitee shall give prompt notice thereof to
the Lessee, but such failure to give notice shall not effect the
obligations of the Lessee in respect thereof. With respect to
any amount that the Lessee is requested by an Indemnitee to pay
by reason of this Section 8.1 such Indemnitee shall, if so
requested by the Lessee and prior to any payment, submit such
additional information to the Lessee as the Lessee may reasonably
request properly to substantiate the requested payment, but no
such request shall affect the obligations of the Lessee to make
such payment when due.
In case any action, suit or proceeding shall be brought
against any Indemnitee, such Indemnitee shall notify the Lessee
of the commencement thereof (but the failure to do so shall not
relieve the Lessee of its obligation to indemnify such Indemnitee
except to the extent that the Lessee is prejudiced as a result of
such failure), and the Lessee shall be entitled, at its expense,
acting through counsel acceptable to such Indemnitee, to
participate in, and, to the extent that the Lessee desires, to
assume and control the defense thereof; provided, however, that
the Lessee shall not be entitled to assume and control the
defense of any such action, suit or proceeding if and
to the extent that, in the opinion of such Indemnitee, (i) such
action, suit or proceeding involves the potential imposition of
criminal liability on such Indemnitee, (ii) such action, suit or
proceeding involves the potential imposition of civil liability
on such Indemnitee which the Lessee may not be obligated to pay
or, in the reasonable opinion of such Indemnitee, the Lessee
shall be unable to pay or (iii) such Indemnitee determines, in
its sole discretion, that it may raise a defense or defenses
which are unavailable to the Lessee or different from the
defenses available to the Lessee in such action, suit or
proceeding. Such Indemnitee shall be entitled, at its expense,
to participate in any action, suit or proceeding the defense of
which has been assumed by the Lessee.
Each Indemnitee shall supply the Lessee with such
information and documents requested by the Lessee as are
necessary or advisable for the Lessee to participate in any
action, suit or proceeding to the extent permitted by this
Section 8.1. No Indemnitee shall enter into any settlement or
other compromise with respect to any Expense without the prior
written consent of the Lessee (which consent shall not be
unreasonably withheld or delayed) unless (i) such Indemnitee
waives its right to be indemnified under this Section 8.1 with
respect to such Expense or (ii) a Lease Event of Default shall
have occurred and be continuing, provided the Lessee's written
consent must be obtained if the Lessee shall have (A) waived all
objections it may have to the application of the indemnity
provisions of this Section 8.1 to such claims and (B) set aside
adequate reserves (in the reasonable opinion of the Owner
Participant and the Administrative Agent) for such indemnity.
Upon payment of any Expense by the Lessee pursuant to
this Section 8.1 to or on behalf of an Indemnitee, the Lessee,
without any further action, shall be subrogated to any and all
claims that such Indemnitee may have to recover such Expense from
third parties (other than claims in respect of insurance policies
maintained by such Indemnitee at its own expense), and such
Indemnitee shall cooperate with the Lessee and give such further
assurances as are necessary or advisable to enable the Lessee to
pursue such claims.
Nothing in this Section 8 shall be construed as a
guaranty by the Lessee of any residual value in the Facility.
8.2 General Tax Indemnity. All payments by the Lessee
in connection with the Transaction Documents shall be free of
withholdings of any nature whatsoever (and at the time that the
Lessee is required to make any payment upon which any withholding
is required the Lessee shall pay an additional amount such that
the net amount actually received by the Indemnitee entitled to
receive such payment will, after such withholding, equal the full
amount of the payment then due) and shall be free of expense to
each Indemnitee for collection or other charges. If any such
Taxes are required to be withheld or deducted, the Lessee shall
(A) pay such Taxes to the appropriate taxing authority on behalf
of the Indemnitee, and (B) as promptly as possible thereafter,
provide the Indemnitee (at the Lessee's expense) with an original
receipt (or a copy thereof that has been stamped by the
appropriate taxing authority to certify payment) showing payment
thereof, together with such additional evidence as the Indemnitee
may require. Notwithstanding the preceding two sentences, the
Lessee will have no duty to compensate any Indemnitee for amounts
that the Lessee is required to withhold under Section 1441 or
1442 of the Code, except to the extent that a withholding results
from a change in Law (including, but limited to, a change to any
treaty) after the Indemnitee becomes a party to the Transaction
Documents. Lessee agrees to assume liability for and indemnify,
protect, hold harmless and defend each Indemnitee on an After Tax
Basis against any and all liabilities, losses, expenses and costs
of any kind whatsoever that are in the nature of Taxes on or with
respect to or by reason of (i) the Facility Lease, the
Transaction Documents or any future amendment, supplement, waiver
or consent requested by the Lessee with respect thereto, or the
execution, delivery or performance of any thereof or the
issuance, acquisition or subsequent transfer thereof; (ii) the
Facility or any component thereof or interest therein, any
Modification or the Site; (iii) the financing, refinancing,
construction, possession, ownership, use, operation, acquisition,
modification, leasing, subleasing, condition, maintenance,
redelivery or disposition of the Facility or the Site; (iv) the
rentals or receipts arising from the Facility or the Site; (v)
any payment made pursuant to any of the Transaction Documents; or
(vi) otherwise with respect to or in connection with the
transactions contemplated by the Transaction Documents;
excluding, however:
(A) Taxes imposed by the United States Federal
government pursuant to Subtitle A of the Code (including any
minimum Taxes and any Taxes on or measured by any items of
tax preference);
(B) Taxes (other than Taxes in the nature of sales,
use or rental Taxes) imposed by any foreign, state or local
taxing jurisdiction (including any minimum Taxes and any
Taxes on or measured by any items of tax preference) that
are based upon or measured by net income;
(C) franchise Taxes, Taxes on doing business, Taxes on
capital or net worth, Taxes on capital gains, Taxes on
excess profits, Taxes on accumulated earnings and personal
holding company Taxes (in each case, other than any Taxes in
the nature of sales, use or rental Taxes);
provided, however, that the provisions of the foregoing
subparagraphs (A), (B) and (C) shall not be interpreted to
limit the Lessee's obligations under the second to last
paragraph of this Section 8.2;
(D) Taxes imposed on or with respect to an Indemnitee
resulting from (x) any voluntary transfer by the Lessor or
any Indemnitee of any interest in the Facility or the Site
or any part thereof or any interest arising under the
Transaction Documents or (y) any involuntary transfer of any
of the foregoing interests in connection with any bankruptcy
or other proceeding for the relief of debtors in which the
Lessor or any Indemnitee with respect thereto is the debtor
or any foreclosure by a creditor of the Lessor with respect
thereto (other than any transfer pursuant to clause (x) or
(y) of this subparagraph (D) while a Lease Event of Default
or Event of Regulation shall have occurred and be
continuing);
(E) any interest, penalties or additions to Tax
resulting (in whole or in part) from the failure of any
Indemnitee to file any return properly and timely unless
such failure (i) shall be caused by the failure of Lessee to
fulfill its obligations, if any, under Section 8.5 hereof
with respect to such return or (ii) is attributable to the
Indemnitee's contesting any claim at the Lessee's request
pursuant to Section 8.3;
(F) any tax imposed on or measured by any
compensation received by any owner trustee for services
in its capacity as owner trustee;
(G) any Taxes imposed on or with respect to an
Indemnitee to the extent of the excess of such Taxes over
the amount of such Taxes that would have been imposed had
there not been a transfer by a predecessor in interest of
such Indemnitee or any Person related thereto of any
interest in the Facility or any part thereof or any interest
arising under any Transaction Document or any interest in
any Indemnitee or any Person related thereto other than a
transfer while a Lease Event of Default, Event of Loss or
Event of Regulation shall have occurred and be continuing;
(H) any Tax that is being contested in accordance with
the provisions of Section 8.3 hereof during the pendency of
such contest; provided, however, that the Lessor shall
receive all amounts of Rent payable to it when payable
without reduction by reason of such Tax;
(I) any Tax that is imposed with respect to any event
or period after the earliest of (x) the expiration or early
termination of the Lease Term with respect to the Facility,
the Site and the Easements (provided, however, that the
Lessee has delivered possession of the Facility and the Site
to the Lessor), (y) the discharge in full of Lessee's
obligations to pay Stipulated Loss Value, and all other
amounts due under the Transaction Documents and (z) return
of possession of the Facility and the Site to the Lessor
pursuant to Section 5(a) of the Facility Lease; provided,
however, that the exclusion set forth in this subparagraph
shall not apply to Taxes relating to events occurring or
matters arising prior to or simultaneous with the earliest
of such times (including payments by the Lessee with respect
to such events or matters);
(J) any Tax which was included in the tax basis of the
Facility; and
(K) any Tax imposed on an Indemnitee as a direct
result of such Indemnitee's (x) gross negligence or willful
misconduct or (y) material breach of the representations
made by it under the Transaction Documents or a material
breach of its obligations under the Transaction Documents.
Lessee's indemnity obligation to an Indemnitee under
this Section 8.2 shall include any amount necessary to hold such
Indemnitee harmless, after taking into account any Tax benefits
actually realized by such Indemnitee, from the net amount of all
United States Federal, state and local Taxes actually required to
be paid by such Indemnitee by reason of the receipt or accrual of
such indemnity; provided, however, that such Indemnitee shall
provide such certifications, information and documentation as
shall be reasonably requested by the Lessee to substantiate the
amount of any payment pursuant to this paragraph.
If any Indemnitee receives a payment from the Lessee
which includes an amount for Taxes and the Lessee is not required
to indemnify such Indemnitee under this section for such Taxes,
such Indemnitee shall promptly pay to the Lessee such amount.
8.3 Contests. If a written claim shall be made
against any Indemnitee for any Tax for which Lessee is obligated
to indemnify pursuant to this Section 8, such Indemnitee shall
notify the Lessee promptly of such claim upon becoming aware of
the same (but the failure so to notify the Lessee shall not
affect the Lessee's obligations hereunder except to the extent
such failure results in a material and adverse effect on such
Lessee). If the Lessee shall so request within 30 days after
receipt of such notice, such Indemnitee shall in good faith and
with due diligence at the Lessee's expense contest the imposition
of such Tax; provided, however, that such Indemnitee may in its
sole discretion select the forum for such contest and determine
whether any such contest shall be by (i) resisting payment of
such Tax, (ii) paying such Tax under protest or (iii) paying such
Tax and seeking a refund thereof; provided, further, however,
that at the Indemnitee's option, such contest shall be conducted
by Lessee in the name of such Indemnitee (subject to the
preceding proviso). The Indemnitee shall consider in good faith
any suggestions of the Lessee with respect to conducting the
contest and shall afford the Lessee reasonable opportunity to be
present at any administrative or judicial proceeding in the
contest, provided, however, that (x) any failure by the
Indemnitee to comply with the terms of this sentence shall not
relieve the Lessee of its obligation to indemnify the Indemnitee
hereunder unless such failure precludes the Lessee from
contesting and (y) that nothing in this sentence shall be
construed as limiting the Indemnitee's absolute right to control
and make all decisions concerning the contest.
In no event shall any Indemnitee be required or Lessee
permitted to contest the imposition of any Tax for which the
Lessee is obligated to indemnify pursuant to this Section 8
unless: (i) the Lessee shall have acknowledged its liability to
such Indemnitee for an indemnity payment pursuant to this
Section 8 as a result of such claim if and to the extent such
Indemnitee or the Lessee, as the case may be, shall not prevail
in the contest of such claim; (ii) such Indemnitee shall have
received from the Lessee (unless such requirement is waived by
the Indemnitee) an opinion of a law firm selected by such
Indemnitee and reasonably satisfactory to Lessee ("Lessor's Tax
Counsel"), furnished at the Lessee's sole expense, to the effect
that there is a more-likely-than-not likelihood of success for
such contest; (iii) the Lessee shall have agreed to pay such
Indemnitee on demand all reasonable costs and expenses that such
Indemnitee may incur in connection with contesting such claim
(including, without limitation, all costs, expenses, losses,
reasonable legal and accounting fees, disbursements, penalties,
interest and additions to tax); (iv) no Lease Event of Default
shall have occurred and shall be continuing; (v) such Indemnitee
shall have reasonably determined that the action to be taken will
not result in any danger of sale, forfeiture or loss of, or the
creation of any Lien on, the Facility, or the Site or any portion
thereof or any interest therein; (vi) the amount of such claims
alone, or, if the subject matter thereof shall be of a continuing
or recurring nature, when aggregated with identical potential
claims, shall be at least $50,000; and (vii) if such contest
shall be conducted in a manner requiring the payment of the
claim, the Lessee shall have paid the amount required. The
Indemnitee shall appeal any adverse decision (but shall not
appeal any decision to the Supreme Court of the United States)
upon the request of the Lessee providing that the Lessee agrees
to abide by the preconditions set forth in this paragraph and the
Indemnitee receives an opinion by Lessor's Tax Counsel (at
Lessee's sole expense) that there is a more-likely-than-not
likelihood that such appeal will be successful. The Indemnitee
shall not settle any contest pertaining to a tax indemnified
hereunder without the consent of the Lessee except to the extent
that the opinion of Lessor's Tax Counsel is no longer applicable.
An Indemnitee may decline to contest the imposition of any tax
pursuant to this Section 8 by notifying the Lessee of its intent
and by relieving Lessee of its duty to indemnify the Indemnitee
with respect to such tax.
8.4 Payments. Any Tax indemnifiable under this
Section 8 shall be paid directly by the Lessee when due to the
applicable taxing authority if permitted. Any amount payable to
an Indemnitee pursuant to this Section 8 shall be paid within 30
days after receipt of a written demand therefor from such
Indemnitee accompanied by a written statement describing in
reasonable detail the amount so payable but not before the date
such Tax is due. Any payments made pursuant to this Section 8
shall be made directly to the Indemnitee entitled thereto in
immediately available funds at such bank or to such account as
specified by the payee in written directions to the payor, or, if
no such direction shall have been given, by check of the payor
payable to the order of the payee and mailed to the payee by
certified mail, postage prepaid at its address as set forth in
this Agreement. Any amount payable under this Section 8 that is
not paid when due shall bear interest at the Overdue Rate.
8.5 Reports. (i) If any report, statement or return
relating to any Taxes imposed on or with respect to the Facility
or the Site or any part thereof or any report, statement or
return otherwise relating to the Facility or the Site or any part
thereof is required to be filed by an Indemnitee or if the Lessee
knows of any report, return or statement otherwise required to be
filed by an Indemnitee, in each case, with respect to any Tax
that is subject to indemnification under this Section 8, the
Lessee will (1) notify the Indemnitee of such requirement not
later than 30 days prior to the date and (2) unless notified by
the Indemnitee that (even in the case of recurring or periodic
reports, statements or returns) it will prepare and file such
return, statement or report, either (x) if permitted by
applicable law, prepare such report, statement or return for
filing by the Lessee in such manner as will show the ownership of
the Facility or the Site by the Lessor for federal, state or
local income tax purposes, send a copy of such report, statement
or return to the Indemnitee and timely file such report,
statement or return with the appropriate taxing authority, or (y)
if practicable and if the report, statement or return to be filed
reflects only information in respect of the transactions
contemplated in the Transaction Documents, prepare and furnish to
such Indemnitee not later than 15 days prior to the date such
report, statement or return is required to be filed (determined
without regard to extensions) a proposed form of such report,
statement or return for filing by the Indemnitee. If the
Indemnitee shall notify the Lessee of its intention to prepare
and file any return, statement or report subject to this Section
8.5, or in the case of any other return, statement or report
subject to this Section 8.5 required to be prepared and filed by
the Indemnitee, the Lessee, at its expense, shall make available
or provide to such Indemnitee, upon request, such records and
information as is within the Lessee's control or otherwise is
reasonably available to the Lessee. If no report, statement or
return is required to be filed with respect to a Tax subject to
indemnification under this Section 8, the Lessee will promptly
notify the Indemnitee of such Tax not later than 30 days prior to
the due date for payment of such Tax.
(ii) Subject to Section 8.4 above, not later than
the date any Tax described in the preceding clause (i) is
required to be paid by the Indemnitee, the Lessee will either (1)
if permitted by applicable law, pay such Tax directly to the
appropriate taxing authority or (2) pay the Indemnitee the amount
of such Tax in immediately available funds.
(iii) Each Indemnitee shall, to the extent
permitted by Law, cause all billings for property taxes covered
by this indemnity to be made to the Indemnitee in care of the
Lessee. Each Indemnitee will furnish the Lessee, promptly after
receipt thereof, copies of all requests for information from any
taxing authority relating to any Taxes covered by this indemnity.
The Indemnitee, at the Lessee's expense, will provide the Lessee
with all other information in its possession and not otherwise
available to the Lessee that the Lessee may reasonably require
and request in writing to satisfy its obligations under this
Section 8.5, subject to a confidentiality agreement satisfactory
to the Indemnitee.
Section 9. SUCCESSOR OWNER TRUSTEE
9.1 Appointment of Successor Owner Trustee. (a)
Resignation and Removal. The Owner Trustee or any successor
Owner Trustee may resign or may be removed by the Owner
Participant, and a successor Owner Trustee may be appointed and a
Person may become Owner Trustee under the Trust Agreement only in
accordance with the provisions of Section 9.1 of the Trust
Agreement and the provisions of paragraphs (b) and (c) of this
Section 9.1; provided, however, that in no event shall any
successor to Owner Trustee be substituted without the prior
approval of Administrative Agent, which approval shall not be
unreasonably withheld.
(b) Condition to Appointment. The appointment in any
manner of a successor Owner Trustee pursuant to Section 9.1 of
the Trust Agreement shall be subject to the following conditions:
(i) Such successor Owner Trustee shall be
incorporated in the United States;
(ii) Such successor Owner Trustee shall be a bank
or a trust company having combined capital and surplus at
least $75,000,000;
(iii) Such successor Owner Trustee shall enter into
an agreement or agreements, in form and substance reasonably
satisfactory to the Lessee, the Owner Participant, the Loan
Participants, Administrative Agent and the Indenture Trustee
whereby such successor Owner Trustee confirms that it shall
be deemed a party to this Agreement, the Trust Agreement,
the Facility Lease, and any other Transaction Document to
which the Owner Trustee is a party and agrees to be bound by
all the terms of such documents applicable to the Owner
Trustee and makes the representations and warranties
contained in Section 4.3 hereof (except that it may be duly
incorporated, validly existing and in good standing under
the laws of the United States of America or any State
hereof); and
(iv) All filings of Uniform Commercial Code
financing and continuation statements, and amendments
thereto shall be made and all further actions taken in
connection with such appointments as may be necessary in
connection with maintaining the validity, perfection and
priority of the Lien of the Indenture.
Section 10. LIABILITIES AND INTERESTS OF THE OWNER
PARTICIPANT AND THE LOAN PARTICIPANTS
10.1 Liabilities of the Owner Participant and Loan
Participants. The Owner Participant and each Loan Participant
shall have no obligation or duty to the Lessee or to any other
Loan Participant or the Owner Participant, as the case may be,
with respect to the transactions contemplated by this Agreement,
except those obligations or duties expressly set forth in this
Agreement, the Indenture, the Trust Agreement, the Tax Indemnity
Agreement, the Facility Lease or any other Transaction Document
to which such Owner Participant or Loan Participant is a party
and neither the Owner Participant nor any Loan Participant shall
be liable for the performance by any party hereto of such other
party's obligations or duties hereunder. Under no circumstances
shall the Owner Participant or any Loan Participant as such be
liable to the Lessee, nor shall the Owner Participant or any Loan
Participant be liable to any other Loan Participant or the Owner
Participant, for any action or inaction on the part of the Owner
Trustee, the Administrative Agent or the Indenture Trustee in
connection with the Agreement, the Indenture, the Facility Lease,
the Trust Agreement, any other Transaction Document, the
ownership of the Facility, the administration of the Lessor's
Estate or the Trust Estate or otherwise, whether or not such
action or inaction is caused by the willful misconduct or gross
negligence of the Owner Trustee or the Indenture Trustee.
10.2 Interest of Holders of Loan Certificates. A
Holder of a Loan Certificate shall have no further interest in,
or other right with respect to, the Trust Estate when and if the
principal and interest on all Loan Certificates held by such
Holder and all other sums payable to such Holder under this
Agreement, under the Indenture or any other Financing Document
and under such Loan Certificates shall have been paid in full.
Section 11. REFINANCING
11.1 Refinancing. (a) The Owner Participant may
refinance the Loan Certificates in whole (but not in part without
the consent of the Required Loan Participants) prior to the end
of the Basic Term (a "Refinancing"); provided that without the
Partnership's consent no installment of Basic Rent shall be
increased as a result of such Refinancing.
(b) In the event the Owner Participant elects to
consummate a Refinancing, the installments of Basic Rent shall be
recalculated and reduced in the manner set forth in Schedule 9.
Such adjustment shall be computed by the Owner Participant on the
closing of the Refinancing consistent with the methodology set
forth in Schedule 9, and the Owner Participant shall promptly
certify, and, at the Partnership's request and expense, KPMG Peat
Marwick or such other independent financial advisors expert in
leasing transactions selected by the Owner Participant and
reasonably satisfactory to the Partnership shall verify the same
to the Partnership.
(c) Upon the consummation of the Refinancing, the
evidence of indebtedness issued pursuant to the Refinancing shall
be considered "Loan Certificates" for purposes of this Agreement,
the Lease and the Indenture.
(d) Notwithstanding the foregoing, the Lessee shall
have no obligation to proceed with any Refinancing transaction as
contemplated by this Section 11.1 unless the Owner Participant
indemnifies the Lessee for all reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees)
incurred by the Lessee in connection with such Refinancing;
provided that such costs and expenses may be applied as set forth
in Schedule 9.
(e) Each party agrees to take or cause to be taken all
requested action, including, without limitation, the execution
and delivery of any documents and instruments, including, without
limitation, amendments or supplements to the Transaction
Documents, which may be reasonably necessary or desirable to
effect such Refinancing. The Partnership will use all reasonable
efforts to cooperate with the Owner Participant to address any
reasonable concerns of any rating agency with respect to such
Refinancing including, without limitation, concerns related to
the bankruptcy remote nature of the Partnership.
Section 12. THE ADMINISTRATIVE AGENT
12.1 Appointment of Administrative Agent, Etc. Each
Loan Participant hereby irrevocably appoints and authorizes the
Administrative Agent to act as its agent hereunder and under the
other Transaction Documents with such powers as are specifically
delegated to the Administrative Agent by the terms of this
Agreement and of the other Transaction Documents together with
such other powers as are reasonably incidental thereto.
Each of the Loan Participants and the Administrative
Agent hereby agrees to the provisions of Schedule II hereto,
which provisions are hereby incorporated herein by reference with
the same effect as if set forth in their entirety in this
Section 12.
Section 13. MISCELLANEOUS
13.1 Amendments and Waivers. Neither this Agreement
nor any of its terms may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination
is in writing and signed by the party against which the
enforcement thereof is sought, and, to the extent required by
Subsection 8.9(b) of the Power Purchase Agreement, is consented
to by the Power Purchaser. No such change, waiver, discharge or
termination shall be effective unless a signed copy shall have
been delivered to and executed by the Owner Trustee and the
Indenture Trustee. A copy of each such change, waiver,
discharge, or termination shall also be delivered to each other
party to this Agreement.
13.2 Notices. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in
writing, by telecopier or by telex and, unless otherwise
expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or three days after being
deposited in the mail, first class postage prepaid, or, in the
case of a nationally recognized overnight courier service, one
Business Day after delivery to such courier service, or in the
case of transmission by telecopier, when confirmation of receipt
is obtained, or in the case of telex notice, when sent,
answerback received, addressed as follows, or to such other
address as may be hereafter notified by the respective parties
hereto:
The Partnership: Panda-Brandywine, L.P.
4100 Spring Valley
Suite 1001
Dallas, Texas 75244
Telephone: (972) 980-7159
Telecopy: (972) 980-6815
Attention: Chairman,
with a copy to the General Counsel
The Owner
Participant: General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06905
Telecopy: (203) 357-6970
Attention: Vice President,
Energy Project Operations
The Owner Trustee: Fleet National Bank
777 Main St.
Hartford, Connecticut 06115
Telephone:
Telecopy:
Attention: Corporate Trust Administration
The Security Agent: Fleet National Bank
777 Main St.
Hartford, Connecticut 06115
Telephone:
Telecopy:
Attention: Corporate Trust Administration
The Administrative
Agent: Credit Suisse
11 Madison Avenue, 19th Floor
New York, New York 10010
Telephone: (212) 325-9126
Telecopy: (212) 325-8321
Attention: Global Project Finance -
Portfolio Management
The Indenture
Trustee: First Security Bank, National Association
79 South Main St., 3rd Floor
Salt Lake City, Utah 84111
Telephone: (801) 246-5630
Telecopy: (801) 246-5053
Attention: Corporate Trust Services
and if to the Administrative Agent or a Loan Participant, to its
respective office as set forth on Schedule I hereto.
13.3 [Intentionally Left Blank.]
13.4 Survival. All representations and warranties
made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement.
13.5 Transaction Costs. (a) Without limiting the
provisions of Section 8 hereof, the Partnership shall pay all
reasonable out-of-pocket expenses incurred by the Owner
Participant, the Security Agent, the Owner Trustee, the Indenture
Trustee and the Administrative Agent for the period prior to the
Lease Closing Date with respect to the negotiation, preparation,
execution and delivery of this Agreement, the Lease Documents and
the other Transaction Documents, and the preparation of any
document reasonably required hereunder or thereunder, including
(without limiting the generality of the foregoing) all reasonable
fees and expenses of counsel for the Owner Participant and the
Administrative Agent, all reasonable fees and expenses of the
Independent Engineer, environmental consultant, fuel consultant
and each other professional consultant retained by the Owner
Participant, all fees and expenses of the Owner Trustee, the
Indenture Trustee and the Security Agent (including their
reasonable legal fees and expenses), all title and conveyancing
charges, recording and filing fees and taxes (including any such
taxes imposed in the future relating to the filing of any
document filed in connection with the Lease Closing Date),
mortgage taxes, intangible personal property taxes, escrow fees,
revenue and tax stamp expenses, insurance premiums, court costs,
surveyors', appraisers', architects', engineers', consultants',
accountants' and reasonable attorneys' fees and disbursements,
and will reimburse to the Owner Participant, the Owner Trustee
and the Security Agent, the Indenture Trustee and the
Administrative Agent (excluding syndication expenses), but not
the Loan Participants, all expenses paid by them of the nature
described in this subsection 13.5 which have been or may be
incurred by such party with respect thereto; provided that the
portion of such costs directly attributable to the leveraging of
the Facility Lease (including, without limitation, the fees and
expenses, including legal fees and expenses, of the
Administrative Agent), as reasonably determined by the Owner
Participant, shall be applied as set forth in Schedule 9.
(b) Without limiting the provisions of Section 8
hereof, the Partnership shall pay when due the ongoing fees and
reasonable expenses (including wire charges) of the Owner Trustee
and the Security Agent.
(c) Except as otherwise provided in Section 6.7, the
Owner Participant shall pay the fees and expenses of the
Independent Engineer, not to exceed $100,000 in the aggregate,
incurred in connection with periodic inspections by the
Independent Engineer of the Facility.
(d) Out-of-pocket expenses incurred after the Lease
Closing Date in connection with any Refinancing shall be
allocated in accordance with Section 11.1(d).
13.6 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Partnership, the
Owner Participant (and any successor to the Owner Participant
Interest), each Loan Participant, the Indenture Trustee (and any
additional Indenture Trustee appointed), the Administrative Agent
(and any successor thereof) the Owner Trustee (and any additional
Owner Trustee appointed), the Security Agent (and any additional
Security Agent appointed), and their respective successors and
assigns, except that the Partnership may not assign or transfer
any of its rights or obligations under this Agreement without the
prior written consent of the Owner Participant and the
Administrative Agent. Any assignment or transfer made by the
Partnership without the prior written consent of the Owner
Participant and the Administrative Agent (and to the extent
required by the Power Purchase Agreement, the Power Purchaser)
shall be void and of no effect.
13.7 Severability. Any provision hereof which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof and without affecting the validity or enforceability of
any provision in any other jurisdiction.
13.8 Headings. The headings of the various sections
and paragraphs of this Agreement are for convenience of reference
only, do not constitute a part hereof and shall not affect the
meaning or construction of any provision hereof.
13.9 Counterparts. This Agreement may be executed by
one or more of the parties hereto on any number of separate
counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
13.10 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
13.11 SUBMISSION TO JURISDICTION; WAIVERS. (a) EACH
OF THE PARTNERSHIP AND THE GENERAL PARTNER HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, OR
ANY OTHER TRANSACTION DOCUMENT OR FOR RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-
EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY
THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING
MAY BE BROUGHT IN SUCH COURTS, AND WAIVES ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION
OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES
NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH
ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY
THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID TO IT
AT ITS ADDRESS SPECIFIED IN SUBSECTION 13.2 AND, IF
APPLICABLE, TO ANY OTHER PARTY HERETO AT ITS ADDRESS SET
FORTH IN SUBSECTION 13.2 HERETO OR AT SUCH OTHER ADDRESS OF
WHICH SUCH PARTY OR THE PARTNERSHIP OR THE GENERAL PARTNER,
IF APPLICABLE, SHALL HAVE BEEN NOTIFIED PURSUANT HERETO; AND
(iv) AGREES THAT NOTHING HEREIN OR THEREIN SHALL
AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN
ANY OTHER JURISDICTION.
(b) EACH OF THE PARTNERSHIP, THE GENERAL PARTNER AND
EACH OTHER PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
13.12 Limitation of Liability. (a) There shall be
full recourse to the Partnership and all of its assets for the
liabilities of the Partnership under this Agreement and its other
Lessee Obligations, but in no event shall any Partner, Affiliate
of any Partner, or any officer, director or employee of the
Partnership, any Partner or their Affiliates or any holder of any
equity interest in any Partner be personally liable or obligated
for such liabilities and Lessee Obligations of the Partnership,
except as may be specifically provided herein or in any other
Transaction Document to which such Partner is a party or in the
event of fraudulent actions, knowing misrepresentations, gross
negligence or willful misconduct by the Partnership, any Partner
or any of their Affiliates in connection with the financing
contemplated by this Agreement. Subject to the foregoing
limitation on liability, each other party hereto may sue or
commence any suit, action or proceeding against any Partner or
any Affiliate thereof in order to obtain jurisdiction over the
Partnership in order to enforce its rights and remedies
hereunder. Nothing herein contained shall limit or be construed
to limit the liabilities and obligations of any Partner or any
Affiliate thereof in accordance with the terms of any other
Transaction Document creating such liabilities and obligations to
which such Partner or Affiliate is a party.
(b) Fleet National Bank (f/k/a Shawmut Bank
Connecticut, National Association) is entering into this
Participation Agreement solely as Owner Trustee under the Trust
Agreement and not in its individual capacity, except as expressly
set forth herein. Accordingly, each of the representations,
warranties, undertakings and agreements herein made on the part
of the Owner Trustee, is made and intended not as a personal
representation, warranty, undertaking or agreement by or for the
purpose or with the intention of binding Fleet National Bank
(f/k/a Shawmut Bank Connecticut, National Association)
personally, but is made and intended for the purpose of binding
only the Trust Estate. This Participation Agreement is executed
and delivered by the Owner Trustee solely in the exercise of the
powers expressly conferred upon it as trustee under the Trust
Agreement; and no personal liability or responsibility is assumed
hereunder by or shall at any time be enforceable against Fleet
National Bank (f/k/a Shawmut Bank Connecticut, National
Association) or any successor in trust on account of any action
taken or omitted to be taken or any representation, warranty,
undertaking or agreement hereunder of the Owner Trustee, either
expressed or implied, all such personal liability, if any, being
expressly waived by the parties hereto, except that the parties
hereto, or any Person acting by, through or under them, making a
claim hereunder, may look to the Trust Estate for satisfaction of
the same and Fleet National Bank of Connecticut (f/k/a Shawmut
Bank Connecticut, National Association) or its successor in
trust, as applicable, shall be personally liable for its own
gross negligence or willful misconduct in the performance of its
duties as Owner Trustee or otherwise.
13.13 Certain Limitations on Reorganization. The
Holders of the Loan Certificates and the Indenture Trustee agree
that, if (i) the Owner Participant or the Owner Trustee becomes,
or all or any part of the Lessor's Estate or the trust created by
the Trust Agreement becomes the property of, a debtor subject to
the reorganization provisions of the Bankruptcy Code or any other
applicable bankruptcy or insolvency statutes, (ii) pursuant to
such reorganization provision, the Owner Participant is held to
have recourse liability to the Indenture Trustee or the Holder of
any Loan Certificate directly or indirectly on account of any
amount payable as principal, interest, or any other amount
payable on any Loan Certificate that is provided in the
Transaction Documents to be nonrecourse to the Owner Participant,
and (iii) the Holder of any Loan Certificate or the Indenture
Trustee actually receives any Recourse Amount which reflects any
payment by the Owner Participant on account of (ii) above, then
such Loan Certificate Holder or the Indenture Trustee, as the
case may be, shall promptly refund to the Owner Participant such
Recourse Amount. For purposes of this Section 13.13, "Recourse
Amount" means the amount by which the portion of such payment by
the Owner Participant on account of clause (iii) above received
by such Loan Certificate Holder or Indenture Trustee exceeds the
amount which would have been received by such Loan Certificate
Holder or the Indenture Trustee if the Owner Participant had not
become subject to the recourse liability referred to in (ii)
above. Nothing contained in this Section shall prevent any Loan
Certificate Holder or the Indenture Trustee from enforcing any
individual obligation (and retaining the proceeds thereof) of the
Owner Participant under this Agreement or any other Transaction
Documents to the extent herein or therein provided, for which the
Owner Participant has expressly agreed by the terms of this
Agreement to accept individual responsibility.
13.14 Personal Property. It is the intention of the
parties hereto that the Facility, each Modification and every
portion thereof is severed, and shall be and remain severed, to
the maximum extent permitted by Applicable Law, from the real
estate constituting the Site and the Easements and even if
physically attached thereto, shall retain the character of
personal property, shall be treated as personal property with
respect to the rights of all Persons, shall be removable (subject
to the provisions of the Transaction Documents) and shall not be
or become fixtures or part of the real estate constituting the
Site and the Easements.
13.15 Special Exculpation. No claim may be made by
the Partnership, the General Partner or any other Person claiming
by or through the Partnership or the General Partner against the
Administrative Agent, the Owner Participant, the Loan
Participants or any of their respective successors, assigns,
Affiliates, directors, officers, employees, attorneys or agents
for any special, indirect, consequential or punitive damages in
respect of any claim for breach of contract or any other theory
of liability arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and the Partnership hereby
waives, releases and agrees not to sue upon any claim for any
such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.
13.16 No Proceedings. Each of Credit Suisse, the Loan
Participants, the Partnership and General Partner, the Owner
Trustee, the Security Agent, the Owner Participant, the Indenture
Trustee and the Administrative Agent hereby agree that it shall
not institute against, or join any other person in instituting
against, GFC any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other proceedings under
any federal or state bankruptcy or similar Law, for one year and
a day after the latest maturing commercial paper note issued by
GFC is paid. This Section 13.16 shall survive termination of
this Agreement.
13.17 Certain Rights of Power Purchaser. Nothing in
this Participation Agreement shall be deemed to limit the
provisions of the Consent of the Power Purchaser, which
provisions are solely for the benefit of the Power Purchaser and
not the Partnership. Without limiting the scope of the
foregoing, the parties hereto agree, for the exclusive benefit of
the Power Purchaser and not the Partnership, that the exercise of
remedies or any similar action under this Participation Agreement
is subject to, and shall be conducted in a manner consistent
with, the Power Purchaser's rights under (i) the Consent of the
Power Purchaser and (ii) the Power Purchase Agreement and the
Transfer Agreement (to the extent such rights under the Power
Purchase Agreement and the Transfer Agreement are not explicitly
waived by the Power Purchaser in accordance with the terms of the
Consent of the Power Purchaser).
13.18 Rights of Owner Participant. In the event there
shall be more than one Owner Participant hereunder, the Owner
Participants shall appoint an agent among them (the "Owner
Participant Agent") and all rights of the Owner Participant
hereunder and under the other Financing Documents to take actions
with respect to certificates, waivers, consents and other matters
shall vest with the Owner Participant Agent, who shall act as
liaison with the other parties hereto; provided that no Owner
Participant shall be relieved of any obligations it may have
hereunder (including Section 4.2(b) hereof) or under any other
Financing Document by reason of this provision. Upon notice of
the appointment of any Owner Participant Agent, the parties
hereto agree to execute such documents as may be necessary to
effectuate the intent of the foregoing.
13.19 Adjustments. The adjustments to the Basic Rent
Factors and Stipulated Loss Values in connection with the
leveraging of the Facility Lease which have been computed by GE
Capital at the closing of the Lease Debt financing are intended
to be consistent with the methodology set forth in Schedule 9 to
the Participation Agreement, and, at the Partnership's request
and expense, KPMG Peat Marwick or such other independent
financial advisors expert in leasing transactions selected by GE
Capital and reasonably satisfactory to the Partnership shall
verify the same to the Partnership. The costs of such
verification shall be borne by the Lessee, unless the amount of
the rent adjustment is changed by the greater of (i) five percent
of the rent adjustment and (ii) one half percent of the rent as
adjusted, in each case in present value terms following such
audit, in which case such costs shall be borne by the Owner
Participant.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
PANDA-BRANDYWINE, L.P., as the
Partnership and as Lessee
By: Panda Brandywine Corporation,
its General Partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President and
General Counsel
PANDA BRANDYWINE CORPORATION, as
the General Partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Senior Vice President and
General Counsel
GENERAL ELECTRIC CAPITAL
CORPORATION, as Owner Participant
By: /s/ Michael J. Tzougrakis
Name: Michael J. Tzougrakis
Title: Manager of Operations
FLEET NATIONAL BANK, not in its
individual capacity, but solely as
Owner Trustee and as Security Agent
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Indenture
Trustee
By: /s/ L. Scott Nielsen
Name: L. Scott Nielsen
Title: Vice Presient
CREDIT SUISSE, a bank organized and
existing under the laws of
Switzerland, acting by and through
its New York branch, as
Administrative Agent
By: /s/ Guy R. Cirincione /s/ Louis D. Iaconetti
Name: Guy R. Cirincione Louis D. Iaconetti
Title: Member of Senior Management Associate
GREENWICH FUNDING CORP., as Loan
Participant
By: Credit Suisse, New York Branch as Attorney-in-Fact
By: /s/ Carin L. Okita
Name: Carin L. Okita
Title: Associate
By: /s/ Thomas Meier
Name: Thomas Meier
Title: Associate
SCHEDULE I
LOAN PARTICIPANTS AND COMMITMENTS
Part A (Percentages of Purchase Price):
Loan Participant Percentage Amount
Greenwich Funding Corp. 79.08% $172,000,000
Owner Participant
General Electric Capital Corporation 20.92% $ 45,488,645
Part B (Percentages of Loan Certificates Held):
Loan Participant Percentage
Greenwich Funding Corp 100%
11 Madison Avenue
New York, New York 10010
SCHEDULE II
THE ADMINISTRATIVE AGENT
Capitalized terms used herein and not otherwise defined
herein are used herein as used or defined in the foregoing
Participation Agreement.
1. Powers and Immunities. The Administrative Agent
(which term as used in this sentence and in Section 5 below and
the first sentence of Section 6 below shall include reference to
its Affiliates and its own and its Affiliates' officers,
directors, employees and agents): (a) shall have no duties or
responsibilities except those expressly set forth in the
Participation Agreement and the other Transaction Documents, and
shall not by reason of the Participation Agreement or any other
Transaction Documents be a trustee for any Loan Participant; (b)
shall not be responsible to the Loan Participants for any
recitals, statements, representations or warranties contained in
the Participation Agreement or in any other Transaction
Documents, or in any certificate or other document referred to
or provided for in, or received by any of them under, the
Participation Agreement or any other Transfer Document, or for
the value, validity, effectiveness, genuineness, enforceability
or sufficiency of the Participation Agreement, any Loan
Certificate or any other Transfer Document or any other document
referred to or provided for herein or therein or for any failure
by the Lessee, the Owner Trustee, the Owner Participant, the
Indenture Trustee or any other Person to perform any of its
obligations thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings under the
Participation Agreement or under any other Transaction Document;
and (d) shall not be responsible for any action taken or omitted
to be taken by it under the Participation Agreement or under any
other Transaction Documents or under any other document or
instrument referred to or provided for therein or in connection
therewith, except for its own gross negligence or willful
misconduct. The Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence
or misconduct of any such agents or attorneys-in-fact selected by
it in good faith. The Administrative Agent may deem and treat
the payee of any Loan Certificate as the holder thereof for all
purposes hereof and of the Participation Agreement unless and
until a notice of the assignment or transfer thereof shall have
been filed with the Administrative Agent.
2. Reliance by Administrative Agent. The
Administrative Agent shall be entitled to rely upon any
certification, notice or other communication (including, without
limitation, any thereof by telephone, telecopy, telex, telegram
or cable) believed by it to be genuine and correct and to have
been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the
Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Transaction Documents, the
Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder or thereunder in
accordance with instructions given by the Majority in Interest of
the Loan Certificate Holders or, if provided herein, in
accordance with the instructions given by all of the Loan
Certificate Holders as is required in such circumstance, and such
instructions of such Loan Certificate Holders and any action
taken or failure to act pursuant thereto shall be binding on all
of the Loan Certificate Holders.
3. Defaults, Etc. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of a
Default, Lease Event of Default, an Indenture Event of Default or
an Indenture Default unless the Administrative Agent has received
notice from a Participant, the Owner Trustee, the Indenture
Trustee or the Lessee specifying such Lease Default, Lease Event
of Default, Indenture Event of Default or Indenture Default and
stating that such notice is a "Notice of Lease Default", "Notice
of Lease Event of Default", "Notice of an Indenture Event of
Default" or "Notice of an Indenture Default", as the case may be.
In the event that the Administrative Agent receives such a notice
of the occurrence of a Lease Default, Lease Event of Default, an
Indenture Event of Default or an Indenture Default, the
Administrative Agent shall give prompt notice thereof to the Loan
Certificate Holders. The Administrative Agent shall (subject
always to the provisions of the applicable Indenture and to
Section 7 below) take such action with respect to such Lease
Default, Lease Event of Default, Indenture Event of Default or
Indenture Default as shall be directed by the Majority in
Interest of Loan Certificate Holders, provided that, unless and
until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such
action, with respect to such Lease Default, Lease Event of
Default, Indenture Event of Default or Indenture Default as it
shall deem advisable in the best interest of the Loan Certificate
Holders except to the extent that the Participation Agreement or
the Indenture expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of
the Majority in Interest of Loan Certificate Holders or all of
the Loan Certificate Holders.
4. Rights as a Loan Certificate Holder. With respect
to the Loans made by it, the Administrative Agent (and any
successor acting as Administrative Agent) in its capacity as a
Loan Certificate Holder hereunder shall have the same rights and
powers hereunder as any other Loan Certificate Holder and may
exercise the same as though it were not acting as the
Administrative Agent, and the terms "Loan Certificate Holder" or
"Loan Certificate Holders" and "Loan Participant" or "Loan
Participants" shall, unless the context otherwise indicates,
include the Administrative Agent in its individual capacity. The
Administrative Agent (and any successor acting as Administrative
Agent) and its affiliates may (without having to account therefor
to any Loan Certificate Holder) accept deposits from, lend money
to, make investments in and generally engage in any kind of
banking, trust or other business with the Lessee, the Owner
Participant and any of their respective subsidiaries or
Affiliates as if it were not acting as the Administrative Agent,
and the Administrative Agent and its Affiliates may accept fees
and other consideration for services as provided in the
Participation Agreement or otherwise without having to account
for the same to the Loan Certificate Holders.
5. Indemnification. The Loan Certificate Holders
agree to indemnify the Administrative Agent (to the extent not
reimbursed under the Participation Agreement, but without
limiting the obligations of the Lessee and the Owner Participant
under the Participation Agreement) ratably in accordance with
their respective Loans at the time outstanding, for any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind
and nature whatsoever that may be imposed on, incurred by or
asserted against the Administrative Agent (including by any Loan
Certificate Holder) arising out of or by reason of any
investigation in or in any way relating to or arising out of the
Participation Agreement or any other Transaction Document or any
other documents contemplated hereby or herein or therein or the
transactions contemplated hereby or thereby (including, without
limitation, the costs and expenses that the Lessee and the Owner
Participant are obligated to pay under the Participation
Agreement, but excluding, unless a Lease Default or a Lease Event
of Default has occurred and is continuing, normal administrative
costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof
or thereof or of any such other documents, provided that no Loan
Participant shall be liable for any of the foregoing to the
extent they arise from the gross negligence or willful misconduct
of the party to be indemnified.
6. Non-Reliance on Administrative Agent and Other Loan
Participants. Each Loan Participant agrees that it has,
independently and without reliance on the Administrative Agent or
any other Loan Participant, and based on such documents and
information as it has deemed appropriate, made its own credit
analysis of the Lessee and the Owner Participant and decision to
enter into the Participation Agreement and that it will,
independently and without reliance upon the Administrative Agent
or any other Loan Participant, and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking
action under the Participation Agreement and the other
Transaction Documents. The Administrative Agent shall not be
required to keep itself informed as to the performance or
observance by the Lessee or any other party of the Participation
Agreement or any of the other Transaction Documents or any other
document referred to or provided for herein or therein or to
inspect the Properties or books of the Lessee or any other party.
Except for notices, reports and other documents and information
expressly required to be furnished to the Loan Participants by
the Administrative Agent hereunder, the Administrative Agent
shall not have any duty or responsibility to provide any Loan
Participant with any credit or other information concerning the
affairs, financial condition or business of the Lessee or the
Owner Participant or any of their respective subsidiaries (or any
of their Affiliates) that may come into possession of the
Administrative Agent or any of its Affiliates.
7. Failure to Act. Except for action expressly
required of the Administrative Agent hereunder and under the
Transaction Documents, the Administrative Agent shall in all
cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its
satisfaction from the Loan Participants of their indemnification
obligations under Section 5 hereof against any and all liability
and expense that may be insured by it by reason of taking or
continuing to take any such action.
8. Resignation or Removal of Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agent
may resign at any time by giving notice thereof to the Loan
Participants, the Lessee, the Owner Participant, the Owner
Trustee and the Indenture Trustee, and the Administrative Agent
may be removed at any time with or without cause by the Majority
in Interest of the Loan Certificate Holders. Upon any such
resignation or removal, the Majority in Interest of the Loan
Certificate Holders shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall
have been so appointed by the Majority in Interest of the Loan
Certificate Holders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent's giving
of notice of resignation or the Majority in Interest of the Loan
Certificate Holders' removal of the retiring Administrative
Agent, then the retiring Administrative Agent may, on behalf of
the Loan Participants, appoint a successor Administrative Agent,
that shall be a bank which has an office in New York, New York.
Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested
with all the rights, power, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations hereunder. After
any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this
Schedule II shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was
acting as the Administrative Agent.
ANNEX A to
Participation Agreement
DEFINITIONS
Whenever used in (i) the Participation Agreement, dated
as of December 18, 1996 among Panda-Brandywine, L.P., Panda
Brandywine Corporation, General Electric Capital Corporation, as
Owner Participant, Fleet National Bank, as Owner Trustee and
Security Agent, First Security Bank, National Association, as
Indenture Trustee, Credit Suisse, as Administrative Agent and the
other entities listed on Schedule I thereto, as Loan
Participants, (ii) the Amended and Restated Deed of Trust and
Security Agreement, dated as of December 18, 1996 between Panda-
Brandywine, L.P. and Chicago Title Insurance Company, as trustee,
(iii) the Amended and Restated Security Deposit Agreement, dated
as of December 18, 1996, among Panda-Brandywine, L.P., Panda
Brandywine Corporation, General Electric Capital Corporation, as
Owner Participant, Fleet National Bank, as Owner Trustee and
Security Agent, First Security Bank, National Association, as
Indenture Trustee and Credit Suisse, as Administrative Agent,
(iv) the Trust Indenture and Security Agreement, dated as of
December 18, 1996 by Fleet National Bank in favor of First
Security Bank, National Association, as Indenture Trustee, or (v)
any of the other Financing Documents referred to therein, the
following terms shall have the following meanings, unless
otherwise defined therein:
"Accounts": the collective reference to the Operation
and Maintenance Reserve Account, the Rent Reserve Account,
the Insurance and Condemnation Proceeds Account, the
Warranty Maintenance Reserve Account, the Revenue Account,
the Special Payment Account, the Current Account, the
Distribution Reserve Account, the Completion Account, the
Interest Hedging Account, the LOC Fee Account and the
Partnership Security Account and each other account
established by the Security Agent pursuant to the terms of
the Security Deposit Agreement.
"Accretion Amount": as of any Payment Date during the
Accretion Loan Availability Period, that portion of
principal, interest and fees due and payable by the Owner
Trustee to the Administrative Agent and the Loan
Participants under the Loan Certificates and the Indenture
that exceeds the amount of Basic Rent due and payable on
such Payment Date.
"Accretion Line of Credit Commitment": at any time
with respect to each Loan Participant, such Loan
Participant's Accretion Loan Proportionate Share of the
Total Accretion Line of Credit Commitment at such time.
"Accretion Line of Credit Commitment Fees": as defined
in Section 2.20 of the Indenture.
"Accretion Line of Credit Termination Date": the
earlier to occur of (a) the eighth Payment Date after the
Lease Closing Date and (b) the date on which the Accretion
Line of Credit Commitments shall terminate under the
Indenture.
"Accretion Loan": as defined in Section 2.2(b)(i) of
the Indenture.
"Accretion Loan Availability Period": the period from
and including the Lease Closing Date to and including the
Accretion Line of Credit Termination Date.
"Accretion Loan Proportionate Share": with respect to
each Loan Participant, the percentage set forth opposite
such Loan Participant's name on Part B to Schedule I of the
Participation Agreement, as such Schedule I may be amended
from time to time.
"Accrued Maintenance Payment": as defined in Section
5(e) of the Lease.
"Additional Construction Contract": direct order
contracts for miscellaneous project facilities and
additional construction contracts, other than the
Construction Contract, entered into by the Partnership with
the consent of the Owner Participant and the Administrative
Agent for the provision of labor, services and/or material
in connection with the design, engineering, construction,
equipping and/or testing of the Project or any part thereof,
including the Effluent Pipeline and the Transmission
Facilities.
"Additional Costs": has the meaning set forth in
Section 2.12 to the Indenture.
"Additional Project Documents": any contract,
agreement or instrument (but excluding Governmental Actions)
related to the development, ownership, construction,
testing, maintenance, repair, operation or use of the
Project entered into by the Partnership and any other Person
subsequent to the Initial Loan Funding Date (including each
Additional Construction Contract) and any consent and
agreement which constitutes an Ancillary Document and is
delivered in connection therewith, but excluding Non-
Material Agreements.
"Administrative Agent": Credit Suisse, New York
Branch, as the agent for the Loan Participants, and any
successor Administrative Agent under the Participation
Agreement.
"Adverse Proceedings": any action, investigation, law
or proceeding which seeks to revoke, suspend, delay or
adversely modify any of the Governmental Actions.
"Affiliate": of any designated Person, each Person
which, directly or indirectly, controls or is controlled by
or is under common control with such designated Person. For
the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of
voting securities or by contract or otherwise; provided that
for purposes of Section 8(e) of the Stock Pledge Agreement
"control" (and its correlative meanings), as used with
respect to any Person, shall also mean the ownership,
directly or indirectly, of any equity securities of or any
interests in such Person, whether or not it has the power to
direct or cause the direction of the management and policies
of such Person.
"After-Tax Basis": with respect to any payment to be
received by any Person, the amount of such payment
supplemented by a further payment or payments so that, after
deducting from such payments the amount of all Taxes imposed
by any Governmental Authority with respect to such payments
(whether or not such Taxes are payable), the sum of such
payments shall be equal to the original payment to be
received by such Person.
"Amended and Restated Agreements": the collective
reference to the Amended and Restated Deed of Trust and
Security Agreement, the Amended and Restated Trust
Agreement, the Amended and Restated Site Lease, the Amended
and Restated Site Sublease, the Amended and Restated General
Partner Pledge Agreement, the Amendment and Restated Limited
Partner Pledge Agreement, the Amended and Restated Security
Agreement, the Amended and Restated Steam Lessee Security
Agreement, the Amended and Restated Stock Pledge Agreement,
the Amended and Restated Security Deposit Agreement and the
Amended and Restated Ascending Letter of Credit Pledge
Agreement.
"Amended and Restated Ascending Letter of Credit Pledge
Agreement": the Amended and Restated Ascending Letter of
Credit Pledge Agreement, dated as of December 18, 1996
between the Partnership and the Security Agent, for the
benefit of GE Capital and the Owner Trustee (and, by
collateral assignment, the Indenture Trustee), substantially
in the form of Exhibit R to the Participation Agreement, as
amended, supplemented or otherwise modified from time to
time.
"Amended and Restated Deed of Trust and Security
Agreement": the Amended and Restated Deed of Trust and
Security Agreement, dated as of December 18, 1996, between
the Partnership and Chicago Title Insurance Company, as
trustee for the use and benefit of the Security Agent (for
the benefit of GE Capital and the Owner Trustee (and, by
collateral assignment, the Indenture Trustee)),
substantially in the form of Exhibit T to the Participation
Agreement, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the
terms of such agreement and the Participation Agreement.
"Amended and Restated General Partner Pledge
Agreement": the Amended and Restated General Partner Pledge
Agreement, dated as of December 18, 1996, between the
General Partner and the Security Agent, for the benefit of
GE Capital and the Owner Trustee (and, by collateral
assignment, the Indenture Trustee), substantially in the
form of Exhibit M to the Participation Agreement, as the
same may be amended, supplemented or otherwise modified from
time to time in accordance with the terms of such agreement
and the Participation Agreement.
"Amended and Restated Limited Partner Pledge
Agreement": the Amended and Restated Limited Partner Pledge
Agreement, dated as of December 18, 1996, between the
Limited Partner and the Security Agent, for the benefit of
GE Capital and the Owner Trustee (and, by collateral
assignment, the Indenture Trustee), substantially in the
form of Exhibit N to the Participation Agreement, as the
same may be amended, supplemented or otherwise modified from
time to time in accordance with the terms of such agreement
and the Participation Agreement.
"Amended and Restated Security Agreement": the Amended
and Restated Security Agreement, dated as of December 18,
1996, between the Partnership and the Security Agent, for
the benefit of GE Capital and the Owner Trustee (and, by
collateral assignment, the Indenture Trustee), substantially
in the form of Exhibit O to the Participation Agreement, as
the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms of such
agreement and the Participation Agreement.
"Amended and Restated Security Deposit Agreement": the
Amended and Restated Security Deposit Agreement, dated as of
December 18, 1996, among the Partnership, GE Capital, in its
individual capacity and as Owner Participant, the General
Partner, the Owner Trustee, the Administrative Agent and the
Security Agent (and, by collateral assignment, the Indenture
Trustee), substantially in the form of Exhibit S to the
Participation Agreement, as the same may be amended,
supplemented or otherwise modified from time to time in
accordance with the terms of such agreement and the
Participation Agreement.
"Amended and Restated Site Lease": the Amended and
Restated Site Lease, dated as of December 18, 1996, between
the Partnership and the Owner Trustee, substantially in the
form of Exhibit Y to the Participation Agreement, as the
same may be amended, supplemented or otherwise modified from
time to time in accordance with the terms of such agreement
and the Participation Agreement.
"Amended and Restated Site Sublease": the Amended and
Restated Site Sublease, dated as of December 18, 1996,
between the Owner Trustee and the Partnership, substantially
in the form of Exhibit Z to the Participation Agreement, as
the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms of such
agreement and the Participation Agreement.
"Amended and Restated Steam Lessee Security Agreement":
the Amended and Restated Lessee Security Agreement, dated as
of December 18, 1996, between the Lessee (as steam lessor),
the Steam Host and the Security Agent, for the benefit of GE
Capital and the Owner Trustee (and by collateral assignment,
the Indenture Trustee), in the form of Exhibit P to the
Participation Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Amended and Restated Stock Pledge Agreement": the
Amended and Restated Stock Pledge Agreement, dated as of
December 18, 1996, by Holdings in favor of the Security
Agent, for the benefit of GE Capital and the Owner Trustee
(and, by collateral assignment, the Indenture Trustee),
substantially in the form of Exhibit Q to the Participation
Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
"Amended and Restated Trust Agreement": the Amended
and Restated Trust Agreement, dated as of December 18, 1996,
between the Owner Participant and the Owner Trustee,
substantially in the form of Exhibit AA to the Participation
Agreement, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the
terms of such agreement.
"Ancillary Documents": with respect to each Additional
Project Document, (i) an Assignment in substantially the
form of Exhibit A to the Participation Agreement, together
with any amendments to the Collateral Security Documents
necessary or desirable to grant to the Security Agent, for
the benefit of the Owner Participant and the Owner Trustee
(and, by collateral assignment, the Indenture Trustee), a
first priority perfected Lien in such Additional Project
Document and all property interests received by the
Partnership in connection therewith, (ii) all recorded
financing statements and other filings required to perfect
such Liens, (iii) opinions of counsel for the Partnership
and, to the extent reasonably required by the Owner
Participant and the Administrative Agent (and to the extent
available after diligent attempts to procure the same) the
other parties to such Additional Project Document, (iv) a
Consent to Assignment with respect to such Additional
Project Document from such other parties substantially in
the form of Exhibit B to the Participation Agreement or
otherwise in form and substance reasonably satisfactory to
the Owner Participant and the Administrative Agent, and (v)
evidence of the Partnership's authorization of such
Additional Project Document, all in form and substance
satisfactory to the Owner Participant and the Administrative
Agent.
"Annual QF Status Certificate": a certificate of an
Authorized Officer of the General Partner setting forth (a)
the QF Minimum Steam Take for the period covered by such
certificate, and (b) whether, during the period covered by
such certificate, the Steam Host has purchased an amount of
steam under the Steam Sales Agreement at least equal to such
QF Minimum Steam Take.
"Applicable Law" or "Law": with respect to any
Governmental Authority, any constitutional provision, law,
statute, rule, regulation, ordinance, treaty, order, decree,
judgment, decision, certificate, holding, injunction,
Governmental Action or requirement of such Governmental
Authority along with the interpretation and administration
thereof by any Governmental Authority charged with the
interpretation or administration thereof. Unless the
context clearly requires otherwise, the term "Applicable
Law" or "Law" shall include each of the foregoing (and each
provision thereof) as in effect at the time in question,
including any amendments, supplements, replacements, or
other modifications thereto or thereof, and whether or not
in effect as of the Initial Loan Funding Date or the Lease
Closing Date.
"Applicable Lending Office": for each Loan
Participant, the "Lending Office" of such Loan Participant
(or of an Affiliate of such Loan Participant) designated on
Schedule I to the Participation Agreement or such other
office of such Loan Participant (or of an Affiliate of such
Loan Participant) as such Loan Participant may from time to
time specify to the Administrative Agent, the Owner Trustee,
the Owner Participant and the Lessee as the office by which
its Loans are to be made and maintained.
"Applicable Margin": (a) for each Type of Loan, the
rate per annum set forth under the relevant column heading
below:
Period Base Rate Eurodollar
Loans Loans
From (and including) 0.000% 1.000%
the Lease Closing
Date to (but excluding)
the fourth anniversary
thereof
From (and including) 0.125% 1.125%
the fourth anniversary
of the Lease Closing
Date to (but excluding)
the eighth anniversary
thereof
From (and including) 0.250% 1.250%
the eighth anniversary
of the Lease Closing Date
to (but excluding)the
twelfth anniversary
thereof
From (and including) 0.375% 1.375%
the twelfth anniversary
of the Lease Closing Date
to (but excluding)
the fifteenth anniversary
thereof
Thereafter 0.500% 1.500%
"Appraisal Procedure": a procedure whereby two
independent appraisers, one appointed by the Owner
Participant and one by the Lessee, shall agree upon the
value, period, amount or determination then the subject of
an appraisal. If either the Owner Participant or the Lessee
shall determine that a value, period, amount or
determination to be determined under the Facility Lease or
any other Transaction Document cannot timely be established
by agreement, such party shall appoint its appraiser and
give notice thereof to the other party, which shall appoint
its appraiser within 30 days thereafter. If such other
party does not appoint its appraiser within such thirty-day
period, the determination of the first appraiser made within
60 days thereafter shall be conclusive and binding. If
within 60 days after appointment of the second of the two
appraisers, such appraisers are unable to agree upon the
value, period, amount or determination in question, they
jointly shall appoint a third appraiser within 10 days
thereafter, or, if they do not do so, either the Owner
Participant or the Lessee may request the American
Arbitration Association, or any organization successor
thereto, to appoint the third appraiser from a panel of
arbitrators knowledgeable on the subject of natural gas-
fired cogeneration plants and the equipment used or operated
in connection therewith. The decision of the third
appraiser shall be given within 60 days after the
appointment thereof. If three appraisers shall be so
appointed, the average of all three determinations shall be
conclusive and binding on the Owner Participant and the
Lessee unless the determination of one appraiser is
disparate from the middle determination by more than twice
the amount by which the third determination is disparate
from the middle determination, in which case the
determination of the most disparate appraiser shall be
excluded and the average of the remaining two determinations
shall be conclusive and binding on the Owner Participant and
the Lessee. The obligation to pay the fees and expenses of
appraisers incurred in connection with any Appraisal
Procedure relating to any transaction contemplated by any
provision of the Facility Lease or any other Transaction
Document shall be divided equally between the Owner
Participant and the Lessee (except the obligation to pay
such fees and expenses in connection with any Appraisal
Procedure pursuant to Section 15 of the Facility Lease,
which shall be solely that of the Lessee).
"Approved Budget": the budget delivered pursuant to
subsection 4.1(n) of the Construction Loan Agreement on the
Initial Loan Funding Date, as such Approved Budget may have
been amended from time to time with the prior written
consent of the Owner Participant.
"Ascending Letter of Credit": the letter of credit
issued by Deutsche Bank pursuant to the terms of Section
3.14(a) of the Construction Contract as security for the
performance by the Contractor of its obligations under the
Construction Contract.
"Ascending Letter of Credit Pledge Agreement": the
Ascending Letter of Credit Pledge Agreement entered into on
March 30, 1995 by the Partnership in favor of the Security
Agent, for the benefit of GE Capital and the Owner Trustee
(and, by collateral assignment, the Indenture Trustee), as
amended and restated by the Amended and Restated Ascending
Letter of Credit Pledge Agreement, substantially in the form
of Exhibit R to the Participation Agreement, as the same may
be further amended, supplemented or otherwise modified from
time to time.
"Assigned Contracts": the collective reference to the
Construction Contract, the Raytheon Parent Guaranty, the
Power Purchase Agreement, the Gas Supply Contract, the Gas
Supply Guaranty, the Fuel Management Agreement, the Fuel
Management Guaranty, the Gas Transportation Contracts, the
Effluent Water Agreement, the Steam Sales Agreement, the
Steam Lease, the Steam Lessee Security Agreement, the
Operation and Maintenance Agreement and, from and after the
date any Additional Project Document is executed by the
Partnership, such Additional Project Document.
"Assignments": the collective reference to the
Assignments of each of the Assigned Contracts, each
substantially in the form of Exhibit A to the Participation
Agreement, executed or to be executed by the Partnership in
favor of the Security Agent for the benefit of the Owner
Participant and the Owner Trustee (and, by collateral
assignment, the Indenture Trustee).
"Authorized Officer": shall mean (i) with respect to
any Person that is a corporation, the president, any vice
president, the treasurer, or the chief financial officer of
such Person, (ii) with respect to any Person that is a
partnership, the president, any vice president, the
treasurer or the chief financial officer of a general
partner of such Person, or (iii) with respect to the Owner
Trustee, any officer in its Corporate Trust Administration
department, or (iv) with respect to any Person, such other
representative of such Person that is approved by the Owner
Participant and the Administrative Agent in writing. No
Person shall be deemed to be an Authorized Officer unless
named on a certificate of incumbency of such Person
delivered to the Owner Participant and the Administrative
Agent on or after the Lease Closing Date.
"Available Accretion Line of Credit Commitment": (i)
at any time and from time to time during the Accretion Line
of Credit Availability Period, the Total Accretion Line of
Credit Commitment at such time minus the aggregate principal
amount of all Accretion Loans theretofore made under the
Indenture and (ii) at any time after the Accretion Line of
Credit Availability Period, zero.
"Available Cash Flow": for any period (including any
Quarterly Measurement Period), the amount, if any, by which
Project Revenues for such period exceed the sum of (i)
Project Expenses of the Partnership for such period, plus
(ii) payments of Rent for such period, plus (iii) payments
of fees in respect of the Letter(s) of Credit for such
period.
"Bankruptcy Code": Title 11 of the United States Code
titled "Bankruptcy," as amended from time to time, and any
successor statute thereto.
"Base Rate": with respect to any Base Rate Loan (or
other amount owing under the Transaction Documents with
respect to which interest is payable at the Base Rate), for
any day, a rate per annum equal to the higher of (a) the
base commercial lending rate announced from time to time by
Credit Suisse, New York Branch, or (b) the rate quoted by
Credit Suisse, New York Branch, at approximately 11:00 a.m.,
New York City time, to dealers in the New York Federal Funds
Market for the overnight offering of dollars by Credit
Suisse, New York Branch, for deposit, plus 1/2 of 1%. Each
change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall
take effect at the time of such change in the Base Rate.
"Base Rate Loans": the Loans that are made or
maintained at an interest rate based on the Base Rate.
"Basic Rent": as defined in Section 3(a) of the
Facility Lease.
"Basic Rent Factors": as of any Basic Rent Payment
Date, the percentages set forth in Schedule C to the
Facility Lease as such percentages may be adjusted from time
to time in accordance with the provisions of Section 3(d) of
the Facility Lease.
"Basic Rent Payment Dates": initially, January 31,
1997 and each April 30, July 31, October 31 and January 31
occurring thereafter during the Lease Term.
"Basic Term" or "Basic Lease Term": the period from
and including the Basic Term Commencement Date to and
including October 31, 2016.
"Basic Term Commencement Date": the Lease Closing
Date.
"Beneficial Interest": the interest of the Owner
Participant under the Trust Agreement.
"Bill of Sale": the Bill of Sale and Severance
Agreement, substantially in the form of Exhibit F to the
Participation Agreement, to be executed on the Lease Closing
Date.
"Breakage Costs": amounts sufficient (in the reasonable
opinion of the relevant Loan Participant) to compensate a
Loan Participant for any loss, cost or expense (but not loss
of profit) that such Loan Participant has sustained or
incurred as a consequence of:
(i) any payment or mandatory or optional
prepayment or purchase or any conversion of a
Eurodollar Loan evidenced by such Loan Participant's
Loan Certificates for any reason (including, without
limitation, the acceleration of the Loan Certificates
pursuant to Section 6.2(a) of the Indenture), on a date
other than the last day of an Interest Period; or
(ii) Any failure by the Owner Trustee for
any reason to borrow, pay, prepay, purchase or convert
any Eurodollar Loan held by a Loan Participant on the
date scheduled therefor in accordance with the
Financing Documents.
"Business Day": a day other than a Saturday, a Sunday
or any other day on which commercial banks in New York City,
Salt Lake City, Utah or Hartford, Connecticut are required
or authorized by Law to be closed and which is also a day on
which dealings in Dollar deposits are carried out in the
London interbank market.
"Capital Lease": any lease of property, real or
personal, which, in accordance with GAAP, would be required
to be capitalized on a balance sheet of the lessee thereof.
"Cash Available for Distributions": for any period
(including any Quarterly Measurement Period), the amount, if
any, by which Distributable Cash Flow for such period
exceeds contributions to the Rent Reserve Account for such
period.
"Certificates": Loan Certificates.
"Change in Accounting Treatment": any amendment to or
revision or official interpretation of the Statements of
Financial Accounting Standards applicable to lease
transactions by the Financial Accounting Standards Board
that shall become effective subsequent to March 23, 1994 and
on or prior to the Lease Closing Date.
"Change in Tax Law": any amendment to the Code that
shall be enacted into law, become effective or is
promulgated (including any technical correction to any such
effective amendment that subsequently shall be enacted into
law) or any change in the Treasury Regulations (including
any proposed or temporary Treasury Regulations) or any other
administrative interpretation of the Code that shall be
adopted or promulgated, as the case may be, subsequent to
March 23, 1994 and through the end of the session of the
United States Congress which is in office during and
including the later of (a) the year in which the Facility is
placed in service or (b) the year in which the Lease Closing
Date occurs, that causes the Owner Participant to experience
tax consequences more or less favorable than those assumed
in the Tax Indemnity Agreement, provided, however, a Change
in Tax Law shall not include any favorable change with
respect to investment tax credits or allowances of any kind
except to the extent that the Owner Participant actually
realizes tax benefits therefrom, and in such case, only to
the extent of such benefits actually realized (which, in
both cases, shall be determined by the Owner Participant in
its reasonable discretion).
"Change Order": a change in the Construction Contract
pursuant to Section 2.15 of the Construction Contract.
"CLNG": Cove Point LNG Limited Partnership, a limited
partnership organized under the laws of the State of
Delaware.
"CLNG Agreement": the FTS Service Agreement dated as
of March 30, 1995 between the Partnership and CLNG, as
supplemented by the letter dated as of March 30, 1995, as
the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms of such
agreement and the Participation Agreement.
"Closing Date": the Initial Loan Funding Date.
"Code": the Internal Revenue Code of 1986, as amended
from time to time.
"Collateral": the collective reference to all real and
personal property, tangible and intangible, and the proceeds
thereof, subjected from time to time to the Liens intended
to be created by the Collateral Security Documents.
"Collateral Security Documents": the collective
reference to the Indenture, the Lessee Security Documents
and any other document pursuant to which a security interest
is granted to secure the Lessee Obligations or the Lender
Obligations.
"Columbia": the Columbia Gas Transmission
Corporation, a corporation organized under the laws of
the State of Delaware.
"Columbia Bankruptcy Proceeding": the proceeding
before the United States Bankruptcy Court for the
District of Delaware captioned as In re: The Columbia
Gas System Inc., and Columbia Gas Transmission
Corporation, Case Nos. 91-803 and 91-804.
"Columbia Facilities": the pipeline improvements and
other facilities constructed by Columbia pursuant to the
Columbia Precedent Agreement.
"Columbia FTS Agreement": the Amended and
Restated FTS Service Agreement, dated as of March 23,
1995, between Columbia and the Partnership, as
supplemented by a letter dated as of October 11, 1996,
and as the same may be further amended, supplemented or
otherwise modified from time to time in accordance with
the terms of such agreement and the Participation
Agreement.
"Columbia Precedent Agreement": the Precedent
Agreement between Columbia and the Partnership, dated
as of February 25, 1994, as amended by the Amending
Agreement, dated as of March 24, 1995 and supplemented
by a letter dated as of March 30, 1995, and as the same
may be further amended, supplemented or otherwise
modified from time to time in accordance with the terms
of such agreement and the Participation Agreement.
"Commercial Operation Date": the "Actual Commercial
Operation Date", as defined in the Power Purchase Agreement.
"Commitment": The respective amount of each Loan
Participant's and the Owner Participant's participation in
the Purchase Price required to be made available in part on
the Lease Closing Date, as provided in Section 2.1 of the
Participation Agreement.
"Commonly Controlled Entity": an entity, whether or
not incorporated, which is under common control with the
Partnership within the meaning of Section 414(b) or (c) of
the Code.
"Completion Account": the special account designated
by that name established by the Security Agent pursuant to
subsection 2.2 of the Security Deposit Agreement.
"Consent of the Power Purchaser": the Consent and
Agreement, dated April 10, 1995, entered into by the Power
Purchaser, the Partnership, GE Capital, the Security Agent
and the Owner Trustee, as amended and restated by the
Amended and Restated Consent of the Power Purchaser, dated
as of December 30, 1996 entered into by the Power Purchaser,
the Partnership, GE Capital, the Security Agent, the Owner
Trustee, the Administrative Agent and the Indenture Trustee,
and as the same may be further amended, supplemented or
otherwise modified from time to time.
"Consents to Assignment": the collective reference to
each Consent, substantially in the form of Exhibit B to the
Participation Agreement, which have been (or in the case of
each Additional Project Document, will be) executed and
delivered by each party (other than the Partnership) to each
Assigned Contract in respect of the Assignments.
"Construction Contract": the Amended and Restated
Turnkey Cogeneration Facility Agreement, dated as of
March 30, 1995 between the Contractor and the Partnership in
the form (including all amendments and clarification letters
relating thereto) delivered to GE Capital on the Initial
Loan Funding Date, together with the Raytheon Parent
Guaranty, as amended, supplemented or otherwise modified
from time to time.
"Construction Loan Agreement": the Construction Loan
Agreement and Lease Commitment, dated as of March 30, 1995,
among the Partnership, the General Partner and GE Capital.
The Construction Loan Agreement is being terminated on the
Lease Closing Date upon payment in full of all loans
outstanding thereunder on such date.
"Contest": with respect to any Tax, Lien, or claim, a
contest pursued in good faith and by appropriate judicial or
administrative proceedings diligently conducted, so long as
(i) adequate cash reserves have been established with
respect thereto, (ii) any Lien filed in connection therewith
shall have been removed from the record by the bonding of
such Lien by a reputable surety company satisfactory to the
Owner Participant and the Administrative Agent, or security
satisfactory to the Owner Participant and the Administrative
Agent is otherwise provided to assure the discharge of the
obligation thereunder and of any additional charge, penalty
or expense arising from or incurred as a result of such
contest, (iii) the failure to pay any such Tax, Lien or
claim during the pendency of such contest would not
otherwise have (nor could it reasonably be expected to have)
a Material Adverse Effect and (iv) the Person subject to any
such Tax, Lien or claim has no knowledge of any material
actual or proposed deficiency or additional assessment that
there is a substantial likelihood of being imposed if a
contest is pursued (but which might otherwise be avoided if
such contest were not pursued).
"Contingent Obligation": with respect to any Person,
any obligation of such Person guaranteeing or intended to
guarantee any Indebtedness, leases, dividends or other
obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of
such Person, whether or not contingent, (i) to purchase any
such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply
funds (a) for the purchase or payment of any such primary
obligation or (b) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure or hold
harmless the owner of such primary obligation against loss
in respect thereof; provided, however, that the term
Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course
of business.
"Contractor": Raytheon Engineers & Constructors, Inc.
(formerly known as United Engineers & Constructors Inc.
d/b/a Raytheon Engineers & Constructors), a Delaware
corporation.
"Contractual Obligation": as to any Person, any
provision of any security issued by such Person or of any
agreement, instrument or undertaking to which such Person is
a party or by which it or any of its property is bound.
"CPCN": the Certificate of Public Convenience and
Necessity granted to the Partnership pursuant to Sections
54A and 54B of Article 78, Public Service Commission Law, of
the Annotated Code of Maryland, by Order No. 71487 dated
October 6, 1994 and by Order No. 71529 dated October 27,
1994, as amended by Order No. 71644 dated December 16, 1994,
Order No. 72723 dated June 28, 1996, and Order No. 72880
dated September 12, 1996, each of the Maryland Commission,
but excluding the portion of such Certificate of Public
Convenience and Necessity transferred to PEPCO by Order No.
72880, dated September 12, 1996, of the Maryland Commission,
and as such certificate may be further amended from time to
time by the Maryland Commission.
"Credit Suisse": Credit Suisse, a bank organized and
existing under the laws of Switzerland, acting by and
through its New York Branch.
"Current Account": the special account designated by
that name established by the Security Agent pursuant to
subsection 2.2 of the Security Deposit Agreement.
"Date of Final Completion": the date on which:
(a) the Facility has achieved final
acceptance under the Construction Contract;
(b) no defects and/or deficiencies exist
that adversely affect the performance of the Facility
under the performance standards set forth in the
Construction Contract;
(c) the Partnership has received all as-
built drawings of the Facility, test data, and other
technical information required for the Partnership or
operator to operate and maintain the Facility;
(d) the Partnership has received all manuals
and instruction books necessary to operate and maintain
the Facility in a safe, efficient and effective manner;
(e) all special tools to be supplied by any
EPC Contractor or the Partnership have been delivered
to the Site;
(f) all EPC Contractors', contractors' and
subcontractors' personnel, supplies, equipment, waste
materials, rubbish and temporary facilities have been
removed from the Site;
(g) the Partnership has received from each
EPC Contractor (i) any waivers of liens and claims
relating to the Work which were not previously
delivered by such EPC Contractor, and (ii) final
waivers of all liens and claims by each subcontractor
or materialman of such EPC Contractor relating to the
Work;
(h) there are no significant unresolved
disputes, litigation or arbitration proceedings with
respect to any of the EPC Contracts;
(i) each EPC Contractor has performed all
provisions of and delivered all items required by the
relevant EPC Contract in a manner reasonably
satisfactory to the Partnership;
(j) The Owner Participant shall have
received a Final Completion Certificate, and if
requested by the Owner Participant, the Partnership and
the Owner Participant have received from each EPC
Contractor an executed copy of a completion
certificate, such completion certificate to be in form
and substance satisfactory to the Owner Participant and
the Independent Engineer;
(k) all Project Costs incurred in connection
with Final Completion of the Facility have been paid;
and
(l) the Commercial Operation Date has
occurred under the Power Purchase Agreement.
"Date of Substantial Completion": the date on
which:
(a) the Facility has achieved "Substantial Completion"
under Section 6.04 of the Construction Contract;
(b) no defects and/or deficiencies exist that
materially adversely affect the performance of the
Facility under the performance standards set forth in
the Construction Contract;
(c) the Partnership has received all manuals and
instruction books necessary to operate and maintain the
Facility in all material respects in a safe, efficient
and effective manner;
(d) all special tools to be supplied by any EPC
Contractor or the Partnership necessary to operate and
maintain the Facility in all material respects have
been delivered to the Site; and
(e) there are no significant unresolved disputes,
litigation or arbitration proceedings with respect to
any of the EPC Contracts.
"Debt Rate": the Eurodollar Rate or the Base Rate, as
the case may be, plus the Applicable Margin, or any other
interest rate applicable to the Loan Certificates from time
to time.
"Deed of Trust and Security Agreement": the Deed of
Trust and Security Agreement, dated as of March 30, 1995, as
amended by the two Partial Releases dated as of October 30,
1996 and as amended and restated by the Amended and Restated
Deed of Trust and Security Agreement, dated as of December
18, 1996, between the Partnership and Chicago Title
Insurance Company, as trustee for the use and benefit of the
Security Agent (for the benefit of GE Capital and the Owner
Trustee (and, by collateral assignment, the Indenture
Trustee)), substantially in the form of Exhibit T to the
Participation Agreement, as the same may be further amended,
supplemented or otherwise modified in accordance with its
terms from time to time.
"Default Rate": as to any Loans, the sum of (i) the
interest rate otherwise applicable to such Loans plus (ii)
two hundred basis points (2.0%) per annum.
"Development Loan Agreement": the Development Loan
Agreement, dated as of March 23, 1994, among the
Partnership, the General Partner, GE Capital (as agent and
as a lender) and the Contractor. The Development Loan
Agreement was terminated on the Initial Loan Funding Date
upon payment in full of the loans outstanding thereunder.
"Development Loan Closing Date": March 23, 1994.
"Development Security Letter of Credit": the Letter of
Credit referred to by that name in the recitals to the
Reimbursement Agreement.
"Discount Rate": the Treasury Index Rate.
"Distilled Water Facility": the distilled water
facility located on the Distilled Water Facility Premises
which was constructed pursuant to the Construction Contract,
as more particularly described in Schedule A to the Steam
Lease.
"Distilled Water Facility Business Plan": the
Distilled Water Facility Business Plan set forth in Schedule
8 to the Participation Agreement.
"Distilled Water Facility Premises": that portion of
the Site described in Schedule B to the Steam Lease, on
which the Distilled Water Facility is located.
"Distributable Cash Flow": for any period (including
any Quarterly Measurement Period), the amount, if any, by
which Project Revenues of the Partnership for such period
exceed the sum of (i) Project Expenses of the Partnership
for such period, plus (ii) payments of Rent for such period
plus (iii) payments of fees in respect of the Letter(s) of
Credit for such period, plus (iv) contributions to the
Operation and Maintenance Reserve Account for such period.
"Distribution Reserve Account": the special account
designated by that name established by the Security Agent
pursuant to subsection 2.2 of the Security Deposit
Agreement.
"Dollars" and "$": dollars in lawful currency of the
United States of America.
"Easement Agreements": each agreement set forth in
Schedule 11 to the Participation Agreement entered into
granting or assigning to the Partnership ownership of or
other rights in respect of any easement, license, right-of-
way or similar real property interest or right relating to
the Facility or the Site or to the transportation and
delivery of Fuel, water, electricity or steam to or from the
Facility or the Site or to ingress or egress to or from the
Facility or the Site.
"Easements": any easement, license, right-of-way or
similar real property interest or right that is the subject
of an Easement Agreement.
"Effluent Pipeline": the pipeline constructed pursuant
to the terms of the Effluent Water Agreement to transport
effluent water to the Facility.
"Effluent Water Agreement": the Treated Effluent Water
Purchase Agreement dated as of September 13, 1994 between
the Partnership and the County Commissioners of Charles
County, Maryland, together with the Water Easement
Maintenance Agreement, in the form (including all amendments
and clarification letters relating thereto) delivered to the
Owner Participant and the Administrative Agent on the Lease
Closing Date, as amended, supplemented or otherwise modified
from time to time in accordance with the terms of such
agreement and the Participation Agreement.
"Environmental Audit": each report or audit relating
to environmental conditions at the Site (including the
environmental reports of (i) Environmental Consulting &
Technology, Inc. ("ECT") dated September 23, 1993,
October 18, 1993, January 3, 1994, March 21, 1994 and
September 1994, (ii) International Engineers, Inc. dated
July 13, 1992 and December 17, 1992, (iii) CSC, Inc. dated
April 13, 1994 and October 10, 1994 and (iv) TPS
Technologies dated April 14, 1994 and the audit thereof by
ENVIRON Corporation dated January 11, 1995, as updated on
December 13, 1996).
"Environmental Law": as to any Person, any current or
future law, treaty, rule, code, ordinance, regulation,
permit, certificate, order, interpretation or license of any
Governmental Authority or any determination of an arbitrator
or a court or other Governmental Authority, relating to the
presence, use, generation, handling, treatment, storage,
transport, recycling, emission, spill, leak, seepage,
discharge, release, threatened release or disposal of
Hazardous Substances, the occurrence or remediation of any
discharge of Hazardous Substances, environmental protection
or any other environmental matter.
"Environmental Proceeding":
(a) any litigation, proceeding, consent order or
agreement under any Environmental Law whether judicial or
administrative (including receipt by the Partnership or
General Partner of any document) relating to:
(i) the happening of any event
involving the use, recycling, emission, spill, leak,
seepage, discharge, release, threatened release, clean-
up or remediation of any Hazardous Substance in such
quantities or under such conditions so as to require
under any Environmental Law removal or other remedial
actions which have not yet been taken; or
(ii) any complaint, order, citation
or notice filed or issued under any Environmental Law
by any Person (including, without limitation, the
United States Environmental Protection Agency) alleging
violation of any Environmental Law; or
(b) any notice from any Person of:
(i) any violation or alleged
violation of any Environmental Law or any allegation
that the Partnership may have any liability under any
Environmental Law; or
(ii) the commencement of any
environmental remediation or other similar remedial or
corrective activity pursuant to or in accordance with
any Environmental Law.
"EPA": the United States Environmental Protection Agency.
"EPC Contractor": the collective reference to the
Contractor and each party (other than the Partnership) to an
Additional Construction Contract.
"EPC Contracts": the collective reference to the
Construction Contract and each Additional Construction
Contract.
"Equity Collateral": the Equity Rent Reserve Sub-
Account, any funds, instruments, investments and securities
on deposit therein, and all proceeds of the foregoing.
"Equity Loan Facility": as such term is defined in the
Equity Loan Facility Letter Agreement.
"Equity Loan Facility Letter Agreement": the Letter
Agreement dated as of December 18, 1996 among GE Capital and
the Partners.
"Equity Loans": the loans, if any, to be made by GE
Capital to the Partners pursuant to the terms and conditions
of the Equity Loan Facility Letter Agreement.
"Equity Rent Reserve Sub-Account": the special sub-
account of the Rent Reserve Account designated by that name
established by the Security Agent pursuant to subsection 2.2
of the Security Deposit Agreement.
"ERISA": the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as
applied to a Eurodollar Loan, the aggregate (without
duplication) of the rates (expressed as a decimal fraction)
of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board or
other Governmental Authority having jurisdiction with
respect thereto), as now and from time to time hereafter in
effect, dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of the Board) maintained by a
member bank of the Federal Reserve System.
"Eurodollar Loans" or "Eurodollar Rate Loans": Loans
bearing interest at a rate based upon the Eurodollar Rate.
"Eurodollar Rate": means, with respect to each
Interest Period, a rate per annum (calculated on the basis
of a 360-day year and actual days elapsed) equal to
(a)(i) the average (rounded upwards, if necessary, to the
nearest 1/100 of 1%) of the offered rates which appear on
the Telerate Page 3750, British Bankers Association Interest
Settlement Rates (or such other system for the purpose of
displaying rates of leading reference banks in the London
interbank market, as mutually agreed by Credit Suisse and
the Owner Participant) as of 11:00 a.m. (London time) for
deposits in Dollars on the day two (2) London business days
prior to the first day of such Interest Period, or (ii) if
fewer than two such offered rates appear on such page which
are relevant to such Interest Period or other period, the
average (rounded upwards, if necessary, to the nearest 1/100
of 1%) of the rates at which Credit Suisse at approximately
11:00 a.m. (London time) on the day that is two (2) London
business days preceding such Interest Period is offered by
prime banks in the London interbank market for deposits in
Dollars for a period comparable to such Interest Period and
in an amount approximately equal to the principal amount of
the Loan scheduled to be outstanding during such Interest
Period, divided by (b) 1 minus the Eurocurrency Reserve
Requirements.
"Event of Loss": means any of the following events:
(i) the actual or constructive total loss of all or
substantially all of the Facility, or the condemnation,
confiscation or seizure of, or requisition of title to, or
requisition by any Governmental Authority (for a period
exceeding the lesser of six months or the remainder of the
Basic Term or any Renewal Term then in effect) of the use of
all or substantially all of the Facility; (ii) the cessation
or material impairment of the operation of the Facility as a
result of damage to the Facility or (iii) the loss, theft,
destruction or damage of, or condemnation, confiscation or
seizure of, or requisition of title to, or requisition by
any Governmental Authority of the use of, such portion of
the Project as shall render the Facility unable to operate
at the level of operation prior to the occurrence of such
event or as a Qualifying Facility (in a situation in which
clause (i) is not applicable).
"Event of Regulation": The Owner Trustee, the Owner
Participant or any of their respective Affiliates becoming a
Public Utility solely by reason of the execution, delivery
and performance of the Lease Documents or the ownership or
leasing of the Facility by the Owner Trustee under the Lease
Documents; provided, that no event resulting solely from a
Special QF Loss Event shall be deemed an Event of
Regulation.
"Excepted Payments": collectively, (i) all payments of
indemnities, costs and expenses to which the Owner Trustee
in its individual capacity, the Owner Participant or any of
their respective Affiliates (or the respective successors,
assigns, agents, officers, directors or employees of any of
the foregoing), is entitled under the Participation
Agreement or any other Transaction Document; (ii) all
indemnity payments to the Owner Trustee and the Owner
Participant or any of their respective Affiliates (or the
respective successors, assigns, agents, officers, directors
or employees of any of the foregoing) pursuant to the Tax
Indemnity Agreement; (iii) all amounts payable to the Owner
Participant by any transferee of the Owner Participant as
the purchase price for the Owner Participant Interest; (iv)
all insurance proceeds under liability policies payable to
the Owner Trustee in its individual capacity, the Owner
Participant or any of their respective Affiliates, or any
officer, director, employee or agent of any of the
foregoing; (v) all insurance proceeds under policies
maintained by the Owner Trustee or the Owner Participant and
not required to be maintained by the Lessee under the
Participation Agreement or any other Transaction Document;
(vi) all amounts payable (whether or not constituting
Supplemental Rent) (A) to the Owner Trustee in its
individual capacity or to the Owner Participant or any of
their respective Affiliates (or the respective successors,
assigns, agents, officers, directors or employees of any of
the foregoing) pursuant to Section 8 of the Participation
Agreement, or (B) to the Owner Trustee in its individual or
trust capacities, or to the Owner Participant, pursuant to
Section 13.5 of the Participation Agreement; (vii) all
amounts, whether or not constituting Supplemental Rent,
payable under any Transaction Document to reimburse the
Owner Trustee or the Owner Participant or any of their
respective Affiliates (including the reasonable expenses
incurred in connection with any such payment) for performing
or complying with any of the obligations of the Lessee
thereunder, to the extent such Person is permitted to
perform or comply with any such obligations; (viii) that
portion of any payment of Basic Rent attributable to any
Adjustments pursuant to Section 3(d) of the Lease; (ix)
where any amount payable to the Owner Participant or the
Owner Trustee or any of their respective Affiliates (or the
respective successors, assigns, agents, officers, directors
or employees of any of the foregoing) is expressed to be
payable on an "After-Tax Basis", the increment to the
underlying payment obligation arising by virtue of the
operation of the definition of "After-Tax Basis" and, where
any amounts is payable to any other Person and it is
provided in the Transaction Documents that such amount is to
be paid on the basis of no after-tax cost to the Owner
Participant or the Owner Trustee, the amount actually paid
to the Owner Participant or the Owner Trustee pursuant to
such provision; (x) any payments in respect of interest to
the extent attributable to payments referred to in the
preceding clauses (i) through (ix) above; (xi) the proceeds
of enforcement of any Excepted Payment; (xii) all amounts
properly distributed or paid to the Owner Participant, the
Owner Trustee (either in its individual or trust capacity)
or any of their respective Affiliates or the respective
successors, assigns, agents, officers, directors or
employees of any of the foregoing pursuant to and in
accordance with the applicable provisions of the Security
Deposit Agreement; and (xiii) all amounts constituting
Equity Collateral. Excepted Payments shall also mean (x)
with respect to any Excepted Payments owing to any Person,
the right of such Person to make demand for and receive and
retain payment of such Excepted Payments and to commence an
action at law to obtain and enforce any judgment with
respect to such Excepted Payment, provided that such Person
shall not seek to obtain or enforce any Lien with respect
thereto on any property of the Lessee or the Owner Trustee;
and (y) all rights and privileges expressly reserved to the
Owner Trustee or the Owner Participant exclusively or
jointly with the Indenture Trustee pursuant to Section 3.10
of the Indenture.
"Expenses": liabilities, obligations, losses, damages,
penalties, claims (including, without limitation, claims
involving liability in tort, strict or otherwise), actions,
suits, judgments, out-of-pocket costs, expenses and
disbursements (including reasonable legal and other
professional fees and expenses and costs of investigation)
of any kind and nature whatsoever.
"Facility": the (a) gas-fired cogeneration facility
having a net rating of approximately 230 megawatts (measured
at the Site) located on the Site which was constructed
pursuant to the Construction Contract, including all
equipment and systems set forth in the Construction
Contract, but excluding any property that has been
transferred by the Partnership to the Power Purchaser and
(b) the Distilled Water Facility, all as more particularly
described in Schedule A to the Facility Lease.
"Facility Lease": the Facility Lease, dated as of
December 18, 1996, between the Lessor and the Lessee,
substantially in the form of Exhibit J to the Participation
Agreement, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with its
terms.
"Fair Market Rental Value": the value, which shall not
in any event be less than zero, that would be obtained in an
arm's-length transaction for cash between an informed and
willing lessee and an informed and willing lessor, neither
of whom is under any compulsion to lease, for the use of the
Facility for the appropriate period. Except as required to
be determined pursuant to Section 15 of the Facility Lease,
Fair Market Rental Value shall be determined on the
assumptions that: (i) the Facility is in at least the
condition and state of repair required under Section 8(a) of
the Facility Lease; (ii) the Partnership is in compliance
with the requirements of the Transaction Documents; and
(iii) during such lease period, Basic Rent will be payable
in equal quarterly installments in arrears.
"Fair Market Sales Value": the value, which shall not
in any event be less than zero, that would be obtained in an
arm's-length transaction for cash between an informed and
willing purchaser and an informed and willing seller,
neither of whom is under any compulsion to purchase or sell,
respectively, for the ownership of the Facility. Except as
required to be determined pursuant to Sections 9 and 15 of
the Facility Lease, Fair Market Sales Value of the Facility
shall be determined on the assumptions that: (i) the
Facility is in at least the condition and state of repair
required under Section 8(a) of the Facility Lease and
(ii) the Partnership is in compliance with the requirements
of the Transaction Documents.
"Federal Power Act": the Federal Power Act of 1935, as
amended from time to time.
"FERC": the Federal Energy Regulatory Commission or
any successor or analogous federal Governmental Authority.
"Final Completion": final completion of the Facility,
which shall be deemed to have occurred when the Date of
Final Completion for the Facility shall have occurred and
the conditions described in clauses (a) through (l) of the
definition of "Date of Final Completion" shall have been
satisfied.
"Final Completion Certificate": a certificate
substantially in the form of Exhibit E to the Participation
Agreement, signed by the Partnership.
"Final Maturity Date": with regard to the Lease Debt,
shall mean the Payment Date occurring on October 31, 2014.
"Financing Documents": the collective reference to the
Lease Documents, the Collateral Security Documents, the
Letters of Credit, the Reimbursement Agreement and the Trust
Agreement.
"Fixed Rate Renewal Basic Rent": for each three-month
period during the Fixed Rate Renewal Term, if any, an amount
equal to 50% of the average of the installments of Basic
Rent payable by the Lessee during the Basic Term.
"Fixed Rate Renewal Option": as defined in
Section 12(a) of the Facility Lease.
"Fixed Rate Renewal Term": as defined in Section 12(a)
of the Facility Lease.
"Fuel": all fuel purchased or acquired by the
Partnership, or on the Partnership's behalf, as fuel for the
operation of the Facility, including without limitation all
natural gas purchased, acquired or transported pursuant to
the Gas Contracts.
"Fuel Consultant": C.C. Pace Resources, Inc.
"Fuel Management Agreement": the Fuel Supply
Management Agreement, dated as of March 30, 1995, between
Cogen Development Company, a Michigan corporation, and the
Partnership in the form (including all amendment and
clarification letters relating thereto) delivered to the
Owner Participant and the Administrative Agent on the Lease
Closing Date, as amended, supplemented, or otherwise
modified from time to time in accordance with the terms of
such agreement and the Participation Agreement.
"Fuel Management Guaranty": the Guaranty of the Fuel
Supply Management Agreement, dated as of March 30, 1995, by
MCN Investment Corporation, a Michigan corporation, in favor
of the Partnership, as amended, supplemented or otherwise
modified from time to time in accordance with the terms of
such agreement and the Participation Agreement.
"Fuel Management Plan": the Fuel Management Plan set
forth in Schedule 7 to the Participation Agreement.
"GAAP": generally accepted accounting principles as in
effect from time to time in the country under whose laws the
relevant Person is organized.
"Gas Contracts": the collective reference to the Gas
Supply Contract, the Fuel Management Agreement, the Gas
Supply Guaranty, the Fuel Management Guaranty and the Gas
Transportation Contracts.
"Gas Supplier": Cogen Development Company, a Michigan
corporation.
"Gas Supply Contract": the Gas Sales Agreement, dated
as of March 30, 1995, between the Gas Supplier and the
Partnership, in the form (including all amendments and
clarification letters relating thereto) delivered to the
Owner Participant and the Administrative Agent on the Lease
Closing Date and each other agreement entered into after the
Lease Closing Date providing for the transportation of Fuel
to the Facility, as amended, supplemented or otherwise
modified from time to time in accordance with the terms of
such agreement and the Participation Agreement.
"Gas Supply Guaranty": the Guaranty of the Gas Sales
Agreement, dated as of March 30, 1995, by MCN Corporation, a
Michigan corporation, in favor of the Partnership, as
amended, supplemented or otherwise modified from time to
time in accordance with the terms of such agreement and the
Participation Agreement.
"Gas Transportation Contracts": the Columbia Precedent
Agreement, the Columbia FTS Agreement, the CLNG Agreement
and the Washington LDC Agreement and each other agreement
entered into after the Lease Closing Date providing for the
transportation of fuel to the Facility.
"Gas Transporters": the collective reference to
Columbia, CLNG and Washington.
"GE Capital": General Electric Capital Corporation, a
New York corporation.
"General Partner": Panda Brandywine Corporation, a
Delaware corporation.
"General Partner Pledge Agreement": the General
Partner Pledge Agreement, dated as of March 30, 1995, as
amended and restated by the Amended and Restated General
Partner Pledge Agreement, dated as of December 18, 1996,
between the General Partner and the Security Agent, for the
benefit of GE Capital and the Owner Trustee (and, by
collateral assignment, the Indenture Trustee), substantially
in the form of Exhibit M to the Participation Agreement, as
the same may be further amended, supplemented or otherwise
modified from time to time in accordance with the terms of
such agreement and the Participation Agreement.
"GFC": Greenwich Funding Corporation, a Delaware
corporation.
"GNP Deflator": as defined in the Power Purchase
Agreement.
"Governmental Action": all permits, authorizations,
registrations, consents, approvals, waivers, exceptions,
variances, claims, orders, judgments and decrees, licenses,
exemptions, publications (to the extent legally binding upon
the Partnership, any other Participant or the Project),
filings (other than filings of a purely ministerial nature),
notices to and declarations of or with any Governmental
Authority and shall include, without limitation, all siting,
environmental, construction and operating permits and
licenses that are required for the construction, use and
operation of the Project.
"Governmental Authority": any nation or government,
any state or other political subdivision thereof, and any
entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Granting Clause Document": as defined in the Granting
Clause of the Indenture.
"Hazardous Substance": (a) any toxic, caustic or
otherwise hazardous substance, including, without
limitation, petroleum, its derivatives, by-products and
other hydrocarbons, solid wastes, contaminants,
polychlorinated biphenyls, paint containing lead, urea,
formaldehyde foam insulation, asbestos and discharge of
sewage or effluent, whether or not regulated under Federal,
state or local environmental statutes, ordinance, rules,
regulations or orders; (b) any "hazardous substance,"
"extremely hazardous substance," "hazardous waste," "solid
waste," "pollutant," "toxic pollutant," "toxic substance,"
"oil" or "contaminant" as those terms are used in or defined
pursuant to any Environmental Law of the United States, the
State of Maryland, the District of Columbia or relevant
local government, including, without limitation, the
Comprehensive Environmental Response, Compensation, and
Liability Act, as amended, 42 U.S.C. Ss. 9601 et seq., the
Safe Drinking Water Act, as amended, 42 U.S.C. Ss. 300f et
seq., the Oil Pollution Act, as amended, 33 U.S.C. Ss. 2701
et seq., the Federal Clean Air Act, as amended, 42 U.S.C.
Ss. 7401 et seq., the Solid Waste Disposal Act, as amended,
42 U.S.C. Ss. 6901 et seq., the Toxic Substances Control Act,
as amended, 15 U.S.C. Ss. 2601 et seq., the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Ss. 1251 et
seq., the Emergency Planning and Community Right to-Know
Act, as amended, 42 U.S.C. Ss. 11001 et seq., and any
regulations promulgated pursuant to the foregoing statutes;
and (c) any other substance, waste, pollutant, or material,
the presence, use, handling, generation, treatment, storage,
disposal, transport, recycling, emission, spill, leak,
seepage, discharge, release or threatened release of which
is regulated by, or could result in the imposition of
liability under, any statute, ordinance, rule or regulation
of the United States, the State of Maryland, the District of
Columbia, relevant local government or other applicable
Governmental Authority, including, but not limited to, the
foregoing cited statutes and rules.
"Highly Qualified Transferee": a United States Person
(a) rated at least (i) "AA" or its equivalent by Standard &
Poor's Ratings Group or (ii) "Aa" or better by Moody's
Investors Service, Inc., (b) having a minimum net worth of
$1 billion and (c) who expressly assumes the obligations of
the Owner Participant under Section 4.2(b) of the
Participation Agreement.
"Holders" or "Holders of the Loan Certificates": the
Loan Participants.
"Holding Company Act": the Public Utility Holding
Company Act of 1935, as amended from time to time.
"Holdings": Panda Interholding Corporation, a Delaware
corporation.
"Indebtedness": as to any Person, (a) indebtedness of
such Person for borrowed money or for the deferred purchase
price of property or services (other than obligations under
agreements for the purchase of goods and services in the
normal course of business which are not more than 60 days
past due); (b) obligations of such Person under Capital
Leases; (c) Contingent Obligations of such Person, including
obligations of such Person under direct or indirect
guarantees in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness
or obligations of others of the kinds referred to in clause
(a) or (b) above (other than endorsements of negotiable
instruments in the ordinary course of business); and (d) any
obligation of such Person or a Commonly Controlled Entity to
a MultiEmployer Plan.
"Indemnitee": Each of GE Capital (as Owner
Participant, issuer of the Letters of Credit or otherwise),
Fleet National Bank (formerly known as Shawmut Bank of
Connecticut, National Association), in its individual
capacity, as Owner Trustee and Lessor and as Security Agent,
Credit Suisse, in its individual capacity and as
Administrative Agent, First Security Bank, National
Association, in its individual capacity and as Indenture
Trustee, each of the Loan Participants and LOC Participants
and any successor, Affiliate, assign, agent, officer,
shareholder, director and employee of any of the foregoing,
the Trust Estate and the Trust Indenture Estate.
"Indenture": the Trust Indenture and Security
Agreement, dated as of December 18, 1996, by Fleet National
Bank, in its capacity as Owner Trustee, in favor of First
Security Bank, National Association,, in its capacity as
Indenture Trustee, substantially in the form of Exhibit I to
the Participation Agreement, and as the same may be amended,
supplemented or otherwise modified from time to time.
"Indenture Default": any event or condition, which with
the lapse of time or the giving of notice, or both, would
constitute an Indenture Event of Default.
"Indenture Event of Default": each of the events
specified in Section 6.1 of the Indenture.
"Indenture Property": as defined in the Granting Clause
of the Indenture.
"Indenture Trustee": First Security Bank, National
Association, a national banking association, as indenture
trustee under the Indenture, and any successor trustee
thereunder.
"Indenture Trustee's Liens": Any Lien on the Trust
Indenture Estate resulting from (i) claims against the
Indenture Trustee not related to the administration of the
Trust Indenture Estate or any transactions pursuant to the
Indenture or any document included in the Trust Indenture
Estate, (ii) any act or omission of the Indenture Trustee
which is not related to the transactions contemplated by the
Transaction Documents or is in violation of any of the terms
of the Transaction Documents or (iii) Taxes imposed against
the Indenture Trustee in its individual capacity in respect
of which the Lessee has not indemnified (and is not
obligated to indemnify) the Indenture Trustee in such
capacity.
"Initial Construction Completion Deposit": $5,300,796.
"Independent Engineer": as defined in subsection 6.7
of the Participation Agreement.
"Initial Loan Funding Date": April 10, 1995.
"Initial Operation and Maintenance Reserve Deposit":
$1,000,000.
"Initial QF Standards Measurement Period": (a) the 12-
month period beginning with the date the Facility first
produces electricity or (b) any successor or analogous
period specified under the PURPA Regulations for the purpose
of determining whether the Facility is in compliance with
the QF Operating Standard and the QF Efficiency Standard and
that includes the date the Facility first produces
electricity.
"Initial Rent Reserve Deposit": $2,400,000.
"Insurance and Condemnation Proceeds": as such term is
defined in the Security Deposit Agreement.
"Insurance and Condemnation Proceeds Account": the
special account designated by that name established by the
Security Agent pursuant to subsection 2.2 of the Security
Deposit Agreement.
"Insurance and Condemnation Proceeds Deposits": as
such term is defined in the Security Deposit Agreement.
"Insurance Indemnitee": Each of GE Capital (as
construction lender, Owner Participant, issuer of the
Letters of Credit or otherwise), Fleet National Bank
(formerly known as Shawmut Bank of Connecticut, National
Association), in its individual capacity, as Owner Trustee
and Lessor and as Security Agent, Credit Suisse, New York
Branch, in its individual capacity and as Administrative
Agent, First Security Bank, National Association, in its
individual capacity and as Indenture Trustee, each of the
Loan Participants and any successor of any of the foregoing,
the Trust Estate and the Trust Indenture Estate.
"Interconnection Letter of Credit": the Letter of
Credit referred to by that name in subsection 2.1(b) of the
Reimbursement Agreement.
"Interest Hedging Account": the special account
designated by that name established by the Security Agent
pursuant to subsection 2.2 of the Security Deposit
Agreement.
"Interest Hedging Agreement": shall mean the Master
Agreement, dated as of December 18, 1996, entered into by
the Owner Trustee and the Interest Hedging Counterparty, as
amended, supplemented or otherwise modified from time to
time to the extent permitted by the Transaction Documents
and with the prior written consent of the Administrative
Agent.
"Interest Hedging Counterparty": shall mean Credit
Suisse, or, with the prior written consent of the Administrative
Agent and the Owner Participant, any successor or assign thereof
party to the Interest Hedging Agreement.
"Interest Hedging Obligations": shall mean all
indebtedness, liabilities and obligations of the Owner
Trustee to the Interest Hedging Counterparty under the
Interest Hedging Agreement.
"Interest Payment Date": Payment Date.
"Interest Period": With respect to any Eurodollar
Loan, each period commencing on the date such Eurodollar
Loan is made or converted from a Base Rate Loan or the last
day of the next preceding Interest Period for such Loan and
ending on the next succeeding Payment Date; provided that
each Interest Period that would otherwise end on a day which
is not a Business Day shall end on the next succeeding
Business Day (or, if such next succeeding Business Day falls
in the next succeeding calendar month, on the next preceding
Business Day) and any Interest Period which would otherwise
extend beyond the Final Maturity Date of the Loan
Certificates shall end on the Final Maturity Date.
"Law": see "Applicable Law".
"Lease Closing Date": the date set forth in the Lease
Closing Notice as the date on which the Facility shall be
conveyed and transferred to the Owner Trustee.
"Lease Closing Notice": the notice of closing
delivered pursuant to subsection 5.1 of the Construction
Loan Agreement substantially in the form of Exhibit G to the
Construction Loan Agreement.
"Lease Debt": the indebtedness evidenced by the Loan
Certificates.
"Lease Default": any of the events specified in
Section 14 of the Facility Lease, whether or not any
requirement for the giving of notice, the lapse of time, or
both, or for the happening of any other condition has been
satisfied.
"Lease Documents": the collective reference to the
Participation Agreement, the Indenture, the Loan
Certificates, the Tax Indemnity Agreement, the Bill of Sale,
the Site Lease, the Site Sublease, the Present Assignment
and the Facility Lease.
"Lease Default": any event or condition, which with
the lapse of time or the giving of notice, or both, would
constitute a Lease Event of Default.
"Lease Event of Default": as defined in Section 14 of
the Facility Lease.
"Lease Financing": the lease of the Facility pursuant
to the Facility Lease and consummation of the transactions
contemplated by the Lease Documents and the Financing
Documents.
"Lease Term": the Basic Term and, if the Facility
Lease is renewed pursuant to Sections 12 and 13 of the
Facility Lease, each Renewal Term.
"Lease Termination Date": the last day of the Lease
Term (whether occurring by reason of a termination or
expiration of the Lease Term).
"Lease Year": initially, the period commencing on the
Lease Closing Date and ending on the first anniversary
thereof and, thereafter, each yearly period commencing on
the last day of the prior Lease Year and ending twelve
months thereafter, until the Lease Termination Date.
"Lender Obligations": as defined in the Granting Clause
of the Indenture.
"Lenders Title Company": Stewart Title Insurance
Company, or such other title insurance company approved by
the Administrative Agent, to insure the priority of the Lien
of the Deed of Trust and Security Agreement for the benefit
of the Loan Participants on (i) the Site and (ii) the
Easements.
"Lessee": the Partnership, as lessee under the
Facility Lease.
"Lessee Collateral": the collective reference to all
real and personal property, tangible and intangible, and the
proceeds thereof, subjected from time to time to the Liens
intended to be created by the Lessee Security Documents to
secure the Lessee Obligations.
"Lessee Obligations": all the unpaid principal amount
of, and accrued interest on (including, without limitation,
interest accruing after the maturity of the LOC
Reimbursement Obligations and interest accruing after the
filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating
to the Partnership, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding),
the LOC Reimbursement Obligations, all Rent and other
obligations payable by the Partnership under the Facility
Lease and all other obligations and liabilities of the
Partnership and the Partners to GE Capital, the Owner
Trustee, the Security Agent, the Indenture Trustee, the
Administrative Agent or any other Indemnitee, whether direct
or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise
under, out of, or in connection with the Participation
Agreement, the Reimbursement Agreement, the Facility Lease,
the Collateral Security Documents or any other Financing
Document and any other document made, delivered or given in
connection therewith or herewith, whether on account of
principal, interest, reimbursement obligations, fees,
indemnitees, costs, expenses (including, without limitation,
fees and disbursements of counsel) or otherwise.
"Lessee Security Documents": the collective reference
to the Deed of Trust and Security Agreement, the Security
Agreement, the Security Deposit Agreement, the Ascending
Letter of Credit Pledge Agreement, the Steam Lessee Security
Agreement, the Pledge Agreements, the Assignments, the
Consents to Assignment, each assignment (or consent to
assignment) of an Easement Agreement, and any other
agreement or instrument now or hereafter entered into by the
Partnership or any other Person which secures the payment of
the Lessee Obligations.
"Lessor": the Owner Trustee, as lessor under the
Facility Lease.
"Lessor Collateral": as defined in the recitals of the
Security Deposit Agreement.
"Lessor's Cost": $217,488,645.
"Lessor's Estate": the Trust Estate.
"Lessor's Liens": Liens against the Facility or the
Site that result from acts of, or any failure to act by, or
as a result of (a) claims against, the Lessor unrelated to
the ownership of the Facility or any other part of the
Project, its status as Lessor under the Facility Lease, its
interest in the Site Lease or the transactions contemplated
by the Transaction Documents, (b) Taxes imposed against the
Owner Participant which are not indemnified against by the
Lessee pursuant to the Tax Indemnity Agreement or any other
Transaction Document, or (c) claims against the Owner
Participant arising out of the transfer by the Owner
Participant of its interest in the Project other than a
transfer pursuant to Section 4.2(d) of the Participation
Agreement.
"Letter of Credit Commitment": $7,330,000, as the same
may be reduced pursuant to subsection 2.1(d) of the
Reimbursement Agreement.
"Letter of Credit Commitment Period": the period from
and including the date of the Construction Loan Agreement to
and including the Letter of Credit Commitment Termination
Date.
"Letter of Credit Commitment Termination Date": the
fifteenth anniversary of the Basic Term Commencement Date or
such earlier date on which the Letter of Credit Commitment
shall terminate.
"Letter of Credit Issuance Termination Date": the date
occurring ten days after the later of December 31, 2000 and
the fourth anniversary of the Commercial Operation Date, or
such earlier date on which the Letter of Credit Commitment
shall terminate.
"Letters of Credit": the PEPCO Letters of Credit.
"Lien": any mortgage, security interest, pledge,
hypothecation, encumbrance or lien (statutory or other) of
any kind or nature whatsoever (including, without
limitation, any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any
Maryland construction lien or any financing lease having
substantially the same economic effect as any such
agreement, the filing of any statement under the Uniform
Commercial Code or comparable law of any jurisdiction and
any right of first refusal or option to purchase granted to
the Power Purchaser in the Power Purchase Agreement or the
Transfer Agreement).
"Limited Partner": Panda Energy Corporation, a
Delaware corporation.
"Limited Partner Pledge Agreement": the Limited
Partner Pledge Agreement, dated as of March 30, 1995, as
amended and restated by the Amended and Restated Limited
Partner Pledge Agreement, dated as of December 18, 1996,
between the Limited Partner and the Security Agent, for the
benefit of GE Capital and the Owner Trustee (and, by
collateral assignment, the Indenture Trustee), substantially
in the form of Exhibit N to the Participation Agreement, as
the same may be further amended, supplemented or otherwise
modified from time to time in accordance with the terms of
such agreement and the Participation Agreement.
"LNG": liquified natural gas.
"LNG Account": as defined in subsection 6.33 of the
Participation Agreement.
"Loan Certificate": a loan certificate substantially
in the form set forth in Section 2.1 of the Indenture,
issued by the Owner Trustee pursuant to and as provided in
the Indenture, and including any loan certificate issued in
exchange for or replacement of a Loan Certificate pursuant
to the provisions of the Indenture.
"Loan Participants": the parties identified on
Schedule I to the Participation Agreement as Loan
Participants and their successors and permitted assigns and
any other Person in whose name a Loan Certificate shall be
registered as payee with the Indenture Trustee.
"Loans": the non-recourse loans with respect to the
Facility made by each Loan Participant to the Owner Trustee
pursuant to Section 2.1(i) of the Participation Agreement
(including any Accretion Amount capitalized and made a part
of the principal amount of such loans pursuant to Section
2.2(b) of the Indenture.
"LOC Beneficiary": the Power Purchaser.
"LOC Fee Account": the special account designated by
that name established by the Security Agent pursuant to
subsection 2.2 of the Security Deposit Agreement.
"LOC Fee Payment Date": as defined in subsection 2.3
(b) of the Reimbursement Agreement.
"LOC Participant": as defined in the preamble to the
LOC Participation Agreement.
"LOC Participation Agreement": each Letter of Credit
Participation Agreement between General Electric Capital
Corporation and an LOC Participant party thereto.
"LOC Reimbursement Obligations": as defined in
subsection 2.2 of the Reimbursement Agreement.
Majority Loan Participants" or "Majority in Interest of
Loan Certificate Holders": as of a particular date of
determination, the Holders of more than 50% of the aggregate
unpaid principal amount of all Loan Certificates outstanding
as of such date.
"Maryland Commission": the Maryland Public Service
Commission.
"Maryland Commission Order": Order No. 72723 dated
June 28, 1996 of the Maryland Commission.
"Material Adverse Effect": a material adverse effect
upon (i) the business, operations, properties, assets,
prospects or condition (financial or otherwise) of the
Partnership, any Partner or the Project, (ii) the value,
validity, perfection and enforceability of the Liens granted
to the Security Agent, for the benefit of the Owner
Participant and the Owner Trustee (and, by collateral
assignment, the Indenture Trustee), under the Collateral
Security Documents, (iii) the ability of GE Capital, the
Owner Trustee, the Administrative Agent, the Indenture
Trustee or the Security Agent to enforce any of the Lessee
Obligations or Lender Obligations or any of their respective
rights and remedies under the Transaction Documents or (iv)
the ability of any Specified Participant to perform any of
its material obligations under the Transaction Documents to
which it is a party, including but not limited to the timely
payment of Rent.
"Modification": (a) any addition, alteration,
improvement or modification to the Facility, other than
original, substitute or replacement parts incorporated into
the Facility, and (b) the addition, betterment or
enlargement of any property constituting part of the
Facility or the replacement of any such property with other
property, irrespective of whether (i) such replacement
property constitutes an enlargement or betterment of the
property that it replaces, (ii) the cost of such addition,
betterment, enlargement or replacement is or may be
capitalized, or (iii) such addition, betterment or
enlargement is or is not included or reflected in the plans
and specifications for the Facility, as built.
"Monthly QF Status Certificate": a certificate of an
Authorized Officer of the General Partner stating whether
the Facility met the QF Efficiency Standard and the QF
Operating Standard for the period covered by such
certificate.
"Monthly Transfer Date": as defined in subsection 4.2
of the Security Deposit Agreement.
"Multiemployer Plan": a Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"Net Economic Return": The Owner Participant's
expected net after-tax return on investment and after-tax
net income resulting from the transactions described in and
contemplated by the Participation Agreement and the Lease
Documents based on the amount of Basic Rent during the Basic
Term equal to the percentages of Lessor's Cost set forth on
Schedule 6 to the Participation Agreement and based on the
assumptions set forth in Schedule 10 to the Participation
Agreement and the Tax Indemnity Agreement; provided,
however, that in determining the amount of increase or
decrease required to preserve the Owner Participant's Net
Economic Return, it is intended that the Owner Participant's
net after-tax return on investment and after-tax net income
shall each be maintained (or where one such component must
be enhanced to preserve the other component, enhanced).
"Non-Material Agreements": (i) short term agreements
entered into in the ordinary course of business in
accordance with the provisions of the Fuel Management Plan,
(ii) agreements entered into by the Partnership in the
ordinary course of business with environmental consultants,
public relations consultants, financial consultants,
engineering consultants and legal counsel for the Project,
and (iii) agreements (other than those described in (i) and
(ii)) entered into by the Partnership in the ordinary course
of business under which the Partnership shall have
obligations not in excess of $25,000 under any such
agreement or $50,000 in the aggregate as to all such
agreements in any fiscal year, excluding, however, any
agreement providing for non-monetary obligations of the
Partnership the performance of which could reasonably be
expected to have a Material Adverse Effect. For purposes of
this definition, indemnity obligations of the Partnership
subject to a maximum dollar amount shall be computed at such
amount, and all other indemnity obligations of the
Partnership shall be computed at the amount thereof which
could, at the time such agreement is entered into,
reasonably be expected to become due and payable.
"Non-Severable Modification": any Modification that is
not a Severable Modification.
"O&M Letter of Credit": the Letter of Credit referred
to by that name in subsection 2.1(b) of the Reimbursement
Agreement.
"Operating Budget": as defined in subsection 6.9(e) of
the Participation Agreement.
"Operating Cash Flow": for any three month period
(including any Quarterly Measurement Period), the amount by
which Project Revenues for such period exceed the sum of (i)
Project Expenses and (ii) fees payable pursuant to
subsections 2.3(b) and (c) of the Reimbursement Agreement,
for such period.
"Operating Cash Flow Ratio": as of any date of
determination, the quotient obtained by dividing Operating
Cash Flow for the rolling three-month period ending on the
last calendar day of the preceding month by the sum of the
Basic Rent payable on the next succeeding Basic Rent Payment
Date.
"Operating Projections": the operating projections
attached as Schedule 4 to the Participation Agreement.
"Operation and Maintenance Agreement": the Operation
and Maintenance Agreement, dated as of December 7, 1994
between the Operator and the Partnership, in the form
(including all amendments and clarification letters relating
thereto) delivered to the Owner Participant and the
Administrative Agent on the Lease Closing Date, as amended,
supplemented or otherwise modified from time to time in
accordance with the terms of such agreement, the
Participation Agreement and the Power Purchase Agreement.
"Operation and Maintenance Reserve Account": the
special account designated by that name established by the
Security Agent pursuant to subsection 2.2 of the Security
Deposit Agreement.
"Operator": Ogden Brandywine Operations, Inc., a
corporation organized under the laws of the State of
Delaware or such other operator of the Facility engaged by
Lessee in accordance with the terms of the Participation
Agreement.
"Overdue Rate": at any time, the highest of (i) 12.0%
per annum, (ii) the rate of interest then applicable to the
Lease Debt plus 200 basis points and (ii) the Base Rate plus
750 basis points.
"Owner Participant": General Electric Capital
Corporation, a New York corporation, and each other person
or persons that may from time to time become a party to the
Participation Agreement pursuant to the terms thereof, and
their respective permitted successors and assignees.
"Owner Participant Interest": the interest of the
Owner Participant under the Trust Agreement.
"Owner Trustee": Fleet National Bank (formerly known
as Shawmut Bank Connecticut, National Association), a
national banking association, not in its individual
capacity, but solely as trustee under the Trust Agreement,
and any permitted successor trustee thereunder.
"Owner Trustee Obligations": as defined in the Granting
Clause of the Indenture.
"Panda": Panda Energy Corporation, a corporation
organized under the laws of the State of Texas.
"Participants": collectively, the Partnership, the
Limited Partner, the General Partner, Panda, Holdings, the
Contractor, the Power Purchaser, the Gas Supplier, the Gas
Transporters and each other Person who is a party to a
Project Document.
"Participation Agreement": the Participation
Agreement, dated as of December 18, 1996 among
Panda-Brandywine, L.P., Panda Brandywine Corporation,
General Electric Capital Corporation, as Owner Participant,
Fleet National Bank, as Owner Trustee and Security Agent,
First Security Bank, National Association, as Indenture
Trustee, Credit Suisse, as Administrative Agent and the
other entities listed on Schedule I thereto, as Loan
Participants.
"Partners": collectively, the General Partner and the
Limited Partner.
"Partnership": Panda-Brandywine L.P., a Delaware
limited partnership.
"Partnership Agreement": the Agreement of Limited
Partnership of Panda-Brandywine L.P., dated as of March 25,
1991, between the General Partner and the Limited Partner,
as amended by Amendment No. 1 thereto dated as of December
2, 1993 and Amendment No. 2 thereto dated as of December 2,
1994, in the form delivered to Owner Participant and
Administrative Agent on the Lease Closing Date, as amended,
supplemented or otherwise modified from time to time in
accordance with the terms of such agreement and the
Participation Agreement.
"Partnership Security Account": the special account
designated by that name established by the Security Agent
pursuant to subsection 2.2 of the Security Deposit
Agreement.
"Partnership's Pro Rata Share": 30%.
"Parts": appliances, parts, instruments,
appurtenances, accessories and equipment of whatever nature,
whether or not constituting Modifications.
"Payment Date": January 31, 1997 and each April 30,
July 31, October 31, and January 31, thereafter until the
Loan Certificates are paid in full.
"PBGC": the Pension Benefit Guaranty Corporation.
"PEII": Panda Energy International Inc., a Texas
corporation.
"PEPCO Closing Certificate": the certificate,
delivered by the Power Purchaser to the Partnership, the
Owner Participant and the Administrative Agent on the Lease
Closing Date.
"PEPCO Letters of Credit": as defined in the recitals
to the Reimbursement Agreement.
"Performance Letter of Credit": the Letter of Credit
referred to by that name in subsection 2.1(a) of the
Reimbursement Agreement.
"Permitted Investments": (i) obligations of, or
guaranteed as to the interest and principal by, the United
States Government or any agency thereof and having a maximum
remaining maturity of one (1) year; (ii) open market
commercial paper, with a maturity of not longer than ninety
(90) days, of any corporation incorporated under the laws of
the United States or any state thereof rated "prime-1" or
its equivalent by Moody's Investors Services, Inc. or "A-1"
or its equivalent by Standard & Poor's Ratings Group; (iii)
bankers acceptances or certificates of deposit issued by any
bank rated "Aa" or "AA" or better by Moody's Investors
Service, Inc. or Standard & Poor's Ratings Group, and having
a maximum maturity of one (1) year; (iv) any obligations of
the Security Agent, the Indenture Trustee, the
Administrative Agent, any bank rated "A" or better by
Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group, in respect of the repurchase of obligations of the
type described in clause (i) which obligation is secured by
obligations of the type described in clause (i) or by any
one or more certificates of deposit of the type described in
clause (iii) hereof; (v) federally insured demand deposit
accounts with the Security Agent and banks having capital,
surplus and undivided profits of at least One Billion
Dollars ($1,000,000,000) that are members of the Federal
Reserve System of the United States; or (vi) a money market
fund registered under the Investment Company Act of 1940, as
amended from time to time, the portfolio of which is limited
to United States government obligations and United States
government agency obligations (bearing the full faith and
credit of the United States government); provided, that with
respect to the credit ratings specified above, if neither
Moody's Investors Service, Inc. nor Standard & Poor's
Ratings Group is in the business of rating the relevant
Permitted Investment, such Permitted Investment shall have
received a rating equivalent to that specified above for
such Permitted Investment by another nationally recognized
credit rating agency of similar standing.
"Permitted Liens": (i) the Liens created by the
Collateral Security Documents; (ii) Liens which arise in the
ordinary course of business (including materialmen's,
mechanics', workers', repairmen's and employees' Liens or
similar Liens which arise in connection with any tax,
assessment, governmental charge or levy) of the Partnership,
but not in connection with any Indebtedness, and which are
subject to a Contest; (iii) Liens arising out of judgments
or awards and which are subject to a Contest, which are
satisfactorily bonded or with respect to which at the time
an appeal or proceeding for review is being prosecuted in
good faith and for the payment of which adequate cash
reserves shall have been provided, (iv) Liens arising out of
the rights of the Power Purchaser arising under the Power
Purchase Agreement and the Transfer Agreement, (v) the
subordinated Liens, if any, granted by the Partners in their
interests in the Partnership in favor of GE Capital in order
to secure the Partners' obligations under the Equity Loan
Facility, (vi) the matters excepted on the title insurance
policies issued by the Title Company on the Initial Loan
Funding Date in favor of the Security Agent and (vii) the
matters excepted on the title insurance policies issued by
the Lender's Title Company on the Lease Closing Date in
favor of the Loan Participants.
"Person": an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other
entity of whatever nature.
"Pipeline Facilities": collectively, the Columbia
Facilities and the facilities constructed by the other Gas
Transporters in order to furnish the gas transportation
service to the Facility.
"Plan": any pension plan which is covered by Title IV
of ERISA and in respect of which the Partnership or a
Commonly Controlled Entity is an "employer" as defined in
Section 3(5) of ERISA.
"Plans and Specifications": all plans and
specifications for the construction, operation and
maintenance of the Facility in accordance with the
Construction Contract, any other EPC Contract, the Power
Purchase Agreement, the Operation and Maintenance Agreement
and any Governmental Action or any Law.
"Pledge Agreements": the collective reference to the
General Partner Pledge Agreement, the Limited Partner Pledge
Agreement and the Stock Pledge Agreement.
"Power Purchase Agreement": the Power Purchase
Agreement, dated as of August 9, 1991, between the Power
Purchaser and the Partnership, as amended as of March 30,
1995, in accordance with the First Amendment to the Power
Purchase Agreement, dated as of September 16, 1994, in the
form (including all amendments and clarification letters
relating thereto) delivered to the Owner Participant and
Administrative Agent on the Lease Closing Date, as the same
may thereafter be amended, supplemented or otherwise
modified from time to time in accordance with the terms of
such agreement and the Participation Agreement.
"Power Purchaser" or "PEPCO": Potomac Electric Power
Company, a corporation organized under the laws of the
District of Columbia and the State of Virginia, or any
successor or permitted assign thereof.
"Present Assignment": the Present Assignment of Power
Purchase Agreement to be entered into substantially in the
form of Exhibit G to the Participation Agreement, as the
same may be amended, supplemented or otherwise modified in
accordance with its terms from time to time.
"Principal Office": the principal office of the
Administrative Agent, located on the date hereof at 11
Madison Avenue, New York, New York 10010.
"Project": the Facility, the Site, the Easements and
all other easements, licenses, permits and other real
property interests owned by the Partnership or in which the
Partnership has any rights.
"Project Costs": the following costs and expenses
incurred by the Partnership in connection with the
development, design, engineering, acquisition, construction,
financing, testing, start-up and completion of the Project
which are referred to on Schedule 4 to the Construction Loan
Agreement: (a) the price payable by the Partnership
pursuant to the Construction Contract and any Additional
Construction Contract; (b) all costs and expenses payable by
the Partnership in connection with the performance by it of
its covenants in the Construction Contract, any Additional
Construction Contract and all permitting costs associated
with the Project; (c) the cost of site acquisition and
improvement and the cost of the interconnection facilities
and other items required for the Project which are not
included within the work to be performed by the Contractor
under the Construction Contract; (d) initial organizational
expenses and other start-up, testing and training costs of
the Partnership (including employees' salaries and
benefits); (e) legal, accounting, engineering, development
and financial fees and expenses; (f) cost of insurance and
bonds; (g) financing fees and expenses, interest on the
loans under the Construction Loan Agreement and fees in
respect of the Letters of Credit accruing during
construction; (h) ad valorem, property and sales and use
taxes (including recordation and transfer taxes); (i) the
construction management fee payable to Panda in the amount
of $1,000,000 on the Initial Loan Funding Date and the
monthly management fee payable to Panda in an amount equal
to $111,000 per month but not to exceed an aggregate amount
equal to $2,000,000; (j) third-party development costs;
(k) an amount equal to $750,000 in respect of the initial
deposit into the Warranty Maintenance Reserve Account, an
amount equal to $1,000,000 in respect of the initial deposit
into the Operation and Maintenance Reserve Account and an
amount equal to $2,400,000 in respect of the initial deposit
into the Rent Reserve Account; (l) after the payment of all
other Project Costs and to the extent of funds remaining in
the construction loan commitment, the Success Fee, if any,
payable to Panda; (m) payments to the Power Purchaser in
respect of the Partnership's interconnection security
obligations pursuant to subsection 4.2 of the Power Purchase
Agreement; (n) payments to Columbia as a "Contribution-in-
aid-of Construction" as provided in the Columbia Precedent
Agreement; (o) payments for such other reasonable costs and
expenses associated with the Project as GE Capital has
approved; and (p) principal and interest on the Development
Loans and all other amounts which were payable under the
Development Loan Agreement. There shall be excluded from
the foregoing items set forth in clauses (a) through (o) any
amounts which have been previously funded pursuant to the
Development Loan Agreement. Final total Project Costs
(including amounts on deposit in the Completion Account
being held for the payment of Project Costs not yet due)
through the Lease Closing Date equal $217,172,931.
"Project Documents": the collective reference to the
Power Purchase Agreement, the Construction Contract, the
Raytheon Parent Guaranty, the Operation and Maintenance
Agreement, the Steam Agreements, the Gas Contracts, the
Effluent Water Agreement, the Partnership Agreement and each
Additional Project Document.
"Project Expenses": for any period, the sum (without
duplication) of the following items for the Partnership to
the extent that the same are due and owing or have actually
been paid by the Partnership and are necessary or desirable
for the standard operation and maintenance of the Project:
(i) the sum of all salaries, employee benefits and other
compensation, plus (ii) the cost of acquiring Fuel
(including payments under Sections 3.3 and 7.1 of the Gas
Supply Agreement and Section 6.1 of the Fuel Management
Agreement) and the cost of other materials and utilities
paid, including the transportation costs for Fuel and such
other materials and utilities paid, plus (iii) insurance
premiums, plus (iv) costs of operating and maintaining the
Project, plus (v) property and other Taxes (except income
taxes), plus (vi) fees for accounting, legal and other
professional services, plus (vii) general and administrative
expenses plus (viii) capital expenditures in the ordinary
course of business and set forth in the current Operating
Budget, plus (ix) all other cash expenditures approved by
the Owner Participant and the Administrative Agent relating
to operation, maintenance and administrative costs of the
Project plus (x) the aggregate annual rental for leases of
personal property other than Capital Leases. There shall be
excluded from the foregoing clauses (i) through (x) payments
with respect to federal, state and local income taxes,
payments of Basic Rent, payments in respect of the Letters
of Credit or the funding of the Reserve Accounts or payments
in respect of any other Indebtedness of the Partnership or
any Partner.
"Project Revenues" or "Revenues": for any period the
sum of (i) all revenues received by the Partnership under
the Power Purchase Agreement, plus (ii) all other revenues
received by the Partnership from the sale of electricity,
heat or steam or from the sale of surplus fuel oil or
surplus natural gas (including any payments received for
"Banked Quantities" under the Washington LDC Agreement) or
from releases of firm transportation capacity held by the
Partnership under the Gas Transportation Agreements, and all
amounts received by the Partnership as rent under the Steam
Lease, plus (iii) the amount of earnings by the Partnership
in respect of Permitted Investments during such period, to
the extent such earnings have been deposited into the
Revenue Account, plus (iv) any other revenues received by
the Partnership.
"Prudent Utility Practice": at a given time, any of
the practices, methods and acts engaged in or approved by a
majority of independent power producers prior to such time
with respect to similar facilities owned and operated by
such independent power producers. "Prudent Utility
Practice" is not intended to be limited to the optimum
practice, method or act to the exclusion of all others, but
rather to a spectrum of possible practices, methods or acts
having due regard for, among other things, manufacturers'
warranties, engineering and operating considerations and the
requirements of Governmental Authorities and the
requirements of the Power Purchase Agreement and the other
Transaction Documents.
"Public Utility":
(a) any Person who has been deemed by any
Governmental Authority having jurisdiction to be, for
the purposes of the PURPA Regulations, (i) "primarily
engaged in the generation or sale of electric power
(other than electric power solely from cogeneration
facilities or small power production facilities)" or
(ii) an "electric utility" or an "electric utility
holding company" or a wholly or partially-owned direct
or indirect subsidiary of an "electric utility" or
"electric utility holding company"; or
(b) any Person who is, under any Law,
regulated as a "public utility", a "public service
corporation", an "electric utility", a "steam utility",
a "public utility holding company", an "affiliate" or
"subsidiary" of a "public utility" or "public utility
holding company", or any other type of entity subject
under any Law to regulation relating to public
utilities, including, without limitation:
(i) a "public utility"
under the Federal Power Act;
(ii) a "holding company",
an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company" under
the Holding Company Act;
(iii) a "public service
company", an "electric company" or a "steam
heating company" under Article 78, Public Service
Commission Law, of the Annotated Code of Maryland;
or
(iv) a "public utility"
or an "electric corporation" under Title 43,
Public Utilities, of part V of the District of
Columbia Code.
"Purchase Price": an amount equal to Lessor's Cost.
"PURPA": the Public Utility Regulatory Policies Act of
1978, as amended from time to time.
"PURPA Regulations": FERC's Regulations under Sections
201 and 210 of PURPA with regard to Small Power Production
and Cogeneration, 18 C.F.R. Part 292, as such regulations
may be amended or supplemented from time to time.
"QF Certification Application": as defined in
subsection 3.27 of the Participation Agreement.
"QF Certification Order": as defined in subsection
3.27 of the Participation Agreement.
"QF Efficiency Standard": the efficiency standard
specified in Section 292.205(a)(2)(i) of the PURPA
Regulations or any successor or analogous standard specified
under the PURPA Regulations that the Facility must meet to
be a Qualifying Facility.
"QF Minimum Steam Take": for purposes of each Annual
QF Status Certificate furnished pursuant to Section 6.30(b)
or (d) of the Participation Agreement, an amount of steam
purchased by the Steam Host under the Steam Sales Agreement
during the period covered by such certificate such that the
Facility would meet the QF Operating Standard for the
Initial QF Standards Measurement Period or the QF Standards
Measurement Period, as the case may be, even if both:
(i) the Steam Host were to purchase no more
steam during the remaining portion of such period; and
(ii) the Power Purchaser were to
dispatch the Facility under the Power Purchase
Agreement such that the Facility's electric generating
capacity would be fully loaded during every hour of the
remaining portion of such period at a level for each
such hour equal to the greater of (x) 230 megawatts and
(y) the Facility's reasonably predicated "Available
Capacity", as such term is defined under the Power
Purchase Agreement, for each such hour.
"QF Operating Standard": the operating standard
specified in Section 292.205(a)(1) of the PURPA Regulations
or any successor or analogous standard specified under the
PURPA Regulations that the Facility must meet to be a
Qualifying Facility.
"QF Standards Measurement Period": (a) any calendar
year other than the calendar year in which the first day of
the Initial QF Standards Measurement Period occurred or (b)
any successor or analogous period specified under the PURPA
Regulations for the purpose of determining whether the
Facility is in compliance with the QF Operating Standard and
the QF Efficiency Standard and that does not include the
date the Facility first produces electricity.
"Qualifying Facility": a cogeneration facility that
meets all the requirements set forth in the PURPA
Regulations for such facility to be a "qualifying facility"
under such regulations.
"Quarterly Measurement Period": as of any Basic Rent
Payment Date, the three-month period (or, in the case of the
initial Quarterly Measurement Period, the two month period)
ending one month prior to such Basic Rent Payment Date.
"Raytheon Parent Guaranty": the Parent Guaranty dated
as of March 30, 1995 executed by Raytheon Company in favor
of the Partnership, in the form delivered to the Owner
Participant and the Administrative Agent on the Lease
Closing Date, as amended, supplemented or otherwise modified
from time to time in accordance with the terms of such
agreement and the Participation Agreement.
"Reaffirmation": as defined in Section 6.39 of the
Participation Agreement.
"Refinancing": as defined in subsection 11.1 of the
Participation Agreement.
"Registry of Deeds": the Office of Land Records for
Prince George's County and Charles County, Maryland.
"Regulatory Change": any change after the Lease
Closing Date in federal, state, municipal or foreign law or
regulations or the adoption or making after such date of any
interpretation, directive, requirement or request applying
to a class of financial institutions including any
Certificate Holder of or under any federal, state, municipal
or foreign law or regulation (whether or not having the
force of law and whether or not failure to comply therewith
would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration
thereof.
"Reimbursement Agreement": the Letter of Credit
Reimbursement Agreement to be entered into among the
Partnership, the General Partner and GE Capital,
substantially in the form of Exhibit H to the Participation
Agreement, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with its
terms and with the prior written consent of the
Administrative Agent.
"Reimbursement Default": any of the events specified
in Section 6 of the Reimbursement Agreement, whether or not
any requirement for the giving of notice, the lapse of time,
or both, or for the happening of any other condition, has
been satisfied.
"Reimbursement Event of Default": any of the events
specified in Section 6 of the Reimbursement Agreement,
provided that any requirement for the giving of notice, the
lapse of time, or both, or for the happening of any other
condition, has been satisfied.
"Renewal Rent": Fixed Rate Renewal Basic Rent.
"Renewal Term": Fixed Rate Renewal Term.
"Rent": the collective reference to Basic Rent,
Supplemental Rent and Renewal Rent.
"Rent Payment Date": a Basic Rent Payment Date.
"Rent Reserve Account": the special account designated
by that name established by the Security Agent pursuant to
subsection 2.2 of the Security Deposit Agreement (and
including all sub-accounts thereof).
"Reportable Event": any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder.
"Reportable Spill": a release, suspected or threatened
release, or spill of a Hazardous Substance which gives rise
to an obligation under applicable Law to give notice to any
Governmental Authority.
"Reporting Participant": each of the Partnership, the
General Partner, the Limited Partner, Panda and Holdings.
"Requested Specifications": as defined in subsection
6.33 of the Participation Agreement.
"Required Loan Participants": as of a particular date
of determination, the holders of more than 66_% of the
aggregate unpaid principal amount of all Loan Certificates
outstanding as of such date.
"Required Operation and Maintenance Reserve Balance":
from the Lease Closing Date until the fifth anniversary
thereof, $5,000,000; and for each [calendar] year from and
after the fifth anniversary of the Lease Closing Date, an
amount equal to the sum of (x) the Required Operation and
Maintenance Reserve Balance then in effect for the prior
calendar year (the "Existing Balance") plus (y) the product
of the GNP Deflator for the prior calendar year times the
Existing Balance.
"Required Rent Reserve Balance": at any time, the
greater of (a) $2,400,000 and (b) an amount equal to the sum
of the payments of Basic Rent scheduled to be due and owing
on the next two succeeding Rent Payment Dates.
"Required Warranty Maintenance Reserve Deposit":
$750,000.
"Reserve Accounts": the collective reference to the
Operation and Maintenance Reserve Account, the Rent Reserve
Account and the Warranty Maintenance Reserve Account.
"Revenue Account": the special account designated by
that name established by the Security Agent pursuant to
subsection 2.2 of the Security Deposit Agreement.
"Rosemary Project": the 180 megawatt, gas-fired,
combined cycle cogeneration facility located in Roanoke
Rapids, North Carolina owned by Panda-Rosemary, L.P.
"Sale Proceeds": the gross proceeds of any sale of the
Facility, or any part thereof, by the Lessor to any Person
paid in cash, less all costs and expenses incurred by the
Lessor in connection therewith.
"Scheduled Commercial Operation Date": as defined in
the Power Purchase Agreement.
"Security Agent": Fleet National Bank (formerly known
as Shawmut Bank Connecticut, National Association), a
national banking association, or any bank acting as
successor security agent under the Security Deposit
Agreement.
"Security Agreement": the Security Agreement, dated as
of March 30, 1995, as amended by the First Amendment to the
Security Agreement dated as of October 30, 1996, and as
amended and restated by the Amended and Restated Security
Agreement, dated as of December 18, 1996, between the
Partnership and the Security Agent, for the benefit of GE
Capital and the Owner Trustee (and, by collateral
assignment, the Indenture Trustee), substantially in the
form of Exhibit O to the Participation Agreement, and as the
same may be further amended, supplemented or otherwise
modified in accordance with its terms from time to time.
"Security Deposit Agreement": the Amended and Restated
Security Deposit Agreement, dated as of December 18, 1996,
among the Partnership, GE Capital, in its individual
capacity and as Owner Participant, the General Partner, the
Owner Trustee, the Administrative Agent, the Indenture
Trustee and the Security Agent, substantially in the form of
Exhibit S to the Participation Agreement, as the same may be
further amended, supplemented or otherwise modified from
time to time.
"Severable Modification": any modification that can be
removed from the Facility without damaging the Facility or
diminishing the value, durability, performance
characteristics, useful life or utility of the Facility.
"Single Employer Plan": any Plan which is not a
Multiemployer Plan.
"Site": the land and easements located in Brandywine,
Maryland described in Schedule 1 to the Facility Lease, on
which the Facility is located.
"Site Lease": the Site Lease dated as of March 30,
1995 between the Partnership, as lessor, and the Owner
Trustee, as lessee, as amended by the First Amendment to
Site Lease dated as of October 30, 1996, and amended and
restated by the Amended and Restated Site Lease, and as the
same may be further amended, supplemented or otherwise
modified in accordance with its terms from time to time.
"Site Sublease": the Site Sublease dated as of
March 30, 1995 between the Owner Trustee, as sublessor, and
the Partnership, as sublessee, as amended by the First
Amendment to Site Sublease dated as of October 30, 1996, and
amended and restated by the Amended and Restated Site
Sublease, and as the same may be further amended,
supplemented or otherwise modified in accordance with its
terms from time to time.
"Special Lessee Obligations": as defined in the
Granting Clause of the Indenture.
"Special Payment Account": the special account
designated by that name established by the Security Agent
pursuant to Section 2.2 of the Security Deposit Agreement.
"Special Payments": the collective reference to (i)
all "Contract Price Discounts" paid by the Contractor
pursuant to Sections 5.02 and 5.04 of the Construction
Contract and all "liquidated damage" or similar payments
made by any other Contractor under any provision of any
other EPC Contract, and (ii) all payments made by the Gas
Supplier (or any guarantor of the Gas Supplier) in respect
of the lump sum termination payment pursuant to Section 17.3
of the Gas Supply Agreement.
"Special QF Loss Event": the loss of the Facility's
Qualifying Facility status solely as a result of the Owner
Participant's or the Owner Trustee's ownership of the
Facility causing the Facility not to be in compliance with
the ownership criteria of 18 C.F.R. Ss. 292.206.
"Specified Participant": each of the Partnership, the
Partners, Panda, the Steam Host, Holdings, the Contractor,
the Gas Supplier, each Gas Transporter and the Power
Purchaser, provided that after the date of expiration of the
warranties under the Construction Contract, the Contractor
shall cease to be a Specified Participant.
"Steam Agreements": the Steam Sales Agreement, the
Steam Lease and the Steam Lessee Security Agreement.
"Steam Host": Brandywine Water Company, a corporation
organized under the laws of the State of Delaware.
"Steam Lease": the Lease Agreement, dated as of
December 18, 1996, between the Partnership, as lessor, and
the Steam Host, as lessee, in the form of Exhibit L to the
Participation Agreement (including all amendments and
clarification letters relating thereto), as the same may
thereafter be amended, supplemented or otherwise modified
from time to time in accordance with the terms of such
agreement and the Participation Agreement.
"Steam Lessee Security Agreement": the Lessee Security
Agreement, dated as of March 30, 1995, as amended and
restated by the Amended and Restated Lessee Security
Agreement, dated as of December 18, 1996, between the Lessee
(as steam lessor), the Steam Host and the Security Agent,
for the benefit of GE Capital and the Owner Trustee (and by
collateral assignment, the Indenture Trustee), in the form
of Exhibit P to the Participation Agreement, as the same may
be further amended, supplemented or otherwise modified from
time to time.
"Steam Sales Agreement": the Steam Sales Agreement,
dated as of March 30, 1995 between the Steam Host and the
Partnership, in the form (including all amendments and
clarification letters relating thereto) delivered to the
Owner Participant and the Administrative Agent on the Lease
Closing Date, as amended, supplemented or otherwise modified
from time to time in accordance with the terms of such
agreement, the Participation Agreement and the Power
Purchase Agreement.
"Stipulated Loss Value": as of the Basic Term
Commencement Date or any Basic Rent Payment Date, as the
case may be, the percentage of Lessor's Cost set forth
opposite such date in Schedule D to the Facility Lease, as
adjusted pursuant to Section 3(d) of the Facility Lease.
Stipulated Loss Value as of any Basic Rent Payment Date
during any Renewal Term shall mean an amount equal to the
Fair Market Sales Value of the Facility as of the first day
of such Renewal Term, after deducting from such amount
depreciation to such Rent Payment Date calculated on a
straight-line basis from the first day of such Renewal Term
to the end of the estimated useful life of the Facility.
Stipulated Loss Value in all cases shall be an amount not
less than the principal amount of the Loan Certificates,
together with accrued interest thereon and other amounts
owing to the Loan Participants under the Transaction
Documents.
"Stock Pledge Agreement": the Stock Pledge Agreement,
dated as of March 30, 1995, as amended by Amendment No. 1
dated as of October 27, 1995 and Amendment No. 2 dated as of
July 31, 1996 and amended and restated by the Amended and
Restated Stock Pledge Agreement, dated as of December 18,
1996, by Holdings in favor of the Security Agent, for the
benefit of GE Capital and the Owner Trustee (and, by
collateral assignment, the Indenture Trustee), substantially
in the form of Exhibit Q to the Participation Agreement, as
the same may be further amended, supplemented or otherwise
modified from time to time.
"Subsidiary": as to any Person, a corporation of which
shares of stock having ordinary voting power (other than
stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors
or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled,
directly, or indirectly through one or more intermediaries,
or both, by such Person.
"Substantial Completion": substantial completion of
the Facility, which shall be deemed to have occurred when
the Date of Substantial Completion for the Facility shall
have occurred and the conditions described in clauses (a)
through (e) of the definition of "Date of Substantial
Completion" shall have been satisfied.
"Substantial Completion Certificate": a certificate
substantially in the form of Exhibit I-1 to the Construction
Loan Agreement, signed by the Partnership.
"Success Fee": the amount equal to the unused
Construction Loan commitment on the Lease Closing Date after
the funding of all other Project Costs (including any
amounts funded into the Reserve Accounts or into a
completion account in respect of punch list or similar
items) incurred in connection with the construction and
start-up of the Project.
"Supplemental Rent": as defined in Section 3(b) of the
Facility Lease.
"Swap Breakage Costs": as defined in Section 3(b)(iv)
of the Facility Lease.
"Tax" or "Taxes": any and all fees (including, without
limitation, documentation, recording, license and
registration fees), taxes (including, without limitation,
net income, franchise, value added, ad valorem, gross
income, gross receipts, sales, use, rental, property
(personal and real, tangible and intangible) and stamp
taxes), levies, imposts, duties, charges, assessments or
withholdings of any nature whatsoever, general or special,
ordinary or extraordinary, together with any and all
penalties, fines, additions to tax and interest thereon.
"Tax Indemnity Agreement": the Tax Indemnity Agreement
to be entered into between the Partnership and the Owner
Participant, substantially in the form of Exhibit K to the
Participation Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"Termination": as such term is defined in the Security
Deposit Agreement.
"Title Company": Chicago Title Insurance Company and
First American Title Insurance Company as co-insurers, or
such other title insurance company approved by the Owner
Participant, to insure the priority of the Lien of the Deed
of Trust and Security Agreement on (i) the Site and (ii) the
Easements.
"Total Accretion Line of Credit Commitment":
$8,000,000, as such amount may be reduced in accordance
with the terms of the Indenture.
"Transaction Documents": the collective reference to
the Project Documents and the Financing Documents.
"Transfer": the transfer, by bill of sale or
otherwise, by the Lessor of all the Lessor's right, title
and interest in and to the Facility, the Site and the
Partnership's interest in the Easements, on an "as is, where
is with all faults" basis, free and clear of all Lessor's
Liens but otherwise without recourse, representation or
warranty, together with the due assumption by the transferee
of, and the due release of the Lessor and the Owner
Participant's from, all the Lessor's and the Owner
Participant's obligations under the Transaction Documents by
an instrument or instruments satisfactory in form and
substance to the Owner Participant.
"Transfer Agreement": The Agreement With Respect To
Transfers Of Interest in Panda-Brandywine, L.P., dated as of
August 8, 1991, between the Power Purchaser, the General
Partner and the Limited Partner, as the same may be amended,
supplemented or otherwise modified in accordance with the
terms of such agreement and the Participation Agreement.
"Transmission Facilities": as defined in the Power
Purchase Agreement.
"Transmission Facilities Site": as defined in the
Power Purchase Agreement.
"Treasury Index Rate": the rate per annum equal to the
sum of the average of the interpolated rates for United
States Treasury Notes with constant maturities equal to the
weighted average life of the Facility Lease (not counting
any renewals) (as published in Federal Reserve Statistical
Release H.15(519) Selected Interest Rates) for the four week
period ending on the most recent Friday which is at least 15
days prior to the Lease Closing Date.
"Trust Agreement": the Trust Agreement dated as of
March 30, 1995 between the Owner Participant and Fleet
National Bank, as amended and restated by the Amended and
Restated Trust Agreement, and as the same may be further
amended, supplemented or otherwise modified from time to
time in accordance with its terms.
"Trust Estate": as defined in the Trust Agreement.
"Trust Indenture Estate": all estate, right, title and
interest of the Indenture Trustee in and to any of the
property, rights, interests and privileges granted to the
Indenture Trustee pursuant to the Granting Clause of the
Indenture, other than Excepted Payments and any and all
other rights of the Owner Trustee or the Owner Participant
expressly reserved to the Owner Trustee or the Owner
Participant pursuant to the Indenture.
"Turbine Contract": the contract between the
Contractor and the Turbine Manufacturer providing for the
supply of the combustion and steam turbine generators and
associated parts and equipment to the Project.
"Turbine Manufacturer": the General Electric Company,
a corporation organized under the laws of the State of New
York, acting through its General Electric Power Systems
division.
"Turbine Warranty Termination Date": the date the
General Electric turbine warranty expires, as certified by
the Partnership to the Owner Participant and the
Administrative Agent, but no later than the second
anniversary of the Date of Final Completion.
"Type": as to any Loan, its nature as a Base Rate Loan
or a Eurodollar Loan.
"Value": as such term is defined in the Security
Deposit Agreement.
"Warranty Maintenance Reserve Account": the special
account designated by that name established by the Security
Agent pursuant to subsection 2.2 of the Security Deposit
Agreement.
"Washington": Washington Gas Light Company, a
corporation organized under the laws of the Commonwealth of
Virginia and the District of Columbia.
"Washington LDC Agreement": the Gas Transportation and
Supply Agreement, dated as of November 10, 1994, between
Washington and the Partnership, in the form (including all
amendments and clarification letters relating thereto)
delivered to the Owner Participant and the Administrative
Agent on the Lease Closing Date, as amended, supplemented or
otherwise modified from time to time in accordance with the
terms of such agreement and the Participation Agreement.
"Water Easement Maintenance Agreement": the Agreement
dated April 4, 1995 between the Partnership and Prince
George's County, as amended, supplemented or otherwise
modified from time to time in accordance with the terms of
such agreement and the Participation Agreement.
"Winter Heating Period": as defined in Section 6.35 of
the Participation Agreement.
"Withholding Taxes": as defined in subsection 2.8 of
the Reimbursement Agreement.
"Work": any and all services, functions, duties,
responsibilities or other obligations to be undertaken and
performed by any EPC Contractor pursuant to any EPC
Contract, including, but not limited, to all "Work", as
defined in the Construction Contract, and the provision of
all labor, material and services utilized in the design,
construction, engineering, equipping and testing of the
Facility.
Schedule 5
LOCATION OF SITE
AND
ENVIRONMENTAL MATTERS
Ss. 3.24 Location of Site
1. A portion of the Site along Timothy Branch
Creek in the northwest corner of the Site, lies
within an area of "special flood hazard."
2. Portions of the Easements cross areas of
"special flood hazard."
Ss. 3.25 Environmental Matters
1. Environmental matters are described in the
Environmental Audits.
2. The Site has an old septic tank and pipes in the
ground from the former residence.
Schedule 6 to
Participation Agreement
Basic Rent Factors
Basic Rent Payment Dates Basic Rent Factors
(expressed as a
percentage of
Lessor's Cost)
1 0.00000000
2-5 1.20029675
6-9 1.19683328
10-13 2.29620246
14-17 2.37488883
18-21 3.13407979
22-25 3.21146101
26-29 3.20786720
30-33 3.15604880
34-37 3.17283124
38-41 3.24021670
42-45 3.45664779
46-49 3.50922174
50-53 3.59615670
54-57 3.81771181
58-61 4.12919795
62-65 4.64822566
66-69 4.81119481
70-73 4.91283292
74-77 4.73222658
78-80 4.33548907
Stipulated Loss Values
(Does not include accrued Basic Rent)
Percentage of
Settlement Date Lessor's Cost
December 31, 1996 102.6940868
January 31, 1997 103.5835176
April 30, 1997 105.0818708
July 31, 1997 106.5606003
October 31, 1997 108.0346849
January 31, 1998 109.5404455
April 30, 1998 111.0243886
July 31, 1998 112.4934824
October 31, 1998 113.9614550
January 31, 1999 115.4647321
April 30, 1999 115.8413064
July 31, 1999 116.2133821
October 31, 1999 116.5829078
January 31, 2000 116.9952710
April 30, 2000 117.2887505
July 31, 2000 117.5774056
October 31, 2000 117.8649491
January 31, 2001 118.2133382
April 30, 2001 117.7702829
July 31, 2001 117.3125097
October 31, 2001 116.8374231
January 31, 2002 116.3819144
April 30, 2002 115.7923177
July 31, 2002 115.1885155
October 31, 2002 114.5659027
January 31, 2003 113.9599963
April 30, 2003 113.3091352
July 31, 2003 112.6349848
October 31, 2003 111.9418678
January 31, 2004 111.2799687
April 30, 2004 110.6219010
July 31, 2004 109.9648015
October 31, 2004 109.3029443
January 31, 2005 108.6934086
April 30, 2005 108.0206457
July 31, 2005 107.3485249
October 31, 2005 106.6706979
January 31, 2006 106.0337316
April 30, 2006 105.2782399
July 31, 2006 104.5285936
October 31, 2006 103.7773433
January 31, 2007 103.0616258
April 30, 2007 102.0837241
July 31, 2007 101.1065038
October 31, 2007 100.1201405
January 31, 2008 99.1615295
April 30, 2008 98.1009635
July 31, 2008 97.0465823
October 31, 2008 95.9873911
January 31, 2009 94.9837308
April 30, 2009 93.8307069
July 31, 2009 92.6818851
October 31, 2009 91.5247731
January 31, 2010 90.3961988
April 30, 2010 88.9881069
July 31, 2010 87.5781092
October 31, 2010 86.1514123
January 31, 2011 84 7442992
April 30, 2011 82.9562116
July 31, 2011 81.1571049
October 31, 2011 79.3285664
January 31, 2012 77.5251655
April 30, 2012 75.1059818
July 31, 2012 72.6594327
October 31, 2012 70.1621122
January 31, 2013 67.6494783
April 30, 2013 64.8607552
July 31, 2013 62.0489710
October 31, 2013 59.1883544
January 31, 2014 56.3142524
April 30, 2014 53.2247758
July 31, 2014 50.1048472
October 31, 2014 46.9265093
January 31, 2015 43.7313060
April 30, 2015 40.5506215
July 31, 2015 37.2706782
October 31, 2015 33.8626356
January 31, 2016 30.3223928
April 30, 2016 27.0167931
July 31, 2016 23.5831704
October 31, 2016 20.0000000
Schedule 9 to
Participation Agreement
Refinancing/Leverage Option Adjustment
Pursuant to Section 5.8 of the Construction Loan Agreement and
Lease Commitment dated as of March 30, 1995, GE Capital
exercised its option to fund the Facility Lease with
non-recourse debt as a leveraged lease rather than a single
investor lease. Such funding occurred on the Lease Closing
Date.
Schedule 13 to Construction Loan Agreement and Lease
Commitment set forth a methodology by which Basic Rent would
be adjusted to reflect a sharing of any economic benefit of
leveraging the Facility Lease. The methodology set forth
therein is as follows: Basic Rent is recalculated and reduced
to reflect the economic benefit of 30 percent of the interest
rate savings between a "Target Interest Rate" (applicable
treasury index rate associated with the average life of the
Lease Debt at the time of leveraging plus 250 basis points)
and the actual interest rate ("Actual Interest Rate") of the
Lease Debt actually obtained by the Lessor (inclusive of
fees). The methodology utilized to recalculate Basic Rent is
as follows:
Determine GE Capital's after-tax yield (the "Target
Yield") if Basic Rent were held constant while the Lease
is levered with Lease Debt priced at the Target Interest
Rate. Then reduce the Basic Rent payments such that GE
Capital obtains the Target Yield assuming the Facility
Lease is levered with Lease Debt priced at the Target
Interest Rate less 30 percent of the excess of Target
Interest Rate over the Actual Interest Rate, including 30
percent of the Fees.
Based on the financing assumptions set forth in Schedule 10 of
the Participation Agreement, the annual Basic Rents on a
single investor lease basis would be as follows (in $000):
<TABLE>
<CAPTION>
Table I
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year 1 2 3 4 5 6 7 8 9 10
Rent 7,885 10,491 17,705 20,629 25,789 27,960 28,106 27,757 27,754 28,234
Year 11 12 13 14 15 16 17 18 19 20
Rent 29,803 30,622 31,309 32,954 35,486 39,577 41,785 42,809 41,845 38,844
</TABLE>
Leverage Scenario:
Facility Lease is levered with $172MM (79.08 percent of
Lessor's Cost of $217,488,645) of non-recourse debt with an
average life of approximately 12 years. The Lease Debt is
initially funded with $172MM on the Lease Closing Date and
accretes to approximately $182MM by the second anniversary of
the Lease Closing Date. The Lease Debt fully amortizes on
October 3l, 2014. Applicable treasury index rate associated
with the Lease Debt at time of leveraging is 6.31 percent. The
Fees involved and pricing of the Lease Debt are as set forth
below:
LIBOR Pricing Matrix: Applicable Margin
Years 1-4 + 1.000 percent
Years 5-8 + 1.l25 percent
Years 9-12 + 1.250 percent
Years 13-15 + 1.375 percent
Years 16-18 + 1.500 percent
LIBOR was swapped to a fixed rate of 6.69 percent as of
January 2, 1997. From the Lease Closing Date through and
including January l, 1997, the Lease Debt is priced at a
Base Rate of 8.25 percent. The equivalent fixed rates for
the Lease Debt are as follows:
Swap Basis: Equivalent Fixed Rates
Years 1-4 7.690 percent
Years 5-8 7.815 percent
Years 9-12 7.940 percent
Years 13-15 8.065 percent
Years 16-18 8.190 percent
Fees: The fees related to leveraging the lease are
as follows: (i) $3,009,968 of closing
related fees paid on the Lease Closing Date;
(ii) annual agency fees of $78,000
commencing on the Lease Closing Date and
payable annually on October 31, (iii)
independent engineers fee of $15,000
($1996), initially payable, on January 31,
1999 and every three years thereafter as
adjusted by inflation of 3 percent per
annum; and (iv) commitment fee of 0.375
percent payable quarterly, in advance, on
the Accretion Line of Credit, currently
$10MM (collectively, the "Fees").
Methodology: The Target Interest Rate is 6.31 percent + 2.50
percent = 8.81 percent. The leveraged lease s precede using the
Basic Rent payments given in Table I above and the Target
Interest Rate of 8.81 percent (excluding Fees) to arrive at the
Target Yield. The Facility Lease is then repriced using 30
percent of the Fees and a debt rate of:
12/30/96 - 1/1/97 8.810 % - (0.30 x (8.810 % - 8.250 %)) = 8.6420 %
Years 1-4 8.810 % - (0.30 x (8.810 % - 7.690 %)) = 8.4740 %
Years 5-8 8.810 % - (0.30 x (8.810 % - 7.815 %)) = 8.5115 %
Years 9-12 8.810 % - (0.30 x (8.810 % - 7.940 %)) = 8.5490 %
Years 13-15 8.810 % - (0.30 x (8.810 % - 8.065 %)) = 8.5865 %
Years 16-18 8.810 % - (0.30 x (8.810 % - 8.190 %)) = 8.6240 %
The Basic Rent payments are adjuster] subject to the maximum
values set forth in Table I above so that the after tax yield
remains constant, equal to the Target Yield. The resulting
annual Basic Rent Payments are as follows (in $000):
<TABLE>
<CAPTION>
Table II
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year 1 2 3 4 5 6 7 8 9 10
Rent 7,832 10,419 17,785 20,489 25,614 27,770 27,915 27,569 27,566 28,042
Year 11 12 13 14 15 16 17 18 19 20
Rent 29,601 30,414 31,096 32,731 35,245 39,309 41,501 42,518 41,561 38,580
</TABLE>
The methodology set forth above for the leverage option
adjustments will also apply to any subsequent refinancing of
the Lease Debt (the "New Lease Debt") taking into account the
remaining life of the Lease and the average life of the New
Lease Debt as follows:
Determine GE Capital's after-tax yield (the "New Target
Yield") of the remaining Basic Rent payments as calculated
on the Lease Closing Date. Then reduce the Basic Rent
payments, only to the extent they can be collectively
reduced to benefit the Lessee, such that GE Capital obtains
the New Target Yield assuming the Facility Lease is levered
with New Lease Debt priced at the New Target Interest Rate
(applicable treasury index rate associated with the average
life of the New Lease Debt at the time of refinancing plus
250 basis points) less 30 percent of the excess of the New
Target Interest Rate over the Actual Interest Rate of the
New Lease Debt at the time of refinancing (including 30
percent of financing fees and related expenses).
Schedule 10 to
Participation Agreement
Assumptions
1. The Facility Lease is a "true lease" for purposes
of the Code.
2. GE Capital is entitled to the following
depreciation deductions:
Category % of Lessor's Cost Depreciation
Machinery & Equipment 96.57% 20 year MACRS
Land Improvements .89% 15 year MACRS
Buildings .28% 39 year Straight Line
Land 2.26% None
3. All items of income and expense related to the
Facility and the Facility Lease and the transactions
contemplated by the Lease Documents or the Financing
Documents are U.S. source.
4. GE Capital will not be required for Federal income
tax purposes to include in its gross income during the
Basic Term or any Renewal Term any amount with respect
to the transactions provided for or contemplated by the
Lease Documents other than (i) each payment of Basic
Rent and Supplemental Rent (other than any payment made
pursuant to Section 7(d)(ii) and 7(e) of the Facility
Lease), in the amount and at the time specified in the
Facility Lease, accrued ratably over the period with
respect to which such payment is required to be made,
(ii) any payment made pursuant to Section 7(d)(ii) and
7(e) of the Facility Lease, (iii) the amount of any
payment of Stipulated Loss Value, (iv) any amounts paid
to GE Capital, the calculation of which is specifically
determined under the Lease Documents with regard to the
income tax consequences as to GE Capital of the receipt
or accrual of such amounts, (v) any payments pursuant
to the Lessee's exercise or its option to purchase the
Facility pursuant to the Facility Lease, and (vi) any
other amount to the extent offset by a corresponding
deduction in the taxable period of GE Capital in which
such amount is included in income.
5. The Treasury Index Rate is 6.34%.
6. The Lease Closing Date is December 30, 1996.
7. The Basic Rent Payment Dates are each January 31,
April 30, July 31 and October 31, commencing January
31, 1997.
8. The Basic Term is approximately 19 years and 10
and one-half months commencing on December 23, 1996 and
ending on October 31, 2016.
9. The Federal Income Tax Rate is thirty-five percent.
10. The federal rate of tax on the taxable income of
GE Capital will be 35% and the effective combined rate
of tax imposed by all state and local taxing
authorities on the taxable income of GE Capital will be
5%, for a combined federal, state and local effective
rate of 40%.
11. Lessor's Cost is $217,488,645.
12. Basic Rent Payments are paid quarterly in arrears.
13. The last Basic Rent Payment Date is October 31, 2016.
14. Fees related to leveraging the lease: (i) initial
$3,009,968 (on the Lease Closing Date); (ii) annual
agency fees of $78,000 commencing on the Lease Closing
Date and payable annually on October 31; (iii)
independent engineers fee of $15,000 (1996), initially
payable, on January 31, 1999 and every three years
thereafter as adjusted by inflation of 3% per annum;
and (iv) commitment fee of 0.375% payable quaarterly,
in advance, on the Accretion Line of Credit.
Schedule 11 to
Participation Agr.
The Site
Being a parcel of land hereinafter described, said parcel of land
having been acquired by Panda-Brandywine, L.P., by deed dated
March 30, 1995 and recorded April 12, 1995 among the Land Records
of Prince George's County, Maryland in Liber 10100 at Folio 185,
said parcel of land being more particularly described as follows:
Beginning for the said parcel of land at a point on the northerly
Right of Way line of Cedarville Road, (30 feet Right of Way), and
the westerly Right of Way line of the Penn-Central Railroad,
running thence with the said northerly Right of Way line of
Cedarvllle Roada;
1.. South 85 degrees 33' 38" West, 249 52 feet to a point,
thence;
2. North 05 degrees 03' 51" East, 1,482.70 feet to a point
at a common corner of the lands formerly of Jerry W. Jasper,
surviving joint tenant of Jones D. Jasper, and Part of Parcel
'A', Montgomery Ward Brandywine Subdivision as recorded in Plat
Book V.U. 157 at Plat No. 4l, thence running with the division
line between said former Jasper parcel and Part of Parcel 'A';
3. North 51 degrees 57' 01" West, 380.94 to an iron pipe
found at the common corner of the former Jerry W. Jasper parcel,
Part of Parcel 'A', and the lands of Brandywine Auto Sales, Inc.,
Liber 4530 at Folio 728, thence running with the division line
between said former Jasper parcel and Brandywine Auto Sales,
Inc.;
4. North 14 degrees 49' 35" East, 806.46 feet to an Iron
pipe found at the common corner of the former Jerry W. Jasper
parcel, Brandywine Auto Sales, Inc., and the lands of Dee Vee
Associates Joint Venture, Liber 6970 at Folio 539, thence running
with the division line between salt former Jasper parcel and Dee
Vee Associates Joint Venture;
5. South 38 degrees 00' 02" East, 1,074.65 feet to a stone
found at the common corner of the former Jerry W. Jasper parcel,
Dee Vee Associates Joint Venture, and Lot 32, "TOWSEN TERRACE"
Subdivision, as recorded in Plat Book 3 as Plat No. 75, thence
running with the division line between said former Jasper parcel
and Lot 32 and Lot 31, "TOWSEN TERRACE";
6. South 10 degrees 52' 16" West, 1,187.98 feet to a point
on the said westerly Right of Way line of the Penn-Central
Railroad, thence running with said line;
7. South 26 degrees 00' 11" West, 514.98 feet to the point
of beginning, containing 1,125,013 square feet or 25.8268 acres
of land more or less.
Together with:
Being a parcel of land hereinafter described, said parcel of land
having been acquired by PandaBrandywine, L.P. by deed dated
December 28, 1994 and recorded on April 12, 1995 among the Land
Records of Prince George's County, Maryland in Liber 10100 at
Folio 190, said parcel of land being more particularly described
as follows:
Beginning for the said parcel of Land at a point on the westerly
Right of Way Line of the PennCentral Railroad, said point lying
on and distant North 26 degrees 00' 11" East, 514.98 feet from
the northerly Right of Way line of Cedarville Road, thence
running with the division line between Lots 31 and 32 of the
"TOWSEN TERRACE" Subdivision and the property formerly of Jerry
W. Jasper, Liber 4222 at Folio 97;
1. North 10 degree 52' 16" East, 1,187.98 feet to a stone
found at the common corner of Lot 32, Towsen Terrace, the
property formerly of Jerry W. Jasper, and the property of Dee Vee
Associates Joint Venture, Liber 6970 at Folio 539, thence running
with the division between said Dee Vee Associates Joint Venture
and the northerly line of Lot 32, Towsen Terrace;
2. South 74 degrees 05' 26" East, 314.99 feet to a point
on the westerly Right of Way line of the Penn Central Railroad,
thence running with said line;
3. South 26 degrees 00' 11" West, 1,202.00 feet to the
point of beginning, containing 186,377 square feet or 4.2786
acres of land
Together with:
Being a parcel of Land hereinafter described as Lot 22, and shown
on a Plat of Subdivision entitled "Towsen Terrace" as recorded
among the Land Records of Prince George's County, Maryland in
Plat Book 3 as P1at No. 75, said Lot 22 having been acquired by
Panda-Brandywine, L.P. by deed dated December 28, 1994 and
recorded on April 12, 1995 among the Land Records of Prince
George's County, Maryland in Liber 10100 at Folio 193, said
parcel Lot 22 being more particularly described as follows:
Beginning for the said Lot 22 at a point of intersection of
Cedarville Road, 30 feet wide and formerly called Horse Head
Road, and Indian Head Road 30 feet wide, as shown on the
aforementioned plat, running thence with the centerline of Indian
Head Road;
l. North 49 degrees 02' 00" East, 384.80 feet to a point,
thence;
2. North 52 degrees 54' 00" West, 110.97 feet to a point,
thence leaving said Indian Head Road and running with the
division lines between said Lot 22 and Lots 23 and 16 of Towsen
Terrace Subdivision;
3. South 58 degrees 53' 15" East, 120.06 feet to a point,
thence;
4. South 31 degrees 06' 45" West, 351.26 feet to a point
in the centerline of the aforementioned Cedarville Road, thence
running with said centerline;
5. North 82 degrees 21' 00" West, 307.11 feet to the point
of beginning, containing 70,131 square feet or 1.16 acres of Land
more or less.
EXHIBIT A to
Participation Agreement
FORM OF ASSIGNMENT
COLLATERAL ASSIGNMENT OF [ ] CONTRACT
KNOW ALL MEN BY THESE PRESENTS, that PANDA-BRANDYWINE,
L.P. (the "Partnership"), for a valuable consideration, receipt
of which is hereby acknowledged, has, as of this ___ day of
__________, 1996, sold, assigned, transferred, conveyed and set
over and does hereby sell, assign, transfer, convey and set over
unto FLEET NATIONAL BANK, as Security Agent (the "Security
Agent") under the Amended and Restated Security Deposit Agreement
dated as of December 18, 1996 among the Partnership, the Owner
Trustee (as hereinafter defined), General Electric Capital
Corporation individually ("GE Capital") and as owner participant
(in such capacity, the "Owner Participant"), Panda Brandywine
Corporation (the "General Partner"), Credit Suisse as
administrative agent (in such capacity, the "Administrative
Agent") for the Loan Participants (as hereinafter defined), First
Security Bank, National Association as the indenture trustee (in
such capacity, the "Indenture Trustee") and the Security Agent,
and its successors and assigns, in connection with the
transactions contemplated by the Participation Agreement, dated
as of December 18, 1996, among the Partnership, the Owner
Trustee, GE Capital, the Owner Participant, the General Partner,
the Administrative Agent, the Indenture Trustee, the Security
Agent and the entities listed on Schedule I to the Participation
Agreement (the "Loan Participants") (as amended, supplemented or
otherwise modified from time to time, the "Participation
Agreement"; capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the
Participation Agreement), all the right, title and interest of
the Partnership in, to and under (including all moneys due and to
become due to the Partnership under), and does hereby grant to
the Security Agent, for the benefit of GE Capital and the Owner
Trustee (and, by collateral assignment, the Indenture Trustee), a
first priority security interest in the [ ] Contract
between [ ] ("Contract Party") and the Partnership (as
the same may from time to time be amended, supplemented or
otherwise modified, the "Assigned Agreement").
This Assignment is made as collateral security for all
obligations of the Partnership to GE Capital and the Owner
Trustee under the Reimbursement Agreement, the Site Sublease, the
Facility Lease and the other Transaction Documents and is subject
to all of the terms and conditions of (i) the Amended and
Restated Deed of Trust and Security Agreement and (ii) the
Amended and Restated Security Agreement. All the right, title
and interest of the Partnership in, to and under the Assigned
Agreement shall from the date hereof constitute part of the
"Trust Property" as defined in the Amended and Restated Deed of
Trust and Security Agreement and the "Collateral" as defined in
the Amended and Restated Security Agreement, for all purposes of
such agreements.
The Partnership hereby irrevocably authorizes and
directs Contract Party to pay all moneys, if any, due and to
become due under or by reason of the Assigned Agreement directly
to the Security Agent at its address at 777 Main Street,
Hartford, Connecticut 06115, Attention: Corporate Trust
Administration, for deposit in the Revenue Account, or to such
other person or in such other manner as the Security Agent, GE
Capital or the Indenture Trustee may hereafter from time to time
specify to Contract Party in writing, until such time as the
Security Agent, GE Capital or the Indenture Trustee shall notify
Contract Party that this Assignment has been terminated and
released.
This Assignment shall not cause the Security Agent, the
Owner Trustee, GE Capital, the Indenture Trustee or the
Administrative Agent to be under any obligation to the
Partnership or to Contract Party for the performance or
observance of any of the representations, warranties, terms or
conditions of the Assigned Agreement.
Notwithstanding this Assignment, the Partnership shall
be and remain obligated to Contract Party to perform all of the
Partnership's obligations and agreements under the Assigned
Agreement, and Contract Party shall be and remain obligated to
the Partnership to perform all of Contract Party's obligations
and agreements under the Assigned Agreement.
The Partnership does hereby irrevocably constitute and
appoint the Security Agent its true and lawful attorney-in-fact
with full and irrevocable power and authority in the place and
stead of the Partnership and in the name of the Partnership or in
the name of the Security Agent, for the purpose of carrying out
the terms of this Assignment, the Amended and Restated Deed of
Trust and Security Agreement and the Amended and Restated
Security Agreement, to take any and all action and to execute any
and all instruments which may be necessary to accomplish the
purposes of this Assignment. This power-of-attorney is a power
coupled with an interest and shall be irrevocable.
The Partnership hereby represents and warrants that it
has not heretofore assigned or otherwise disposed of or
encumbered any right, title or interest of the Partnership in, to
or under the Assigned Agreement or any moneys due or to become
due to the Partnership under or by reason thereof, and that the
Partnership has the right and power to transfer to the Security
Agent, on behalf of GE Capital and the Owner Trustee (and, by
collateral assignment, the Indenture Trustee), absolute title to
the Partnership's right, title and interest in, to and under the
Assigned Agreement and in and to all the moneys due and to become
due to the Partnership under the Assigned Agreement.
This Assignment shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Partnership has caused this
Assignment to be duly executed and delivered as of the date first
above written.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION,
its General Partner
By:
Title:
EXHIBIT B to
Participation Agreement
FORM OF CONSENT
CONSENT AND AGREEMENT (the "Consent"), dated as of
_________ __, 1996, among ____________________________________, a
________ corporation ("Contract Party"), PANDA-BRANDYWINE, L.P.,
a Delaware limited partnership (the "Partnership"), GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE
Capital"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, as
Indenture Trustee under the Indenture (the "Indenture Trustee")
and FLEET NATIONAL BANK, in its capacity as Security Agent (the
"Security Agent") under the Amended and Restated Security Deposit
Agreement (as defined in the Participation Agreement referred to
below).
All capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in
Appendix A to the Participation Agreement, as defined below.
W I T N E S S E T H :
WHEREAS, Contract Party and the Partnership have
entered into the ___________________ (as amended, supplemented or
otherwise modified from time to time, the "Assigned Agreement"),
providing for, among other things, ______________;
WHEREAS, the Partnership entered into a Construction
Loan Agreement and Lease Commitment, dated as of March 30, 1995,
with GE Capital (as amended, supplemented or otherwise modified
from time to time, the "Construction Loan Agreement") pursuant to
which GE Capital (i) provided construction financing for the
Project and (ii) issued the Letters of Credit as collateral
security for certain obligations of the Partnership under the
Power Purchase Agreement;
WHEREAS, as contemplated by the Construction Loan
Agreement and pursuant to the terms and conditions of the
Participation Agreement, dated as of December 18, 1996 among the
Partnership, GE Capital, Fleet National Bank, in its capacity as
Security Agent and as Owner Trustee, the Indenture Trustee,
Credit Suisse (as Administrative Agent) and the Loan Participants
named therein (the "Participation Agreement"), the Owner
Participant caused the Owner Trustee to purchase the Facility
from the Partnership and the Partnership and the Owner Trustee
entered into the Facility Lease and the other Lease Documents
pursuant to which, among other things, the Owner Trustee leased
the Facility to the Partnership;
WHEREAS, the Owner Participant has elected to fund the
Facility Lease with non-recourse indebtedness as a leveraged
lease pursuant to Section 5.8 of the Construction Loan Agreement
and, in connection therewith, on the Lease Closing Date (i) each
Loan Participant participated in the debt financing of a portion
of the Owner Trustee's payment of the Purchase Price for the
Facility, (ii) the Owner Participant participated in the Owner
Trustee's payment of the Purchase Price by making an equity
investment in the Owner Trustee, (iii) the Partnership directed
that the Purchase Price for the Facility be paid to GE Capital as
repayment for the loans made by it under the Construction Loan
Agreement and (iv) the Construction Loan Agreement was
terminated;
WHEREAS, as security for the payment and performance by
the Partnership of all of its obligations to GE Capital and the
Owner Trustee, the Partnership has assigned all of its right,
title and interest in, to and under, and granted a security
interest in, the Assigned Agreement to the Security Agent, for
the benefit of the Owner Trustee and GE Capital (and by
collateral assignment, the Indenture Trustee), pursuant to (i)
the Collateral Assignment of ___________ Contract, dated as of
, 199 (the "Assignment", a copy of which is attached as Exhibit
A), (ii) the Amended and Restated Deed of Trust and Security
Agreement, dated as of December 18, 1996, between the Partnership
and Chicago Title Insurance Company, as trustee for the benefit
of the Security Agent, as the same may be amended, supplemented
or otherwise modified from time to time (the "Deed of Trust"),
and (iii) the Amended and Restated Security Agreement, dated as
of December 18, 1996, between the Partnership and the Security
Agent, as amended, supplemented or otherwise modified from time
to time (together with the Assignment and the Deed of Trust, the
"Security Agreement");
NOW THEREFORE, in consideration of good and valuable
consideration, the receipt of which is hereby acknowledged, and
intending to be legally bound, Contract Party, the Partnership,
GE Capital and the Security Agent hereby agree as follows,
anything in the Assigned Agreement to the contrary
notwithstanding:
SECTION 1. CONSENT TO ASSIGNMENT, SALE AND LEASE, ETC.
1.1 Consent to Assignment. Contract Party (a)
consents to the pledge and assignment to the Security Agent, for
the benefit of the Owner Trustee (and, by collateral assignment,
the Indenture Trustee) and GE Capital, of all of the
Partnership's right, title and interest in, to and under the
Assigned Agreement pursuant to the Security Agreement (the
"Assigned Interest"), and (b) acknowledges the right of the
Security Agent in the exercise of its rights and remedies under
the Security Agreement to make all demands, give all notices,
take all actions and exercise all rights of the Partnership under
the Assigned Agreement; provided that, insofar as the Security
Agent exercises any of its rights under the Assigned Agreement or
makes any claims with respect to payments or other obligations
under the Assigned Agreement, the terms and conditions of the
Assigned Agreement applicable to such exercise of rights or
claims shall apply to the Security Agent to the same extent as to
the Partnership. Contract Party further acknowledges and agrees
that the Indenture Trustee shall, until the Lender Obligations
are fully satisfied, enjoy jointly with (or, upon notice by the
Indenture Trustee to the Contract Party that it has foreclosed
the Lien of the Indenture, to the exclusion of) GE Capital and
the Security Agent, all rights of GE Capital and the Security
Agent under the Existing Consent and this Consent for the benefit
of the Loan Participants.
1.2 Substitute Owner. Contract Party agrees that, if
GE Capital, the Owner Trustee or the Security Agent shall notify
Contract Party that a Reimbursement Event of Default under the
Reimbursement Agreement, a Lease Event of Default under the
Facility Lease or an Indenture Event of Default under the
Indenture has occurred and is continuing or if the Indenture
Trustee shall notify the Contract Party that it has foreclosed
the Lien of the Indenture and that the Security Agent or the
Indenture Trustee, as the case may be, has elected to exercise
its rights and remedies pursuant to the Security Agreement or the
Indenture, as appropriate, then the Security Agent or the
Indenture Trustee, as the case may be, or the Security Agent's or
the Indenture Trustee's transferee or any purchaser of the
Assigned Interest, in each case, which party has elected to
assume the rights and obligations of the Partnership under the
Assigned Agreement (the "Substitute Owner"), shall be substituted
for the Partnership under the Assigned Agreement.
1.3 Right to Cure. In the event of a default by the
Partnership in the performance of any of its obligations under
the Assigned Agreement, or upon the occurrence or non-occurrence
of any event or condition under the Assigned Agreement which
would immediately or with the passage of any applicable grace
period or the giving of notice, or both, enable Contract Party to
terminate or suspend its obligations under the Assigned Agreement
(hereinafter a "default"), Contract Party will not terminate the
Assigned Agreement until it first gives prompt written notice of
such default to GE Capital, the Indenture Trustee and the
Security Agent and affords GE Capital, the Indenture Trustee and
the Security Agent a period of at least 60 days (or if such
default is a nonmonetary default, such longer period as is
required so long as GE Capital, the Indenture Trustee or the
Security Agent has commenced and is diligently pursuing
appropriate action to cure such default) from receipt of such
notice to cure such default; provided, however, that if GE
Capital, the Indenture Trustee or the Security Agent is
prohibited by any process, stay or injunction issued by any
governmental authority or by any bankruptcy or insolvency
proceeding involving the Partnership from curing any such
default, the time periods specified herein for curing a default
shall be extended for the period of such prohibition.
1.4 No Amendments. Contract Party will not, without
the prior written consent of the Security Agent, the Indenture
Trustee or GE Capital, enter into any amendment, supplement,
assignment, transfer or other modification of the Assigned
Agreement, or enter into any consensual cancellation or
termination of the Assigned Agreement, or assign or otherwise
transfer (or consent to any such assignment or transfer by the
Partnership of) any of its right, title and interest thereunder.
1.5 Replacement Agreement. In the event that the
Assigned Agreement is terminated as a result of any bankruptcy or
insolvency proceeding affecting the Partnership, Contract Party
will, at the option of the Security Agent, enter into a new
agreement with the Security Agent or its transferee or nominee
having terms substantially the same (except for economic terms,
which shall be exactly the same) as the terms of such Assigned
Agreement.
1.6 No Liability. Contract Party acknowledges and
agrees that the Security Agent, the Indenture Trustee, the Owner
Trustee and GE Capital (and each transferee of the Security
Agent, the Indenture Trustee, the Owner Trustee and GE Capital)
shall not have any liability or obligation under the Assigned
Agreement as a result of this Consent, the Security Agreement or
otherwise, nor shall the Security Agent, the Owner Trustee, the
Indenture Trustee nor GE Capital nor any transferee of such
person, except during any period in which such person has elected
to become a Substitute Owner pursuant to subsection 1.2, be
obligated or required to perform any of the Partnership's
obligations under the Assigned Agreement or to take any action to
collect or enforce any claim for payment assigned under the
Security Agreement; provided that under no circumstances shall
the Security Agent, the Indenture Trustee, the Owner Trustee or
GE Capital (or any transferee) have any liability or obligation
respecting events which occurred prior to the date of its
becoming a Substitute Owner. Notwithstanding anything to the
contrary contained in this Consent, in the event that the
Security Agent, the Indenture Trustee, the Owner Trustee, GE
Capital, any transferee, or another purchaser succeeds to the
Partnership's interest, then liability in respect of any and all
obligations of such successor under the Assigned Agreement shall
be limited solely to such successor's interest in the Project and
the sole recourse of Contract Party in seeking enforcement of
such obligations shall be to such successor's interest in the
Project (and no officer, director, employee, shareholder, agent
or affiliate or subsidiary of such successor shall have any
liability with respect thereto).
1.7 Performance under Assigned Agreement. Contract
Party shall perform and comply with all terms and provisions of
the Assigned Agreement to be performed or complied with by it and
shall maintain the Assigned Agreement in full force and effect in
accordance with its terms.
1.8 Delivery of Notices. Contract Party shall deliver
to GE Capital, the Indenture Trustee and the Security Agent,
concurrently with the delivery thereof to the Partnership, a copy
of each notice, request or demand given by Contract Party
pursuant to the Assigned Agreement.
SECTION 2. PAYMENTS
Contract Party will pay all moneys due and to become
due to the Partnership under the Assigned Agreement directly to
Fleet National Bank, as Security Agent, 777 Main Street,
Hartford, Connecticut 06115, Attention: Corporate Trust
Administration, for deposit in the Revenue Account, or to such
other person or in such other manner as GE Capital, the Indenture
Trustee or the Security Agent may from time to time specify in
writing to Contract Party, without offset, abatement, withholding
or reduction except as provided or permitted by the Assigned
Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF CONTRACT PARTY
Contract Party makes the following representations and
warranties for the benefit of GE Capital, the Indenture Trustee
and the Security Agent, which shall survive the execution and
delivery of this Consent and the Assigned Agreement and the
consummation of the transactions contemplated hereby and thereby.
3.1 Organization of the Contract Party. The Contract
Party is a corporation duly organized, validly existing and in
good standing under the laws of the State of _____________ and is
duly qualified and authorized to do business and is in good
standing as a foreign corporation in every jurisdiction in which
it owns or leases real property or in which the nature of its
business requires it to be so qualified, and has all requisite
power and authority, corporate and otherwise, to enter into and
to perform its obligations hereunder and under the Assigned
Agreements, and to carry out the terms hereof and thereof and the
transactions contemplated hereby and thereby.
3.2 Approval. The execution, delivery and performance
by Contract Party of this Consent and the Assigned Agreement do
not require any approval or consent of any holder (or any trustee
for any holder) of any indebtedness or other obligation Contract
Party or of any other person or entity, except approvals or
consents which have been obtained or which are otherwise required
as described in Section 3.7 hereof.
3.3 Execution, Delivery; Binding Agreements. Each of
this Consent and the Assigned Agreement is in full force and
effect, has been duly executed and delivered by Contract Party,
and constitutes the legal, valid and binding obligation of
Contract Party, enforceable against Contract Party in accordance
with its terms except as the enforceability thereof may be
limited by (a) bankruptcy, insolvency, reorganization, or other
similar laws affecting the enforcement of creditors' rights
generally and (b) general equitable principles (whether
considered in a proceeding in equity or at law).
3.4 Litigation. There is no legislation, litigation,
action, suit, adverse proceeding or investigation pending or (to
the best of Contract Party's knowledge after due inquiry)
threatened, against Contract Party before or by any court,
administrative agency, arbitrator or governmental authority, body
or agency which, if adversely determined, individually or in the
aggregate, (i) could adversely affect the performance by Contract
Party of its obligations hereunder or under the Assigned
Agreement or (ii) questions the validity, binding effect or
enforceability hereof or of the Assigned Agreement, any action
taken or to be taken pursuant hereto or thereto or any of the
transactions contemplated hereby or thereby.
3.5 Compliance with Other Instruments, etc. The
execution, delivery and performance by Contract Party of this
Consent and the Assigned Agreement, and the consummation of the
transactions contemplated hereby and thereby, will not result in
any violation of any term of any contract or agreement to which
it is a party or by which it or its property is bound, or of any
license, permit, franchise, judgment, writ, injunction, decree,
order, charter, law, ordinance, rule or regulation applicable to
it.
3.6 No Default or Amendment. Neither the Contract
Party nor, to the best of Contract Party's knowledge after due
inquiry, any other party to the Assigned Agreement is in default
of any of its obligations thereunder. Contract Party and, to
best of Contract Party's knowledge after due inquiry, each other
party to the Assigned Agreement have complied with all conditions
and agreements contained in the Assigned Agreement required to be
performed or complied with by such party prior to the date
hereof. To the best of Contract Party's knowledge after due
inquiry, no event or condition exists which would, either
immediately or with the passage of any applicable grace period or
giving of notice, or both, enable either Contract Party or the
Partnership to terminate or suspend its obligations under the
Assigned Agreement. The Assigned Agreement has not been amended,
modified or supplemented in any manner.
3.7 Governmental Approval. No consent, order,
authorization, waiver, approval or any other action by, or
registration, declaration or filing with, any Governmental
Authority (collectively the "Approvals") is required to be
obtained by the Contract Party in connection with the execution,
delivery or performance of the Assigned Agreement or this Consent
or the consummation of the transactions contemplated hereunder or
thereunder, except as listed on Schedule A hereto. The Approvals
set forth on Schedule A are Final (as hereinafter defined). An
approval shall be "Final" if it has been validly issued, is in
full force and effect, is not subject to any condition (other
than compliance with the terms of the Assigned Agreement), and is
final and not subject to any appeal.
3.8 No Previous Assignments. Contract Party has no
notice of, and has not consented to, any previous assignment by
the Partnership of all or any part of its rights under the
Assigned Agreement.
3.9 Representations and Warranties. All
representations, warranties and other statements made by Contract
Party to the Partnership in the Assigned Agreement were true and
correct as of the date when made and are true and correct as of
the date of this Consent.
SECTION 4. MISCELLANEOUS
4.1 Notices. All notices and other communications
hereunder shall be in writing, shall refer on their face to the
Assigned Agreement (although failure to so refer shall not render
any such notice or communication ineffective), shall be sent by
first class mail, by personal delivery or by a nationally
recognized courier service, and shall be directed (a) if to
Contract Party, in accordance with the Assigned Agreement, (b) if
to GE Capital, at 1600 Summer Street, Stamford, Connecticut
06927, attention Vice President, Energy Project Operations and
Transportation and Industrial Financing Division, (c) if to the
Partnership, at 4100 Spring Valley, Suite 1001, Dallas, Texas
75244, or (d) if to the Security Agent, at 777 Main Street,
Hartford, Connecticut 06115, Attention: Corporate Trust
Administration, (e) if to the Indenture Trustee, to First
Security Bank, National Association, 79 South Main Street, Salt
Lake City, Utah 84111, Attention: Corporate Trust Services, or
(f) to such other address or addressee as any party may designate
by notice given pursuant hereto.
4.2 Governing Law. THIS CONSENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
4.3 Counterparts. This Consent may be executed in any
number of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together
constitute one and the same instrument.
4.4 Headings Descriptive. The headings of the several
Sections and subsections of this Consent are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Consent.
4.5 Severability. In case any provision in or
obligation under this Consent shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.
4.6 Amendment, Waiver. Neither this Consent nor any
of the terms hereof may be terminated, amended, supplemented,
waived or modified except by an instrument in writing signed by
Contract Party, the Indenture Trustee, the Security Agent and GE
Capital.
4.7 Successors and Assigns. This Consent shall be
binding upon Contract Party and its permitted successors and
assigns and shall inure to the benefit of the Security Agent, the
Owner Trustee, the Indenture Trustee, GE Capital and their
respective successors and assigns.
4.8 Further Assurances. Each of Contract Party and
the Partnership hereby agrees to execute and deliver all such
instruments and take all such action as may be necessary to
effectuate fully the purposes of this Consent, including to
confirm the rights of any permitted successor or assignee of GE
Capital, the Indenture Trustee or the Owner Trustee (including
any lender referred to in subsection 1.9) under this Consent.
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Consent, or have caused this Consent to be duly
executed and delivered by their Authorized Officers, as of the
date first above written.
[Contract Party]
By:
Name:
Title:
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its general partner
By:
Name:
Title:
FLEET NATIONAL BANK, as Security Agent
By:
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name:
Title:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION
By:
Name:
Title:
Exhibit C to
Participation Agreement
[FORM OF LEASE CLOSING NOTICE]
General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06905
Fleet National Bank, as
Owner Trustee
777 Main Street
Hartford, Connecticut 06115
Pursuant to subsection 5.1(b) of the Participation Agreement
dated as of December 18, 1996 (the 'participation Agreement")
among Panda-Brandywine, L.P., a Delaware limited partnership
(the "Partnership"), Panda Brandywine Corporation, a Delaware
corporation, and the sole general partner of the Partnership
(the "General Partner"), General Electric Capital Corporation,
a New York corporation in its individual capacity and as Owner
Participant, Fleet National Bank (formerly known as Shawmut
Bank Connecticut, National Association), a national banking
association, not in its individual capacity but solely as Owner
Trustee under the Trust Agreement and as security agent under
the Security Deposit Agreement, First Security Bank, National
Association, a national banking association, not in its
individual capacity but solely as Indenture Trustee under the
Indenture, Credit Suisse, a bank organized and existing under
the laws of Switzerland, acting by and through its New York
branch as Administrative Agent for the entities listed on
Schedule I to the Participation Agreement (all capitalized
terms used herein having the respective meanings set forth in
the Participation Agreement) the Partnership hereby gives
notice on behalf of the Partnership that the Lease Closing Date
for the conveyance and transfer of the Facility to Fleet
National Bank, as Owner Trustee, shall occur on __________,
19__ /1 at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017.
IN WITNESS WHEREOF, the undersigned has executed this
certificate on the date set forth below.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION, its
General Partner
By:
Name:
Title:
Date:
1/ The Lease Closing Date shall not be earlier than fifteen
(15) Business Days from the date of this Lease Closing
Notice (and, to the extent possible, shall be on the last
day of a calendar month).
EXHIBIT D to
Participation Agreement
[FORM OF CERTIFICATE OF LESSOR'S CERTIFICATE]
CERTIFICATE OF LESSOR'S COST
December 18, 1996
Pursuant to subsection 5.1(v) of the Participation Agreement
dated as of December 18, 1996 (the "Participation Agreement")
among Panda-Brandywine, L.P., a Delaware limited partnership
(the "Partnership"), Panda Brandywine Corporation, a Delaware
corporation, and the sole general partner of the Partnership
(the "General Partner"), General Electric Capital Corporation,
a New York corporation in its individual capacity and as Owner
Participant, Fleet National Bank (formerly known as Shawmut
Bank Connecticut, National Association), a national banking
association, not in its individual capacity but solely as Owner
Trustee under the Trust Agreement and as security agent under
the Security Deposit Agreement, First Security Bank, National
Association, a national banking association, not in its
individual capacity but solely as Indenture Trustee under the
Indenture, Credit Suisse, a bank organized and existing under
the laws of Switzerland, acting by and through its New York
branch as Administrative Agent for the entities listed on
Schedule I to the Participation Agreement (all capitalized
terms used herein having the respective meanings set forth in
the Participation Agreement), the General Partner hereby
certifies on behalf of the Partnership that Lessor's Cost is
$_________
IN WITNESS WHEREOF, the undersigned has executed this
certificate on the date set forth below.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION, its
General Partner
By: /S/ Bryan
Urban
Name: Bryan Urban
Title: Vice President
Accepted:
GENERAL ELECTRIC
CAPITAL
CORPORATION
By:
Title:
Dated: December , 1996
FLEET NATIONAL BANK, as Owner Trustee under the
Amended and Restated Trust Agreement dated as
of December 18, 1996 between General Electric
Capital Corporation and Fleet National Bank
By:
Title:
Date: December , 1 9 9 6
Exhibit E to
Participation Agreement
[ FORM OF FINAL COMPLETION CERTIFICATE]
The undersigned, PANDA-BRANDYWINE, L. P. , a Delaware limited
partnership (the "Partnership"), refers to the Participation
Agreement dated as of December 18, 1996 (the "Participation
Agreement") between the Partnership, Panda Brandywine
Corporation, the sole general partner of the Partnership (the
"General Partner"), General Electric Capital Corporation, in
its individual capacity ("GE Capital") and as Owner
Participant, Fleet National Bank (formerly known as Shawmut
Bank Connecticut, National Association), a national banking
association, not in its individual capacity but solely as Owner
Trustee under the Trust Agreement and as security agent under
the Security Deposit Agreement, First Security Bank, National
Association, a national banking association, not in its
individual capacity but solely as Indenture Trustee under the
Indenture, Credit Suisse, a bank organized and existing under
the laws of Switzerland, acting by and through its New York
branch as Administrative Agent and the entities listed on
Schedule I to the Participation Agreement (all capitalized
terms used herein having the respective meanings set forth in
the Participation Agreement), and hereby certifies to GE
Capital that it has made or caused to be made such examination
or investigation as is necessary to enable it to deliver this
certificate, and that:
(a) the Facility has achieved final acceptance
under the Construction Contract;
(b) no defects and/or deficiencies exist that
adversely affect the performance of the Facility
under the performance standards set forth in the
Construction Contract;
(c) the Partnership has received all as-buiTt
drawings of the Facility, test data, and other
technical information required for the Partnership
or operator to operate and maintain the Facility;
(d) the Partnership has received all manuals and
instruction books necessary to operate and maintain
the Facility in a safe, efficient and effective
manner;
(e) all special tools to be supplied by any EPC
Contractor or the Partnership have been delivered
to the Site;
(f) all EPC Contractors', contractors' and
subcontractors' personnel, supplies, equipment,
waste materials, rubbish and temporary facilities
have been removed from the Site;
(g) the Partnership has received from each EPC
Contractor (i) any waivers of liens and claims
relating to the Work which were not previously
delivered by such
EPC Contractor, and (ii) final waivers of all liens and
claims by each subcontractor or materialman of such EPC
Contractor relating to the Work;
(h) there are no significant unresolved disputes,
litigation or arbitration proceedings with respect to
any of the EPC Contracts;
(i) each EPC Contractor has performed all provisions
of and delivered aT1 items required by the relevant
EPC Contract in a manner reasonably satisfactory to
the Partnership;
(j) GE Capital has received from each EPC Contractor
an executed copy of a completion certificate, in form
and substance satisfactory to GE Capital;
(k) all Project Costs incurred in connection with Final
Completion of the Facility have been paid; and
(1) the Commercial Operation Date has occurred under
the Power Purchase Agreement.
IN WITNESS WHEREOF, we have signed this certificate
this day of , 199_.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION, its
General Partner
By:
Name:
Title:
EXHIBIT F to
Participation Agreement
FORM OF BILL OF SALE AND SEVERANCE AGREEMENT
[See Exhibit 10.25 to this Registration Agreement]
EXHIBIT G to
Participation Agreement
FORM OF PRESENT ASSIGNMENT
[See Exhibit 10.62.1 to this Registration Agreement]
EXHIBIT H to
Participation Agreement
FORM OF REIMBURSEMENT AGREEMENT
[See Exhibit 10.24.2 to this Registration Agreement]
EXHIBIT I
to Participation Agreement
FORM OF
TRUST INDENTURE AND SECURITY AGREEMENT
Dated as of December 18, 1996
by
FLEET NATIONAL BANK,
as Owner Trustee
in favor of
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
TABLE OF CONTENTS
Page
ARTICLE 1
Definitions 10
1.1 Defined Terms 10
1.2 Other Definitional Provisions 10
ARTICLE 2
Loan Certificates 10
2.1 Form of Loan Certificates 10
2.2 Issuance and Terms of Loan Certificates 20
2.3 Payments from Trust Indenture Estate Only 21
2.4 Method of Payment 22
2.5 Application of Payments 23
2.6 Termination of Interest in Trust Indenture
Estate or Lessor's Estate 23
2.7 Transfer and Exchange of Loan Certificates 24
2.8 Mutilated, Destroyed, Lost or Stolen Loan
Certificates 25
2.9 Costs and Expenses of Issuance of New Loan
Certificates 26
2.10 Prepayment of Loan Certificates 26
2.11 Taxes; Withholding 27
2.12 Additional Costs 28
2.13 Limitation on Types of Loans 31
2.14 Illegality 32
2.15 Treatment of Affected Loans 32
2.16 ERISA Plan Prohibition 33
2.17 Administrative Agent Fee 34
2.18 Total Accretion Loan Commitment 34
2.19 Accretion Loan Funding Procedure and
Conditions 34
2.20 Accretion Line of Credit Commitment Fees 35
ARTICLE 3
General Covenants and Provisions 35
3.1 Payment of Loan Certificates and Accretion
Loan Certificates 35
3.2 Indenture Trustee Assumes No Obligations 35
3.3 Further Assurances 36
3.4 Acts of Owner Trustee 36
3.5 After-Acquired Property 36
3.6 Actions with Respect to Indenture Property 37
3.7 The Site 37
3.8 Power of Attorney 40
3.9 Notice of Default or Event of Loss 41
3.10 Certain Rights of Owner Trustee and Owner
Participant 41
3.11 Certain Agreements of Owner Trustee 44
3.12 Covenants of Fleet National Bank and the
Owner Trustee 44
3.13 Covenant to Pay 45
ARTICLE 4
Release of Indenture Property 45
4.1 Release of Parts 45
ARTICLE 5
Application of Assigned Moneys
Received by the Indenture Trustee 46
5.1 Application of Payments 46
5.2 Basic Rent Payments 46
5.3 Application of Prepayments 47
5.4 Payments After Indenture Event of Default,
etc. 48
5.5 Application of Certain Other Payments 50
5.6 Excepted Payments and Indemnities 50
ARTICLE 6
Indenture Event of Default and Remedies 50
6.1 Indenture Events of Default 50
6.2 Rights and Remedies of the Indenture Trustee 52
6.3 Appointment of Receiver 56
6.4 Application of Proceeds; Effect of Sale 57
6.5 Abandonment of Sale 57
6.6 Non-Extinguishment of Lien 57
6.7 Right to Purchase 57
6.8 Waiver of Marshalling, etc. 58
6.9 Remedies not Exclusive 58
6.10 Physical Possession 58
6.11 Enforcement of Remedies Under Lease 58
6.12 Discontinuance of Proceedings 59
6.13 Waiver of Past Defaults 59
ARTICLE 7
Rights of Owner Trustee and Owner Participant 59
7.1 Owner Trustee's and Owner Participant's
Right to Cure Certain Events of Default 59
7.2 Owner Trustee's and Owner Participant's
Right to Purchase Loan Certificates 61
ARTICLE 8
Payments from Indenture Property Only 62
ARTICLE 9
Concerning the Owner Trustee 63
9.1 Limitation on Liability of Owner Trustee 63
9.2 Successor Owner Trustee 63
ARTICLE 10
Concerning the Indenture Trustee 63
10.1 Appointment 63
10.2 Action Upon Instructions 64
10.3 Exculpatory Provisions 64
10.4 Indemnification 65
10.5 No Duties Except as Specified 66
10.6 Resignation or Removal of the Indenture
Trustee 66
ARTICLE 11
General 67
11.1 Discharge 67
11.2 Investment of Funds 68
11.3 No Waiver 68
11.4 Forcible Detainer 68
11.5 Waiver of Stay or Extension 68
11.6 Notices 69
11.7 Severability 69
11.8 Application of Payments 69
11.9 Other Instruments 69
11.10 GOVERNING LAW 70
11.11 Amendments 70
11.12 Successors and Assigns 70
11.13 Renewal, Etc. 70
11.14 Assignment of Rents 70
11.15 Certain Rights of Power Purchaser 71
Schedule 1 - Description of Site
TRUST INDENTURE AND SECURITY AGREEMENT, dated as of
December 18, 1996 (this "Indenture") by FLEET NATIONAL BANK
(formerly known as Shawmut Bank Connecticut, National
Association), a national banking association ("Fleet National
Bank"), not in its individual capacity (except as expressly
provided herein) but solely as Owner Trustee (in such capacity,
the "Owner Trustee") under the Amended and Restated Trust
Agreement (as amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof, the "Trust
Agreement") dated as of December 18, 1996, with General Electric
Capital Corporation ("GE Capital" or the "Owner Participant"), in
favor of FIRST SECURITY BANK, NATIONAL ASSOCIATION, in its
capacity as Indenture Trustee (the "Indenture Trustee"), for the
equal and ratable benefit of the Loan Participants (as defined
herein) and for the benefit of the Interest Hedging Counterparty
(as defined herein).
W I T N E S S E T H :
WHEREAS, as provided in Article 1 hereof, the
capitalized terms used in this Indenture and not otherwise
defined herein shall have the meanings assigned to them in Annex
A to the Participation Agreement (as amended, supplemented or
otherwise modified from time to time, the "Participation
Agreement"), dated as of December 18, 1996 among Panda-
Brandywine, L.P. (the "Partnership"), as Lessee, Panda Brandywine
Corporation (the "General Partner"), as General Partner, GE
Capital, as Owner Participant, Fleet National Bank, not in its
individual capacity (except as expressly set forth therein) but
solely as Owner Trustee and Security Agent, First Security Bank,
National Association, as Indenture Trustee, Credit Suisse, as
Administrative Agent and the other entities listed on Schedule I
thereto, as Loan Participants; and
WHEREAS, the Partnership, the General Partner and GE
Capital entered into the Construction Loan Agreement and Lease
Commitment dated as of March 30, 1995 (the "Construction Loan
Agreement") pursuant to which GE Capital (i) provided
construction financing for the Project and (ii) issued the
Letters of Credit as collateral security for certain obligations
of the Partnership under the Power Purchase Agreement;
WHEREAS, the construction of the Facility has been
substantially completed and the Date of Substantial Completion
has occurred;
WHEREAS, Owner Participant and Owner Trustee have
entered into a Trust Agreement whereby, among other things, a
certain Trust is declared for the use and benefit of Owner
Participant, subject, however, to the Lien created pursuant
hereto for the use and with the priority of payment to the
Holders of the Loan Certificates and the Interest Hedging
Counterparty;
WHEREAS, the Partnership has requested that GE Capital
cause the Owner Trustee to purchase the Facility from the
Partnership and lease the same back to the Partnership as
provided in the Participation Agreement, and the Owner Trustee
intends to do the same pursuant to the terms of the Participation
Agreement;
WHEREAS, in furtherance thereof, the Partnership and
the Owner Trustee are entering into the Facility Lease and the
other Lease Documents pursuant to which, among other things, the
Owner Trustee will lease the Facility to the Partnership;
WHEREAS, the Owner Participant wishes to fund the
Facility Lease with non-recourse indebtedness as a leveraged
lease and, in connection therewith, on the Lease Closing Date (i)
each Loan Participant will participate in the debt financing of a
portion of the Owner Trustee's payment of the Purchase Price for
the Facility, as described in the Participation Agreement and
(ii) the Owner Participant will participate in the Owner
Trustee's payment of the Purchase Price by making an equity
investment in the Owner Trustee, as described in the
Participation Agreement and (iii) the Partnership has directed
that the Purchase Price for the Facility be paid to GE Capital as
repayment for the Loans made by it under the Construction Loan
Agreement;
WHEREAS, the Owner Trustee desires by this Indenture,
among other things, (i) to provide for the issuance by the Owner
Trustee to the Loan Participants of the Loan Certificates
evidencing the Loans made by the Loan Participants to the Owner
Trustee to finance in part the Owner Trustee's purchase of the
Facility, as provided in the Participation Agreement and (ii) to
provide, to the extent provided herein, for the assignment,
mortgage and grant of a security interest in and pledge by the
Owner Trustee to the Indenture Trustee, as part of the Trust
Indenture Estate, among other things, of all of the Owner
Trustee's right, title and interest in and to the Facility, the
Facility Lease and payments and other amounts received under this
Indenture or the Facility Lease (other than Excepted Payments) in
accordance with the terms of this Indenture as security for the
Interest Hedging Obligations and the Owner Trustee's obligations
to the holders from time to time of the Loan Certificates and for
the benefit and security of the Interest Hedging Counterparty and
such Holders;
WHEREAS, all things have been done to make the Loan
Certificates, when executed by the Owner Trustee, authenticated
and delivered under this Indenture and issued, the legal, valid
and binding obligations of the Owner Trustee; and
WHEREAS, all things necessary to make this Indenture
the legal, valid and binding obligation of the Owner Trustee, for
the uses and purposes set forth in this Indenture, in accordance
with its terms, have been done and performed and have happened;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that to
secure (i)(A) payment when due of the principal amount of,
premium, if any, and interest on the Loan Certificates from time
to time outstanding and all other amounts (including, without
limitation, interest accruing after the maturity of the Loan
Certificates and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Owner Trustee,
the Owner Participant or the Lessee, whether or not a claim for
post-filing or post-petition interest is allowed in such
proceeding, all indemnities, all Breakage Costs, all Interest
Hedging Obligations, and all expenses, costs and fees), from time
to time payable by the Owner Trustee to or on behalf of any
holder of the Loan Certificates or any Interest Hedging
Counterparty under this Indenture, any Interest Hedging Agreement
or the Participation Agreement and all other obligations and
liabilities from time to time payable by the Owner Trustee to any
Loan Participant, the Administrative Agent or the Indenture
Trustee pursuant to the Transaction Documents, whether direct or
indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, (B) all fees and expenses of the
Indenture Trustee, from time to time payable by the Owner Trustee
under this Indenture and the Participation Agreement, and (C) the
principal of and interest and other amounts owing on any
indebtedness incurred in connection with any refinancing
permitted by this Indenture and the Participation Agreement of
any indebtedness referred to in clause (A) above (all of the
foregoing in clauses (A) through (C) above being herein
collectively called the "Owner Trustee Obligations"), (ii)
payment when due of all amounts from time to time owing by the
Lessee to or for the benefit of the Loan Participants pursuant to
the Participation Agreement, whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter
incurred (herein collectively called the "Special Lessee
Obligations"; the Owner Trustee Obligations and the Special
Lessee Obligations being herein collectively called the "Lender
Obligations"), (iii) the performance and observance by the Owner
Trustee of all agreements contained herein and in the
Participation Agreement and (iv) the performance and observance
by the Owner Participant of its covenants and agreements
contained in the Participation Agreement and for the uses and
purposes and subject to the terms and provisions hereof, and in
consideration of the premises and of the covenants herein
contained and of the acceptance of the Loan Certificates by the
Holders, the Owner Trustee, intending to be legally bound, does
hereby grant, bargain, sell, convey, warrant, assign, transfer,
mortgage, pledge, grant a security interest in and under the
Uniform Commercial Code, set over and confirm unto the Indenture
Trustee and its successors and assigns, for the benefit of the
Holders and the Interest Hedging Counterparty, all of the Owner
Trustee's estate, right, title, interest, property, claim and
demand, now or hereafter arising, in and to the following
property and rights, excluding Excepted Payments (herein
collectively called the "Indenture Property"):
(a) the Facility and all buildings, structures,
fixtures and other improvements now or hereafter erected on
the Site (collectively, the "Improvements");
(b) all machinery, apparatus, equipment, fittings,
fixtures and other articles of personal property, including
all goods and all goods which become fixtures, now owned or
hereafter acquired by the Owner Trustee or the Partnership
and now or hereafter located on, attached to or used in the
operation of or in connection with the Leased Premises
and/or the Improvements, including items constituting part
of the Facility and all replacements thereof, additions
thereto and substitutions therefor (all of the foregoing
being hereinafter collectively called the "Equipment");
(c) all inventory, raw materials, work in process and
other materials used or consumed in the operation of the
Facility and now or hereafter located on or used in
connection with the Site, the Improvements and/or the
Equipment, and all replacements thereof, additions thereto
and substitutions therefor;
(d) all rights, powers, privileges and other benefits
of the Owner Trustee in Governmental Actions now or
hereafter obtained by the Owner Trustee, the Partnership or
the General Partner (or any Affiliates thereof) from any
Governmental Authority, including, without limitation,
Governmental Actions relating to the ownership, operation,
management and use of the Site, the development and
financing of the Project, the Improvements and the
Equipment, the construction and operation of the Facility
and any improvements, modifications or additions thereto;
(e) the Facility Lease, all Rent due and to become due
thereunder and all rights, powers, privileges, options and
other benefits of the Owner Trustee as lessor under the
Facility Lease, including, without limitation, (i) all
rights of the Owner Trustee to receive Basic Rent and
Supplemental Rent and any other moneys due and to become due
under or pursuant to the Facility Lease, (ii) all rights of
the Owner Trustee to receive proceeds of any insurance
(other than any insurance maintained by or for the benefit
of the Owner Trustee and not required to be maintained by
the Lessee pursuant to Section 6.6 of the Participation
Agreement), indemnity, warranty or guaranty with respect to
the Facility, (iii) all claims of the Owner Trustee for
damages arising out of or for breach of or default under the
Facility Lease (including, without limitation, all rights to
receive payments under Section 15 of the Facility Lease),
(iv) all rights of the Owner Trustee to any security now or
hereafter payable to or receivable by the Owner Trustee with
respect to the Facility or the Facility Lease, (v) the right
of the Owner Trustee to exercise any election or option or
to make any decision or determination or to give or receive
any notice, consent, waiver or approval or to take any
action under the Facility Lease and (vi) the right of the
Owner Trustee to terminate, amend, supplement or otherwise
modify the Facility Lease and to compel performance and
otherwise exercise all remedies thereunder;
(f) the Bill of Sale and all rights, powers,
privileges, options and other benefits of the Owner Trustee
under the Bill of Sale, including, without limitation, (i)
all rights of the Owner Trustee to receive moneys due and to
become due under or pursuant to the Bill of Sale, (ii) all
rights of the Owner Trustee to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to
the Bill of Sale, (iii) all claims of the Owner Trustee for
damages arising out of or for breach of or default under the
Bill of Sale, (iv) all rights of the Owner Trustee to any
security now or hereafter payable to or receivable by the
Owner Trustee under the Bill of Sale, (v) all rights of the
Owner Trustee to exercise any election or option or to make
any decision or determination or to give or receive any
notice, consent, waiver or approval or to take any action
under the Bill of Sale and (vi) the right of the Owner
Trustee to terminate, amend, supplement or otherwise modify
the Bill of Sale and to compel performance and otherwise
exercise all remedies thereunder;
(g) the Deed of Trust and Security Agreement and the
Security Agreement and all rights, powers, privileges and
benefits of the Owner Trustee thereunder, including, without
limitation, (i) all rights of the Owner Trustee to receive
moneys due and to become due under or pursuant to the Deed
of Trust and Security Agreement and the Security Agreement,
(ii) all rights of the Owner Trustee to receive proceeds of
any insurance, indemnity, warranty or guaranty with respect
to the Deed of Trust and Security Agreement and the Security
Agreement, (iii) all claims of the Owner Trustee for damages
arising out of or for breach of or default under the Deed of
Trust and Security Agreement and the Security Agreement,
(iv) all rights of the Owner Trustee to any security now or
hereafter payable to or receivable by the Owner Trustee
under the Deed of Trust and Security Agreement and the
Security Agreement, (v) all rights of the Owner Trustee to
exercise any election or option or to make any decision or
determination or to give or receive any notice, consent,
waiver or approval or to take any action under the Deed of
Trust and Security Agreement and the Security Agreement, and
(vi) the right of the Owner Trustee to terminate, amend,
supplement or otherwise modify the Deed of Trust and
Security Agreement and the Security Agreement and to compel
performance and otherwise exercise all remedies thereunder;
(h) the General Partner Pledge Agreement, the Limited
Partner Pledge Agreement and the Stock Pledge Agreement
(collectively, the "Pledge Agreements") and the shares of
stock of the General Partner and of the Limited Partner
(collectively, the "Pledged Stock") pledged to the Security
Agent for the benefit of the Owner Trustee pursuant thereto
and all rights, powers, privileges and other benefits of the
Owner Trustee thereunder, including, without limitation, (i)
all rights of the Owner Trustee to receive moneys due and to
become due under or pursuant to the Pledge Agreements, (ii)
all claims of the Owner Trustee for damages arising out of
or for breach of or default under the Pledge Agreements,
(iii) all rights of the Owner Trustee to exercise any
election or option or to make any decision or determination
or to give or receive any notice, consent, request,
direction, waiver or approval or to take any action under
the Pledge Agreements and (iv) the right of the Owner
Trustee to terminate, amend, supplement or otherwise modify
the Pledge Agreements and to compel performance thereunder
and otherwise exercise all remedies thereunder;
(i) the accounts established and maintained pursuant
to the Security Deposit Agreement, all Project Revenues and
all cash, cash equivalents, instruments, investments and
other securities deposited or required to be deposited with
the Security Agent pursuant to any provision of the Security
Deposit Agreement and any other Transaction Document;
(j) all accounts, chattel paper, general intangibles,
documents, instruments and securities now owned or hereafter
acquired by the Owner Trustee;
(k) the Lessee Collateral;
(l) the Site Lease and the Site Sublease, and all
rights, powers, privileges, options and other benefits of
the Owner Trustee as lessee under the Site Lease and as
lessor under the Site Sublease, including, without
limitation, (i) all rights of the Owner Trustee to receive
rent and any other moneys due and to become due under or
pursuant to the Site Sublease, (ii) all rights of the Owner
Trustee to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to the Site Lease or the
Site Sublease, (iii) all claims of the Owner Trustee for
damages arising out of or for breach of or default under the
Site Lease or the Site Sublease, (iv) all rights of the
Owner Trustee to any security now or hereafter payable to or
receivable by the Owner Trustee under the Site Lease or the
Site Sublease, (v) the right of the Owner Trustee to
exercise any election or option or to make any decision or
determination or to give or receive any notice, consent,
waiver or approval or to take any action under the Site
Lease or the Site Sublease and (vi) the right of the Owner
Trustee to terminate, amend, supplement or otherwise modify
the Site Lease and the Site Sublease and to compel
performance and otherwise exercise all remedies thereunder;
(m) all rights of the Owner Trustee to exercise any
election or option or to make any determination or to give
any notice, consent, waiver or approval or to take any other
action under the Site Lease or the Site Sublease; any right
of the Owner Trustee to elect to terminate the Site Sublease
or to remain in possession of the Site pursuant to 11 USC
Ss. 365(h)(1) or any similar provision of Applicable Law and
any possessory rights of the Owner Trustee in the Site
pursuant to 11 USC Ss. 365(h)(2) or any similar provision of
Applicable Law;
(n) all the lands and interests in lands, tenements
and hereditaments hereafter acquired by the Owner Trustee,
including (without limitation) all interests of the Owner
Trustee, whether as lessor or lessee, in any leases of land
hereafter made and all rights of the Owner Trustee
thereunder;
(o) each Project Document and each Assignment, and all
rights, powers, privileges and other benefits of the Owner
Trustee thereunder, including without limitation, (i) all
rights of Owner Trustee to receive moneys due and to become
due under or pursuant to the Project Documents and the
Assignments, (ii) all claims of the Owner Trustee for
damages arising out of or for breach of or default under any
Project Document or any Assignment, (iii) all rights of the
Owner Trustee to any security now or hereafter payable to or
receivable by the Owner Trustee under any Project Document
or Assignment, (v) all rights of the Owner Trustee to
exercise any election or option or to make any decision or
determination or to give or receive any notice, consent,
waiver or approval or to take any action under any Project
Document and any Assignment, and (vi) the right of the Owner
Trustee to terminate, amend, supplement or otherwise modify
any Project Document or Assignment and to compel performance
and otherwise exercise all remedies thereunder;
(p) any and all other property that may from time to
time, by delivery or by writing of any kind, be subjected to
the lien hereof by the Owner Trustee or by anyone with its
consent, or which may come into the possession or be subject
to the control of the Indenture Trustee pursuant to this
Indenture, including, without limitation, all proceeds of
any sales or other dispositions of all or part of the
Indenture Property, any such property being hereby assigned
to the Indenture Trustee and subjected or added to the lien
or estate created by this Indenture forthwith upon the
acquisition thereof by the Owner Trustee, as fully as if
such property were now owned by the Owner Trustee and were
specifically described in this Indenture and subjected to
the lien and security interest hereof; and the Indenture
Trustee is hereby authorized to receive any and all such
property as and for additional security hereunder;
(q) all the remainder or remainders, reversion or
reversions, rents, revenues, issues, profits, royalties,
income and other benefits derived from any of the foregoing,
all of which are hereby assigned to the Indenture Trustee,
who hereby authorizes the Security Agent, on its behalf, to
collect and receive the same, to give proper receipts and
acquittances therefor and to apply the same to the payment
of the Loan Certificates in accordance with the provisions
of this Indenture and the Security Deposit Agreement;
(r) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated
claims, including all proceeds of the insurance required to
be maintained by or on behalf the Lessee pursuant to the
Participation Agreement (but not any insurance maintained by
or on behalf of the Owner Trustee and not required to be
maintained by the Lessee under the Participation Agreement)
and all awards or other compensation heretofore or hereafter
made to the Owner Trustee as the result of any Event of
Loss, including any awards for changes of the grades of
streets and any awards for severance damages, all of which
are hereby assigned to the Indenture Trustee, who hereby
authorizes the Security Agent, on its behalf, to collect and
receive the proceeds thereof, to give proper receipts and
acquittances therefor and to apply the same to the payment
of the Loan Certificates in accordance with the provisions
of this Indenture and the Security Deposit Agreement;
(s) all rights of the Owner Trustee to amounts paid or
payable by the Lessee to the Owner Trustee under the
Participation Agreement and all rights of the Owner Trustee
to enforce payments of any such amounts thereunder; and
(t) any right to restitution from the Lessee, the
General Partner, or any other Person in respect of any
determination of invalidity of any of the Facility Lease,
the Lessee Security Documents, the Bill of Sale, the Site
Lease, the Site Sublease, the Assigned Contracts, the Pledge
Agreements, the Assignments and the Security Deposit
Agreement (collectively, the "Granting Clause Documents");
EXCLUDING, HOWEVER, from the Indenture Property any and
all Excepted Payments now existing or hereafter arising and
SUBJECT to the rights of the Owner Trustee and the Owner
Participant set forth in Section 3.10 hereof and Article 7
hereof.
PROVIDED, that with respect to (a) all rights of the
Owner Trustee to exercise any election or option or to make any
decision or determination or to give or receive any notice,
consent, waiver or approval or to take any other action under or
in respect of any of the Granting Clause Documents as well as all
the rights, powers, privileges, options, remedies and other
benefits of the Owner Trustee under any Granting Clause Document,
by Applicable Law or otherwise arising out of any Lease Event of
Default and (b) any right to restitution from the Lessee, the
General Partner, the other Reporting Participants or any other
Person in respect of any determination of invalidity of any
Granting Clause Document, it is understood that such rights,
powers, privileges, options, remedies and other benefits (other
than Excepted Payments) are, subject to Section 3.10 hereof,
presently assigned and transferred to the Indenture Trustee and
may be exercised by the Indenture Trustee without the necessity
of proceeding to exercise remedies under Section 6.2 hereof.
TO HAVE AND TO HOLD the said Indenture Property,
whether now owned or held or hereafter acquired, unto the
Indenture Trustee, its successors and assigns, in trust for the
equal and ratable benefit and security of the holders from time
to time of the Loan Certificates, without any priority of any one
Loan Certificate over any other and for the benefit of the
Interest Hedging Counterparty and for the uses and purposes and
subject to the terms and conditions set forth in this Indenture
and the rights of the Owner Trustee and the Owner Participant
hereunder, forever.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the
lien, security interest or estate created by this Indenture to
secure the payment of the Loan Certificates, and the Interest
Hedging Obligations, both present and future, shall be first,
prior and superior to any Lien (subject to any Permitted Lien),
security interest, reservation of title or other interest
heretofore, contemporaneously or subsequently suffered or granted
by the Owner Trustee, its legal representatives, successors or
assigns, except only those, if any, expressly hereinafter
referred to and that the Indenture Property is to be held, dealt
with and disposed of by the Indenture Trustee, upon and subject
to the terms, covenants, conditions, uses, agreements and trusts
set forth in this Indenture.
PROVIDED ALWAYS, that upon payment in full of the Loan
Certificates and the Interest Hedging Obligations in accordance
with the terms and provisions hereof and thereof and the
observance and performance by the Owner Trustee of its covenants
and agreements set forth herein and therein and in the Interest
Hedging Agreement, then this Indenture and the estate hereby and
therein granted shall cease, determine and be void.
CONCURRENTLY with the delivery of this Indenture, the
Owner Trustee is delivering to the Indenture Trustee the Original
of the Facility Lease which the Indenture Trustee will at all
times maintain in its possession and control until the Loan
Certificates and the Interest Hedging Obligations have been paid
in full and the Owner Trustee shall have observed and performed
its covenants and agreements set forth herein.
ARTICLE 1
Definitions
1.1 Defined Terms. Capitalized terms used in this
Indenture and not otherwise defined herein shall have the
meanings assigned to them in Annex A to the Participation
Agreement (such definitions to be equally applicable to both the
singular and the plural forms of the terms defined). Any term
defined by reference to an agreement, instrument or other
document shall have the meaning so assigned to it whether or not
such document is in effect.
1.2 Other Definitional Provisions. (a) As used
herein and in any certificate or other document made or delivered
pursuant hereto, accounting terms not defined in Annex A to the
Participation Agreement shall have the respective meanings given
to them under GAAP.
(b) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Indenture shall refer
to this Indenture as a whole and not to any particular provision
of this Indenture. Article, section, paragraph, clause,
Schedule, Annex and Exhibit references are to this Indenture
unless otherwise specified.
ARTICLE 2
Loan Certificates
2.1 Form of Loan Certificates. The Loan Certificates
and the Indenture Trustee's forms of certificate of
authentication to appear on the Loan Certificates shall each be
substantially in the forms set forth below:
[FORM OF LOAN CERTIFICATE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
SOLD OR OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT OR LAWS
OR UNLESS AN EXEMPTION IS AVAILABLE UNDER SAID ACT OR LAWS.
FLEET NATIONAL BANK
AS OWNER TRUSTEE UNDER AMENDED AND RESTATED TRUST AGREEMENT
DATED AS OF DECEMBER 18, 1996
LOAN CERTIFICATE DUE [__________]
No._____ ___________ __, 1996
$______________________
FLEET NATIONAL BANK, a national banking association,
not in its individual capacity, but solely as Owner Trustee (in
such capacity, "Owner Trustee") under the Amended and Restated
Trust Agreement dated as of December 18, 1996, as from time to
time supplemented and amended (the "Trust Agreement"), between
the Owner Participant named therein (the "Owner Participant"),
and Fleet National Bank, hereby promises to pay to
______________, or its registered assigns, the principal sum of
_______________ DOLLARS, or, if less, the unpaid principal amount
of this Loan Certificate, together with interest on the amount of
said principal sum remaining unpaid from time to time from and
including the date of this Loan Certificate until paid at the
rates of interest per annum set forth in the Indenture (as
defined below). Accrued interest on this Loan Certificate shall
be payable in arrears on each Payment Date and on the date this
Loan Certificate is paid in full, except as otherwise provided in
the next succeeding paragraph. The Loan Certificates shall bear
interest on the unpaid principal amount thereof at the Debt Rate.
For each Interest Period occurring prior to or on the Accretion
Line of Credit Termination Date, the Holder of this Loan
Certificate's Accretion Loan Proportionate Share of the Accretion
Amount, if any, in respect of the Payment Date for such Interest
Period may be borrowed to pay interest and fees and added to the
principal balance outstanding under this Loan Certificate on such
Payment Date, subject to Section 2.19 of the Indenture, and such
amount shall thereafter be considered principal owing under such
Loan Certificate for all purposes thereunder and hereunder.
Principal on this Loan Certificate is to be payable in
consecutive quarterly installments, each such installment to be
in an amount equal to the amount set forth in Annex A attached
hereto and payable on the dates set forth in said Annex A
(subject to modification as provided in Section 2.2(e) of the
Indenture), except that in any event, the last such installment
shall be in an amount sufficient to discharge the accrued
interest on, and unpaid principal amount of, and any other unpaid
amounts due under this Loan Certificate.
This Loan Certificate shall bear interest, payable on
demand, at the Default Rate on any part of the principal,
Breakage Costs, if any, and, to the extent permitted by
Applicable Law, interest due under this Loan Certificate not paid
when due for any period during which the same shall be overdue.
Capitalized terms used herein and not otherwise herein
defined have the meanings specified in Annex A to the
Participation Agreement.
All payments of principal, Breakage Costs, if any, and
interest to be made by the Owner Trustee under this Loan
Certificate or under the Trust Indenture and Security Agreement,
dated as of December 18, 1996, as from time to time supplemented
and amended (the "Indenture"), between the Owner Trustee and
First Security Bank, National Association as Indenture Trustee
thereunder (the "Indenture Trustee"), shall be made only from the
income or proceeds from the Trust Indenture Estate and only to
the extent that the Owner Trustee shall have sufficient income or
proceeds from the Trust Indenture Estate to make such payments in
accordance with the terms of the Indenture. Each Holder of this
Loan Certificate, by its acceptance of this Loan Certificate,
agrees that, except as otherwise provided in Section 2.3 of the
Indenture, it will look solely to the income and proceeds from
the Trust Indenture Estate to the extent available for
distribution to such Holder as above provided and that except as
provided in said Section 2.3, neither the Owner Participant, the
Owner Trustee nor the Indenture Trustee is personally or
individually liable to the holder of this Loan Certificate for
any amounts payable under this Loan Certificate or for any
liability under the Indenture, this Loan Certificate or the
Participation Agreement.
All principal, Breakage Costs, if any, and interest due
under this Loan Certificate shall be payable in U.S. dollars in
immediately available funds at the office of the Security Agent
acting on behalf of the Indenture Trustee under the terms of the
Security Deposit Agreement or at such other place as the
Indenture Trustee shall have designated to the Owner Trustee
pursuant to Section 2.4 of the Indenture. Each such payment
shall be made on the date such payment is due and without any
presentment or surrender of this Loan Certificate. Whenever the
date scheduled for any payment to be made hereunder or under the
Indenture shall not be a Business Day, then such payment need not
be made on such scheduled date but shall be made on the next
succeeding Business Day with the same force and effect as if made
on such scheduled date and interest shall accrue on the amount of
such payment from and after such scheduled date to the time of
such payment on such next succeeding Business Day; provided,
however, that if at any time when the Debt Rate is calculated by
reference to the Eurodollar Rate such next succeeding Business
Day falls in another calendar month, payment shall be due on the
next preceding Business Day.
Each holder of this Loan Certificate, by its acceptance
of this Loan Certificate, agrees that all amounts received by it
in payment of this Loan Certificate shall be applied as provided
in Article 5 of the Indenture.
This Loan Certificate is one of the Loan Certificates
referred to in the Indenture which have been or are to be issued
by the Owner Trustee pursuant to the terms of the Indenture. The
Trust Indenture Estate is held by the Indenture Trustee as
security for the Loan Certificates. Reference is hereby made to
the Indenture for a statement of the rights and obligations of
the holder of, and the nature and extent of the security for,
this Loan Certificate and of the rights and obligations of the
holders of, and the nature and extent of the security for, the
other Loan Certificates under the Indenture, as well as for a
statement of the terms and conditions of the trusts created by
the Indenture, to all of which terms and conditions in the
Indenture each holder of this Loan Certificate agrees by its
acceptance of this Loan Certificate.
As provided in the Indenture and subject to certain
limitations set forth in the Indenture, the Loan Certificates are
exchangeable for a like aggregate principal amount of Loan
Certificates of a different denomination, as requested by the
holder of such Loan Certificates surrendering the same.
This Loan Certificate is a registered Loan Certificate
and is transferable, as provided in the Indenture, only upon
surrender of this Loan Certificate for registration of transfer
duly endorsed by, or accompanied by a written statement of
transfer duly executed by, the registered holder hereof or such
holder's attorney duly authorized in writing. Prior to due
presentment for registration of transfer of this Loan
Certificate, the Owner Trustee and the Indenture Trustee shall
deem and treat the Person in whose name this Loan Certificate is
registered as the owner of this Loan Certificate for all purposes
whether or not this Loan Certificate shall be overdue, and
neither the Owner Trustee nor the Indenture Trustee shall be
affected by notice to the contrary.
This Loan Certificate is subject to optional and
mandatory prepayment as provided in Section 2.10 of the Indenture
and is subject to purchase by the Owner Participant as provided
in Section 7.2 of the Indenture. By acceptance hereof, each
holder of this Loan Certificate acknowledges and agrees to be
bound by all of the terms and conditions of the Indenture,
including without limitation such Section 7.2 thereof regarding
the rights of the Owner Participant to purchase this Loan
Certificate under the circumstances specified in said Section
7.2.
Upon the occurrence of any one or more Indenture Events
of Default, all amounts then remaining unpaid on this Loan
Certificate may become or be declared to be immediately due and
payable as provided in the Indenture and other Financing
Documents.
No Person may acquire or hold any of the Loan
Certificates (or any participating interest therein) using,
directly or indirectly, the assets of any employee benefit plan
subject to Title I of ERISA or individual retirement account or
plan subject to Section 4975 of the Code, or any trust
established under any such plan or account (hereinafter
collectively referred to as an "ERISA Plan") unless such
acquisition or holding will not result in a nonexempt prohibited
transaction under Section 406 of ERISA or Section 4975 of the
Code. The acquiring by any Person of any Loan Certificates (or
participation interest therein) shall be deemed to constitute a
representation by such Person to the Owner Trustee, the Lessee,
the Owner Participant and the Indenture Trustee that such Person
is not an ERISA Plan and that such Person is not acquiring, and
has not acquired, directly or indirectly, such Loan Certificate
(or participation interest therein) with assets of an ERISA Plan
or that, if such acquisition and holding is being done directly
or indirectly on behalf of the assets of an ERISA Plan, such
acquisition or holding of the Loan Certificates (or participating
interest therein) will not result in a nonexempt prohibited
transaction under Section 406 of ERISA or Section 4975 of the
Code.
By acceptance hereof, the holder of this Loan
Certificate shall be entitled to the rights and benefits of the
Loan Participants under the Participation Agreement and subject
to the burdens and limitations contained therein, including,
without limitation, the restrictions of Sections 4.1 and 4.5
thereof.
THIS LOAN CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
IN WITNESS WHEREOF, the Owner Trustee has caused this
Loan Certificate to be executed by its duly authorized officer as
of the date hereof.
FLEET NATIONAL BANK,
not in its individual capacity,
but solely as Owner Trustee
By:
Name:
Title:
[FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Loan Certificates referred to in the
within mentioned Indenture.
First Security Bank, National
Association, not in its individual
capacity, but solely as Indenture
Trustee
By:
Name:
Title:
ANNEX A
TO
LOAN CERTIFICATE
SCHEDULE OF PRINCIPAL PAYMENTS
Percentage of Aggregate
Principal Amount Outstanding as
of the Accretion Line of Credit
Payment Date Termination Date to be Paid
January 31, 1997
April 30, 1997
July 31, 1997
October 31, 1997
January 31, 1998
April 30, 1998
July 31, 1998
October 31, 1998
January 31, 1999
April 30, 1999
July 31, 1999
October 31, 1999
January 31, 2000
April 30, 2000
July 31, 2000
October 31, 2000
January 31, 2001
April 30, 2001
July 31, 2001
October 31, 2001
Percentage of Aggregate
Principal Amount Outstanding as
of the Accretion Line of Credit
Payment Date Termination Date to be Paid
January 31, 2002
April 30, 2002
July 31, 2002
October 31, 2002
January 31, 2003
April 30, 2003
July 31, 2003
October 31, 2003
January 31, 2004
April 30, 2004
July 31, 2004
October 31, 2004
January 31, 2005
April 30, 2005
July 31, 2005
October 31, 2005
January 31, 2006
April 30, 2006
July 31, 2006
October 31, 2006
January 31, 2007
April 30, 2007
July 31, 2007
October 31, 2007
January 31, 2008
Percentage of Aggregate
Principal Amount Outstanding as
of the Accretion Line of Credit
Payment Date Termination Date to be Paid
April 30, 2008
July 31, 2008
October 31, 2008
January 31, 2009
April 30, 2009
July 31, 2009
October 31, 2009
January 31, 2010
April 30, 2010
July 31, 2010
October 31, 2010
January 31, 2011
April 30, 2011
July 31, 2011
October 31, 2011
January 31, 2012
April 30, 2012
July 31, 2012
October 31, 2012
January 31, 2013
April 30, 2013
July 31, 2013
October 31, 2013
January 31, 2014
April 30, 2014
Percentage of Aggregate
Principal Amount Outstanding as
of the Accretion Line of Credit
Payment Date Termination Date to be Paid
July 31, 2014
October 31, 2014
2.2 Issuance and Terms of Loan Certificates. (a)
There shall be issued to each of the Loan Participants in
connection with its participation in the payment of the Purchase
Price, as provided in the Participation Agreement, a Loan
Certificate or Loan Certificates dated the Lease Closing Date,
designated as having been issued in connection with the purchase
of the Facility, and registered in the name of such Loan
Participant in a principal amount equal to the sum of (i) the
loan made by such Loan Participant pursuant to Section 2.1 of the
Participation Agreement as such Loan Participant's participation
in the payment of the Purchase Price for the Facility and (ii)
the commitment made by such Loan Participant to provide its
Accretion Loan Proportionate Share of the Total Accretion Line of
Credit Commitment.
(b) (i) Each Loan Certificate shall bear interest on
the unpaid principal amount thereof from time to time outstanding
from and including the date thereof until such principal amount
is paid in full, for each Interest Period relating thereto, at
the sum of the Eurodollar Rate (or with the prior written consent
of the Administrative Agent in its sole discretion, the Base
Rate, as the Owner Trustee may select), plus the Applicable
Margin. Accrued interest on each Loan Certificate shall be
payable in arrears on each Payment Date and on the date such Loan
Certificate is paid in full. Each Loan Certificate shall be
payable as to principal as provided in the form of Loan
Certificate set forth in Section 2.1 hereof, provided that in any
event the last payment made on such Loan Certificate shall be in
an amount sufficient to discharge the accrued interest on and
unpaid principal amount of and any other unpaid amounts due under
such Loan Certificate. The Owner Trustee may (with the prior
written consent of the Administrative Agent which consent may be
granted or withheld in its sole discretion) convert Eurodollar
Loans to Base Rate Loans as of the last day of any Interest
Period, provided the Owner Trustee provides notice of such
conversion to the Administrative Agent and the Indenture Trustee
no later than three Business Days prior to the last day of such
Interest Period. For each Interest Period occurring prior to or
on the Accretion Line of Credit Termination Date, each Loan
Participant's Accretion Loan Proportionate share of the Accretion
Amount, if any (such amount, an "Accretion Loan"), in respect of
the Payment Date for such Interest Period, may be borrowed to pay
interest and fees and added to the principal balance outstanding
under its Loan Certificate on such Payment Date, subject to
Section 2.19 hereof, and such amount shall thereafter be
considered principal owing under such Loan Certificate for all
purposes hereunder and thereunder. The Owner Trustee may, at any
time, on not less than three (3) Business Days' prior notice to
the Administrative Agent and the Indenture Trustee convert a Base
Rate Loan into a Eurodollar Loan.
(ii) Interest on Eurodollar Loans shall be
computed on the basis of a year of 360 days and actual days
elapsed (including the first day but excluding the last day of
the Interest Period) occurring in the period for which payable
and interest on Base Rate Loans shall be computed on the basis of
a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day of
the Interest Period) in the period for which interest is payable.
(c) Each Loan Certificate shall bear interest at the
applicable Default Rate on any part of the principal, any
Breakage Costs and, to the extent permitted by Applicable Law,
interest on such Loan Certificate not paid when due for any
period during which the same shall be overdue.
(d) The Loan Certificates shall be executed on behalf
of the Owner Trustee by an authorized officer of the Owner
Trustee. Loan Certificates bearing the manual signature of an
individual who was at any time the proper officer of the Owner
Trustee shall bind the Owner Trustee, notwithstanding that such
individual has ceased to hold such office prior to the
authentication and delivery of such Loan Certificates or did not
hold such office at the respective dates of such Loan
Certificates. The Owner Trustee may from time to time execute
and deliver Loan Certificates to the Indenture Trustee for
authentication upon original issue, and such Loan Certificates
shall promptly be authenticated and delivered by the Indenture
Trustee upon the written request of the Owner Trustee signed by
an authorized officer of the Owner Trustee. Each Loan
Certificate issued under this Indenture shall be dated the Lease
Closing Date. No Loan Certificate shall be secured or entitled
to any benefit under this Indenture or be valid or obligatory for
any purpose, unless there appears on such Loan Certificate a
certificate of authentication in the form provided for in Section
2.1 hereof, executed by the Indenture Trustee by the manual
signature of one of its authorized officers, and such certificate
of authentication upon any Loan Certificate shall be conclusive
evidence, and the only evidence, that such Loan Certificate has
been duly authenticated and delivered under this Indenture.
(e) Whenever any payment to be made under this
Indenture or under the Loan Certificates shall be stated to be
due on a day which is not a Business Day such payment shall be
made on the next succeeding Business Day with the same force and
effect as if made on such scheduled date and interest shall
accrue on the amount of such payment from and after such
scheduled date to the time of such payment on such next
succeeding Business Day; provided, however, that if at any time
when the Debt Rate is calculated by reference to the Eurodollar
Rate such next succeeding Business Day falls in another calendar
month, payment shall be due on the next preceding Business Day.
2.3 Payments from Trust Indenture Estate Only. Except
as otherwise expressly provided in the next succeeding sentence
of this Section 2.3, all payments to be made by the Owner Trustee
under this Indenture and under the Loan Certificates shall be
made only from the income and the proceeds from the Trust
Indenture Estate and only to the extent that the Owner Trustee
shall have sufficient income or proceeds from the Trust Indenture
Estate to make such payments in accordance with the terms of this
Indenture. Each holder of a Loan Certificate by its acceptance
of such Loan Certificate and the Indenture Trustee each agrees
that it will look solely to the income and proceeds from the
Trust Indenture Estate to the extent available for distribution
to it as herein provided and that none of the Owner Participant,
the Owner Trustee or the Indenture Trustee is personally liable
or individually liable to any such holder of a Loan Certificate
or to the Indenture Trustee for any amounts payable or liability
under any Loan Certificate or this Indenture or for the failure
to perform any of its covenants or agreements in the Transaction
Documents, except (in the case of the Indenture Trustee) as
expressly provided herein, or (in the case of the Owner Trustee)
for any liability for damages that may result from the inaccuracy
or breach by the Owner Trustee, when given in its individual
capacity, of any of its representations, warranties, covenants or
agreements in Section 4.3 of the Participation Agreement, or (in
the case of the Owner Participant) for any liability for damages
that may result from the inaccuracy or breach by the Owner
Participant of its representations, warranties and covenants in
Section 4.2 of the Participation Agreement. The foregoing shall
not be construed as a waiver by the Indenture Trustee or any
holder of a Loan Certificate of any rights which it may otherwise
have against the Owner Trustee as a result of any gross
negligence or willful misconduct on the part of the Owner
Trustee.
2.4 Method of Payment. (a) The principal of and any
Breakage Costs and interest on each Loan Certificate and all
other amounts due hereunder or under the Loan Certificates, will
be payable at the times and in the manner specified in the
Security Deposit Agreement or at such other place as the
Indenture Trustee (with the consent of the Owner Participant)
shall have designated to the Owner Trustee in writing. The
Indenture Trustee will pay promptly (and in no event later than
1:00 p.m. (New York City Time) on the same day in the case of any
amount so received by the Indenture Trustee by 11:00 a.m. (New
York City Time)) from amounts so received by it all amounts
payable by the Indenture Trustee under this Indenture to the
holder of each Loan Certificate as such holder shall direct in
writing which, in the case of the Loan Participants, shall be
deemed to be given by reference to the payment instructions given
in Schedule I to the Participation Agreement for such Loan
Participant, by:
(i) crediting on a same day basis (or on the next
succeeding Business Day if the funds to be so distributed
shall not have been received by the Indenture Trustee prior
to 1:00 p.m. (New York City Time)) the amount (if such
amount is received by the Indenture Trustee on or prior to
1:00 p.m. (New York City Time)) to be distributed to such
holder to the account maintained by the holder of such Loan
Certificates with the Indenture Trustee; or
(ii) transferring by wire on the day received (or
on the next succeeding Business Day if the funds to be so
distributed shall not have been received by the Indenture
Trustee prior to 1:00 p.m. (New York City Time)) such amount
(if such amount is received by the Indenture Trustee on or
prior to 1:00 p.m. (New York City Time)) to such other bank
in the United States, including a Federal Reserve Bank, as
shall have been specified in such direction, for credit to
the account of the holder of such Loan Certificates and
maintained at such bank;
in either case without any presentment or surrender of any Loan
Certificate, except that, in the case of the payment in full in
respect of any Loan Certificate, such Loan Certificate shall be
surrendered to the Indenture Trustee within 15 days following a
written request from the Owner Trustee for such fully paid Loan
Certificate. In the event the Indenture Trustee shall fail to
make any payment as provided above after its receipt of funds at
the place and prior to the time specified above, the Indenture
Trustee, in its individual capacity and not as trustee, agrees to
compensate the Loan Participants for loss of use of funds (but
not for consequential damages).
(b) Prior to the due presentment for registration of
transfer of any Loan Certificate, the Owner Trustee and the
Indenture Trustee shall deem and treat the Person in whose name
any Loan Certificate is registered on the Loan Certificate
register as the absolute owner and holder of such Loan
Certificate for the purpose of receiving payment of all amounts
payable with respect to such Loan Certificate and for all other
purposes, and neither the Owner Trustee nor the Indenture Trustee
shall be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, any payments for the
benefit of GFC and Credit Suisse shall be paid to Credit Suisse
for itself and as administrative agent for GFC.
2.5 Application of Payments. In the case of each Loan
Certificate, except as otherwise provided in Article 5, all
amounts paid shall be applied, first, to the payment of accrued
interest (including interest on overdue principal and interest)
on such Loan Certificate to the date of such payment, second, to
the payment of the principal amount of such Loan Certificate then
due under such Loan Certificate, third, to the payment of any
Breakage Costs due on such Loan Certificate and fourth, to the
payment of the principal amount of such Loan Certificate
remaining unpaid.
2.6 Termination of Interest in Trust Indenture Estate
or Lessor's Estate. A holder of a Loan Certificate shall have no
further interest in, or other right with respect to, the Trust
Indenture Estate when and if the principal of and any Breakage
Costs and interest on all Loan Certificates held by such holder
and all other sums payable to such holder under this Indenture,
the Participation Agreement and the Facility Lease (to the extent
secured by the Lien of this Indenture) and under such Loan
Certificates shall have been paid in full, and upon such payment
in full such holder shall surrender such Loan Certificates to the
Indenture Trustee for cancellation.
2.7 Transfer and Exchange of Loan Certificates. (a)
The Indenture Trustee shall keep at its principal office a
register of Loan Certificates issued from time to time and the
holders thereof. A holder of a Loan Certificate intending to
transfer such Loan Certificate to a new payee, or to exchange
such Loan Certificate for new Loan Certificates of authorized
denominations, shall endorse such outstanding Loan Certificate
and surrender such outstanding Loan Certificate at the principal
office of the Indenture Trustee, together with a written
instrument of transfer, duly executed by the holder of such Loan
Certificates for the issuance of a new Loan Certificate or Loan
Certificates, specifying the name and address of the new payee or
payees. Promptly upon receipt of such documents, subject to
satisfaction of Section 2.9 hereof, the Owner Trustee shall
execute and the Indenture Trustee will authenticate and deliver a
new Loan Certificate or Loan Certificates, in the same aggregate
original face amount and dated the same date as the Loan
Certificate surrendered, and in such denomination or
denominations and registered in the name of such payee or payees
as the holder of such Loan Certificates may specify by written
request; provided, however, that if more than one new Loan
Certificate is to be issued upon a transfer or exchange of an
outstanding Loan Certificate, the denomination of each such new
Loan Certificate shall be not less than $5,000,000 (except for
any required balance remaining payable). The Indenture Trustee
shall make a notation on each new Loan Certificate of the amount
of all payments of principal previously made on the old Loan
Certificate with respect to which such new Loan Certificate is
issued and the date to which interest on such old Loan
Certificate has been paid. In addition, upon presentation to the
Indenture Trustee of appropriate documentation by any registered
holder of a Loan Certificate indicating the pledge or other
transfer of such Loan Certificate for security purposes, the
Indenture Trustee will execute an acknowledgment of such pledge
or other transfer and the provisions thereof in respect of
transfers of registration and/or payment instructions consistent
with the provisions of this Indenture. The Indenture Trustee
shall not be required to transfer or exchange any surrendered
Loan Certificate as above provided during the period of thirty
(30) days preceding the due date of any payment on such Loan
Certificate. The Indenture Trustee will promptly notify the
Owner Trustee, the Owner Participant and the Lessee of each
request for a registration of transfer of a Loan Certificate.
(b) A Loan Participant may sell or agree to sell to
one or more other Persons a participation in all or any part of
any Loan Certificates held by it, provided that each purchaser of
a participation (a "Participant Party") shall not by reason of
such participation have any rights or benefits under this
Indenture or any Loan Certificate or any other Transaction
Document (such Participant Party's rights against such Loan
Participant in respect of such participation to be those set
forth in the agreements executed by such Loan Participant in
favor of such Participant Party), and in no event shall the Owner
Trustee have any increased liabilities or additional costs in
connection with or as a result of any such participation. In no
event shall a Loan Participant that sells a participation agree
with the Participant Party to take or refrain from taking any
action hereunder or under any other Transaction Document that
would (i) reduce the amount or extend the time of payment of any
amount owing or payable, or modify the basis for, or manner of
calculating interest, under any Loan Certificate, reduce the
interest or Breakage Costs, if any, payable in connection with
the prepayment of any Loan Certificate, or alter or modify the
provisions of the Security Deposit Agreement and Article 5 with
respect to the order of priorities in which distributions shall
be made or with respect to the amount or time of payment of any
such distribution; (ii) except as provided in Section 3(d) of the
Facility Lease, reduce the amount or extend the time of payment
of Basic Rent, Stipulated Loss Value or Supplemental Rent as set
forth in the Facility Lease; or (iii) modify, amend or supplement
the Facility Lease or consent to any assignment of the Facility
Lease, in either case releasing the Lessee from its obligations
in respect of the payment of Basic Rent, Stipulated Loss Value,
or Supplemental Rent or alter the absolute and unconditional
character of the obligations of Lessee to pay Rent as set forth
in Section 4 of the Facility Lease; provided that in no event
shall the Owner Trustee, the Owner Participant or the Lessee have
any obligation by reason of such agreement by a Loan Participant
and a Participant Party to inquire into whether such Loan
Participant has complied with the provisions thereof in
connection with any action taken by such Loan Participant under
or pursuant to this Indenture or any other Transaction Document.
2.8 Mutilated, Destroyed, Lost or Stolen Loan
Certificates. (a) If any Loan Certificate shall become
mutilated, destroyed, lost or stolen, upon the written request of
the holder of such Loan Certificate (a copy of which request
shall be sent by such holder to the Indenture Trustee), and
subject to satisfaction of Section 2.9 hereof, the Owner Trustee
shall execute and the Indenture Trustee shall authenticate and
deliver as replacement a new Loan Certificate, payable in the
same original principal amount and dated the same date as the
Loan Certificate so mutilated, destroyed, lost or stolen.
(b) If the Loan Certificate being replaced has become
mutilated, such Loan Certificate shall be surrendered to the
Indenture Trustee and a photocopy shall be furnished to the Owner
Trustee by the Indenture Trustee. If the Loan Certificate being
replaced has been destroyed, lost or stolen, the holder of such
Loan Certificate shall furnish to the Owner Trustee and the
Indenture Trustee such security or indemnity as may be required
by them to save the Owner Trustee and the Indenture Trustee
harmless and evidence satisfactory to the Owner Trustee and the
Indenture Trustee of the destruction, loss or theft of such Loan
Certificate and of the ownership of such Loan Certificate;
provided, however, that if the holder of such Loan Certificate is
a bank or other institutional investor (or an Affiliate thereof)
having a tangible net worth or capital and surplus of at least
$50,000,000, the written undertaking of such Loan Participant (or
recognized institutional investor or Affiliate) delivered to the
Owner Trustee and the Indenture Trustee shall be sufficient
security and indemnity under this Section 2.8.
2.9 Costs and Expenses of Issuance of New Loan
Certificates. Upon the issuance of a new Loan Certificate
pursuant to Section 2.7 or 2.8 hereof, the Indenture Trustee
and/or the Owner Trustee may require from the party requesting
such new Loan Certificate payment of a sum to reimburse the Owner
Trustee and the Indenture Trustee for, or to provide funds for
the payment of, any tax or other governmental charge in
connection with the issuance of such new Loan Certificate or any
charges and expenses connected with such tax or governmental
charge paid or payable by the Owner Trustee or the Indenture
Trustee. No service charge shall be levied for such transaction.
2.10 Prepayment of Loan Certificates. Every
prepayment of Loan Certificates shall be made in accordance with
the provisions of this Section 2.10.
(a) Mandatory Prepayments. (i) On the date of
payment by the Lessee pursuant to Section 9(c) of the
Facility Lease for an Event of Loss (or, if earlier, on the
date specified for payment with respect to such Event of
Loss in Section 9(c) of the Facility Lease), all, but not
less than all, of the Loan Certificates shall become due and
payable at 100% of the unpaid principal amount thereof,
together with all accrued interest thereon to the date of
prepayment and any Breakage Costs, together with all other
amounts due thereunder and hereunder and under the other
Transaction Documents to the Holders of the Loan
Certificates.
(ii) On the date of payment by the Lessee pursuant
to Section 9(d) of the Facility Lease for an Event of
Regulation (or, if earlier, on the date specified for
payment with respect to such Event of Regulation in Section
9(d) of the Facility Lease), all, but not less than all, of
the Loan Certificates shall become due and payable at 100%
of the unpaid principal amount thereof, together with all
accrued interest thereon to the date of payment and any
Breakage Costs, together with all other amounts due
thereunder and hereunder and under the other Transaction
Documents to the Holders of the Loan Certificates.
(b) Optional Prepayment. The Owner Trustee may at any
time prepay all or a portion, of the outstanding Loan
Certificates and at the date of such prepayment all of the Loan
Certificates (or the portion thereof designated by the Owner
Trustee) shall become due and payable at 100% of the unpaid
principal amount thereof, together with all accrued interest
thereon to the date of prepayment and any Breakage Costs and all
other amounts due thereunder and hereunder and under the other
Transaction Documents to the Holders of such Loan Certificates.
Partial prepayments shall be in minimum increments of $5,000,000.
(c) Notice of Prepayment. The Owner Trustee will give
notice of prepayment under this Section 2.10 promptly after
receipt of the Lessee's notice of payment under Section 9(c) or
9(d) of the Facility Lease to the extent the same shall not have
been furnished to the Indenture Trustee pursuant to the Facility
Lease.
2.11 Taxes; Withholding. The Indenture Trustee
agrees, to the extent required by Applicable Law, to withhold
from each payment received by it due hereunder or under any Loan
Certificate, United States withholding taxes at the appropriate
rate, and, on a timely basis, to deposit such amounts with an
authorized depository and make such returns, filings and other
reports in connection therewith, and in the manner, required
under Applicable Law. The Indenture Trustee shall promptly
furnish to each Loan Participant (but in no event later than the
date 30 days after the due date thereof) a U.S. Treasury Form
1042S and Form 1099-INT (or similar forms as at any relevant time
in effect), if applicable, indicating payment in full of any
Taxes withheld from any payments by the Indenture Trustee to such
Loan Participant together with all such other information and
documents reasonably requested by such Loan Participant and
necessary or appropriate to enable such Loan Participant to
substantiate a claim for credit or deduction with respect thereto
for income tax purposes of the country where such Loan
Participant is located. In the event that a Loan Participant
which is a Non-U.S. Person has furnished to the Indenture Trustee
a properly completed and currently effective U.S. Treasury Form
1001 (or such successor Form or Forms as may be required by the
United States Treasury Department) during the calendar year in
which a payment hereunder or under the Loan Certificate(s) held
by such Loan Participant is made (but prior to the making of such
payment), or in either of the two preceding calendar years, and
has not notified the Indenture Trustee of the withdrawal or
inaccuracy of such Form prior to the date of such payment, only
the amount, if any, required by Applicable Law or treaty shall be
withheld from such payment in respect of United States federal
income tax. In the event that a Loan Participant (x) which is a
Non-U.S. Person has furnished to the Indenture Trustee a properly
completed and currently effective (1) certificate in
substantially the form of Exhibit B hereto and a U.S. Treasury
Form W-8 (or such successor certificate or Forms or Forms as may
be required by the United States Treasury Department as necessary
in order to avoid withholding of United States federal income
tax), during the calendar year in which a payment hereunder or
under the Loan Certificate(s) held by such Loan Participant is
made (but prior to the making of such payment), or in either of
the two preceding calendar years (2) U.S. Treasury Forms 4224 in
duplicate (or such successor Form or Forms as may be required by
the United States Treasury Department as necessary in order to
avoid withholding of United States Federal income tax) during the
taxable year of the Loan Participant in which a payment hereunder
or under the Loan Certificate(s) held by such Loan Participant is
made (but prior to the making of such payment in such taxable
year), and has not notified the Indenture Trustee of the
withdrawal or inaccuracy of such certificate or Form prior to the
date of such payment or (y) which is a U.S. Person not described
in Section 6049(b)(4) of the Code and has furnished to the
Indenture Trustee a properly completed and currently effective
U.S. Treasury Form W-9 prior to a payment hereunder or under the
Loan Certificates held by such Loan Participant certifying that
such Loan Participant is not subject to backup withholding, no
amount shall be withheld from such payment in respect of United
States federal income tax. No tax shall be withheld in respect
of any U.S. Person described in Section 6049(b)(4) of the Code.
If any Loan Participant has notified the Indenture Trustee that
any of the foregoing Forms or certificates is withdrawn or
inaccurate, or if the Code or the regulations thereunder or the
administrative interpretation thereof are at any time after the
date hereof amended to require such withholding of United States
federal income taxes from payments under the Loan Certificates
held by such Loan Participant, or if such withholding is
otherwise required, the Indenture Trustee agrees to withhold from
each payment due to the relevant Loan Participant withholding
taxes at the appropriate rate under Applicable Law, and will, as
more fully provided above, on a timely basis, deposit such
amounts with an authorized depository and make such returns,
filings and other reports in connection therewith, and in the
manner required under Applicable Law. Each Loan Participant
shall reimburse the Indenture Trustee or the Lessee, at the
direction of the Lessee, for any United States withholding taxes
paid by the Indenture Trustee but not withheld from payments to
such Loan Participant, which taxes were legally required to be
withheld from such payments and that were not subject to
indemnification by the Lessee pursuant to the Transaction
Documents. The amount payable hereunder shall be paid within 30
days after receipt by a Loan Participant of a written demand
therefor.
2.12 Additional Costs. (a) The Owner Trustee shall
pay directly to each Loan Participant from time to time such
amounts as such Loan Participant may determine to be necessary to
compensate such Loan Participant for any costs that such Loan
Participant determines are attributable to its funding or
maintaining of any Loan Certificates or any loan evidenced
thereby or any reduction in any amount receivable by such Loan
Participant hereunder or under such Loan Certificates in respect
thereof or any such loan (such increases in costs and reductions
in amount receivable being herein called "Additional Costs"),
resulting from any Regulatory Change that:
(1) changes the basis of taxation of any amounts
payable to such Loan Participant hereunder or under the Loan
Certificates or any loan evidenced thereby (other than (A)
taxes imposed on the net income of such Loan Participant or
its Applicable Lending Office(s) for any of such Loan
Certificates or any such Loan evidenced thereby by the
jurisdiction in which such Loan Participant has its
principal office or such Applicable Lending Office is
located and (B) withholding taxes, the sole indemnification
for which is contained in Section 8 of the Participation
Agreement) or that is a tax imposed by Maryland or any
taxing authority therein or thereof on such Loan Participant
the measure of which is interest on such Loan Participant's
portion of the Loan or fees paid to such Loan Participant
with respect to such portion of the Loan;
(2) imposes or modifies any reserve, special
deposit, compulsory loan or similar requirements relating to
any extensions of credit or other assets of, or any deposits
with or other liabilities of, such Loan Participant
(including, without limitation, the Loan or any deposits
referred to in the definition of "Eurodollar Rate"); or
(3) imposes any other condition affecting this
Indenture or the Loan Certificates or any Loan evidenced
thereby (or any of such extensions of credit or
liabilities), provided such Loan Participant's actions with
respect to such Additional Costs are consistent with its
actions with respect to similar additional costs under
similar financings.
(b) Without limiting the effect of the provisions of
subsection (a) of this Section 2.12, in the event that, by reason
of any Regulatory Change, any Loan Participant either (i) incurs
Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other
liabilities of such Loan Participant that includes deposits by
reference to which the interest rate on Eurodollar Loans is
determined or a category of extensions of credit or other assets
of such Loan Participant that includes Eurodollar Loans, or (ii)
becomes subject to restrictions on the amount of such a category
of liabilities or assets that it may hold, then, if such Loan
Participant so elects by notice to the Owner Trustee (with a copy
to the Administrative Agent and the Indenture Trustee), the
obligation of such Loan Participant to make or continue such
Eurodollar Loan shall be suspended until such Regulatory Change
ceases to be in effect (in which case the provisions of Section
2.15 hereof shall be applicable).
(c) Without limiting the effect of the foregoing
provisions of this Section 2.12 (but without duplication), in the
event that a Loan Participant determines that (i) compliance with
any Regulatory Change or other judicial, administrative or other
governmental interpretation of any Applicable Law made after the
date hereof or (ii) compliance by such Loan Participant or any
corporation controlling such Loan Participant with any guideline
or request from any central bank or other Governmental Authority
(whether or not having the force of law) made after the date
hereof has the effect of reducing the rate of return on assets or
equity of such Loan Participant (or any Applicable Lending Office
or such bank holding company) as a consequence of its obligations
hereunder to a level below that which such Loan Participant (or
any Applicable Lending Office or such bank holding company) could
have achieved but for such law, regulation, interpretation,
directive or request), the Owner Trustee shall pay to such Loan
Participant, as appropriate, such additional amount as shall be
certified by such Loan Participant to be the amount which will
compensate such Loan Participant for such reduction.
(d) Each Loan Participant shall notify the Owner
Trustee, the Lessee and the Indenture Trustee of any event
occurring after the date hereof entitling such Loan Participant
to compensation under subsection (a) or (c) of this Section 2.12
as promptly as practicable, but in any event within 30 days,
after such Loan Participant obtains actual knowledge thereof;
provided that (i) if any Loan Participant fails to give such
notice within 30 days after it obtains actual knowledge of such
an event, such Loan Participant shall, with respect to
compensation payable pursuant to this Section 2.12 in respect of
any costs resulting from such event, only be entitled to payment
under this Section 2.12 for costs incurred from and after the
date 30 days prior to the date that such Loan Participant does
give such notice and (ii) such Loan Participant will designate a
different Applicable Lending Office for holding the Loan
Certificates or any loan evidenced thereby of such Loan
Participant affected by such event if such designation will avoid
the need for, or reduce the amount of, such compensation and will
not, in the sole opinion of such Loan Participant, be materially
disadvantageous to such Loan Participant. Each Loan Participant
will furnish to the Owner Trustee, the Lessee and the Indenture
Trustee a certificate setting forth the basis and amount of each
request by such Loan Participant for compensation under
subsection (a) or (c) of this Section 2.12. Determinations and
allocations by any Loan Participant for purposes of this Section
2.12 of the effect of any Regulatory Change pursuant to
subsection (a) or (c) of this Section 2.12, or of the effect of
capital maintained pursuant to subsection (c) of this Section
2.12, on its costs or rate of return of making or maintaining its
Loan Certificates or any loan evidenced thereby or on amounts
receivable by it in respect of its Loan Certificates or any loan
evidenced thereby, and of the amounts required to compensate such
Loan Participant under this Section 2.12, shall be conclusive,
provided that such determinations and allocations are made on a
reasonable basis.
(e) If the Owner Trustee elects or is required to
prepay or purchase any Loan Certificate under any provision of
this Indenture and such prepayment or purchase is not consummated
on the date originally scheduled therefor (unless, following the
Lessee's or the Lessor's election to refinance the Loan
Certificates as provided in Section 11.1 of the Participation
Agreement, the Owner Trustee provides written notice to the
Indenture Trustee and each Loan Participant no later than three
Business Days prior to such originally scheduled prepayment or
purchase date to the effect that such termination or purchase
will not occur and accordingly it will not be prepaying the Loan
Certificates on such date), the Owner Trustee shall, not later
than three Business Days after receipt of demand by such Loan
Participant (accompanied in any such case by a certificate of the
type specified in the next succeeding sentence), pay to such Loan
Participant an amount equal to Breakage Costs incurred by such
Loan Participant as a result of the above specified prepayment or
purchase not being made on the date scheduled therefor. In
connection therewith, the Administrative Agent shall furnish to
the Owner Trustee and the Lessee a certificate setting forth, in
reasonable detail, the calculation of the amounts of such losses,
costs, expenses and liabilities, which calculations shall be made
by the Administrative Agent (upon consultation with such Loan
Participants) on a reasonable basis.
2.13 Limitation on Types of Loans. Anything herein to
the contrary notwithstanding, if, on or prior to the
determination of any Eurodollar Base Rate for any Interest
Period:
(a) the Administrative Agent determines, which
determination shall be conclusive, the quotations of
interest rates for the relevant deposits referred to in the
definition of "Eurodollar Base Rate" are not being provided
in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for any Eurodollar
Loan as provided herein; or
(b) if the Majority Loan Participants determine,
which determination shall be conclusive, and notify the
Administrative Agent and the Indenture Trustee that the
relevant rates of interest referred to in the definition of
"Eurodollar Base Rate" upon the basis of which the rate of
interest for Eurodollar Loans for such Interest Period is to
be determined are not likely adequately to cover the cost to
such Loan Participants of making or maintaining such
Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Owner Trustee, the
Lessee, the Indenture Trustee and each Loan Participant prompt
notice thereof and, so long as such condition remains in effect,
the Loan Participants shall be under no obligation to make or
continue Eurodollar Loans, and on the last day of the then
current Interest Period for the outstanding Eurodollar Loan, such
Eurodollar Loan shall be automatically converted into a Base Rate
Loan.
2.14 Illegality. Notwithstanding any other provision
in this Indenture, if a Loan Participant determines that any
Applicable Law or any change therein, or any change in the
interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such
Loan Participant (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of
any such Governmental Authority, central bank or comparable
agency shall make it unlawful or impossible for such Loan
Participant (or its Applicable Lending Office) to (a) maintain
its Commitment or Accretion Line of Credit Commitment, then upon
notice to the Owner Trustee (with a copy to the Lessee, the
Administrative Agent and the Indenture Trustee) by such Loan
Participant, the Commitment and Accretion Line of Credit
Commitment of such Loan Participant shall terminate; or (b)
maintain or fund its Eurodollar Loans, then upon notice to the
Owner Trustee (with a copy to the Lessee, the Administrative
Agent and the Indenture Trustee) by such Loan Participant, as
appropriate, such Loan Participant's obligation to make or
continue Eurodollar Loans shall be suspended (in which case the
provisions of Section 2.15 hereof shall be applicable) until such
time as such Loan Participant may again fund and maintain
Eurodollar Loans.
2.15 Treatment of Affected Loans. If the obligation
of any Loan Participant to make or continue a Eurodollar Loan is
suspended pursuant to Section 2.12, 2.13 or 2.14 hereof (Loans of
such Type being herein called "Affected Loans" and such Type
being herein called the "Affected Type"), or, in the case of
clause (a) below, if the Owner Trustee shall be required to
compensate any Loan Participant pursuant to Section 2.12 hereof
(and such Loan Participant shall not have waived its right to
such compensation) then, (a) at the request of the Owner Trustee,
such Loan Participant will assign its Affected Loans and the Loan
Certificates evidencing the same, without recourse or warranty,
to any financial institution designated by the Owner Trustee,
provided that concurrently with such assignment, such Loan
Participant receives from such financial institution and/or the
Owner Trustee an amount in immediately available funds equal to
the unpaid principal amount of such Loan Certificates at the time
outstanding, plus all accrued and unpaid interest thereon,
whether or not then due, and all other sums then owing to such
Loan Participant in respect of such Loan Certificates or any of
the Transaction Documents relating thereto, including without
limitation, any amounts owing to such Loan Participant pursuant
to Section 2.12 hereof and any Breakage Costs (determined for
such purposes as if such assignment were a prepayment in full of
the principal amount of such Loan Certificates), and if such Loan
Participant shall fail to so assign such Affected Loans and the
Loan Certificates evidencing the same in accordance with the
foregoing provisions after such request by the Owner Trustee,
such Loan Participant shall not be entitled to any compensation
otherwise payable to it pursuant to Section 2.12 hereof to the
extent (but only to the extent) such assignment would have
avoided the need for, or reduced the amount of, such
compensation, and (b) if no such assignment shall be requested
and consummated, or if the Affected Loans are not prepaid in the
case of any such suspension pursuant to Section 2.13 hereof, or
if the Affected Loans are otherwise to be converted into Base
Rate Loans pursuant to the provisions of Section 2.12, 2.13 or
2.14 hereof, then such Loan Participant's Affected Loan shall be
automatically converted into a Base Rate Loan on the last day of
the then current Interest Period for such Affected Loan (or, in
the case of a conversion required by Section 2.12(b), 2.13 or
2.14 hereof, on such earlier date as such Loan Participant may
specify to the Owner Trustee with a copy to the Administrative
Agent and the Indenture Trustee) and, unless and until such Loan
Participant gives notice as provided below that the circumstances
specified in Section 2.12, 2.13 or 2.14 hereof that gave rise to
such conversion no longer exist, all Loans that would otherwise
be made or continued by such Loan Participant as Loans of the
Affected Type hereunder shall be made or continued instead as
Base Rate Loans, and all Loans of such Loan Participant that
would otherwise be converted into Loans of the Affected Type
shall be converted instead into (or shall remain as) Base Rate
Loans. Each Loan Participant shall give notice to the Owner
Trustee with a copy to the Administrative Agent and the Indenture
Trustee that the circumstances specified in Section 2.12, 2.13 or
2.14 hereof that gave rise to the conversion of such Loan
Participant's Affected Loans pursuant to this Section 2.15 no
longer exist (which such Loan Participant agrees to do promptly
upon such circumstances ceasing to exist). Five Business Days
after the date of receipt of such notice by the Administrative
Agent, the Affected Loans shall automatically be converted into
Eurodollar Loans unless the Administrative Agent, at least three
Business Days prior to the date such conversion would otherwise
have occurred, shall have received notice from the Owner Trustee
that the Owner Trustee elected (with the consent of the
Administrative Agent) to continue such Loans as Base Rate Loans.
2.16 ERISA Plan Prohibition. No Person may acquire or
hold any of the Loan Certificates (or participating interest
therein) using, directly or indirectly, the assets of any
employee benefit plan subject to Title I of ERISA, or individual
retirement account or plan subject to Section 4975 of the Code,
or any trust established under any such plan or account
(hereinafter collectively referred to as an "ERISA Plan"), unless
such acquisition or holding will not result in a nonexempt
prohibited transaction under Section 406 of ERISA or Section 4975
of ERISA. The purchase by any Person of any Loan Certificate (or
participation interest therein) constitutes a representation by
such Person to the Owner Trustee, the Lessee, the Owner
Participant and the Indenture Trustee that such Person is not an
ERISA Plan and that such Person is not acquiring, and has not
acquired, directly or indirectly, such Loan Certificate (or
participation interest therein) with assets of an ERISA Plan or
that, if such acquisition or holding is being done, directly or
indirectly, on behalf of the assets of an ERISA Plan, such
acquisition or holding of the Loan Certificates (or participating
interest therein) will not result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code.
2.17 Administrative Agent Fee. The Owner Trustee
agrees to pay to the Administrative Agent, on the Lease Closing
Date and on each Basic Rent Payment Date occurring on October 31
thereafter (until the Loan Certificates are paid in full), an
administrative fee in the amount of $75,000.
2.18 Total Accretion Loan Commitment. The Owner
Trustee may, from time to time upon five (5) Business Days
written notice to the Administrative Agent, permanently reduce,
by an amount of One Million Dollars ($1,000,000) or an integral
multiple of One Hundred Thousand Dollars ($100,000) in excess
thereof or cancel in its entirety, the Total Accretion Line of
Credit Commitment; provided, that (i) the Owner Trustee may not
reduce or cancel the Total Accretion Line of Credit Commitment
if, after giving effect to such reduction or cancellation, (A)
the aggregate principal amount of all Accretion Loans then
outstanding would exceed the Total Accretion Line of Credit
Commitment as so reduced or (B) the Available Accretion Line of
Credit Commitment would not, in the Administrative Agent's
reasonable judgment, be equal to or exceed the aggregate
Accretion Amount for the remainder of the Accretion Loan
Availability Period, and (ii) the Owner Trustee shall pay to the
Administrative Agent an amount equal to the Accretion Line of
Credit Commitment Fees in respect of the portion of the Accretion
Line of Credit Commitment terminated in accordance with this
Section 2.18. From the effective date of any such reduction, the
Accretion Line of Credit Commitment Fees shall be computed on the
basis of the Total Accretion Line of Credit Commitment as so
reduced. Once reduced or cancelled, the Total Accretion Line of
Credit Commitment may not be increased or reinstated. Any
reductions pursuant to this Section 2.18 shall be allocated among
the Loan Participants pro rata according to their respective
Accretion Loan Proportionate Shares.
2.19 Accretion Loan Funding Procedure and Conditions.
On each Payment Date during the Accretion Loan Availability
Period, each Loan Participant's Accretion Loan Proportionate
Share of the Accretion Amount in respect of such Payment Date (as
set forth in a notice from the Owner Participant or the Owner
Trustee to the Administrative Agent five Business Days prior to
such Payment Date) shall be funded and made a part of the
principal amount of such Loan Participant's Loan Certificate;
provided that as of such Payment Date, (i) each representation
and warranty of the Owner Trustee set forth in Section 4.3 of the
Participation Agreement is true and correct as if made on such
date, (ii) no Lease Default under Section 14(a) of the Facility
Lease or Lease Event of Default shall have occurred and be
continuing and (iii) no Indenture Default or Indenture Event of
Default shall have occurred and be continuing (it being
understood that a Lease Default (other than under Section 14(a)
of the Facility Lease) shall not be deemed to constitute an
Indenture Default for purposes of this Section 2.19).
2.20 Accretion Line of Credit Commitment Fees. On
each Payment Date during the Accretion Loan Availability Period,
the Owner Trustee shall pay to the Administrative Agent, for the
benefit of the Loan Participants, accruing from the first day of
such Interest Period a facility commitment fee (the "Accretion
Line of Credit Commitment Fee") for such Interest Period equal to
the product of (A) 0.375% times (B) the daily average Available
Accretion Line of Credit Commitment for such Interest Period
times (C) a fraction, the numerator of which is the number of
days in such quarter (or portion thereof) and the denominator of
which is the number of days in that calendar year (365 or 366, as
the case may be). Each payment of Accretion Line of Credit
Commitment Fees shall be shared among the Loan Participants pro
rata according to (A) their respective Accretion Loan
Proportionate Shares and (B) in the case of each a Loan
Participant which becomes Loan Participant hereunder after the
date hereof, the date upon which such Loan Participant so became
a Loan Participant.
ARTICLE 3
General Covenants and Provisions
3.1 Payment of Loan Certificates and Accretion Loan
Certificates. The Owner Trustee will duly and punctually pay or
cause to be paid all of the Loan Certificates and other amounts
due and payable hereunder to the Holders at the times and the
places and in the manner specified herein and in the Security
Deposit Agreement.
3.2 Indenture Trustee Assumes No Obligations. It is
expressly agreed that, anything herein contained to the contrary
notwithstanding, the Owner Trustee (or the Lessee, as the case
may be) shall remain obligated to perform its obligations under
the agreements that constitute Indenture Property in accordance
with the provisions thereof, and neither the Indenture Trustee
nor any of the Loan Participants shall have any obligation or
liability with respect to such obligations of the Owner Trustee
(or the Lessee), nor shall the Indenture Trustee or any of the
Loan Participants be required or obligated in any manner to
perform or fulfill any obligations or duties of the Owner Trustee
(or the Lessee, as the case may be) under such agreements, or to
make any payment or to make any inquiry as to the nature or
sufficiency of any payment received by it, or to present or file
any claim or take any action to collect or enforce the payment of
any amounts which have been assigned to the Indenture Trustee
hereunder or to which the Indenture Trustee or the Loan
Participants may be entitled at any time or times.
3.3 Further Assurances. The Owner Trustee shall, from
time to time, at the expense of the Lessee, promptly execute and
deliver all further instruments and documents, and take all
further action, that the Indenture Trustee may reasonably
request, in order to perfect (except to the extent discussed in
the opinions of counsel delivered in connection herewith),
continue and protect the liens and security interests granted or
purported to be granted hereby and to enable the Indenture
Trustee to obtain the full benefits of the liens and security
interests granted or intended to be granted hereby. The Owner
Trustee shall keep the Indenture Property free and clear of all
Lessor's Liens. Without limiting the generality of the
foregoing, the Owner Trustee shall: (a) if any Indenture Property
shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Indenture Trustee (or
the Security Agent acting on its behalf) such note, instrument or
chattel paper duly endorsed or accompanied by duly executed
instruments of transfer or assignment, all in form and substance
reasonably satisfactory to the Indenture Trustee (and in such
case, the Indenture Trustee (or the Security Agent, as the case
may be) shall hold such promissory note or other instrument or
chattel paper as agent for the Indenture Trustee and the Loan
Participants); and (b) execute and record such financing or
continuation statements, or amendments thereto, and such other
instruments, endorsements or notices specified in Schedule 3 to
the Participation Agreement in order to perfect (except to the
extent discussed in the opinions of counsel delivered in
connection herewith) and preserve the lien and security interest
granted or purported to be granted hereby.
3.4 Acts of Owner Trustee. The Owner Trustee hereby
represents and warrants that it has not mortgaged, hypothecated,
assigned or pledged and hereby covenants that it will not
mortgage, hypothecate, assign or pledge, so long as this
Indenture shall remain in effect, any of its right, title or
interest in and to the Indenture Property, to anyone other than
the Indenture Trustee. The Owner Trustee also agrees in its
individual capacity that it will, at its own cost and expense,
without regard to the provisions of Section 9.1 hereof, promptly
take such action as may be necessary to duly discharge any
Lessor's Liens attributable to it in its individual capacity.
3.5 After-Acquired Property. Any and all of the
Indenture Property which is hereafter acquired shall immediately,
and without any further conveyance, assignment or act on the part
of the Owner Trustee or the Indenture Trustee, become and be
subject to the lien and security interest of this Indenture as
fully and completely as though specifically described herein, but
nothing in this Section 3.5 contained shall be deemed to modify
or change the obligation of the Owner Trustee under Section 3.3
hereof.
3.6 Actions with Respect to Indenture Property. The
Owner Trustee will not, without the prior written consent of the
Indenture Trustee, sell, mortgage, transfer (except to a
successor Owner Trustee in accordance with Article IX of the
Trust Agreement and Section 9 of the Participation Agreement),
pledge, assign, hypothecate or otherwise alienate or encumber
(other than to the Indenture Trustee hereunder) its interest in
the Project or any part thereof or in any other part of the
Indenture Property except pursuant to this Indenture and pursuant
to the Security Deposit Agreement and the Consent of the Power
Purchaser.
3.7 The Site. (a) The Owner Trustee shall pay or
cause to be paid all rent and other charges required under the
Site Lease as and when the same are due and shall promptly and
faithfully perform or cause to be performed all other material
terms, obligations, covenants, conditions, agreements,
indemnities, representations, warranties and liabilities of the
lessee under the Site Lease.
(b) The Owner Trustee shall do, or cause to be done,
all things necessary to preserve and keep unimpaired all material
rights of the Owner Trustee as lessee or lessor, as the case may
be, under the Site Lease and the Site Sublease and to prevent any
default under the Site Lease and the Site Sublease, or any
termination, surrender, cancellation, forfeiture, subordination
or impairment thereof. The Owner Trustee does hereby authorize
and irrevocably appoint and constitute the Indenture Trustee as
its true and lawful attorney-in-fact, which appointment is
coupled with an interest, in its name, place and stead, to take
any and all actions deemed necessary or desirable by the
Indenture Trustee to perform and comply with all the obligations
of the Owner Trustee under the Site Lease and the Site Sublease,
and to do and take, but without any obligation so to do, any
action which the Indenture Trustee deems necessary or desirable
to prevent or cure any default by the Owner Trustee under the
Site Lease or the Site Sublease, to enter into and upon the Site
or any part thereof to such extent and as often as the Indenture
Trustee, in its sole discretion, deems necessary or desirable in
order to prevent or cure any default of the Owner Trustee
pursuant thereto, to the end that the rights of the Owner Trustee
in and to the leasehold estates created by the Site Lease and the
Site Sublease shall be kept unimpaired and free from default.
(c) The Owner Trustee shall enforce the obligations of
the lessor under the Site Lease.
(d) The Owner Trustee shall not surrender its
leasehold estate and interest under the Site Lease, or modify,
change, supplement, alter or amend the Site Lease or the Site
Sublease, or waive any provisions thereof, either orally or in
writing, and any attempt on the part of the Owner Trustee to
exercise such right without the written consent of the Indenture
Trustee shall be null and void.
(e) If any action or proceeding shall be instituted to
evict the Owner Trustee or to recover possession of the Site from
the Owner Trustee or any part thereof or interest therein or any
action or proceeding otherwise affecting the Site or this
Indenture shall be instituted, then the Owner Trustee shall,
immediately after receipt, deliver to the Indenture Trustee a
true and complete copy of each petition, summons, complaint,
notice of motion, order to show cause and all other pleadings and
papers, however designated, served in any such action or
proceeding. The Owner Trustee shall not, as lessor under the
Site Sublease, commence any action or proceeding to evict the
Partnership or to recover possession of the Site or any part
thereof or interest therein or any action or proceeding otherwise
affecting the Site without the written consent of the Indenture
Trustee.
(f) No release or forbearance of any of the Owner
Trustee's obligations under the Site Lease, pursuant to the Site
Lease or the Site Sublease or otherwise, shall release the Owner
Trustee from any of its obligations under this Indenture,
including its obligations to pay rent and to perform all of the
terms, provisions, covenants, conditions and agreements of the
lessee under the Site Lease.
(g) The Owner Trustee shall, within ten days after
written demand from the Indenture Trustee, deliver to the
Indenture Trustee proof of payment of all items that are required
to be paid by the Owner Trustee under the Site Lease, including,
without limitation, rent, taxes, operating expenses and other
charges.
(h) (i) The lien of this Indenture shall attach to all
of the Owner Trustee's rights and remedies (other than
Excepted Payments) at any time arising under or pursuant to
subsection 365(h) of the Bankruptcy Code, including, without
limitation, all of the Owner Trustee's rights as Lessor
under the Site Sublease and its rights to remain in
possession of the Site. The Owner Trustee shall not elect
to treat the Site Lease or the Site Sublease as terminated
under Subsection 365(h)(1) of the Bankruptcy Code, and any
such election shall be void.
(ii) If pursuant to Subsection 365(h)(2) of the
Bankruptcy Code, the Owner Trustee shall seek to offset
against the rent reserved in the Site Lease or the Site
Sublease the amount of any damages caused by the
nonperformance by the lessor, the lessee or any other party
of any of their respective obligations thereunder after the
rejection by the lessor, the lessee or such other party of
the Site Lease or the Site Sublease under the Bankruptcy
Code, then the Owner Trustee shall, prior to effecting such
offset, notify the Indenture Trustee of its intent to do so,
setting forth the amount proposed to be so offset and the
basis therefor. The Indenture Trustee shall have the right
to object to all or any part of such offset that, in the
reasonable judgment of the Indenture Trustee, would
constitute a breach of the Site Lease or the Site Sublease,
and in the event of such objection, the Owner Trustee shall
not effect any offset of the amounts found objectionable by
the Indenture Trustee. Neither the Indenture Trustee's
failure to object as aforesaid nor any objection relating to
such offset shall constitute an approval of any such offset
by the Indenture Trustee.
(iii) If any action, proceeding, motion or notice
shall be commenced or filed in respect of the lessor, the
lessee or any other party under the Site Lease or the Site
Sublease or in respect of the Site Lease or the Site
Sublease in connection with any case under the Bankruptcy
Code, then the Indenture Trustee shall have the option,
exercisable upon notice from the Indenture Trustee to the
Owner Trustee, to conduct and control any such litigation
with counsel of the Indenture Trustee's choice. The
Indenture Trustee may proceed in its own name or in the name
of the Owner Trustee in connection with any such litigation,
and the Owner Trustee agrees to execute any and all powers,
authorizations, consents or other documents required by the
Indenture Trustee in connection therewith. The Owner
Trustee shall not commence any action, suit, proceeding or
case, or file any application or make any motion, in respect
of the Site Lease or the Site Sublease in any such case
under the Bankruptcy Code without the prior written consent
of the Indenture Trustee.
(iv) The Owner Trustee shall, after obtaining
knowledge thereof, promptly notify the Indenture Trustee of
any filing by or against the lessor, the lessee or other
party with an interest in the Site of a petition under the
Bankruptcy Code. The Owner Trustee shall promptly deliver
to the Indenture Trustee, following receipt, copies of any
and all notices, summonses, pleadings, applications and
other documents received by the Owner Trustee in connection
with any such petition and any proceedings relating thereto.
(v) If there shall be filed by or against the Owner
Trustee a petition under the Bankruptcy Code and the Owner
Trustee, as lessee under the Site Lease, shall determine to
reject the Site Lease pursuant to Section 365(a) of the
Bankruptcy Code, then the Owner Trustee shall give the
Indenture Trustee not less than twenty days' prior notice of
the date on which the Owner Trustee shall apply to the
Bankruptcy Court for authority to reject the Site Lease.
The Indenture Trustee shall have the right, but not the
obligation, to serve upon the Owner Trustee within such
twenty day period a notice stating that the Indenture
Trustee demands that the Owner Trustee assume and assign the
Site Lease to the Indenture Trustee pursuant to Section 365
of the Bankruptcy Code. If the Indenture Trustee shall
serve upon the Owner Trustee the notice described in the
preceding sentence, the Owner Trustee shall not seek to
reject such lease and shall comply with the demand provided
for in the preceding sentence. In addition, effective upon
the entry of an order for relief with respect to the Owner
Trustee under the Bankruptcy Code, the Owner Trustee hereby
assigns and transfers to the Indenture Trustee a non-
exclusive right to apply to the Bankruptcy Court under
subsection 365(d)(4) of the Bankruptcy Code for an order
extending the period during which the Site Lease may be
rejected or assumed; and the Owner Trustee shall (i)
promptly notify the Indenture Trustee of any default by the
Owner Trustee in the performance or observance of any of the
terms, covenants or conditions on the part of the Owner
Trustee to be performed or observed under the Site Lease and
of the giving of any written notice by the lessor thereunder
to the Owner Trustee of any such default, and (ii) promptly
cause a copy of each written notice given to the Owner
Trustee by the lessor under the Site Lease to be delivered
to the Indenture Trustee. The Indenture Trustee may rely on
any notice received by it from any such lessor of any
default by the Owner Trustee under the Site Lease and may
take action to cure such default even though the existence
of such default or the nature thereof shall be questioned or
denied by the Owner Trustee or by any Person on its behalf.
3.8 Power of Attorney. Subject to Section 3.10, the
Owner Trustee does hereby irrevocably constitute and appoint the
Indenture Trustee its true and lawful attorney (which appointment
is coupled with an interest), with full power of substitution,
for the Owner Trustee and in the name, place and stead of the
Owner Trustee or in the Indenture Trustee's own name, for so long
as any of the Loan Certificates are outstanding, to ask, demand,
collect, receive, receipt for and sue for any and all rents,
income and other sums which are assigned hereunder (including,
without limitation, all Basic Rent, Stipulated Loss Value and
Supplemental Rent payments and all other amounts payable by the
Lessee under or pursuant to the Facility Lease or the
Participation Agreement, but excluding all Excepted Payments),
with full power to endorse the name of the Owner Trustee on all
instruments given in payment or in part payment thereof, to
settle, adjust or compromise any claims thereunder as fully as
the Owner Trustee itself could do and in its discretion to file
any claim or take any action or proceeding, either in its own
name or in the name of the Owner Trustee or otherwise, which the
Indenture Trustee may deem necessary or appropriate to protect
and preserve the right, title and interest of the Indenture
Trustee in and to such rents, income and other sums and the
security intended to be afforded hereby.
3.9 Notice of Default or Event of Loss. In the event
the Owner Trustee shall have knowledge of a Lease Default, a
Lease Event of Default, an Indenture Default, an Indenture Event
of Default, an Event of Loss or an Event of Regulation, the Owner
Trustee shall give prompt written notice thereof to the Owner
Participant and the Indenture Trustee. Upon receipt of any such
notice, the Indenture Trustee shall give prompt written notice
thereof to the other Loan Participants. For all purposes of this
Indenture, in the absence of actual knowledge of an officer in
its corporate trust department, the Owner Trustee shall not be
deemed to have knowledge of a Lease Default, a Lease Event of
Default, an Indenture Default, an Indenture Event of Default, an
Event of Loss or an Event of Regulation unless it has received
written notice thereof from the Owner Participant, the Lessee,
the Indenture Trustee, any Loan Participant or the Administrative
Agent.
3.10 Certain Rights of Owner Trustee and Owner
Participant. Anything contained in this Indenture to the
contrary notwithstanding (and without limiting the rights of the
Owner Trustee and the Owner Participant specified in the last
sentence of the definition of Excepted Payments):
(a) at all times the Owner Trustee shall have the
right, but not to the exclusion of the Indenture Trustee,
(i) to receive from the Lessee all notices, financial
statements, certificates, opinions of counsel and other
documents and all information which the Lessee is permitted
or required to give or furnish to the "Lessor" or the "Owner
Trustee" pursuant to the Facility Lease or any other
Granting Clause Document, to receive the benefits of, and to
exercise the rights conferred upon the "Lessor" under,
Sections 8(b), 8(c), 8(i) and 18 of the Facility Lease, to
apply for specific performance of such Sections, and,
subject to the provisions of the second proviso at the end
of this Section 3.10, to seek payments (as damages,
reimbursement or otherwise) from the Lessee for
noncompliance with such sections, but not to take any action
to enforce remedies in respect thereof under Section 15 of
the Facility Lease (other than declaring the Facility Lease
in default), (ii) to receive the benefits of and insist upon
compliance with the covenants of the Lessee under the
Participation Agreement and, subject to the provisions of
the second proviso at the end of this Section 3.10, to seek
payments (as damages, reimbursement or otherwise) from the
Lessee for the breach of such covenants, but not to enforce
remedies in respect thereof under Section 15 of the Facility
Lease (other than declaring the Facility Lease in default),
and (iii) to receive the benefits of the covenants of any
Person (other than the Lessee) under any Granting Clause
Document to which the Owner Trustee is a party or under
which it has rights to seek enforcement (as a third party
beneficiary, through the Security Agent, or otherwise) and,
so long as no Indenture Event of Default (other than an
Indenture Event of Default that is or arises out of a Lease
Event of Default) shall have occurred and be continuing, to
insist upon compliance with such covenants and to apply for
specific performance of such covenants;
(b) (i) the Owner Participant and the Owner Trustee
shall retain, to the exclusion of the Indenture Trustee, all
rights (including, without limitation, all rights to enter
into, execute and deliver amendments, modifications, waivers
or consents thereto or thereunder) in respect of the Tax
Indemnity Agreement and, subject to the provisions of
Section 9.13(b) of the Security Deposit Agreement, the
Letters of Credit, and (ii) so long as the Indenture Trustee
shall not have foreclosed the Lien of this Indenture against
the Indenture Property, the Owner Participant shall retain,
to the exclusion of the Indenture Trustee, the right to
calculate adjustments to Basic Rent Factors and Stipulated
Loss Value pursuant to Section 3(d) of the Facility Lease,
but subject to Section 3(h) of the Facility Lease.
(c) so long as no Indenture Event of Default (other
than an Indenture Event of Default that is or arises out of
a Lease Event of Default) shall have occurred and be
continuing, the Owner Trustee shall have the right, but not
to the exclusion of the Indenture Trustee, (i) to give to
the Lessee notice of any failure to perform any covenant,
condition or agreement under any Granting Clause Document
(and, subject to the provisions of the second proviso at the
end of this Section 3.10, to seek payments (as damages,
reimbursement or otherwise) from the Lessee for the breach
of any such covenant, condition or agreement) and to declare
the Facility Lease to be in default, but not to take any
other action to enforce remedies in respect thereof under
Section 15 of the Facility Lease, (ii) to seek specific
performance of the covenants of the Lessee under the
Participation Agreement and the Facility Lease relating to
the protection, insurance, maintenance, possession and use
of the Project and to maintain separate insurance for its
own account with respect to the Facility, and (iii) to
enforce any warranty contained in any Construction Contract;
(d) until the earlier to occur of (i) the acceleration
of the Loan Certificates following the occurrence of an
Indenture Event of Default (other than an Indenture Event of
Default that is or arises out of a Lease Event of Default)
provided that such acceleration has not been rescinded, and
(ii) the foreclosure of the Lien of this Indenture against
the Indenture Property, the Owner Trustee shall have the
right, to be exercised jointly with the Indenture Trustee
(the approval of both being required), to amend, modify or
supplement, or to give any waiver, consent or approval (or
direct the Security Agent to do the same) with respect to,
any Granting Clause Document if and to the extent such
Granting Clause Document confers such right on the Owner
Trustee (or the Security Agent, as the case may be);
(e) if the Lessee shall fail to pay any amount which
shall constitute an Excepted Payment, the Owner Trustee and
the Owner Participant at all times shall have the right, to
the exclusion of the Indenture Trustee, to institute suit
against the Lessee for breach of any covenants of the Lessee
to pay such amount directly to the Owner Trustee or the
Owner Participant, as the case may be, and, subject to the
provisions of the second proviso at the end of this Section
3.10, to seek payments (as damages, reimbursement or
otherwise) from the Lessee for any such breach and to
declare the Facility Lease to be in default, but not to take
any other action to enforce remedies in respect thereof
under Section 15 of the Facility Lease; and
(f) the Owner Participant shall have the right: (i) to
the exclusion of the Indenture Trustee, to receive the
benefits of, and to exercise the rights conferred upon the
"Owner Participant" under, Section 9(d) of the Facility
Lease and to apply for specific performance of such Section
and, subject to the provisions of the second proviso at the
end of this Section 3.10, to seek payments from the Lessee
thereunder, and to give a notice of default, but not to
enforce any other remedies in respect thereof under Section
15 of the Facility Lease; (ii) so long as no Indenture Event
of Default (other than an Indenture Event of Default that is
or arises out of a Lease Event of Default) shall have
occurred and be continuing, to the exclusion of the
Indenture Trustee, the rights of the Lessor under Sections
5, 12 and 13 of the Facility Lease; (iii) not to the
exclusion of the Indenture Trustee, to receive the benefits
of, and to exercise the rights conferred upon the "Lessor"
or the "Owner Participant" under, Section 18 of the Facility
Lease and, subject to the provisions of the second proviso
at the end of this Section 3.10, to seek payments (as
Supplemental Rent, damages, reimbursement or otherwise) from
the Lessee in respect thereof and to give a notice of
default, but not to enforce any other remedies in respect
thereof under Section 15 of the Facility Lease; and (iv) not
to the exclusion of the Indenture Trustee, to apply for
specific performance of Section 19 of the Facility Lease
and, subject to the provisions of the second proviso at the
end of this Section 3.10, to seek payments (as damages,
reimbursement or otherwise) from the Lessee for the breach
thereof and to give a notice of default, but not to take any
other action to enforce remedies in respect thereof under
Section 15 of the Facility Lease;
provided, however, that nothing in this Section 3.10 or elsewhere
in this Indenture shall be deemed to limit the exclusive right of
the Indenture Trustee (as assignee of the Owner Trustee), as
between the Indenture Trustee and the Owner Trustee, to terminate
the Facility Lease or to take any other action to exercise or
enforce any other rights or remedies (other than declaring the
Facility Lease in default) (i) pursuant to Section 15 of the
Facility Lease or (ii) pursuant to the provisions of any other
Collateral Security Document (or to direct the Security Agent to
take such action or exercise or enforce such rights or remedies),
in each case, upon the occurrence of a Lease Event of Default;
and
provided, further that neither the Owner Trustee nor the Owner
Participant shall seek to obtain or enforce any judgment or other
lien with respect to any Excepted Payments on any property of the
Lessee or the Owner Trustee.
If any of the rights enumerated above are exercisable
under any Granting Clause Documents by the Security Agent, acting
on behalf of the "Owner Trustee" or "Lessor", then the right of
the Owner Trustee, the Owner Participant or the Indenture
Trustee, as the case may be, granted pursuant to this Section
3.10 to exercise any such right of the "Owner Trustee" or
"Lessor" under such Granting Clause Documents shall include the
right to direct the Security Agent to take such action on its
behalf under such Granting Clause Documents.
3.11 Certain Agreements of Owner Trustee. The Owner
Trustee will not directly or indirectly (a) engage in any
business or activity other than the carrying out of the
transactions contemplated by this Indenture, the Participation
Agreement and the other Transaction Documents, (b) create, incur,
assume, guarantee, agree to purchase or repurchase or provide
funds in respect of any indebtedness, liability or obligations
other than as expressly permitted or contemplated by this
Indenture, the Participation Agreement and the other Transaction
Documents, (c) purchase or agree to purchase any property or
asset except as expressly permitted or contemplated by the
Participation Agreement and the other Transaction Documents.
3.12 Covenants of Fleet National Bank and the Owner
Trustee. (a) Fleet National Bank (formerly known as Shawmut
Bank Connecticut, National Association) in its individual
capacity hereby covenants and agrees that it will not directly or
indirectly create, incur or suffer to exist any Lessor's Lien
attributable to it and shall, at its own cost and expense,
promptly take such action as may be necessary duly to discharge
any such Lessor's Lien.
(b) The Owner Trustee hereby covenants and agrees as
follows:
(i) the Owner Trustee will not directly or
indirectly create, incur or suffer to exist any Lessor's
Lien and shall, at its own cost and expense, promptly take
such action as may be necessary duly to discharge any such
Lessor's Lien;
(ii) the Owner Trustee will not incur any
indebtedness for borrowed money;
(iii) the Owner Trustee will perform all of its
obligations hereunder and will duly and punctually pay the
principal of and interest and Breakage Costs, if any, on,
and any and all other amounts payable under, the Loan
Certificates in accordance with the terms of the Loan
Certificates and this Indenture and all amounts payable by
it to the Holders of the Loan Certificates and the Indenture
Trustee pursuant to the Participation Agreement; and
(iv) the Owner Trustee will furnish to the Indenture
Trustee and the Administrative Agent, promptly upon its
receipt, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and
other instruments furnished to the Owner Trustee under the
Facility Lease or any other Transaction Document, except to
the extent any such instrument is required to be provided to
the Indenture Trustee or the Administrative Agent by any
other party to any Transaction Document.
(v) the Owner Trustee will not amend, modify, assign
or transfer the Power Purchase Agreement without the express
written consent of the Owner Participant and the
Administrative Agent.
3.13 Covenant to Pay. If the Owner Trustee shall fail
to make any payment or fail to perform any of the agreements,
covenants or obligations required to be performed or observed by
it under this Indenture, or the Lessee shall fail to make any
payment or fail to perform any of the agreements, covenants or
obligations under the Facility Lease or any of the other
agreements constituting the Indenture Property to which the
Lessee is a party, then the Indenture Trustee shall, without
limiting the provisions of Article 6 hereof, have the right, but
not the obligation, to itself perform or pay the same. All sums,
including reasonable attorneys' fees, so expended to sustain the
lien or estate of this Indenture or its priority, or to protect
or enforce any of the rights of the Indenture Trustee hereunder,
shall constitute additional indebtedness secured by this
Indenture, and shall be paid by the Owner Trustee within 10 days
after demand therefor, together with interest thereon at the
Default Rate.
ARTICLE 4
Release of Indenture Property
4.1 Release of Parts. Provided no Lease Default or
Lease Event of Default shall have occurred and be continuing, the
Indenture Trustee shall, upon request of the Lessee, execute a
release in respect of any Part or Parts of the Project which are
removed and replaced in accordance with the provisions of
Section 8(f) of the Facility Lease.
ARTICLE 5
Application of Assigned Moneys
Received by the Indenture Trustee
5.1 Application of Payments. Except as otherwise
provided in Sections 5.2, 5.3 and 5.4 hereof, any payment
received by the Indenture Trustee the application of which is
provided for in the Facility Lease, the Trust Agreement, the
Participation Agreement or in any other Transaction Document but
not elsewhere in this Indenture shall be applied forthwith to the
purpose for which such payment was made and in accordance with
any applicable provisions of the Security Deposit Agreement. All
monies, investments and securities at any time on deposit in the
Accounts (other than the Equity Rent Reserve Sub-Account) shall
constitute part of the Indenture Property, and shall be subject
to the Lien of this Indenture.
5.2 Basic Rent Payments. Except as otherwise provided
in Section 5.4 hereof, each payment of Basic Rent and any payment
of interest on overdue installments of Basic Rent received by the
Indenture Trustee under the Security Deposit Agreement, and any
payment received by the Indenture Trustee as contemplated by
Section 7.1 hereof, shall be distributed by the Indenture Trustee
on the date such payment is due (or as soon thereafter as such
payment shall be received by the Indenture Trustee) in the
following order of priority:
(a) First, so much of such payment as shall be
required to pay the Administrative Agent's Fee pursuant to
Section 2.17 hereof and the Indenture Trustee's fees payable
hereunder;
(b) Second, so much of such payment as shall be
required to pay in full (pro rata, if there are not
sufficient amounts available to pay all amounts specified in
clauses (i) and (ii)) (i) any Interest Hedging Obligations
(excluding Swap Breakage Costs) due and owing and (ii) the
accrued and unpaid interest (including interest on all
overdue principal and, to the extent permitted by Applicable
Law, interest), Accretion Line of Credit Commitment Fees and
Additional Costs on all outstanding Loan Certificates shall
be distributed to the Interest Hedging Counterparty and the
Holders of the Loan Certificates, respectively, and in the
case of such Holders, ratably, without priority of one over
the other, in the proportion that the interest then due on
each such Loan Certificate bears to the aggregate amount of
interest then due on all such Loan Certificates;
(c) Third, so much of such payment as shall be
required to pay in full the aggregate amount of the payment
or payments of principal then due under all Loan
Certificates shall be distributed to the Holders of the Loan
Certificates ratably, without priority of one over the
other, in the proportion that the amount of such payment or
payments then due under each such Loan Certificate bears to
the aggregate amount of the payments then due under all such
Loan Certificates; and
(d) Fourth, the balance, if any, of such payment
remaining shall be distributed to the Owner Trustee for
distribution to the Owner Participant.
5.3 Application of Prepayments. (a) Except as
otherwise provided in Section 5.4 hereof, any payment received
pursuant to Section 9(c) of the Facility Lease as a result of the
occurrence of an Event of Loss or Section 9(d) of the Facility
Lease as a result of the occurrence of an Event of Regulation,
and any payment received pursuant to Section 2.10 hereof as a
result of a prepayment of the Loan Certificates, shall subject to
Section 2.11 hereof and paragraph (b) below, in each case be
distributed by the Indenture Trustee promptly upon receipt in the
following order of priority:
(i) First, so much of such payment as shall be
required to reimburse (A) the Indenture Trustee for any
expenses not reimbursed in connection with the collection or
distribution of such payment shall be applied in
reimbursement of such expenses; and (B) the Administrative
Agent for any unpaid fees, taxes, expenses or costs incurred
in connection with its duties as Administrative Agent and
not previously reimbursed.
(ii) Second, so much of such payments or amounts
as shall be required to reimburse the Loan Participants for
payments made by them to the Indenture Trustee pursuant to
Section 10.4 hereof (to the extent not previously
reimbursed) shall be distributed to the Loan Participants in
proportion to the amount of such payments made by each such
Loan Participant pursuant to Section 10.4 hereof;
(iii) Third, so much of such payment as shall be
required to pay in full the accrued and unpaid interest
(including interest on all overdue principal and, to the
extent permitted by Applicable Law, interest) and all
Additional Costs on all outstanding Loan Certificates at the
interest rate therein provided shall be distributed to the
Holders of such Loan Certificates ratably, without priority
of one over the other, in the proportion that the amount of
interest then accrued and unpaid on each such Loan
Certificate bears to the aggregate amount of interest then
accrued and unpaid on all such Loan Certificates;
(iv) Fourth, so much of such payment as shall be
required to pay any Breakage Costs due in connection
therewith shall be distributed to the Holders of the Loan
Certificates ratably, without priority of one over the
other, in the proportion that the Breakage Costs of each
Holder bear to the aggregate Breakage Costs of all such
Holders;
(v) Fifth, so much of such payment remaining as
shall be required to pay in full (pro rata if insufficient
amounts remain to pay all amounts set forth in clauses (A)
and (B) in full) (A) any Interest Hedging Obligations due
and owing shall be distributed to the Interest Hedging
Counterparty and (B) the aggregate unpaid principal amount
of all Loan Certificates shall be distributed to the Holders
of the Loan Certificates, and in case the aggregate amount
so to be distributed under this sub-clause (B) shall be
insufficient to pay in full as stated above, then, ratably,
without priority of one over the other, in the proportion
that the aggregate unpaid principal amount of all such Loan
Certificates held by each Holder bears to the aggregate
unpaid principal amount of all such Loan Certificates;
(vi) Sixth, so much of such payment, as shall be
required to pay all other amounts then due and payable to
Holders of the Loan Certificates under this Indenture and,
to the extent secured by the lien of this Indenture, under
the Participation Agreement shall be distributed to the
Holders of the Loan Certificates ratably, without priority
of one over the other, in the proportion that the aggregate
of such amounts due to each Holder of a Loan Certificate
bears to the aggregate of all such amounts due to all
Holders of Loan Certificates;
and
(vii) Seventh, the balance, if any, shall be
distributed to the Owner Trustee for distribution to the
Owner Participant.
(b) Any payments received pursuant to Section 2.10
hereof as a result of a partial prepayment of the Loan
Certificates shall be distributed by the Indenture Trustee in the
order of priority described in paragraph (a) above, but only to
the extent of the portion of the Loan Certificates to be prepaid.
5.4 Payments After Indenture Event of Default, etc.
All payments received and all amounts held or realized by the
Indenture Trustee after an Indenture Event of Default shall have
occurred and shall be continuing and after the Loan Certificates
shall have become due and payable as provided in Section 6.2(a),
as well as any other payments or amounts then held by the
Indenture Trustee as part of the Trust Indenture Estate, shall be
promptly distributed by the Indenture Trustee in the following
order of priority, subject to Section 2.11 hereof:
(i) First, so much of such payment as shall be
required to reimburse (A) the Indenture Trustee for any expenses
not reimbursed in connection with the collection or distribution
of such payment shall be applied in reimbursement of such
expenses and (B) the Administrative Agent for any unpaid fees,
taxes, expenses or costs incurred in connection with its duties
as Administrative Agent and not previously reimbursed;
(ii) Second, so much of such payment as shall be
required to pay in full the accrued and unpaid interest
(including interest on all overdue principal and, to the extent
permitted by Applicable Law, interest) and all Additional Costs
(other than any Breakage Costs provided for in clause (iii)
below) on all outstanding Loan Certificates at the interest rate
therein provided shall be distributed to the holders of such Loan
Certificates ratably, without priority of one over the other, in
the proportion that the amount of interest then accrued and
unpaid on each such Loan Certificate bears to the aggregate
amount of interest then accrued and unpaid on all such Loan
Certificates;
(iii) Third, so much of such payment as shall be
required to pay any Breakage Costs due in connection therewith
shall be distributed to the holders of the Loan Certificates
ratably, without priority of one over the other, in the
proportion that the Breakage Costs of each Loan Participant bear
to the aggregate Breakage Costs of all such Loan Participants;
(iv) Fourth, so much of such payment remaining as
shall be required to pay in full (pro rata if insufficient
amounts remain to pay all amounts set forth in clauses (A) and
(B) in full) (A) any Interest Hedging Obligations due any owing
shall be distributed to the Interest Hedging Counterparty and (B)
the aggregate unpaid principal amount of all Loan Certificates
shall be distributed to the Loan Participants, and in case the
aggregate amount so to be distributed pursuant to this clause
(B) shall be insufficient to pay in full as stated above, then,
ratably, without priority of one over the other, in the
proportion that the aggregate unpaid principal amount of all such
Loan Certificates held by each Loan Participant bears to the
aggregate unpaid principal amount of all such Loan Certificates;
(v) Fifth, so much of such payment, as shall be
required to pay all other amounts (other than principal) then due
and payable to Loan Participants under this Indenture and, to the
extent secured by the lien of this Indenture, under the
Participation Agreement shall be distributed to Loan Participants
ratably, without priority of one over the other, in the
proportion that the aggregate of such amounts due to each Loan
Participant bears to the aggregate of all such amounts due to all
Loan Participants; and
(vi) Sixth, any balance thereof shall be
distributed to the Owner Trustee for distribution to the Owner
Participant.
5.5 Application of Certain Other Payments. Except as
otherwise provided herein or in the Security Deposit Agreement,
any payment received by the Indenture Trustee for which no
provision as to the application thereof is made in the
Participation Agreement, the Facility Lease or any other
Transaction Document shall be delivered by the Indenture Trustee
to the Security Agent for deposit in the Revenue Account.
5.6 Excepted Payments and Indemnities. All Excepted
Payments, if received by the Indenture Trustee at any time, shall
be promptly paid by the Indenture Trustee to, or upon the order
of, the Owner Trustee, and any other payments received by the
Indenture Trustee from or on behalf of the Lessee with respect to
the Lessee's indemnity or expense obligations under Section 8 or
Section 13.5 of the Participation Agreement shall be paid by the
Indenture Trustee to the Indemnitee or Tax Indemnitee entitled to
such payment.
ARTICLE 6
Indenture Event of Default and Remedies
6.1 Indenture Events of Default. The term "Indenture
Event of Default", wherever used herein, shall mean any of the
following events (whatever the reason for such event and whether
it shall be voluntary or involuntary, or come about or be
effected by operation of law, or be pursuant to or in compliance
with any Applicable Law or Governmental Action):
(a) other than by reason of a Lease Default or a Lease
Event of Default (i) the failure of the Owner Trustee to pay
when due any payment of principal of or interest on any Loan
Certificate or any Breakage Costs and such failure shall
have continued unremedied for 3 Business Days after the date
when due, or (ii) the failure of the Owner Trustee to pay
when due any other amount due and payable hereunder, and
such failure shall have continued unremedied for 10 days
after the Owner Trustee and the Owner Participant shall
receive written demand therefor from the Indenture Trustee
or the Administrative Agent; or
(b) a Lease Event of Default shall occur and be
continuing (other than any Lease Event of Default arising
out (i) of any failure of the Lessee to make an Excepted
Payment, or (ii) a misrepresentation or breach of warranty
made by the Partnership in the Tax Indemnity Agreement
unless the Owner Participant shall acquiesce in the
treatment of such failure, misrepresentation or breach as an
Event of Default); or
(c) a default on the part of the Owner Trustee or the
Owner Participant in the observance or performance of any
covenant or agreement (other than those referred to in
paragraph (a) above) to be observed or performed by it under
this Indenture or the Participation Agreement and any such
default shall continue unremedied for a period of 30 days
after the Owner Trustee and the Owner Participant have
received written notice thereof; or
(d) any representation or warranty made by the Owner
Trustee or the Owner Participant in this Indenture or the
Participation Agreement or in any certificate or other
document delivered by or on behalf of the Owner Trustee or
the Owner Participant pursuant hereto or thereto shall prove
to have been incorrect in any material respect when such
representation or warranty was made and was and remains in
any respect material to the rights and remedies of the
Holders of the Loan Certificates under this Indenture, the
Loan Certificates or the Participation Agreement, and if
such misrepresentation is capable of being corrected as of a
subsequent date and if such correction is being sought
diligently, such misrepresentation shall not have been
corrected within 30 days following notice thereof identified
as a "Notice of Indenture Event of Default" being given to
the Owner Trustee and the Owner Participant by the Indenture
Trustee or the Administrative Agent; or
(e) the Trust, the Owner Trustee or the Owner
Participant shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect, or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent
to any such relief or the appointment of or taking of
possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall
take any corporate, partnership or other action to authorize
any of the foregoing; or an involuntary case or other
proceeding shall be commenced against the Trust, the Owner
Trustee or the Owner Participant seeking liquidation,
reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain
undismissed or unstayed for a period of 60 consecutive days;
(f) the lien and security interest of this Indenture
shall cease to constitute a valid and perfected lien on and
security interest in any part (other than an immaterial
portion) of the Indenture Property as to which a valid and
perfected lien was granted to the Indenture Trustee on the
Lease Closing Date, prior to all other Liens except
Permitted Liens which are not Lessor's Liens; or
(g) other than by reason of a Lease Default or Lease
Event of Default, an Event of Default shall have occurred
and be continuing under the Interest Hedging Agreement; or
For the avoidance of doubt, it is understood that upon
the occurrence of an Indenture Event of Default, certain rights
of the Owner Trustee and the Indenture Trustee under the
provisions of this Indenture (such as under Sections 3.10, 6.11,
7.1 and 7.2) are affected by, or determined with reference to,
whether such Indenture Event Default is or arises of out a Lease
Event of Default, and the Owner Trustee and the Indenture Trustee
acknowledge and agree that any Indenture Event of Default under
clause (a), (c), (d), (f) or (g) above may, depending upon the
facts and circumstances of such Indenture Event of Default, arise
out of or constitute a Lease Event of Default. The Owner Trustee
and the Indenture Trustee further acknowledge and agree that any
Indenture Event of Default under clause (a), (c), (d), (f) or (g)
above that is or arises out of a Lease Default that has not yet
matured into a Lease Event of Default shall, unless otherwise
indicated, be deemed for purposes of this Indenture to arise out
of a Lease Event of Default. The Owner Trustee and the Indenture
Trustee further acknowledge and agree that a Reimbursement Event
of Default (which constitutes a Lease Event of Default under the
Lease) shall be deemed to be a Lease Event of Default hereunder
and treated the same as a Lease Event of Default for all purposes
of this Agreement.
The Indenture Trustee shall give the Holders of the Loan
Certificates, the Owner Participant and the Owner Trustee written
notice of any Indenture Event of Default within one Business Day
of Indenture Trustee's receiving actual knowledge thereof
specifying a date which is not less than fifteen (15) Business
Days thereafter (the "Enforcement Date"), after which the
Indenture Trustee may, so long as such Indenture Event of Default
shall be continuing, commence and consummate the exercise of any
remedy or remedies described in Section 6.2 hereof, or the remedy
of terminating the Lease pursuant to the provisions of Article 15
thereof.
6.2 Rights and Remedies of the Indenture Trustee.
When any Indenture Event of Default has occurred and is
continuing, the Indenture Trustee may, without limitation of all
other rights and remedies available at law or in equity in such
event, but subject to the provisions of Article 7 and Section
6.11 hereof, exercise any one or more or all, and in any order,
of the remedies hereinafter set forth (and in the event such
Indenture Event of Default is an Indenture Event of Default
referred to in Section 6.1(b), any and all of the remedies
pursuant to Section 15 of the Facility Lease), it being expressly
understood that no remedy herein conferred is intended to be
exclusive of any other remedy or remedies, but each and every
remedy shall be cumulative and shall be in addition to every
other remedy given herein or now or hereafter existing at law or
in equity or by statute:
(a) If an Indenture Event of Default under Section
6.1(e) hereof shall occur and be continuing, the unpaid
principal of all Loan Certificates then outstanding,
together with accrued interest thereon, any Breakage Costs
and all other Owner Trustee Obligations, shall immediately
become due and payable without presentment, demand, protest
or notice, all of which are hereby waived, and the Accretion
Line of Credit Commitment shall terminate, and in the case
of any other Indenture Event of Default, the Indenture
Trustee may at any time, and upon the written instructions
of a Majority in Interest of Loan Certificate Holders
forthwith shall, by written notice to the Owner Trustee and
the Owner Participant, declare all the Loan Certificates to
be due and payable, whereupon the unpaid principal amount of
all Loan Certificates then outstanding, together with
accrued interest thereon, any Breakage Costs and all other
Owner Trustee Obligations shall immediately become due and
payable without presentment, demand, protest or other
notice, all of which are hereby waived, and the Accretion
Line of Credit Commitment shall terminate;
(b) Subject to the then existing rights, if any, of
the Lessee under the Facility Lease, the Indenture Trustee
personally, or by agents or attorneys (including the
Security Agent), shall have the right to enter into and upon
and take possession of the Indenture Property, and, having
and holding the same, may, use, operate, manage and control
the Indenture Property and conduct the business thereof and
collect and receive all earnings, revenues, rents, issues,
proceeds and income of the Indenture Property and every part
thereof and may maintain, repair and renew the Indenture
Property and make replacements, alterations, additions and
improvements thereto or remove and dispose of any portion of
the Indenture Property and may otherwise exercise any and
all of the rights and powers of the Owner Trustee in respect
thereof. The Owner Trustee hereby constitutes and appoints
the Indenture Trustee and any officer or agent thereof, with
full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority
in the place and stead of the Owner Trustee and in the name
of the Owner Trustee or in its own name, from time to time
in the Indenture Trustee's discretion, for the purpose of
carrying out the terms of this Indenture, to take any and
all appropriate action and to execute any and all documents
and instruments which may be necessary or desirable to
exercise the rights of the Owner Trustee in any statutory or
nonstatutory proceeding to make any election pursuant to
11 USC Ss. 365(h)(1) or any similar provision of Applicable
Law to remain in possession of the Site if the Site Lease is
rejected as provided in 11 USC Ss. 365(h)(1) or any similar
provision of Applicable Law. Upon demand of the Indenture
Trustee, the Owner Trustee shall pay all costs and expenses
advanced or expended by the Indenture Trustee in connection
with the exercise by the Indenture Trustee of the foregoing
rights, including, without limitation, costs of evidence of
title, court costs, appraisals, surveys and reasonable
attorneys' fees and expenses and insurance premiums,
together with interest thereon at the Default Rate from the
date of such advance or expenditure until paid;
(c) Subject to the then existing rights, if any, of
the Lessee under the Facility Lease, the Indenture Trustee
may personally, or by agents or attorneys (including the
Security Agent), to the extent permitted by Applicable Law,
(i) institute and maintain an action of mortgage foreclosure
against all or any part of the Indenture Property or (ii)
either with or without taking possession, and either before
or after taking possession, and without instituting any
legal proceedings whatsoever, and having first given notice
of such sale by registered or certified mail to the Owner
Trustee and the Owner Participant with a copy to the Lessee
at least 30 days prior to the date of such sale, and any
other notice which may be required by Applicable Law, sell
or otherwise dispose of the Indenture Property, or any part
thereof, or interest therein, at public auction to the
highest bidder, in one lot as an entirety or in separate
lots, and either for cash or on credit and on such terms as
the Indenture Trustee may determine, and at any place
(whether or not it be the location of the Indenture Property
or any part thereof) designated in the notice referred to
above. After deducting all costs, fees and expenses of the
Indenture Trustee (and, to the extent foreclosure remedies
are being pursued under the Facility Lease, the trustee
under the Deed of Trust), the Indenture Trustee shall apply
the proceeds of sale to payment in accordance with the
provisions of Section 5.4 hereof. Any such sale or sales
may be adjourned from time to time by announcement at the
time and place appointed for such sale or sales or for any
such adjourned sale or sales, without further notice, and
the Indenture Trustee or any Loan Participant or the Owner
Participant may bid and become the purchaser at any such
sale;
(d) Subject to the then existing rights, if any, of
the Lessee under the Facility Lease, the Indenture Trustee
may proceed to exercise all rights, privileges and remedies
(other than rights of the Owner Trustee with respect to
Excepted Payments) of the Owner Trustee under the Facility
Lease (including, without limitation, all remedies under
Section 15 of the Facility Lease) and may exercise all such
rights and remedies either in the name of the Indenture
Trustee or in the name of the Owner Trustee for the use and
benefit of the Indenture Trustee and the Loan Participants.
The Indenture Trustee may also proceed to exercise all
rights, privileges and remedies (other than rights of the
Owner Trustee with respect to Excepted Payments) of the
Owner Trustee and the Indenture Trustee under each Granting
Clause Document (including any right to direct the Security
Agent), subject to the then existing rights, if any, of the
other party to such Granting Clause Document, and the
Collateral Security Documents, either in the name of the
Indenture Trustee or in the name of the Owner Trustee for
the use and benefit of the Indenture Trustee and the Loan
Participants;
(e) Subject to the then existing rights, if any, of
the Lessee under the Facility Lease, the Indenture Trustee,
personally or by agents or attorneys (including the Security
Agent), may exercise any or all of the remedies available to
a secured party under the Uniform Commercial Code as in
effect in the applicable jurisdiction in which the Indenture
Property or the portion thereof in question is located or by
which this Indenture is governed, including:
(i) either personally or by means
of a court appointed receiver, take possession of all
or any of the Indenture Property and exclude therefrom
the Owner Trustee and all others claiming under the
Owner Trustee, and thereafter hold, store, operate,
use, manage, maintain and control, make repairs,
replacements, alterations, additions and improvements
to and exercise all rights and powers of the Owner
Trustee in respect of all or any of the Indenture
Property or any part thereof, or cause the same to be
operated by a Person selected by the Indenture Trustee;
and in the event the Indenture Trustee demands or
attempts to take possession of the Indenture Property
in the exercise of any rights hereunder, the Owner
Trustee shall promptly turn over and deliver complete
possession thereof to the Indenture Trustee;
(ii) without notice to or demand
upon the Owner Trustee, make such payments and do such
acts as the Indenture Trustee may deem necessary to
protect the security interest granted hereby in the
Indenture Property (but, as to perfection, only to the
extent the same was perfected on the Lease Closing Date
unless, at such time, the Owner Participant is
unwilling to reaffirm its obligations under the last
sentence of Section 4.2(b) of the Participation
Agreement or the Owner Participant no longer satisfies
the requirements of a Highly Qualified Transferee),
including paying, purchasing, contesting or
compromising any encumbrance, charge or Lien which is
prior or superior thereto, and in exercising any such
powers or authority to pay all expenses incurred in
connection therewith;
(iii) sell, lease or otherwise
dispose of all or any of the Indenture Property at
public or private sale, with or without having the
Indenture Property at the place of sale, and upon such
terms and in such manner as the Indenture Trustee may
determine, and the Indenture Trustee or any Loan
Participant may be a purchaser at any such sale; and
(iv) unless any of the Indenture
Property is perishable or threatens to decline speedily
in value or is of a type customarily sold on a
recognized market, give the Owner Trustee and the Owner
Participant at least 30 days' prior notice of the time
and place of any public sale of the Indenture Property
or other intended disposition thereof.
As to any personal property subject to Article 9 of the
Uniform Commercial Code included in the Indenture Property,
including accounts, contract rights and general intangibles,
the Indenture Trustee may proceed under the Uniform
Commercial Code or proceed as to both real and personal
property in accordance with the provisions of this Indenture
and the rights and remedies that the Indenture Trustee may
have, at law or in equity, in respect of real property, and
treat both the real and personal property included in the
Indenture Property as one parcel or package of security.
(f) The Indenture Trustee may proceed to protect and
enforce its rights under this Indenture by suit for specific
performance of any covenant herein contained, or in aid of
the execution of any power herein granted, or for the
foreclosure of this Indenture and the sale of the Indenture
Property under the judgment or decree of a court of
competent jurisdiction, or for the enforcement of any other
right as the Indenture Trustee shall deem most effectual for
such purposes.
In case of any sale of the Indenture Property, or of
any part thereof, pursuant to any judgment or decree of any court
or power of sale or otherwise in connection with the enforcement
of any of the terms of this Indenture, all of the Lender
Obligations, if not previously due and payable pursuant to the
provisions of this Indenture, shall at once become and be
immediately due and payable.
6.3 Appointment of Receiver. If any Indenture Event
of Default shall occur and be continuing, the Indenture Trustee
shall have the right, but subject to the provisions of Article 7
and Section 6.11 hereof, forthwith and without notice, to the
appointment by a court of competent jurisdiction of a receiver
who shall be entitled (subject to the then existing rights, if
any, of the Lessee under the Facility Lease) to enter into and
upon the Indenture Property, to take possession of the Indenture
Property, whether the same shall be then occupied as a homestead
or not, and to collect all rent, issues, revenues, proceeds,
income and profits (other than, in each case, Excepted Payments),
regardless of the adequacy of the security for the payment of the
Loan Certificates and other sums secured hereby or the solvency
of the Owner Trustee, the Owner Participant or the Lessee. The
Owner Trustee hereby covenants that the appointment of such a
receiver by a court of competent jurisdiction, regardless of the
adequacy of the security or the solvency of the Owner Trustee,
the Owner Participant or the Lessee, shall be a matter of right
to the Indenture Trustee. Any such receiver shall have all the
usual powers and duties of receivers in like or similar cases and
all the powers and duties of the Indenture Trustee in case of
entry as provided in Section 6.2(b). All net income (other than
Excepted Payments), after payment of any collection, management
and attorneys' fees, shall be applied in the manner set forth in
the Security Deposit Agreement and Article 5 hereof.
6.4 Application of Proceeds; Effect of Sale. The
Indenture Trustee shall pay, distribute and apply the proceeds of
any sale made either under the power of sale hereby given or
under a judgment, order or decree made in any action to foreclose
or to enforce this Indenture in the order of priority set forth
in Section 5.4 hereof. Said sale or foreclosure shall operate to
divert all right, title, interest, claim and demand whatever,
either at law or in equity, of the Owner Trustee in and to the
property said and shall forever be a bar against the Owner
Trustee, its legal representatives, successors and assigns, and
all other Persons claiming under any of them. It is expressly
agreed that the recitals in each conveyance to the purchaser
shall be full evidence of the truth of the matters therein
stated, and all lawful prerequisites to said sale shall be
conclusively presumed to have been performed.
6.5 Abandonment of Sale. If foreclosure should be
commenced by the Indenture Trustee, the Indenture Trustee may at
any time before the sale abandon the sale, and may at any time or
times thereafter again commence foreclosure; and, irrespective of
whether foreclosure is commenced by the Indenture Trustee, the
Indenture Trustee may institute suit for collection of all
amounts owing under the Loan Certificates.
6.6 Non-Extinguishment of Lien. No single sale or
series of sales by the Indenture Trustee under this Indenture and
no judicial foreclosure shall extinguish the lien and security
interest created by, or exhaust the power of sale under, this
Indenture except with respect to the items of property sold, but
such lien, security interest and power shall exist for so long
as, and may be exercised in any manner by law or in this
Indenture provided as often as, the circumstances require to give
the Indenture Trustee full relief hereunder.
6.7 Right to Purchase. The Indenture Trustee or any
Loan Participant or the Owner Participant shall have the right to
become the purchaser at any sale made hereunder, by being the
highest bidder, and credit upon all or any part of the Lender
Obligations shall be deemed cash paid for the purposes of this
Article.
6.8 Waiver of Marshalling, etc. All rights of
marshalling of assets or sale in inverse order of alienation,
including any such rights with respect to the Indenture Property
in the event of foreclosure of any lien or security interest at
any time securing the Lender Obligations or any part thereof
(including, without limitation, the lien and security interests
hereby created), are hereby waived.
6.9 Remedies not Exclusive. No delay or omission of
Indenture Trustee or any Loan Participant to exercise any right
or power arising from any Indenture Default or Indenture Event of
Default shall exhaust or impair any such right or power or
prevent its exercise during the continuance of such Indenture
Default or Indenture Event of Default. No waiver by the
Indenture Trustee of any such Indenture Default or Indenture
Event of Default, whether such waiver be full or partial, shall
extend to or be taken into effect upon any subsequent Indenture
Default or Indenture Event of Default, or impair the rights
resulting therefrom. No lien, security interest, right, remedy
or power in favor of the Indenture Trustee or the Loan
Participants granted in or secured by this Indenture shall be
considered as exclusive, but all liens, security interests,
rights, remedies and powers under this Indenture or existing at
law or in equity or by statute or otherwise shall be cumulative,
and any exercise of rights, remedies or powers by the Indenture
Trustee or any of the Loan Participants shall not preclude the
simultaneous or later exercise by the Indenture Trustee or any of
the Loan Participants of any or all such other rights, remedies
or powers.
6.10 Physical Possession. Upon any sale, whether
under the power of sale hereby given or by virtue of judicial
proceeding, no necessity shall exist for the Indenture Trustee,
or any public officer acting under execution or order of court,
to have physically present or constructively in his possession
any of the Indenture Property.
6.11 Enforcement of Remedies Under Lease. The
Indenture Trustee shall not, as a result of an Indenture Event of
Default which is or arises out of a Lease Default or a Lease
Event of Default, foreclose the Lien of this Indenture or
otherwise exercise remedies hereunder which would result in the
exclusion of the Owner Trustee from the Indenture Property unless
the Indenture Trustee has terminated the Facility Lease and has
taken action to dispossess the Lessee from the Facility and is
concurrently exercising remedies under the Lessee Security
Documents; provided, however, if the Indenture Trustee is then
stayed or otherwise prevented from exercising such remedies by
operation of law or by order of a court for a continuous period
expiring on the earlier of (a) 270 days from the date such stay
or operation of law becomes effective and (b) the date such stay
or operation of law shall no longer be in effect and such
remedies are being exercised, the Indenture Trustee may proceed
to foreclose the Lien of this Indenture.
6.12 Discontinuance of Proceedings. In case the
Indenture Trustee shall have instituted any proceeding to enforce
any right, power or remedy under this Indenture by foreclosure,
entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been
determined adversely to the Indenture Trustee, then and in every
such case the Owner Trustee, the Indenture Trustee and the Lessee
shall, subject to any determination in such proceedings, be
restored to their former positions and rights hereunder with
respect to the Indenture Property, and all rights, remedies and
powers of the Indenture Trustee shall continue as if no such
proceedings had been instituted.
6.13 Waiver of Past Defaults. Upon written
instructions from the Majority Loan Participants, the Indenture
Trustee shall waive any past Indenture Default or Indenture Event
of Default and its consequences and upon any such waiver such
Indenture Default or Indenture Event of Default, as the case may
be, shall cease to exist and shall be deemed to have been cured
for every purpose of this Indenture, but no such waiver shall
extend to any subsequent or other Indenture Default or Indenture
Event of Default or impair any right consequent thereon;
provided, however, that in the absence of written instructions
from each affected Loan Participant, the Indenture Trustee shall
not waive any default in the payment of any of the Loan
Certificates; and provided, further, that in the event of any
waiver of a Lease Default or Lease Event of Default by the
Indenture Trustee (or any other Person authorized to do so under
the Facility Lease) in accordance with the terms hereof and the
Facility Lease, the Indenture Default or Indenture Event of
Default which is or arises out of such Lease Default or Lease
Event of Default shall also be deemed waived and any acceleration
of the Loan Certificates in connection with such Indenture Event
of Default shall be deemed automatically rescinded.
ARTICLE 7
Rights of Owner Trustee and Owner Participant
7.1 Owner Trustee's and Owner Participant's Right to
Cure Certain Events of Default. (a) If the Lessee shall fail to
make any payment of Basic Rent under the Facility Lease, then, so
long as no Indenture Event of Default which is not or does not
arise out of a Lease Default or Lease Event of Default shall have
occurred and be continuing, the Owner Trustee or the Owner
Participant may (but need not) pay, at any time prior to the
later of (i) the expiration of 15 Business Days after the date on
which the Indenture Trustee gives notice to the Owner Participant
of the failure of the Lessee to make such payment of Basic Rent
and (ii) the date upon which the Indenture Trustee gives notice
to the Owner Participant that it intends to commence the exercise
of any significant remedy under the Facility Lease, an amount
equal to such overdue Basic Rent (together with interest thereon,
calculated at the Default Rate from the date such payment was
due). Payment by the Owner Trustee or the Owner Participant in
accordance with the provisions of the preceding sentence shall be
deemed to cure the Indenture Event of Default which arose or
would have arisen from such failure of the Lessee to pay such
Basic Rent (but not the related Lease Event of Default);
provided, however, that the right of the Owner Trustee and the
Owner Participant under this Section 7.1(a) to cure defaults in
the payment of Basic Rent may not be exercised (i) with respect
to more than four (4) consecutive payments of Basic Rent, or (ii)
with respect to more than a total of eight (8) payments of Basic
Rent throughout the Basic Lease Term.
(b) If (i) there shall occur a Lease Event of Default
for any reason other than the Lessee's failure to make any
payment of an installment of Basic Rent and (ii) the Owner
Trustee shall have taken or caused to be taken such action
necessary to cure and shall have cured such Lease Event of
Default prior to the later of the date on which the Indenture
Trustee has commenced any significant remedy under the Facility
Lease and 15 Business Days after the Owner Participant's receipt
of notice of such Lease Event of Default, then the failure of the
Lessee to perform such covenant, condition or agreement, the
observance or performance of which was accomplished by the Owner
Trustee hereunder shall not constitute an Indenture Event of
Default under this Indenture and any declaration based solely on
the same shall be deemed to be automatically rescinded.
(c) The Owner Trustee or the Owner Participant, as the
case may be, shall be subrogated to the right of the Loan
Participants, to the extent hereinafter provided, to receive from
the Lessee an amount equal to the Basic Rent as to which any
payment by the Owner Trustee or the Owner Participant, as the
case may be, pursuant to paragraph (a) of this Section 7.1 was
made or an amount equal to the amounts paid by the Owner Trustee
or the Owner Participant pursuant to paragraph (b) of this
Section 7.1, provided that (i) such right shall not be
exercisable if an Indenture Default or an Indenture Event of
Default has occurred and is continuing and (ii) neither the Owner
Trustee nor the Owner Participant shall obtain or enforce any
Lien of any kind on any of the Indenture Property for or on
account of any payment made by the Owner Trustee or the Owner
Participant, as the case may be, in connection with the exercise
of any such right, nor shall any claims of the Owner Trustee or
the Owner Participant against the Lessee or any other Person for
the repayment of such payments impair the prior right and
interest of the Indenture Trustee on the Indenture Property.
(d) During the period in which the Owner Trustee or
the Owner Participant shall have the right to make any payment on
account of overdue Basic Rent pursuant to Section 7.1(a) or any
other payment pursuant to Section 7.1(b), the Indenture Trustee
shall not, without the prior written consent of the Owner
Participant, exercise any remedies under the Facility Lease or
this Indenture solely as a result of the failure by the Lessee to
make such payment.
7.2 Owner Trustee's and Owner Participant's Right to
Purchase Loan Certificates. The Owner Trustee or the Owner
Participant may, at any time during the 15 Business Day period
commencing on the date on which the Indenture Trustee gives
notice (an "Enforcement Notice") to the Owner Participant of the
occurrence of a Indenture Event of Default and its intention to
commence foreclosure proceedings on the Lien of this Indenture or
of its intention to otherwise exercise remedies hereunder which
would result in the exclusion of the Owner Trustee from the
Indenture Property, purchase all, but not less than all, of the
Loan Certificates then outstanding for the purchase price set
forth in this Section 7.2. Each Loan Participant agrees that it
will, upon deposit by the Owner Participant with the Indenture
Trustee within 20 Business Days after the notice of election
thereunder shall have been given to the Indenture Trustee (during
which time the Indenture Trustee shall not exercise any of the
remedies available to it hereunder or under the Facility Lease,
as the case may be), of cash in an amount equal to the aggregate
unpaid principal amount of all Loan Certificates then held by all
such Loan Participants, together with Breakage Costs, if any, and
accrued interest on such amount to the date of purchase and plus
all other sums due to such Holders hereunder and under the other
Financing Documents to the extent secured hereby, be deemed,
whether or not such Loan Certificates shall have been delivered
to the Indenture Trustee on such date, to have thereupon sold,
assigned, transferred and conveyed (and shall promptly take such
actions as the Owner Participant shall reasonably request to
evidence such sale, assignment, transfer and conveyance) to the
Owner Participant (without recourse or warranty of any kind
except for its own acts) other than of title to the Loan
Certificates so conveyed, all of the right, title and interest of
such Holder in and to the Trust Indenture Estate, this Indenture,
the Participation Agreement and the other Transaction Documents,
and the Owner Participant shall be deemed to have assumed (and
shall promptly take such actions as any Loan Participant shall
reasonably request to evidence such assumption) all of such Loan
Participant's obligations under the Participation Agreement and
this Indenture arising subsequent to such sale; provided,
however, that no Holder shall convey the Certificates held by it
unless all other Certificates at the time outstanding shall be
simultaneously purchased by the Owner Participant or the Owner
Trustee, and such conveyance shall not be in violation of
Applicable Law. If the Owner Trustee shall so request, such
Holder will comply with all the provisions of Section 2.7 of this
Indenture to enable new Loan Certificates to be issued to the
Owner Participant in such authorized denominations as the Owner
Participant shall request. All charges and expenses required
pursuant to Section 2.9 hereof in connection with the issuance of
any such new Loan Certificates shall be borne by the Owner
Participant. Any election to purchase the Loan Certificates
under this Section 7.2 shall be irrevocable, provided that if on
the specified payment date the Indenture Event of Default giving
rise to such election shall no longer be continuing such election
shall be deemed to be automatically withdrawn. The Indenture
Trustee agrees that (i) it shall not give an Enforcement Notice
during the 15 Business Day period in which the Owner Trustee and
the Owner Participant may exercise their rights pursuant to
Section 7.1 hereof, and (ii) it shall not, without the prior
written consent of the Owner Participant, exercise its remedies
under the Facility Lease or this Indenture during any period in
which the Owner Trustee or the Owner Participant shall have the
purchase right set forth in this Section 7.2.
ARTICLE 8
Payments from Indenture Property Only
Without limiting the rights and interests of the
Holders, except as otherwise specifically set forth in this
Indenture or the Participation Agreement, all payments of the
Owner Trustee Obligations shall be made only from the Indenture
Property and the income and proceeds thereof. Except as so
provided, the Indenture Trustee and the Loan Participants shall
look solely to the Indenture Property and the income and proceeds
thereof to the extent available for distribution as provided
herein and in the Security Deposit Agreement. Neither the Owner
Trustee in its individual capacity nor the Owner Participant
shall be personally liable for any amounts payable on the Loan
Certificates or, except as specifically provided herein or in the
Participation Agreement, for any other Owner Trustee Obligation.
These provisions are not intended as any release or discharge of
the indebtedness represented by or payable pursuant to the
provisions of the certificates or this Indenture, and the
indebtedness represented by or payable pursuant to the provisions
of the Indenture and the Loan Certificates shall remain in full
force. The Owner Trustee acknowledges that the Holders have
expressly reserved all their legal rights and remedies against
the Indenture Property and the Trust Estate, including the right
upon the occurrence and continuation of an Indenture Event of
Default, to foreclose on this Indenture in accordance with the
terms hereof and to enforce any other right under this Indenture.
ARTICLE 9
Concerning the Owner Trustee
9.1 Limitation on Liability of Owner Trustee. Fleet
National Bank is entering into this Indenture solely as Owner
Trustee under the Trust Agreement and not in its individual
capacity (except as expressly provided herein), and in no event
whatsoever shall it (or any entity acting as successor Owner
Trustee under the Trust Agreement) be personally liable on, or
for any loss in respect of, any of the statements,
representations, warranties, agreements or obligations of the
Owner Trustee hereunder, as to all of which the Indenture Trustee
and the Loan Participants agree to look solely to the Trust
Indenture Estate, provided that the Owner Trustee shall be
liable, in its individual capacity, (a) for its own wilful
misconduct or gross negligence (other than with respect to the
handling of funds, in which case the Owner Trustee shall be
accountable for its simple negligence), and (b) in the case of a
breach of its covenant contained in the second sentence of
Section 3.4 hereof.
9.2 Successor Owner Trustee. If any bank or trust
company becomes a successor Owner Trustee in accordance with the
provisions of Article IX of the Trust Agreement and the
Participation Agreement, such successor Owner Trustee shall,
without any further act, succeed to all the rights, duties,
immunities and obligations of the Owner Trustee hereunder and its
predecessor Owner Trustee shall be released from all further
duties and obligations hereunder. In the case of any appointment
of a successor to the Owner Trustee pursuant to the Trust
Agreement or any merger, conversion, consolidation or transfer of
substantially all of the corporate trust business of the Owner
Trustee pursuant to Section 9.1(d) of the Trust Agreement, the
successor Owner Trustee shall give prompt written notice thereof
to the Indenture Trustee and each Loan Participant.
ARTICLE 10
Concerning the Indenture Trustee
10.1 Appointment. First Security Bank, National
Association is hereby appointed as Indenture Trustee hereunder
and in its individual capacity hereby accepts the trusts and
duties hereby created and applicable to it for the benefit of the
Loan Participants and the Interest Hedging Counterparty and
agrees to perform the same but only upon the terms of this
Indenture, and agrees to receive and disburse all monies
constituting part of the Trust Indenture Estate in accordance
with the terms hereof. The Indenture Trustee shall not be
answerable or accountable under any circumstances, except for (a)
ordinary negligence in the receipt and disbursement of money, (b)
its obligations specified in Section 10.5(b) hereof and (c) its
own willful misconduct or gross negligence (except as otherwise
provided in the last sentence of Section 2.4(a) hereof and except
as otherwise provided with respect to liabilities that may result
from the inaccuracy of any of its representations or warranties
in its individual capacity or as Indenture Trustee set forth in
the Participation Agreement). The Indenture Trustee shall not be
liable for any action or inaction of the Owner Trustee and the
Owner Trustee shall not be liable for any action or inaction of
the Indenture Trustee. Unless otherwise expressly provided in
this Indenture or in the Participation Agreement, the Indenture
Trustee shall have no obligation to advance its individual funds
for any purpose and shall have no obligation to distribute to the
Loan Participants, the Owner Trustee, the Lessee or any third
party any amounts to be paid to the Indenture Trustee until such
amounts are collected by the Indenture Trustee.
10.2 Action Upon Instructions. Subject to the terms
of Sections 10.4 hereof, upon the written instructions at any
time and from time to time of the Administrative Agent (which
instructions shall specify that the Administrative Agent is
authorized to give such directions on behalf of the Loan
Participants) the Indenture Trustee shall take such of the
following actions as may be specified in such instructions: (i)
exercise such election or option, or make such decision or
determination, or give such notice, consent, waiver or approval
or exercise such right, remedy or power or take such other action
hereunder or under any other Transaction Document or in respect
of any part or all of the Indenture Property as shall be
specified in such instructions; (ii) take such action with
respect to, or to preserve or protect, the Indenture Property
(including the discharge of Liens) as shall be specified in such
instructions and as are consistent with this Indenture; and (iii)
take such other action in respect of the subject matter of this
Indenture as is consistent with the terms hereof and the other
Transaction Documents. The Indenture Trustee will execute and
file or cause to be filed such continuation statements with
respect to financing statements relating to the security interest
created hereunder in the Indenture Property as may be specified
from time to time in written instructions of the Administrative
Agent (which instructions may, by their terms, be operative only
at a future date and which shall be accompanied by the execution
form of such continuation statements so to be filed). The
Interest Hedging Counterparty shall have no right to
independently direct the actions of the Indenture Trustee and
shall be bound by the directions of the Administrative Agent.
10.3 Exculpatory Provisions. (a) The Indenture
Trustee may exercise any of its duties under this Indenture by or
through agents or employees and shall be entitled to advice of
counsel concerning all matters pertaining to its duties
hereunder.
(b) Without limiting the provisions of Section 10.1,
the Indenture Trustee shall not be responsible in any manner to
any of the Loan Participants for the value, validity, due
execution, genuineness, effectiveness, legality, enforceability
or sufficiency of this Indenture, any Collateral Security
Document or the Indenture Property or any part thereof, or of any
of the certificates, documents or instruments at any time
delivered to it pursuant hereto, or for the failure of the Owner
Trustee to perform its obligations hereunder or for the value,
sufficiency, title or condition of all or any part of the
Indenture Property. The Indenture Trustee shall not be under any
obligation to any of the Loan Participants to ascertain or
inquire as to the performance or observance on the part of the
Owner Trustee or the Lessee of any of the terms, covenants or
conditions of this Indenture, the Facility Lease or any other
Transaction Document, to see to any recording or filing of this
Indenture (or any financing or continuation statements with
respect thereto), to inspect the properties, books or records of
the Owner Trustee or to ascertain or to inquire as to the
financial condition of the Owner Trustee or the Lessee.
(c) The Indenture Trustee shall be entitled to rely,
and shall be fully protected in relying, upon any note, notice,
consent, certificate, affidavit, letter, telegram, telex,
statement, order, instruction or other document in good faith
believed by it to be genuine, and to have been signed, sent or
made by the proper Person or Persons and upon advice and
statements in respect of legal matters of legal counsel
(including counsel to the Owner Trustee or the Lessee),
independent accountants and other experts selected by the
Indenture Trustee. The Indenture Trustee shall be fully
justified in failing or refusing to take any action under this
Indenture unless it shall first receive (i) directions of the
Administrative Agent and (ii) such indemnification, including
reasonable advances, as it deems appropriate. The Indenture
Trustee shall in all cases be fully protected in, and shall not
be responsible to the Loan Participants for, acting or refraining
from acting under this Indenture or any other Transaction
Document in accordance with a request of the Required Loan
Participants and such request and any action taken or failure to
act pursuant to such request shall be binding upon all the Loan
Participants.
10.4 Indemnification. The Indenture Trustee shall not
be required to take any action or refrain from taking any action
requested by the Loan Certificate Holders under Section 6 unless
it shall have been indemnified by the Loan Participants to the
extent permitted by law against any liability, cost or expense
including reasonable counsel fees and expenses) which may be
incurred in connection with such action or unless in the good
faith judgment of the Indenture Trustee, the indemnities of the
Lessee under the Participation Agreement shall be adequate for
such purpose; provided, however, that a written undertaking to
indemnify shall be sufficient indemnity for purposes of this
Section 10.4. The Indenture Trustee shall not be under any
obligation to take any action under this Indenture and nothing in
this Indenture contained shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in
the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not
reasonably assured to it. The Indenture Trustee shall not be
required to take any action pursuant to Article 6 hereof, nor
shall any other provision of this Indenture be deemed to impose a
duty on the Indenture Trustee to take any action, if the
Indenture Trustee shall have been advised by counsel that such
action is contrary to the terms hereof or of the Facility Lease
or is otherwise contrary to law.
10.5 No Duties Except as Specified. (a) The
Indenture Trustee shall not have any duty or obligation to
manage, control, use, sell, dispose of or otherwise deal with the
Facility or any other party of the Trust Indenture Estate or
otherwise to take or refrain from taking any action under or in
connection with this Indenture or the Facility Lease, except as
expressly provided by the terms of this Indenture or as expressly
provided in written instructions received pursuant to the terms
of Section 6.13 or 10.2 hereof. No implied duties or obligations
shall be read into this Indenture against the Indenture Trustee.
(b) Notwithstanding the provisions of paragraph (a) of
this Section 10.5, the Indenture Trustee agrees that it will, in
its individual capacity and at its own cost and expense, promptly
take such action as may be necessary to discharge duly any
Indenture Trustee's Liens; provided, however, that the Indenture
Trustee shall be deemed to be in compliance with such obligation
so long as the Indenture Trustee contests in good faith the
validity of any such Lien by appropriate proceedings promptly
initiated and diligently prosecuted and of which the Indenture
Trustee shall have given notice to each Loan Certificate Holder;
provided, further, that no such contest shall be permitted if, in
the opinion of a Majority in Interest of Loan Certificate Holders
(after consultation with counsel), such contest might result in
any material danger of the sale, forfeiture, loss or impairment
of all or any portion of the Trust Indenture Estate.
10.6 Resignation or Removal of the Indenture Trustee.
(a) The Indenture Trustee may resign as Indenture Trustee
hereunder and under the Security Deposit Agreement and the other
Collateral Security Documents by delivering written notice
thereof to the Owner Trustee, the Loan Participants, the Owner
Participant and the Lessee. The Required Loan Participants may
at any time remove the Indenture Trustee as Indenture Trustee
hereunder and under the other Collateral Documents without cause
by delivering written notice thereof to the Indenture Trustee,
the Owner Trustee, the Owner Participant, the Lessee and the Loan
Participants. Such resignation or removal shall take effect
immediately upon the appointment of a successor Indenture Trustee
pursuant to paragraph (b) of this Section 10.6.
(b) If the Indenture Trustee shall resign or be
removed as Indenture Trustee hereunder and under the other
Collateral Security Documents, a successor Indenture Trustee may
be appointed by the Administrative Agent by an instrument or
instruments in writing executed by the Administrative Agent and
filed with such successor Indenture Trustee, the Owner Trustee,
the Owner Participant, the Loan Participants and the Lessee. If
a successor Indenture Trustee shall not be appointed pursuant to
this Section 10.6(b) within 30 days after the resignation or
removal of the Indenture Trustee, any Loan Participant or such
resigning or removed Indenture Trustee may apply to any court of
competent jurisdiction to appoint a successor Indenture Trustee,
and such court may thereupon, after such notice, if any, as it
may deem proper, appoint a successor Indenture Trustee complying
with the provisions of Section 10.6(c) below. Any successor
Indenture Trustee so appointed by such court shall immediately
and without further action be superseded by a successor Indenture
Trustee appointed by the Required Loan Participants as
hereinabove provided in this Section 10.6(b). Any successor
trustee shall execute the Consent of the Power Purchaser.
(c) The Indenture Trustee shall be a bank or trust
company organized under the laws of the United States or any
State thereof having a combined capital and surplus of at least
$50,000,000, if there be such an institution willing, able and
legally qualified to perform the duties of the Indenture Trustee
hereunder and under the other Loan Documents.
(d) Any corporation into which the Indenture Trustee
may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or
consolidation to which the Indenture Trustee shall be a party, or
any corporation to which substantially all the corporate trust
business of the Indenture Trustee may be transferred, shall,
subject to such Person's qualification pursuant to the provisions
of paragraph (c) of this Section 10.6, be the Indenture Trustee
under this Indenture without further act.
ARTICLE 11
General
11.1 Discharge. When all of the Owner Trustee
Obligations shall have been paid in full, then this Indenture and
the lien and security interest created hereby shall be of no
further force and effect, the Owner Trustee shall be released
from the covenants, agreements and obligations of the Owner
Trustee contained in this Indenture, and the Indenture Trustee,
at the request and the expense of the Owner Trustee, shall
execute such documents as may be reasonably requested by the
Owner Trustee to evidence the discharge and satisfaction of this
Indenture and the release of the Owner Trustee from its
obligations hereunder. Otherwise, this Indenture shall remain
and continue in full force and effect.
11.2 Investment of Funds. The Indenture Trustee will
invest and reinvest the moneys deposited with or held by the
Indenture Trustee pursuant to the provisions of this Indenture in
Permitted Investments. The proceeds received from the sale or at
maturity of any Permitted Investment and any interest received on
any Permitted Investment shall be held and applied by the
Indenture Trustee in the same manner as moneys used to make such
Permitted Investment, and any Permitted Investment may be sold
(without regard to maturity date) by the Indenture Trustee
whenever necessary to make any payment, prepayment or
distribution required to be made by the Indenture Trustee under
this Indenture. Except as specifically provided above, any
moneys received by the Indenture Trustee hereunder need not be
segregated in any manner except to the extent required by law,
and such moneys may be deposited, under such general conditions
as may be prescribed by law, in the general banking department of
the Indenture Trustee, and the Indenture Trustee shall not be
liable for any interest thereon.
11.3 No Waiver. The exercise of the privileges
granted in this Indenture to perform the Owner Trustee's
obligations under the agreements which constitute the Indenture
Property shall in no event be considered or constitute a waiver
of any right which the Indenture Trustee may have at any time,
after an Indenture Event of Default shall have occurred and be
continuing, to declare the Owner Trustee Obligations to be
immediately due and payable. No delay or omission to exercise
any right, remedy or power accruing upon any default shall impair
any such right, remedy or power or shall be construed to be a
waiver of any such default or acquiescence therein; and every
such right, remedy and power may be exercised from time to time
and as often as may be deemed expedient.
11.4 Forcible Detainer. The Owner Trustee agrees for
itself and all Persons claiming by, through or under it, that
subsequent to foreclosure hereunder if the Owner Trustee shall
hold possession of the Indenture Property or any part thereof,
the Owner Trustee or the Persons so holding possession shall be
guilty of trespass; and any such tenant failing or refusing to
surrender possession upon demand shall be guilty of forcible
detainer and shall be liable to such purchasers for reasonable
rental on said premises, and shall be subject to eviction and
removal, forcible or otherwise, with or without process of law,
all damages which may be sustained by any such tenant as a result
thereof being hereby expressly waived.
11.5 Waiver of Stay or Extension. To the extent
permitted to be waived by law, the Owner Trustee shall not at any
time insist upon or plead or in any manner whatever claim the
benefit or advantage of any stay, extension or moratorium law now
or at any time hereafter in force in any locality where the
Indenture Property or any part thereof may or shall be situated,
nor shall the Owner Trustee claim any benefit or advantage from
any law now or hereafter in force providing for the valuation or
appraisement of the Indenture Property or any part thereof prior
to any sale thereof to be made pursuant to any provision of this
Indenture or to a decree of any court of competent jurisdiction,
nor after any such sale shall the Owner Trustee claim or exercise
any right conferred by any law now or at any time hereafter in
force to redeem the Indenture Property so sold or any part
thereof; and the Owner Trustee hereby expressly waives all
benefit or advantage of any such law or laws and the appraisement
of the Indenture Property or any part thereof, and covenants that
the Owner Trustee shall not hinder or delay the execution of any
power herein granted and delegated to the Indenture Trustee but
that the Owner Trustee shall permit the execution of every such
power as though no such law had been made.
11.6 Notices. All notices, demands, declarations,
consents, directions, approvals, instructions, requests and other
communications required or permitted by the terms hereof shall be
in writing and shall be given in compliance with Section 13.2 of
the Participation Agreement.
11.7 Severability. All rights, powers and remedies
provided herein may be exercised only to the extent that the
exercise thereof does not violate any Applicable Law, and are
intended to be limited to the extent necessary so that they will
not render this Indenture invalid, unenforceable or not entitled
to be recorded, registered or filed under any Applicable Law. In
the event any term or provision contained in this Indenture is in
conflict, or may hereafter be held to be in conflict, with the
laws of the State of New York or Maryland or of the United States
of America, this Indenture shall be affected only as to such
particular term or provision, and shall in all other respects
remain in full force and effect.
11.8 Application of Payments. In the event that any
part of the Loan Certificates cannot lawfully be secured hereby,
or in the event that the lien and security interest hereof cannot
be lawfully enforced to pay any part of the Owner Trustee
Obligations, or in the event that the lien or security interest
created by this Indenture shall be invalid or unenforceable as to
any part of the Owner Trustee Obligations, then all payments on
the Owner Trustee Obligations shall be deemed to have been first
applied to the complete payment and liquidation of that part of
the Owner Trustee Obligations which is not secured by this
Indenture and the unsecured portion of the Owner Trustee
Obligations shall be completely paid and liquidated prior to the
payment and liquidation of the remaining secured portion of the
Owner Trustee Obligations.
11.9 Other Instruments. This Indenture shall be
deemed to be and may be enforced from time to time as an
Assignment, Contract, Security Agreement, Financing Statement or
Lien on Machinery Situated on Realty, and from time to time as
any one or more thereof, and shall constitute a "fixture filing"
for purposes of Article 9 of the Maryland Uniform Commercial
Code. This Indenture secures indebtedness incurred or to be
incurred in connection with the construction of improvements on
land, including the cost of land.
11.10 GOVERNING LAW. THIS INDENTURE SHALL BE GOVERNED
BY, IN ALL RESPECTS INCLUDING VALIDITY, INTERPRETATION AND
EFFECT, AND SHALL BE ENFORCEABLE IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THE VALIDITY OR
PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR REMEDIES
HEREUNDER, ARE GOVERNED BY THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
11.11 Amendments. This Indenture may be amended,
supplemented or otherwise modified only by an instrument in
writing signed by the Owner Trustee and the Indenture Trustee
(and the Interest Hedging Counterparty, as to any amendment which
would adversely affect its interests), acting in accordance with
the provisions of subsection 13.1 of the Participation Agreement.
11.12 Successors and Assigns. All terms of this
Indenture shall bind each of the Owner Trustee and the Indenture
Trustee and their respective successors and assigns, and all
Persons claiming under or through the Owner Trustee or the
Indenture Trustee, as the case may be, or any such successor or
assign, and shall inure to the benefit of the Indenture Trustee
and the Owner Trustee, and their respective successors and
assigns.
11.13 Renewal, Etc. The Indenture Trustee may at any
time and from time to time renew or extend this Indenture, or
alter or modify the same in any way, or waive any of the terms,
covenants or conditions hereof in whole or in part and may
release any portion of the Indenture Property or any other
security, and grant such extensions and indulgences in relation
to the Owner Trustee Obligations as the Indenture Trustee may
determine, without the consent of any subordinated lienor or
encumbrancer and without any obligation to give notice of any
kind thereto and without in any manner affecting the priority of
the lien and security interest hereof on any part of the
Indenture Property.
11.14 Assignment of Rents. The Owner Trustee hereby
assigns to the Indenture Trustee the Rent (other than the portion
thereof constituting Excepted Payments) as further security for
the payment of the Owner Trustee Obligations, and the Owner
Trustee grants to the Indenture Trustee the right to enter the
Indenture Property for the purpose of collecting the same and to
let the Indenture Property or any part thereof, and to apply the
Rent on account of the Owner Trustee Obligations. The foregoing
assignment and grant is present and absolute and shall continue
in effect until the Owner Trustee Obligations are paid in full.
11.15 Certain Rights of Power Purchaser. Nothing in
this Indenture shall be deemed to limit the provisions of the
Consent of the Power Purchaser, which provisions are solely for
the benefit of the Power Purchaser and not the Lessee. Without
limiting the scope of the foregoing, the Indenture Trustee
agrees, for the exclusive benefit of the Power Purchaser and not
the Owner Trustee, that the exercise of remedies or any similar
action under this Indenture is subject to, and shall be conducted
in a manner consistent with, the Power Purchaser's rights under
(i) the Consent of the Power Purchaser and (ii) the Power
Purchase Agreement and the Transfer Agreement (to the extent such
rights under the Power Purchase Agreement and the Transfer
Agreement are not explicitly waived by the Power Purchaser in
accordance with the terms of the Consent of the Power Purchaser).
IN WITNESS WHEREOF, the Owner Trustee has caused this
Indenture to be executed by its duly authorized officer as of the
date first set forth above.
FLEET NATIONAL BANK,
not in its individual
capacity but solely as Owner
Trustee under the Trust Agreement
referred to above
By____________________________
Title:
Address for Notices:
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust
Administration
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Indenture
Trustee
By:________________________
Address for Notices:
The undersigned consents to the
execution of this Indenture by the
Owner Trustee.
PANDA-BRANDYWINE, L.P.,
as Lessee
By: Panda Brandywine Corporation,
as general partner
By:______________________________
Name:
Title:
EXHIBIT J to
Participation Agreement
FORM OF FACILITY LEASE
[See Exhibit 10.26 to this Registration Agreement]
EXHIBIT L to
Participation Agreement
FORM OF STEAM LEASE
[See Exhibit 10.27 to this Registration Agreement]
EXHIBIT M to
Participation Agreement
FORM OF AMENDED AND RESTATED
GENERAL PARTNER PLEDGE AGREEMENT
[See Exhibit 10.33 to this Registration Agreement]
EXHIBIT N to
Participation Agreement
FORM OF AMENDED AND RESTATED
LIMITED PARTNER PLEDGE AGREEMENT
[See Exhibit 10.34 to this Registration Agreement]
EXHIBIT O to
Participation Agreement
FORM OF AMENDED AND RESTATED SECURITY AGREEMENT
[See Exhibit 10.31 to this Registration Agreement]
EXHIBIT P to
Participation Agreement
FORM OF AMENDED AND RESTATED STEAM LESSEE SECURITY AGREEMENT
[See Exhibit 10.30 to this Registration Agreement]
EXHIBIT Q to
Participation Agreement
FORM OF AMENDED AND RESTATED STOCK PLEDGE AGREEMENT
[See Exhibit 10.35 to this Registration Agreement]
EXHIBIT S to
Participation Agreement
FORM OF AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT
[See Exhibit 10.28 to this Registration Agreement]
EXHIBIT T to
Participation Agreement
FORM OF AMENDED AND RESTATED
DEED OF TRUST AND SECURITY AGREEMENT
[See Exhibit 10.29 to this Registration Agreement]
EXHIBIT Y to
Participation Agreement
FORM OF AMENDED AND RESTATED SITE LEASE
[See Exhibit 10.72 to this Registration Agreement]
EXHIBIT Z to
Participation Agreement
FORM OF AMENDED AND RESTATED SITE SUBLEASE
[See Exhibit 10.73 to this Registration Agreement]
EXHIBIT AA to
Participation Agreement
FORM OF AMENDED AND RESTATED TRUST AGREEMENT
[See Exhibit 10.32 to this Registration Agreement]
EXHIBIT BB
to Participation Agreement
FORM OF REAFFIRMATION
This REAFFIRMATION OF CONSENT OF [ ]
(this "Reaffirmation"), dated as of December 18, 1996, is
executed by and among [ ], a
[ ] (the "Contract Party"),
Panda-Brandywine, L.P., a Delaware limited partnership (the
"Partnership"), General Electric Capital Corporation, a New York
corporation ("GE Capital" or the "Owner Participant"), Fleet
National Bank (formerly known as Shawmut Bank Connecticut,
National Association), a national banking association, in its
capacity as Security Agent (the "Security Agent" or the "Owner
Trustee"), and First Security Bank, National Association, a
national banking association, in its capacity as Indenture
Trustee under the Indenture (the "Indenture Trustee").
W I T N E S S E T H
WHEREAS, Contract Party and the Partnership have entered
into the [ ] (as amended,
supplemented or otherwise modified from time-to-time, the
"Assigned Agreement"), providing for, among other things, the [
];
WHEREAS, in order to finance the construction of the
Project, the Partnership entered into a Construction Loan
Agreement and Lease Commitment, dated as of March 30, 1995, with
GE Capital (as amended, supplemented or otherwise modified from
time-to-time, the "Construction Loan Agreement") pursuant to
which GE Capital (i) provided construction financing for the
Project and (ii) issued the Letters of Credit as collateral
security for certain obligations of the Partnership under the
Power Purchase Agreement;
WHEREAS, the Owner Trustee leased the Site from the
Partnership pursuant to the Site Lease and subleased the Site
back to the Partnership pursuant to the Site Sublease;
WHEREAS, as partial security for the repayment and
performance of all of its obligations to GE Capital and the Owner
Trustee, the Partnership assigned all of its right, title and
interest in, to and under, and granted a security interest in,
the Assigned Agreement to the Security Agent, for the benefit of
the Owner Trustee and GE Capital pursuant to (i) the Collateral
Assignment of the [ ] (the
"Assignment"), (ii) the Deed of Trust, and (iii) the Security
Agreement, dated as of March 30, 1995, between the Partnership
and the Security Agent, as amended, supplemented or otherwise
modified from time-to-time (together with the Assignment and the
Deed of Trust, the "Security Agreement");
WHEREAS, as a condition precedent to GE Capital's obligation
to enter into the Construction Loan Agreement, the Contract Party
consented to the assignment described in the foregoing paragraph
by executing and delivering the Consent of [
], dated as of [ ], between Contract Party, the
Partnership, GE Capital and the Security Agent, (the "Consent"
and, together with the Assigned Agreement, the "Documents");
WHEREAS, the construction of the Facility has been
substantially completed and the Date of Substantial Completion
has occurred;
WHEREAS, the Partnership has requested that the Owner
Participant cause the Owner Trustee to purchase the Facility from
the Partnership and lease the same to the Partnership as provided
in the Construction Loan Agreement;
WHEREAS, the Partnership and the Owner Trustee are entering
into the Facility Lease and the other Lease Documents pursuant to
which, among other things, the Owner Trustee will lease the
Facility to the Partnership;
WHEREAS, the Partnership and GE Capital are entering into
the Reimbursement Agreement to provide for the continued issuance
by GE Capital to the Power Purchaser of the Letters of Credit;
WHEREAS, the Owner Participant has elected to fund the
Facility Lease as a leveraged lease pursuant to Section 5.8 of
the Construction Loan Agreement and, in the connection therewith,
on the Lease Closing Date (i) each Loan Participant will
participate in the debt financing portion of the Owner Trustee's
payment of the Purchase Price for the Facility, (ii) the Owner
Participant will participate in the Owner Trustee, and (iii) the
Partnership has directed that the Purchase Price for the Facility
be paid to GE Capital as repayment for the loans made by it under
the Construction Loan Agreement;
WHEREAS, in order to set forth the rights and obligations of
the Owner Participant, the Owner Trustee, the Partnership, the
Administrative Agent, the Indenture Trustee and the Loan
Participants in connection with the foregoing transactions and to
describe and provide for the transactions contemplated thereby,
(i) the foregoing entities are entering into the Participation
Agreement, (ii) the Owner Trustee and the Indenture Trustee are
entering into the Indenture, (iii) certain of the Lessee Security
Documents are being amended and restated (including, without
limitation, the Security Deposit Agreement) and (iv) the
Construction Loan is being terminated;
WHEREAS, the obligations of the Partnership under the
Reimbursement Agreement to GE Capital and under the Site Sublease
and the Facility Lease to the Owner Trustee, including its
obligation to repay the LOC Reimbursement Obligations and to make
payments of Rent, are secured by a first assignment of and prior
perfected security interest in all rights and property of the
Partnership, including all of the revenues of the Partnership, to
the Security Agent, as agent for GE Capital and the Owner Trustee
pursuant to the terms and provisions of the Security Agreement;
WHEREAS, the obligations of the Owner Trustee under the
Indenture to the Indenture Trustee, the Administrative Agent and
the Loan Participants, including the Owner Trustee's obligations
to repay the Loan Certificates with interest thereon, are secured
by, a first assignment of and prior perfected security interest
in all rights and property of the Owner Trustee, including an
assignment by the Owner Trustee of all of its right, title and
interest under the Facility Lease, the Security Agreement, the
Pledge Agreements, the Deed of Trust, the Lessee Security
Agreements and the Collateral to the Indenture Trustee;
WHEREAS, the parties hereto desire that the Contract Party
acknowledge the transactions described above and confirm and
reaffirm the rights of the Indenture Trustee in respect of the
Documents;
NOW THEREFORE, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in
Annex A to the Participation Agreement (referenced above).
2. Contract Party hereby confirms and reaffirms the
provisions of the Consent in their entirety. Contract Party
hereby acknowledges and agrees that the Indenture Trustee shall
be deemed to be a "lender" as referred to in Section [ ] of
the Consent and that the Indenture Trustee shall, until the
Lender Obligations are fully satisfied, enjoy jointly with (or,
upon notice by the Indenture Trustee to the Contract Party that
it has foreclosed the Lien of the Indenture, to the exclusion of)
GE Capital and Security Agent, all rights of "GE Capital" and
"Security Agent" under the Consent for the benefit of the Loan
Participants.
3. Contract Party hereby represents and warrants that:
a. The execution, delivery and performance by
Contract Party of the Documents and this Reaffirmation have been
duly authorized by all necessary corporate action, and do not and
will not require any further consents or approvals which have not
been obtained, or violate any provision of law, regulation,
order, judgment, injunction or similar matters or breach any
agreement presently in effect with respect to or binding on
Contract Party;
b. The Documents and this Reaffirmation are legal,
valid and binding obligations of Contract Party enforceable
against Contract Party in accordance with their respective terms;
c. All government approvals necessary for the
execution, delivery and performance by Contract Party on its
obligations under the Documents have been obtained and are in
full force and effect;
d. As of the date hereof, the Documents are in full
force and effect and have not been amended, supplemented or
modified;
e. To the best of Contract Party's knowledge after
reasonable inquiry, the Partnership has fulfilled all of its
obligations under the Documents, and there are no breaches or
unsatisfied conditions presently existing (or which would exist
after the passage of time and/or giving of notice) that would
allow Contract Party to terminate the Assigned Agreement; and
f. All representations, warranties and other
statements made by Contract Party in the Documents, including,
without limitation, those set forth in Article XI of the Assigned
Agreement and Section [ ] of the Consent, were true and
correct as of the date when made and are true and correct as of
the date hereof.
4. Contract Party shall on or before the Lease Closing
Date cause its counsel to deliver to the Indenture Trustee and
the Administrative Agent a reliance letter (or other instrument),
in form and substance reasonably satisfactory to the Indenture
Trustee and the Administrative Agent, stating that the Indenture
Trustee and the Administrative Agent may rely on the opinion
previously provided by such counsel in respect of the Documents
to the same extent as if such opinion were originally addressed
and delivered to the Indenture Trustee and the Administrative
Agent.
5. In accordance with Section [ ] of the Consent,
all notices and other communications required or permitted
hereunder or under the Documents shall be in writing and shall be
sent by first class mail, by personal delivery or by a nationally
recognized courier service and shall be directed, if to the
Indenture Trustee, to First Security Bank, National Association,
at the following address: 79 South Main Street, Salt Lake City,
Utah 84111; Attn: Corporate Trust Services.
6. This Reaffirmation shall be binding upon and inure to
the benefit of the parties and their respective successors,
transferees and assigns. Contract Party agrees to confirm such
continuing obligation in writing upon the reasonable request of
the Indenture Trustee or any of its successors, transferees or
assigns. No termination, amendment, variation or waiver of any
provision of this Reaffirmation shall be effective unless in
writing and signed by Contract Party and the Indenture Trustee.
This Reaffirmation shall be governed by the laws of the State of
New York.
7. In the event of any conflict between the terms and
conditions of the Documents and those of this Reaffirmation, the
terms and conditions of this Reaffirmation shall prevail.
8. This Reaffirmation may be executed in one or more
duplicate counterparts, and when executed and delivered by all
the parties listed below, shall constitute a single binding
agreement.
IN WITNESS WHEREOF, the parties by their respective officers
thereunto duly authorized, have duly executed this Reaffirmation
as of the day and year first above-written.
[CONTRACT PARTY]
By:
Name:
Title:
PANDA-BRANDYWINE, L.P.,
a Delaware limited partnership
By: Panda Brandywine Corporation,
its General Partner
By:
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation
By:
Name:
Title:
FLEET NATIONAL BANK,
a national banking association, as Security Agent
By:
Name:
Title:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
a national banking association, as Indenture Trustee
By:
Name:
Title:
EXHIBIT 10.24.2
PANDA-BRANDYWINE, L.P.
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
Dated as of December 18, 1996
GENERAL ELECTRIC CAPITAL CORPORATION
(230 MW Natural Gas-Fired Qualifying Cogeneration Facility
located in Brandywine, Maryland)
TABLE OF CONTENTS
Page
Section 1. DEFINITIONS 2
1.1 Defined Terms 2
1.2 Other Definitional Provisions 2
Section 2. ISSUANCE AND REIMBURSEMENT PROVISIONS 2
2.1 Issuance of Letters of Credit 3
2.2 Reimbursement Obligations 4
2.3 Letter of Credit Fees 5
2.4 Payments 6
2.5 Mandatory Collateralization 6
2.6 Computation of Interest and Fees 6
2.7 Compensation for Increased Costs 7
2.8 Taxes 8
2.9 Evidence of Debt 9
Section 3. REPRESENTATIONS AND WARRANTIES 9
Section 4. CONDITIONS PRECEDENT TO ISSUANCE
OF LETTERS OF CREDIT 9
Section 5. COVENANTS 9
Section 6. REIMBURSEMENT EVENTS OF DEFAULT 9
Section 7. MISCELLANEOUS 10
7.1 Amendments and Waivers 10
7.2 Notices 10
7.3 No Waiver; Cumulative Remedies 11
7.4 Survival 11
7.5 Payment of Expenses 11
7.6 Successors and Assigns 11
7.7 Severability 12
7.8 Headings 12
7.9 Counterparts 12
7.10 GE Capital Sole Beneficiary 12
7.11 GOVERNING LAW 12
7.12 SUBMISSION TO JURISDICTION; WAIVERS 13
7.13 Limitation of Liability 13
7.14 Special Exculpation 14
7.15 Certain Rights of Power Purchaser 14
EXHIBITS
Exhibit A Form of Performance Letter of Credit
Exhibit B Form of O&M Letter of Credit
Exhibit C Form of Interconnection Letter of Credit
LETTER OF CREDIT REIMBURSEMENT AGREEMENT (this
"Agreement"), dated as of December 18, 1996 among PANDA-
BRANDYWINE, L.P., a Delaware limited partnership (the
"Partnership"), PANDA BRANDYWINE CORPORATION, a Delaware
corporation and the sole general partner of the Partnership (the
"General Partner"), and GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation ("GE Capital").
W I T N E S S E T H :
WHEREAS, capitalized terms used in these recitals shall
have the respective meanings assigned thereto in Section 1;
WHEREAS, the Partnership, the General Partner and GE
Capital entered into the Construction Loan Agreement and Lease
Commitment dated as of March 30, 1995 (the "Construction Loan
Agreement") pursuant to which GE Capital (i) provided
construction financing for the Project and (ii) agreed to issue
and deliver certain stand-by letters of credit during the Letter
of Credit Commitment Period for the account of the Partnership in
favor of the Power Purchaser to secure the following obligations
of the Partnership under the Power Purchase Agreement: (a) its
obligation to post development security (the "Development
Security Letter of Credit") as required by Section 4.1 of the
Power Purchase Agreement, (b) its obligation to post security in
respect of interconnection costs (the "Interconnection Letter of
Credit") as required by Section 4.2 of the Power Purchase
Agreement, (c) the Partnership's performance obligations under
the Power Purchase Agreement after the Commercial Operation Date
(the "Performance Letter of Credit") as required by Section 4.5
of the Power Purchase Agreement and (d) its obligation to provide
for operating and maintenance cost reserves pursuant to
Section 8.7 of the Power Purchase Agreement (the "O&M Letter of
Credit"; together with the Performance Letter of Credit and the
Interconnection Letter of Credit, the "PEPCO Letters of Credit"
or the "Letters of Credit");
WHEREAS, the construction of the Facility has been
substantially completed and the Date of Substantial Completion
has occurred;
WHEREAS, the Partnership has requested that the Owner
Participant cause the Owner Trustee to purchase the Facility from
the Partnership and lease the same to the Partnership as provided
in the Participation Agreement;
WHEREAS, the Partnership and the Owner Trustee are
entering into the Facility Lease and the other Lease Documents
pursuant to which, among other things, the Owner Trustee will
lease the Facility to the Partnership;
WHEREAS, the Owner Trustee is entering into the
Indenture pursuant to which, among other things, the Owner
Trustee is granting to Indenture Trustee a prior perfected
security interest in all of Owner Trustee's right, title and
interest in the Facility;
WHEREAS, the Development Security Letter of Credit
expired on or prior to December 10, 1996; and
WHEREAS, in connection with the foregoing transactions,
the Construction Loan Agreement is being terminated and the
Partnership and GE Capital are entering into this Reimbursement
Agreement to provide for the issuance by GE Capital to the Power
Purchaser of the PEPCO Letters of Credit and the reimbursement by
the Partnership of any drawings thereunder.
NOW, THEREFORE, in consideration of the premises and to
induce GE Capital to continue to issue and maintain outstanding
the Letters of Credit, the Partnership hereby agrees with GE
Capital as follows:
Section 1. DEFINITIONS
1.1 Defined Terms. Capitalized terms used in this
Agreement shall, unless otherwise defined herein, have the
respective meanings assigned thereto in Annex A to the
Participation Agreement.
1.2 Other Definitional Provisions. (a) All terms
defined in this Agreement shall have the defined meanings when
used in a Letter of Credit or in any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in any certificate or other
document made or delivered pursuant hereto, accounting terms not
defined in Annex A to the Participation Agreement, and accounting
terms partly defined in Annex A to the Participation Agreement,
to the extent not defined, shall have the respective meanings
given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and section, schedule and exhibit references
are to this Agreement unless otherwise specified.
(d) Any term defined by reference to an agreement,
instrument or other document shall have the meaning so assigned
to it whether or not such agreement, instrument or document is in
effect.
Section 2. ISSUANCE AND REIMBURSEMENT PROVISIONS
2.1 Issuance of Letters of Credit. (a) Subject to
the terms and conditions of this Agreement, GE Capital agrees to
issue and deliver (or continue to issue or to maintain
outstanding, as the case may be) certain stand-by letters of
credit during the Letter of Credit Commitment Period for the
account of the Partnership in favor of the Power Purchaser to
secure the Partnership's obligations under the Power Purchase
Agreement. The commitment of GE Capital to issue any Letter of
Credit, or increase the stated amount of any Letter of Credit,
shall terminate on the Letter of Credit Issuance Termination
Date.
(b) (i) The Performance Letter of Credit was
initially issued in the form of Exhibit A on the Commercial
Operation Date in the stated amount of $2,000,000 and shall
expire on the earlier to occur of (A) the next succeeding
December 31 and (B) the Letter of Credit Commitment Termination
Date; provided, however, that clause (A) notwithstanding, the
Performance Letter of Credit issued on the Commercial Operation
Date shall expire on December 31, 1997.
(ii) So long as no Reimbursement Default,
Reimbursement Event of Default, Lease Default or Lease Event of
Default shall have occurred and be continuing at such time, the
O&M Letter of Credit shall initially be issued substantially in
the form of Exhibit B hereto on December 31, 1998 in the stated
amount of $1,000,000 and shall expire on the earlier to occur of
(A) the next succeeding December 31 and (B) the Letter of Credit
Commitment Termination Date. So long as no Reimbursement
Default, Reimbursement Event of Default, Lease Default or Lease
Event of Default shall have occurred and be continuing at such
time, the O&M Letter of Credit shall be amended on December 31,
1999 to increase the stated amount to $2,000,000 and shall be
amended on December 31, 2000 to increase the stated amount to
$5,000,000 in accordance with the terms of the Power Purchase
Agreement.
(iii) The Interconnection Letter of Credit was
initially issued in the form of Exhibit C on the Initial Loan
Funding Date in the stated amount of $2,003,460 (which stated
amount was reduced to $330,000 on July 1, 1996) and shall expire
on the earlier to occur of (A) the date occurring 180 days after
the Commercial Operation Date and (B) June 30, 1998.
(c) On or prior to October 31 of each calendar year
after the occurrence of the Commercial Operation Date, the
Partnership shall deliver a certificate to GE Capital confirming
that the Partnership continues to have obligations to the LOC
Beneficiary and requesting GE Capital to renew the Letters of
Credit referred to in paragraphs (b)(i) and (ii) above. So long
as no Reimbursement Default, Reimbursement Event of Default,
Lease Default or Lease Event of Default shall have occurred and
be continuing, on or prior to the November 30 next succeeding the
delivery of the notice specified in the immediately preceding
sentence, GE Capital shall deliver to the LOC Beneficiary a
replacement Letter of Credit in a stated amount equal to the
amount requested and having an effective date on the next
succeeding January 1 and an expiration date the following
December 31 (or GE Capital, at its option, may amend the existing
Letter of Credit to extend its expiration date to the following
December 31). GE Capital's obligation to renew (or extend the
maturity date of Letters of Credit pursuant to this paragraph
(c)) shall expire on the Letter of Credit Commitment Termination
Date.
(d) The Letter of Credit Commitment shall automatically
decrease (on a dollar for dollar basis) with any corresponding
decrease in the stated amount of any Letter of Credit or with any
termination of any Letter of Credit.
(e) The aggregate stated amount of the Letters of Credit
at any time shall not exceed the lesser of (i) $7,330,000 and
(ii) the then applicable Letter of Credit Commitment.
2.2 Reimbursement Obligations. (a) If GE Capital
makes any payment to a LOC Beneficiary with respect to a Letter
of Credit, the Partnership shall reimburse GE Capital for the
amount thereof not later than the close of business on the
Business Day on which payment by GE Capital was made and shall
pay all charges and expenses relating to such payment and, if
such payment is not made when due, shall pay upon demand interest
at a rate equal to the Base Rate plus 2.50% on the amount of such
payment for the period commencing on and including the date of
any such payment and ending on but not including the date
reimbursement is received by GE Capital (after as well as before
judgment). The obligation of the Partnership to reimburse
GE Capital for Letter of Credit payments (such obligation being
herein called the "LOC Reimbursement Obligation") is absolute,
unconditional and irrevocable and shall be observed strictly in
accordance with the terms of this Agreement under all
circumstances whatsoever including, without limitation, the
following circumstances: (i) any lack of legality, validity,
enforceability or regularity of any Letter of Credit, this
Agreement or any other Transaction Document; (ii) any amendment,
waiver of or any consent to or departure from all or any of the
Transaction Documents; (iii) the existence of any claim, set-off,
defense, counterclaim or other right which the Partnership may
have at any time against GE Capital, the Owner Trustee, the
Security Agent, the Indenture Trustee, any LOC Beneficiary or any
other person, whether in connection with this Agreement, any
Letter of Credit, the Lease Documents, the Project Documents or
any unrelated transaction; (iv) any statement or any other
document presented under any Letter of Credit proving to be
forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever;
(v) payment by GE Capital under any Letter of Credit against
presentation of a sight draft or certificate that does not comply
with the terms of such Letter of Credit; (vi) the existence of
any dispute between the Partnership and any LOC Beneficiary or
any transferee thereof; (vii) any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of
Credit; and (viii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.
(b) Without limiting the effect of paragraph (a)
above, the Partnership agrees with GE Capital that:
(i) GE Capital is authorized to make payments
under each Letter of Credit upon the presentation of the
documents provided for therein and without regard to whether
the Partnership has failed to fulfill any of its obligations
with respect to any Project Document, Lease Document or
other Financing Document or any other default has occurred
thereunder.
(ii) GE Capital is authorized to take such action
on its behalf under the provisions of this Agreement and to
exercise such powers and perform such duties as are
specifically delegated to or required of it by the terms
hereof, together with such powers as are reasonably
incidental thereto.
(iii) GE Capital shall be entitled to rely upon any
certificate, notice, demand or other communication (whether
by cable, telegram, telecopy, telex or other written
communication) believed by it to be genuine and to have been
signed or sent by the proper Person or Persons (and no such
reliance or failure shall place it under any liability to
the Partnership or limit or otherwise affect the
Partnership's obligations under this Agreement).
(iv) Any action, inaction or omission on the part
of GE Capital under or in connection with any Letter of
Credit or the instruments or documents related thereto, if
in good faith and in conformity with such laws, regulations
or customs as GE Capital may reasonably deem to be
applicable, shall be binding upon the Partnership (and shall
not place GE Capital under any liability to the Partnership
or limit or otherwise affect the Partnership's obligations
under this Agreement).
(v) Notwithstanding any change or modification,
with or without the consent of the Partnership, in any
instruments or documents called for in any Letter of Credit,
including waiver of noncompliance of any such instruments or
documents with the terms of any Letter of Credit, this
Agreement shall be binding on the Partnership with regard to
each Letter of Credit and to any action taken by GE Capital
relative thereto.
(vi) The Partnership will indemnify and hold
harmless GE Capital from any loss or expense arising from or
in connection with any Letter of Credit (exclusive of any
loss or expense arising directly from the gross negligence
or wilful misconduct of GE Capital).
2.3 Letter of Credit Fees. (a) On the initial date
of issuance of each Letter of Credit hereunder, the Partnership
agrees to pay to GE Capital a letter of credit issuance fee in an
amount equal to one and three-quarters percent (1.75%) of the
stated amount thereof.
(b) So long as a Letter of Credit shall be
outstanding, the Partnership agrees to pay to GE Capital an
annual letter of credit fee in an amount equal to one and one-
half percent (1.50%) of the stated amount of each Letter of
Credit then outstanding. From the date hereof to and including
the Basic Term Commencement Date, such fee shall be payable in
arrears on the next-to-last Business Day of each March, June,
September and December, commencing with the first such date to
occur following the initial issuance date of a Letter of Credit
hereunder. From the Basic Term Commencement Date to and
including the end of the Basic Term, such fee shall be payable in
arrears on each Rent Payment Date (each such payment date, an
"LOC Fee Payment Date").
(c) During the Letter of Credit Commitment Period, the
Partnership shall pay to GE Capital an annual letter of credit
commitment fee in an amount equal to one-hundred and twenty-five
basis points (1.25%) multiplied by the amount by which the Letter
of Credit Commitment exceeds the aggregate stated amount of the
then outstanding Letter(s) of Credit. The letter of credit
commitment fee shall be payable on each LOC Fee Payment Date.
2.4 Payments. All payments (including prepayments) to
be made by the Partnership on account of principal, interest,
reimbursement obligations and fees shall be made without set-off
or counterclaim and shall be made not later than 12:00 Noon New
York City time on the date when due and shall be sent by wire
transfer to GE Capital's account no. 50-205-776 (GECC Depositary
Account) at Bankers Trust Company, New York, New York 10017, ABA
Number: 0210-0103-3 (Re: Panda Brandywine) in lawful money of
the United States of America and in immediately available funds;
provided that so long as the Security Deposit Agreement shall
remain in effect, all payments shall be made to the Security
Agent in accordance with the terms of the Security Deposit
Agreement, including without limitation, with regard to deposits
to the LOC Fee Account as described therein. Subject to the
Security Deposit Agreement, any payment received by GE Capital
after 12:00 Noon shall be deemed to have been paid on the next
succeeding Business Day. If any payment hereunder becomes due
and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be due
and payable at the then applicable rate during such extension.
2.5 Mandatory Collateralization. If an Event of Loss
shall occur, unless the Project is being repaired in accordance
with Section 9(c)(i) of the Facility Lease, on the earlier of (i)
the date occurring 90 days after the date of such Event of Loss
and (ii) the date on which insurance proceeds are received with
respect to such Event of Loss, the Partnership shall (A) prepay
in full the unpaid principal amount of the then outstanding LOC
Reimbursement Obligations, together with accrued interest thereon
to the date of prepayment, and all fees and other amounts owing
with respect thereto by the Partnership hereunder and (B) cash
collateralize all undrawn and outstanding Letters of Credit in
the manner provided in the introductory paragraph of Section 6.
2.6 Computation of Interest and Fees. (a) All fees
payable hereunder shall be calculated on the basis of a 360-day
year for the actual days elapsed. Interest shall be calculated
on the basis of a year of 365/366 days.
(b) It is the intention of the parties hereto to
conform strictly to applicable usury laws and, anything herein or
elsewhere to the contrary notwithstanding, interest on the LOC
Reimbursement Obligations shall be subject to the limitation that
the Partnership shall not be required to pay, and GE Capital
shall not be entitled to charge or receive, any interest to the
extent that such interest exceeds the maximum rate of interest
which GE Capital is permitted by any applicable law to contract
for, charge or receive and which would not give rise to any claim
or defense of usury. If, as a result of any circumstances
whatsoever, performance of any provision hereof shall, at the
time performance of such provision is due, violate applicable
usury law, then, ipso facto, the obligation to be performed shall
be reduced to the highest lawful rate, and if, from any such
circumstance, GE Capital shall ever receive interest or anything
which might be deemed interest under applicable law which would
exceed the highest lawful rate, the amount of such excess
interest shall be applied to the amounts owing on the LOC
Reimbursement Obligations and not to the payment of interest, or
if such excessive interest exceeds the unpaid balance of the LOC
Reimbursement Obligations, such excess shall be refunded to the
Partnership.
2.7 Compensation for Increased Costs. (a) In the
event that any Law or any change therein or in the interpretation
or application thereof by any Governmental Authority charged with
the administration or interpretation thereof, or compliance by GE
Capital with any request or directive (whether or not having the
force of Law) received from any central bank or monetary
authority or other Governmental Authority:
(i) does or shall subject GE Capital to any tax of any
kind whatsoever or change therein with respect to this
Agreement, or any Letter of Credit issued by GE Capital, or
the performance by GE Capital of its obligations hereunder,
or change the basis of taxation of payments to GE Capital of
principal, interest, or any other amount payable hereunder
(except for changes in the rate of tax on the overall net
income of GE Capital); or
(ii) does or shall impose, modify or hold
applicable or change any reserve (including, without
limitation, basic, supplemental, marginal and emergency
reserves), special deposit, compulsory loan or similar
requirement against assets held by, deposits or other
liabilities in or for the account of, advances or loans
by, or other credit extended by, or any other
acquisition of funds by (including, without limitation,
all eurocurrency funding by and all eurocurrency
liabilities), any office of GE Capital; or
(iii) does or shall impose on GE Capital any other
condition, or change therein;
and the result of any of the foregoing is to increase the cost to
GE Capital (as compared to the Initial Loan Funding Date) of
issuing or maintaining any Letter of Credit or to reduce any
amount receivable by GE Capital hereunder (as compared to the
Initial Loan Funding Date), then, in any such case, the
Partnership shall promptly pay GE Capital, upon its demand, such
additional amount which will compensate GE Capital for such
additional cost or reduced amount receivable.
(b) In the event that the adoption of any Law, rule,
regulation or guideline regarding capital adequacy, or any change
therein or in the interpretation or application thereof by any
Governmental Authority charged with the administration or
interpretation thereof or compliance by GE Capital with any
request or directive regarding capital adequacy (whether or not
having the force of Law) from any central bank or Governmental
Authority including, without limitation, the issuance of any
final rule, regulation or guideline, does or shall have the
effect of reducing the rate of return on GE Capital's capital as
a consequence of its obligations hereunder to a level below that
which GE Capital could have achieved but for such adoption,
change or compliance (taking into consideration GE Capital's
policies with respect to capital adequacy) by any material
amount, then from time to time, upon demand by GE Capital, the
Partnership shall pay to GE Capital such additional amount or
amounts as will compensate GE Capital for such reduction.
(c) If circumstances arise that would entitle GE
Capital to claim any additional amounts pursuant to this
subsection 2.7, GE Capital shall promptly notify the Partnership
thereof and consult in good faith with the Partnership with a
view toward avoiding such circumstance to the extent reasonably
practicable; provided that the failure of GE Capital to so notify
or consult the Partnership shall not act as a waiver of the right
of GE Capital to receive additional amounts pursuant to this
subsection 2.7 when GE Capital provides the required notice to
the Partnership. A certificate as to any additional amounts
payable pursuant to this subsection 2.7 submitted by GE Capital
to the Partnership shall be conclusive absent manifest error.
The provisions of this subsection 2.7 shall accrue to the benefit
of each assignee of GE Capital and shall survive the termination
of this Agreement, payment of the LOC Reimbursement Obligations
and all other amounts payable hereunder.
2.8 Taxes. All payments made by the Partnership under
this Agreement shall be made free and clear of, and without
reduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any
Governmental Authority (all such taxes, levies, imposts,
deductions, charges or withholdings being hereinafter called
"Withholding Taxes"). If any Withholding Taxes are required to
be withheld from any amounts payable to GE Capital hereunder, the
amounts so payable to GE Capital shall be increased to the extent
necessary to yield to GE Capital (after payment of all
Withholding Taxes) interest or any such other amounts payable
hereunder at the rates and in the amounts specified in this
Agreement. Notwithstanding the preceding two sentences, the
Partnership will have no duty to compensate GE Capital for
amounts that the Partnership is required to withhold under
Section 1441 or 1442 of the Code. Whenever any Withholding Taxes
are payable by the Partnership, as promptly as possible
thereafter, the Partnership shall send to GE Capital a certified
copy of an original official receipt received by the Partnership
showing payment thereof. If the Partnership fails to pay any
Withholding Taxes when due to the appropriate taxing authority or
fails to remit to GE Capital the required receipts or other
required documentary evidence, the Partnership shall indemnify GE
Capital for (i) any incremental taxes, interest or penalties that
may become payable by GE Capital as a result of any such failure
and (ii) any expenses incurred by GE Capital arising from or with
respect to such Withholding Taxes. This indemnification shall be
made within 30 days from the date GE Capital makes written demand
therefor. The agreements in this subsection 2.8 shall accrue to
the benefit of each LOC Participant under subsection 7.6 and
shall survive the termination of this Agreement and the payment
of the LOC Reimbursement Obligations and all other amounts
payable hereunder.
2.9 Evidence of Debt. GE Capital shall maintain, in
accordance with its usual practice, an account or accounts
evidencing the indebtedness of the Partnership resulting from
each drawing under any Letter of Credit and the amounts of
principal and interest payable and paid from time to time in
respect thereof hereunder. In any legal action or proceeding in
respect of this Agreement or any Letter of Credit, the entries
made in such account or accounts shall, in the absence of
manifest error, be conclusive evidence of the existence and
amounts of the obligations of the Partnership therein recorded.
Section 3. REPRESENTATIONS AND WARRANTIES
In order to induce GE Capital to enter into this
Agreement, each of the Partnership and the General Partner shall
make (or be deemed to have made) the representations and
warranties set forth in Section 3 of the Participation Agreement.
Section 4. CONDITIONS PRECEDENT TO ISSUANCE
OF LETTERS OF CREDIT
The obligation of GE Capital to execute and deliver
this Agreement is subject to the fulfillment to the satisfaction
in form and substance of, or waiver by, GE Capital, of each of
the conditions precedent set forth in Section 5.1 of the
Participation Agreement.
Section 5. COVENANTS
So long as any Letter of Credit or LOC Reimbursement
Obligation remains outstanding, each of the Partnership and the
General Partner hereby agrees, for the benefit of GE Capital and
the LOC Participants, to comply with the covenants set forth in
Sections 6 and 7 of the Participation Agreement.
Section 6. REIMBURSEMENT EVENTS OF DEFAULT
If any of the Reimbursement Events of Default listed
below shall occur and be continuing, (i) GE Capital or the
Administrative Agent may demand that the Partnership immediately
pay to GE Capital an amount equal to the full amount available to
be drawn under the Letter(s) of Credit whereupon the Partnership
shall immediately make such payment to GE Capital which shall
hold such payment as collateral security for the LOC
Reimbursement Obligations of the Partnership; and/or (ii) the
Security Agent or the Indenture Trustee may foreclose on any or
all of the Collateral in accordance with the Collateral Security
Agreements; and/or (iii) GE Capital, the Security Agent or the
Indenture Trustee may proceed to enforce all other remedies
available to them under Applicable Law. Notwithstanding the
foregoing, if a Reimbursement Event of Default referred to in
paragraph (f) or (g) of Section 14 of the Facility Lease shall
occur with respect to the Partnership, the General Partner, the
Limited Partner, Panda or Holdings, automatically and without
notice the actions described in clause (i) above shall be deemed
to have occurred. The Partnership consents to the provisions of
Section 9.13(b) of the Security Deposit Agreement.
Such Reimbursement Events of Default include the
following:
(a) Any LOC Reimbursement Obligation shall not be paid
when due and shall remain unpaid for five or more days; or
(b) a Lease Event of Default shall have occurred.
Section 7. MISCELLANEOUS
7.1 Amendments and Waivers. This Agreement may not be
changed, waived, discharged or terminated unless such change,
waiver, discharge or termination is in writing signed by the
Partnership, GE Capital, the General Partner and, for so long as
the Indenture shall not have been discharged, the Administrative
Agent and, to the extent required by Subsection 8.9(b) of the
Power Purchase Agreement, consented to by the Power Purchaser.
7.2 Notices. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in
writing, by telecopier or by telex and, unless otherwise
expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or three days after being
deposited in the mail, first class postage prepaid, or, in the
case of a nationally recognized overnight courier service, one
Business Day after delivery to such courier service, or in the
case of transmission by telecopier, when confirmation of receipt
is obtained, or in the case of telex notice, when sent,
answerback received, addressed as follows, or to such other
address as may be hereafter notified by the respective parties
hereto:
The Partnership: Panda-Brandywine, L.P.
4100 Spring Valley
Suite 1001
Dallas, Texas 75244
Telephone: (972) 980-7159
Telecopy: (972) 980-6815
Attention: Chairman,
with a copy to the General Counsel
GE Capital: General Electric Capital Corporation
1600 Summer Street
Stamford, Connecticut 06905
Telecopy: (203) 357-6970
Attention: Vice President,
Energy Project Operations.
7.3 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of GE Capital
(or, pursuant to Section 9.13(b) of the Security Deposit
Agreement, Administrative Agent or Indenture Trustee), any right,
remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of
any rights, remedies, powers and privileges provided by law.
7.4 Survival. All representations and warranties made
hereunder, incorporated by reference herein and in any document,
certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of
this Agreement and the Letters of Credit.
7.5 Payment of Expenses. (a) The Partnership shall
pay all reasonable out-of-pocket expenses incurred by GE Capital
with respect to the negotiation, preparation, execution and
delivery of this Agreement and the Letters of Credit, any and all
transactions contemplated hereby or thereby and the preparation
of any document reasonably required hereunder or thereunder,
including (without limiting the generality of the foregoing) all
reasonable fees and expenses of Simpson Thacher & Bartlett,
counsel for GE Capital, recording and filing fees and taxes,
revenue and tax stamp expenses, and reasonable attorneys' fees
and disbursements, and will reimburse to GE Capital all expenses
paid by it of the nature described in this subsection 7.5 which
have been or may be incurred by GE Capital, with respect to any
and all of the transactions contemplated herein.
(b) The Partnership shall pay all reasonable out-of-
pocket costs and expenses in connection with the preservation of
rights under, and enforcement of, this Agreement or any Letter of
Credit or in connection with any restructuring or rescheduling of
the LOC Reimbursement Obligations (including, without limitation,
the reasonable fees and disbursements of counsel).
7.6 Successors and Assigns. (a) This Agreement shall
be binding upon and inure to the benefit of the Partnership,
GE Capital and their respective successors and assigns (including
any LOC Participant, the Administrative Agent and the Indenture
Trustee), except that the Partnership may not assign or transfer
any of its rights or obligations under this Agreement without the
prior written consent of GE Capital. Any assignment or transfer
made by the Partnership without the prior written consent of GE
Capital shall be void and of no effect.
(b) The Partnership acknowledges that GE Capital may,
in the ordinary course of its business and in accordance with
Applicable Law, at any time grant risk participations in all or
any portion of the Letters of Credit or of its right, title and
interest therein or in this Agreement and the Collateral Security
Documents (collectively, "Participations") to one or more banks
or other financial institutions or other entities ("LOC
Participants"); provided that no such Participation shall, at the
time of such Participation, subject the Partnership to any
increased costs or taxes for which the Partnership has agreed to
indemnify GE Capital hereunder.
(c) The Partnership authorizes GE Capital to disclose
to any prospective LOC Participant all financial information in
GE Capital's possession concerning the Partnership, the General
Partner or the Project which has been delivered to GE Capital by
or on behalf of the Partnership pursuant to this Agreement or any
other Transaction Document or which has been delivered to
GE Capital by or on behalf of the Partnership in connection with
GE Capital's credit evaluation of the Partnership and the Project
prior to or after entering into this Agreement; provided,
however, that prior to furnishing any information marked in
writing as being confidential information, GE Capital shall
either (i) obtain Panda's or the Partnership's consent to the
furnishing of such information or (ii) require the prospective
LOC Participant to execute a reasonably satisfactory
confidentiality agreement with respect to such confidential
information in favor of the Partnership.
7.7 Severability. Any provision hereof which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof and without affecting the validity or enforceability of
any provision in any other jurisdiction.
7.8 Headings. The headings of the various sections
and paragraphs of this Agreement are for convenience of reference
only, do not constitute a part hereof and shall not affect the
meaning or construction of any provision hereof.
7.9 Counterparts. This Agreement may be executed by
one or more of the parties hereto on any number of separate
counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
7.10 GE Capital Sole Beneficiary. All conditions of
the obligations of GE Capital to issue the Letter(s) of Credit
are imposed solely and exclusively for the benefit of GE Capital
and its assigns (including each LOC Participant, the
Administrative Agent and the Indenture Trustee) and no other
Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to
assume that GE Capital will refuse to issue Letters of Credit in
the absence of strict compliance with any or all thereof and no
Person shall, under any circumstances, be deemed to be a
beneficiary of such conditions, any or all of which may be freely
waived in whole or in part by GE Capital at any time if in its
sole discretion it deems it advisable to do so. GE Capital is
obligated hereunder solely to issue Letters of Credit if and to
the extent required by this Agreement.
7.11 GOVERNING LAW. THIS AGREEMENT AND THE LETTER(S)
OF CREDIT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS AGREEMENT AND THE LETTER(S) OF CREDIT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
7.12 SUBMISSION TO JURISDICTION; WAIVERS. (a) EACH
OF THE PARTNERSHIP AND THE GENERAL PARTNER HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING
MAY BE BROUGHT IN SUCH COURTS, AND WAIVES ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION
OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES
NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH
ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY
THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY
SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID TO IT
AT ITS ADDRESS SPECIFIED IN SUBSECTION 7.2 AND, IF
APPLICABLE, TO GE CAPITAL AT ITS ADDRESS SET FORTH IN
SUBSECTION 7.2 HERETO OR AT SUCH OTHER ADDRESS OF WHICH
GE CAPITAL OR THE PARTNERSHIP OR THE GENERAL PARTNER, IF
APPLICABLE, SHALL HAVE BEEN NOTIFIED PURSUANT HERETO; AND
(iv) AGREES THAT NOTHING HEREIN OR THEREIN SHALL
AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN
ANY OTHER JURISDICTION.
(b) EACH OF THE PARTNERSHIP, AND THE GENERAL PARTNER AND
GE CAPITAL HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO OR ARISING OUT
OF THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
7.13 Limitation of Liability. There shall be full
recourse to the Partnership and all of its assets for the
liabilities of the Partnership under this Agreement, but in no
event shall any Partner, Affiliate of any Partner, or any
officer, director or employee of the Partnership, any Partner or
their Affiliates or any holder of any equity interest in any
Partner be personally liable or obligated for such liabilities
and LOC Reimbursement Obligations of the Partnership, except as
may be specifically provided herein or in any other Transaction
Document to which such Partner is a party or in the event of
fraudulent actions, knowing misrepresentations, gross negligence
or willful misconduct by the Partnership, any Partner or any of
their Affiliates in connection with the financing contemplated by
this Agreement. Subject to the foregoing limitation on
liability, GE Capital, Security Agent or Indenture Trustee may
sue or commence any suit, action or proceeding against any
Partner or any Affiliate thereof in order to obtain jurisdiction
over the Partnership in order to enforce its rights and remedies
hereunder. Nothing herein contained shall limit or be construed
to limit the liabilities and obligations of any Partner or any
Affiliate thereof in accordance with the terms of any other
Transaction Document creating such liabilities and obligations to
which such Partner or Affiliate is a party.
7.14 Special Exculpation. No claim may be made by the
Partnership, the General Partner or any other Person claiming by
or through the Partnership or the General Partner against GE
Capital or any of its successors, assigns (including any LOC
Participant), Affiliates, directors, officers, employees,
attorneys or agents for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement, or any act, omission
or event occurring in connection therewith; and the Partnership
hereby waives, releases and agrees not to sue upon any claim for
any such damages, whether or not accrued and whether or not known
or suspected to exist in its favor.
7.15 Certain Rights of Power Purchaser. Nothing in
this Agreement shall be deemed to limit the provisions of the
Consent of the Power Purchaser, which provisions are solely for
the benefit of the Power Purchaser and not the Partnership.
Without limiting the scope of the foregoing, the parties hereto
agree, for the exclusive benefit of the Power Purchaser and not
the Partnership, that the exercise of remedies or any similar
action under this Agreement is subject to, and shall be conducted
in a manner consistent with, the Power Purchaser's rights under
(i) the Consent of the Power Purchaser and (ii) the Power
Purchase Agreement and the Transfer Agreement (to the extent such
rights under the Power Purchase Agreement and the Transfer
Agreement are not explicitly waived by the Power Purchaser in
accordance with the terms of the Consent of the Power Purchaser).
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation, its
General Partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
PANDA BRANDYWINE CORPORATION, as the
General Partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Michael J. Tzougrakis
Name: Michael J. Tzougrakis
Title: Manager of Operations
Exhibit A to
Reimbursement Agreement
Irrevocable Letter of Credit No. PAN-003
BENEFICIARY POTOMAC ELECTRIC POWER COMPANY
APPLICANT; PANDA BRANDYWINE, L.P.
October 30, 1996
Potomac Electric Power Company
1900 Pennsylvania Avenue, NW
Washington, DC 20068
Attention: Manager, Supply Side Resources
1. General Electric Capital Corporation (the "Issuer")
hereby establishes, at the request and for the account of
Panda-Brandywine, L.P. a Delaware limited partnership
(the "Partnership"), this irrevocable Letter of Credit in
favor of Potomac Electric Power Company, (hereinafter
referred to as the "Beneficiary"), available to be drawn
in an amount not to exceed USD $2,000,000 (Two million US
dollars) (the "Stated amount"). This Letter of Credit is
provided pursuant to the provisions of Section 4.5 of the
Power Purchase Agreement, dated as of August 9, 1991, as
amended from time to time, between the Beneficiary and the
Partnership, (the "Power Purchase Armament,"). Subject to
paragraph 3 below, this Letter of Credit is available to
the Beneficiary from the date hereof through December 31,
1997 (the "Expiration Date").
2. We shall make funds available to you under this
Letter of Credit against your sight draft drawn on
the Issuer in the form of Annex 1 hereto, accompanied
by a certificate in the form of Annex 2 hereto signed
by an authorized officer of the Beneficiary and
presentation of the originally executed copy of this
Letter of Credit for examination and retention by the
Issuer. Such draft and certificate shall be dated
the date of presentation and shall be presented at
our office located at 1600 Summer Street, Stamford,
Connecticut 06927, Attention Vice President, Energy
Project Operations. A presentation under this Letter
of Credit may be made only on a day on which such
office is open for business (a "Business Day"). If
we receive your draft and certificate, and the
originally executed copy of this Letter of Credit, at
such office on a Business Day, we will honor the
same, notwithstanding any challenges to such payment
made by any person for any reason (including, but not
limited to, claims of illegality, unenforceability or
fraud in connection with the transaction), by making
payment in accordance with your payment instructions
on the next Business Day following presentment of
such draft and certificate. Payment hereunder shall
be made by transferring the amount thereof, in
accordance with the terms of this Letter of Credit in
immediately available funds to the account specified
in your sight draft. Beneficiary shall not be
required to give any notice to the Partnership and
the prior approval of the Partnership shall not be
required before payment is made under this Letter of
Credit.
3. Unless extended pursuant to amendment to this
Letter of Credit duly executed by us, this Letter of
Credit shall expire upon the earliest to occur of (i)
our receipt of a notice in the form of Annex 3 hereto
signed by an authorized officer of the Beneficiary
surrendering to us this Letter of Credit for
cancellation, (ii) our honoring of a draft presented
hereunder and (iii) our close of business at our
aforesaid office on the Expiration Date. This Letter
of Credit shall be surrendered to us by you upon
expiration.
4. Only you or your successors and assigns permitted
by paragraph 8 may make a drawing under this Letter
of Credit. Upon payment to you of any amount
demanded hereunder, we shall be fully discharged of
our obligation under this Letter of Credit, and we
shall not thereafter be obligated to make any further
payment under this Letter of Credit.
5. By paying you an amount demanded in accordance
with this Letter of Credit, we make no representation
as to the correctness of any representation or
statement made by you in connection with this Letter
of Credit, including but not limited to any made by
you in any certificate in the form of Annex 2 hereto.
6. This Letter of Credit is subject to the Uniform
Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce
Publication No, 500, as amended from time to time (the
"Uniform Customs"). This Letter of Credit shall be
deemed to be a contract made under the law of the
State of New York, and shall, as to matters not
governed by the Uniform Customs, be governed and
construed in accordance with the law of said State.
7. Communications with respect to this Letter of
Credit shall be in writing and shall be addressed to
us at the following address:
General Electric Capital Corporation
1600 Summer Street
Stamford, CT 06927
Attention: Vice President, Energy Project Operations
8. This Letter of Credit is transferable in its
entirety (but not in part) to any transferee who has
succeeded you as successor in interest to receipt of
the benefit of the obligations of the Partnership to
provide Performance Security (as defined in the Power
Purchase Agreement) under the Power Purchase
Agreement (including, but not limited to, your rights
to draw upon such Performance Security under the
Power Purchase Agreement) and such transferred Letter
of Credit may be successively so transferred.
Without limiting the scope of the foregoing sentence,
the Issuer acknowledges and agrees that the
Beneficiary will so transfer this Letter of Credit to
Constellation Energy Corporation effective upon the
merger of the Beneficiary with Constellation Energy
Corporation. If you present to us this Letter of
Credit accompanied by the transfer attached hereto as
Annex 4, appropriately completed, then this Letter of
Credit shall be transferred to the transferee so
designated in Annex 4. This Letter of Credit is not
transferable or assignable in any other manner or to
any other person.
This Letter of Credit sets forth in full our
undertaking, and such undertaking shall not in any
way be modified, amended, amplified or limited by
reference to any document, instrument or agreement
referred to herein, except for Annex 1, Annex 2,
Annex 3, and Annex 4 hereto and to the notices
referred to herein. Any such reference shall not be
deemed to incorporate herein by reference any
document, instrument or agreement except as set forth
above.
This Letter of Credit may not be amended except in
writing signed by the Beneficiary and the Issuer.
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ James A. Parke
Exhibit B to
Reimbursement Agreement
[Form of O&M Letter of Credit]
[To be issued on the date which is the
later of (i) December 31, 1998 and
(ii) the second anniversary of the
Commercial Operation Date]
[Note: This amount to be increased to
$2,000,000 after one year and to
$5,000,000 after two years]
Irrevocable Letter of Credit No. ___________
BENEFICIARY: POTOMAC ELECTRIC POWER COMPANY
APPLICANT: PANDA-BRANDYWINE, L.P.
April __, 1995
Potomac Electric Power Company
1900 Pennsylvania Avenue, NW
Washington, DC 20068
Attention: Manager, Supply Side Resources
1. General Electric Capital Corporation (the "Issuer") hereby
establishes, at the request and for the account of Panda-
Brandywine L.P., a Delaware limited partnership (the
"Partnership"), this irrevocable Letter of Credit in favor of
Potomac Electric Power Company, (hereinafter referred to as the
"Beneficiary"), available to be drawn in an amount not to exceed
USD $1,000,000 (One million US dollars) (the "Stated Amount").
This Letter of Credit is provided pursuant to the provisions of
Section 8.7 of the Power Purchase Agreement, dated as of August
9, 1991, as amended from time to time, between the Beneficiary
and the Partnership, (the "Power Purchase Agreement"). Subject
to paragraph 3 below, this Letter of Credit is available to the
Beneficiary from the date hereof through [Insert first anniversary
date of issuance] (the "Expiration Date").
2. We shall make funds available to you from time to time under
this Letter of Credit against your sight draft(s) drawn on the
Issuer in the form of Annex 1 hereto, accompanied by a
certificate in the form of Annex 2 hereto signed by an authorized
officer of the Beneficiary and presentation of the originally
executed copy of this Letter of Credit for examination by the
Issuer, provided that the Beneficiary shall retain such original
executed copy of the Letter of Credit. Such draft and
certificate shall be dated the date of presentation and shall be
presented at our office located at 1600 Summer Street, Stamford,
Connecticut 06927-1560, Attention: Vice President, Energy Project
Operations. A presentation under this Letter of Credit may be
made only on a day on which such office is open for business (a
"Business Day"). If we receive your draft and certificate, and
the originally executed copy of this Letter of Credit, at such
office on a Business Day, we will honor the same, notwithstanding
any challenges to such payment made by any person for any reason
(including, but not limited to, claims of illegality,
unenforceability or fraud in connection with the transaction) by
making payment in accordance with your payment instructions on
the next Business Day following presentment of such draft and
certificate. Payment hereunder shall be made by transferring the
amount thereof, in accordance with the terms of this Letter of
Credit, in immediately available funds to the account specified
in your sight draft. Beneficiary shall not be required to give
any notice to the Partnership and the prior approval of the
Partnership shall not be required before payment is made under
this Letter of Credit.
3. Unless extended pursuant to amendment to this Letter of
Credit duly executed by us, this Letter of Credit shall expire
upon the earliest to occur of (i) our receipt of a notice in the
form of Annex 3 hereto signed by an authorized officer of the
Beneficiary surrendering to us this Letter of Credit for
cancellation and (ii) our close of business at our aforesaid
office on the Expiration Date. This Letter of Credit shall be
surrendered to us by you upon expiration.
4. Only you or your successors and assigns permitted by
paragraph 8 may make a drawing under this Letter of Credit.
Multiple drawings may be made under this Letter of Credit,
provided, however, that each drawing hereunder shall pro tanto
reduce the amount available to be drawn hereunder by the amount
of such drawing, subject to reinstatement (as provided herein),
and provided that no demand for payment hereunder shall exceed
the Maximum Available Amount in effect at such time. This is a
revolving Letter of Credit and following any payment hereunder,
the amount available to be drawn hereunder shall be reinstated as
of such day on which the Beneficiary shall have received from the
Issuer a completed Notice of Reinstatement substantially in the
form of Annex 5 attached hereto, appropriately completed, such
reinstatement to be to the Maximum Available Amount indicated in
such Notice of Reinstatement. A Notice of Reinstatement may be
delivered either personally or by facsimile transmission to the
Beneficiary, at __________ (or such other number as shall be
notified by the Beneficiary to the Issuer) and (b) such
transmission is promptly followed by a hard copy sent by
overnight courier. As used in this Letter of Credit, the term
"Maximum Available Amount" shall mean the Stated Amount prior to
the initial drawing hereunder, and thereafter shall mean the
amount specified as the "Maximum Available Amount" in the most
recent Notice of Reinstatement delivered to the Beneficiary by
the Issuer; provided, that the Maximum Available Amount shall at
no time exceed the Stated Amount of this Letter of Credit then in
effect. Each reduction and increase in the Maximum Available
Amount as a result of a drawing hereunder or a Notice of
Reinstatement shall be deemed to be, and shall be, an amendment
to this Letter of Credit in respect of the amount available to be
drawn hereunder. Upon payment to you of any amount demanded
hereunder, we shall be fully discharged of our obligation under
this Letter of Credit with respect to such demand, and we shall
not thereafter be obligated to make any further payments under
this Letter of Credit in respect of such demand to you or any
other person.
5. By paying you an amount demanded in accordance with this
Letter of Credit, we make no representation as to the correctness
of any representation or statement made by you in connection with
this Letter of Credit, including but not limited to any made by
you in any certificate in the form of Annex 2 hereto.
6. This Letter of Credit is subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, as amended from time to
time (the "Uniform Customs"). This Letter of Credit shall be
deemed to be a contract made under the law of the State of New
York, and shall, as to matters not governed by the Uniform
Customs, be governed and construed in accordance with the law of
said State.
7. Communications with respect to this Letter of Credit shall be
in writing and shall be addressed to us at the following address:
General Electric Capital Corporation
1600 Summer Street
Stamford, CT 06927-1560
Attn: Vice President, Energy Project Operations
8. This Letter of Credit is transferable in its entirety (but
not in part) to any transferee who has succeeded you as successor
in interest to receipt of the benefit of the obligations of the
Partnership to provide the Maintenance Reserve (as defined in the
Power Purchase Agreement) under the Power Purchase Agreement
(including, but not limited to, your rights to draw upon the
Maintenance Reserve under the Power Purchase Agreement) and such
transferred Letter of Credit may be successively so transferred.
If you present to us this Letter of Credit accompanied by the
transfer form attached hereto as Annex 4, appropriately
completed, then this Letter of Credit shall be transferred to the
transferee so designated in Annex 4. This Letter of Credit is
not transferable or assignable in any other manner or to any
other person.
This Letter of Credit sets forth in full our undertaking,
and such undertaking shall not in any way be modified, amended,
amplified or limited by reference to any document, instrument or
agreement referred to herein, except for Annex 1, Annex 2, Annex
3 and Annex 4 hereto and the notices referred to herein. Any
such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement except as set
forth above.
This Letter of Credit may not be amended except in writing
signed by the Beneficiary and the Issuer.
GENERAL ELECTRIC CAPITAL CORPORATION
By: _______________________________
Title:
Exhibit C to
Reimbursement Agreement
July 1, 1996
Mr. Peter E. Schaub
Potomac Electric Company
1900 Pennsylvania Avenue, NW
Washington, DC 20068
Re: Letter of Credit No. PAN002
Dear Mr. Schaub:
This is the General Electric Capital Corporation amendment to
Letter of Credit No. PAN002 held by Potomac Electric Power
Company (the "Letter of Credit") in the amount of $330,000.00.
Per your officers certificate, we are reducing the amount of the
Letter of Credit No. PAN 002 by $1,483,574.08 from $1,813,574.08
to $330,000.00.
This Letter of Credit will remain in full effect until the
earlier to occur of (a) the date occurring 180 days after Actual
Commercial Operation Date, (as defined in the Power Purchase
Agreement) or (b) June 30, 1998 (the "Expiration Date").
All other terms and conditions of the Letter of Credit remain
unchanged.
Sincerely,
/s/ James A. Parke
James A. Parke
Senior Vice President
JAP:jef
Enclosure
Irrevocable Letter of Credit No. PAN 002
BENEFICIARY: POTOMAC ELECTRIC POWER COMPANY
APPLICANT: PANDA-BRANDYWINE, L.P.
April 10, 1995
Potomac Electric Power Company
1900 Pennsylvania Avenue, NW
Washington, DC 20068
Attention: Manager, Supply Side Resources
1. General Electric Capital Corporation (the "Issuer") hereby
establishes, at the request and for the account of Panda-
Brandywine, L.P., a Delaware limited partnership (the
"Partnership"), this irrevocable Letter of Credit in favor of
Potomac Electric Power Company (hereinafter referred to as the
"Beneficiary") available to be drawn in a single drawing in an
amount not to exceed USD $2,003,460 (two million three thousand
four hundred sixty US dollars) (the "Stated Amount"). This
Letter of Credit is provided pursuant to the provision of Section
4.2 of the Power Purchase Agreement, dated as of August 9, 1991,
as amended from time to time, between the Beneficiary and the
Partnership (the "Power Purchase Agreement"). Subject to
paragraph 3 below, this Letter of Credit is available to the
Beneficiary from the date hereof through the earlier to occur of
(a) the date occurring 180 days after the Actual Commercial
Operation Date, (as defined in the Power Purchase Agreement) or
(b) June 30, 1998 (the "Expiration Date").
2. We shall make funds available to you under this Letter of
Credit against your sight draft drawn on the Issuer in the form
of Annex 2 hereto, accompanied by a certificate in the form of
Annex 3 hereto signed by an authorized officer of the Beneficiary
and presentation of the originally executed copy of this Letter
of Credit for examination and retention by the Issuer. Such
draft and certificate shall be dated the date of the presentation
and shall be presented at our office located at 1600 Summer
Street, Stamford, Connecticut 06927-1560, Attention: Vice
President, Energy Project Operation. A presentation under this
Letter of Credit may be made only on a day on which such office
is open for business (a "Business Day"). If we receive your
draft and certificate, and the originally executed copy of the
Letter of Credit, at such office on a Business Day, we will honor
the same, notwithstanding any challenges to such payments made by
any other person for any reason (including, but not limited to,
claims of illegality, uneforceability or fraud in connection with
payment instructions on the next Business Day following
presentation of such draft and certificate. Payment hereunder
shall be made by transferring the amount thereof, in accordance
with the terms of this Letter of Credit, in immediately available
funds to the account specified in your sight draft. Beneficiary
shall not be required to give any notice tot he Partnership and
the prior approval of the Partnership shall not be required
before payment is made under this Letter of Credit.
3. This Letter of Credit shall expire upon the earliest to occur
of (i) our receipt of a notice in the form of Annex 4 hereto
signed by an authorized officer of the Beneficiary surrendering
to us this Letter of Credit for cancellation, (ii) our honoring
of a draft presented hereunder and (iii) our close of business at
our aforesaid office on the Expiration Date. This Letter of
Credit shall be surrendered to us by you upon expiration.
4. Only you or your successors and assigns permitted by
paragraph 8 may make a drawing under this Letter of Credit. If
the Stated Amount shall be partially reduced as a result of a
reduction pursuant to a certificate of the Beneficiary in the
form of Annex 1 hereto, the Issuer shall have the right to either
(a) endorse on this Letter of Credit the amount of such reduction
or (b) issue tot he Beneficiary, in substitution for this Letter
of Credit, a substitute irrevocable letter of credit dated the
date of such substitution, for an amount equal to the amount to
which the Stated Amount shall have been so reduced but otherwise
having terms identical to this Letter of Credit. The Beneficiary
shall surrender this Letter of Credit to the Issuer
simultaneously in exchange for such substitute irrevocable letter
of credit. Upon payment to you of any amount demanded hereunder,
we shall be fully discharged of our obligation under this Letter
of Credit, and we shall not thereafter by obligated to make any
further payments under this Letter of Credit. Notwithstanding
the foregoing, under no circumstances shall the Stated Amount be
reduced below USD $330,000 (three hundred thirty thousand US
dollars).
5. By paying you an amount demanded in accordance with this
Letter of Credit, we make no representation as to the correctness
of any representation or statement made by you in connection with
this Letter of Credit, including but not limited to any made by
you in any certificate in the form of Annex 3 hereto.
6. This Letter of Credit is subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, as amended from time to
time (the "Uniform Customs"). This Letter of Credit shall be
deemed to be a contract made under the law of the State of New
York, and shall, as to matters not governed by the Uniform
Customs, be governed and construed in accordance with the law of
said State.
7. Communications with respect to this Letter of Credit shall be
in writing and shall be addressed to us at the following address:
General Electric Capital Corporation
1600 Summer Street
Stamford, CT 06927-1560
Attn: Vice President, Energy Project Operations
8. This Letter of Credit is transferable in its entirety (but
not in part) to any transferee who has succeeded you as successor
in interest to receipt of the benefit of the obligations of the
Partnership to provide the Interconnection Security (as defined
in the Power Purchase Agreement) under the Power Purchase
Agreement (including, but not limited to, your rights to draw
upon such Interconnection Security under the Power Purchase
Agreement) and such transferred Letter of Credit may be
successively so transferred. If you present to us this Letter of
Credit accompanied by the transfer form attached hereto as Annex
5, appropriately completed, then this Letter of Credit shall be
transferred to the transferee so designated in Annex 5. This
Letter of Credit is not transferable or assignable in any other
manner or to any other person.
This Letter of Credit sets forth in full our undertaking,
and such undertaking shall not in any way be modified, amended,
amplified or limited by reference to any document, instrument or
agreement referred to herein, except for Annex 1, Annex 2, Annex
3, Annex 4 and Annex 5 hereto and the notices referred to herein.
Any such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement except as set
forth above.
This Letter of Credit may not be amended except in writing
signed by the Beneficiary and the Issuer.
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ James A. Parke
Title:
As of December 18, 1996
EQUITY LOAN FACILITY
LETTER AGREEMENT
Panda Brandywine Corporation
4100 Spring Valley
Suite 1001
Dallas, Texas 75244
Panda Energy Corporation (a Delaware corporation)
4100 Spring Valley
Suite 1001
Dallas, Texas 75244
Ladies and Gentlemen:
For purposes hereof, reference is hereby made to:
(1) the Construction Loan Agreement and Lease
Commitment, dated as of March 30, 1995 (the "Construction
Loan Agreement"), among Panda-Brandywine, L.P., a limited
partnership organized under the laws of Delaware (the
"Partnership"), Panda Brandywine Corporation, a Delaware
corporation, and the sole general partner of the Partnership
(the "General Partner") and General Electric Capital
Corporation, a New York corporation, in its individual
capacity ("GE Capital"), pursuant to which GE Capital
agreed, subject to the terms and conditions set forth
therein, to make loans to the Partnership, issue letters of
credit and make available to you a commitment to issue
equity loans (an "Equity Loan Facility"); and
(2) the Participation Agreement, dated as of December
18, 1996 (the "Participation Agreement"), among the
Partnership, the General Partner, GE Capital in its
individual capacity and as owner participant (in such
capacity, the "Owner Participant"), Fleet National Bank
(formerly known as Shawmut Bank Connecticut, National
Association), a national banking association, not in its
individual capacity but solely as owner trustee (in such
capacity, the "Owner Trustee") under the Trust Agreement and
as security agent under the Security Deposit Agreement,
First Security Bank, National Association, a national
banking association, not in its individual capacity but
solely as indenture trustee (in such capacity, the
"Indenture Trustee") under the Indenture, Credit Suisse, a
bank organized and existing under the laws of Switzerland,
acting by and through its New York branch ("Credit Suisse"),
as administrative agent (in such capacity, the
"Administrative Agent") for the entities listed on Schedule
I thereto as the "Loan Participants". Capitalized terms
used herein and not otherwise defined shall have the
meanings assigned to them in Annex A to the Participation
Agreement.
The parties hereto are entering into this Letter
Agreement to maintain the commitment of GE Capital to make
available the Equity Loan Facility after the Construction Loan
Agreement is terminated, subject to the terms and conditions
herein. The obligation of GE Capital to make available the
Equity Loan Facility shall be subject to the fulfillment to the
satisfaction of, or waiver by, GE Capital of the following
conditions precedent on or prior to the Date of Final Completion:
1. the occurrence of the Date of Final Completion and
the delivery by the Partnership to GE Capital of the Final
Completion Certificate.
2. the execution and delivery of (A) a loan agreement
in form and substance satisfactory to GE Capital, reflecting
the terms set forth in Exhibit A and having substantially
the same terms and provisions contained in the Participation
Agreement and the Construction Loan Agreement, including
without limitation, with respect to representations,
conditions precedent, covenants and defaults, (B)
subordinated pledge agreements executed by each borrower
under the Equity Loan Facility in form and substance
satisfactory to GE Capital and having substantially the same
terms as the Pledge Agreements (together with appropriate
subordination documentation in form and substance
satisfactory to the Administrative Agent, together with such
other documents and opinions as the Administrative Agent
shall reasonably request) and (C) amendments to the
Transaction Documents reasonably required by GE Capital to
reflect the making of the Equity Loans; provided, however,
that each such agreement referred to in clauses (A) and (B)
and any such amendment referred to in clause (C) shall
require the prior written consent of the Administrative
Agent, which consent shall not be unreasonably withheld or
delayed.
3. the execution and delivery by the Limited Partner
and/or the General Partner, as the case may be, of a note,
in form and substance satisfactory to GE Capital and the
Administrative Agent, in an amount equal to the Equity Loan
Commitment.
4. the delivery to GE Capital of updated Operating
Projections for the Partnership which shall be satisfactory
in form and substance to GE Capital and shall show, among
other things, an Operating Cash Flow Ratio (for this
purpose, taking into account (A) required debt service on
the Equity Loans, assuming the drawing in full of all
amounts available under the Equity Loan Facility on the Date
of Final Completion and the amortization thereof in
accordance with Exhibit A, (B) required deposits into the
Rent Reserve Account and the Maintenance Reserve Account and
(C) the effect of the capacity payment clawback under the
Power Purchase Agreement and, if the actual amount thereof
has not yet been determined, assuming the maximum clawback)
of at least 1.35 to 1.0 for each Quarterly Measurement
Period to occur during the Basic Term and an average
Operating Cash Flow Ratio of not less than 1.40 to 1.0 for
the Basic Term; provided that to the extent the foregoing
restrictions would prevent the Equity Loan Facility from
being made available in the full amount of the Equity Loan
Commitment, the Partners shall nevertheless have the right
to establish the Equity Loan Facility in a lesser amount
meeting the foregoing restrictions.
Without limiting the provisions of Section 8 of the
Participation Agreement, the Limited Partner and the General
Partner, jointly and severally agree (a) to indemnify and hold
harmless GE Capital and the Administrative Agent and Indenture
Trustee and its respective officers, directors, employees,
affiliates, advisors, agents and controlling persons (each, an
"indemnified person") from and against any and all losses, claims
damages and liabilities to which any such indemnified person may
become subject arising out of or in connection with this Letter
Agreement, the Equity Loan Facility, the use of the proceeds
thereof, or any related transaction or any claim, litigation,
investigation or proceeding relating to any of the foregoing,
regardless of whether any indemnified person is a party thereto,
and to reimburse each indemnified person upon demand for any
legal or other expenses incurred in connection with investigating
or defending any of the foregoing, provided that the foregoing
indemnity will not, as to any indemnified person, apply to
losses, claims, damages, liabilities or related expenses to the
extent they arise from the willful misconduct or gross negligence
of such indemnified person, and (b) to reimburse GE Capital and
its affiliates upon presentation of reasonable documentation for
all reasonable out-of-pocket expenses (including reasonable fees,
charges and disbursements of counsel) incurred in connection with
the Equity Loan Facility and any related documentation (including
this Letter Agreement and the definitive financing
documentation). No indemnified person shall be liable for any
indirect or consequential damages in connection with its
activities related to the Equity Loan Facility.
This Letter Agreement shall not be assignable by the
Limited Partner nor the General Partner without the prior written
consent of GE Capital and the Administrative Agent (and any
purported assignment without such consent shall be null and
void), is intended to be solely for the benefit of the parties
hereto and is not intended to confer any benefits upon, or create
any rights in favor of, any person other than the parties hereto
(and, to the extent specified herein, the Administrative Agent on
behalf of the Holders). This Letter Agreement may not be amended
or waived except by an instrument in writing signed by the
parties hereto and with the prior written consent of the
Administrative Agent. This Letter Agreement may be executed in
any number of counterparts, each of which shall be an original,
and all of which, when taken together, shall constitute one
agreement. Delivery of an executed signature page of this Letter
Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
This Letter Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
Very truly yours,
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Michael J. Tzougrakis
Name: Michael J. Tzougrakis
Title: Manager of Operations
Accepted and agreed to
as of the date first
written above by:
PANDA BRANDYWINE CORPORATION
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
PANDA ENERGY CORPORATION
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
Exhibit A to
Equity Loan Facility
Letter Agreement
Equity Loan Terms
Capitalized terms used herein are defined in Annex A to
the Participation Agreement.
Borrower: The Limited Partner and/or the General Partner.
Availability: The Equity Loan Facility will be available
for up to four years from the Date of Final
Completion in amounts not less than $4.0 million
per draw with a limit of [four] draws.
Equity Loan
Commitment: Up to a maximum of $17,511,355.
Description;
Conditions
to Draws: Upon the Date of Final Completion, GE
Capital (or assignees/designees) would make
available the Equity Loan Commitment of up to
$17,511,355 in accordance with Equity Loan
Facility Letter Agreement, dated as of December
18, 1996 (the "Letter Agreement"). Funding of
each draw under the Equity Loan Facility would be
subject to the satisfaction of each of the
applicable conditions precedent set forth in
subsection 5.1 of the Participation Agreement and
the conditions described in the Letter Agreement.
In addition, each draw will be subject to the
maintenance of an Operating Cash Flow Ratio
(taking into account (i) required deposits into
the Rent Reserve Account and the Maintenance
Reserve Account and (ii) the effect of the
capacity payment clawback under the Power Purchase
Agreement and, if the actual amount thereof has
not yet been determined, assuming the maximum
clawback) of at least 1.35 to 1.0 for each
Quarterly Measurement Period to occur during the
Basic Term and an average Operating Cash Flow
Ratio of not less than 1.40 to 1.0 for the Basic
Term, assuming the amortization schedule set forth
in Appendix 1 hereto.
Interest Rate: The interest rate would be fixed at 515
basis points over the applicable treasury rate in
effect at the time of Equity Loan funding.
Amortization: As per Appendix 1.
Maturity Date: 15 years from the Lease Commencement Date.
Security: The Equity Loan Facility shall be secured
solely by a pledge by the General Partner and the
Limited Partner of their partnership interests in
the Partnership in each case subordinated to the
interests of the Owner Trustee and Indenture
Trustee therein.
Documentation: The Equity Loan Facility will be documented by (a)
a new loan agreement with the Partners having
substantially the same terms and provisions as
contained in the Construction Loan Agreement,
including, without limitation, with respect to
representations, conditions precedent, covenants
and defaults and (b) new subordinated pledge
agreements having substantially the same
provisions as the Pledge Agreements, in each case
satisfactory in form and substance to the
Administrative Agent, together with such other
documentation as the Administrative Agent shall
reasonably request. The parties will also make
any appropriate modifications to the Transaction
Documents as shall be reasonably required by GE
Capital, provided, however, that no such
modifications shall be made without the prior
written consent of the Administrative Agent, which
consent shall not be unreasonably withheld or
delayed.
Appendix 1 to Exhibit A
Equity Loan Amortization Schedule
Year Equity Loan Principal Repayment
(Starting from the Date (expressed as an annual percentage
Date of Final Completion) of total Equity Loans)
1*/ 4.75%
2 4.84%
3 5.11%
4 5.38%
5 8.37%
6 8.89%
7 8.89%
8 7.33%
9 6.09%
10 4.87%
11 4.97%
12 4.89%
13 5.06%
14 6.53%
15 14.03%
_______
Total 100.00%
*/ In the event an Equity Loan is made in years two, three or
four, the amortization payments which were required for the
preceding years (e.g. if an Equity Loan is made in year
three, those payments which were required in years one and
two) shall be evenly distributed over the three years
immediately succeeding the year in which such Equity Loan is
made.
EXHIBIT 10.25
BILL OF SALE AND SEVERANCE AGREEMENT
between
PANDA-BRANDYWINE, L.P.,
as Seller
and
FLEET NATIONAL BANK,
as Owner Trustee,
as Buyer,
______________________
Dated
December 30, 1996
______________________
THIS BILL OF SALE AND SEVERANCE AGREEMENT, dated
December 30, 1996, between PANDA-BRANDYWINE, L.P., a Delaware
limited partnership ("Seller"), and FLEET NATIONAL BANK (formerly
known as Shawmut Bank Connecticut, National Association), not in
its individual capacity but solely as Owner Trustee under the
Trust Agreement referred to below (the "Owner Trustee" or
"Buyer").
RECITALS:
A. Seller, Panda Brandywine Corporation and General
Electric Capital Corporation ("GE Capital") entered into the
Construction Loan Agreement and Lease Commitment, dated as of
March 30, 1995 (as amended, supplemented or otherwise modified
from time to time, the "Construction Loan Agreement"), pursuant
to which GE Capital provided, among other things, construction
financing for the Facility (as defined below).
B. GE Capital, as owner participant (in such capacity,
the "Owner Participant") and the Owner Trustee entered into the
Amended and Restated Trust Agreement, dated as of December 18,
1996 (as amended, supplemented or otherwise modified from time to
time, the "Trust Agreement") pursuant to which the Owner Trustee
agrees to act as Owner Trustee for the benefit of the Owner
Participant and agrees to hold all right, title and interest in
and to the Trust Estate (as defined therein) for the use and
benefit of the Owner Participant.
C. The Owner Participant has elected to fund the
Facility Lease with non-recourse indebtedness as a leveraged
lease pursuant to Section 5.8 of the Construction Loan Agreement
and, in connection therewith, on the date hereof pursuant to the
Participation Agreement (the "Participation Agreement") dated as
of December 18, 1996 among the Seller, the General Partner, GE
Capital in its individual capacity and as Owner Participant,
Fleet National Bank in its capacity as Owner Trustee and Security
Agent, First Security Bank, National Association not in its
individual capacity but solely as Indenture Trustee, Credit
Suisse, in its capacity as Administrative Agent, and the other
entities listed on Schedule I thereto, as Loan Participants (the
"Loan Participants") (i) each Loan Participant will participate
in the debt financing of a portion of the Owner Trustee's payment
of the Purchase Price of the Facility, (ii) the Owner Participant
will participate in the Owner Trustee's payment of the Purchase
Price by making an equity investment in the Owner Trustee, (iii)
the Seller has directed that the Purchase Price for the Facility
be paid to GE Capital as repayment for the loans made by it under
the Construction Loan Agreement and (iv) the Construction Loan
Agreement is being terminated.
D. Seller desires to sell, and Buyer desires to
purchase, the Assets (as defined below) and certain other assets,
for the Purchase Price.
E. Seller desires to lease the Facility from the Buyer
pursuant to the Facility Lease and the other Lease Documents.
F. Seller and Buyer desire to set forth their
agreement and understanding as to the character of the Assets and
the relationship of the Assets to the land on which the Assets
are located.
All capitalized terms used herein and not otherwise
defined have the meanings ascribed to them in Annex A to the
Participation Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises, of
the Purchase Price paid by Buyer to Seller, and of other good and
valuable consideration, receipt of which is hereby acknowledged,
the parties hereto agree as follows:
SECTION 1. SALE OF ASSETS
Seller does hereby BARGAIN, SELL, ASSIGN AND TRANSFER
unto Buyer (for the benefit of the Owner Participant), its
successors and assigns, all its estate, right, title and interest
in and to (A) the property described under the heading
"Description of Facility" in Schedule I hereto (such property
being hereinafter called the "Facility"), which on the date
hereof is located on the site described in Schedule II hereto
(the "Site") and the easements described in Schedule III hereto
(collectively, the "Easements"), which Site is owned and which
Easements are held by Seller, leased to the Buyer pursuant to an
Amended and Restated Site Lease and subleased back to the Seller
pursuant to an Amended and Restated Site Sublease, each dated as
of December 18, 1996, a memorandum of each of which is recorded
in the Registry of Deeds, (B) all other assets incorporated in
the Facility in the performance of the covenants under Section 7
of the Facility Lease, and (C) all assets included or
incorporated in the Facility title to which shall vest in Buyer
pursuant to the Facility Lease;
TO HAVE AND TO HOLD the same unto Buyer (for the
benefit of the Owner Participant), its successors and assigns,
FOREVER. All assets described in the preceding sentence are
referred to herein as the "Assets".
SECTION 2. WARRANTY OF TITLE
Seller hereby (A) warrants that (1) it is the true and
lawful owner of the Facility, (2) it has the legal right to sell
the Facility, (3) it has good and marketable title to the
Facility, (4) its title to the Facility is free and clear of all
Liens of every kind whatsoever, except Permitted Liens, and (5)
good, marketable and indefeasible title to the Facility is hereby
conveyed to the Buyer free and clear of all Liens except
Permitted Liens and (B) binds itself, its successors and assigns,
to warrant and forever defend such title unto Buyer, its
successors and assigns, against every Person whomsoever claiming
the same or any part thereof by, through or under Seller.
SECTION 3. SEVERANCE OF THE ASSETS
FROM THE SITE
The parties hereto understand and agree that it is the
intention of the parties that the Assets and each portion
thereof, whether now or hereafter at any time located on the Site
or the Easements be severed, and the parties understand and agree
that the Assets and each portion thereof, whether now or
hereafter at any time located on the Site or the Easements, are
severed, and shall be and remain severed, from the Site and the
Easements even if physically attached, are and shall remain
personal property, and are not fixtures or an accession to the
Site and the Easements, the title thereto being separate and
distinct from the title to the Site and the Easements, and shall
be treated as personal property with respect to the rights of all
Persons whatsoever and for all purposes of the Participation
Agreement, the Facility Lease, the Site Lease, the Site Sublease,
the Security Agreement, the Indenture and the Deed of Trust and
Security Agreement, and title to the Facility shall not, except
as specifically contemplated by the Transaction Documents, be
affected in any way by any instrument dealing with the Site or
any part thereof.
SECTION 4. ASSIGNMENT OF WARRANTIES
Seller hereby bargains, sells, assigns, transfers and
sets over to and for the benefit of Buyer all right, title and
interest of Seller in, to and under any and all contracts to
which Seller is a party relating to the design, manufacture,
construction, installation or testing of the Facility (the
"Facility Contracts") including, without limitation, all claims
for damages arising under the representations, indemnities,
warranties, guarantees and agreements made to or for the benefit
of Seller by the parties (other than Seller) to the Facility
Contracts (other than Seller, the "Facility Contractors"), and
the right to compel performance of the terms of the Facility
Contracts, provided that Seller may exercise its rights
thereunder so long as no Reimbursement Event of Default or Lease
Event of Default shall have occurred and be continuing; and
provided, further that (a) Seller shall at all times remain
liable to the Facility Contractors under the respective Facility
Contracts to perform all the duties and obligations of Seller
thereunder as if this assignment had not been executed, (b) Buyer
shall not be liable for any of the obligations or duties of
Seller under the Facility Contracts, nor shall this assignment
give rise to any duties or obligations whatsoever on the part of
Buyer owing to any of the Facility Contractors and (c) Buyer
shall not be obligated to make any payment or to make any inquiry
as to the sufficiency of any payment received by any Facility
Contractor or to present or file any claim or to take any other
action to collect or enforce any claim under any Facility
Contract. Seller agrees to preserve and protect Buyer's rights
under any warranty, covenant or representation made by each
Facility Contractor with respect to the Facility, and Seller
warrants that Seller will not take any action which will impair
such rights of Buyer, and covenants to act solely in compliance
with any restrictions and requirements prerequisite to the
continued existence, enforcement, validity and maintenance of any
warranty, covenant or representation made by the Facility
Contractors in connection with the Facility Contractors.
SECTION 5. GOVERNING LAW
THIS BILL OF SALE AND SEVERANCE AGREEMENT SHALL BE
GOVERNED BY AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF MARYLAND.
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Bill of Sale and Severance Agreement as of the
day and year first above written.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION,
its General Partner
By: /s/ William C. Nordlund
Title: Senior Vice President
FLEET NATIONAL BANK, not in its
individual capacity, but solely
as Owner Trustee
By: /s/ William C. Nordlund
Title: Senior Vice President
Schedule I
to the
Bill of Sale
DESCRIPTION OF FACILITY
The Brandywine facility is a 230 megawatt natural gas-
fired qualifying cogeneration facility and a distilled water
facility to be located in Brandywine, Maryland. This facility
will include, but not be limited to, the following equipment:
Steam Generator
Air Pollution Control Equipment
Turbine Generator
Condenser
Cooling Tower
Distributed Control System
Instrumentation
Switchyard
Fuel Handling
Fans
Feedwater Pumps
Circulation Pumps
Fire Protection
Demineralizer
Piping and Valves
Electrical and Wiring
Concrete
Insulation
Buildings
Distilled Water Facility (as described on Schedule
I-1 hereto)
Schedule I cont.
to the
Bill of Sale
DISTILLED WATER FACILITY DESCRIPTION
The Distilled Water facility is located in Prince
George's County, Maryland. This facility consists of, but is not
limited to, the following:
Part I
Piperacks and miscellaneous supports (including grating)
Packaged distilled water system
Distilled water storage tank - 220,000 gallons
Truck filling pumps
Sump pumps
12" steam supply from Facility
Piping for Distilled Water Facility systems: circ. water, drains,
pump suction and discharge, tank, sumps, fire protection,
acid, potable water, including safety shower and eye wash
station
Electrical equipment including: MCCs, transformer, circuit
breakers, panels and local control stations
Raceway including conduit, cable tray and fittings
Wire, cable and terminations
Lighting, grounding and miscellaneous systems
Instrumentation
Insulation
Part II
Structural excavation for foundations
Backfill and placement for foundations
Paving required including subbase and base course
Chain link fence
Drainage pipe
Catch basins
Landscaping - trees and shrubs
Foundations and slabs for building, tank, equipment, sumps,
piperack and loading/unloading area
Painting
Pre-engineered building - 40'x50'x26' (including doors, HVAC and
fire protection)
Schedule II
to the
Bill of Sale
DESCRIPTION OF SITE
Description of the
Property of PANDA-BRANDYWINE, L.P.
(formerly owned by JERRY W. JASPER)
Brandywine (11th) District
Prince George's County, Maryland
Being a parcel of land hereinafter described, said parcel of
land having been acquired by Jerry W. Jasper, surviving joint
tenant of Jones D. Jasper, by deed dated May 8, 1973 and recorded
among the Land Records of Prince George's County, Maryland in
Liber 4222 at Folio 97, said parcel of land being described as
follows;
Beginning for the said parcel of land at a point on the
northerly Right of Way line of Cedarville Road (30 feet Right of
Way), and the westerly Right of Way line of the Penn-Central
Railroad, running thence with the said northerly Right of Way
line of Cedarville Road;
1. South 86 degrees 33' 38" West, 249.52 feet to a point, thence;
2. North 05 degrees 03' 51" East 1, 1,482.70 feet to a point at a
common corner of the lands of Jerry W. Jasper, Part of Parcel 'A'
Montgomery Ward Brandywine Subdivision as recorded in Plat Book
V.U. 157 at Plat No. 41, thence running with the division line
between said Jasper and Part of Parcel 'A';
3. North 51 degrees 57' 01" West, 380.94 feet to an iron pipe found at
the common corner of Jerry W. Jasper, Part of Parcel 'A', and the
lands of Brandywine Auto Sales, Inc., Liber 4530 at Folio 728,
thence running with the division line between said Jasper and
Brandywine Auto Sales, Inc.;
4. North 14 degrees 49' 35" East, 806.46 feet to an iron pipe found at
the common corner of Jerry W. Jasper, Brandywine Auto Sales,
Inc., and the lands of Dee Vee Associates Joint Venture, Liber
6970 at Folio 539, thence running with the division line between
said Jasper and Dee Vee Associates Joint Venture;
5. South 38 degrees 00' 02" East, 1,074.65 feet to a stone found at
the common corner of Jerry W. Jasper, Dee Vee Associates Joint
Venture, and Lot 32, 'TOWSEN TERRACE" Subdivision, as recorded in
Plat Book 3 as Plat No. 75, thence running with the division line
between said Jasper and Lot 32 and Lot 31, "TOWSEN TERRACE";
6. South 10 degrees 52' 16th West, 1,187.98 feet to a point on the
said westerly Right of Way line of the Penn-Central Railroad,
thence running with said line;
7. South 26 degrees 00' 11" West, 514.98 feet to the point of
beginning, containing 1,125,013 square feet or 25.8268 acres of
land more or less.
Schedule II
to the
Bill of Sale
DESCRIPTION OF SITE
Description of the
Property of PANDA-BRANDYWINE, L.P.
(formerly owned by W. GORDON GEMENY)
Brandywine (11th) District
Prince George's County, Maryland
Being a parcel of land hereinafter described, said parcel of
land having been acquired by W. Gordon Gemeny by deed dated June
26, 1991 and recorded among the Land Records of Prince George's
County, Maryland in Liber 7988 at Folio 424, said parcel of land
being described as follows;
Beginning for the said parcel of land at a point on the
westerly Right of Way Line of the Penn-Central Railroad, said
point lying on and distant North 26 degree 00' 11" East, 514.98 feet
from the northerly Right of Way line of Cedarville Road, thence
running with the division line between Lots 31 and 32 of the
"TOWSEN TERRACE" Subdivision and the property of Jerry W. Jasper,
Liber 4222 at Folio 97;
1. North 10 degrees 52' 16" East, 1,187.98 feet to a stone fount at
the common corner of Lot 32, Towsen Terrace, the Property of
Jerry W. Jasper, and the property of Dee Vee Associates Joint
Venture, Liber 6970 at Folio 539, thence running with the
division between said Dee Vee Associates Joint Venture and the
northerly line of Lot 32, Towsen Terrace;
2. South 74 degrees 05' 26" East, 314.99 feet to a point on the
westerly Right of Way line of the Penn-Central Railroad, thence
running with said line;
3. South 26 degrees 00' 11" West, 1,202.00 feet to the point of
beginning, containing 186,377 square feet or 4.2786 acres of
land.
Schedule II
to the
Bill of Sale
DESCRIPTION OF SITE
Description of the
LOT 22
TOWSEN TERRACE
Brandywine (11th) District
Prince George's County, Maryland
Being a parcel of land hereinafter described as Lot 22, and
shown on a Plat of Subdivision entitled "TOWSEN TERRACE" as
recorded among the Land Records of Prince George's County,
Maryland in Plat Book 3 as Plat No. 75, said Lot 22 having been
acquired by Donald E. Richards and Evelyn O. Richards, his wife,
from Andrew Gemeny and Myrtelle G. Gemeny, his wife, by deed
dated August 2, 1954 and recorded among the Land Records of
Prince George's County, Maryland in Liber 1756 as Page 11, said
Lot 22 being described as follows;
Beginning for the said Lot 22 at a point of intersection of
Cedarville Road, 30 feet wide and formerly called Horse Head
Road, and Indian Head Road 30 feet wide, as shown on the
aforementioned plat, running thence with the centerline of Indian
Head Road;
1. North 49 degrees 02' 00" Est, 384.80 feet to a point, thence;
2. North 52 degrees 54' 00" West, 110.97 feet to a point, thence
leaving said Indian Head Road and running with the division lines
between said Lot 22 and Lots 23 and 16 of TOWSEN TERRACE
Subdivision;
3. South 58 degrees 53' 15" East, 120.06 feet to a point, thence;
4. South 31 degrees 06' 45" West, 351.26 feet to a point in the
centerline of the aforementioned Cedarville Road, thence running
with said centerline;
5. North 82 degrees 21' 00" West, 307.11 feet to the point of
beginning, containing 70,131 square feet or 1.16 acres of land
more or less.
EXHIBIT 10.26
FACILITY LEASE
dated as of December 18, 1996
between
FLEET NATIONAL BANK,
not in its individual
capacity but solely
as Owner Trustee,
as Lessor
and
PANDA-BRANDYWINE, L.P.,
as Lessee
(230 MW Natural Gas-Fired
Qualifying Cogeneration Facility
Located in Brandywine, Maryland)
THIS FACILITY LEASE AND THE FACILITY COVERED HEREBY HAVE BEEN
ASSIGNED TO AND ARE SUBJECT TO A LIEN AND SECURITY INTEREST IN
FAVOR OF
FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS INDENTURE
TRUSTEE UNDER THE TRUST INDENTURE DATED
AS OF THE DATE HEREOF FOR THE BENEFIT OF THE HOLDERS OF THE LOAN
CERTIFICATES REFERRED TO IN SUCH TRUST INDENTURE. THIS FACILITY
LEASE HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. TO THE EXTENT,
IF ANY, THAT THIS FACILITY LEASE CONSTITUTES CHATTEL PAPER (AS
SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT
IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS
FACILITY LEASE MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION
OF ANY COUNTERPART HEREOF OTHER THAN THE "ORIGINAL EXECUTED
COUNTERPART", WHICH SHALL BE IDENTIFIED AS THE COUNTERPART
CONTAINING THE RECEIPT THEREFOR EXECUTED BY
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGES THEREOF.
TABLE OF CONTENTS
Page
SECTION 1. Definitions 1
SECTION 2. Lease of the Facility; Term; Personal Property 2
SECTION 3. Rent; Adjustments to Rent 2
(a) Basic Rent 2
(b) Supplemental Rent 2
(c) Method of Payment 4
(d) Adjustments 4
(e) Computation of Adjustments 5
(f) Intentionally left blank. 6
(g) Amendment to Lease 6
(h) Minimum Basic Rent 6
SECTION 4. Net Lease 6
SECTION 5. Relinquishment of Possession and Use of the
Facility 8
(a) Surrender 8
(b) Manuals; Books 9
(c) Aid in Disposition 9
(d) Removal 9
(e) Accrued Maintenance 10
SECTION 6. Warranties of the Lessor 10
(a) Quiet Enjoyment 10
(b) Disclaimer of Other Warranties 10
(c) Enforcement of Certain Warranties 11
(d) Governmental Actions 12
SECTION 7. Special Covenants of Lessee 12
(a) Liens; Taxes 12
(b) Operation and Maintenance Reserve Account 12
(c) Rent Reserve Account 13
(d) Warranty Maintenance Reserve Account 14
(e) Termination of Accounts 15
SECTION 8. Facility Operation and Maintenance;
Modification; Identification 15
(a) Facility Operation and Maintenance 15
(b) Inspection 16
(c) Modifications 17
(d) Title to Modifications 17
(e) Funding of the Costs of Modifications 18
(f) Removal of Property 18
(g) Reports 19
(h) Contest of Applicable Law 20
(i) Identification 21
SECTION 9. Event of Loss, Event of Regulation 21
(a) Damage or Loss 21
(b) Repair 21
(c) Event of Loss; Payment of Stipulated Loss
Value 21
(d) Event of Regulation; Payment of Fair Market
Sales Value 22
(e) Requisition of Use 24
(f) Application of Payments on an Event of Loss 24
(g) Application of Payments Not Relating to an
Event of Loss 24
(h) Application During Default or Event of Default 25
SECTION 10. Insurance 25
SECTION 11. No Assignment or Sublease 25
SECTION 12. Lease Renewal; Purchase Option 26
(a) Fixed Rate Renewal Option 26
(b) Purchase Option 26
(c) Purchase Date 26
SECTION 13. Notices for Renewal or Purchase; Determination
of Fair Market Value 27
(a) Expiration of Basic Term 27
(b) Expiration of Renewal Terms 27
(c) Elections Irrevocable 27
(d) Determination of Fair Market Value 27
SECTION 14. Events of Default 28
SECTION 15. Remedies 34
(a) Remedies 34
(b) No Release 36
(c) Remedies Cumulative 36
(d) Waiver 37
(e) Allocation of Basic Rent 37
SECTION 16. Notices 37
SECTION 17. Successors and Assigns 38
SECTION 18. Right to Perform for Lessee 38
SECTION 19. General Covenants 38
SECTION 20. Amendments and Miscellaneous 39
(a) Amendments in Writing 39
(b) Survival 39
(c) Severability of Provisions 39
(d) True Lease 39
(e) GOVERNING LAW 39
(f) SUBMISSION TO JURISDICTION 39
(g) WAIVER 40
(h) Headings 40
(i) Counterpart Execution 40
(j) Limitation of Liability 40
(k) Copies of Notices 41
(l) Certain Rights of Power Purchaser 41
Schedules
A Description of Facility
B Description of Site and Easements
C Basic Rent Factors
D Stipulated Loss Values
FACILITY LEASE
FACILITY LEASE, dated as of December 18, 1996, between
FLEET NATIONAL BANK (formerly known as Shawmut Bank Connecticut,
National Association), a national banking association, not in its
individual capacity but solely as Owner Trustee under the Trust
Agreement referred to below, as Lessor (the "Lessor"), and PANDA-
BRANDYWINE, L.P., a Delaware limited partnership, as Lessee (the
"Lessee" or the "Partnership").
W I T N E S S E T H
WHEREAS, General Electric Capital Corporation and the
Lessor have entered into the Trust Agreement, dated as of March
30, 1995, pursuant to which the Lessor has agreed to act as
trustee for General Electric Capital Corporation (in such
capacity, the "Owner Participant") for the purpose of, among
other things, purchasing the Facility from the Lessee and leasing
it back to the Lessee hereunder;
WHEREAS, the Lessor owns the Facility and is the lessee
of the Site;
WHEREAS, subject to the terms and conditions set forth
in the Participation Agreement, the Lessee desires to lease from
the Lessor the Facility upon the terms and subject to the
conditions set forth herein; and
WHEREAS, subject to the terms and conditions set forth
in the Participation Agreement, the Lessor is willing to lease
the Facility to the Lessee upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of
the mutual agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. For purposes of this Facility
Lease, capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in Annex A to the
Participation Agreement dated as of December 18, 1996 among the
Owner Participant, the Owner Trustee, Panda Brandywine
Corporation, the Lessee, Fleet National Bank, not in its
individual capacity but solely as Security Agent, First Security
Bank, National Association, not in its individual capacity but
solely as Indenture Trustee, Credit Suisse, a bank organized and
existing under the laws of Switzerland, acting by and through its
New York branch, as Administrative Agent, and the Loan
Participants named therein (as the same may be amended,
supplemented or otherwise modified from time to time, the
"Participation Agreement") (such definitions to be equally
applicable to both the singular and plural forms of the terms
defined). Any term defined in the Participation Agreement or by
reference to an agreement, instrument or other document shall
have the meaning so assigned to it whether or not the
Participation Agreement, such agreement, instrument or document
is in effect. Unless otherwise indicated, references in this
Facility Lease to sections, paragraphs, clauses, appendices,
schedules and exhibits are to the same contained in or attached
to this Facility Lease.
SECTION 2. Lease of the Facility; Term; Personal
Property. (a) Upon the terms and subject to the conditions of
this Facility Lease, the Lessor hereby leases to the Lessee, and
the Lessee hereby leases from the Lessor, the Facility.
(b) The term of this Lease shall begin on the Lease
Closing Date and shall end, unless terminated earlier pursuant to
the terms hereof, on the last day of the Lease Term.
(c) It is the intention of the Lessor and the Lessee
that the Facility, each Modification and every portion thereof is
severed, and shall be and remain severed, to the maximum extent
permitted by Applicable Law, from the real estate constituting
the Site and the Easements and even if physically attached
thereto, shall retain the character of personal property, shall
be treated as personal property with respect to the rights of all
Persons, shall be removable (subject to the provisions of the
Transaction Documents) and shall not be or become fixtures or
part of the real estate constituting the Site and the Easements.
(d) The Facility is described in Schedule A hereto and
the Site and Easements are described in Schedule B hereto.
SECTION 3. Rent; Adjustments to Rent.
(a) Basic Rent. The Lessee shall pay to the Lessor,
as basic rent (herein referred to as "Basic Rent") for the
Facility, the following amounts:
(i) on each Basic Rent Payment Date
occurring during the Basic Term, an installment of Basic
Rent equal to the percentage of Lessor's Cost set forth
opposite such Basic Rent Payment Date on Schedule C hereto;
and
(ii) on each Basic Rent Payment Date
occurring during the Fixed Rate Renewal Term, if any, an
amount equal to the Fixed Rate Renewal Basic Rent.
(b) Supplemental Rent. The Lessee shall pay to the
Lessor, or to whomever shall be entitled thereto, as supplemental
rent (herein referred to as "Supplemental Rent"), the following
amounts:
(i) when due, any amount payable hereunder
as Stipulated Loss Value; and
(ii) when due, or if no due date is
specified, on demand, and on an After-Tax Basis (except with
respect to payments of interest and fees made in respect of
the LOC Reimbursement Obligations, which shall not be on an
After-Tax Basis), any and all amounts, liabilities and
obligations, other than Basic Rent, Stipulated Loss Value
and the Supplemental Rent referred to in the other clauses
of this Section 3(b), which the Lessee assumes or agrees to
pay hereunder, under the Participation Agreement, the
Collateral Security Documents or the other Financing
Documents to the Lessor, the Security Agent, any Loan
Participant, the Indenture Trustee, the Administrative
Agent, the Owner Participant or others, including without
limitation any amounts constituting LOC Reimbursement
Obligations;
(iii) when due, or if no due date is
specified, on demand, all amounts required to be paid by the
Lessee under the Tax Indemnity Agreement;
(iv) when due, (A) an amount equal to the
Partnership's Pro Rata Share (or the full amount if payable
as a result of a Lease Event of Default) of the amounts due
as Breakage Costs on the Loan Certificates pursuant to the
Indenture, (B) an amount equal to the Partnership's Pro Rata
Share of amounts payable under Section 2.12 of the Indenture
and (C) amounts payable ("Swap Breakage Costs") to the
Interest Hedging Counterparty in connection with an early
termination of the Interest Hedging Agreement (but only if
such termination is a result of a Lease Event of Default, an
Event of Loss pursuant to which the Lessee does not elect to
rebuild the Facility (but only to the extent of available
insurance proceeds after payment of all amounts due to
Lessor pursuant to Section 9(c) hereof) or an Event of
Regulation (excluding any Special QF Loss Event); and
(v) on demand and, in any event, no later
than the Basic Rent Payment Date next succeeding the date
such amounts shall be due and payable hereunder, to the
extent permitted by Applicable Law, interest on any Rent not
paid when due at a rate per annum equal to the Overdue Rate
(calculated on the same basis as the Loan Certificates and
with respect to the period when the same shall be overdue),
for the period commencing on such due date (or, in the case
of any payment with respect to an indemnity, when payment is
made by the Indemnitee of the related liability) until the
same shall be paid.
(c) Method of Payment. Each payment of Rent shall be
made in immediately available funds no later than 12:00 noon, New
York City time, on the date such payment shall be due and payable
hereunder or, if no due date is specified, upon demand of the
Person entitled to such payment, and shall be paid to the Lessor
at its address specified in Section 16 or at such other address
as the Lessor may specify by notice in writing to the Lessee;
provided, however, that so long as the Lien of the Indenture
shall not have been discharged or the Security Deposit Agreement
shall remain in effect, the Lessor hereby directs, and the Lessee
agrees, that all Rent (other than Excepted Payments, which shall
be paid by the Lessee directly to the Person entitled thereto),
(all without set-off or counterclaim as and to the extent
provided in Section 4 hereof) and all other amounts referred to
in Section 3(a) and 3(b) hereof shall be paid directly to the
Security Agent at its principal office at 777 Main Street,
Hartford, Connecticut 06115, or as the Security Agent may
otherwise direct within the United States, by wire transfer of
immediately available funds in U.S. Dollars no later than the
time specified therefor in the Security Deposit Agreement on the
due date of payment. If the date on which any payment of Rent is
due hereunder shall not be a Business Day, such payment shall be
made as aforesaid on the next succeeding Business Day (unless the
Debt Rate is then based upon the Eurodollar Rate and the next
succeeding Business Day falls in another calendar month, in which
case such payment shall be made on the next preceding Business
Day), together with interest thereon at the higher of (i) 12% and
(ii) the Debt Rate. Any payment made later than 12:00 noon, New
York City time, shall be deemed to have been made on the next
succeeding Business Day.
(d) Adjustments. The Basic Rent Factors and
Stipulated Loss Values contained on Schedule C and Schedule D
hereto have been calculated in part on the basis of the
assumptions set forth in Schedule 10 to the Participation
Agreement. If a Change in Tax Law or a Change in Accounting
Treatment shall occur prior to the Lease Closing Date or any such
assumption proves on the Lease Closing Date to have been
incorrect (even if such determination is made subsequent to the
Lease Closing Date), such Basic Rent Factors and Stipulated Loss
Values shall be adjusted (upward or downward) so as to preserve
the Owner Participant's Net Economic Return. If after the Lease
Closing Date the costs and expenses paid in connection with the
leveraging of this Facility Lease prove to be greater or less
than the amount set forth therefor in Item 14 of Schedule 10 to
the Participation Agreement, such Basic Rent Factors and
Stipulated Loss Values shall be adjusted so as to preserve the
Owner Participant's Net Economic Return, provided that in no
event shall installments of Basic Rent be increased as a result
of such adjustment such that they would be higher than if no
leveraging had been done. In the event the Owner Participant
elects to consummate a refinancing pursuant to Section 11 of the
Participation Agreement, the installments of Basic Rent shall be
recalculated and reduced in the manner set forth in Section 11.1
of the Participation Agreement.
All adjustments shall (A) to the extent the original
Basic Rent Schedule complied with the IRS guidelines and Section
467 of the Code, satisfy the provisions of Revenue Procedures 75-
21 and 75-28 or any successor or supplemental procedure as in
effect on the date of such adjustment and any other applicable
statutes, regulations, revenue procedures, revenue rulings or
technical information releases relating to the subject matter of
such revenue procedures, (B) to the extent the original Basic
Rent Schedule complied with the IRS guidelines and Section 467 of
the Code, be made in a manner designed to comply with Section 467
of the Code and any regulations thereunder or under any other
successor, supplemental or similar provisions of Federal income
tax law and not otherwise cause any adverse effect under any
Federal income tax law in effect at the time of such adjustment,
(C) preserve the Owner Participant's Net Economic Return, (D) to
the extent possible and not inconsistent with the foregoing, be
made in a manner designed to maintain level Operating Cash Flow
Ratios for each Quarterly Measurement Period to occur during the
Basic Term and (E) to the extent possible and not inconsistent
with the foregoing (and except in the case of an adjustment
resulting from an increase in Lessor's Cost from that set forth
in Schedule 10 to the Participation Agreement), minimize any
resulting increase and maximize any resulting decrease in the net
present value of the installments of Basic Rent to the Lessee
(determined using the Discount Rate) to the extent the foregoing
criteria are met.
(e) Computation of Adjustments. (i) Upon the
occurrence of an event specified in Section 3(d), the Owner
Participant shall make the necessary computations on a basis
consistent with that used by the Owner Participant in the
computation of the Basic Rent Factors and Stipulated Loss Values
at the time and in connection with the execution and delivery of
this Facility Lease.
(ii) Upon the occurrence of an event
requiring an adjustment to any Basic Rent Factors or Stipulated
Loss Values pursuant to Section 3(d) or the provisions of the Tax
Indemnity Agreement, the Owner Participant shall make the
necessary computations and, within 90 days of the Owner
Participant's knowledge of such event, furnish to the Lessee a
certificate of the Owner Participant setting forth the amount of
any increase or decrease in such Basic Rent Factors or Stipulated
Loss Values and certifying that each adjustment made was
calculated in accordance with the same methodology as was
applicable to the Basic Rent Factors and Stipulated Loss Values
set forth in Schedules 6 and 10 to the Participation Agreement.
Upon request of the Lessee made within a reasonable time
following the delivery to the Lessee by the Owner Participant of
any such certificate, KPMG Peat Marwick (or such other
independent auditors as may be selected by the Owner Participant
and reasonably satisfactory to the Lessee) shall verify that each
adjustment made was calculated in accordance with the same
methodology as was applicable to the Basic Rent Factors and
Stipulated Loss Values set forth in Schedules 6 and 10 to the
Participation Agreement. The costs of such verification shall be
borne by the Lessee, unless the amount of the rent adjustment is
changed by the greater of (i) five percent of the rent adjustment
and (ii) one half percent of the rent as adjusted, in each case
in present value terms following such audit, in which case such
costs shall be borne by the Owner Participant.
The adjustments to the Basic Rent Factors and
Stipulated Loss Values in connection with the leveraging of the
Facility Lease which have been computed by GE Capital at the
closing of the Lease Debt financing are intended to be consistent
with the methodology set forth in Schedule 9 to the Participation
Agreement, and, at the Partnership's request and expense, KPMG
Peat Marwick or such other independent financial advisors expert
in leasing transactions selected by GE Capital and reasonably
satisfactory to the Partnership shall verify the same to the
Partnership. The costs of such verification shall be borne by
the Lessee, unless the amount of the rent adjustment is changed
by the greater of (i) five percent of the rent adjustment and
(ii) one half percent of the rent as adjusted, in each case in
present value terms following such audit, in which case such
costs shall be borne by the Owner Participant.
(f) Intentionally left blank.
(g) Amendment to Lease. The Lessor and the Lessee
shall execute and deliver an addendum to this Facility Lease to
reflect each adjustment referred to in Section (d), provided that
the failure to execute and deliver an addendum shall not affect
any such adjustment.
(h) Minimum Basic Rent. Notwithstanding any other
provision of this Lease to the contrary, each installment of
Basic Rent due on each Rent Payment Date and not constituting an
Excepted Payment shall be, under any and all circumstances, an
amount at least sufficient to pay in full each installment of
principal of and interest on the Loan Certificates (assuming the
full drawdown thereof) then required to be paid pursuant to the
Loan Certificates (other than, during the Accretion Loan
Availability Period, the Accretion Amount with respect to such
Rent Payment Date and amounts becoming due in connection with the
exercise of remedies pursuant to Section 15 hereof).
SECTION 4. Net Lease.
This Facility Lease is a net lease and the Lessee
hereby acknowledges and agrees that the Lessee's obligation to
pay all Rent hereunder, and the rights of the Lessor in and to
such Rent, shall be absolute, unconditional and irrevocable and,
to the maximum extent permitted by Law, shall not be affected by
any circumstance of any character whatsoever, including, without
limitation: (i) any set-off, abatement, counterclaim, suspension,
recoupment, reduction, compromise, settlement, release,
modification, amendment (whether material or otherwise), waiver,
release or discharge (by act or operation of law), rescission,
defense or other right or claim that the Lessee may have against
the Lessor, the Owner Participant, the Security Agent, any Loan
Participant, the Administrative Agent, the Indenture Trustee, the
Operator, the Contractor, any subcontractor, any vendor or
manufacturer of any equipment or assets included in the Facility
or any Modification or any part of any thereof, or any other
Person for any reason whatsoever; (ii) any defect in or failure
of the title, merchantability, condition, design, compliance with
specifications, operation or fitness for use of all or any part
of the Facility, any Modification, the Site or the Easements;
(iii) any damage to, or removal, abandonment, dismantling,
decommissioning, shutdown, salvage, scrapping, requisition,
taking, condemnation, loss, theft or destruction of all or any
part of the Facility, any Modification, the Site or the
Easements, or any interference, interruption or cessation in the
use or possession of the Facility, the Site or the Easements by
the Lessee or by any other Person for any reason whatsoever or of
whatever duration; (iv) any restriction, prevention or
curtailment of or interference with any use of all or any part of
the Facility, any Modification, the Site or the Easements; (v)
any insolvency, bankruptcy, reorganization, liquidation, sale or
other disposition of all or substantially all the assets of,
marshalling of assets or similar proceeding by or against the
Lessee or the Lessor, the Owner Participant, the Security Agent,
the Administrative Agent, any Partner, any Participant or any
other Person; (vi) the invalidity, illegality or unenforceability
(or the allegation of invalidity, illegality or unenforceability)
of this Facility Lease, the Participation Agreement, any
Collateral Security Agreement, any other Financing Document, any
Project Document, the Tax Indemnity Agreement or any other
instrument referred to herein or therein or any other infirmity
herein or therein or any lack of right, power or authority of the
Lessor, the Owner Participant, the Security Agent, the Indenture
Trustee, the Lessee, any Partner, any Participant, any Loan
Participant or any other Person to enter into this Facility
Lease, the Participation Agreement, any Collateral Security
Document, any other Financing Document, any Project Document, the
Tax Indemnity Agreement or to perform the obligations hereunder
or thereunder or consummate the transactions contemplated hereby
or thereby or any doctrine of force majeure, impossibility,
frustration or failure of consideration; (vii) the breach or
failure of any warranty or representation made in this Facility
Lease, the Participation Agreement, any Collateral Security
Document, any other Financing Document, any Project Document, the
Tax Indemnity Agreement or any other agreement by the Lessee, the
Lessor, the Owner Participant the Security Agent, any Partner,
any Participant, the Indenture Trustee, the Administrative Agent,
any Loan Participant or any other Person; (viii) any failure,
omission or delay on the part of any Person to enforce, assert or
exercise any right, power or remedy under any Transaction
Document; (ix) the taking or omission of any of the actions
referred to in any of the Transaction Documents; or (x) any other
circumstance or happening whatsoever, whether or not similar to
any of the foregoing. The Lessee hereby waives, to the extent
permitted by Applicable Law, any and all rights that it may now
have or that at any time hereafter may be conferred upon it, by
statute or otherwise, to modify, terminate, cancel, quit or
surrender this Facility Lease or to effect or claim any
diminution or reduction of Rent payable by the Lessee hereunder,
except in accordance with the express terms hereof. The Lessee
agrees that, if for any reason whatsoever this Lease shall be
terminated in whole or in part by operation of Law or otherwise,
then, except as provided herein, the Lessee shall pay, to the
maximum extent permitted by Applicable Law, to the Lessor or any
other Person entitled thereto, an amount equal to each
installment of Basic Rent and all payments of Supplemental Rent
at the time such payment would have become due and payable in
accordance with the terms hereof had this Facility Lease not been
terminated in whole or in part. Each payment of Rent made by the
Lessee hereunder (absent manifest error) shall be final and the
Lessee shall not seek or have any right to recover all or any
part of such payment from the Lessor or any Person for any reason
whatsoever. All covenants, agreements and undertakings of the
Lessee herein shall be performed at its cost, expense and risk
unless expressly otherwise stated. Nothing in this Section 4 or
elsewhere shall be construed as a guaranty by the Lessee of any
residual value of the Facility or as waiving in any respect the
rights of the Lessee to seek enforcement through money damages or
specific performance of its rights hereunder.
SECTION 5. Relinquishment of Possession and Use of the Facility.
(a) Surrender. Unless the Lessee has theretofore
acquired the Facility as provided herein, on the Lease
Termination Date, the Lessee shall surrender possession of the
Facility and the Site to the Lessor (or to a Person specified by
the Lessor to the Lessee in writing not less than 30 days prior
to the Lease Termination Date). At the time of such surrender,
the Lessee shall pay or have paid all amounts due and payable, or
to become due and payable, by it hereunder and under the
Financing Documents and the Tax Indemnity Agreement (including,
without limitation, all amounts payable with respect to any and
all Modifications approved or authorized (with or without the
consent of the Lessor) prior to the Lease Termination Date,
whether or not implementation thereof has been completed on or
prior to such date), and the Facility and the Site shall be free
and clear of all Liens (other than Lessor's Liens and Permitted
Liens) and in the condition and state of repair required by the
provisions of this Facility Lease, including Section 8(a) hereof,
and not subject to any contest referred to in Section 8(h)
hereof. Unless the Lessee has theretofore acquired the Facility
as provided herein, the Lessee will use all reasonable efforts to
transfer to the Lessor on the Lease Termination Date all permits
and other Governmental Actions (to the extent permitted by Law),
rights, lease(s), license agreement(s), easements and
appurtenances held by Lessee that are necessary to or reasonably
desirable for the ownership, operation or maintenance of the
Facility and any Modifications, including all permits and other
Governmental Actions, rights, lease(s), license agreement(s),
easements and appurtenances held by Lessee that are necessary to
or reasonably desirable to possess and enjoy the Site and the
Easements. During the Lease Term, the Lessee warrants that it
shall not take any action that would prevent, or make unlikely
the return of the Facility, together with such permits and other
Governmental Actions, rights, easements and appurtenances held by
Lessee.
(b) Manuals; Books. Unless the Lessor otherwise
directs, upon return of the Facility, the Lessee shall deliver to
the Lessor all logs, books, manuals and data and inspection,
modification and overhaul records required to be maintained or
maintained with respect to the Facility or otherwise in the
Lessee's possession.
(c) Aid in Disposition. If the Lessee has not given
notice of its intention to buy the Facility or renew the Lease,
the Lessee agrees, during the last 24 months of the Lease Term,
to cooperate in all reasonable respects with the efforts of the
Owner Participant and/or the Lessor to (i) (to the extent not
inconsistent with the terms of the Power Purchase Agreement)
lease or sell the Facility on the expiration of the Lease Term
and (ii) obtain any permits, other Governmental Actions, rights
and easements which under Applicable Law cannot be transferred by
the Lessee; provided, however, that the Lessor shall reimburse
the Lessee for all reasonable out of pocket expenses and that
nothing in this Section 5(c) shall require the Lessee to take any
action or to permit or suffer any action which shall unreasonably
interfere with the use of the Facility by the Lessee.
(d) Removal. Unless the Facility shall have been
transferred to the Lessee pursuant to Section 9(c), 9(d), 12(b)
or 15 hereof, the Lessee shall, upon the request of the Lessor
after the Lease Termination Date and the termination of the Power
Purchase Agreement, at the Lessee's own expense and risk,
promptly dismantle the Facility and prepare the deliverable
components of the Facility for shipment by rail or truck
following the expiration or termination of this Facility Lease.
Upon request of the Lessor, the Lessee shall also deliver, at the
Lessee's expense, the deliverable components of the Facility, as
so disassembled and prepared for shipment, to the nearest
railhead or other suitable common carrier for shipment. In
connection with the foregoing, the Lessee shall furnish or cause
to be furnished to the Lessor such insurance, bonds, indemnities
and other assurances as the Lessor may reasonably require.
(e) Accrued Maintenance. On or prior to six months
prior to the Lease Termination Date, unless the Facility is to be
transferred to the Lessee pursuant to Section 9(c), 9(d), 12(b)
or 15 hereof, the Lessee and the Owner Participant shall select
an independent engineer of nationally recognized standing (the
"Independent Engineer") and the Lessee shall, (i) if the
Independent Engineer determines that a major maintenance overhaul
of the Facility is advisable at such time, conduct, at Lessee's
expense, a major maintenance overhaul of the Facility within six
months of the Lease Termination Date (such major maintenance
overhaul to be conducted in accordance with the Independent
Engineer's reasonable specifications) or (ii) if the Independent
Engineer determines that a major maintenance overhaul of the
Facility is not advisable at such time, pay to the Lessor on the
Lease Termination Date an amount equal to the lesser of (A) the
amount then on deposit in the Operation and Maintenance Reserve
Account and (B) the amount determined by the Independent Engineer
to be the Lessee's "proportionate share" of the costs of the next
scheduled major maintenance overhaul of the Facility (the lesser
of (A) and (B), the "Accrued Maintenance Payment"). The
Independent Engineer will determine such proportionate share by
multiplying the reasonably estimated cost of the next scheduled
major maintenance overhaul by a fraction, the numerator of which
is the number of years from the last major maintenance overhaul
of the Facility to the Lease Termination Date and the denominator
of which is the number of years from the last such overhaul to
the next scheduled date for major maintenance overhaul of the
Facility.
SECTION 6. Warranties of the Lessor.
(a) Quiet Enjoyment. The Lessor warrants that, so
long as no Lease Event of Default shall have occurred and be
continuing, it will not disturb the Lessee's rights to quiet
enjoyment of the possession and use of the Facility, the Site and
the Easements in accordance with the terms of this Facility Lease
and the other Transaction Documents.
(b) Disclaimer of Other Warranties. The warranties
set forth in Section 6(a) hereof are in lieu of all other
warranties of the Lessor, whether written, oral or implied, with
respect to this Facility Lease, the Facility, any Modification,
the Site or the Easements. As among the Loan Participants, the
Administrative Agent, the Indenture Trustee, the Security Agent,
the Owner Participant, the Lessor and the Lessee, execution by
the Lessee of this Facility Lease shall be conclusive proof of
the compliance of the Facility, the Site, any Modification and
the Easements with all requirements of this Facility Lease, and
the Lessee acknowledges and agrees that (i) THE LESSOR IS NOT A
MANUFACTURER OF OR A DEALER IN PROPERTY OF SUCH KIND AND (ii) THE
LESSOR LEASES AND THE LESSEE TAKES THE FACILITY, AND SHALL TAKE
EACH MODIFICATION AND ANY PART THEREOF, AS IS AND WHERE IS, WITH
ALL FAULTS, AND NONE OF THE LESSOR, THE OWNER PARTICIPANT, THE
ADMINISTRATIVE AGENT, INDENTURE TRUSTEE OR ANY LOAN PARTICIPANT
HAS MADE NOR SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY
DISCLAIMS ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, THE DESIGN OR CONDITION OF THE FACILITY, ANY
MODIFICATION, THE SITE, THE EASEMENTS OR ANY PART THEREOF, THE
MERCHANTABILITY THEREOF OR THE FITNESS THEREOF, FOR ANY
PARTICULAR PURPOSE, TITLE TO THE FACILITY, ANY MODIFICATION, THE
SITE, THE EASEMENTS OR ANY PART THEREOF, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO
SPECIFICATIONS, FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT OR
THE ABSENCE OF ANY LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, NOR SHALL THE LESSOR, THE OWNER PARTICIPANT, THE
ADMINISTRATIVE AGENT, INDENTURE TRUSTEE OR ANY LOAN PARTICIPANT
BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING
LIABILITY IN TORT, STRICT OR OTHERWISE), IT BEING AGREED THAT ALL
SUCH RISKS, AS AMONG THE LOAN PARTICIPANTS, THE ADMINISTRATIVE
AGENT, THE INDENTURE TRUSTEE, THE SECURITY AGENT, THE OWNER
PARTICIPANT, THE LESSOR AND THE LESSEE, ARE TO BE BORNE BY THE
LESSEE AND THE BENEFITS OF ANY IMPLIED WARRANTIES OF SUCH PARTIES
ARE HEREBY WAIVED BY LESSEE. The provisions of this Section 6(b)
have been negotiated, and except to the extent otherwise
expressly provided in Section 6(a) hereof, the foregoing
provisions are intended to be a complete exclusion and negation
of any representations or warranties by the Lessor, the Security
Agent, the Indenture Trustee, the Administrative Agent, the Owner
Participant and the Loan Participants, express or implied, with
respect to the Facility or any Modification that may arise
pursuant to the Uniform Commercial Code of any applicable
jurisdiction, or any other Law now or hereafter in effect, under
this Facility Lease or otherwise.
(c) Enforcement of Certain Warranties. (i) Unless a
Lease Event of Default shall have occurred and be continuing, the
Lessor authorizes the Lessee (directly or through agents,
including the Operator) at the Lessee's expense (but not so as to
prejudice the rights of the Lessor as assignee of Lessee's
rights), to assert for the Lessor's account, during the Lease
Term, all of the Lessor's rights (if any) under any applicable
warranty and any other claim (whether under this Facility Lease,
any Financing Document or otherwise) that the Lessee or the
Lessor may have against any vendor or manufacturer with respect
to the Facility or any Modification, and the Lessor agrees to
cooperate, at the Lessee's expense, with the Lessee and its
agents in asserting such rights. Any amount recovered by the
Lessee under any such warranty or other claim against any vendor
or manufacturer shall be applied in accordance with Sections 9(g)
and (h) hereof.
(ii) The Lessee agrees to preserve and
protect Lessor's rights under any warranty, covenant or
representation made by Contractor, any other EPC Contractor or
any other vendor, manufacturer or supplier with respect to the
Facility or any Modification, and the Lessee will take no action
which will impair such rights of the Lessor and covenants to act
solely in strict compliance with any restrictions or requirements
prerequisite to the continued existence, enforcement, validity
and maintenance of any such warranty, covenant or representation.
(d) Governmental Actions. The Lessor will, upon the
reasonable request and at the expense of the Lessee, assist the
Lessee in any proceeding as may be reasonably necessary or as may
be otherwise required by law in connection with the obtaining of
any Governmental Action necessary or desirable to operate the
Facility.
SECTION 7. Special Covenants of Lessee.
(a) Liens; Taxes. The Lessee shall not directly or
indirectly create, incur or suffer to exist any Lien on or with
respect to the Facility, any Modification, the Site, the
Easements, the Lessor's title thereto or interest therein, or on
or with respect to any title or interest of the Lessee therein or
in this Facility Lease or in any other asset of the Lessee,
except Permitted Liens, and the Lessee, at its own expense, shall
promptly take such action as may be necessary duly to discharge
any such Lien that may arise at any time during the Lease Term.
Subject to the contest provisions of the Tax Indemnity Agreement
and subsection 6.11 of the Participation Agreement, the Lessee
further agrees that it shall pay or cause to be paid on or before
the time or times prescribed by Applicable Law (after giving
effect to any applicable grace period) any Taxes imposed on the
Lessee (or any affiliated or related group of which the Lessee is
a member) under the Applicable Laws of any jurisdiction that, if
unpaid, might result in any Lien prohibited by this Facility
Lease. The Lessee will promptly pay or cause to be paid any
valid, final judgment enforcing any such Tax against it and cause
the same to be satisfied and discharged. THE LESSEE SHALL NOT
HAVE ANY RIGHT, POWER OR AUTHORITY TO CREATE OR INCUR ANY LIEN
UPON THE FACILITY. NOTICE IS HEREBY GIVEN TO ALL CONTRACTORS,
SUBCONTRACTORS, LABORERS, MATERIALMEN AND OTHER PERSONS THAT
NEITHER THE LESSOR NOR THE OWNER PARTICIPANT WILL BE LIABLE FOR
ANY LABOR, SERVICES OR MATERIALS FURNISHED TO LESSEE, AND THAT NO
LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO
OR AFFECT THE FACILITY.
(b) Operation and Maintenance Reserve Account. (i) On
the Lease Closing Date, the Lessee shall deposit in the Operation
and Maintenance Reserve Account an amount equal to the Initial
Operation and Maintenance Reserve Deposit. On each Basic Rent
Payment Date, unless and until the Required Operation and
Maintenance Reserve Balance shall be on deposit in the Operation
and Maintenance Reserve Account, the Lessee shall, out of the
cash then available in the Revenue Account (and in accordance
with the priorities set forth in the Security Deposit Agreement),
deposit into the Operation and Maintenance Reserve Account: (A)
with respect to each of the first eight (8) Basic Rent Payment
Dates, an amount equal to $125,000 plus the amount of any accrued
deficiencies in contributions to the Operation and Maintenance
Reserve Account with respect to prior periods, (B) with respect
to the eight (8) Basic Rent Payment Dates occurring immediately
thereafter, an amount equal to $375,000 plus the amount of any
accrued deficiencies in contributions to the Operation and
Maintenance Reserve Account with respect to prior periods and (C)
with respect to each Basic Rent Payment Date thereafter, an
amount equal to one fourth of the "Incremental Required Balance"
for the Lease Year in which such Basic Rent Payment Date falls,
plus the amount of any accrued deficiencies in contributions to
the Operation and Maintenance Reserve Account with respect to
prior periods. "Incremental Required Balance" for any Lease Year
shall be the difference between the Required Operation and
Maintenance Reserve Balance for such Lease Year and the Required
Operation and Maintenance Reserve Balance for the immediately
preceding Lease Year. Deposits made into the Operation and
Maintenance Reserve Account pursuant to Section 7(b)(iii) shall
not be credited toward the Lessee's obligation to make deposits
in such Account pursuant to this Section 7(b)(i).
(ii) Income or gain earned on amounts on deposit
in the Operation and Maintenance Reserve Account shall be deemed
to have been earned by Lessee and deposited into such account and
shall be retained therein and credited to the Required Operation
and Maintenance Reserve Balance. If, on any Basic Rent Payment
Date, as the result of the actual realization of income or gain
on the amounts on deposit in the Operation and Maintenance
Reserve Account, an amount in excess of the Required Operation
and Maintenance Reserve Balance shall be on deposit therein and
no Lease Default or Lease Event of Default shall have occurred
and then be continuing, such excess may be distributed to the
Revenue Account on such Basic Rent Payment Date.
(iii) In the event of any withdrawal from the
Operation and Maintenance Reserve Account (other than withdrawals
of income or gain in excess of the Required Operation and
Maintenance Reserve Balance as permitted pursuant to Section
7(b)(ii)), on each Basic Rent Payment Date occurring after such
withdrawal and until the Operation and Maintenance Reserve
Account has been replenished by the amount of such withdrawal,
the Lessee shall deposit into the Operation and Maintenance
Reserve Account, prior and in addition to any deposits required
to be made pursuant to Section 7(b)(i), 50% of Available Cash
Flow for the Quarterly Measurement Period ended one month prior
to such Basic Rent Payment Date.
(c) Rent Reserve Account.
(i) On the Lease Closing Date, the Lessee shall
deposit in the Rent Reserve Account an amount equal to the
Initial Rent Reserve Deposit. On each Basic Rent Payment Date,
unless and until the Required Rent Reserve Balance shall be on
deposit in the Rent Reserve Account, the Lessee shall deposit
into the Rent Reserve Account an amount equal to 50% of
Distributable Cash Flow for the Quarterly Measurement Period
ended one month prior to such Basic Rent Payment Date. Deposits
made into the Rent Reserve Account pursuant to Section 7(c)(iii)
shall not be credited toward the Lessee's obligations to make
deposits in such Account pursuant to this Section 7(c)(i).
(ii) Income or gain earned on amounts on deposit
in the Rent Reserve Account shall be deemed to have been earned
by Lessee and deposited into such account and shall be retained
therein and credited to the Required Rent Reserve Balance. If,
on any Basic Rent Payment Date, as the result of the actual
realization of income or gain on the amounts on deposit in the
Rent Reserve Account, an amount in excess of the Required Rent
Reserve Balance shall be on deposit therein and no Lease Default
or Lease Event of Default shall have occurred and be continuing,
such excess may be distributed to the Revenue Account on such
Basic Rent Payment Date.
(iii) In the event of any withdrawal from the
Rent Reserve Account (other than withdrawals of income or gain in
excess of the Required Rent Reserve Balance as permitted pursuant
to Section 7(c)(ii)), on each Basic Rent Payment Date occurring
after such withdrawal and until the amount on deposit in the Rent
Reserve Account has been replenished by the amount of such
withdrawal, the Lessee shall deposit into the Rent Reserve
Account, prior and in addition to any deposits required to be
made pursuant to Section 7(c)(i), an amount equal to 100% of
Distributable Cash Flow for the Quarterly Measurement Period
ended one month prior to such Basic Rent Payment Date.
(d) Warranty Maintenance Reserve Account; Completion Account.
(i) On the Lease Closing Date, the Lessee shall
deposit in the (A) Warranty Maintenance Reserve Account an amount
equal to the Required Warranty Maintenance Reserve Deposit and
(B) Completion Account an amount equal to the Initial
Construction Completion Deposit.
(ii) Income or gain earned on amounts on deposit
in the Warranty Maintenance Reserve Account and the Completion
Account shall be deemed to have been earned by Lessee and
deposited into such account and shall be retained therein.
(e) Termination of Accounts. If, on the Turbine
Warranty Termination Date, no Lease Default or Lease Event of
Default shall have occurred and be continuing and the Lessee
shall have paid all Rent then due and owing, the funds on deposit
in the Warranty Maintenance Reserve Account shall be transferred
to the Revenue Account. After the date of final acceptance under
the Construction Contract, the funds on deposit in the Completion
Account shall be transferred to the Partnership at the times and
on the conditions set forth in the Security Deposit Agreement.
If, on the Lease Termination Date, no Lease Default or Lease
Event of Default shall have occurred and be continuing and the
Lessee shall have paid all Rent then due and owing (including the
Accrued Maintenance Payment pursuant to Section 5(e)), the funds
on deposit in the Operation and Maintenance Reserve Account and
the Rent Reserve Account shall be distributed to the Lessee.
(f) Establishment of Special Account. Upon the
delivery by the Power Purchaser of a notice of "Fuel Default" (as
defined in the Consent of the Power Purchaser), the Security
Agent shall establish a special account under the Security
Deposit Agreement into which the Lessee shall deposit, on each
Basic Rent Payment Date thereafter (until such notice is
rescinded or such "Fuel Default" is cured (as determined by
Lessor in its reasonable judgment)), an amount equal to 100% of
the Cash Available for Distributions for the immediately
preceding Quarterly Measurement Period. The amounts on deposit
in such account shall be used by the Lessee, with the consent of
the Owner Participant and the Administrative Agent, to cure the
event or events giving rise to such Fuel Default or, following
the occurrence of a Lease Event of Default (including as a result
of the occurrence of a "Fuel/Performance Failure" (as defined in
the Consent of the Power Purchaser)), such amounts may be used by
the Owner Participant and the Administrative Agent to effect a
cure of any such event or may be otherwise applied by the Owner
Participant and the Administrative Agent, to satisfy the Lessee
Obligations in such order as they shall determine. All amounts
remaining in such account after all outstanding "Fuel Defaults"
have been cured shall, so long as no Lease Default or Lease Event
of Default shall have occurred and be continuing, be transferred
to the Partnership Security Account.
(g) Other Covenants.
The Lessee shall comply with each and every
covenant set forth in Section 19 hereof.
SECTION 8. Facility Operation and Maintenance;
Modification; Identification.
(a) Facility Operation and Maintenance. The Lessee
shall: (i) maintain the Facility in such condition that it will
have the capacity and functional ability to perform on a
continuing basis, in normal commercial operation, the functions
for which it was designed, ordinary wear and tear excepted; (ii)
operate, service, maintain, overhaul, test and repair the
Facility and any Modifications and replace all necessary or
useful parts and components thereof so that the condition and
operating efficiency of the Facility and any Modification will be
maintained and preserved in all respects in accordance with (A)
Prudent Utility Practice, (B) such operating standards as shall
be required to take advantage of and enforce all available
warranties, (C) the terms and conditions of all insurance
policies required to be maintained pursuant to Section 10 hereof
and (D) the terms and conditions of the Power Purchase Agreement;
(iii) use, possess, operate and maintain the Facility, any
Modification, the Site and the Easements in compliance with all
Applicable Laws and Governmental Actions affecting the Facility,
any Modification, the Site or the Easements or the use,
possession, operation and maintenance thereof except for such
noncompliance as would not subject Lessor, Lessee, Owner
Participant, Administrative Agent, Indenture Trustee or any Loan
Participant to criminal or material civil liability and as would
not have or would not reasonably be expected to have a material
adverse effect on the Facility or the ability of the Lessee or
any other Person to perform its obligations under any Transaction
Document to which it is or will become a party; and (iv) maintain
all records, logs, manuals and other materials in respect of the
Facility, any Modification, the Site and the Easements in
accordance with Prudent Utility Practice. Subject to Section
8(h) hereof, the Lessee shall comply, and shall cause the
Operator to comply, with all the Lessee's obligations under
Applicable Laws (including, without limitation, the CPCN)
affecting the Facility, any Modification, the Site and the
Easements. The Lessee shall not permit the Facility to be
maintained, used or operated in any manner or for any purpose
excepted from any insurance in respect of the Facility. The
Lessee shall not omit to take any action necessary to cause the
Facility to be maintained, used or operated in any manner or for
any purpose excepted from any insurance in respect of the
Facility. The Lessee shall not permit the Facility to be
maintained, used or operated other than as a Qualifying Facility.
The Lessee shall take all action necessary to cause the Facility
to be maintained, used and operated as a Qualifying Facility.
The Lessee shall not sell any electricity generated by the
Facility to any person other than the Power Purchaser.
(b) Inspection. The Owner Participant, the
Administrative Agent, the Lessor and their authorized
representatives, upon reasonable notice to the Lessee, shall have
the right, subject to the Lessee's safety rules and regulations,
to inspect the Facility and the Site at their expense, or, if a
Lease Event of Default has occurred and is continuing, at the
expense of the Lessee (including such inspections as may be
necessary to comply with Applicable Law and such inspections as
may be necessary to permit Lessor, Indenture Trustee or any Loan
Participant to exercise any rights such Person may have to
operate, take title to or transfer the Project). The Owner
Participant, the Administrative Agent, the Lessor and their
authorized representatives, upon reasonable notice to the Lessee,
shall have the right, at their expense, or, if a Lease Event of
Default has occurred and is continuing, at the expense of the
Lessee, to inspect the books and records of the Lessee relating
to the Facility and to make copies of and extracts therefrom
(other than copies of and extracts from proprietary data and
information) and may discuss the Lessee's affairs, finances and
accounts with its executive officers, all at such times and as
often as may be reasonably requested. None of the Owner
Participant, the Administrative Agent nor the Lessor shall have
any duty whatsoever to make any inspection or inquiry referred to
in this Section 8(b) nor shall they incur any liability or
obligation by reason of not making any such inspection or
inquiry.
(c) Modifications. The Lessee, at its expense (except
as provided in Section 8(e) hereof), shall make any Modification
required by any Applicable Law or Governmental Action (including,
without limitation, any Applicable Law or Governmental Action as
shall be necessary to avoid the Facility's losing its Qualifying
Facility status) unless the Lessee is contesting such Applicable
Law or Governmental Action in accordance with Section 8(h)
hereof. In addition, the Lessee, at its expense (except as
provided in Section 8(e) hereof), from time to time may make any
Modification that the Lessee may deem desirable in the conduct of
its business; provided, however, that the Lessee shall not have
the right to make any such optional Modification (i) if such
optional Modification, together with any optional Modifications
previously made, would diminish the utility, durability or
performance characteristics of the Facility or diminish the value
of the Facility, (ii) that will reduce the remaining useful life
of the Facility, (iii) that could cause the Facility to become
"limited use property" for Federal income tax purposes or (iv)
that would result in the Owner Participant being deemed to
receive additional income (as a result of such Modifications)
pursuant to the Code, regulations or Internal Revenue Service
guidelines, unless the Owner Participant is indemnified for all
taxes arising as a result of such additional income pursuant to
the Tax Indemnity Agreement and the Owner Participant is
reasonably satisfied that the Lessee has sufficient cash on hand
to pay such indemnity. On every other Basic Rent Payment Date,
commencing on the second Basic Rent Payment Date, the Lessee
shall provide to the Lessor a certificate of an Authorized
Officer of the Lessee which shall certify to the Lessor that from
the date of the last such certificate (or, in the case of the
first such certificate, from the Lease Closing Date to the date
of such certificate) the Lessee has not made optional
Modifications which diminish the value of the Project.
(d) Title to Modifications. Title to each
Modification shall vest as follows:
(i) in the case of each Nonseverable
Modification and each Severable Modification required by
Applicable Law or a Governmental Action, whether or not such
Modification is purchased (in whole or in part) by the
Lessor, the Lessor shall, without further act, effective on
the date such Modification shall have been incorporated into
the Facility, acquire title to such Modification;
(ii) in the case of each Severable Modification
not required by Applicable Law or Governmental Action, if
such Modification is purchased by the Lessor, the Lessor
shall, without further act, effective on the date such
Modification shall have been incorporated into the Facility,
acquire title to such Modification; and
(iii) in the case of each Severable Modification
not required by Applicable Law or Governmental Action, if
such Modification is not purchased by the Lessor, the Lessee
shall retain title to such Modification; provided, however,
that the Lessor shall have the option, exercisable by
irrevocable notice to the Lessee given not less than 30 days
prior to the Lease Termination Date (or within thirty days
after such date if the Lease is terminated in accordance
with the provisions of Section 15 hereof), to purchase such
Modification as of the Lease Termination Date for cash at a
price equal to the Fair Market Sales Value thereof, free and
clear of all Liens.
Immediately upon title to such Modification vesting in
the Lessor pursuant to subparagraph (i) or subparagraph (ii) of
this Section 8(d), such Modification shall, without further act,
become subject to this Lease and, if the Indenture is in effect,
to the Lien of the Indenture, and be deemed part of the Facility
for all purposes hereof.
(e) Funding of the Costs of Modifications. The Lessee
may request that the Owner Participant finance all or a portion
of the cost of any Modification on such terms as shall be
mutually acceptable to the Lessee and the Owner Participant and
consistent with the provisions of Section 3.11(b) of the
Indenture. The Owner Participant shall consider in good faith
any such request but shall not be under any obligation to provide
any financing. If the Owner Participant agrees to finance the
cost of any Modification, the Basic Rent Factors and Stipulated
Loss Values will be adjusted upward by an amount mutually
acceptable to the Lessor and the Owner Participant. The failure
or inability of the Owner Participant to finance a Modification
required by Applicable Law or Governmental Action shall not in
any manner affect the Lessee's obligation to make such
Modification.
(f) Removal of Property. Subject to compliance with
Applicable Law and Section 7.1 of the Participation Agreement and
so long as no Lease Default or Lease Event of Default shall have
occurred and be continuing, the Lessee may remove, sell, transfer
or dispose of any Severable Modification to which the Lessee
shall have title as provided in Section 8(d)(iii) hereof,
provided that, as soon as practicable after the removal of such
Severable Modification, the Lessee, at its expense, shall repair
any damage to the Facility caused by such removal and shall
restore any diminishment in value, utility, durability,
performance characteristics or useful life (other than the loss
of additional value, utility, durability or useful life directly
attributable to the Severable Modification) of the Facility
caused by such removal. The Lessee, at its expense, will
promptly replace all Parts which may from time to time become
worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use for any
reason whatsoever. The Lessee may, at its expense, remove in the
ordinary course of maintenance, service, repair, overhaul or
testing, any Parts, whether or not worn out, lost, stolen,
destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use, so long as the Lessee, at its
expense, promptly replaces such Parts. In addition, subject to
compliance with Applicable Law and so long as no Lease Default or
Lease Event of Default shall have occurred and be continuing, the
Lessee may remove any tangible property that is unnecessary and
can be removed without diminishing the value or utility or useful
life of the Facility; provided, however, that the consent of the
Administrative Agent and the Owner Participant shall be required
for the removal of any such tangible property if the aggregate
fair market sales value of all such tangible property previously
removed pursuant to this sentence shall exceed $100,000. If any
Part is removed from the Facility for the purpose of replacement
thereof with another Part, title to such removed Part shall
remain the property of the Lessor, no matter where such removed
Part is located, until such time as the Part constituting a
replacement thereof shall have been incorporated into the
Project, at which time, without further act, title to such
removed Part shall vest in the Lessee or in such Person as shall
be designated by the Lessee, free of the Lien and security
interest of the Indenture and the Collateral Security Documents.
Each such replacement Part shall be free and clear of all Liens,
other than Permitted Liens, and shall be in as good operating
condition as, and shall have a value, utility and useful life at
least equal to, that of the Part removed, it being assumed for
purposes of this sentence that such removed Part was in at least
the condition and state of repair required by Section 8(a)
hereof.
(g) Reports. To the extent permissible under
Applicable Law, the Lessee shall prepare (or cause to be
prepared) and file in a timely fashion, or, if the Lessor or the
Owner Participant shall be required to file, the Lessee shall
prepare or cause to be prepared and deliver to the Lessor or the
Owner Participant, as the case may be, within a reasonable time
prior to the date for filing, all reports with respect to the
Facility, or the condition or operation thereof, that shall be
required to be filed with any Governmental Authority. On or
before March 1 of each year (commencing on the first March 1 to
occur twelve months after the Lease Closing Date) and on the
Lease Termination Date, the Lessee shall furnish to the Lessor
and the Administrative Agent a report stating the total cost of
all Modifications and describing separately and in reasonable
detail each Modification (or related group of Modifications) made
during the period from the Lease Closing Date to the last day of
the calendar year occurring more than twelve months after the
Lease Closing Date, in the case of the first such report, and
during the period from the end of the period covered by the last
previous period to the December 31 immediately preceding such
report, in the case of subsequent reports.
(h) Contest of Applicable Law. If, with respect to
any requirement of Applicable Law or any Governmental Action
relating to the use, operation or maintenance of the Facility,
(i) the Lessee is contesting diligently and in good faith by
appropriate proceedings such requirement or Governmental Action,
or (ii) compliance with such requirement or Governmental Action
shall have been permanently excused or exempted by a valid
nonconforming use, permit or waiver, exempting the Lessor and/or
the Lessee from such requirement or Governmental Action or (iii)
the Lessee shall be making a good faith effort and shall be
diligently taking all appropriate steps to comply with such
requirement or Governmental Action and shall achieve compliance
therewith within 90 days, then, in each such case, the failure by
the Lessee to comply with such requirement or Governmental Action
shall not constitute a Default hereunder, provided that (A) such
contest or noncompliance does not, in the opinion of the Lessor,
the Administrative Agent and the Owner Participant, involve any
material danger of (1) the sale, foreclosure, forfeiture or loss
of the Facility, any Modification or the Site or any part
thereof, (2) criminal or civil liability being imposed on the
Lessor, the Security Agent, the Administrative Agent, any Loan
Participant, the Indenture Trustee, the Owner Participant or any
Affiliate thereof, (B) the Lessee shall have furnished to the
Lessor, the Administrative Agent and the Owner Participant an
opinion of counsel satisfactory to such parties to the effect
that there is a substantial likelihood of success for such
contest and (C) such contest or noncompliance could not
reasonably be expected to have a materially adverse effect on the
ability of the Lessee to pay Rent or otherwise to comply with the
provisions of and to perform its obligations under this Facility
Lease or any other Financing Document or other Transaction
Document. The Lessee shall provide the Lessor, the
Administrative Agent and the Owner Participant with notice of any
such contest or noncompliance in detail sufficient to enable the
Lessor, the Administrative Agent and the Owner Participant to
ascertain whether such contest may have any material adverse
effect of the type described in the immediately preceding
sentence. Notwithstanding anything to the contrary herein or in
any Financing Document or in any other Transaction Document, the
Lessee's use, maintenance and operation of the Facility shall be
in compliance in all material respects with the requirements of
all Applicable Laws and Governmental Actions at the end of the
Lease Term unless compliance with such Applicable Laws or
Governmental Actions shall have been permanently excused or
exempted by a valid nonconforming use, permit or waiver exempting
the Lessor and/or the Lessee from such compliance.
(i) Identification. The Lessee shall maintain in
prominent places on and about the Facility throughout the Lease
Term plates or other appropriate markings bearing the inscription
"PROPERTY OF FLEET NATIONAL BANK, AS OWNER TRUSTEE, AND LEASED TO
PANDA-BRANDYWINE, L.P." in letters not less than one-half inch in
height. In addition, so long as the Lien of the Indenture shall
not have been discharged, such inscription shall, within 60 days
of the Lease Closing Date, also include the following sentence:
"A deed of trust and security interest in this facility has been
granted to First Security Bank, National Association, as
Indenture Trustee." Except as provided or as otherwise directed
by the Lessor or Indenture Trustee, the Lessee shall not allow
the name of any Person other than that of the Lessee to be placed
on any part of the Project as a designation that might reasonably
be interpreted as a claim of ownership or right to possession or
use thereof, other than meters or other property or equipment
owned by the Power Purchaser or buildings dedicated for use by
the Power Purchaser which may be identified as being owned by, or
designated for use by, as the case may be, the Power Purchaser.
Lessee shall replace any such inscription which may be removed or
destroyed or become illegible or which shall no longer be correct
because of a change in the identity of the Lessor or the
Indenture Trustee and, to the extent necessary, to give notice of
the Indenture Trustee's security interest in the Facility.
SECTION 9. Event of Loss, Event of Regulation.
(a) Damage or Loss. If an Event of Loss shall occur,
or if a substantial part of the Facility shall suffer damage,
loss, condemnation, confiscation, theft or seizure that does not
constitute an Event of Loss, the Lessee shall promptly, and in
any case within 5 Business Days after such event, so notify the
Lessor, the Owner Participant, the Administrative Agent, the
Indenture Trustee and the Security Agent.
(b) Repair. If the Facility or any part thereof shall
suffer damage that does not constitute an Event of Loss, the
Lessee shall, or the Lessee shall cause the Operator to, make
such repairs as are necessary to ensure that the Facility is
maintained in the condition and state of repair required under
Section 8(a) hereof.
(c) Event of Loss; Payment of Stipulated Loss Value.
If an Event of Loss shall occur, the Lessee shall, at its option,
either (i) if (A) in the reasonable opinion of the Independent
Engineer, the period required to replace or repair the Facility
(the "Reconstruction Period") will not exceed twelve months and
the amount of the proceeds of casualty insurance or condemnation
awards, or the like, payable with respect to such Event of Loss
(net of the costs of obtaining such proceeds or awards), is
sufficient to repair or replace the Facility and to pay Rent and
all other expenses and liabilities of the Lessee during such
Reconstruction Period (including any additional costs or amounts
payable under the Project Documents or payable in connection with
the execution of any additional or replacement Project Documents)
as such Rent and other expenses and liabilities come due, (B) all
Governmental Actions required in connection with the work done or
proposed to be done have been obtained, (C) the Power Purchase
Agreement will remain in full force and effect during such
Reconstruction Period and (D) the Operating Cash Flow Ratio after
rebuilding the Facility will be at least 1.0 to 1.0 for each
Quarterly Measurement Period prior to the end of the Lease Term
(as reasonably determined by the Administrative Agent and the
Owner Participant), then, at its sole cost and expense, repair or
replace the Facility, in which case all proceeds of casualty
insurance and condemnation awards, or the like, shall be applied
to such repair or replacement and to the payment of such Rent and
other expenses and liabilities, or (ii) pay to the Lessor, as
soon as is reasonably practicable, but in any event within 90
days from the date of the Event of Loss (or, if earlier, upon the
receipt of insurance proceeds in respect thereof), the Stipulated
Loss Value determined as of the Basic Rent Payment Date next
succeeding the date of the Event of Loss, cash collateralize all
undrawn and outstanding Letters of Credit in the manner provided
for in the Reimbursement Agreement and, without duplication, pay
all Rent and other amounts payable that the Lessee has assumed,
agreed or is required to pay to, or for the account of, the
Lessor, the Loan Participants or the Owner Participant under this
Facility Lease, the Participation Agreement, the Tax Indemnity
Agreement or any other Transaction Document. From the date the
Event of Loss occurs, or is deemed to have occurred, to and
including the date of payment of such Stipulated Loss Value and
other amounts, all Rent shall continue to be paid when due. Upon
the payment of all such amounts, (x) the Lease Term shall end and
the obligations of the Lessee hereunder (other than any
obligation expressed herein as surviving termination of this
Facility Lease) shall cease as of the date of such payment and
(y) the Lessor shall effect a Transfer to the Lessee or as the
Lessee shall direct.
(d) Event of Regulation; Payment of Fair Market Sales
Value. If an Event of Regulation shall occur, the party hereto
having knowledge thereof shall promptly so notify the other
party. Following the occurrence of an Event of Regulation, the
Lessor may demand, by notice to the Lessee, that the Lessee
purchase all right, title and interest of the Lessor in and to
the Facility, the Site, and the Transaction Documents, and, on
the date specified in such notice (which date shall be no earlier
than the thirtieth day following such notice), the Lessee shall
purchase from the Lessor the right, title and interest of the
Lessor in and to the Facility, the Site, and the Transaction
Documents, for a purchase price equal to the sum of Stipulated
Loss Value and Swap Breakage Costs (the "Event of Regulation
Purchase Price") determined as of the date of such purchase. The
Lessor shall apply such Event of Regulation Purchase Price to the
repayment in full of the unpaid principal amount and accrued
interest owing under the Loan Certificates and the payment of all
amounts owing in respect of the early termination of the Interest
Hedging Agreement; provided, however, that upon such repayment in
full of the Loan Certificates, and provided that the Lien of the
Indenture shall have then been discharged (or shall be discharged
concurrently therewith), that portion of the amount payable by
the Lessee in connection with such a Transfer that is in excess
of the sum of the amount of the unpaid principal amount and
accrued interest owing under the Loan Certificates, and Swap
Breakage Costs shall be paid either (i) in cash or (ii) by the
issuance of a promissory note of the Lessee (the "Lessee Note")
payable to the order of the Lessor or its designee (which may be
the Owner Participant), in a principal amount equal to the amount
of such payment (the principal amount of such Lessee Note being
herein called the "Lessee Loan"), which note (i) shall have a
term equal to the remainder of the Basic Term, (ii) shall be
payable in equal consecutive quarterly installments of principal
and interest, (iii) shall bear interest at a rate per annum which
will maintain the Owner Participant's Net Economic Return (as
certified by the Owner Participant to the Lessee and, upon the
request and at the expense of the Lessee, as verified by KPMG
Peat Marwick or such other independent auditors as may be
selected by the Owner Participant and reasonably satisfactory to
the Lessee), (iv) shall be secured by a valid and perfected Lien
on the Lessee's interests in the Facility, which security
interest shall be first, prior and superior to all Liens (other
than Permitted Liens), and the mortgage granting such Lien,
together with customary opinions of counsel, shall be
satisfactory to the Owner Participant, and (v) shall be governed
by customary terms and conditions (and certain customary defaults
and remedies), substantially the same as those set forth in the
Construction Loan Agreement, as shall be agreed in good faith
between the Lessor and the Lessee; and provided, further that in
the event such Event of Regulation shall result from a Special QF
Loss Event or otherwise from the acts or omissions of the Owner
Trustee or Owner Participant or an Affiliate thereof, the Lessee
shall not be required to pay any amounts in respect of the early
termination of the Interest Hedging Agreement or Swap Breakage
Costs. When the purchase price of the Facility is paid
(including any and all accrued and unpaid Rent owing hereunder),
and the documents are recorded or filed as hereinabove provided,
(x) the Lease Term shall end and the obligations of the Lessee
hereunder (other than the covenants and agreements of the Lessee
set forth in Sections 7, 10 and 19 and any other obligations
expressed herein as surviving termination of this Lease) shall
cease and (y) the Lessor shall effect a Transfer to the Lessee.
The obligations of the Lessee to the Lessor, the Security Agent,
the Owner Participant, GE Capital or the Loan Participants under
the other Transaction Documents (including, in respect of the
Letters of Credit) shall not be affected and shall remain in full
force and effect. The Lessee shall pay the costs and expenses
(including reasonable legal fees) incurred by the Lessor, the
Owner Participant and the Administrative Agent in connection with
the purchase of the Facility by the Lessee and the other
transactions referred to in this Section 9(d).
(e) Requisition of Use. In the case of a requisition
of use not constituting an Event of Loss, this Facility Lease
shall continue, and each and every obligation of the Lessee
hereunder and under each Financing Document shall remain in full
force and effect; provided, the Lessee shall promptly notify the
Lessor, the Owner Participant, the Administrative Agent and the
Indenture Trustee of such requisition of use. The Lessee shall
be entitled to all sums received by reason of any such
requisition of use for the period ending on the Lease Termination
Date. The Lessor shall be entitled to all sums received by
reason of any such requisition of use for the period after the
Lease Termination Date.
(f) Application of Payments on an Event of Loss.
Except as otherwise provided in Section 9(c) hereof and subject
to the provisions of the Security Deposit Agreement, payments
received by the Lessor or the Lessee from any Governmental
Authority, insurer or other Person (other than proceeds of
insurance carried by or on behalf of the Lessor pursuant to
subsection 6.6(i)(iv) of the Participation Agreement) as a result
of an Event of Loss shall be promptly paid to the Lessor (or the
Security Agent so long as the Security Deposit Agreement is in
effect) and applied as follows:
(i) so much of such payments as shall not
exceed the amount required to be paid by the Lessee pursuant
to Section 9(c) hereof shall be applied in reduction of the
Lessee's obligation to pay such amount if the same has not
already been paid by the Lessee or, if the same has already
been paid by the Lessee, shall be applied to reimburse the
Lessee for its payment of such amount;
(ii) the balance, if any, of such payments from
an insurer shall be paid over to the Lessee; and
(iii) the balance, if any, of such payments other
than from an insurer shall be paid to the Lessor and the
Lessee as their respective interests in the Project may
appear.
(g) Application of Payments Not Relating to an Event
of Loss. Subject to the provisions of the Security Deposit
Agreement, payments received by the Lessor or by the Lessee
(other than proceeds of insurance carried by or on behalf of the
Lessor pursuant to subsection 6.6(i)(iv) of the Participation
Agreement), net of the costs of obtaining such proceeds or
awards, from any Governmental Authority, insurer or other Person
with respect to any destruction, damage, loss, condemnation,
confiscation, theft, seizure of or requisition of title to the
Project or any part thereof, in each case not constituting an
Event of Loss, shall be promptly paid to the Lessor and applied
as follows:
(i) so much of such payments as shall be
necessary to reimburse the Lessee for all amounts expended
by it pursuant to Section 9(b) hereof shall be paid over to
the Lessee from time to time as such expenditures occur,
upon receipt by the Lessor of invoices or other appropriate
evidence of such expenditures;
(ii) the balance, if any, of such payments from an
insurer shall be paid over to, or retained by, the Lessee;
and
(iii) the balance, if any, of such payments other
than from an insurer shall be paid to the Lessor and the
Lessee as their respective interests in the Project may
appear.
(h) Application During Default or Event of Default.
Notwithstanding the foregoing provisions of this Section 9, if a
Lease Default or Lease Event of Default shall have occurred and
be continuing, any amount that would otherwise be payable to or
for the account of, or that would otherwise be retained by, the
Lessee pursuant to subsection 6.6 of the Participation Agreement,
Section 10 hereof or this Section 9 shall be paid to the Security
Agent as security for the obligations of the Lessee under this
Facility Lease and the other Transaction Documents and, at such
time thereafter as no Lease Default or Lease Event of Default
shall be continuing, such amount shall be paid promptly to the
Lessee unless this Facility Lease shall have previously been
declared to be in default pursuant to Section 15 hereof, in which
event such amount shall be disposed of in accordance with the
provisions of the Security Deposit Agreement and the other
Collateral Security Documents.
SECTION 10. Insurance.
The Lessee shall at all times comply with subsection
6.6 of the Participation Agreement whether or not the
Participation Agreement shall be in effect, the provisions of
which are hereby incorporated by reference and deemed set forth
herein, mutatis mutandis.
SECTION 11. No Assignment or Sublease.
THE LESSEE WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT
OF THE LESSOR, ASSIGN OR SUBLEASE OR OTHERWISE IN ANY MANNER
DELIVER, TRANSFER OR RELINQUISH POSSESSION OF ALL OR ANY PORTION
OF THE FACILITY OR THE SITE OR ASSIGN ANY OF ITS RIGHTS OR
OBLIGATIONS HEREUNDER, EXCEPT PURSUANT TO THE STEAM LEASE.
SECTION 12. Lease Renewal; Purchase Option.
(a) Fixed Rate Renewal Option. Subject to the
requirements set forth in Section 13(a), (b) and (c) hereof,
unless a Lease Default or Lease Event of Default shall have
occurred and be continuing on the date that notice of renewal is
delivered by the Lessee pursuant to Section 13(a) or (b) or at
the end of the Basic Term or the initial Renewal Term, as the
case may be, the Lessee shall have the option to renew the term
of this Lease (the "Fixed Rate Renewal Option") at the end of the
Basic Term or the initial Renewal Term, as the case may be, for a
five-year period (each such period being herein called a "Fixed
Rate Renewal Term"). On or before the date the Lessee provides
its notice of renewal, the Lessee shall provide the Lessor a copy
of an opinion (the "Renewal Appraisal") of an independent expert
appraiser (the "Renewal Appraiser"), reasonably satisfactory in
form and substance to the Lessor, which shall demonstrate that at
the end of the Basic Term or any Fixed Rate Renewal Terms, the
Lease will meet all applicable IRS and accounting guidelines.
During the Fixed Rate Renewal Term, the Lessee shall pay to the
Lessor the Fixed Rate Renewal Basic Rent in quarterly
installments in arrears on each Basic Rent Payment Date during
such Renewal Term.
(b) Purchase Option. Subject to the requirements of
Section 13(a) or 13(b) hereof, as the case may be, and to Section
13(c) hereof, unless a Lease Default or Lease Event of Default
shall have occurred and be continuing at the end of the Basic
Lease Term or any Renewal Term, as the case may be, the Lessee or
its designee shall have the option to purchase all of the right,
title and interest of the Lessor in and to the Facility, the
Site, the Easements and the Transaction Documents for the Fair
Market Sales Value thereof (excluding any Modifications not
purchased by the Lessor) at the end of the Basic Term or any
Renewal Term; provided, however, if there is a Lease Default or
Lease Event of Default on the date the Lessee delivers notice
pursuant to Section 13(a) or (b) hereof, as the case may be, that
it will exercise an option to purchase under this Section 12(b)
and if the Lessor enters into an agreement to sell all of the
right, title and interest of the Lessor in and to the Facility,
the Site, and the Transaction Documents prior to (x) the end of
the Basic Lease Term or any Renewal Term, as the case may be, and
(y) the date on which the Lessee shall have remedied all Lease
Defaults and Lease Events of Default and delivered notice of such
cure to the Lessor, the Lessee shall have no option to purchase
pursuant to this Section 12(c) notwithstanding anything to the
contrary in this Lease.
(c) Purchase Date. In the event that the Lessee
elects to purchase the Facility in accordance with Section 12(b),
on the closing date of such purchase the Lessee shall pay to the
Lessor the applicable purchase price, together with an amount
equal to all costs and expenses (including reasonable legal fees
and expenses incurred or paid by the Lessor and the Owner
Participant in connection with such sale and this Facility Lease
shall terminate). Upon receipt of such amounts (and all other
amounts owing to the Lessor, the Indenture Trustee, the
Administrative Agent, the Security Agent, the Loan Participants,
and the Owner Participant under the Transaction Documents), the
Lessor shall effect a Transfer of the Facility, the Site and
Lessor's interest in the Easements and the Transaction Documents.
SECTION 13. Notices for Renewal or Purchase;
Determination of Fair Market Value.
(a) Expiration of Basic Term. Not less than 18 months
prior to the expiration date of the Basic Term, the Lessee shall
give to the Lessor written notice that it intends to exercise one
of the following options: (i) the option to renew this Facility
Lease for the Fixed Rate Renewal Term pursuant to Section 12(a)
hereof or (ii) the option to purchase the Facility, the Site and
the Transaction Documents pursuant to Section 12(b) hereof.
Failure to give such notice shall be deemed an irrevocable
election to return the Facility to the Lessor pursuant to Section
5 hereof.
(b) Expiration of Renewal Terms. Not less than 18
months prior to the expiration date of any Fixed Rate Renewal
Term, the Lessee shall give to the Lessor written notice that it
intends to exercise one of the following options: (i) the option
to renew this Lease for a Fixed Rate Renewal Term pursuant to
Section 12(a) hereof (such option is only exercisable during the
initial Renewal Term) or (ii) the option to purchase the
Facility, the Site and the Transaction Documents pursuant to
Section 12(b) hereof. Failure to give such notice shall be
deemed an irrevocable election to return the Facility to the
Lessor pursuant to Section 5 hereof.
(c) Elections Irrevocable. If the Lessee has given a
notice referred to in Section 13(a) or 13(b) hereof, not less
than 180 days prior to the expiration of the Basic Term or any
Renewal Term, as the case may be, the Lessee or its designee
shall give to the Lessor irrevocable written notice as to which
of such options pursuant to Section 12(a) or 12(b) hereof, as the
case may be, the Lessee or its designee has selected and such
election shall be binding on the Lessee.
(d) Determination of Fair Market Value. If the Lessee
shall give to the Lessor notice of its election to purchase the
Facility, the Site and the Transaction Documents pursuant to
Section 12(b) hereof, then, not later than six months prior to
the expiration date of the Basic Term or of the then current
Renewal Term, as the case may be, the Lessee and the Owner
Participant shall endeavor in good faith to agree on the Fair
Market Sales Value of the Facility, the Site, Lessor's interest
in the Easements and the Transaction Documents at the end of the
Basic Term or the then current Renewal Term, as the case may be.
If the Lessee and the Owner Participant are unable to agree upon
such Fair Market Sales Value, such Fair Market Sales Value shall
be determined by the Appraisal Procedure which, to the fullest
extent possible and consistent with the existing conditions,
shall use the same methodology and assumptions as were used in
the appraisal delivered pursuant to Section 5.1(u) of the
Participation Agreement and which shall not take into
consideration any renewal or purchase option of the Lessee.
SECTION 14. Events of Default.
The term "Lease Event of Default" or "Event of
Default", wherever used herein, shall mean any of the following
events (whatever the reason for such event and whether it shall
be voluntary or involuntary, or come about or be effected by
operation of Law, or be pursuant to or in compliance with any
Applicable Law or Governmental Action):
(a) The Lessee shall fail to make, or cause to be
made, (i) any payment of Basic Rent, or Stipulated Loss
Value within five Business Days after the same shall become
due or (ii) any payment of Supplemental Rent (other than
Stipulated Loss Value) including, without limitation,
Supplemental Rent pursuant to Section 18 hereof, within five
days after notice from the Person entitled thereto; or
(b) Any representation or warranty made by the Lessee
herein or in the Participation Agreement or by the Lessee,
any Partner or Holdings in any Transaction Document to which
the Lessee, such Partner or Holdings is a party, or any
representation, warranty or statement in any certificate,
financial statement or other document furnished to the
Lessor by or on behalf of the Lessee hereunder or the
Lessee, any Partner or Holdings under any Transaction
Document, shall prove to have been false or misleading in
any material respect as of the time made or deemed made and,
if such misrepresentation is capable of being corrected as
of a subsequent date and if such correction is being sought
diligently, such misrepresentation shall not have been
corrected as of a day within thirty calendar days following
notice thereof being given to the Lessee, such Partner or
Holdings, as the case may be, or any of the representations
contained in clause (ii) of Section 3.13, Section 3.20 or
Section 3.27 of the Participation Agreement shall cease to
be correct at any time; or
(c)(i) The Lessee shall fail to perform or observe any
of its covenants contained in Section 5, Section 7, Section
10 or Section 11 hereof or contained in Section 6.2(iv)
(unless such failure is due solely to the occurrence of a
Special QF Loss Event), Section 6.6 or Section 7 of the
Participation Agreement (and incorporated herein by
reference) or (ii) the Lessee shall fail to perform or
observe any other of its covenants contained in the
Participation Agreement (and incorporated herein by
reference) or in this Facility Lease (other than those
referred to in paragraphs (a) and (b) above and in clause
(i) of this paragraph (c)) and such failure shall continue
unremedied or unwaived for a period of 30 days after written
notice thereof from the Lessor to the Lessee, or in the
event that such failure cannot be cured during such 30-day
period despite the Lessee's best efforts to do so, the cure
period shall be extended by an additional 30 days, for a
total of 60 days, as long as the failure cannot be cured by
the payment of money, the Lessee has promptly commenced cure
of the default within the initial 30-day period and
thereafter diligently and continuously prosecutes such cure
and the failure is of such a nature that is capable of being
cured within 60 days; provided that no cure period shall be
provided for a failure to comply with any such covenant or
obligation if providing such cure period could reasonably be
expected to have a Material Adverse Effect; or
(d) The Lessee, any Partner, Panda, Holdings or any
Affiliate of any thereof shall fail to perform or observe
any of its covenants or obligations contained in any of the
Financing Documents (except those described in paragraphs
(a), (b) and (c) above) or shall breach or otherwise be in
default under any such Financing Document (except to the
extent that the applicable grace period, if any, under such
document has not expired). The Lessee or any Participant
shall fail to perform or observe in any material respect
the terms or conditions of any Project Document to which it
is a party or shall materially breach or otherwise be in
default under any such Project Document; provided that any
such failure or breach by a Participant (other than any
Specified Participant) shall not constitute an Event of
Default hereunder so long as such failure or breach (i) does
not give rise to a default under the Power Purchase
Agreement and (ii) does not have (nor could it reasonably be
expected to have) a Material Adverse Effect; or
(e) The Lessee or the General Partner or any other
Specified Participant (or its permitted successor) shall (i)
default in any payment of principal of or interest on any
Indebtedness beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness
was created; or (ii) default in the observance or
performance of any other agreement or condition relating to
any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, in each
case beyond the period of grace, if any, provided therein,
or any other event shall occur or condition exist, the
effect of which default or other event or condition is to
cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder
or holders) to cause, such Indebtedness to become due prior
to its stated maturity or to realize upon any collateral
given as security therefor; provided, however, with respect
to any Specified Participant other than the Lessee (or any
Affiliate thereof) or the Power Purchaser, any such event
described in clause (i) or (ii) shall not constitute an
Event of Default hereunder unless such event would (x) give
rise to a default under the Power Purchase Agreement or (y)
have (or could reasonably be expected to have) a Material
Adverse Effect; or
(f) Any Specified Participant (or its permitted
successor) shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial
part of its property, (ii) admit in writing its inability,
or be generally unable, to pay its debts as such debts
become due, (iii) make a general assignment for the benefit
of its creditors, (iv) commence a voluntary case under the
Bankruptcy Code (as now or hereafter in effect), (v) file a
petition seeking to take advantage of any other law relating
to bankruptcy, insolvency, reorganization, winding up, or
composition or readjustment of debts, (vi) fail to
controvert in a timely and appropriate manner, or acquiesce
in writing to, any petition filed against such Specified
Participant in an involuntary case under such Bankruptcy
Code, or (vii) take any partnership or corporate action for
the purpose of effecting any of the foregoing; provided,
that with respect to any Specified Participant other than
the Lessee (or any Affiliate thereof) or the Power
Purchaser, any such action or failure to act shall not
constitute an Event of Default hereunder unless such action
or failure to act would (x) give rise to a default under the
Power Purchase Agreement or (y) would have (or could
reasonably be expected to have) a Material Adverse Effect;
or
(g) A proceeding or case shall be commenced without
the application or consent of any Specified Participant (or
its permitted successor) in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization,
dissolution, winding-up, or the composition or readjustment
of debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of such Specified
Participant under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or
adjustment of debts or (iii) a warrant of attachment,
execution or similar process against all or a substantial
part of the assets of such Specified Participant, and such
proceeding or case shall continue undismissed, or any order,
judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in
effect, for a period of 60 or more days, or any order for
relief against such Specified Participant shall be entered
in an involuntary case under the Bankruptcy Code; provided,
that with respect to any Specified Participant other than
the Lessee (or any Affiliate thereof) or the Power
Purchaser, such proceeding or appointment shall not
constitute an Event of Default hereunder unless such action
or failure to act would (x) give rise to a default under the
Power Purchase Agreement or (y) would have (or could
reasonably be expected to have) a Material Adverse Effect;
or
(h) A judgment or judgments for the payment of money
in excess of $150,000 shall be rendered against the Lessee,
the Steam Host or the General Partner and (x) such judgment
or judgments shall remain in effect and unstayed and
unbonded for a period of 30 or more consecutive days or (y)
enforcement proceedings shall be commenced by any creditor
on any such judgments; or
(i) Any material provision of any Project Document
shall at any time for any reason cease to be valid and
binding or in full force and effect or any party thereto
shall so assert in writing; or any material provision of any
Project Document shall be declared to be null and void or
the validity or enforceability thereof shall be contested by
any party thereto or any Governmental Authority; or any
Participant shall deny that it has any further liability or
obligation under any Project Document to which it is a
party, except upon fulfillment of its obligations
thereunder; provided that with respect to any Project
Document (other than the Gas Contracts, the Power Purchase
Agreement and the Construction Contract), it shall not
constitute an Event of Default under this paragraph if (i)
the Partnership shall obtain a replacement agreement
satisfactory in form and substance to the Owner Participant
and the Administrative Agent (and, to the extent required
under the Power Purchase Agreement, the Power Purchaser)
with a Person reasonably satisfactory to the Owner
Participant and the Administrative Agent (and, to the extent
required, the Power Purchaser) within 30 days after such
invalidity, contest or denial shall have occurred and (ii)
such event does not give rise to a default under the Power
Purchase Agreement; or
(j) Any Collateral Security Document shall cease, for
any reason, to be in full force and effect or any party
thereto shall so assert in writing; any Collateral Security
Document shall cease to be effective to grant a perfected
Lien on the Collateral described therein with the priority
purported to be created thereby; or
(k) (i) The General Partner shall at any time cease to
be the managing general partner of the Lessee, or (ii) the
General Partner or the Limited Partner shall transfer, sell,
assign, mortgage, pledge or otherwise dispose of its equity
interest in the Lessee or the Project, or (iii) Holdings
shall transfer, sell, assign, mortgage, pledge or otherwise
dispose of its interest in any Partner or in any Affiliate
of any Partner (except, in the case of any Affiliate, as
contemplated by Section 8(e) of the Stock Pledge Agreement)
or (iv) Panda shall cease to directly or indirectly own 100%
of the capital stock of Holdings or indirectly own 100% of
the capital stock of the General Partner and the Limited
Partner, in each case without the Lessor's prior written
consent; provided, that the provisions of clauses (iii) and
(iv) notwithstanding, Holdings and Panda may transfer
interests in the General Partner and the Limited Partner so
long as (x) any such transfer is not prohibited by and is
made in accordance with the applicable provisions of the
Power Purchase Agreement, (y) Panda and Holdings (or, if
Panda and Holdings merge into each other or Holdings merges
into an intermediate entity between itself and Panda, the
surviving company of such merger) each continues to directly
or indirectly own at least 51% of the capital stock of the
General Partner and the Limited Partner and (z) any such
transfer is made subject to the Liens in favor of the
Security Agent under the Collateral Security Documents (and
any transferee shall so confirm the same); or
(l) The Lessee shall abandon the Facility for a period
longer than 30 consecutive days; or
(m) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section
4975 of the Code) involving any Plan, (ii) any "accumulated
funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan,
or (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate
any Single Employer Plan, which Reportable Event or
institution of proceedings is, in the reasonable opinion of
the Owner Participant or the Administrative Agent, likely to
result in the termination of such Plan for purposes of Title
IV of ERISA, or (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, or (v) the
Lessee or any Commonly Controlled Entity shall, or is, in
the reasonable opinion of the Owner Participant or the
Administrative Agent, likely to incur any liability in
connection with a withdrawal from, or the insolvency or
reorganization of, a Multiemployer Plan, or (vi) any other
event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (vi) above,
such event or condition, together with all other such events
or conditions, if any, could subject the Lessee to any tax,
penalty or other liabilities in the aggregate material in
relation to the business, operations, property or financial
or other condition of the Lessee; or
(n) the Facility at any time ceases to be a Qualifying
Facility (unless such event constitutes a Special QF Loss
Event); or
(o) any Governmental Action required for (x) the
execution, delivery or performance by the Lessee, any
General Partner or any Reporting Participant of its
respective rights and obligations under any of the
Transaction Documents or (y) the construction, ownership,
leasing or operation of the Project as contemplated by the
Transaction Documents, shall be revoked, terminated,
withdrawn, modified, suspended or withheld or shall cease to
be in full force or effect, or any proceeding shall be
commenced by or before any Governmental Authority for the
purpose of so revoking, terminating, withdrawing, modifying,
suspending or withholding any such Governmental Action and
such proceeding is not dismissed within 60 days of the
commencement thereof; and such revocation, termination,
withdrawal, modification, suspension, withholding or
cessation or such proceedings could reasonably be expected
to have a Material Adverse Effect; or
(p) a Reimbursement Event of Default shall have
occurred and be continuing; or
(q) The Limited Partner or the General Partner shall
breach any of its obligations under the Transfer Agreement;
or the Power Purchaser shall have given the Lessee a notice
of a "Fuel Default" (as defined in the Consent of the Power
Purchaser), which shall have given rise to a
"Fuel/Performance Failure" (as defined in the Consent of the
Power Purchaser); or an "Event of Default" shall occur under
Subsection 15.1 of the Power Purchase Agreement; or
(r) The Lessee shall (i) fail to furnish to the
Lessor, the Owner Participant and the Administrative Agent
an Annual QF Status Certificate pursuant to Section 6.30(b)
or (d) of the Participation Agreement on the day such
certificate is due or (ii) any Annual QF Status Certificate
furnished pursuant to Section 6.30(b) or (d) of the
Participation Agreement shall indicate that, during the
period covered by such certificate, the Steam Host purchased
an amount of steam under the Steam Sales Agreement which was
less than the QF Minimum Steam Take set forth in such
certificate; provided, that an Event of Default shall not be
deemed to have occurred so long as either:
(A)(i) such Annual QF Status Certificate indicates
that the Facility met the QF Operating Standard for the
period covered by such certificate and (ii) on or prior to
the day that is 7 days after the last day of the period
covered by such certificate, the Steam Host shall have
purchased under the Steam Sales Agreement, during the period
covered by such certificate plus this additional 7-day
period, an amount of steam at least equal to the QF Minimum
Steam Take as determined for purposes of such certificate;
or
(B)(i) the Lessee shall have obtained from FERC an
order granting the Lessee a waiver of the QF Operating
Standard for the Initial QF Standards Measurement Period or
the QF Standards Measurement Period, as the case may be, for
which such certificate was furnished and (ii) such order
shall have become final and not subject to appeal and shall
not have become the subject of any judicial or
administrative proceedings.
SECTION 15. Remedies.
(a) Remedies. Upon the occurrence of any Event of
Default and at any time thereafter so long as the same shall be
continuing the Lessor at its option may, by notice to the Lessee,
declare this Lease to be in default (provided that this Lease
shall be deemed to have been declared in default without the
necessity of such notice upon the occurrence of any Event of
Default described in paragraph (f) or (g) of Section 14) and at
any time thereafter the Lessor may, to the extent permitted by
Applicable Law, exercise one or more of the following remedies,
as the Lessor in its sole discretion shall elect:
(i) the Lessor may (x) demand that the Lessee,
and thereupon the Lessee shall, at the Lessee's expense,
return possession of the Facility promptly to the Lessor in
the manner and condition required by, and otherwise in
accordance with the provisions of, Section 5 hereof, and (y)
take all action required to enable the Lessor to, and
thereafter, enter upon the Site and the Easements and take
possession (to the exclusion of the Lessee) of the Facility,
all without liability to the Lessor for or by reason of such
entry or taking of possession, whether for the restoration
of damage to property caused by such taking or otherwise;
(ii) the Lessor may sell the Facility or any
part thereof, either together with, or without, any interest
of the Lessor under the Site Lease and the Easements, at
public or private sale, as the Lessor may determine, free
and clear of any rights of the Lessee therein and without
any duty to account to the Lessee with respect to such sale
or for the proceeds thereof (except to the extent required
by clause (iv) or (v) below if the Lessor shall elect to
exercise its rights thereunder), in which event the Lessee's
obligation to pay Basic Rent with respect to the Facility or
the part thereof that has been sold (and as to which the
Lessee shall have been deprived of the use thereof), for
periods commencing after the date of such sale shall
terminate (except to the extent that Basic Rent is to be
included in computations under clause (iv) or (v) below if
the Lessor shall elect to exercise its rights thereunder);
(iii) the Lessor may hold, keep idle or lease to
others the Facility or any part thereof, as the Lessor in
its discretion may determine, free and clear of any rights
of the Lessee therein and without any duty to account to the
Lessee with respect to such action or inaction or any
proceeds with respect thereto, except that the Lessee's
obligation to pay Basic Rent for periods commencing after
the Lessee shall have been deprived of use of the Facility
pursuant to this clause (iii) shall be reduced by an amount
equal to the net proceeds, if any, received by the Lessor
from leasing the Facility to any Person other than the
Lessee for the same periods or any portion thereof;
(iv) the Lessor may, whether or not the Lessor
shall have exercised or shall thereafter at any time
exercise its rights under clause (i), (ii) or (iii) above,
by notice to the Lessee specifying a payment date (which
shall be not earlier than 10 days after the date of such
notice), demand that the Lessee pay to the Lessor, and the
Lessee shall pay to the Lessor, on the payment date
specified in such notice, as liquidated damages for loss of
a bargain and not as a penalty (in lieu of the Basic Rent
due after the Basic Rent Payment Date occurring on or
immediately succeeding the payment date specified in such
notice), any unpaid Rent due as of the Basic Rent Payment
Date occurring on or immediately succeeding the payment date
specified in such notice plus whichever of the following
amounts the Lessor, in its sole discretion, shall specify in
such notice (together with interest on such amount at the
Overdue Rate from the payment date specified in such notice
to the date of actual payment):
(A) an amount equal to the excess, if any,
of (1) Stipulated Loss Value, computed as of the Basic
Rent Payment Date occurring on or immediately
succeeding the payment date specified in such notice,
over (2) the Fair Market Rental Value of the Project
(determined on the basis of the then actual condition
of the Facility) for the remainder of the Lease Term
after discounting such Fair Market Rental Value
semiannually to present value as of the Basic Rent
Payment Date occurring on or immediately succeeding the
payment date specified in such notice at the Discount
Rate; or
(B) an amount equal to the excess, if any,
of (1) such Stipulated Loss Value over (2) the Fair
Market Sales Value of the Facility (determined on the
basis of the then actual condition of the Project) as
of the payment date specified in such notice; or
(C) an amount equal to the Stipulated Loss
Value as of the Basic Rent Payment Date occurring on or
next succeeding the payment date specified in such
notice and, in this event, upon payment by the Lessee
of all amounts payable by it hereunder and under the
other Transaction Documents, the Lessor shall effect a
Transfer to the Lessee and the Lease Term shall end and
all the Lessee's obligations hereunder (other than any
obligations expressed herein as surviving termination
of this Lease) shall cease; or
(v) if the Lessor shall have sold all the
Facility pursuant to clause (ii) above, the Lessor, if it
shall so elect, in lieu of exercising its rights under
clause (iv) above with respect to the Facility, by notice to
the Lessee may demand that the Lessee pay to the Lessor, and
the Lessee shall pay to the Lessor on the date specified in
such demand, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of Basic Rent due for periods
commencing after the next Basic Rent Payment Date following
the date of such sale), any unpaid Rent due as of the next
Basic Rent Payment Date following the date of such sale,
plus the amount of any deficiency between the Sale Proceeds
and Stipulated Loss Value, computed as of such Basic Rent
Payment Date, together with interest at the Overdue Rate on
the amount of such Rent and such deficiency from the date
specified for payment until the date of actual payment; or
(vi) the Lessor may rescind or terminate this
Facility Lease or may exercise any other right or remedy
that may be available to it under Applicable Law or proceed
by appropriate court action to enforce the terms hereof or
to recover damages for the breach hereof.
(b) No Release. Except as provided in Section 15(a)
hereof, no rescission or termination of this Facility Lease, in
whole or in part, or repossession of the Facility or exercise of
any remedy under Section 15(a) hereof shall relieve the Lessee of
any of its obligations under this Facility Lease. In addition,
except as aforesaid, the Lessee shall be liable for any and all
unpaid Rent due hereunder before, after or during the exercise of
any of the foregoing remedies, including all reasonable legal
fees and other costs and expenses incurred by the Lessor, the
Owner Participant, the Security Agent, the Indenture Trustee and
the Administrative Agent by reason of the occurrence of any Event
of Default or the exercise of the Lessor's remedies with respect
thereto. At any sale of the Facility or any part thereof
pursuant to this Section 15, the Lessor, the Security Agent, the
Administrative Agent,the Owner Participant, the Indenture Trustee
or any Loan Participant may bid for and purchase such property.
(c) Remedies Cumulative. Except as expressly set
forth therein, no remedy under Section 15(a) hereof is intended
to be exclusive, but each shall be cumulative and in addition to
any other remedy provided thereunder or otherwise available to
the Lessor at law or in equity. No express or implied waiver by
the Lessor of any Default or Event of Default hereunder shall in
any way be, or be construed to be, a waiver of any future or
subsequent Default or Event of Default. The failure or delay of
the Lessor in exercising any right granted it hereunder upon any
occurrence of any of the contingencies set forth herein shall not
constitute a waiver of any such right upon the continuation or
recurrence of any such contingency or similar contingencies and
any single or partial exercise of any particular right by the
Lessor shall not exhaust the same or constitute a waiver of any
other right provided herein. To the extent permitted by
Applicable Law, the Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise that may require the
Lessor to sell, lease or otherwise use the Facility in mitigation
of the Lessor's damages as set forth in paragraph (a) of this
Section 15 or that may otherwise limit or modify any of the
Lessor's rights and remedies provided in this Section 15.
(d) Waiver. To the extent permitted by Applicable
Law, the Lessee hereby waives any notice of termination or
intention to reenter provided for in any statute, or of the
institution of legal proceedings for that purpose, and in
addition waives any right of redemption or reentry or
repossession, or to restore the operation of this Lease if it is
terminated or if the Lessee is dispossessed by any judgment or by
warrant of any court or judge in the case of reentry or
repossession by the Lessor, or in the case of expiration of the
Lease Term. The Lessee, in addition, waives any and all benefits
of any and all Laws now or hereafter in force or effect exempting
property of the Lessee from liability for rent or for debt. The
Lessee also expressly waives:
(i) any and all rights of redemption granted by
or under any present or future laws in the event of the
Lessee being evicted or dispossessed for any cause, or in
the event of the Lessor obtaining possession of the
Facility, by reason of the violation by the Lessee of any of
the covenants or conditions of this Lease, or otherwise' and
(ii) the right, if any, to three months notice
and/or fifteen (15) or thirty (30) days' notice under the
Landlord and Tenant Act of 1951, as amended.
(e) Allocation of Basic Rent. If for the purpose of
Section 15(a)(ii) hereof it shall become necessary to allocate a
portion of the Basic Rent payable hereunder to any part of the
Facility, such allocation shall be in the same proportion as the
original cost of such part bears to Lessor's Cost.
SECTION 16. Notices.
All communications, declarations, demands and notices
provided for in this Facility Lease shall be in writing and shall
be given in person or by means of telex, telecopy, or other wire
transmission, or mailed by registered or certified mail, or sent
by courier, addressed as provided in the Participation Agreement
or, in the case of the Lessor, addressed to it at 777 Main
Street, Hartford, Connecticut, 06115, Attention: Corporate Trust
Administration, with a copy to the Owner Participant and the
Administrative Agent at their respective addresses provided in
the Participation Agreement. All such communications,
declarations, demands and notices given in such manner shall be
effective as specified in the Participation Agreement.
SECTION 17. Successors and Assigns.
This Facility Lease, including all agreements,
covenants, indemnities, representations and warranties contained
herein, shall be binding upon and inure to the benefit of the
Lessor and the Lessee and their respective successors and
permitted assigns (including the Indenture Trustee).
SECTION 18. Right to Perform for Lessee.
If Lessee fails to make any payment of Rent required to
be made hereunder or fails to perform or comply with any of its
agreements, covenants or obligations herein or hereunder, the
Owner Participant, the Indenture Trustee, the Administrative
Agent or the Lessor may, after notice to the Lessee, to the
extent permitted by Applicable Law and the Lessee's failure to
promptly cure such non-performance, but shall not be obligated
to, to the extent not prohibited by Applicable Law, itself make
any such payment or perform or comply with any such agreement,
covenant or obligation as the Lessee shall be obligated to pay,
perform or comply with under this Facility Lease, and the amount
of such payment and the amount of the reasonable expenses of the
Owner Participant, the Indenture Trustee, the Administrative
Agent or the Lessor incurred in connection with such payment or
the performance or compliance with such agreement, covenant or
obligation, as the case may be, together with interest thereon at
the Overdue Rate, shall be deemed Supplemental Rent, payable by
the Lessee upon demand.
SECTION 19. General Covenants.
The Lessee agrees, for the benefit of the Lessor, to
comply with its covenants and agreements set forth in Sections 6
and 7 of the Participation Agreement and its covenants and
agreements set forth in Articles X and XI of the Site Lease,
which covenants and agreements are incorporated herein by this
reference as fully as if set forth in full at this place. The
Lessee further agrees, during the Lease Term, to perform all
covenants, agreements and obligations imposed by the Site Lease
upon the Site Lessee.
SECTION 20. Amendments and Miscellaneous.
(a) Amendments in Writing. The provisions of this
Lease may not be waived, altered, modified, amended, supplemented
or terminated in any manner whatsoever except by written
instrument signed by the Lessor, the Lessee and, to the extent
required by the Power Purchase Agreement, the Power Purchaser.
(b) Survival. All indemnities, representations and
warranties contained or incorporated by reference in this
Facility Lease shall survive, and shall continue in effect
following, the execution and delivery of this Facility Lease and
the expiration or termination of this Facility Lease. The
obligations of the Lessee to pay Supplemental Rent and the
obligations of the Lessee and the Lessor under Sections 5, 6(a),
7(a), 9(b), 9(c), 9(d), 9(f), 9(g), 15, 17, 18, 19, 20(b), 20(c),
20(d) and 20(f) hereof shall survive the expiration or
termination of this Facility Lease.
(c) Severability of Provisions. Any provision of this
Facility Lease that may be determined by competent authority to
be prohibited or unenforceable in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by Applicable Law, the
Lessee hereby waives any provision of law that renders any
provision hereof prohibited or unenforceable in any respect.
(d) True Lease. This Facility Lease is intended as,
and shall constitute, an agreement of lease for all purposes
including for federal income tax purposes, and nothing herein
shall be construed as conveying to the Lessee any right, title or
interest in or to the Facility except as a lessee.
(e) GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW
YORK, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE
LEASEHOLD ESTATES HEREUNDER AND THE EXERCISE OF RIGHTS AND
REMEDIES WITH RESPECT TO SUCH LEASEHOLD AND ESTATES, WHICH SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF MARYLAND TO THE EXTENT MANDATORILY APPLICABLE.
(f) SUBMISSION TO JURISDICTION. (a) THE LESSEE
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
1. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS FACILITY LEASE, OR ANY
OTHER FINANCING DOCUMENT OR FOR RECOGNITION AND ENFORCEMENT
OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE
GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK,
THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
2. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES
NOT TO PLEAD OR CLAIM THE SAME;
3. AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION
OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR
FORM OF MAIL), POSTAGE PREPAID TO THE LESSEE AT ITS ADDRESS
SPECIFIED IN SUBSECTION 13.2 OF THE PARTICIPATION AGREEMENT
AND, IF APPLICABLE, TO LESSOR AT ITS ADDRESS SET FORTH
HEREIN OR AT SUCH OTHER ADDRESS OF WHICH THE LESSEE, IF
APPLICABLE, SHALL HAVE BEEN NOTIFIED PURSUANT HERETO; AND
4. AGREES THAT NOTHING HEREIN OR THEREIN SHALL AFFECT
THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY
OTHER JURISDICTION.
(g) WAIVER. EACH OF THE LESSEE AND LESSOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT
OR ANY OTHER TRANSACTION DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
(h) Headings. The division of this Facility Lease
into sections, the provision of a table of contents and the
insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation of this
Facility Lease.
(i) Counterpart Execution. This Facility Lease may be
executed in two counterparts and by each of the parties hereto in
separate counterparts (except that only the counterpart bearing
the receipt executed by the Indenture Trustee shall be the
original for purposes of perfecting a security interest therein
as chattel paper under the Uniform Commercial Code), such
counterparts together constituting but one and the same
instrument.
(j) Limitation of Liability. (i) There shall be full
recourse to the Partnership and all of its assets for the
liabilities of the Lessee under this Facility Lease and the other
Lessee Obligations, but in no event shall any Partner, Affiliate
of any Partner, or any officer, director or employee of the
Partnership, any Partner or their Affiliates or any holder of any
equity interest in any Partner be personally liable or obligated
for such liabilities and Lessee Obligations except as may be
specifically provided in any other Transaction Document to which
such Partner is a party or in the event of fraudulent actions,
knowing misrepresentations, gross negligence or wilful misconduct
by the Partnership, any Partner or any of their Affiliates in
connection with this Facility Lease. Subject to the foregoing
limitation on liability, the Lessor may sue or commence any suit,
action or proceeding against, any Partner or Affiliate in order
to obtain jurisdiction over the Lessee in order to enforce its
rights and remedies hereunder. Nothing herein contained shall
limit or be construed to limit the liabilities and obligations of
any Partner or any Affiliate in accordance with the terms of any
other Transaction Document creating such liabilities and
obligations to which such Partner or Affiliate is a party.
(ii) Fleet National Bank (f/k/a Shawmut Bank
Connecticut, National Association) is entering into this Facility
Lease solely as Owner Trustee under the Trust Agreement and not
in its individual capacity except as expressly set forth herein.
Accordingly, each of the representations, warranties,
undertakings and agreements herein made on the part of the
Lessor, is made and intended not as a personal representation,
warranty, undertaking or agreement by or for the purpose or with
the intention of binding Fleet National Bank (f/k/a Shawmut Bank
Connecticut, National Association) personally, but is made and
intended for the purpose of binding only the Trust Estate (except
as otherwise expressly set forth herein). This Facility Lease is
executed and delivered by the Lessor solely in the exercise of
the powers expressly conferred upon it as trustee under the Trust
Agreement; and no personal liability or responsibility is assumed
hereunder by or shall at any time be enforceable against Fleet
National Bank (f/k/a Shawmut Bank Connecticut, National
Association) or any successor in trust on account of any action
taken or omitted to be taken or any representation, warranty,
undertaking or agreement hereunder of the Lessor, either
expressed or implied, all such personal liability, if any, being
expressly waived by the parties hereto, except that the parties
hereto, or any Person acting by, through or under them, making a
claim hereunder, may look to the Trust Estate for satisfaction of
the same and Fleet National Bank of Connecticut (f/k/a Shawmut
Bank Connecticut, National Association) or its successor in
trust, as applicable, shall be personally liable for its own
gross negligence or willful misconduct in the performance of its
duties as Owner Trustee or otherwise.
(k) Copies of Notices. The Lessee agrees to furnish
to the Owner Participant and the Administrative Agent at their
respective addresses set forth in subsection 13.2 of the
Participation Agreement a copy of each notice, demand or other
written communication which it delivers to the Lessor hereunder.
(l) Certain Rights of Power Purchaser. Nothing in
this Facility Lease shall be deemed to limit the provisions of
the Consent of the Power Purchaser, which provisions are solely
for the benefit of the Power Purchaser and not the Lessee.
Without limiting the scope of the foregoing, the Lessor agrees,
for the exclusive benefit of the Power Purchaser and not the
Lessee, that the exercise of remedies or any similar action under
this Facility Lease is subject to, and shall be conducted in a
manner consistent with, the Power Purchaser's rights under (i)
the Consent of the Power Purchaser and (ii) the Power Purchase
Agreement and the Transfer Agreement (to the extent such rights
under the Power Purchase Agreement and the Transfer Agreement are
not explicitly waived by the Power Purchaser in accordance with
the terms of the Consent of the Power Purchaser).
(m) Assignment to Indenture Trustee. In order to
secure the indebtedness evidenced by the Loan Certificates and
certain other obligations as provided in the Indenture, the
Indenture provides, among other things, for the assignment by
Lessor to the Indenture Trustee of all of its right, title and
interest in, to and under this Facility Lease, to the extent set
forth in the Indenture, and for the creation of a Lien on and
security interest in the Lessor's Estate in favor of the
Indenture Trustee, and in furtherance thereof, Lessee and Lessor
have entered into the Security Deposit Agreement with the
Security Agent. The Lessee hereby acknowledges and consents to
such assignment and such security interest and hereby
acknowledges that to the extent set forth in the Indenture, the
Indenture Trustee shall have the right in its own name (in
certain cases together with the Owner Trustee and in other cases
to the exclusion of the Owner Trustee, all as set forth in
Section 3.10 of the Indenture) to take or refrain from taking
action under this Facility Lease, including the right (i) of the
Lessor to exercise any election or option, and to make any
decision or determination, and to give any notice, consent,
waiver or approval under this Facility Lease or in respect
thereof, (ii) to exercise any and all of the rights, powers and
remedies of the Lessor hereunder and (iii) to receive all moneys
payable to the Lessor under this Facility Lease. Lessee agrees
it will make all payments payable to Lessor hereunder in
accordance with the provisions of the Security Deposit Agreement.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Facility Lease to be duly executed in New York, New
York, by an officer thereunto duly authorized as of the date and
year first above written.
FLEET NATIONAL BANK not in its
individual capacity but solely as
Owner Trustee, as Lessor
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
Address: 777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust
Administration
PANDA-BRANDYWINE, L.P., as Lessee
By: PANDA BRANDYWINE CORPORATION,
its general partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
Address: 4100 Spring Valley
Suite 1001
Dallas, Texas 75244
Receipt of this original counterpart of the Lease is
hereby acknowledged on this day of , 1996.
Indenture Trustee:
not in its individual capacity, but
solely as Indenture Trustee
By:
Name:
Title:
Schedule A to Facility Lease
Facility Description
The Brandywine facility is a 230 megawatt natural gas-
fired qualifying cogeneration facility and a distilled water
facility located in Brandywine, Maryland. This facility
includes, but is not limited to, the following equipment:
Steam Generator
Air Pollution Control Equipment
Turbine Generator
Condenser
Cooling Tower
Distributed Control System
Instrumentation
Switchyard
Fuel Handling
Fans
Feedwater Pumps
Circulation Pumps
Fire Protection
Demineralizer
Piping and Valves
Electrical and Wiring
Concrete
Insulation
Buildings
Distilled Water Facility (as described on Schedule A-1 hereto)
Schedule A-1 to the Facility Lease
DISTILLED WATER FACILITY DESCRIPTION
The Distilled Water facility is located in Prince
George's County, Maryland. This facility consists of, but is not
limited to, the following:
Part I
Piperacks and miscellaneous supports (including grating)
Packaged distilled water system
Distilled water storage tank - 220,000 gallons
Truck filling pumps
Sump pumps
12" steam supply from Facility
Piping for Distilled Water Facility systems: circ. water, drains,
pump suction and discharge, tank, sumps, fire protection,
acid, potable water, including safety shower and eye wash
station
Electrical equipment including: MCCs, transformer, circuit
breakers, panels and local control stations
Raceway including conduit, cable tray and fittings
Wire, cable and terminations
Lighting, grounding and miscellaneous systems
Instrumentation
Insulation
Part II
Structural excavation for foundations
Backfill and placement for foundations
Paving required including subbase and base course
Chain link fence
Drainage pipe
Catch basins
Landscaping - trees and shrubs
Foundations and slabs for building, tank, equipment, sumps,
piperack and loading/unloading area
Painting
Pre-engineered building - 40'x50'x26' (including doors, HVAC and
fire protection)
Schedule C to Facility Lease
Basic Rent
Basic Rent Factors
Basic Rent Payment (Expressed as a Percentage
Dates of Lessor's Cost) Basic Rent ($)
January 31, 1997 0.00000000 0.00
April 30, 1997 1.20029675 2,610,509.14
July 31, 1997 1.20029675 2,610,509.14
October 31, 1997 1.20029675 2,610,509.14
January 31, 1998 1.20029675 2,610,509.14
April 30, 1998 1.19683328 2,602,976.48
July 31, 1998 1.19683328 2,602,976.48
October 31, 1998 1.19683328 2,602,976.48
January 31, 1999 1.19683328 2,602,976.48
April 30, 1999 2.29620246 4,993,979.62
July 31, 1999 2.29620246 4,993,979.62
October 31, 1999 2.29620246 4,993,979.62
January 31, 2000 2.29620246 4,993,979.62
April 30, 2000 2.37488883 5,165,113.54
July 31, 2000 2.37488883 5,165,113.54
October 31, 2000 2.37488883 5,165,113.54
January 31, 2001 2.37488883 5,165,113.54
April 30, 2001 3.13407979 6,816,267.67
July 31, 2001 3.13407979 6,816,267.67
October 31, 2001 3.13407979 6,816,267.67
January 31, 2002 3.13407979 6,816,267.67
April 30, 2002 3.21146101 6,984,563.04
July 31, 2002 3.21146101 6,984,563.04
October 31, 2002 3.21146101 6,984,563.04
January 31, 2003 3.21146101 6,984,563.04
April 30, 2003 3.20786720 6,976,746.91
July 31, 2003 3.20786720 6,976,746.91
October 31, 2003 3.20786720 6,976,746.91
January 31, 2004 3.20786720 6,976,746.91
April 30, 2004 3.15604880 6,864,047.77
July 31, 2004 3.15604880 6,864,047.77
October 31, 2004 3.15604880 6,864,047.77
January 31, 2005 3.15604880 6,864,047.77
April 30, 2005 3.17283124 6,900,547.67
July 31, 2005 3.17283124 6,900,547.67
October 31, 2005 3.17283124 6,900,547.67
January 31, 2006 3.17283124 6,900,547.67
April 30, 2006 3.24021670 7,047,103.40
July 31, 2006 3.24021670 7,047,103.40
October 31, 2006 3.24021670 7,047,103.40
January 31, 2007 3.24021670 7,047,103.40
April 30, 2007 3.45664779 7,517,816.44
July 31, 2007 3.45664779 7,517,816.44
October 31, 2007 3.45664779 7,517,816.44
January 31, 2008 3.45664779 7,517,816.44
April 30, 2008 3.50922174 7,632,158.81
July 31, 2008 3.50922174 7,632,158.81
October 31, 2008 3.50922174 7,632,158.81
January 31, 2009 3.50922174 7,632,158.81
April 30, 2009 3.59615670 7,821,232.48
July 31, 2009 3.59615670 7,821,232.48
October 31, 2009 3.59615670 7,821,232.48
January 31, 2010 3.59615670 7,821,232.48
April 30, 2010 3.81771181 8,303,089.69
July 31, 2010 3.81771181 8,303,089.69
October 31, 2010 3.81771181 8,303,089.69
January 31, 2011 3.81771181 8,303,089.69
April 30, 2011 4.12919795 8,980,536.67
July 31, 2011 4.12919795 8,980,536.67
October 31, 2011 4.12919795 8,980,536.67
January 31, 2012 4.12919795 8,980,536.67
April 30, 2012 4.64822566 10,109,363.00
July 31, 2012 4.64822566 10,109,363.00
October 31, 2012 4.64822566 10,109,363.00
January 31, 2013 4.64822566 10,109,363.00
April 30, 2013 4.81119481 10,463,802.40
July 31, 2013 4.81119481 10,463,802.40
October 31, 2013 4.81119481 10,463,802.40
January 31, 2014 4.81119481 10,463,802.40
April 30, 2014 4.91283292 10,684,853.75
July 31, 2014 4.91283292 10,684,853.75
October 31, 2014 4.91283292 10,684,853.75
January 31, 2015 4.91283292 10,684,853.75
April 30, 2015 4.73222658 10,292,055.47
July 31, 2015 4.73222658 10,292,055.47
October 31, 2015 4.73222658 10,292,055.47
January 31, 2016 4.73222658 10,292,055.47
April 30, 2016 4.33548907 9,429,196.43
July 31, 2016 4.33548907 9,429,196.43
October 31, 2016 4.33548907 9,429,196.43
Schedule D to Facility Lease
Stipulated Loss Value
(Does Not Include Accrued Basic Rent)
Stipulated Loss Value
(Expressed as a Percentage
Basic Rent Payment Dates of Lessor's Cost)
January 31, 1997 103.5835176
April 30, 1997 105.0818708
July 31, 1997 1065606003
October 31, 1997 108.0346849
January 31, 1998 109.5404455
April 30, 1998 111.0243886
July 31, 1998 112.4934824
October 31, 1998 113.9614550
January 31, 1999 115.4647321
April 30, 1999 115.8413064
July 31, 1999 116.2133821
October 31, 1999 116.5829078
January 31, 2000 116.9952710
April 30, 2000 117.2887505
July 31, 2000 117.5774056
October 31, 2000 117.8649491
January 31, 2001 118.2133382
April 30, 2001 117.7702829
July 31, 2001 117.3125097
October 31, 2001 116.8374231
January 31, 2002 116.3819144
April 30, 2002 115.7923177
July 31, 2002 115.1885155
October 31, 2002 114.5659027
January 31, 2003 113.9699963
April 30, 2003 113.3091352
July 31, 2003 112.6349848
October 31, 2003 111.9418678
January 31, 2004 111.2799687
April 30, 2004 110.6219010
July 31, 2004 109.9648015
October 31, 2004 109.3029443
January 31, 2005 108.6934086
April 30, 2005 108.0206457
July 31, 2005 107.3485249
October 31, 2005 106.6706979
January 31, 2006 106.0337316
April 30, 2006 105.2782399
July 31, 2006 104.5285936
October 31, 2006 103.7773433
January 31, 2007 103.0616258
April 30, 2007 102.0837241
July 31, 2007 101.1065038
October 31, 2007 100.1201405
January 31, 2008 99.1615295
April 30, 2008 98.1009635
July 31, 2008 97.0465823
October 31, 2008 95.9873911
January 31, 2009 94.9837308
April 30, 2009 93.8307069
July 31, 2009 926818851
October 31, 2009 91.5247731
January 31, 2010 90.3961988
April 30, 2010 88.9881069
July 31, 2010 87.5781992
October 31, 2010 86.1514123
January 31, 2011 84.7442992
April 30, 2011 82.9562116
July 31, 2011 81.1571049
October 31, 2011 79.3285664
January 31, 2012 77.5251655
April 30, 2012 75.1059818
July 31, 2012 72.6594327
October 31, 2012 70.1621122
January 31, 2013 67.6494783
April 30, 2013 64.8607552
July 31, 2013 62.0489710
October 31, 2013 591883544
January 31, 2014 56.3142524
April 30, 2014 53.2247758
July 31, 2014 50.1048472
October 31, 2014 46.9265093
January 31, 2015 43.7313060
April 30, 2015 40.5506215
July 31, 2015 37.2706782
October 31, 2015 33.8626356
January 31, 2016 30.3223928
April 30, 2016 27.0167931
July 31, 2016 23.5831704
October 31, 2016 20.0000000
EXHIBIT 10.27
STEAM LEASE
Dated as of December 18, 1996
between
PANDA-BRANDYWINE, L.P.
and
BRANDYWINE WATER COMPANY
Distilled Water Facility located in
Brandywine, Maryland, Prince George's County
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 2
1.1 Defined Terms 2
1.2 Other Definitional Provisions 2
SECTION 2. DEMISING PROVISIONS; SUBORDINATION 2
2.1 Sublease of the Distilled Water Facility 2
2.2 Right to Use the Distilled Water Facility
Premises 2
2.3 Severance 3
2.4 Subordination 3
SECTION 3. TERM 3
SECTION 4. USE 3
SECTION 5. RENT; PROFIT SHARING 4
SECTION 6. POSSESSION AND QUIET ENJOYMENT 4
SECTION 7. NO MERGER OF TITLE 4
SECTION 8. RESPONSIBILITY OF LESSOR 4
SECTION 9. NO ASSIGNMENT OR FURTHER SUBLEASE 5
SECTION 10. SURRENDER 5
SECTION 11. MISCELLANEOUS 5
11.1 Notices 5
11.2 Amendments 5
11.3 Headings, etc. 6
11.4 Successors and Assigns 6
11.5 GOVERNING LAW 6
11.6 Severability 6
11.7 Limitation of Liability 6
SCHEDULES AND EXHIBITS
Schedule A Description of the Distilled Water Facility
Schedule B Legal Description of Distilled Water Facility Premises
STEAM LEASE
THIS STEAM LEASE, dated as of December 18, 1996, is
made between PANDA-BRANDYWINE, L.P., a Delaware limited
partnership ("Lessor" or the "Partnership"), and BRANDYWINE WATER
COMPANY, a Delaware corporation ("Lessee").
RECITALS:
A. Lessor is the owner of a subleasehold estate in the
Site under the terms of the Site Sublease dated as of March 30,
1995 as amended as of October 30, 1996, and as of December 18,
1996, and as further amended and restated as of December 18,
1996, (as the same may be further amended, supplemented or
otherwise modified from time to time, the "Site Sublease") a
memorandum of which has been recorded among the Land Records of
Prince George's County, Maryland.
B. Lessor is the lessee of a distilled water facility
more particularly described in Schedule A attached hereto (the
"Distilled Water Facility") which is located on a portion of the
Site as shown on the as-built survey of the site delivered
pursuant to Section 5.1(h) of the Participation Agreement (as
defined below) ("the Distilled Water Facility Premises") under
the terms of the Facility Lease dated as of the date hereof
between Fleet National Bank (formerly known as Shawmut Bank
Connecticut, National Association), not in its individual
capacity, but solely as owner trustee (in such capacity, the
"Owner Trustee") and the Lessor (as the same may be amended,
supplemented or otherwise modified from time to time, the
"Facility Lease").
C. The Distilled Water Facility is comprised of the
equipment described in Part I of Schedule A (the "Distilled Water
Facility Equipment") and the other property described in Part II
of Schedule A (the "Distilled Water Facility Property").
D. Lessor desires to sublease the Distilled Water
Facility Equipment to Lessee and Lessee desires to sublease the
Distilled Water Facility Equipment from the Lessor upon the terms
and conditions hereinafter set forth.
AGREEMENT:
In consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Lessor and the
Lessee, intending to be legally bound hereby, hereby agree as
follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings assigned to
them in Annex A to the Participation Agreement, dated as of
December 18, 1996, among the Partnership, the General Partner,
the Owner Participant, the Owner Trustee, Fleet National Bank,
not in its individual capacity but solely as Security Agent,
First Security Bank, National Association, not in its individual
capacity but solely as Indenture Trustee under the Indenture,
Credit Suisse, as administrative agent (the "Administrative
Agent") and the other entities listed on Schedule I thereto (the
"Loan Participants") (as the same may be amended, supplemented or
otherwise modified from time to time, the "Participation
Agreement") (such definitions to be equally applicable to both
the singular and plural forms of the terms defined). Any term
defined by reference to an agreement, instrument or other
document shall have the meaning so assigned to it whether or not
such document is in effect.
1.2 Other Definitional Provisions. The words
"hereof," "herein" and "hereunder" and words of similar import
when used in this Steam Lease shall refer to this Steam Lease as
a whole and not to any particular provision hereof. Section,
subsection, Appendix, Exhibit and Schedule references contained
in this Steam Lease are references to Sections, subsections,
Appendices, Exhibits and Schedules in or to this Steam Lease
unless otherwise specified.
SECTION 2. DEMISING PROVISIONS; SUBORDINATION
2.1 Sublease of the Distilled Water Facility. Lessor
hereby subleases to Lessee and Lessee hereby subleases from
Lessor, upon and subject to the terms and conditions hereinafter
set forth, the Distilled Water Facility Equipment TO HAVE AND TO
HOLD the same, subject as aforesaid, unto Lessee and Lessee's
successors and assigns, commencing on the date hereof and
continuing for the term described in Section 3 hereof. LESSEE
ACKNOWLEDGES THAT IT SUBLEASES AND HIRES THE DISTILLED WATER
FACILITY EQUIPMENT "AS IS" AND LESSOR HAS NOT MADE ANY COVENANTS,
REPRESENTATIONS OR WARRANTIES ABOUT THE DISTILLED WATER FACILITY
EQUIPMENT OTHER THAN THOSE EXPRESSLY SET FORTH HEREIN.
2.2 Right to Use the Distilled Water Facility
Premises. So long as this Steam Lease is in effect, Lessor
grants to Lessee the right to occupy and use the Distilled Water
Facility Premises and the Distilled Water Facility Property, and
the right of ingress and egress thereto, solely for the purposes
of using and enjoying the Distilled Water Facility Equipment.
The foregoing right shall terminate automatically if and when
Lessee's rights under this Lease terminate.
2.3 Severance. The Distilled Water Facility Equipment
and each portion thereof, and all repairs, replacements,
substitutions and additions thereto, whether now or at any time
hereafter located on the Distilled Water Facility Premises or
attached to the Distilled Water Facility Property, are severed,
and shall remain severed, from the Distilled Water Facility
Premises and the Distilled Water Facility Property even if
physically attached, are and shall remain personal property, and
are not and shall not be fixtures or an accession to the
Distilled Water Facility Premises or the Distilled Water Facility
Property, the title thereto being separate and distinct from the
title to the Distilled Water Facility Premises and the Distilled
Water Facility Property, and shall be treated as personal
property with respect to the rights of all Persons whatsoever and
for all purposes of the Participation Agreement, the Site Lease,
the Site Sublease, the Facility Lease and this Steam Lease, and
title to the Distilled Water Facility Equipment shall not, except
as specifically contemplated by the Transaction Documents, be
affected in any way by any instrument dealing with the Distilled
Water Facility Premises or the Distilled Water Facility Property
or any part thereof.
2.4 Subordination. Lessee covenants and agrees for
itself and its successors and assigns that all of its rights
under this Steam Lease are hereby expressly made subject and
subordinate to the rights of the Security Agent, for the benefit
of GE Capital and the Owner Trustee (and, by collateral
assignment, the Indenture Trustee), under each of the Amended and
Restated Deed of Trust and Security Agreement dated as of
December 18, 1996 by the Partnership to Chicago Title Insurance
Company, as trustee for the Security Agent (the "Deed of Trust"),
the Site Lease, the Site Sublease and the Facility Lease.
SECTION 3. TERM
The term of this Steam Lease shall commence on the date
hereof and shall end on the earlier to occur of the expiration or
earlier termination of (i) the Facility Lease (taking into
account any renewals of the term thereof), (ii) the Site Sublease
and (iii) the Steam Sales Agreement.
SECTION 4. USE
During the term of this Steam Lease, the Distilled
Water Facility and the Distilled Water Facility Premises shall be
used by Lessee as provided in the Facility Lease and the Site
Sublease. The Lessee shall perform all the terms, covenants and
conditions to be performed by Lessor (i) under the Site Sublease,
with respect to the Distilled Water Facility Premises and (ii)
under the Facility Lease with respect to the Distilled Water
Facility (which obligations are hereby incorporated herein by
reference).
SECTION 5. RENT; PROFIT SHARING
As rent for the lease of the Distilled Water Facility
Equipment and the use of the Distilled Water Facility Property
and the Distilled Water Facility Premises for the term hereof,
Lessee shall pay to Lessor all amounts payable to Lessee in
connection with the operation of the Distilled Water Facility and
the sale of its products. In return, Lessor shall pay to Lessee
such portion of the cash as is available to be distributed to
Lessor's partners as Lessor and Lessee shall agree is fair.
SECTION 6. POSSESSION AND QUIET ENJOYMENT
Subject to the provisions of the Site Lease, the Site
Sublease and the Facility Lease, and so long as no Lease Event of
Default shall have occurred and be continuing, Lessor shall not
disturb Lessee's peaceful and quiet use and possession of the
Distilled Water Facility and the Distilled Water Facility
Premises; provided, however, Lessor shall not be responsible for
the acts of predecessors in title to Lessor.
SECTION 7. NO MERGER OF TITLE
There shall be no merger of this Steam Lease or the
leasehold estate created by this Steam Lease with any estate in
the Distilled Water Facility Equipment or other estate in the
Distilled Water Facility Premises or the Distilled Water Facility
Property or any part thereof by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, (a) this
Steam Lease or any interest in this Steam Lease or in any such
leasehold estate and (b) any estate in the Distilled Water
Facility Equipment or any part thereof or any interest in such
estate, and no such merger shall occur unless and until all
Persons having any interest (including a security interest) in
(i) this Steam Lease or the leasehold estate created by this
Steam Lease and (ii) any estate in the Distilled Water Facility
Equipment or other estate in the Distilled Facility Premises or
the Distilled Water Facility Property or any part thereof, shall
join in a written instrument effecting such merger.
SECTION 8. RESPONSIBILITY OF LESSOR
Lessor shall have no duty, responsibility, liability or
obligation to Lessee in respect of the Distilled Water Facility
or the Distilled Water Facility Premises for the use, maintenance
or condition of the Distilled Water Facility, or the Distilled
Water Facility Premises except as provided in Section 6 hereof
and in the Facility Lease, Site Lease and Site Sublease (which
obligations are hereby incorporated herein by reference). Lessor
shall have no liability or obligation whatsoever to Lessee under
this Steam Lease by reason of termination of the Facility Lease
or the Site Sublease in the absence of any breach by Lessor of
its express affirmative obligations to Lessee hereunder.
SECTION 9. NO ASSIGNMENT OR FURTHER SUBLEASE
Lessee will not, without the prior written consent of
the Owner Trustee, assign or further sublease or otherwise in any
manner deliver, transfer or relinquish possession of all or any
portion of the Distilled Water Facility or the Distilled Water
Facility Premises or assign any of its rights hereunder.
SECTION 10. SURRENDER
At the termination of this Steam Lease, Lessee shall
forthwith quit and surrender the Distilled Water Facility and
deliver the Distilled Water Facility to Lessor in the same
condition, reasonable wear and tear excepted, as on the date
hereof. Subject to any applicable provisions of the Site Lease,
Site Sublease and except as provided in Section 8 of the Facility
Lease, all improvements affixed to the Distilled Water Facility
and the Distilled Water Facility Premises shall be and remain the
property of Lessor from and after the termination of this Steam
Lease.
SECTION 11. MISCELLANEOUS
11.1 Notices. Unless otherwise specifically provided
for herein, all notices, consents, directions, approvals,
instructions, requests and other communications required or
permitted by the terms hereof to be given to each party hereto
shall be in writing, and shall be deemed to have been given when
delivered to the other party by registered or certified mail,
return receipt requested, addressed as follows:
For Lessor:
Panda-Brandywine, L.P.
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attn: Chairman & General Counsel
For Lessee:
Brandywine Water Company
4100 Spring Valley, Suite 1001
Dallas, Texas 75244
Attn: Chairman & General Counsel
11.2 Amendments. Neither this Steam Lease nor any of
the terms hereof may be terminated, amended, supplemented, waived
or modified orally, but only by an instrument in writing signed
by the party against which enforcement of the termination,
amendment, supplement, waiver or modification shall be sought.
11.3 Headings, etc. The headings of various Sections
and subsections of this Steam Lease are for convenience of
reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
11.4 Successors and Assigns. The terms of this Steam
Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
11.5 GOVERNING LAW. THIS STEAM LEASE HAS BEEN
DELIVERED IN AND SHALL BE GOVERNED BY AND BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND.
11.6 Severability. Any provision of this Steam Lease
that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
11.7 Limitation of Liability. There shall be full
recourse to Lessor and all of its assets for the liabilities of
Lessor under this Steam Lease, but in no event shall any Partner
or any officer, director or holder of any equity interest in any
Partner be personally liable or obligated for such liabilities of
Lessor, except as may be specifically provided in any other
Transaction Document to which such Partner is a party. Subject
to the foregoing limitation on liability, Lessee may sue or
commence any suit, action or proceeding against, any Partner or
any officer, director or holder of any equity interest in any
Partner in order to obtain jurisdiction over Lessor to enforce
its rights and remedies hereunder. Nothing herein contained
shall limit or be construed to limit the liabilities and
obligations of any Partner in accordance with the terms of any
other Transaction Document creating such liabilities and
obligations to which such Partner, is a party.
IN WITNESS WHEREOF, the parties hereto have caused this
Steam Lease to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above
written.
BRANDYWINE WATER COMPANY
By: /S/ William C. Nordlund
Name: William C. Nordlund
Title:
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its general partner
By:
Name: William C. Nordlund
Title: Senior Vice President
Schedule A
to the
Steam Lease
DISTILLED WATER FACILITY DESCRIPTION
The Distilled Water facility is located in Prince
George's County, Maryland. This facility consists of, but is not
limited to, the following:
Part I
Piperacks and miscellaneous supports (including grating)
Packaged distilled water system in one or more sites to be
designed and furnished by Aqua-Chem
Distilled water storage tank - 220,000 gallons
Truck filling pumps
Sump pumps
12" steam supply from Facility
Piping for Distilled Water Facility systems: circ. water, drains,
pump suction and discharge, tank, sumps, F.P., acid, potable
water, including small sore and eye wash station
Electrical equipment including: MCCs, transformer, C/B's, panels
and local control stations
Raceway including conduit, cable tray and fittings
Wire, cable and terminations
Lighting, grounding and miscellaneous systems
Instrumentation
Insulation
Part II
Structural excavation for foundations
Backfill and placement for foundations
Paving required including subbase and base course
Chain link fence
Drainage pipe
Catch basins
Landscaping - trees and shrubs
Foundations and slabs for building, tank, equipment, sumps,
piperack and loading/unloading area
Painting
Pre-engineered building - 40'x50'x26' (including doors, HVAC and
fire protection)
EXHIBIT 10.28
AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT
dated as of December 18, 1996
among
PANDA-BRANDYWINE, L.P.,
as Lessee,
PANDA BRANDYWINE CORPORATION,
as General Partner,
GENERAL ELECTRIC CAPITAL CORPORATION,
as LOC Issuer and Owner Participant,
FLEET NATIONAL BANK,
as Owner Trustee, Lessor and as Security Agent,
CREDIT SUISSE,
as Administrative Agent
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
(230 MW Natural Gas-Fired Qualifying Cogeneration
Facility located in Brandywine, Maryland)
TABLE OF CONTENTS
Page
ARTICLE I
Definitions 3
SECTION 1.1 Defined Terms. 3
SECTION 1.2 Other Definitional Provisions 3
ARTICLE II
Appointment of Security Agent; Establishment of Accounts 3
SECTION 2.1 Appointment of Security Agent 3
SECTION 2.2 Creation of Accounts 5
SECTION 2.3 Security Interest 6
SECTION 2.4 Location of the Accounts 7
ARTICLE III
Deposits into Accounts 7
SECTION 3.1 Deposits 7
SECTION 3.2 Information to Accompany Amounts
Delivered to Security Agent; Deposits
Irrevocable 9
SECTION 3.3 Books of Account; Statements 9
ARTICLE IV
Payments from Accounts 9
SECTION 4.1 Completion Account 9
SECTION 4.2 Revenue Account--Monthly Transfers
After the Lease Closing Date 10
SECTION 4.3 Revenue Account--Quarterly Transfers
After the Lease Closing Date 11
SECTION 4.4 Supplemental Rent 12
SECTION 4.5 Rent Reserve Account 13
SECTION 4.6 Operation and Maintenance Reserve
Account 13
SECTION 4.7 Release of Excess Amounts 14
SECTION 4.8 Special Payment Account 14
SECTION 4.9 Partnership Security Account. 14
SECTION 4.10 Distribution Reserve Account 15
SECTION 4.11 Insurance and Condemnation Proceeds
Account 15
SECTION 4.12 Warranty Maintenance Reserve Account 18
SECTION 4.13 Current Account 18
SECTION 4.14 Defaults 18
SECTION 4.15 Certain Payments 19
SECTION 4.16 Interest Hedging Account 19
SECTION 4.17 Delivery of Officer's Certificates;
Timing of Payments 20
SECTION 4.18 Payments under Lease 20
SECTION 4.19 LOC Fee Account 20
ARTICLE V
Investment 21
SECTION 5.1 Investment 21
ARTICLE VI
Security Agent 22
SECTION 6.1 Rights, Duties, etc. 22
SECTION 6.2 Resignation or Removal 23
ARTICLE VII
Determinations 24
SECTION 7.1 Value 24
SECTION 7.2 Other Determinations 24
SECTION 7.3 Sales of Permitted Investments 24
SECTION 7.4 Available Cash 25
ARTICLE VIII
Representations and Warranties 25
SECTION 8.1 Representations 25
SECTION 8.2 Indemnification 25
ARTICLE IX
Miscellaneous 25
SECTION 9.1 Fees and Indemnification of
Security Agent 25
SECTION 9.2 Termination 26
SECTION 9.3 Severability 26
SECTION 9.4 Counterparts 26
SECTION 9.5 Amendments 26
SECTION 9.6 APPLICABLE LAW 26
SECTION 9.7 Notices 27
SECTION 9.8 Submission to Jurisdiction; Waivers 27
SECTION 9.9 Limited Liability 27
SECTION 9.10 WAIVERS OF JURY TRIAL 27
SECTION 9.11 Benefit of Agreement 27
SECTION 9.12 Certain Rights of Power Purchaser 28
SECTION 9.13 Countersignatures; Rights of
Administrative Agent 28
ANNEX A Definitions
SCHEDULES
Schedule 1 Form of Project Certificate
EXHIBITS
Exhibit A Form of Certificate to be delivered
pursuant to Section 4.1
Exhibit B Form of Certificate to be delivered
pursuant to Section 4.4
Exhibit C Form of Certificate to be delivered
pursuant to Section 4.5
Exhibit D Form of Certificate to be delivered
pursuant to Section 4.6
Exhibit E Form of Certificate to be delivered
pursuant to Section 4.7
Exhibit F Form of Certificate to be delivered
pursuant to Section 4.9(b)
Exhibit G Form of Certificate to be delivered pursuant
to Section 4.12(a)
AMENDED AND RESTATED SECURITY DEPOSIT AGREEMENT, dated
as of December 18, 1996, among PANDA-BRANDYWINE, L.P., a Delaware
limited partnership, as lessee (the "Lessee" or the "Partnership"),
of which PANDA BRANDYWINE CORPORATION, a Delaware corporation, is
the sole general partner (the "General Partner"), GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, in its individual
capacity and as owner participant ("GE Capital" or the "Owner
Participant"), FLEET NATIONAL BANK, not in its individual capacity
but solely as owner trustee (in such capacity, the "Owner Trustee")
under the Trust Agreement (as defined below), FLEET NATIONAL BANK,
a national banking association, as security agent hereunder (in such
capacity, the "Security Agent") for GE Capital, the Owner Trustee and
the Loan Participants (as defined below), CREDIT SUISSE, a bank organized
and existing under the laws of Switzerland, acting by and through
its New York branch ("Credit Suisse"), as administrative agent
for the Loan Participants (the "Administrative Agent") and FIRST
SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity but solely as
indenture trustee under the Indenture (as defined below).
W I T N E S S E T H :
WHEREAS, capitalized terms used herein and not
otherwise defined shall have the respective meanings assigned
thereto in Article I;
WHEREAS, in order to finance the cost of developing,
constructing and equipping the Project, the Partnership entered
into the Construction Loan Agreement and Lease Commitment, dated
as of March 30, 1995 (as amended, supplemented or otherwise
modified from time to time, the "Construction Loan Agreement"),
among the Partnership, the General Partner and GE Capital,
pursuant to which GE Capital agreed, subject to the terms and
conditions set forth therein, to make loans to the Partnership
and to issue letters of credit for the account of the
Partnership;
WHEREAS, the construction of the Facility has been
substantially completed and the Date of Substantial Completion
has occurred;
WHEREAS, the Partnership has requested that the Owner
Participant cause the Owner Trustee to purchase the Facility from
the Partnership and lease the same to the Partnership as provided
in the Construction Loan Agreement;
WHEREAS, the Partnership and the Owner Trustee are
entering into the Facility Lease and the other Lease Documents
pursuant to which, among other things, the Owner Trustee will
lease the Facility to the Partnership;
WHEREAS, the Partnership and GE Capital are entering
into the Reimbursement Agreement to provide for the continued
issuance by GE Capital to the Power Purchaser of the PEPCO
Letters of Credit;
WHEREAS, the Owner Participant has elected to fund the
Facility Lease with non-recourse indebtedness as a leveraged
lease pursuant to Section 5.8 of the Construction Loan Agreement;
WHEREAS, the obligations of the Partnership under the
Reimbursement Agreement to GE Capital and under the Site Sublease
and the Facility Lease to the Owner Trustee, including its
obligations to repay the LOC Reimbursement Obligations and to
make payments of Rent, are secured by, among other things, a
first assignment of and prior perfected security interest in all
rights and property of the Partnership, including all of the
revenues of the Partnership, to the Security Agent, as agent for
GE Capital and the Owner Trustee (and, by collateral assignment,
the Indenture Trustee), pursuant to the terms and provisions of
the Security Agreement and the Deed of Trust and Security
Agreement;
WHEREAS, the obligations of the Owner Trustee under the
Participation Agreement and the Indenture to the Indenture
Trustee and the Loan Participants, including its obligations to
repay the Loan Certificates with interest thereon, are secured
by, a first assignment of and prior perfected security interest
in all rights and property of the Owner Trustee, including an
assignment, by the Owner Trustee of all of its right, title and
interest under the Facility Lease, the Security Agreement, the
Deed of Trust and Security Agreement and the Pledge Agreements to
the Indenture Trustee;
WHEREAS, in order to give effect to the foregoing, the
parties hereto are entering into this Agreement, pursuant to
which (i) GE Capital, the Owner Trustee and the Indenture Trustee
appoint Fleet National Bank, to act as Security Agent hereunder
and under the other Lessee Security Documents, to hold all Lessee
Collateral for the benefit of GE Capital and the Owner Trustee
(and, by collateral assignment, the Indenture Trustee) and to
hold all Indenture Property described in clause (i) of the
Granting Clause of the Indenture ("Lessor Collateral") for the
benefit of the Indenture Trustee (acting on behalf of the Loan
Participants) and (ii) the Partnership agrees that its revenues
will be paid directly to the Security Agent, as agent for GE
Capital, the Owner Trustee and the Indenture Trustee, held by the
Security Agent as collateral security for the Lessee Obligations
for the benefit of GE Capital and the Owner Trustee (and, by
collateral assignment, the Indenture Trustee), and as collateral
security for the Lender Obligations for the benefit of the
Indenture Trustee, and distributed by the Security Agent as
provided herein;
WHEREAS, Fleet National Bank has agreed to act as
security agent on behalf of GE Capital, the Owner Trustee and the
Indenture Trustee pursuant to the terms of this Agreement and the
other Collateral Security Documents;
NOW, THEREFORE, in consideration of the premises and of
other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.1 Defined Terms. Capitalized terms used in
this Agreement shall, unless otherwise defined herein, have the
respective meanings assigned to such terms in Annex A ("Annex A")
to the Participation Agreement, dated as of December 18, 1996,
among the Lessee, the General Partner, GE Capital, the Owner
Trustee, the Security Agent, the Administrative Agent, the
Indenture Trustee and the Loan Participants listed on Schedule I
thereto, as amended, supplemented or otherwise modified from time
to time (the "Participation Agreement").
SECTION 1.2 Other Definitional Provisions. (a) As
used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined herein or
in Annex A and accounting terms partly defined herein or in Annex
A, to the extent not defined, shall have the respective meanings
given to them under GAAP.
(b) The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and section, schedule, exhibit and appendix
references are to this Agreement unless otherwise specified.
(c) References to agreements defined herein or in
Annex A shall include such agreements as they may be amended,
supplemented or otherwise modified from time to time in
accordance with the provisions of the Transaction Documents.
(d) Terms defined in Annex A or otherwise defined
herein by reference to any other agreement, document or
instrument shall have the meanings assigned to them in such
agreement, document or instrument whether or not such agreement,
document or instrument is then in effect.
ARTICLE II
Appointment of Security Agent; Establishment of Accounts
SECTION 2.1 Appointment of Security Agent. (a) Fleet
National Bank is hereby appointed by GE Capital, the Owner
Trustee and the Indenture Trustee as security agent hereunder,
under the Deed of Trust and Security Agreement, under the
Security Agreement, under the Pledge Agreements and under the
other Lessee Security Documents, and GE Capital, the Owner
Trustee and the Indenture Trustee hereby authorize Fleet National
Bank, in its capacity as the Security Agent, to take such action
on their behalf under the provisions of this Agreement and the
other Lessee Security Documents and to exercise such powers and
perform such duties as are expressly delegated to the Security
Agent by the terms of this Agreement, together with such other
powers as are reasonably incidental thereto.
(b) Except as otherwise specifically provided in this
Security Deposit Agreement, upon the written instructions at any
time and from time to time of Owner Participant and/or the
Administrative Agent, as the case may be (which instructions, if
requested by the Security Agent, shall state that such parties
are authorized to act on behalf of the Owner Trustee and the
Indenture Trustee and that such instructions are consistent with
Section 3.10 of the Indenture), the Security Agent shall take
such of the following actions as may be specified in such
instructions: (i) exercise such election or option, or make such
decision or determination, or give such notice, consent, waiver
or the approval or exercise such right, remedy or power or take
such other action hereunder or under any other Transaction
Document or in respect of any part or all of the Lessee
Collateral or the Lessor Collateral as shall be specified in such
instructions and as are consistent with this Security Deposit
Agreement and the other Collateral Security Documents; provided
that remedial actions taken with respect to the Lessor Collateral
shall be at the exclusive direction of the Indenture Trustee (or
the Administrative Agent acting on its behalf); (ii) take such
action with respect to, or to preserve or protect, the Lessee
Collateral and Lessor Collateral (including the discharge of
Liens) as shall be specified in such instructions and as are
consistent with this Security Deposit Agreement and the other
Collateral Security Documents; and (iii) take such other action
in respect of the subject matter of this Security Deposit
Agreement and the other Collateral Security Documents as is
consistent with the terms hereof, thereof and the other
Transaction Documents. The Security Agent shall have the right
to request such written instructions at any time and from time to
time. The Security Agent will execute and file or cause to be
filed such continuation statements with respect to financing
statements relating to the security interest created under the
Lessee Security Documents in the Lessee Collateral or under the
Indenture in the Lessor Collateral as may be specified from time
to time in written instructions of the Owner Participant and the
Administrative Agent (which instructions may, by their terms, be
operative only at a future date and which shall be accompanied by
the execution form of such continuation statements so to be
filed). The Security Agent hereby accepts the trust created by
this Security Deposit Agreement and to act as security agent
hereunder and under the Lessee Security Documents.
(c) The Security Agent agrees to accept all revenues,
cash, payments, insurance and condemnation proceeds, other
amounts and Permitted Investments to be delivered to or held by
the Security Agent pursuant to the terms of this Agreement. The
Security Agent shall hold and safeguard the Accounts (and the
revenues, cash, payments, insurance and condemnation proceeds,
instruments, securities and other amounts on deposit therein)
during the term of this Agreement and shall treat the revenues,
cash, payments, insurance and condemnation proceeds, instruments,
securities and other amounts in the Accounts as funds,
instruments, securities and other properties pledged by the
Partnership (other than the Interest Hedging Account, in which
the Partnership has no interest) to the Security Agent as
collateral securing the Lessee Obligations and pledged by the
Owner Trustee (other than the Equity Collateral) to the Indenture
Trustee for the benefit of the Loan Participants, to be held by
the Security Agent as collateral securing the Lender Obligations
in accordance with the provisions hereof.
SECTION 2.2 Creation of Accounts. The Security Agent
hereby establishes the following ten special, segregated and
irrevocable cash collateral accounts in the name of the Security
Agent and for the benefit of GE Capital, the Owner Trustee and
the Indenture Trustee which shall be maintained at all times
until the termination of this Agreement:
(a) Revenue Account;
(b) Operation and Maintenance Reserve Account;
(c) Rent Reserve Account, and within such account
including the following sub-account:
Equity Rent Reserve Sub-Account (for the sole
benefit of the Owner Participant);
(d) Warranty Maintenance Reserve Account;
(e) Insurance and Condemnation Proceeds Account;
(f) Special Payment Account;
(g) Interest Hedging Account (Owner Trustee);
(h) Partnership Security Account;
(i) Distribution Reserve Account;
(j) Current Account;
(k) Construction Completion Account; and
(l) Letter of Credit Fee Account.
All moneys, investments and securities at any time on deposit in
any of the Accounts shall constitute collateral to be held in the
custody of the Security Agent for the purposes and on the terms
set forth in this Agreement; provided that the money, investments
and securities on deposit (x) in the Interest Hedging Account
shall constitute collateral only for the payment of the Owner
Trustee Obligations and not the Lessee Obligations and (y) in the
Equity Rent Reserve Sub-Account shall constitute collateral only
for the payment of the Lessee Obligations and not the Owner
Trustee Obligations.
SECTION 2.3 Security Interest. (a) In order to
secure the payment and performance by the Partnership when due of
all of the Lessee Obligations, this Agreement is intended to
create, and the Partnership hereby pledges to, and creates in
favor of the Security Agent, for the benefit of GE Capital and
the Owner Trustee (and, by collateral assignment, the Indenture
Trustee), a prior perfected and continuing security interest in
all right, title and interest of the Partnership in and to the
Accounts (other than the Interest Hedging Account), all cash,
cash equivalents, instruments, investments and other securities
at any time on deposit in such Accounts, all present and future
accounts, chattel paper, documents, general intangibles and
instruments (each as defined in the New York Uniform Commercial
Code) of the Partnership, all other rights of the Partnership to
receive the payment of money, including (without limitation) all
moneys due and to become due to the Partnership or the Owner
Trustee under the Power Purchase Agreement, the Steam Sales
Agreement, the Steam Lease and any other contract of the Owner
Trustee or the Partnership for the sale of electricity, steam,
excess natural gas or fuel oil or by-products produced by the
Facility, all other Project Revenues, all amounts payable under
insurance policies maintained by the Partnership, all license
fees and all moneys due and to become due to the Partnership
under the Construction Contract and the Gas Supply Contract, and
all proceeds of any of the foregoing.
(b) In order to secure the payment and performance by
the Owner Trustee when due of all of the Owner Trustee
Obligations, this Agreement is intended to create, and the Owner
Trustee hereby pledges to, and creates in favor of the Indenture
Trustee, for the equal and ratable benefit of the Loan
Participants, a prior perfected and continuing security interest
in all right, title and interest of the Owner Trustee in, to and
under this Agreement and in and to the Accounts (other than the
Equity Rent Reserve Sub-Account), all cash, cash equivalents,
instruments, investments and other securities at any time on
deposit in such Accounts, all present and future accounts,
chattel paper, documents, general intangibles and instruments
(each as defined in the New York Uniform Commercial Code) of the
Owner Trustee, all other rights of the Owner Trustee to receive
the payment of money including (without limitation) all moneys
due and to become due to the Partnership or the Owner Trustee
under the Power Purchase Agreement and any other contract of the
Owner Trustee or the Partnership for the sale of electricity,
excess natural gas, fuel oil, by-products or steam produced by
the Facility, all other Project Revenues, all amounts payable
under insurance policies maintained by the Partnership (excluding
any policy maintained by the Owner Trustee or the Owner
Participant for its own account and not required to be maintained
by the Lessee), all license fees and all moneys due and to become
due to the Owner Trustee under the Construction Contract and the
Gas Supply Contract, and all proceeds of any of the foregoing;
but, excluding from the foregoing all Excepted Payments.
(c) All moneys, cash equivalents, instruments,
investments and securities at any time on deposit in any of such
Accounts shall constitute collateral security for the payment and
performance by the Partnership when due of the Lessee Obligations
(other than with respect to the Interest Hedging Account) and
collateral security granted by the Owner Trustee to the Indenture
Trustee for the payment and performance by the Owner Trustee of
the Owner Trustee Obligations (other than with respect to the
Equity Collateral) and shall at all times be subject to the sole
dominion and control of the Security Agent (as agent of the
Indenture Trustee (until the Lien of the Indenture has been
discharged) and the Owner Trustee), and shall be held in the
custody of the Security Agent in trust for the purposes of, and
on the terms set forth in, this Agreement. For the purpose of
perfecting the security interest of the Indenture Trustee in and
to the Accounts and all cash, investments and securities at any
time on deposit in the Accounts, the Security Agent shall be
deemed to be the agent of the Indenture Trustee.
(d) The Partnership shall not have any rights or
powers with respect to any amounts in the Accounts or any part
thereof except (i) as provided in Article IV hereof and (ii) the
right to have such amounts applied in accordance with the
provisions hereof; provided that the Lessee shall have no right,
title or interest whatsoever in or to the Interest Hedging
Account.
SECTION 2.4 Location of the Accounts. The Accounts
shall be maintained by the Security Agent at its corporate trust
office located at 777 Main Street, Hartford, Connecticut 06115,
until the Security Agent (i) gives written notice to the other
parties to this Agreement setting forth a different location of
the Accounts, in the manner specified in Section 9.7; provided,
however, that such location shall be in Hartford, Connecticut or
New York City or in another location as may be agreed to by the
Owner Participant and the Administrative Agent; and (ii)
furnishes to the Owner Trustee and, until such time as the
Indenture shall have been terminated in accordance with its
terms, the Indenture Trustee an Opinion, in form and substance
and of counsel satisfactory to the Owner Trustee and the
Indenture Trustee, with respect to the perfection of the security
interest of the Owner Trustee and the Indenture Trustee in and to
the Accounts.
ARTICLE III
Deposits into Accounts
SECTION 3.1 Deposits. (a) Each of the Partnership
and the Owner Trustee shall instruct each Person from whom it
receives or is entitled to receive any Project Revenues to pay
such Project Revenues directly to the Security Agent for deposit
in the Revenue Account, and if either the Partnership or the
Owner Trustee shall receive directly any Project Revenues it
shall deliver such Project Revenues in the exact form received
(but with its endorsement, if necessary) to the Security Agent
for deposit in the Revenue Account not later than the second
Business Day after its receipt thereof. The Security Agent shall
have the right to receive all Project Revenues directly from the
Persons owing the same. All Project Revenues received by the
Security Agent shall be deposited in the Revenue Account.
(b) The Partnership and the Owner Trustee shall
instruct the Contractor, the Power Purchaser, the Gas Supplier
and any other applicable Person to make all Special Payments
(identifying them as such) to the Security Agent for deposit in
the Special Payment Account, and if either the Partnership or the
Owner Trustee shall receive any Special Payments it shall deliver
such Special Payments in the exact form received (but with its
endorsement, if necessary) to the Security Agent for deposit in
the Special Payment Account not later than the second Business
Day after its receipt thereof. The Security Agent shall have the
right to receive all Special Payments directly from the Persons
owing the same. All Special Payments received by the Security
Agent shall be deposited in the Special Payment Account.
(c) Each of the Partnership and the Owner Trustee
shall deliver to the Security Agent all payments in respect of
casualty to or loss of property received by it from any insurer
pursuant to the property or casualty insurance maintained by the
Partnership pursuant to Section 6.6 of the Participation
Agreement (but not pursuant to any insurance maintained by the
Owner Participant or the Owner Trustee for its own account) and
all awards and proceeds in respect of a taking in the exact form
received, but with the Partnership's or the Owner Trustee's
endorsement, if necessary ("Insurance and Condemnation
Proceeds"), for deposit in the Insurance and Condemnation
Proceeds Account not later than the second Business Day after the
Partnership's or the Owner Trustee's receipt thereof.
(d) The Owner Trustee shall deliver to the Security
Agent all payments received under the Interest Hedging Agreement
("Interest Hedging Payments") for deposit in the Interest Hedging
Account not later than the second Business Day after the Owner
Trustee's receipt thereof. The Security Agent shall have the
right to receive all Interest Hedging Payments directly from the
Interest Hedging Counterparty.
(e) On the Lease Closing Date, the Lessee shall
deposit in the Operation and Maintenance Reserve Account an
amount equal to the Initial Operation and Maintenance Reserve
Deposit.
(f) On the Lease Closing Date, the Lessee shall
deposit in the Warranty Maintenance Reserve Account an amount
equal to the Required Warranty Maintenance Reserve Deposit.
(g) On the Lease Closing Date, the Lessee shall
deposit in the Rent Reserve Account an amount equal to the
Initial Rent Reserve Deposit.
(h) On the Lease Closing Date, the Lessee shall
deposit in the Construction Completion Account an amount equal to
the Initial Construction Completion Deposit.
SECTION 3.2 Information to Accompany Amounts
Delivered to Security Agent; Deposits Irrevocable. (a) All
amounts delivered to the Security Agent by the Partnership shall
be accompanied by information in reasonable detail specifying the
source of the amounts and the Account or Accounts into which such
amounts are to be deposited. If the Security Agent shall be
unable to determine the source of any payments received or the
Account or Accounts into which such payments are to be deposited,
the Security Agent shall hold such amounts in the Revenue Account
until identified by the Partnership, the Owner Participant and
the Administrative Agent.
(b) Any deposit made into any Account hereunder shall,
absent manifest error, be irrevocable and the amount of such
deposit and any instrument or security held in such Account
hereunder and all interest thereon shall be held in trust by the
Security Agent and applied solely as provided herein.
SECTION 3.3 Books of Account; Statements. (a) The
Security Agent shall maintain books of account on a cash basis
and record therein all deposits into and transfers to and from
the Accounts and all investment transactions effected by the
Security Agent pursuant to Article V.
(b) Not later than the tenth Business Day of each
month, commencing with the first month to occur after the Lease
Closing Date the Security Agent shall deliver to the Partnership,
GE Capital and the Administrative Agent a statement setting forth
the transactions in each Account during the preceding month and
specifying the Project Revenues, Special Payments, Insurance and
Condemnation Proceeds Deposits, cash equivalents and other amounts
held in each Account at the close of business on the last Business
Day of the preceding month and the Value thereof at such time.
ARTICLE IV
Payments from Accounts
SECTION 4.1 Completion Account. The Security Agent
shall, upon receipt by it of a monthly certificate signed by an
Authorized Officer of the Partnership in substantially the form
of Exhibit A (and countersigned by the Independent Engineer, the
Administrative Agent and the Owner Participant) instructing it to
do so, apply cash available in the Completion Account to the
payment of the Project Costs specified in such certificate or to
such other costs or amounts or purposes as may be specified in
such certificate. So long as no Lease Default or Lease Event of
Default shall have occurred and be continuing, (a) on the date of
final acceptance under the Construction Contract, the Security
Agent shall transfer from amounts on deposit in the Completion
Account to the Partnership an amount equal to 66 2/3% of the excess
of (i) all funds on deposit therein and (ii) all remaining
Project Costs (including amounts in respect of any remaining
dispute under the Construction Contract) not yet paid (such
excess at any time, the "Completion Contingency"), (b) upon the
release of all liens relating to all matters listed on the
Contractor's final release provided by Flippo Construction
Company (other than any claims relating to the McConnel dispute)
the Security Agent shall transfer from amounts on deposit in the
Completion Account to the Partnership an amount equal to 10% of
the sum of the (i) Completion Contingency and (ii) the amounts
transferred to the Partnership, if any, pursuant to clause
(a) above and (c) after transfers have been made pursuant to
clauses (a) and (b) above, on each date on which it receives a
monthly certificate pursuant to this Section 4.1, the Security
Agent shall transfer from amounts on deposit in the Completion
Account to the Partnership an amount equal to the "Applicable
Percentage" of the remaining Completion Contingency, all as
certified by an authorized officer of the Partnership and
countersigned by the Independent Engineer, the Administrative
Agent and the Owner Participant. The "Applicable Percentage" as
of any such date on which a monthly certificate is delivered
pursuant to this Section 4.1 is a percentage equal to the ratio
that the Project Costs set forth in such certificate bears to all
remaining Project Costs.
SECTION 4.2 Revenue Account--Monthly Transfers After
the Lease Closing Date. (a) On or before the twentieth day of
each month after the Lease Closing Date (or if such day is not a
Business Day, the immediately preceding Business Day), the
Partnership shall deliver to the Owner Participant and the
Administrative Agent a Project Certificate in substantially the
form of Schedule 1 signed by an Authorized Officer of the
Partnership requesting distributions to be made from the Revenue
Account. If the Owner Participant and the Administrative Agent
approve such Project Certificate, the Owner Participant and the
Administrative Agent shall countersign such Project Certificate
on the Business Day prior to the applicable Monthly Transfer Date
and the Partnership shall cause such countersigned Project
Certificate to be delivered to the Security Agent. On the twenty-
fifth day of each month (or if such date is not a Business Day,
the immediately succeeding Business Day) (each such date, a
"Monthly Transfer Date"), the Security Agent shall distribute,
from the cash available in the Revenue Account, (i) (A) directly
to each Person to which an amount in excess of $100,000 is due
and payable, the amounts identified as Project Expenses then due
and owing in Item 1 of the Project Certificate referred to above,
or (B) to the Partnership for the benefit of the Persons entitled
thereto, all other Project Expenses then due and owing in Item 1
of such Project Certificate and (ii) to the Current Account, the
amounts identified as Project Expenses expected to be due and
owing prior to the next Monthly Transfer Date in Item 2 of such
Project Certificate. Project Expenses owing to the Gas Supplier,
the Operator, the Gas Transporters and for fuel supplies shall be
identified in the Project Certificate and shall, to the extent
sufficient funds are not on deposit to satisfy all Project
Expenses set forth in such Project Certificate, take priority
over all other Project Expenses.
(b) For purposes of this Section 4.2, cash available
in the Revenue Account shall not include any check or other
instrument which may be deposited therein until the final
collection thereof.
SECTION 4.3 Revenue Account--Quarterly Transfers
After the Lease Closing Date. On each Basic Rent Payment Date,
the Security Agent shall distribute from the cash available in
the Revenue Account (after making any distribution required by
Sections 4.2 and 4.4) the following amounts in the following
order of priority:
first, to the LOC Fee Account, the amount of all fees
payable pursuant to subsection 2.3 of the Reimbursement
Agreement, which GE Capital and the Administrative Agent
certify to the Security Agent to be due and payable on such
date;
second, to the Indenture Trustee, for distribution in
accordance with Section 5.2 of the Indenture, a portion of
the Basic Rent then due equal to the sum of (x) fees owing
to the Administrative Agent and the Indenture Trustee and
(y) the amount of principal, interest and commitment fees
payable on or with respect to the Loan Certificates and (z)
amounts payable under the Interest Hedging Agreement that
the Administrative Agent certifies to the Security Agent are
due and payable on such date;
third, to the Owner Trustee (or, so long as the Owner
Participant shall be the sole beneficiary of the trust
established pursuant to the Trust Agreement, directly to the
Owner Participant), the remaining portion of Basic Rent
which the Owner Participant certifies to the Security Agent
to be due and payable on such date;
fourth, to the Operation and Maintenance Reserve
Account, the amount certified to the Security Agent by an
Authorized Officer of the Partnership (and countersigned by
the Owner Participant and the Administrative Agent) required
to be deposited therein pursuant to Sections 7(b)(i) and
7(b)(iii) of the Facility Lease;
fifth, to the Person entitled thereto, an amount equal
to the amount of Supplemental Rent then due and payable but
not yet paid by reason of the proviso to Section 4.4 (as set
forth in a certificate signed by an Authorized Officer of
the Partnership and countersigned by the Owner Participant
and the Administrative Agent) or of the Owner Participant
and the Administrative Agent, in substantially the form of
Exhibit B;
sixth, to the Rent Reserve Account, the amount
certified to the Security Agent by an Authorized Officer of
the Partnership (and countersigned by the Owner Participant
and the Administrative Agent) required to be deposited
therein pursuant to Sections 7(c)(i) and 7(c)(iii) of the
Facility Lease;
seventh, if the conditions precedent to cash
distributions to the Partners set forth in Section 7.3 of
the Participation Agreement are not satisfied as of such
Basic Rent Payment Date (as set forth in a certificate of
the Owner Participant and the Administrative Agent to the
Security Agent), to the Distribution Reserve Account, an
amount equal to the lesser of (x) the remainder of the cash
available in the Revenue Account and (y) Cash Available for
Distributions for the immediately preceding Quarterly
Measurement Period; and
eighth, if and to the extent permitted pursuant to
Section 7.3 of the Participation Agreement (as set forth in
a certificate of an Authorized Officer of the Partnership
and countersigned by the Owner Participant and the
Administrative Agent), to the Partnership Security Account,
an amount equal to the lesser of (x) the remainder of the
cash available in the Revenue Account and (y) Cash Available
for Distributions for the immediately preceding Quarterly
Measurement Period.
SECTION 4.4 Supplemental Rent. On any date when due,
the Security Agent, upon receipt of a certificate signed by an
Authorized Officer of the Partnership or of the Owner Participant
and the Administrative Agent, in substantially the form of
Exhibit B (and in the case of a certificate signed by the
Partnership, countersigned by the Owner Participant and the
Administrative Agent), shall promptly pay to the Owner Trustee or
such other Person as may be entitled thereto the amount (to the
extent of cash available in the Revenue Account) equal to the
amount of Supplemental Rent (other than amounts specifically
provided for in Section 4.3, which shall be paid in accordance
with such Section 4.3, but including the fees and expenses of the
Security Agent and the Owner Trustee and any LOC Reimbursement
Obligations (but in the case of LOC Reimbursement Obligations in
respect of the O&M Letter of Credit, only after amounts have been
applied thereto from the Operation and Maintenance Reserve
Account) then due and payable pursuant to Section 3(b) of the
Facility Lease and not otherwise paid or payable from amounts on
deposit in the Insurance and Condemnation Proceeds Account or the
Special Payment Account, as specified in such certificate;
provided that any portion of Supplemental Rent not included in
the current Operating Budget in excess of $250,000 per calendar
year with respect to the Lessee's general indemnity or general
tax indemnity obligations pursuant to Section 8 of the
Participation Agreement or with respect to the Lessee's
Obligations under the Tax Indemnity Agreement shall only be paid
to the Person entitled thereto on a Basic Rent Payment Date after
the payment of all amounts specified in clauses "first" through
"fourth" of Section 4.3 on such date.
SECTION 4.5 Rent Reserve Account. If, on any Basic
Rent Payment Date, the cash available in the Revenue Account, the
Distribution Reserve Account and the Partnership Security Account
is insufficient to make the payment obligations set forth in
clauses second and third of Section 4.3 on such Basic Rent
Payment Date, the Security Agent shall immediately notify the
Administrative Agent and the Owner Participant of such fact, and
(a) the Administrative Agent, at its option, may direct the
Security Agent (by delivering a certificate in substantially the
form of Exhibit C) to transfer to the Indenture Trustee the
amount (to the extent cash is available in the Rent Reserve
Account (other than amounts on deposit in the Equity Rent Reserve
Sub-Account)) equal to the amount of any deficiency in the
payment obligations set forth in clause second of Section 4.3 on
such Basic Rent Payment Date and (b) the Owner Participant, at
its option, may direct the Security Agent (by delivery of a
certificate in substantially the form of Exhibit C) to transfer
to the Owner Trustee (or to the Owner Participant, if the Owner
Participant is the sole beneficiary of the trust established
pursuant to the Trust Agreement) the amount (to the extent cash
is available in the Equity Rent Reserve Sub-Account) equal to the
amount of any deficiency in the payment obligations set forth in
clause third of Section 4.3 on such Basic Rent Payment Date). On
each Basic Rent Payment Date, after giving effect to all other
transactions hereunder on such date, the Security Agent shall
transfer from amounts on deposit in the Rent Reserve Account to
the Equity Rent Reserve Sub-Account an amount equal to the excess
of (x) the amount on deposit in the Rent Reserve Account (not
counting amounts on deposit in the Equity Rent Reserve Sub-
Account) over (y) an amount equal to the sum of the payments of
principal and interest expected to be due on the Loan
Certificates on the next two succeeding Payment Dates (less any
Accretion Amount), as reasonably determined by the Administrative
Agent and certified to the Security Agent.
SECTION 4.6 Operation and Maintenance Reserve
Account. Within three Business Days after receipt by the
Security Agent of a certificate, which (a) states that a drawing
has been made under the O&M Letter of Credit or (b) includes a
list of requested disbursements and invoices and other supporting
documents as may be necessary to properly document all such
disbursements, which certificate is signed by GE Capital and the
Administrative Agent (in the case of clause (a)), or by an
Authorized Officer of the Partnership and countersigned by the
Owner Participant and the Administrative Agent (in the case of
clause (b)), substantially in the form of Exhibit D hereto, and,
in the case of clause (b), so long as no Lease Default or Lease
Event of Default shall have occurred and be continuing (as set
forth in such certificate), funds on deposit in the Operation and
Maintenance Reserve Account shall be distributed to GE Capital in
respect of such drawing or to the Partnership or the payee(s), as
the case may be, in the manner, in the amount and at the
addresses specified in such certificate.
SECTION 4.7 Release of Excess Amounts. If, as of any
Basic Rent Payment Date, (i) an amount is on deposit in the Rent
Reserve Account or the Operation and Maintenance Reserve Account
in excess of the Required Rent Reserve Balance or the Required
Operation and Maintenance Reserve Balance, as the case may be, as
the result of the actual realization of income or gain on the
amounts on deposit in such Account, (ii) no Lease Default or
Lease Event of Default has occurred and is continuing and (iii)
the Security Agent shall have received a certificate signed by an
Authorized Officer of the Partnership and countersigned by the
Administrative Agent and the Owner Participant, substantially in
the form of Exhibit E, certifying as to such matters, then the
Security Agent shall distribute any such excess amounts to the
Revenue Account.
SECTION 4.8 Special Payment Account.
(a) Intentionally Left Blank.
(b) All Special Payments deposited in the Special
Payment Account constituting payments by the Gas Supplier
pursuant to Section 17.3 of the Gas Supply Agreement shall,
subject to Section 4.14 of this Agreement, be distributed to the
Partnership to be applied by the Partnership with the consent of
the Administrative Agent and the Owner Participant to the costs
of entering into a replacement gas supply agreement and to such
other related costs as shall be approved by the Administrative
Agent and the Owner Participant in writing. If, as of any Basic
Rent Payment Date, an amount is on deposit in the Special Payment
Account after all amounts required (and, in the reasonable
opinion of the Administrative Agent and the Owner Participant,
will be required) to be distributed under this Section 4.8 have
been so distributed, the Security Agent shall distribute any such
excess amounts to the Revenue Account.
SECTION 4.9 Partnership Security Account. (a) To
the extent that at any time the cash then available in the
Revenue Account is insufficient to make any of the payments,
deposits or transfers contemplated by Sections 4.1, 4.2, 4.3 and
4.4, the Security Agent shall from and to the extent of the cash
available in the Partnership Security Account withdraw such
amounts from the Partnership Security Account as directed by the
Administrative Agent and the Owner Participant and make the
aforesaid payments, deposits and transfers.
(b) Within three Business Days after each Basic Rent
Payment Date, if the Partnership has delivered a certificate
signed by an Authorized Officer of the Partnership and
countersigned by the Administrative Agent and the Owner
Participant, substantially in the form of Exhibit F hereto,
certifying that the conditions precedent to cash distributions to
the Partners set forth in subsection 7.3 of the Participation
Agreement have been satisfied, the Security Agent shall
distribute to the Partnership the cash then available in the
Partnership Security Account.
SECTION 4.10 Distribution Reserve Account. (a) To
the extent that at any time the cash then available in the
Revenue Account is insufficient to make any of the payments,
deposits or transfers contemplated by Sections 4.1, 4.2, 4.3 and
4.4, the Security Agent shall from and to the extent of the cash
available in the Distribution Reserve Account withdraw such
amounts from the Distribution Reserve Account as directed by the
Administrative Agent and the Owner Participant and make the
aforesaid payments, deposits and transfers.
(b) If, as of any Basic Rent Payment Date, the
Security Agent shall have received a certificate of an Authorized
Officer of the Partnership (and countersigned by the
Administrative Agent and the Owner Participant that (i) the
Operating Cash Flow Ratio for each of the two Quarterly
Measurement Periods immediately preceding the date of such
certificate was greater than 1.20 to 1 and provided that no Lease
Default or Lease Event of Default shall have occurred and be
continuing (as set forth in such certificate), the Security Agent
shall transfer the amounts on deposit in the Distribution Reserve
Account to the Revenue Account.
SECTION 4.11 Insurance and Condemnation Proceeds
Account. (a) All cash, cash equivalents, instruments,
investments and securities at any time on deposit in the
Insurance and Condemnation Proceeds Account, including all
interest or other income earned with respect thereto, are herein
called the "Insurance and Condemnation Proceeds Deposits".
(b) The Insurance and Condemnation Proceeds Deposits
shall be accumulated in the Insurance and Condemnation Proceeds
Account and held therein until paid to or upon the order of the
Partnership as provided in paragraph (c) of this Section 4.11, or
paid to the Indenture Trustee as provided in paragraph (d) or (e)
of this Section 4.11, or returned to the Partnership as provided
in Section 9.2.
(c) (i) If the amount of Insurance and Condemnation
Proceeds Deposits of the Partnership is less than $500,000, such
amount shall, subject to the provisions of paragraphs (d) and (e)
of this Section 4.11, be paid over to or upon the order of the
Partnership, as the case may be, to reimburse it for, or to pay,
the cost of repairing, rebuilding or otherwise replacing the
damaged or destroyed or lost or condemned property in respect of
which such moneys were received, upon the receipt by the Security
Agent of a certificate of an Authorized Officer of the
Partnership, countersigned by the Administrative Agent and the
Owner Participant, (A) containing the plans and specifications
setting forth in reasonable detail the work done or proposed to
be done and materials purchased or to be purchased by way of the
renewal, repair, rebuilding or other replacement of the damaged
or destroyed or lost or condemned property and (B) stating the
specific amount requested to be paid over to or upon the order of
the Partnership or that such amount is requested to reimburse the
Partnership as the case may be, for, or to pay, costs actually
incurred to repair, rebuild or replace property and that such
amount, together with amounts remaining in the Insurance and
Condemnation Proceeds Account for such purpose and other funds of
the Partnership available for such purpose, are sufficient to pay
in full the costs of such renewal, repair, rebuilding or other
replacement. The Administrative Agent and the Owner Participant
shall countersign such certificate if (w) no Lease Default or
Lease Event of Default has occurred and is continuing, (x) the
Owner Participant and the Administrative Agent shall each have
received an opinion of counsel, satisfactory to it, stating that
all Governmental Actions required in connection with the work
done or proposed to be done have been obtained, (y) in the
reasonable opinion of the Owner Participant and the
Administrative Agent and the Independent Engineer, the matters
referred to in such certificate can be accomplished in the manner
provided for in such certificate and (z) the Owner Participant
and the Administrative Agent shall have each received (I)
evidence of any lien waivers requested to be obtained by it, and
(II) evidence, satisfactory to the Administrative Agent and the
Owner Participant, that the Lien of the Lessee Security Documents
is in full force and effect; or
(ii) If the amount of Insurance and Condemnation
Proceeds Deposits is more than $500,000, such amount shall,
subject to the provisions of paragraphs (d) and (e) of this
Section 4.11, be paid over to the Persons entitled thereto from
time to time (as set forth in the certificate referred to below)
to pay the cost of repairing, rebuilding or otherwise replacing
the damaged or destroyed or lost or condemned property in respect
of which such moneys were received, upon the receipt by the
Security Agent of a certificate of an Authorized Officer of the
Partnership countersigned by the Administrative Agent and the
Owner Participant, (A) containing the plans and specifications
setting forth in reasonable detail the work done or proposed to
be done and the materials purchased or to be purchased by way of
the renewal, repair, rebuilding or other replacement of the
damaged or destroyed or lost or condemned property and (B)
stating the specific amounts requested to be paid, the Persons to
whom and the dates on which such amounts are to be paid, that
such amounts will be used to pay costs actually incurred to
repair, rebuild or replace property and that such amounts,
together with amounts remaining in the Insurance and Condemnation
Proceeds Account for such purpose and other funds of the
Partnership available for such purpose, are sufficient to pay in
full the costs of such renewal, repair, rebuilding or other
replacement. The Administrative Agent and the Owner Participant
shall countersign such certificate if (w) no Lease Default or
Lease Event of Default has occurred and is continuing, (x) the
Administrative Agent and the Owner Participant shall have each
received an opinion of counsel, satisfactory to it, stating that
all Governmental Actions required in connection with the work
done or proposed to be done have been obtained, (y) in the
reasonable opinion of the Administrative Agent and the Owner
Participant and the Independent Engineer, the matters referred to
in such certificate can be accomplished in the manner provided
for in such certificate and (z) the Administrative Agent and the
Owner Participant shall have each received (I) evidence of any
lien waivers requested to be obtained by it, and (II) evidence,
satisfactory to the Administrative Agent and the Owner
Participant, that the Lien of the Lessee Security Documents is in
full force and effect; or
(iii) In the event that any amounts remain in the
Insurance and Condemnation Proceeds Account after application
thereof in accordance with this paragraph (c), the Security Agent
shall either apply such Insurance and Condemnation Proceeds
Deposits to the payment of the Lessee Obligations or in
accordance with Section 9(g)(iii) of the Facility Lease, in
accordance with the instructions of the Administrative Agent and
the Owner Participant.
(d) If the Owner Participant or the Administrative
Agent shall at any time notify the Security Agent that an Event
of Loss has occurred, then, unless the Project is being repaired
in accordance with Section 9(c)(i) of the Facility Lease (as
certified to the Security Agent by the Partnership and
countersigned by the Administrative Agent and the Owner
Participant), the Security Agent shall promptly withdraw the
Insurance and Condemnation Proceeds Deposits from the Insurance
and Condemnation Proceeds Account and deliver the same to be
applied by the Indenture Trustee to the payment of the Lessee
Obligations and the Owner Trustee Obligations in accordance with
the provisions of Section 5.3 of the Indenture.
(e) If Owner Participant or the Administrative Agent
shall at any time notify the Security Agent that a Reimbursement
Event of Default or a Lease Event of Default has occurred and is
continuing and the Loan Certificates have become due and payable,
then the Security Agent shall promptly withdraw the Insurance and
Condemnation Proceeds Deposits from the Insurance and
Condemnation Proceeds Account and apply the same to the payment
of the Lessee Obligations and the Owner Trustee Obligations in
accordance with the provisions of Section 4.14 hereof.
SECTION 4.12 Warranty Maintenance Reserve Account.
(a) Within three Business Days after receipt by the Security
Agent of a certificate, which includes a list of requested
disbursements and invoices and other supporting documents as may
be necessary to properly document all such disbursements, signed
by an Authorized Officer of the Partnership and countersigned by
GE Capital and the Administrative Agent, substantially in the
form of Exhibit G hereto, and so long as no Lease Default or
Lease Event of Default shall have occurred and be continuing (as
specified in such certificate), funds on deposit in the Warranty
Maintenance Reserve Account shall be distributed to the Turbine
Manufacturer in the manner and in the amount and at the addresses
specified in such certificate.
(b) Upon receipt of a certificate signed by an
Authorized Officer of the Partnership or of the Owner Participant
and the Administrative Agent (and in the case of a certificate
signed by the Partnership, countersigned by GE Capital and the
Administrative Agent) certifying that the warranty period in
respect of the Turbine Contract, including any extensions
thereof, has expired, and provided that no Lease Default or Lease
Event of Default shall have occurred and be continuing (as
specified in such certificate), the Security Agent shall promptly
transfer the amounts on deposit in the Warranty Maintenance
Reserve Account to the Revenue Account.
SECTION 4.13 Current Account. The Security Agent
shall pay, from and to the extent of cash available in the
Current Account and as set forth in an officer's certificate
signed by an Authorized Officer of the Partnership (and
countersigned by the Administrative Agent and the Owner
Participant), (i) directly to each Person to which an amount in
excess of $100,000 is due and payable, the amounts previously
identified as Project Expenses in Item 2 of the most recently
delivered Project Certificate which are then due and owing, or
(ii) to the Partnership for the benefit of the Persons entitled
thereto, all other such Project Expenses previously identified in
Item 2 of the most recently delivered Project Certificate which
are then due and owing.
SECTION 4.14 Defaults. (a) Any other provision
contained in this Agreement to the contrary notwithstanding, upon
receipt by the Security Agent of written notice from the Owner
Participant or the Administrative Agent stating that a
Reimbursement Event of Default or Lease Event of Default has
occurred and is continuing, the Security Agent shall thereafter
distribute cash from the Accounts only upon the express written
instructions of the Administrative Agent (or, after the Indenture
shall have been terminated in accordance with its terms, the
Owner Participant), until such time as the Security Agent shall
have been notified in writing by such Person that such
Reimbursement Event of Default or Lease Event of Default has been
waived or cured in accordance with the Financing Documents. Any
other provision in this Agreement to the contrary notwith
standing, upon receipt by the Security Agent of written notice
from the Administrative Agent stating that an Indenture Event of
Default which is not and does not arise out of a Lease Event of
Default has occurred and is continuing, the Security Agent shall
thereafter distribute cash from the Interest Hedging Account only
upon the express written instructions of the Administrative Agent
until such time as the Security Agent shall have been notified in
writing by the Administrative Agent that such Indenture Event of
Default has been cured or waived in accordance with the Financing
Documents.
(b) If, following the occurrence and during the
continuance of a Lease Event of Default, the Administrative Agent
shall at any time notify the Security Agent that the Loan
Certificates have become due and payable in accordance with
Section 6.2(a) of the Indenture, then the Security Agent shall
transfer all cash, cash equivalents, instruments, investments and
securities available in the Accounts from time to time (after
making any transfers in respect of Project Expenses permitted
pursuant to Section 4.14(a)) first, on a pro rata basis (in
accordance with amounts payable under clauses (i) and (ii) below)
to (i) the Indenture Trustee, for the benefit of the
Administrative Agent and the Loan Participants, to the payment of
the amounts specified in Section 5.4 of the Indenture (other than
clause (vi) thereof) and (ii) to GE Capital, to the payment of
all amounts owing under the Reimbursement Agreement, including
all LOC Reimbursement Obligations, any payments owing to GE
Capital under Section 2.3 of the Reimbursement Agreement and all
cash collateralization obligations under Section 6 thereof, and
second, to the Owner Trustee, for distribution in accordance with
the Trust Agreement, to the payment of the remaining Lessee
Obligations.
SECTION 4.15 Certain Payments. Any other provision
contained in this Agreement to the contrary notwithstanding, in
the event that on any Basic Rent Payment Date there are
insufficient funds on deposit in any Account to pay principal,
interest, fees, distributions and/or other amounts due and
payable from such Account on such Basic Rent Payment Date to the
Person entitled thereto and thereafter funds are deposited into
the Revenue Account, the Security Agent shall distribute such
funds to such Person for the payment of such principal, interest,
fees or other amounts, such payments to be made in the same order
of priority (and pursuant to the same instructions) as they would
have been made had such funds been on deposit in the applicable
Account on such Basic Rent Payment Date.
SECTION 4.16 Interest Hedging Account. On each Basic
Rent Payment Date, the Security Agent shall pay all cash
available in the Interest Hedging Account to the Owner Trustee
for application in accordance with the Trust Agreement, provided
that all amounts payable pursuant to clause second of Section 4.3
hereof shall have been paid on such Basic Rent Payment Date from
amounts on deposit in the Revenue Account (or, in the event of a
shortfall, from the Interest Hedging Account). The Lessee shall
have no right, title or interest in the Interest Hedging Account
or amounts on deposit therein.
SECTION 4.17 Delivery of Officer's Certificates;
Timing of Payments. (a) Each of the certificates of an
Authorized Officer required to be delivered hereunder shall be
delivered not later than 12:00 noon, New York City time, on the
Business Day immediately prior to the day on which the Security
Agent is required to make transfers hereunder. Any certificate
of an Authorized Officer delivered later than the time specified
herein shall nevertheless be considered valid and shall be
honored by the Security Agent on or as promptly after the date
otherwise specified herein for payment as is practicable, subject
to the availability of cash in the applicable Account.
(b) Subject to (i) the timely receipt of a certificate
of an Authorized Officer as set forth in Section 4.17(a),
(ii) the availability of cash in the applicable Account and
(iii) other circumstances beyond the control of the Security
Agent, the Security Agent shall make any payment hereunder
required (except for transfers between Accounts) by means of wire
transfer of immediately available funds, to the address of the
payee(s) set forth in the applicable certificate, to be received
prior to 2:00 p.m., New York City time, on the date specified
herein for such payment.
(c) Each of the Lessee, the Owner Participant, the
Owner Trustee, the Indenture Trustee and the Administrative Agent
agrees that, concurrently with its delivery of any certificate,
notice or written request to the Security Agent, it shall deliver
a copy thereof to the other parties to this Agreement.
SECTION 4.18 Payments under Lease. Each transfer by
the Security Agent to the Indenture Trustee hereunder on account
of the payment or discharge of any Owner Trustee Obligation shall
be deemed, to the extent of such transfer, to satisfy the
obligation of the Lessee to pay any corresponding payment of
Rent, Stipulated Loss Value and all other corresponding amounts
payable by the Lessee under the Facility Lease, in each case due
and payable on such date under the Facility Lease.
SECTION 4.19 LOC Fee Account. On each Basic Rent
Payment Date, the Security Agent shall pay from cash available in
the LOC Fee Account, first, to any LOC Participant entitled
thereto, all fees payable to such LOC Participant pursuant to
Section 5(c) of the LOC Participation Agreement and second, to GE
Capital the remaining portion of fees payable pursuant to Section
2.3 of the Reimbursement Agreement (all as certified by GE
Capital or the Administrative Agent).
ARTICLE V
Investment
SECTION 5.1 Investment. (a) Any cash held by the
Security Agent in any Account shall be invested by the Security
Agent from time to time as directed in writing by the Lessee (or,
if GE Capital, the Owner Participant or the Administrative Agent,
as the case may be, shall have notified the Security Agent that a
Reimbursement Default, Reimbursement Event of Default, Lease
Default or Lease Event of Default has occurred and is continuing,
by the Administrative Agent or, after the Indenture has been
terminated, the Owner Trustee, as the case may be) in Permitted
Investments. Any income or gain realized as a result of any such
investment shall be held as part of the applicable Account and
reinvested as provided herein. Any income tax payable on account
of any such income or gain shall be paid by the Lessee or its
Affiliates. Any such investment may be sold (without regard to
maturity date) by the Security Agent whenever necessary to make
any distribution required by this Agreement. The Security Agent
shall have no liability for any loss resulting from any such
investment or sale thereof other than by reason of its willful
misconduct or negligence. The Security Agent will promptly
notify GE Capital, the Owner Participant, the Administrative
Agent and the Lessee of any loss resulting from any such
investment or sale and the Administrative Agent, or, after the
Indenture shall have been terminated in accordance with its
terms, the Owner Trustee in its sole discretion, may instruct the
Security Agent to, and the Security Agent shall, reimburse the
affected Account from the Revenues received pursuant to Section
4.2 hereof.
(b) The term "Permitted Investments" means (i)
obligations of, or guaranteed as to the interest and principal
by, the United States Government or any agency thereof having a
maturity of less than one (1) year; (ii) open market commercial
paper, with a maturity of not longer than ninety (90) days, of
any corporation incorporated under the laws of the United States
or any state thereof rated "prime-1" or its equivalent by Moody's
Investors Service, Inc. or "A-1" or its equivalent by Standard &
Poor's Ratings Group; (iii) bankers acceptances or certificates
of deposit issued by any bank rated "Aa" or "AA" or better by
Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group, and having a maximum maturity of one (1) year; (iv) any
obligations of the Security Agent, any bank rated "A" or better
by Moody's Investors Service, Inc. or Standard & Poor's Ratings
Group, in respect of the repurchase of obligations of the type
described in clause (i) which obligation is secured by
obligations of the type described in clause (i) or by any one or
more certificates of deposit of the type described in clause
(iii) hereof; (v) federally insured demand deposit accounts with
the Security Agent and banks having capital, surplus and
undivided profits of at least One Billion dollars
($1,000,000,000) that are members of the Federal Reserve System
of the United States; or (vi) a money market fund registered
under the Investment Company Act of 1940, as amended from time to
time, the portfolio of which is limited to United States
government obligations and United States government agency
obligations (bearing the full faith and credit of the United
States government); provided, that all funds in the Accounts
shall not at any time be invested in Permitted Investments with a
maturity of greater than one (1) year or with an average
maturity, calculated on a weighted average basis, of more than
six (6) months; and provided, further, that with respect to the
credit ratings specified above, if neither Moody's Investors
Service, Inc. nor Standard & Poor's Ratings Group is in the
business of rating the relevant Permitted Investment, such
Permitted Investment shall have received a rating equivalent to
that specified above for such Permitted Investment by another
nationally recognized credit rating agency of similar standing.
ARTICLE VI
Security Agent
SECTION 6.1 Rights, Duties, etc. The acceptance by
the Security Agent of its duties hereunder and under the other
Lessee Security Documents is subject to the following terms and
conditions which the parties to this Agreement hereby agree shall
govern and control with respect to its rights, duties,
liabilities and immunities:
(i) it shall act hereunder as an agent only and
shall not be responsible or liable in any manner whatever
for soliciting any funds or for the sufficiency,
correctness, genuineness or validity of any funds,
securities or other amounts deposited with or held by it;
(ii) it shall be protected and held harmless in
acting or refraining from acting upon, and shall not be
bound to make any investigation into the facts or other
matters stated in, any written notice, certificate,
instruction, request or other paper or document, as to the
due execution thereof and the validity and effectiveness of
the provisions thereof and as to the truth of any
information therein contained, which the Security Agent in
good faith believes to be genuine;
(iii) it shall not be liable for any error of
judgment or for any act done or step taken or omitted except
in the case of its gross negligence, willful misconduct or
bad faith;
(iv) it may consult with and obtain advice from
counsel of its own choice in the event of any dispute or
question as to the construction of any provision hereof or
otherwise in connection with its duties as Security Agent
hereunder;
(v) it shall have no duties as Security Agent
except those which are expressly set forth herein and in any
modification or amendment hereof, and it is not charged with
knowledge of or any duties or responsibilities in connection
with any other document or agreement other than the
Collateral Security Documents; provided, however, that no
such modification or amendment hereof shall affect its
duties unless it shall have given its prior written consent
thereto;
(vi) it may execute or perform any duties
hereunder and under the other Lessee Security Documents
(other than the holding of the Accounts and stock
certificates or any other collateral which is required to be
held by it for purposes of perfection) either directly or
through agents or attorneys selected with reasonable care;
(vii) it may engage or be interested in any
financial or other transactions with any party hereto and
may act on, or as depositary, trustee or agent for, any
committee or body of holders of obligations of such Persons
as freely as if it were not Security Agent hereunder;
(viii) it shall have no right of set-off against any
Account;
(ix) it hereby waives any and all Liens which may
arise from time to time in its favor on any Account or any
other amounts received by it pursuant to this Agreement; and
(x) it shall not be obligated to take any action
which in its reasonable judgment would involve it in expense
or liability unless it has been furnished with an indemnity
reasonably satisfactory to it.
SECTION 6.2 Resignation or Removal. (a) The
Security Agent may at any time resign by giving notice to each
other party to this Agreement, such resignation to be effective
upon the appointment of a successor Security Agent as hereinafter
provided.
(b) The Owner Participant and the Administrative Agent
may jointly remove the Security Agent at any time by giving
notice to each other party to this Agreement, such removal to be
effective upon the appointment of a successor Security Agent as
hereinafter provided.
(c) In the event of any resignation or removal of the
Security Agent, a successor Security Agent, which shall be a bank
or trust company organized under the laws of the United States of
America or any state thereof having a capital and surplus of not
less than $100,000,000 and shall be appointed by the Owner
Participant and the Administrative Agent, subject to the approval
of the Lessee (which approval shall not be unreasonably withheld
or delayed) so long as no Reimbursement Default or Reimbursement
Event of Default or Lease Default or Lease Event of Default shall
have occurred and be continuing. If a successor Security Agent
shall not have been appointed or shall not have accepted its
appointment as Security Agent hereunder within 45 days after such
notice of resignation of the Security Agent or such notice of
removal of the Security Agent, the Security Agent, the Owner
Participant, the Owner Trustee, the Indenture Trustee or the
Lessee may apply to any court of competent jurisdiction to
appoint a successor Security Agent to act until such time, if
any, as a successor Security Agent shall have accepted its
appointment as above provided. Any successor Security Agent so
appointed by such court shall immediately and without further act
be superseded by any successor Security Agent appointed by the
Owner Participant, the Administrative Agent and the Owner Trustee
with the approval of the Lessee as above provided. Any such
successor Security Agent shall deliver to each party to this
Agreement a written instrument accepting such appointment
hereunder and under the other Lessee Security Documents and
thereupon such successor Security Agent shall deliver to each
party to this Agreement a written instrument accepting such
appointment and thereupon succeed to all the rights and duties of
the Security Agent hereunder and thereunder and shall be entitled
to receive the Accounts and other collateral from the predecessor
Security Agent. Any such successor Security Agent shall execute
the Consent of the Power Purchaser.
ARTICLE VII
Determinations
SECTION 7.1 Value. Cash and Permitted Investments
on deposit from time to time in the Accounts shall be valued (the
"Value") by the Security Agent as follows:
(a) cash shall be valued at the face amount thereof;
and
(b) Permitted Investments shall be valued at the
lesser of the face amount and the purchase price.
SECTION 7.2 Other Determinations. The Lessee, the
Administrative Agent, the Owner Participant and the Security
Agent may establish procedures not inconsistent with this
Agreement pursuant to which the Security Agent may conclusively
determine, for purposes of this Agreement, the amounts from time
to time to be distributed or paid by the Security Agent from cash
available in the Accounts.
SECTION 7.3 Sales of Permitted Investments. The
Security Agent will use its best efforts to sell Permitted
Investments so that actual cash is available, on each date on
which a distribution is to be made pursuant to this Agreement,
for the Security Agent to make such distribution in cash on such
date. The amount of any check or other instrument which may be
deposited in any Account shall not be treated as cash available
until the final collection thereof.
SECTION 7.4 Available Cash. In determining the
amount of available cash in any Account at any time, in addition
to any cash then on deposit in such Account, the Security Agent
shall treat as available cash the amount which the Security Agent
would have received on such day if the Security Agent had
liquidated all the Permitted Investments (at then prevailing
market prices) then on deposit in such Account.
ARTICLE VIII
Representations and Warranties
SECTION 8.1 Representations. The Lessee represents
and warrants, for the benefit of GE Capital, the Administrative
Agent and the Loan Participants, that each certificate of an
Authorized Officer delivered by the Lessee in connection with
this Agreement shall be true and correct in all material respects
and that the amounts of money certified thereby shall be the
proper amounts to be set forth in such certificate of an
Authorized Officer. The Security Agent represents and warrants
to the other parties hereto that it has the power and authority
to enter into and perform its obligations under this Agreement.
SECTION 8.2 Indemnification. The Lessee hereby
undertakes to indemnify and hold harmless the Security Agent, the
Administrative Agent and GE Capital from and against any and all
expenses imposed on, incurred by or asserted against such Person
in any way relating to or arising out of any inaccuracy in any
certificate of an Authorized Officer delivered by the Lessee.
ARTICLE IX
Miscellaneous
SECTION 9.1 Fees and Indemnification of Security
Agent. The Lessee agrees to pay the reasonable fees of the
Security Agent as compensation for its services under this
Agreement. In addition, the Lessee assumes liability for, and
agrees to indemnify, protect, save and keep harmless the Security
Agent and its respective officers, employees, successors,
assigns, agents and servants from and against, any and all
claims, liabilities, obligations, losses, damages, penalties,
costs and expenses (including reasonable attorney's fees and
expenses) that may be imposed on, incurred by, or asserted
against, at any time, the Security Agent or its respective
officers and employees and in any way relating to or arising out
of the execution and delivery of this Agreement, the
establishment of the Accounts, the acceptance of deposits, the
purchase or sale of Permitted Investments, the retention of cash,
Permitted Investments or the proceeds thereof and any payment,
transfer or other application of cash or Permitted Investments by
the Security Agent in accordance with the provisions of this
Agreement, or as may arise by reason of any act, omission or
error of the Security Agent made in good faith in the conduct of
its duties; except that the Lessee shall not be required to
indemnify, protect, save and keep harmless the Security Agent
against its own gross negligence, active or passive, or willful
misconduct. The indemnities contained in this Section 9.1 shall
survive the termination of this Agreement.
SECTION 9.2 Termination. Subject to Section 9.1, the
provisions of this Agreement shall terminate on the date on which
all Lessee Obligations and Lender Obligations shall have been
paid in full and the Indenture, the Reimbursement Agreement, the
Participation Agreement and the Facility Lease shall have
terminated in accordance with their respective terms. This
Agreement shall be deemed to have terminated upon receipt by the
Security Agent of a certificate to such effect executed by the
Lessee, GE Capital and the Administrative Agent. Upon
termination of this Agreement the Security Agent shall transfer
any remaining amounts, together with any interest thereon, on
deposit in the Accounts to the party or parties specified in such
certificate. Any liability or obligation hereunder arising prior
to the termination of this Agreement shall survive such
termination.
SECTION 9.3 Severability. If any one or more of the
covenants or agreements provided in this Agreement on the part of
the parties hereto to be performed should be determined by a
court of competent jurisdiction to be contrary to law, such
covenant or agreement shall be deemed and construed to be
severable from the remaining covenants and agreements herein
contained and shall in no way affect the validity of the
remaining provisions of this Agreement.
SECTION 9.4 Counterparts. This Agreement may be
executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same
instrument.
SECTION 9.5 Amendments. This Agreement may not be
modified or amended except in accordance with the provisions of
the Participation Agreement and with the prior written consent of
each of the parties hereto.
SECTION 9.6 APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, EXCEPT THAT THE CREATION, VALIDITY AND
PERFECTION OF THE SECURITY INTERESTS IN THE ACCOUNTS HEREUNDER
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CONNECTICUT.
SECTION 9.7 Notices. Unless otherwise specifically
provided herein, all notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing, by
telecopier or, if available, by telex and, unless otherwise
expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or when deposited in the
mail, first class postage prepaid or with an overnight courier
service, or in the case of transmission by telecopier, when
confirmation of receipt is obtained, or in the case of telex
notice, when sent, answerback received, and shall be directed to
the address, telecopy or telex number of such Person designated
pursuant to the Participation Agreement, or in the case of the
Security Agent or the Owner Trustee, to 777 Main Street,
Hartford, CT 06115, Attention: Corporate Trust Administration,
Telecopy No. (203) 986-7920, or to such other address, or
telecopy number as may be specified from time to time by such
Person or the Security Agent.
SECTION 9.8 Submission to Jurisdiction; Waivers.
Each of the parties hereto irrevocably and unconditionally agrees
to the submission to jurisdiction and the waivers as set forth in
Section 13.11 of the Participation Agreement.
SECTION 9.9 Limited Liability. There shall be full
recourse to the Lessee and all of its assets for the liabilities
of the Lessee under this Agreement and the other Lessee
Obligations, but in no event shall any Partner, Affiliate of any
Partner, or any officer, director or employee of the Lessee, any
Partner or their Affiliates or any holder of any equity interest
in any Partner be personally liable or obligated for such
liabilities and Lessee Obligations, except as may be specifically
provided in any other Financing Document to which such Partner is
a party or in the event of fraudulent actions, knowing
misrepresentations, gross negligence or willful misconduct by the
Lessee, any Partner or any of their Affiliates hereunder.
Subject to the foregoing limitation on liability, GE Capital, the
Administrative Agent, or the Owner Trustee or the Indenture
Trustee may sue or commence any suit, action or proceeding
against any Partner or any Affiliate thereof in order to obtain
jurisdiction over the Lessee in order to enforce its rights and
remedies hereunder. Nothing herein contained shall limit or be
construed to limit the liabilities and obligations of any Partner
or any Affiliate thereof in accordance with the terms of any
other Transaction Document creating such liabilities and
obligations to which such Partner or Affiliate is a party.
SECTION 9.10 WAIVERS OF JURY TRIAL. THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS SECURITY
DEPOSIT AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 9.11 Benefit of Agreement. This Agreement
shall inure to the benefit of, and be enforceable by, the parties
hereto and their respective successors and permitted assigns, and
no other Person shall be entitled to any of the benefits of this
Agreement.
SECTION 9.12 Certain Rights of Power Purchaser.
Nothing in this Security Deposit Agreement shall be deemed to
limit the provisions of the Consent of the Power Purchaser, which
provisions are solely for the benefit of the Power Purchaser and
not the Lessee. Without limiting the scope of the foregoing, the
Security Agent agrees, for the exclusive benefit of the Power
Purchaser and not the Lessee, that the exercise of remedies or
any similar action under this Security Deposit Agreement is
subject to, and shall be conducted in a manner consistent with,
the Power Purchaser's rights under (i) the Consent of the Power
Purchaser and (ii) the Power Purchase Agreement and the Transfer
Agreement (to the extent such rights under the Power Purchase
Agreement and the Transfer Agreement are not explicitly waived by
the Power Purchaser in accordance with the terms of the Consent
of the Power Purchaser).
SECTION 9.13 Countersignatures; Rights of
Administrative Agent. (a) In the event that the Security Agent
shall have received notice from the Indenture Trustee that an
Indenture Event of Default that is not and does not arise out of
a Lease Event of Default shall have occurred and be continuing,
approvals or countersignatures of the Owner Participant (but not
"GE Capital", in its capacity as issuer of the Letters of Credit)
shall not be required in order for the Security Agent to take any
action hereunder.
(b) In the event that a drawing under any Letter of
Credit shall have been made and not have been reimbursed by the
Lessee, upon written notice from the Administrative Agent to the
Lessee, GE Capital and the Security Agent that the LOC
Participants have funded all amounts owing to GE Capital under
the LOC Participation Agreements, the Administrative Agent (or
the Indenture Trustee, as the case may be) shall be entitled to
exercise any and all rights of GE Capital (as issuer of the
Letters of Credit), to the exclusion of GE Capital, hereunder and
under the other Lessee Security Documents in respect of the
Letters of Credit and the LOC Reimbursement Obligations.
IN WITNESS WHEREOF, the parties hereto have each caused
this Agreement to be duly executed by their duly authorized
officers, all as of the day and year first above written.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation, its
General Partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
PANDA BRANDYWINE CORPORATION, as the
General Partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Michael J. Tzougrakis
Name: Michael J. Tzougrakis
Title: Manager of Operations
FLEET NATIONAL BANK, as Security Agent
and as Owner Trustee
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
CREDIT SUISSE, a bank organized and
existing under the laws of Switzerland,
acting by and through its New York
branch, as Administrative Agent
By: /s/ Guy R. Cirincione /s/ Louis D. Laconetti
Name: Guy R. Cirincione Louis D. Laconetti
Title: Member of Associate
Senior Management
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Indenture Trustee
By: /s/ C. Scott Nielsen
Name: C. Scott Nielsen
Title: Vice President
EXHIBIT 10.29
AMENDED AND RESTATED
DEED OF TRUST AND SECURITY AGREEMENT
by
PANDA-BRANDYWINE, L.P.,
Grantor
to
CHICAGO TITLE INSURANCE COMPANY,
Trustee
for the use and benefit of
FLEET NATIONAL BANK
(formerly known as Shawmut Bank Connecticut,
National Association),
as Security Agent, Beneficiary
Dated as of December 18, 1996
THE PRINCIPAL SUM SECURED
BY THIS DEED OF TRUST AND SECURITY AGREEMENT
IS $130,000,000
Real Property Located in the County of
Prince George's, Maryland
After recording please return to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3909
Attention: Janet Lapidus, Esq.
TABLE OF CONTENTS
Page
ARTICLE I
GENERAL COVENANTS AND AGREEMENTS 9
1.01 Instruments of Further Assurance; Filing and Recording 9
1.02 Warranties of Title 10
1.03 General 10
1.04 Insurance 12
1.05 Monthly Payment of Assessments 12
1.06 Performance of Grantor's Obligations 12
1.07 Additional Advances and Readvances From Beneficiary 13
1.08 Agreements Between Grantor and Beneficiary 14
1.09 Continuance of Use 14
1.10 Leases 14
1.11 Alterations of Security 15
1.12 Liability of Grantor 15
1.13 No Waiver of Remedies 15
ARTICLE II
REMEDIES UPON EVENT OF DEFAULT 16
2.01 Events of Default 16
2.02 Remedies 16
2.03 Applications of Proceeds; Effect of Sale 18
2.04 Abandonment of Sale 18
2.05 Right to Purchase 18
2.06 Waiver of Marshalling, etc. 18
2.07 Remedies not Exclusive 19
2.08 Limitation of Liability 19
ARTICLE III
GENERAL 19
3.01 No Waiver 19
3.02 Notices 19
3.03 Successors and Assigns 19
3.04 Indemnity 20
3.05 Severability 20
3.06 Fixture Filing 20
3.07 GOVERNING LAW 20
3.08 No Merger 20
3.10 Successor Trustee 21
3.11 Actions of Trustee 21
3.12 Trustee as Attorney 21
3.13 Incapacity or Absence from State 21
3.14 Certain Rights of the Power Purchaser 21
Schedule 1 Legal Description of Site
Schedule 2 UCC-1 Financing Statements
AMENDED AND RESTATED
DEED OF TRUST AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED DEED OF TRUST AND SECURITY
AGREEMENT, dated as of December 18, 1996 by PANDA-BRANDYWINE,
L.P., a Delaware limited partnership (the "Grantor"), having an
address at 4100 Spring Valley, Suite 1001, Dallas, Texas 75244,
to CHICAGO TITLE INSURANCE COMPANY, a Missouri corporation having
an address at 19 East Fayette Street, Baltimore, Maryland 21202
(the "Trustee"), for the use and benefit of FLEET NATIONAL BANK
(formerly known as Shawmut Bank Connecticut, National
Association), a national banking association, in its capacity as
Security Agent under the Security Deposit Agreement (as defined
below) (the "Beneficiary" or the "Security Agent"), for the
benefit of the Owner Trustee (and, by collateral assignment, the
Indenture Trustee, each as defined below) and General Electric
Capital Corporation, a New York corporation ("GE Capital"). The
address of the Beneficiary is 777 Main Street, Hartford,
Connecticut 06115. References to this "Deed of Trust" shall mean
this instrument and any and all renewals, modifications,
amendments, supplements, extensions, consolidations,
substitutions, spreaders and replacements of this instrument.
W I T N E S S E T H :
WHEREAS, Grantor, Panda Brandywine Corporation, a
Delaware corporation and the sole general partner of Grantor (the
"General Partner") and GE Capital entered into that certain
Construction Loan Agreement and Lease Commitment dated as of
March 30, 1995 (the "Construction Loan Agreement") pursuant to
which GE Capital (i) provided construction financing for the
Project and (ii) issued the Letters of Credit as collateral
security for certain obligations of the Partnership under the
Power Purchase Agreement;
WHEREAS, Grantor, Trustee and Beneficiary, for the
benefit of the Owner Trustee and GE Capital, entered into the
Deed of Trust and Security Agreement dated as of March 30, 1995
which was recorded on April 12, 1995 in Liber 2078, Folio 447 in
the Land Records of Charles County, Maryland, and in Liber 10100,
Folio 232 in the Land Records of Prince George's County,
Maryland, as modified by (i) that certain Partial Release dated
October 30, 1996 and recorded in Liber ____, Folio ____ in the
Land Records of Charles County, Maryland, and Liber ____, Folio
____ in the Land Records of Prince George's County, Maryland,
(ii) the letter concerning the release of assigned agreements
from the Owner Trustee to the Partnership and the Power Purchaser
dated October 30, 1996 and (iii) that certain Partial Release
dated as of December 18, 1996 and recorded in the Land Records of
Charles County, Maryland and the Land Records of Prince George's
County, Maryland immediately prior to the recording of this Deed
of Trust (as further amended, supplemented or otherwise modified
prior to the date hereof, the "Existing Deed of Trust") to secure
the payment and performance by Grantor of all of its obligations
to the Owner Trustee and GE Capital;
WHEREAS, as contemplated by the Construction Loan
Agreement, Grantor and the Owner Trustee have entered into a
lease of the Facility and certain related documents on the date
hereof pursuant to which, among other things, the Owner Trustee
will lease the Facility to Grantor;
WHEREAS, GE Capital has elected to fund the lease of
the Facility with non-recourse indebtedness as a leveraged lease
and, pursuant to Section 3.14 of the Existing Deed of Trust, the
parties hereto have agreed to amend and restate the Existing Deed
of Trust subject to the terms and conditions provided herein;
WHEREAS, contemporaneously with the execution and
delivery hereof, the Owner Trustee is entering into an Indenture
with the Indenture Trustee (as defined below) which, among other
things, provides for the issuance of, and equal and ratable
security for, the Loan Certificates;
WHEREAS, Grantor and GE Capital are entering into the
Letter of Credit Reimbursement Agreement to provide for the
continued issuance by GE Capital of the Letters of Credit;
WHEREAS, it is a condition precedent to the performance
of certain obligations on the Lease Closing Date that the parties
shall have executed and delivered this Amended and Restated Deed
of Trust which amends and restates the Existing Deed of Trust in
all respects;
WHEREAS, the parties hereto desire to execute this Deed
of Trust to satisfy the condition described in the preceding
recital;
WHEREAS, this Deed of Trust secures the same
indebtedness and obligations as the Existing Deed of Trust (other
than certain indebtedness and obligations secured by the Existing
Deed of Trust which have been paid or satisfied prior to the date
of this Deed of Trust), and all applicable transfer and recording
taxes with respect to the Existing Deed of Trust have been paid
in full;
WHEREAS, pursuant to the terms of the Amended and
Restated Security Deposit Agreement, dated as of the date hereof
among Beneficiary, Grantor, the Owner Trustee and the Indenture
Trustee, Beneficiary has agreed to act as security agent on
behalf of GE Capital, the Owner Trustee and the Indenture Trustee
and to hold the Collateral for the benefit of GE Capital and the
Owner Trustee (and, by collateral assignment, the Indenture
Trustee);
WHEREAS, capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them
in Annex A to the Participation Agreement, dated as of the date
hereof (the "Participation Agreement"), among Grantor, the
General Partner, GE Capital, Fleet National Bank, not in its
individual capacity but solely as owner trustee (in such
capacity, the "Owner Trustee", including any successor owner
trustee appointed in accordance with the terms of the Trust
Agreement and the Participation Agreement) under the Trust
Agreement and as Security Agent under the Security Deposit
Agreement, Credit Suisse, as administrative agent (the
"Administrative Agent") and First Security Bank, National
Association, not in its individual capacity but solely as
indenture trustee (in such capacity, the "Indenture Trustee")
under the Indenture, and the other entities listed on Schedule I
to the Participation Agreement (the "Loan Participants");
NOW, THEREFORE, to secure (i) the unpaid principal
amount of, and accrued interest on (including, without
limitation, interest accruing after the maturity of the LOC
Reimbursement Obligations and interest accruing after the filing
of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the
Grantor, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the LOC Reimbursement
Obligations; (ii) all rent and other amounts which may be payable
by Grantor to GE Capital or the Owner Trustee under any lease of
the Facility, the Participation Agreement and the Reimbursement
Agreement; and (iii) the payment and performance of all other
indebtedness, liabilities and obligations of Grantor to
Beneficiary, GE Capital, the Owner Trustee, the Administrative
Agent, the Indenture Trustee, the Loan Participants, the Trustee
and any other Indemnitee, in each case whether now existing or
hereafter incurred, direct or indirect, absolute or contingent,
secured or unsecured, matured or unmatured, joint or several,
under, arising out of or in connection with this Deed of Trust,
any lease of the Facility, the Reimbursement Agreement, the
Participation Agreement, any other Collateral Security Document,
any other Financing Document and any other document made,
delivered or given in connection therewith or herewith, whether
on account of principal, interest, reimbursement obligations,
fees, indemnitees, costs, expenses (including without limitation
fees and disbursements of counsel) or otherwise (the items set
forth in clauses (i), (ii) and (iii), collectively, the "Lessee
Obligations"), and for the uses and purposes and subject to the
terms and provisions hereof, and in consideration of the premises
and of the covenants herein contained and other good and valuable
consideration the receipt and sufficiency of which are hereby
acknowledged, GRANTOR, INTENDING TO BE LEGALLY BOUND, DOES HEREBY
GRANT, BARGAIN, SELL, CONVEY, WARRANT, ASSIGN, TRANSFER,
MORTGAGE, PLEDGE, SET OVER AND CONFIRM UNTO TRUSTEE, IN TRUST
WITH THE POWER OF SALE FOR THE USE AND BENEFIT OF BENEFICIARY
(FOR THE BENEFIT OF GE CAPITAL AND THE OWNER TRUSTEE, AND BY
COLLATERAL ASSIGNMENT, THE INDENTURE TRUSTEE) AND THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS, AND GRANTS TO TRUSTEE AND
BENEFICIARY (FOR THE BENEFIT OF GE CAPITAL AND THE OWNER TRUSTEE,
AND BY COLLATERAL ASSIGNMENT, THE INDENTURE TRUSTEE) AND ITS
SUCCESSORS AND ASSIGNS A SECURITY INTEREST IN, UNDER THE UNIFORM
COMMERCIAL CODE OF THE STATE OF MARYLAND, THE FOLLOWING DESCRIBED
PROPERTY, WHETHER NOW OWNED OR HEREAFTER ACQUIRED (collectively,
the "Trust Property"); provided, however, that the maximum
principal sum secured by this Deed of Trust or upon any
contingency which may be secured hereby at any time is
$130,000,000, and $4,377,660.76 of the amount secured was
purchase money for the Site (as defined below) and certain
easements located in Prince George's County, Maryland, and
$316,193.94 of the amount secured was purchase money for certain
easements located in Charles County, Maryland:
(i) All right, title and interest of Grantor in
and to the tracts of land described in Schedule 1 attached
hereto and made a part hereof (the "Site");
(ii) all the estate, right, title, claim or demand
whatsoever of Grantor, in possession or expectancy, in and
to the Real Estate (as defined below) or any part thereof;
(iii) all right, title and interest of Grantor in,
to and under all easements, rights of way, gores of land,
streets, ways, alleys, passages, sewer rights, waters, water
courses, water and riparian rights, development rights, air
rights, mineral rights and all estates, rights, titles,
interests, privileges, licenses, tenements, hereditament and
appurtenances belonging, relating or appertaining to the
Real Estate (as defined below), and any reversions,
remainders, rents, issues, profits and revenue thereof and
all land lying in the bed of any street, road or avenue, in
front of or adjoining the Real Estate to the center line
thereof;
(iv) all right, title, estate and interest of
Grantor in or to any and all present and future buildings
and improvements now or hereafter erected on the Site and
all fixtures, attachments, appliances, equipment, machinery,
and other articles now or subsequently attached to said
buildings and improvements or used in connection with the
operation of the Facility to be located on the Site (all of
the items enumerated in this clause (iv) being collectively
referred to as the "Improvements"; the Site and the
Improvements, collectively, the "Real Estate");
(v) all right, title, interest and estate of
Grantor now owned or at any time hereafter acquired in and
to the Facility, including all fixtures, equipment and
personalty (collectively called the "Equipment"), now or at
any time hereafter located in or used in connection with the
use of the Real Estate or located in, used in connection
with, or constituting a part or component of, the Facility
(excluding any metering equipment owned by the Power
Purchaser), including, without being limited to, the
Distilled Water Facility, all fuel handling equipment, fuel
receiving and storage, fuel reclaim and boiler feed
equipment, metering and storage equipment, boiler and
related equipment, auxiliary boiler and related equipment,
steam turbine and generator together with their dedicated
auxiliaries, fuel water systems, condensing cooling towers,
emission and wastewater control equipment, compressed air
and related equipment, fire protection equipment, central
control equipment, dynamos, generators, engines, ducts,
switchboards, controls, motors, belting, gas and electric
fixtures, bulbs, apparatus, machinery, fittings, appliances
and appurtenances, burners, furnaces, heaters, boilers,
pipes, pumps, radiators, fans and other power, heating,
plumbing, hot water, sanitary, drainage and ventilating
apparatus and equipment, air conditioning and cooling
systems and equipment, water cooling and condensing
apparatus and equipment, call systems and other
communications systems, fuel conveyors, incinerators,
incinerating fixtures and equipment, and all other articles,
equipment, appliances, implements, devices and accessories
or things whatsoever (including any and all accessions to,
proceeds of, replacements of and substitutions for the
Equipment), used or to be used, or placed or to be placed,
in the Improvements, or located in, used in connection with,
or constituting a part or component of, the Facility,
whether herein enumerated or not, and whether or not affixed
to the Improvements, and which are used or useful in the
operation and maintenance of the Facility, the Improvements
or the Equipment or in the activities conducted therein;
(vi) all right, title and interest of Grantor in
and to all substitutes and replacements of, and all
additions and improvements to, the Site, the Improvements,
the Equipment, the Facility and the remainder of the Real
Estate, subsequently acquired by or released to Grantor or
constructed, assembled or placed by Grantor on the Real
Estate, immediately upon such acquisition, release,
construction, assembling or placement, including, without
limitation, any and all building materials whether stored at
the Real Estate or offsite, and, in each such case, without
any further mortgage, conveyance, assignment or other act by
Grantor;
(vii) all right, title and interest of Grantor in,
to and under all leases, subleases, sub-subleases,
subtenancies, assignments, occupancies, underlettings,
concession agreements, management agreements, licenses and
other agreements relating to the use or occupancy of the
Site, the Improvements, the Equipment, the Facility, any
other part of the Real Estate or any part thereof, now
existing or subsequently entered into by Grantor and whether
written or oral and all guarantees of any of the foregoing
(collectively, as any of the foregoing may be amended,
restated, extended, renewed or modified from time to time,
the "Leases"), and all rights of Grantor in respect of cash
and securities deposited thereunder and the right to receive
and collect the revenues, income, rents, issues and profits
thereof, together with all other rents, royalties, issues,
profits, revenue, income and other benefits arising from the
use and enjoyment of the Trust Property (collectively, the
"Rents");
(viii) all trade names, trade marks, logos,
copyrights, good will and books and records relating to or
used in connection with the operation of the Trust Property
or any part thereof;
(ix) all unearned premiums under insurance
policies now or subsequently obtained by Grantor relating to
the Site, the Improvements, the Equipment, the Facility or
any other part of the Real Estate, and Grantor's interest in
and to all proceeds of any such insurance policies
(including title insurance policies) including the right to
collect and receive such proceeds, subject to the provisions
relating to insurance generally set forth below; and all
awards and other compensation, including the interest
payable thereon and the right to collect and receive the
same, made to the present or any subsequent owner of the
tenant's interest under the Site Lease, the Improvements,
the Equipment, the Facility or any other part of the Real
Estate for the taking by eminent domain, condemnation or
otherwise, of all or any part of the Site or any other part
of the Real Estate, or any easement or other right therein;
(x) all right, title and interest of Grantor in
and to (i) all contracts from time to time executed by
Grantor or any manager or agent on its behalf relating to
the ownership, construction, maintenance, repair, operation,
occupancy, sale or financing of the Real Estate or the
Equipment or any part thereof and all agreements relating to
the purchase or lease of any portion of the Real Estate or
the Equipment or any part thereof or any property which is
adjacent or peripheral to the Real Estate, together with the
right to exercise such options (collectively, the
"Contracts"), any guarantees or letters of credit provided
to Grantor to assure the performance by any party to any
Contract and all moneys or amounts due or to become due
under or with respect to any Contract (including all Special
Payments), any damages arising out of or for breach or
default in respect of any Contract, and all rights of
Grantor to terminate any Contract or to perform or exercise
any remedy thereunder or to exercise any election or option
or to make any decision or determination or to give any
notice, consent, waiver or approval or to take any other
action in respect of any Contract;
(xi) all right, title and interest of Grantor, in
and to any and all monies now or subsequently on deposit for
the payment of real estate taxes or special assessments
against the Real Estate, or for the payment of premiums on
insurance policies covering the foregoing property or
otherwise on deposit with or held by Beneficiary as provided
in this Deed of Trust;
(xii) all right, title and interest of Grantor in
and to the accounts established and maintained pursuant to
the Security Deposit Agreement, all Project Revenues and all
cash, cash equivalents, instruments, letters of credit,
investment and other securities deposited or required to be
deposited with the Trustee or the Beneficiary pursuant to
any provision of this Deed of Trust, the Security Deposit
Agreement or any other Transaction Document, including,
without limitation, the twelve (12) special, segregated and
irrevocable Accounts (and all amounts deposited therein)
established by the Beneficiary at Fleet National Bank
(formerly known as Shawmut Bank Connecticut, National
Association), more specifically described as follows:
Account Number: Name of Account:
0155330010 Revenue Account
0155360010 Warranty Maintenance Reserve Account
0155350010 Rent Reserve Account
0155370010 Insurance and Condemnation Proceeds
Account
0155380010 Special Payment Account
0155390010 Partnership Security Account
0155400010 Distribution Reserve Account
0155340010 Operation and Maintenance Reserve
Account
0155410010 Current Account
0005130010 Completion Account
0005133410 Interest Hedging Account
0005132610 LOC Fee Account
(xiii) all right, title and/or interest of Grantor
in, to and under (A) all now or hereafter existing consents,
licenses, building permits, other permits and governmental
approvals, certificates of occupancy, authorizations and
agreements relating to construction, ownership, management,
completion, occupancy, use or operation of the Trust
Property or any part thereof (collectively, the "Permits"),
to the extent assignment hereunder does not violate the
provisions of such Permits, and (B) all now or hereafter
existing drawings, plans, specifications and similar or
related items relating to the Real Estate or the Equipment
or any part thereof (collectively, the "Plans");
(xiv) all right, title and interest of Grantor in
and to all "Accounts", "Chattel Paper", "Documents",
"Instruments", "Equipment", "General Intangibles", "Goods"
and "Inventory" (each phrase in quotations having the
meaning given in the Uniform Commercial Code of the State of
Maryland as in effect on the date hereof) and all other, if
any, personal, real or mixed property of Grantor, now owned
or hereafter acquired (the "Personal Property");
(xv) all right, title and interest of Grantor in
and to any and all other property that may from time to
time, by delivery or by writing of any kind, be subjected to
the lien hereof by Grantor or by anyone on its behalf or
with its consent, or which may come into the possession or
be subject to the control of the Trustee or the Beneficiary
pursuant to this Deed of Trust, including, without
limitation, all proceeds of any sales or other dispositions
of all or part of the Trust Property, any such property
being hereby assigned to the Trustee for the benefit of the
Beneficiary and subjected or added to the lien or estate
created by this Deed of Trust forthwith upon the acquisition
thereof by Grantor, as fully as if such property were now
owned by Grantor and were specifically described in this
Deed of Trust and subjected to the lien and security
interest hereof; and the Trustee for the benefit of the
Beneficiary is hereby authorized to receive any and all such
property as and for additional security hereunder;
(xvi) all right, title and interest of Grantor in
and to all the remainder or remainders, reversion or
reversions, rents, revenues,issues, profits, royalties,
income and other benefits derived from any of the foregoing,
all of which are hereby assigned to Trustee, who is hereby
authorized to collect and receive the same, to give proper
receipts and acquittances therefor and to apply the same to
the payment of the Lessee Obligations in accordance with the
provisions of this Deed of Trust; and;
(xvii) all right, title and interest of Grantor in
and to all proceeds, products and other "Proceeds" (as such
term is defined in the Uniform Commercial Code of the State
of Maryland as in effect on the date hereof), both cash and
noncash, and including those arising from the sale, lease,
transfer or other use or disposition of any kind or nature,
of the foregoing;
provided, however, that the execution and delivery of this Deed
of Trust is for security only and shall not (a) transfer, pass or
in any way affect or modify the liability or responsibility of
Grantor under or in respect of any Contract, or (b) subject
Beneficiary or Trustee to any liabilities or responsibilities of
Grantor under or in respect of any Contract.
Notwithstanding anything to the contrary contained
herein, this Deed of Trust shall not be deemed to encumber any
property that is perfected by the filing of the UCC-1 financing
statements set forth on Schedule 2 attached hereto.
TO HAVE AND TO HOLD the Trust Property, with all the
privileges and appurtenances thereof, to Trustee, their
successors and assigns for the uses and purposes set forth
herein; PROVIDED NEVERTHELESS, that if all the Lessee Obligations
shall be paid and performed in full, then this Deed of Trust
shall be void and the Trustee shall, on receipt of a written
request therefor from Beneficiary (A) release and discharge the
lien of this Deed of Trust, (B) cause this Deed of Trust to be
cancelled of record and (C) transfer and deliver to Grantor the
Trust Property which is then subject to the lien of this Deed of
Trust and is in the Trustee's possession or control; otherwise it
shall remain in full force and effect.
ARTICLE I
GENERAL COVENANTS AND AGREEMENTS
1.01 Instruments of Further Assurance; Filing and
Recording. (a) Grantor covenants that it shall do, execute,
acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such amendments or supplements hereto
and such further acts, instruments and transfers as Beneficiary
or Trustee may reasonably require for the curing of any defect in
the execution or acknowledgment hereof or in the description of
the Trust Property or for the better conveying, assigning,
pledging and confirming unto Trustee or Beneficiary of the Trust
Property conveyed, assigned and pledged hereunder or for properly
evidencing or giving notice of the Lessee Obligations or of each
lien and security interest securing payment of the Lessee
Obligations.
(b) Grantor covenants that (i) upon the execution and
delivery of this Deed of Trust and thereafter, from time to time,
it shall cause this Deed of Trust and each amendment and
supplement hereto (or a memorandum with respect hereto or to such
amendment or supplement) to be filed, registered and recorded and
to be refiled, re-registered and re-recorded in such manner and
in such places as may be required by Beneficiary, GE Capital,
Owner Trustee or Trustee in order to publish notice of and fully
to protect the lien of this Deed of Trust upon, and to perfect or
continue the perfection of the security interests created by this
Deed of Trust in, the Trust Property and (ii) it shall perform or
cause to be performed from time to time any other act as required
by law, and it shall execute or cause to be executed any and all
instruments of further assurance that may be necessary for such
publication, perfection, continuation and protection.
(c) Grantor shall pay all filing, registration and
recording fees, all refiling, re-registration and re-recording
fees, and all reasonable expenses incident to the execution and
acknowledgment of this Deed of Trust, any amendment or supplement
hereto and any instrument of further assurance, and all federal,
state, county and municipal stamp taxes and other taxes, duties,
imposts, assessments and charges arising out of or in connection
with the execution and delivery of this Deed of Trust, any
amendment or supplement hereto or any instruments of further
assurance.
1.02 Warranties of Title. (a) Grantor warrants that
it has good and marketable title to the Trust Property free and
clear of any Lien other than Permitted Liens, and that it has
good right to sell, mortgage and convey the same in manner and
form as provided herein. Grantor shall forever warrant and
defend the title to the Trust Property against the claims and
demands of all persons whomsoever, except those claiming under
Permitted Liens.
(b) Grantor shall proceed with reasonable diligence to
correct any defect in title to the Trust Property, and in this
connection, should there exist upon the Trust Property any Lien,
other than a Permitted Lien, or should any such Lien hereafter
arise, then, unless Beneficiary is the only holder of such other
Lien, or Beneficiary shall have given specific prior written
consent to the creation or continuation thereof, Grantor shall
promptly discharge and remove any such Lien from the Trust
Property.
1.03 General. For the purpose of better securing
payment and performance of the Lessee Obligations, Grantor
covenants and agrees with Beneficiary, for the use and benefit of
Beneficiary, that:
(a) Grantor shall permit, subject to its safety rules
and regulations, Beneficiary, GE Capital and, for so long as
the Indenture shall not have been discharged or terminated,
the Indenture Trustee, and their respective agents,
representatives and employees during normal business hours
and upon reasonable prior notice to go upon, examine,
inspect and remain on the Trust Property, and shall furnish
Beneficiary, GE Capital and the Indenture Trustee all
pertinent information in regard to the development and
operation of the Trust Property as Beneficiary, GE Capital
or the Indenture Trustee may reasonably request; and
(b) Grantor shall notify Trustee, Beneficiary, GE
Capital and, for so long as the Indenture shall not have
been discharged or terminated, the Indenture Trustee, in
writing promptly of the commencement of any legal
proceedings of which it has knowledge affecting title to, or
the lien or security interest of this Deed of Trust upon,
the Trust Property or any part thereof and shall take such
action as may be necessary to preserve Trustee's and
Beneficiary's rights affected thereby; and
(c) Promptly upon demand by Trustee, Beneficiary, GE
Capital or, for so long as the Indenture shall not have been
discharged or terminated, the Indenture Trustee, Grantor
shall pay all reasonable costs and expenses hereafter
advanced or expended by Trustee, Beneficiary, GE Capital or
the Indenture Trustee for legal services rendered in
connection with the enforcement of any rights or remedies of
Beneficiary hereunder, together with interest thereon at a
rate per annum equal to the Overdue Rate from the fifth
(5th) day following demand for payment of such advance or
expenditure until paid; and
(d) Grantor shall comply in all material respects with
all laws, ordinances, rules, regulations and determinations
of any arbitrator, court or other governmental authority
affecting the Trust Property, including, without limitation,
any applicable environmental, zoning or building, use and
land use laws, ordinances, rules or regulations of any
governmental authority, and any applicable covenants and
restrictions, except as permitted pursuant to the
Participation Agreement; and
(e) Grantor shall pay the indebtedness secured by this
Deed of Trust in accordance with the terms hereof and of the
Reimbursement Agreement, any lease of the Facility and each
other Transaction Document and shall perform in all material
respects each term to be performed hereunder and under the
Reimbursement Agreement, any lease of the Facility and each
other Transaction Document;
(f) Grantor shall comply in all material respects with
the requirements of all, and shall not modify, amend or
terminate any, easements and restrictive covenants which
from time to time benefit or burden the whole or any portion
of the Trust Property, and shall also comply in all material
respects with the requirements of, and maintain, preserve,
enforce and renew, all material rights of way, easements,
grants, privileges, licenses, franchises and restrictive
covenants which from time to time benefit or pertain to the
whole or any portion of the Trust Property; and
(g) Any lease or sublease of any portion of the Trust
Property shall be subordinate to the lien of this Deed of
Trust.
1.04 Insurance. (a) Grantor shall maintain, or cause
to be maintained, policies of insurance of the types, in the
amounts and otherwise as required by subsection 6.6 of the
Participation Agreement.
(b) In the event of a sale of the Trust Property to
Beneficiary under this Deed of Trust or other acquisition of the
Trust Property or any part thereof by Beneficiary, such policies
of insurance shall become the absolute property of Beneficiary,
but receipt of any insurance proceeds and any disposition of the
same by Beneficiary shall not constitute a waiver of any rights
of Beneficiary, statutory or otherwise, and specifically shall
not constitute a waiver of any remedies of Trustee or Beneficiary
if an Event of Default (as defined below) shall occur and be
continuing hereunder.
1.05 Monthly Payment of Assessments. Grantor agrees
that, upon the occurrence and during the continuance of an Event
of Default, Grantor shall pay to Beneficiary on a monthly basis
as hereinafter set forth a sum equal to the municipal and other
governmental real estate and personal property taxes and other
assessments next due on the Trust Property and all premiums next
due for fire and other casualty insurance required of Grantor
hereunder, less all sums already paid therefor, divided by the
number of months to elapse not less than one (1) month prior to
the date when said taxes and assessments will become delinquent
and when such premiums will become due. Grantor agrees that
should there be insufficient funds so deposited with Beneficiary
for said taxes, assessments and premiums when due, it will upon
demand by Beneficiary promptly pay to Beneficiary amounts
necessary to make such payments in full; any surplus funds may be
credited toward future such taxes, assessments and premiums; and
if Beneficiary shall have commenced foreclosure proceedings,
Grantor agrees that Beneficiary may apply such funds toward the
payment of the Lessee Obligations without causing thereby a
waiver of any rights, statutory or otherwise, and specifically
such application shall not constitute a waiver of any remedies
hereunder. Grantor hereby assigns to Beneficiary all the
foregoing sums so held hereunder for such purposes.
1.06 Performance of Grantor's Obligations. Should
Grantor fail to make any payment or do any act as and in the
manner provided in this Deed of Trust, which failure lasts beyond
any applicable notice and cure period or may materially impair
Beneficiary's security hereof, Trustee or Beneficiary, without
obligation so to do and without notice to or demand upon Grantor
and without releasing Grantor from any Lessee Obligations, may
make or do the same in such manner and to such extent as Trustee
or Beneficiary may deem necessary to protect the security hereof.
In connection therewith (without limiting its general powers),
Trustee and Beneficiary shall each have and hereby is given the
right, but not the obligation, upon the occurrence and during the
continuance of an Event of Default (i) to enter upon and take
possession of the Trust Property, (ii) to make additions,
alterations, repairs and improvements to the Trust Property which
it may consider necessary or proper to keep the Trust Property in
good condition and repair; (iii) to appear and participate in any
action or proceeding adversely affecting or which may adversely
affect the security hereof or the rights or powers of
Beneficiary; (iv) to pay, purchase, contest or compromise any
encumbrance, claim, charge, lien or debt (other than Permitted
Liens) which in the judgment of Trustee or Beneficiary may
adversely affect the security of this Deed of Trust or be prior
or superior hereto; (v) to procure insurance for risks covering
Beneficiary's interest in the event Grantor fails to provide,
maintain, keep in force or deliver and furnish to Beneficiary the
policies of insurance required by subsection 1.04 of this Deed of
Trust and subsection 6.6 of the Participation Agreement; and (vi)
in exercising such powers, to pay reasonably necessary expenses,
including engagement of counsel or other necessary or desirable
consultants. Grantor hereby irrevocably constitutes and appoints
Beneficiary and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact upon the
occurrence and during the continuance of an Event of Default with
full irrevocable power and authority in the place and stead of
Grantor and in the name of Grantor or in its own name, from time
to time in Beneficiary's discretion to take any and all action
and to execute any and all instruments which Beneficiary may deem
necessary or desirable for the purpose of carrying out the terms
of this Deed of Trust and the Financing Documents. Upon demand
of Trustee or Beneficiary, Grantor shall pay all reasonable costs
and expenses advanced or expended by Trustee or Beneficiary in
connection with the exercise by Trustee or Beneficiary of the
foregoing rights, including, without limitation, costs of
evidence of title, court costs, appraisals, surveys, reasonable
attorneys' fees and expenses and insurance premiums, together
with interest thereon at the Overdue Rate from the date of such
advance or expenditure until paid.
1.07 Additional Advances and Readvances From
Beneficiary. Upon written request of Grantor, GE Capital may,
subject to the terms of the Financing Documents, at its sole
option, from time to time make advances and readvances to Grantor
in addition to advances outstanding on the date hereof, whether
or not pursuant to the Financing Documents or any other document,
provided, however, that the total principal secured hereby and
remaining unpaid, including any such advances, shall not at any
one time exceed the sum of $130,000,000. If requested by
Beneficiary, Grantor shall execute and deliver to GE Capital a
note or other agreement evidencing each and every such further
advance or readvance which may be made, and each and every such
note or other agreement shall contain such terms and conditions
as GE Capital may require. Grantor shall pay when due all such
further advances or readvances with interest and other charges
thereon, as applicable. Said further advances or readvances,
each note and agreement evidencing the same, the Financing
Documents and any lease of the Facility shall all be secured
hereby. All provisions of this Deed of Trust shall apply to each
further advance or readvance as well as to all other indebtedness
secured hereby, including, without limitation, all indebtedness
under the Financing Documents and any lease of the Facility.
Nothing herein contained, however, shall limit the amount secured
by this Deed of Trust if such amount is increased by advances
made by GE Capital as herein elsewhere provided for to protect
the security encumbered hereby.
1.08 Agreements Between Grantor and Beneficiary. Any
agreement hereafter made by Grantor and Beneficiary pursuant to
this Deed of Trust shall be superior to the rights of the holder
of any subsequent lien or encumbrance to the extent allowed by
law.
1.09 Continuance of Use. Grantor agrees that if at
any time the then existing use or occupancy of the Site, the
Facility or any other part of the Trust Property shall, pursuant
to any zoning or other law, ordinance or regulation be permitted
only so long as such use or occupancy shall continue, Grantor
shall not cause or permit such use or occupancy to be
discontinued without the prior written consent of Beneficiary and
GE Capital.
1.10 Leases. Grantor shall submit all Leases to
Beneficiary, GE Capital, and, for so long as the Indenture shall
not have been discharged or terminated, the Indenture Trustee,
for their examination and approval in writing prior to the
execution, delivery and commencement thereof, which approval
shall not be unreasonably withheld or delayed; any Lease not so
approved shall not be valid; and Grantor at its cost and expense,
upon request of Beneficiary, shall cause any parties in
possession of or using the Site, the Facility or any other part
of the Real Estate under any such Lease to vacate and cease the
use thereof immediately; and Grantor acknowledges that
Beneficiary and GE Capital may from time to time at its option
enter upon the Real Estate and take any other action in court or
otherwise to cause such parties to vacate and cease using the
Real Estate; the reasonable costs and expenses of Beneficiary in
so doing shall be paid by Grantor to Beneficiary on demand
thereof and shall be part of the indebtedness secured by this
Deed of Trust as costs and expense incurred to preserve and
protect the security; such rights of Beneficiary shall be in
addition to all its other rights as beneficiary for breach by
Grantor of the requirements of this Deed of Trust.
1.11 Alterations of Security. Without affecting the
liability of Grantor or any other person (except any person
expressly released in writing) for performance of any Lessee
Obligations secured hereby or for performance of any Lessee
Obligation contained herein, in any lease of the Facility or in
any other Financing Document, and without affecting the rights of
Beneficiary, GE Capital or the Owner Trustee with respect to any
security not expressly released in writing, Grantor agrees that
Beneficiary, GE Capital or the Owner Trustee may at any time and
from time to time, either before or after the Lease Termination
Date and without notice or consent:
a. Release any person liable for payment or
for performance of any of the Lessee Obligations;
b. Exercise or refrain from exercising or
waive any right Beneficiary, GE Capital or the Owner
Trustee may have;
c. Accept additional security of any kind; or
d. Release or otherwise deal with any
property and premises, real or personal, securing the
Lessee Obligations, including all or any part of the
Trust Property.
1.12 Liability of Grantor. It is expressly agreed by
Grantor that, anything herein to the contrary notwithstanding,
Grantor shall remain liable under each Contract to observe and
perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with and pursuant
to the terms and provisions of each such Contract. Neither
Trustee nor Beneficiary nor GE Capital nor the Owner Trustee
shall have any obligation or liability under any Contract by
reason of or arising out of this Deed of Trust or assignment to
Trustee or Beneficiary of any payment relating to any Contract,
nor shall Trustee or Beneficiary nor GE Capital nor the Owner
Trustee be required or obligated in any manner to perform or
fulfill any of the obligations of Grantor under or pursuant to
any Contract, or to make any payment, or to make any inquiries as
to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any
Contract, or to present or file any claim, or to take any action
to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be
entitled at any time or times.
1.13 No Waiver of Remedies. Receipt of rents, awards,
proceeds and any other moneys or evidences thereof, pursuant to
the provisions hereunder, and any disposition of the same by
Beneficiary shall not constitute a waiver of the power of sale,
right of foreclosure, or any other remedy if an Event of Default
shall occur and be continuing hereunder.
ARTICLE II
REMEDIES UPON EVENT OF DEFAULT
2.01 Events of Default. Any of the following events
shall be deemed an Event of Default hereunder:
(a) Any Event of Default described in Section 6 of the
Reimbursement Agreement or any event of default under any
lease of the Facility (or other event which, pursuant to the
terms of any lease of the Facility, would permit the lessor
thereunder to exercise remedies in respect of the Facility)
shall constitute an Event of Default hereunder;
(b) It shall be an Event of Default hereunder if
Grantor shall fail to perform any covenant or agreement
contained or referred to herein to be performed by Grantor
and, in the case of any affirmative covenant, such failure
shall continue unremedied for a period of 30 days after
written notice thereof from the Beneficiary to the Grantor.
(c) It shall be an Event of Default hereunder if,
without the prior written consent of Beneficiary, Grantor
shall sell, assign, mortgage or otherwise transfer or
encumber or be or become liable under any agreement for the
lease, hire or use of any of the Trust Property, except in
accordance with the terms and conditions hereof and of the
Financing Documents.
2.02 Remedies. (a) General. If an Event of Default
shall have occurred and be continuing, then in any and each such
event the aggregate of the Lessee Obligations and other sums
secured hereby shall, either automatically or at the option of GE
Capital, as provided in Section 6 of the Reimbursement Agreement,
become due and payable immediately as fully and completely as if
originally stipulated then to be paid, and the Owner Trustee and
GE Capital may exercise the rights and remedies specified in any
lease of the Facility, and the Trust Property shall be subject to
the power of sale, foreclosure and such other action as may be
available at law or in equity for the enforcement hereof and
realization upon the Trust Property. Grantor, in accordance with
the applicable rules of the Maryland Rules of Procedure or any
Public General Law or Public Local Law of the State of Maryland
relating to deeds of trust or mortgages, does hereby, for itself
and its successors and assigns, grant to the Trustee the power of
sale and assent to the passage and entry of a decree for the sale
of the Trust Property by any circuit court having jurisdiction
over the Trust Property. At the sole option of the Security
Agent, any sale or foreclosure of the Trust Property may be
combined with any sale or foreclosure of any other Collateral
held by the Security Agent, including without limitation, under
any security agreement between Grantor and the Security Agent.
To the extent permitted under Maryland law and
notwithstanding anything to the contrary hereinbefore provided,
if an Event of Default shall occur and be continuing (regardless
of the pendency of any proceeding which has or might have the
effect of preventing Grantor from complying with the provisions
hereof), Beneficiary shall have the option, but not the
obligation, to exercise any one or more of the following remedies
in addition to any other right, power or remedy provided for
herein or at law or in equity: (i) cure such Event of Default
itself; (ii) declare immediately due and payable all or any part
of the Lessee Obligations; (iii) bring an action or proceeding,
at law or in equity, to specifically enforce any provision
contained herein; (iv) direct Trustee to exercise Trustee's power
of sale with respect to the Trust Property in accordance with the
Maryland Rules of Procedure and any other legal requirements
affecting the Trust Property; Grantor assents to the passage of a
decree for the sale of the Trust Property upon the occurrence and
during the continuance of an Event of Default by any court having
jurisdiction and Grantor authorizes and empowers Trustee, upon
the occurrence and during the continuance of an Event of Default,
to sell Grantor's interest in the Trust Property, in accordance
with the Maryland Rules of Procedure and any other legal
requirements affecting the Trust Property; no readvertisement of
any sale shall be required if the sale is adjourned by
announcement, at the time and place set therefor, of the time and
place to which the same is to be adjourned ex parte; (v) take
possession of, or obtain the appointment of a receiver for the
purpose of taking possession of the Trust Property; and (vi)
institute and maintain an action of judicial foreclosure against
all or any part of the Trust Property (either for the entire
Lessee Obligations or for such amounts as are then due and
payable, subject to the continuing lien or estate of this Deed of
Trust for the balance of the Lessee Obligations not then due and
payable) conducted in accordance with the laws of the State of
Maryland and the provisions hereof. The expenses (including
receiver's fees, counsel fees, costs and agent's compensation)
incurred pursuant to the powers herein contained shall be secured
hereby.
(b) Possession of Mortgaged Property. Upon the
occurrence and during the continuance of an Event of Default,
each of Beneficiary and GE Capital may personally, or by its
agents, attorneys and employees and without regard to the
adequacy or inadequacy of the Trust Property or any other
collateral as security for the Lessee Obligations enter into and
upon the Trust Property and each and every part thereof and
exclude Grantor and its agents and employees therefrom without
liability for trespass, damage or otherwise (Grantor hereby
agreeing to surrender possession of the Trust Property to
Beneficiary upon demand at any such time) and use, operate,
manage, maintain and control the Trust Property and every part
thereof. Following such entry and taking of possession,
Beneficiary shall be entitled, without limitation, (x) to lease
all or any part or parts of the Trust Property for such periods
of time and upon such conditions as Beneficiary may, in its
discretion, deem proper, (y) to enforce, cancel or modify any
Lease and (z) generally to execute, do and perform any other act,
deed, matter or thing concerning the Trust Property as
Beneficiary or GE Capital shall deem appropriate as fully as
Grantor might do.
2.03 Applications of Proceeds; Effect of Sale.
Beneficiary shall pay, distribute and apply the proceeds of any
such sale or foreclosure first, to the payment of (i) all
reasonable costs and expenses of such sale or foreclosure,
including reasonable attorneys' fees and disbursements, trustee's
commissions and auctioneer's commissions (as allowed by the
appropriate rules of the courts), and the just compensation of
Beneficiary for services rendered in connection therewith or in
connection with any proceeding to sell if a sale is not
completed, and (ii) all reasonable charges, expenses and advances
incurred or made by Beneficiary or GE Capital in order to protect
the lien and security interest of this Deed of Trust or the
security afforded hereby, together with interest at the Overdue
Rate, and second, to the Lessee Obligations in accordance with
the terms of the Security Deposit Agreement. Said sale or
foreclosure shall forever be a bar against Grantor, its legal
representatives, successors and assigns, and all other persons
claiming under any of them. It is expressly agreed that the
purchaser may rely upon the recitals in each conveyance as full
evidence of the truth of the matters therein stated, and, as to
any purchaser, all lawful prerequisites to said sale shall be
conclusively presumed to have been performed.
2.04 Abandonment of Sale. If foreclosure should be
commenced by Beneficiary, Beneficiary may at any time before the
sale abandon the sale, and may at any time or times thereafter
again commence foreclosure; and, irrespective of whether
foreclosure is commenced by Beneficiary, Beneficiary may
institute suit for collection of the Lessee Obligations.
2.05 Right to Purchase. Beneficiary, GE Capital, the
Owner Trustee, the Indenture Trustee or any Loan Participant
shall have the right to become the purchaser at any sale made
hereunder, by being the highest bidder, and credit upon all or
any part of the Lessee Obligations shall be deemed cash paid for
the purposes of this Article II.
2.06 Waiver of Marshalling, etc. All rights of
marshalling of assets or sale in inverse order of alienation,
including any such rights with respect to the Trust Property in
the event of foreclosure of any lien or security interest at any
time securing the Lessee Obligations or any part thereof
(including, without limitation, the lien and security interests
hereby created), are hereby waived.
2.07 Remedies not Exclusive. No lien, security
interest, right or remedy in favor of Beneficiary granted in or
secured by this Deed of Trust shall be considered as exclusive,
but all liens, security interests, rights and remedies under this
Deed of Trust shall be cumulative of each other, and of all
others which Beneficiary, GE Capital or the Owner Trustee may now
or hereafter have as security for the payment of the Lessee
Obligations.
2.08 Limitation of Liability. There shall be full
recourse to Grantor and all of its assets for the liabilities of
the Grantor under this Deed of Trust and the other Transaction
Documents, but in no event shall any Partner, Affiliate of any
Partner, or any officer, director or employee of Grantor, any
Partner or their Affiliates or any holder of any equity interest
in any Partner be personally liable or obligated for such
liabilities of Grantor except as may be specifically provided in
any other Transaction Document to which such Partner is a party
or in the event of fraudulent actions, knowing
misrepresentations, gross negligence or willful misconduct by
Grantor, any Partner or any of their Affiliates in connection
with the financing contemplated under the Transaction Documents.
Subject to the foregoing limitation on liability, Beneficiary may
sue or commence any suit, action or proceeding against any
Partner or any Affiliate in order to obtain jurisdiction over
Grantor in order to enforce its rights and remedies hereunder.
Nothing herein contained shall limit or be construed to limit the
liabilities and obligations of any Partner or any Affiliate
thereof in accordance with the terms of any other Transaction
Document creating such liabilities and obligations to which such
Partner or Affiliate is a party.
ARTICLE III
GENERAL
3.01 No Waiver. No exercise by Beneficiary of, or
delay by Beneficiary in exercising, any right or remedy
hereunder, or otherwise afforded by law, shall operate as a
waiver, or preclude the exercise of any such right or other right
or remedy, including the right of foreclosure, if an Event of
Default shall occur and be continuing.
3.02 Notices. All notices, requests, demands and
other communications hereunder shall be made in accordance with
Section 13.2 of the Participation Agreement, except that the
addresses of Trustee and the Beneficiary shall be as shown on the
first page of this Deed of Trust.
3.03 Successors and Assigns. The covenants and
agreements herein contained shall bind, and the benefits and
advantages thereof shall inure to, the respective successors and
assigns of Beneficiary, GE Capital, the Owner Trustee and the
Indenture Trustee and the respective permitted successors and
assigns of Grantor, subject nevertheless to the limitations on
assignment by Grantor contained herein.
3.04 Indemnity. Grantor shall, subject to Section
2.08 hereof, indemnify and save Beneficiary, GE Capital, Owner
Trustee, Indenture Trustee, Administrative Agent, each Loan
Participant and Trustee harmless from and against and shall
reimburse Beneficiary, GE Capital, Owner Trustee, Indenture
Trustee, Administrative Agent, each Loan Participant and Trustee
for, all liabilities, obligations, damages, fines, penalties,
claims, demands, reasonable costs, charges, judgments and
reasonable expenses (including reasonable attorneys' fees and
expenses) which may be imposed upon or incurred or paid by or
asserted against Beneficiary's, GE Capital's, Owner Trustee's,
Indenture Trustee's, Administrative Agent's, each Loan
Participant's or Trustee's interest in the Trust Property by
reason of or in connection with any failure on the part of
Grantor to perform or comply with any of the covenants and
agreements contained herein or in the lease of the Facility or
any other Transaction Document on its part to be complied with or
performed. The provisions of this subsection 3.04 shall not in
any way be affected by the absence in any case of any insurance
or by the failure or refusal of any insurance company to perform
any obligation on its part.
3.05 Severability. If any obligation or portion of
this Deed of Trust is determined to be invalid or unenforceable
under law, it shall not affect the validity or enforcement of the
remaining obligations or portions hereof.
3.06 Fixture Filing. This Deed of Trust is also a
fixture filing with respect to the Personal Property which is to
become fixtures and is to be recorded in the Land Records of
Prince George's County. No inference should be drawn from this
fixture filing that Beneficiary concedes that any Personal
Property is or will become fixtures on the Real Estate. To the
extent that this Deed of Trust is a fixture filing, it is merely
precautionary.
3.07 GOVERNING LAW. THIS DEED OF TRUST SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MARYLAND.
3.08 No Merger. Unless expressly provided otherwise,
in the event that ownership of this Deed of Trust and title to
the Trust Property or any estate therein shall become vested in
the same person or entity, this Deed of Trust shall not merge in
such title but shall continue as a valid lien on the Trust
Property for the amount secured hereby.
3.10 Successor Trustee. Beneficiary shall have the
right to appoint a substitute, or a successor trustee, to act as
Trustee hereunder by written designation recorded among the land
records of the city or county in the State of Maryland where this
Deed of Trust is recorded. Such right shall extend to the
appointment of other successor and substitute trustees
successively until the Lessee Obligations hereby secured have
been paid and performed in full or until the Trust Property is
sold hereunder, and each substitute and successor trustee shall
succeed to all of the rights and powers of the original Trustee
named herein.
3.11 Actions of Trustee. The Trustee shall be
protected in acting upon any notice, request, consent, demand,
statement, note or other paper or document believed by it to be
genuine and to have been signed by the party or parties
purporting to sign the same. The Trustee shall not be liable for
any error of judgment, nor for any act done or step taken or
omitted, nor for any mistake of law or fact, nor for anything
which it may do or refrain from doing in good faith nor generally
shall the Trustee have any accountability hereunder except for
his individual willful default.
3.12 Trustee as Attorney. The Trustee may act
hereunder and may sell and convey the Trust Property as herein
provided although the Trustee has been, may now be or may
hereafter be, attorney or agent of any beneficiary, in respect of
any matter or business whatsoever.
3.13 Incapacity or Absence from State. It is further
understood and agreed that in the event of the disability of any
Trustee, or of such Trustee's absence from the State of Maryland,
the rights, powers, privileges, discretions, duties, obligations,
and trust hereby created and reposed in the Trustee may be
executed by any other Trustee (should there be more than one
Trustee at any time) with the same legal force, effect and virtue
as though executed by both or all of them.
3.14 Certain Rights of the Power Purchaser. Nothing
in this Deed of Trust shall be deemed to limit the provisions of
the Consent of the Power Purchaser, which provisions are solely
for the benefit of the Power Purchaser and not the Grantor.
Without limiting the scope of the foregoing, the Trustee and the
Security Agent agree, for the exclusive benefit of the Power
Purchaser and not the Grantor, that the exercise of remedies or
any similar action under this Deed of Trust is subject to, and
shall be conducted in a manner consistent with, the Power
Purchaser's rights under (i) the Consent of the Power Purchaser
and (ii) the Power Purchase Agreement and the Transfer Agreement
(to the extent such rights under the Power Purchase Agreement and
the Transfer Agreement are not explicitly waived by the Power
Purchaser in accordance with the terms of the Consent of the
Power Purchaser).
3.15 Assignment to Indenture Trustee. In order to
secure the indebtedness evidenced by the Loan Certificates and
certain other obligations as provided in the Indenture, the
Indenture provides, among other things, for the assignment by the
Owner Trustee to the Indenture Trustee of all of its right, title
and interest in, to and under this Deed of Trust, to the extent
set forth in the Indenture, and for the creation of a Lien on and
security interest in the Lessor's Estate in favor of the
Indenture Trustee, and in furtherance thereof, Grantor and the
Owner Trustee have entered into the Security Deposit Agreement.
Grantor hereby acknowledges and consents to such assignment and
such security interest and hereby acknowledges that to the extent
set forth in the Indenture, the Indenture Trustee shall have the
right in its own name (in certain cases together with the Owner
Trustee and in other cases to the exclusion of the Owner Trustee,
all as set forth in Section 3.10 of the Indenture) to direct the
Beneficiary to take or refrain from taking action under this Deed
of Trust, including the right (i) of the Beneficiary to exercise
any election or option, and to make any decision or
determination, and to give any notice, consent, waiver or
approval under this Deed of Trust or in respect thereof, (ii) to
exercise any and all of the rights, powers and remedies of the
Beneficiary hereunder and (iii) to receive all moneys payable to
the Beneficiary under this Deed of Trust. Grantor will make all
payments hereunder in accordance with the Security Deposit
Agreement.
3.16 Amendment and Restatement. This Deed of Trust
amends and restates the Existing Deed of Trust in its entirety.
This Deed of Trust secures the same indebtedness and obligations
as the Existing Deed of Trust (other than certain indebtedness
and obligations secured by the Existing Deed of Trust which have
been paid or satisfied prior to the date of this Deed of Trust).
All applicable transfer and recording taxes with respect to the
Existing Deed of Trust have been paid in full. The Existing Deed
of Trust, as amended and restated hereby, is and shall remain in
full force and effect.
IN WITNESS WHEREOF, Grantor and Beneficiary have caused
this instrument to be duly executed and delivered by their
respective duly authorized representatives, as of the day and
year first above written.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its General Partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
FLEET NATIONAL BANK,
as Security Agent only, Beneficiary
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
CHICAGO TITLE INSURANCE COMPANY,
as Trustee
By: /s/ Kenneth C. Cohen
Name: Kenneth C. Cohen
Title:
This is to certify that the within instrument was
prepared under the supervision of the undersigned who is an
attorney admitted to practice before the Court of Appeals of
Maryland.
__________________________
Name:
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this 18th day of December, 1996,
the above-named William C. Nordlund, Senior Vice President of PANDA
BRANDYWINE CORPORATION, the general partner of PANDA-BRANDYWINE,
L.P., a Delaware limited partnership, and acknowledged the
foregoing to be his free act and deed in his said capacity and
the free act and deed of said PANDA BRANDYWINE CORPORATION and
PANDA-BRANDYWINE, L.P.
/s/ Catherine S. Konovaliv
Notary Public
Type or print name: Catherine S. Konovaliv
Notary Public, State of New York
No. 01K05067234
Commission Expires, October 15, 1998
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this 18th day of December, 1996, the
above-named Kathy A. Larimore, Assistant Vice President of FLEET
NATIONAL BANK, a national banking association, as Security Agent
only, Beneficiary, and acknowledged the foregoing to be his free
act and deed in his said capacity and the free act and deed of
said FLEET NATIONAL BANK, as Security Agent only, Beneficiary.
/s/ Catherine S. Konovaliv
Notary Public
Type or print name: Catherine S. Konovaliv
Notary Public, State of New York
No. 01K05067234
Commission Expires, October 15, 1998
STATE OF New York )
: ss.:
COUNTY OF New York )
PERSONALLY APPEARED on this 18th day of December, 1996,
the above-named Kenneth C. Cohen, Vice President of CHICAGO
TITLE INSURANCE COMPANY, a national banking association, and
acknowledged the foregoing to be his free act and deed in his
said capacity and the free act and deed of said CHICAGO TITLE
INSURANCE COMPANY.
/s/ Catherine S. Konovali
Notary Public
Type or print name: Catherine S. Konovali
Notary Public, State of New York
No. 01K05067234
Commission Expires, October 15, 1998
Schedule 1
Description of Site
[Reference Election District in Prince George's County]
EXHIBIT 10.30
AMENDED AND RESTATED
STEAM LESSEE SECURITY AGREEMENT
AMENDED AND RESTATED STEAM LESSEE SECURITY AGREEMENT,
dated as of December 18, 1996 (this "Security Agreement" or this
"Agreement"), made by BRANDYWINE WATER COMPANY, a Delaware
corporation (together with its successors and assigns, the "Steam
Lessee"), in favor of FLEET NATIONAL BANK (formerly known as
Shawmut Bank Connecticut, National Association), as Security
Agent (the "Security Agent") under the Security Deposit Agreement
(as defined in the Participation Agreement referred to below).
W I T N E S S E T H :
WHEREAS, Panda-Brandywine, L.P. (the "Partnership"),
Panda Brandywine Corporation, a Delaware corporation, and the
sole general partner of the Partnership (the "General Partner")
and General Electric Capital Corporation, a New York corporation
("GE Capital" or the "Owner Participant") entered into the
Construction Loan Agreement and Lease Commitment dated as of
March 30, 1995 (the "Construction Loan Agreement") pursuant to
which GE Capital (i) provided construction financing for the
Project and (ii) issued the Letters of Credit as collateral
security for certain obligations of the Partnership under the
Power Purchase Agreement;
WHEREAS, the Steam Lessee entered into the Steam Lessee
Security Agreement dated as of March 30, 1995 (as amended,
supplemented or otherwise modified prior to the date hereof, the
"Existing Security Agreement"), in favor of the Security Agent,
to secure the payment and performance by the Partnership of all
of its obligations to GE Capital and the Owner Trustee (as
defined below);
WHEREAS, as contemplated by the Construction Loan
Agreement, the Partnership and the Owner Trustee are entering
into the Facility Lease and the other Lease Documents pursuant to
which, among other things, the Owner Trustee will lease the
Facility to the Partnership;
WHEREAS, the Partnership and GE Capital are entering
into the Letter of Credit Reimbursement Agreement to provide for
the continued issuance by GE Capital of the Letters of Credit;
WHEREAS, the Owner Participant has elected to fund the
Facility Lease with non-recourse indebtedness as a leveraged
lease and in connection therewith, the parties hereto have agreed
to amend and restate the Existing Security Agreement subject to
the terms and conditions provided herein;
WHEREAS, the Steam Lessee will have a leasehold
interest in the Distilled Water Facility pursuant to the Steam
Lease, to be entered into on the Lease Closing Date, between the
Partnership and the Steam Lessee;
WHEREAS, in order to set forth the rights and
obligations of the Owner Participant, the Owner Trustee, the
Partnership, the Loan Participants, the Administrative Agent, the
Security Agent and the Indenture Trustee (each as defined below)
in connection with the foregoing transactions and to describe and
provide for the transactions contemplated hereby, (i) the parties
hereto are entering into the Participation Agreement, (ii) the
Owner Trustee and the Indenture Trustee are entering into the
Indenture, (iii) certain of the Lessee Security Documents are
being amended and restated pursuant to the Amended and Restated
Agreements and (iv) the Construction Loan Agreement is being
terminated;
WHEREAS, it is a condition precedent to the performance
of certain obligations on the Lease Closing Date that the Pledgor
shall have executed and delivered this Security Agreement to the
Security Agent, for the benefit of GE Capital and the Owner
Trustee (and by collateral assignment, the Indenture Trustee);
WHEREAS, the Steam Lessee desires to execute this Secu
rity Agreement to satisfy the condition described in the
preceding recital;
WHEREAS, pursuant to the terms of the Security Deposit
Agreement, the Security Agent has agreed to act as security agent
on behalf of GE Capital, the Owner Trustee and the Indenture
Trustee and to hold the Collateral for the benefit of the Owner
Trustee and GE Capital (and, by collateral assignment, the
Indenture Trustee);
NOW, THEREFORE, in consideration of the premises and
other benefits to the Steam Lessee of the foregoing transactions,
the receipt and sufficiency of which are hereby acknowledged, the
Steam Lessee hereby covenants and agrees with the Security Agent,
for the benefit of the Owner Trustee and GE Capital, as follows:
ARTICLE I
DEFINITIONS
Section 1 Definitions. The following terms shall
have the meanings herein specified unless the context otherwise
requires. Such definitions shall be equally applicable to the
singular and plural forms of the terms defined. Capitalized
terms used but not defined herein shall have the meanings
assigned to them in Annex A to the Participation Agreement, dated
as of December 18, 1996 (the "Participation Agreement"), among
the Partnership, the General Partner, GE Capital, the Owner
Participant, Fleet National Bank (formerly known as Shawmut Bank
Connecticut, National Association), a national banking
association, not in its individual capacity but solely as owner
trustee (in such capacity, the "Owner Trustee", including any
successor owner trustee appointed in accordance with the terms of
the Trust Agreement) under the Trust Agreement and as the
Security Agent, First Security Bank, National Association, a
national banking association, not in its individual capacity but
solely as indenture trustee (in such capacity, the "Indenture
Trustee") under the Indenture, Credit Suisse, a bank organized
and existing under the laws of Switzerland, acting by and through
its New York branch ("Credit Suisse"), as administrative agent
(in such capacity, the "Administrative Agent"), and the entities
listed on Schedule I to the Participation Agreement
(individually, the "Loan Participant" and collectively, the "Loan
Participants"). Commercial terms used herein and not otherwise
defined herein or in Annex A to the Participation Agreement shall
have the meaning specified for such terms in the Uniform
Commercial Code as in effect in the State of New York.
"Chattel Paper" shall have the meaning assigned to that
term under the Uniform Commercial Code as in effect in any
relevant jurisdiction.
"Collateral" shall have the meaning specified in
Section 2.1(a).
"Contract Rights" shall have the meaning specified in
Section 6.1(c).
"Contracts" shall mean all contracts to which the Steam
Lessee now is, or hereafter will be, bound, or a party,
beneficiary or assignee (including, without limitation, the Steam
Lease), and all other instruments, agreements and documents
executed and delivered with respect to such contracts, any
guarantees or letters of credit provided to the Steam Lessee to
assure the performance by any party to any contract and all
revenues, damages, rentals, Proceeds and other sums of money due
and to become due from any of the foregoing, as the same may be
modified, supplemented or amended from time to time in accordance
with their terms.
"Document" shall have the meaning assigned that term
under the Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Equipment" shall mean any "equipment", as such term is
defined in the Uniform Commercial Code as in effect in any
relevant jurisdiction, now or hereafter owned or leased by the
Steam Lessee and, in any event, shall include, but shall not be
limited to, all equipment used in connection with the Distilled
Water Facility, all machinery, tools, office equipment,
furniture, furnishings, fixtures, vehicles, motor vehicles, and
any manuals, instructions, blueprints, computer software and
similar items which relate to the above, and any and all
additions, substitutions and replacements of any of the
foregoing, wherever located, together with all improvements
thereon and all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto.
"Expenses" shall have the meaning specified in Section
8.1.
"Facility Lease" shall mean the Facility Lease, dated
as of the date hereof, to be entered into between the Owner
Trustee and the Partnership, as amended, supplemented or
otherwise modified from time to time.
"Fixtures" shall have the meaning assigned that term
under the Uniform Commercial Code as in effect in any relevant
jurisdiction and in any event shall include all goods now or
hereafter attached to, placed on, or incorporated in the
Distilled Water Facility Premises.
"General Intangibles" shall mean "general intangibles"
as such term is defined in the Uniform Commercial Code as in
effect in any relevant jurisdiction, now or hereafter owned by
the Steam Lessee and shall include, but not be limited to, all
trademarks, trademark applications, trademark registrations,
tradenames, fictitious business names, business names, company
names, business identifiers, prints, labels, trade styles and
service marks (whether or not registered), including logos and/or
designs, copyrights, patents, patent applications, goodwill of
the Steam Lessee's business symbolized by any of the foregoing,
trade secrets, license rights, license agreements, permits,
franchises, and any rights to tax refunds to which the Steam
Lessee is now or hereafter may be entitled.
"Indemnitee" shall have the meaning specified in
Section 8.1.
"Instrument" shall have the meaning assigned that term
under the Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Inventory" shall mean all of the inventory of the
Steam Lessee of every type or description, including all inven
tory as such term is defined in the Uniform Commercial Code as in
effect in any relevant jurisdiction, now owned or hereafter
acquired and wherever located, whether raw, in process or
finished, all materials usable in processing the same and all
documents of title covering any inventory, including but not
limited to work in process, materials used or consumed in the
Steam Lessee's business, now owned or hereafter acquired or
manufactured by the Steam Lessee and held for sale in the
ordinary course of its business; all present and future
substitutions therefore, parts and accessories thereof and all
additions thereto; and all proceeds thereof and products of such
inventory in any form whatsoever.
"Inventory Records" shall mean all books, records and
other property and General Intangibles at any time relating to
the Inventory.
"Lessee Obligations" shall mean all the unpaid
principal amount of, and accrued interest on (including, without
limitation, interest accruing after the maturity of the Letter of
Credit Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Partnership,
whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) the Letter of Credit Obligations,
all Rent and other obligations payable by the Partnership under
the Facility Lease, the Participation Agreement and the
Reimbursement Agreement and all other obligations and liabilities
of the Steam Lessee, the Partnership and the Partners to GE
Capital, the Owner Trustee, the Security Agent, the Indenture
Trustee, the Administrative Agent, the Holders or any other
Indemnitee, whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the
Facility Lease, the Reimbursement Agreement, this Agreement, the
other Collateral Security Documents or any other Financing
Document and any other document made, delivered or given in
connection therewith or herewith, whether on account of
principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, fees
and disbursements of counsel) or otherwise.
"Partnership" shall have the meaning specified in the
recitals to this Security Agreement.
"Proceeds" shall mean "proceeds" as such term is
defined in the Uniform Commercial Code as in effect in any
relevant jurisdiction or under other relevant law and, in any
event, shall include, but shall not be limited to, (i) any and
all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Steam Lessee from time to time, and claims for
insurance, indemnity, warranty or guaranty effected or held for
the benefit of the Steam Lessee with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to the Steam Lessee from time to time in
connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any person acting under color of
Governmental Authority) and (iii) any and all other amounts from
time to time paid or payable under or in connection with any of
the Collateral.
"Receivables" shall mean any "Account" as such term is
defined in the Uniform Commercial Code as in effect in any
relevant jurisdiction and in any event shall include, but not be
limited to, all of the Steam Lessee's rights to payment for goods
(including, without limitation, steam) sold or leased, or
services performed, by the Steam Lessee, whether now in existence
or arising from time to time hereafter, including, without
limitation, rights evidenced by an account, note, contract,
security agreement, chattel paper, or other evidence of indebted
ness or security, together with (i) all security pledged,
assigned, hypothecated or granted to or held by the Steam Lessee
to secure the foregoing, (ii) all of the Steam Lessee's right,
title and interest in and to any goods (including, without
limitation, steam) the sale of which gave rise thereto, (iii) all
guarantees, endorsements and indemnifications on, or of, any of
the foregoing, (iv) all powers of attorney for the execution of
any evidence of indebtedness or security or other writing in
connection therewith, (v) all books, correspondence, credit
files, records, ledger cards, invoices, and other papers relating
thereto, including without limitation all similar information
stored on a magnetic medium or other similar storage device and
other papers and documents in the possession or under the control
of the Steam Lessee or any computer bureau from time to time
acting for the Steam Lessee, (vi) all evidences of the filing of
financing statements and other statements and the registration of
other instruments in connection therewith and amendments thereto,
notices to other creditors or secured parties, and certificates
from filing or other registration officers, (vii) all credit
information, reports and memoranda relating thereto, and (viii)
all other writings related in any way to the foregoing.
"Security Agreement" shall mean this Steam Lessee
Security Agreement, as the same may be amended, supplemented or
otherwise modified from time to time in accordance with its
terms.
ARTICLE II
ASSIGNMENT AND GRANT OF SECURITY INTERESTS
Section 1 Assignment and Grant of Security
Interest. (a) As collateral security for the prompt and
complete payment and performance when due of all of the Lessee
Obligations, the Steam Lessee hereby pledges, hypothecates,
assigns, grants, transfers and delivers to the Security Agent,
for the benefit of GE Capital and the Owner Trustee (and by
collateral assignment, the Indenture Trustee) a continuing security
interest of first priority, in all of the Steam Lessee's
right, title and interest (including any leasehold interest) in,
to and under (i) all Receivables, (ii) all Inventory, (iii) all
Equipment, (iv) all General Intangibles, (v) all Contracts and
all Contract Rights, (vi) all amounts from time to time held in
any checking, savings, deposit or other account of the Steam
Lessee and all investments and securities at any time on deposit
in such accounts and all income or gain earned thereon, (vii) all
Governmental Actions, provided, that any Governmental Action
which by its terms or by operation of law would become void,
voidable, terminable or revocable if mortgaged, pledged or
assigned hereunder or if a security interest therein were granted
hereunder are expressly excepted and excluded from the Lien and
the terms of this Security Agreement to the extent necessary so
as to avoid such voidness, voidability, terminability or
revocability, (viii) all Fixtures, (ix) without limiting the
generality of the foregoing, all other personal property, rights,
interests, goods, Instruments, Chattel Paper, Documents, credits,
claims, demands and assets of the Steam Lessee whether now
existing or hereafter acquired from time to time, and (x) any and
all additions and accessions to any of the foregoing, all
improvements thereto, all substitutions and replacements therefor
and all products and Proceeds thereof (all of the above
collectively, the "Collateral").
(b) The security interest granted to the Security
Agent, for the benefit of GE Capital and the Owner Trustee,
pursuant to this Security Agreement extends to all Collateral of
the kind which is the subject of this Security Agreement which
the Steam Lessee may acquire at any time during the continuation
of this Security Agreement, whether such Collateral is in transit
or in the Steam Lessee's, the Partnership's, the Security
Agent's, the Owner Trustee's, GE Capital's, or any other Person's
constructive, actual or exclusive occupancy or possession.
Section 2 Security Interest Absolute. All rights of
the Security Agent and all security interests hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the
Facility Lease, the Steam Lease, any other Financing Document or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Lessee
Obligations, or any other amendment or waiver of or any consent
to any departure from the Facility Lease, or any other Financing
Document;
(c) any exchange, release or non-perfection of
any other collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the
Lessee Obligations; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Steam
Lessee, the Partnership or a third party pledgor.
Section 3 Power of Attorney. (a) The Steam Lessee
hereby constitutes and appoints the Security Agent or any Person
or agent whom the Security Agent may designate, as the Steam
Lessee's attorney-in-fact, at the Steam Lessee's reasonable cost
and expense, to exercise at any time following the occurrence and
during the continuance of a Reimbursement Event of Default or a
Lease Event of Default all or any of the following powers, which,
being coupled with an interest, shall be irrevocable until all of
the Lessee Obligations have been paid in full:
(i) To receive, take, endorse, sign, as
sign and deliver, all in the Security Agent's name
or the Steam Lessee's name, any and all checks,
notes, drafts, and other documents or instruments
relating to the Collateral;
(ii) To receive, open and dispose of all
mail addressed to the Steam Lessee and to notify
postal authorities to change the address for de
livery thereof to such address as the Security
Agent designates;
(iii) To request from account debt
ors of the Steam Lessee in the Steam Lessee's
name, the Security Agent's name, or in the name of
the Security Agent's designee, information concern
ing the Receivables and the amounts owing thereon;
(iv) To transmit to account debtors in
debted on Receivables notice of the Security
Agent's interest therein;
(v) To notify account debtors indebted
on Receivables to make payment directly to the
Security Agent;
(vi) To take or bring, in the Steam
Lessee's name or the Security Agent's name, all
steps, actions, suits or proceedings deemed by the
Security Agent to be necessary or desirable to
enforce or effect collection of the Receivables;
(vii) To prepare, sign and file any
Uniform Commercial Code financing statements in
the name of the Steam Lessee as debtor;
(viii) If the Steam Lessee shall have
failed to do so in a timely manner, to take or
cause to be taken all actions necessary to perform
or comply or cause performance or compliance with
the covenants of the Steam Lessee contained in the
Steam Lease or in the Financing Documents;
(ix) To sign and endorse any invoices,
freight or express bills, bills of lading, storage
or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other
documents in connection with any of the Collateral;
(x) To defend any suit, action or
proceeding brought against the Steam Lessee with
respect to any Collateral;
(xi) To settle, compromise or adjust any
suit, action or proceeding described in the
preceding clause and, in connection therewith, to
give such discharges or releases as the Security
Agent may deem appropriate;
(xii) Generally, to sell or transfer
and make any agreement with respect to or
otherwise deal with any of the Collateral as fully
and completely as though the Security Agent were
the absolute owner thereof for all purposes, and
to do, at the Security Agent's option and the
Steam Lessee's expense, at any time, or from time
to time, all acts and things which the Security
Agent deems necessary to protect, preserve or
realize upon the Collateral and the Liens of the
Security Agent thereon;
(xiii) To execute, in connection with
any foreclosure, any endorsements, assignments or
other instruments of conveyance or transfer with
respect to the Collateral; and
(xiv) To exercise the Steam Lessee's
rights under any Contract in accordance with
Section 6.4.
(b) The Steam Lessee hereby ratifies all that
said attorney shall lawfully do or cause to be done by virtue
hereof. The Steam Lessee hereby acknowledges and agrees that the
Security Agent shall have no fiduciary duties to the Steam Lessee
and the Steam Lessee hereby waives any claims to the rights of a
beneficiary of a fiduciary relationship hereunder.
ARTICLE III
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Steam Lessee represents, warrants and covenants,
which representations, warranties and covenants shall survive
execution and delivery of this Security Agreement, as follows:
Section 1 Validity of Lien. This Security Agreement
is effective to create, as security for the Lessee Obligations, a
legal, valid and enforceable Lien on and security interest in all
of the Collateral in favor of the Security Agent, for the benefit
of the Owner Trustee and GE Capital, superior to and prior to the
rights of all third Persons and subject to no other Liens (other
than Permitted Liens).
Section 2 No Liens. (a) The Steam Lessee is, and
as to Collateral acquired by it from time to time after the date
hereof, the Steam Lessee will be, the owner of all Collateral
free from all Liens (other than Permitted Liens) or other right,
title or interest of any Person. The Steam Lessee shall defend
the Collateral against all Liens and demands of all Persons at
any time claiming the same or any interest therein adverse to the
Security Agent, the Owner Trustee, GE Capital or the Indenture
Trustee.
(b) There is no financing statement (or similar
statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral, and the Steam Lessee will not execute or
authorize to be filed in any public office any financing
statement (or similar statement or instrument of registration
under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed in favor of the
Security Agent for the benefit of the Owner Trustee (and, by
collateral assignment, the Indenture Trustee) and GE Capital to
secure the Lessee Obligations and (ii) financing statements filed
or to be filed in respect of and covering the security interests
granted hereby to the Security Agent.
Section 3 Chief Executive Office; Name; Records.
The chief executive office of the Steam Lessee is located at 4100
Spring Valley, Suite 1001, Dallas, Texas 75244; provided that
certain records concerning the Distilled Water Facility and
certain contracts relating thereto are kept at the Steam Lessee's
office at the Site. The Steam Lessee will not (a) move its chief
executive office (or change the location(s) where records
concerning the Project are kept), or (b) change its name from,
nor carry on business under any name other than "Brandywine Water
Company", unless it has complied with the requirements of the
last sentence of this Section 3.3. The originals of all
documents evidencing all Contracts and Receivables of the Steam
Lessee, and the only original books of accounts and records
concerning the Collateral are, and will continue to be, kept at,
and controlled and directed (including, without limitation, for
general accounting purposes) from, such chief executive office
(or such other office set forth above), or at such new location
for such chief executive office as the Steam Lessee may establish
in accordance with the last sentence of this Section 3.3. The
Steam Lessee shall not establish a new location for its chief
executive office or change its name or the name under which it
presently conducts its business until (i) it has given to the
Security Agent, the Administrative Agent and GE Capital not less
than 30 days prior written notice of its intention so to do,
clearly describing such new location or specifying such new name,
as the case may be, and providing such other information in
connection therewith as the Security Agent, the Administrative
Agent or GE Capital may reasonably request, and (ii) with respect
to such new location or such new name, as the case may be, it
shall have taken all action, reasonably satisfactory to the
Security Agent, the Administrative Agent and GE Capital, to
maintain the security interest of the Security Agent, on behalf
of the Owner Trustee and GE Capital, in the Collateral intended
to be granted hereby at all times fully perfected and in full
force and effect.
Section 4 Financing Statements. The Steam Lessee
agrees that all necessary and appropriate recordings and filings
will be effected by the Security Agent in all necessary and
appropriate public offices (as determined by GE Capital and the
Administrative Agent) so that the Liens created by this Security
Agreement or the Existing Security Agreement will at all times
constitute perfected Liens on and security interests in the
Collateral prior and superior to all other Liens, all in
accordance with the Uniform Commercial Code as enacted in any and
all relevant jurisdictions or any other relevant Law. The Steam
Lessee authorizes the Security Agent to file any such financing
statements in connection with the Liens created by this Security
Agreement or the Existing Security Agreement without the signa
ture of the Steam Lessee.
Section 5 Further Actions. The Steam Lessee will,
at its own expense, make, execute, endorse, acknowledge, file
and/or deliver to the Security Agent from time to time such
lists, descriptions and designations of its Collateral, bills of
lading, documents of title, vouchers, invoices, schedules, powers
of attorney, certificates, reports and other assurances or
instruments and take such further steps relating to the
Collateral and other property or rights covered by the security
interest hereby granted, which are necessary or desirable to
create, perfect, preserve, protect or validate any security
interest granted pursuant to this Security Agreement or to enable
the Security Agent to exercise and enforce its rights under this
Security Agreement with respect to such security interest.
Section 6 Taxes, Claims, etc. So long as this
Security Agreement is in effect, the Steam Lessee shall pay (a)
all taxes, assessments and governmental charges imposed upon it
or upon its property, and (b) all claims (including, without
limitation, claims for labor, materials, supplies or services)
which might, if unpaid, become a Lien upon its property, unless,
in each case, the validity or amount thereof is subject to
Contest.
Section 7 Right of Inspection. The Steam Lessee
shall allow any representative of the Security Agent, the
Administrative Agent or the Owner Participant to visit and
inspect any of the Steam Lessee's properties, including, without
limitation, the Inventory and Equipment, to examine its books of
record and account, including, without limitation, the Inventory
Records, and to make extracts therefrom and to receive true
copies of any papers, documents or instruments relating to the
Collateral, and to discuss its affairs, finances and accounts
with its officers, all at such times and as often as the Security
Agent, the Administrative Agent or the Owner Participant may re
quest.
Section 8 Additional Statements and Schedules. The
Steam Lessee shall execute and deliver to the Security Agent and
the Administrative Agent, from time to time, solely for their
convenience in maintaining a record of the Collateral, such
written statements and schedules as the Security Agent or the
Administrative Agent may reasonably require designating, identi
fying or describing the Collateral.
Section 9 Warehouse Receipts Non-Negotiable. The
Steam Lessee agrees that if any warehouse receipt or receipt in
the nature of a warehouse receipt is issued with respect to any
of its Inventory, such warehouse receipt or receipt in the nature
thereof shall not be drawn in such a manner as to be "negotiable"
(as such term is used in Section 7-104 of the Uniform Commercial
Code as in effect in any relevant jurisdiction or under other
relevant law).
ARTICLE IV
SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT
Section 1 Location of Inventory and Equipment. The
Steam Lessee agrees that all Inventory and Equipment now held or
subsequently acquired by it shall be kept at (or shall be in
transport to) the Site, or such new location as the Steam Lessee
may establish in accordance with the last sentence of this
Section 4.1. The Steam Lessee may establish a new location for
Inventory and Equipment only if (i) it shall have given to the
Security Agent, the Administrative Agent and GE Capital 30 days
prior written notice of its intention so to do, clearly de
scribing such new location and providing such other information
in connection therewith as the Security Agent, the Administrative
Agent or GE Capital may reasonably request, and (ii) with respect
to such new location, it shall have taken all action necessary to
maintain the security interest of the Security Agent in the
Collateral intended to be granted hereby at all times fully
perfected and in full force and effect.
Section 2 Inventory Records. The Steam Lessee shall
maintain such current Inventory Records as the Security Agent may
from time to time reasonably request.
ARTICLE V
SPECIAL PROVISIONS CONCERNING RECEIVABLES,
CONTRACTS AND INSTRUMENTS
Section 1 Additional Representations and
Warranties. As of the time when each of its Receivables arises,
the Steam Lessee shall be deemed to have represented and
warranted that such Receivable and all records, papers and
documents relating thereto (if any) are genuine and in all
respects what they purport to be, and that all papers and docu
ments (if any) relating thereto (i) will (subject to dispute,
return, replacement, settlement or compromise) evidence
indebtedness unpaid and owed by such account debtor arising out
of the performance of labor or services or the sale and delivery
of the merchandise listed therein, or both, (ii) will be the only
original writings evidencing and embodying such obligation of the
account debtor named therein (other than copies created for
purposes other than general accounting purposes), (iii) will
(subject to dispute, return, replacement, settlement or
compromise and any limits due to applicable bankruptcy,
insolvency, moratorium or other similar rights affecting
creditors' rights generally and general principles of equity)
evidence true and valid obligations, enforceable in accordance
with their respective terms, not subject to the fulfillment of
any contract or condition whatsoever unless set forth in the
writing and (iv) will be in compliance and will conform with all
applicable requirements of Law.
Section 2 Maintenance of Records; Legending of
Records. The Steam Lessee will keep and maintain at its own cost
and expense satisfactory and complete records of its Receivables,
including, but not limited to, records of all payments received
and all credits granted thereon, and the Steam Lessee will make
the same available to the Security Agent and Administrative Agent
for inspection at the Steam Lessee's chief executive office,
without charge to the Security Agent and Administrative Agent, at
such times as the Security Agent and Administrative Agent may
reasonably request. The Steam Lessee shall, without charge to
the Security Agent and Administrative Agent, deliver all tangible
evidence that the Security Agent and Administrative Agent may
request of its Receivables (including, without limitation, all
documents evidencing the Receivables) and books and records to
the Security Agent or to its representatives (copies of which
evidence and books and records may be retained by the Steam
Lessee) at any time upon the Security Agent's or Administrative
Agent's demand. If a Reimbursement Event of Default or a Lease
Event of Default occurs and continues, and if the Security Agent
so directs, the Steam Lessee shall legend in form and substance
satisfactory to the Security Agent, the Receivables and
Contracts, as well as books, records and documents evidencing or
pertaining to the Receivables with an appropriate reference to
the fact that the Receivables and Contracts have been assigned to
the Security Agent, for the benefit of GE Capital and the Owner
Trustee, and that the Security Agent has a security interest
therein.
Section 3 Modification of Terms; No Payment to the
Steam Lessee. The Steam Lessee shall not rescind or cancel any
indebtedness evidenced by any Receivable or make any adjustment
with respect thereto, or extend or renew the same, or compromise
or settle any dispute, claim, suit or legal proceeding relating
thereto, or sell any Receivable or interest therein, without the
prior written consent of the Security Agent, the Administrative
Agent or GE Capital. The Steam Lessee will duly fulfill all obli
gations on its part to be fulfilled under or in connection with
the Receivables and will do nothing to impair the rights of the
Security Agent in the Receivables.
Section 4 Payments Under Contracts and Receivables.
(a) Notice to Obligors under Contracts and Receivables.
The Steam Lessee agrees and confirms that it will notify
each party to the Contracts and each account debtor or obligor
under the Receivables of the grant of the security interest
therein and assignment thereof to the Security Agent and instruct
each of them that all payments due or to become due and all
amounts payable to the Steam Lessee thereunder shall, until the
Lessee Obligations are paid in full, be made directly to the
Security Agent (which payments shall be credited toward the Steam
Lessee's obligations to make payments to the Partnership pursuant
to the Steam Sales Agreement and the Steam Lease). Unless
notified to the contrary by the Security Agent, and subject to
Section 5.3 of this Security Agreement, the Steam Lessee shall,
at its expense, enforce collection of any amounts payable with
respect to each of the Receivables.
(b) Non-Payment to the Security Agent. In the
event the Steam Lessee shall receive directly from any party to
the Contracts or from any account debtor or other obligor under
any Receivable any payments under the Contracts and the
Receivables otherwise than to the Security Agent, the Steam
Lessee shall receive such payments in a constructive trust for
the benefit of the Security Agent, shall segregate such payments
from other funds of the Steam Lessee, and, shall forthwith trans
mit and deliver such payments to the Security Agent in accordance
with the terms of the Security Deposit Agreement.
Section 5 Direction to Account Borrowers,
Contracting Parties; etc. (a) The Steam Lessee agrees that the
Security Agent may, at its option, directly notify the account
debtors or obligors with respect to any Receivables to make
payments with respect thereto directly to the Security Agent.
(b) The Steam Lessee agrees to be bound by any
collection, compromise, forgiveness, extension or other action
taken by the Security Agent with respect to the Receivables.
Without notice to or assent by the Steam Lessee, the Security
Agent may apply any or all amounts then in, or thereafter
deposited with any financial institution in any checking,
savings, deposit or other account of the Steam Lessee in accor
dance with the provisions of the Security Deposit Agreement. The
reasonable costs and expenses (including reasonable attorneys'
fees) of collection, whether incurred by the Steam Lessee or the
Security Agent, shall be borne by the Steam Lessee.
Section 6 Instruments. At such time that a
Reimbursement Event of Default or a Lease Event of Default shall
have occurred and be continuing, the Steam Lessee promptly shall
deliver all Instruments to the Security Agent, appropriately en
dorsed to the order of the Security Agent as further security
hereunder.
ARTICLE VI
SPECIAL PROVISIONS CONCERNING CONTRACTS
Section 1 Security Interest in Contract Rights. The
Steam Lessee's assignment and grant, pursuant to Section 2.1, to
the Security Agent, for the benefit of GE Capital and the Owner
Trustee, of a security interest in all of its right, title and
interest in and to each and all of the Contracts and the contract
rights thereunder, includes, but is not limited to:
(a) all (i) rights to payment under any Contract
and (ii) payments due and to become due under any
Contract, in each case whether as contractual
obligations, damages or otherwise;
(b) all of its claims, rights, powers, or
privileges and remedies under any Contract; and
(c) all of its rights under any Contract to make
determinations, to exercise any election (including,
but not limited to, election of remedies) or option or
to give or receive any notice, consent, waiver or
approval together with full power and authority with
respect to any Contract to demand, receive, enforce,
collect or provide receipt for any of the foregoing
rights or any property the subject of any of the
Contracts, to enforce or execute any checks, or other
instruments or orders, to file any claims and to take
any action which, in the reasonable opinion of the
Security Agent, may be necessary or advisable in
connection with any of the foregoing (the Contracts,
together with all of the foregoing in this Section 6.1,
the "Contract Rights");
provided, however, that until the occurrence and continuance of a
Reimbursement Event of Default or a Lease Event of Default,
notwithstanding anything else herein to the contrary, the Steam
Lessee may exclusively exercise all of the Steam Lessee's rights,
powers, privileges and remedies under the Contracts.
Section 2 Further Protection. The Steam Lessee
warrants and forever shall defend its title to the Contract
Rights against the claims and demands of any Person and hereby
grants the Security Agent full power and authority, upon the
occurrence or during the continuance of a Reimbursement Event of
Default or a Lease Event of Default to take all actions as the
Security Agent reasonably deems necessary or advisable to
effectuate the provisions set forth in this sentence.
Section 3 Steam Lessee Remains Liable under
Receivables and Contracts. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any
rights to the Security Agent, the Owner Trustee or GE Capital, or
any assignment of rights to the Indenture Trustee) the Steam
Lessee shall remain liable under each of the Receivables and
Contracts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise to each
such Receivable or Contract. None of the Security Agent, the
Owner Trustee, GE Capital, the Indenture Trustee, the
Administrative Agent or the Holders shall have any obligation or
liability under any Receivable (or any agreement giving rise
thereto) or Contract by reason of or arising out of this Security
Agreement or the receipt by the Security Agent, the Owner
Trustee, GE Capital or the Indenture Trustee of any payment relating
to such Receivable or Contract pursuant hereto or pursuant to
the Security Deposit Agreement, nor shall the Security Agent, the
Owner Trustee, GE Capital, the Indenture Trustee, the
Administrative Agent or any Holder be obligated in any manner to
perform any of the obligations of the Steam Lessee under or
pursuant to any Receivable (or any agreement giving rise thereto)
or under or pursuant to any Contract, to make any payment, to
make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance
by any party under any Receivable (or any agreement giving rise
thereto) or under any Contract, to present or file any claim, to
take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
Section 4 Remedies. Upon the occurrence of any
Reimbursement Event of Default or a Lease Event of Default and
the continuance thereof, the Security Agent shall have the rights
set forth in Article VII hereof, and in addition may (a) enforce
all remedies, rights, powers and privileges of the Steam Lessee
under any or all of the Contracts, (b) sell any or all of the
Contract Rights at public or private sale upon at least 10 days
prior written notice and/or (c) substitute itself or any nominee
or trustee in lieu of the Steam Lessee as party to any of the
Contracts and to notify the obligor of any Contract Right (the
Steam Lessee hereby agreeing to deliver any such notice at the
request of the Security Agent) that all payments and performance
under the relevant Contract shall be made or rendered to the
Security Agent or such other Person as the Security Agent may
designate.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF
REIMBURSEMENT EVENT OF DEFAULT OR
LEASE EVENT OF DEFAULT
Section 1 Remedies; Obtaining the Collateral Upon
Default. Upon the occurrence of any Reimbursement Event of
Default or Lease Event of Default and the continuance thereof,
the Security Agent shall be entitled to exercise all the rights
and remedies of a secured party under the Uniform Commercial Code
as in effect in any relevant jurisdiction to enforce this
Security Agreement and the security interests contained herein,
and, in addition, subject to any mandatory requirements of Law
then in effect, the Security Agent may, in addition to its other
rights and remedies hereunder, including without limitation under
Sections 7.2 and 7.6, and also its (and GE Capital's and the
Owner Trustee's) rights under the other Financing Documents, do
any of the following:
(a) personally, or by trustees or attorneys,
immediately take possession of the Collateral or any part
thereof, from the Steam Lessee or any other Person who then has
possession of any part thereof with or without notice or process
of law, and for that purpose may enter upon the Steam Lessee's or
such other Person's premises where any of the Collateral is
located and remove the same and use in connection with such
removal any and all services, supplies, aids and other facilities
of the Steam Lessee;
(b) instruct the obligor or obligors on any
agreement, instrument or other obligation (including, without
limitation, the Receivables and the Contracts) constituting the
Collateral to make any payment required by the terms of such
instrument or agreement directly to the Security Agent; and
(c) take possession of the Collateral or any part
thereof, by directing the Steam Lessee in writing to turn over
the same to the Security Agent at the Site, in which event the
Steam Lessee shall at its own expense
(i) forthwith turn over the
same to the Security Agent at the Site;
(ii) store and keep any
Collateral so turned over to the Security
Agent at the Site pending further action by
the Security Agent as provided in Section
7.2, and
(iii) while the Collateral
shall be so stored and kept, provide such
guards and maintenance services as shall be
necessary to protect the same and to preserve
and maintain them in good condition.
The Steam Lessee's obligation to turn over the Collateral as set
forth above is of the essence of this Security Agreement and,
accordingly, upon application to a court of equity having
jurisdiction, the Security Agent shall be entitled to obtain a
decree requiring specific performance by the Steam Lessee of said
obligation.
Section 2 Remedies; Disposition of the Collateral.
Any Collateral repossessed by the Security Agent under or pursuant
to Section 7.1 and any other Collateral, whether or not so
repossessed by the Security Agent, may, to the extent permitted
by any contract terms governing such Collateral, be sold, leased
or otherwise disposed of under one or more contracts or as an
entirety, and without the necessity of gathering at the place of
sale the property to be sold, and in general in such manner, at
such time or times, at such place or places and on such terms
(whether cash or credit, and in the case of credit, without
assumption of future credit risk) as the Security Agent may, in
compliance with applicable requirements of Law, determine to be
commercially reasonable. Any of the Collateral may be sold,
leased or otherwise disposed of, in the condition in which the
same existed when taken by the Security Agent or after any
overhaul or repair which the Security Agent shall determine to be
commercially reasonable. Any such disposition shall be made upon
not less than 15 days written notice to the Steam Lessee
specifying the time such disposition is to be made and, if such
disposition shall be a public sale, specifying the place of such
sale. Any such sale may be adjourned by announcement at the time
and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned. To the extent permitted by applicable requirements of
Law, the Security Agent (or the Owner Trustee, GE Capital, the
Administrative Agent, the Indenture Trustee or any Holder) may
bid for and become the buyer of the Collateral or any item thereof
offered for sale at a public auction without accountability to
the Steam Lessee (except to the extent of surplus money received
as provided in Section 7.4).
Section 3 Waiver. (a) Except as otherwise
provided in this Security Agreement, THE STEAM LESSEE HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS,
NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE SECURITY
AGENT'S TAKING POSSESSION OR THE SECURITY AGENT'S DISPOSITION OF
ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL
PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES
AND ANY SUCH RIGHT WHICH THE STEAM LESSEE WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF
ANY STATE, and the Steam Lessee hereby further waives:
(i) all damages occasioned by such
taking of possession except any damages which are
finally judicially determined to have been the
direct result of the Security Agent's gross
negligence or willful misconduct;
(ii) all other requirements as to
the time, place and terms of sale or other
requirements with respect to the enforcement of
the Security Agent's rights hereunder; and
(iii) all rights of redemption,
appraisement, valuation, stay, extension or
moratorium now or hereafter in force under any
Applicable Law in order to prevent or delay the
enforcement of this Security Agreement or the
absolute sale of the Collateral or any portion
thereof, and the Steam Lessee, for itself and all
who may claim under it, insofar as it or they may
now or hereafter lawfully do so, hereby waives the
benefit of such laws.
(b) Without limiting the generality of the
foregoing, the Steam Lessee hereby: (i) authorizes the Security
Agent, in its sole discretion and without notice to or demand
upon the Steam Lessee and without otherwise affecting the obligations
of the Steam Lessee hereunder from time to time, to take
and hold other collateral granted to it by any other Person (in
addition to the Collateral) for payment of any Lessee
Obligations, or any part thereof, and to exchange, enforce or
release such other collateral or any part thereof, and to accept
and hold any endorsement or guarantee of payment of the Lessee
Obligations or any part thereof, and to release or substitute any
endorser or guarantor or any other person granting security for
or in any way obligated upon any Lessee Obligations, or any part
thereof; and (ii) waives and releases any and all right to
require the Security Agent to collect any of the Lessee
Obligations from any specific item or items of Collateral or from
any other party liable as guarantor or in any other manner in
respect of any of the Lessee Obligations or from any collateral
(other than the Collateral) for any of the Lessee Obligations.
(c) Any sale of, or the grant of options to
purchase, or any other realization upon, any Collateral shall,
provided that it is done in accordance with Applicable Law and
this Security Agreement, operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the
Steam Lessee therein and thereto, and shall be a perpetual bar
both at law and in equity against the Steam Lessee and against
any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part
thereof, from, through and under the Steam Lessee
Section 4 Application of Proceeds; Liable for
Deficiency. Except as otherwise specified therein, the proceeds of
any Collateral obtained pursuant to Section 5.4 or 7.1 or
disposed of pursuant to Section 7.2 shall be applied, first, to
the payment of any expenses incurred by the Security Agent in
connection with the administration of this Security Agreement,
the custody, preservation or sale of, collection from or other
realization from, any of the Collateral, the exercise or
enforcement of any of its rights hereunder or the failure by the
Steam Lessee to perform or observe any of the provisions hereof,
including all reasonable attorney's fees and second, to the
payment of the Lessee Obligations in accordance with the terms of
the Security Deposit Agreement. Any surplus remaining after
payment in full of all of the Lessee Obligations shall be paid
over to the Steam Lessee or to whomever may be entitled to
receive such surplus. The Steam Lessee shall be liable for any
deficiency remaining after any application of funds pursuant
hereto.
Section 5 Remedies Cumulative; No Waiver. Each and
every right, power and remedy hereby specifically given to the
Security Agent shall be in addition to every other right, power
and remedy specifically given to the Security Agent (or the Owner
Trustee, the Administrative Agent, GE Capital, the Indenture
Trustee or any Holder) under this Security Agreement and the
other Financing Documents, or now or hereafter existing at law or
in equity, or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing
may be exercised from time to time or simultaneously and as often
and in such order as may be deemed expedient by the Security
Agent. All such rights, powers and remedies shall be cumulative,
and the exercise or the partial exercise of one shall not be
deemed a waiver of the right to exercise of any other. No delay
or omission of the Security Agent in the exercise of any of its
rights, remedies, powers and privileges hereunder or partial or
single exercise thereof, and no renewal or extension of any of
the Lessee Obligations, shall impair any such right, remedy,
power or privilege or shall constitute a waiver thereof.
Section 6 Discontinuance of Proceedings. In case
the Security Agent shall have instituted any proceeding to en
force any right, power or remedy under this Security Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have
been determined adversely to the Security Agent, then, in every
such case, the Steam Lessee and the Security Agent shall be
restored to their former positions and rights hereunder with
respect to the Collateral, subject to the security interest
created under this Security Agreement, and all rights, remedies
and powers of the Security Agent shall continue as if no such
proceeding had been instituted.
ARTICLE VIII
INDEMNITY
Section 1 Indemnity. (a) The Steam Lessee agrees
to indemnify, reimburse and hold the Security Agent, GE Capital,
the Indenture Trustee, the Administrative Agent, the Holders and
the Owner Trustee and their respective successors, assigns,
officers, directors, employees, and agents (each individually, an
"Indemnitee," and collectively, "Indemnitees") harmless from any
and all liabilities, obligations, damages, injuries, penalties,
claims, demands, actions, suits, judgments and any and all costs
and expenses (including reasonable attorneys' fees and
disbursements) (such expenses, collectively, the "expenses") of
whatsoever kind and nature imposed on, asserted against or
incurred by any of the Indemnitees in any way relating to or
arising out of (i) this Security Agreement, any other Transaction
Document, or the documents executed in connection herewith and
therewith or connected with the administration of the transactions
contemplated hereby and thereby, or the enforcement of any
of the terms hereof or thereof, or the preservation of any rights
hereunder or thereunder, (ii) the ownership, purchase, delivery,
control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of, the
Collateral (including, without limitation, latent or other
defects, whether or not discoverable, and any claim for patent or
trademark infringement), (iii) the violation of any requirements
of Law of any Governmental Authority applicable to the Steam
Lessee or the Project, (iv) any tort (including, without limitation,
claims arising or imposed under the doctrine of strict
liability, or for or on account of injury to or the death of any
Person (including any Indemnitee), or property damage), or (v)
any contract claim, excluding (x) those finally judicially determined
to have arisen solely from the gross negligence or willful
misconduct of any Indemnitee or (y) unless specifically provided
for elsewhere in this agreement, those arising out of the actions
of any Indemnitee while in possession or control of the Collateral.
(b) Without limiting the application of Section
8.1(a), the Steam Lessee agrees to pay, or reimburse the Security
Agent, the Owner Trustee, the Indenture Trustee, the
Administrative Agent, the Holders and GE Capital for any and all
reasonable fees, costs and expenses of whatever kind or nature
incurred in connection with the preservation, protection or
validation of the Security Agent's Liens on, and security
interest in, the Collateral, including, without limitation, all
fees and taxes in connection with the recording or filing of
instruments and documents in public offices, payment or discharge
of any taxes or Liens upon or in respect of the Collateral,
premiums for insurance with respect to the Collateral and all
other fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Security Agent's
interest therein, whether through judicial proceedings or
otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section
8.1(a) or (b), the Steam Lessee agrees to pay, indemnify and hold
each Indemnitee harmless from and against any losses, costs,
damages and expenses which such Indemnitee may suffer, expend or
incur in consequence of or growing out of any failure of the
Steam Lessee to comply with its obligations under this Security
Agreement or any other Transaction Document, or any misrepresentation
by Steam Lessee in this Security Agreement or any other
Transaction Document, or in any statement or writing contemplated
by or made or delivered pursuant to or in connection with this
Security Agreement or any other Transaction Document.
(d) If and to the extent that the obligations of
the Steam Lessee under this Section 8.1 are unenforceable for any
reason, the Steam Lessee hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations
which is permissible under applicable requirements of Law.
Section 2 Lessee Obligations Secured by Collateral.
Any amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement, and any amounts paid by the
Security Agent in preservation of any of its rights or interest
in the Collateral, together with interest on such amounts from
the date paid until reimbursement in full at a rate per annum
equal at all times to the Overdue Rate, shall constitute Lessee
Obligations secured by the Collateral.
ARTICLE IX
MISCELLANEOUS
Section 1 Notices. All notices and other
communications to any party hereunder shall be in writing
(including telecopy or similar teletransmission or writing) and
shall be given to such party at its address or telecopy number
set forth on Annex I hereto or such other address or telecopy
number as such party may hereafter specify by written notice to
the other party. Each such notice or other communication shall
be effective (i) if given by telecopy, when such telecopy is
transmitted by confirmed telecopier to the telecopy number
specified in this Section, (ii) if given by mail, 5 days after
such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any
other means (including, without limitation, by air courier), when
delivered at the address specified in this Section.
Section 2 Amendment. None of the terms and
conditions of this Security Agreement may be amended, changed,
waived, modified or varied in any manner whatsoever except in
accordance with the provisions of subsection 13.1 of the
Participation Agreement and with the prior written consent of
each of the parties hereto and, unless the Indenture shall have
been discharged, the Indenture Trustee.
Section 3 Successors and Assigns. This Agreement
shall be binding upon the Steam Lessee and its successors and
assigns and shall inure to the benefit of the Security Agent, GE
Capital, the Owner Trustee and their respective successors and
assigns (including the Indenture Trustee); provided, however,
that the Steam Lessee may not assign or transfer its rights or
obligations under this Security Agreement without the prior
written consent of the Owner Trustee and, so long as the Lien of
the Indenture shall not have been discharged, the Indenture
Trustee.
Section 4 Survival. (a) All agreements,
statements, representations and warranties made by the Steam
Lessee herein or in any certificate or other instrument delivered
by the Steam Lessee or on its behalf under this Security
Agreement shall be considered to have been relied upon by the
Security Agent and shall survive the execution and delivery of
this Security Agreement and the other Transaction Documents
regardless of any investigation made by the Security Agent, or on
its behalf, until the Lessee Obligations shall have been paid in
full.
(b) The indemnity obligations of the Steam Lessee
contained in Article VIII shall continue in full force and effect
notwithstanding the full payment of the Lessee Obligations and
notwithstanding the discharge thereof.
Section 5 Headings Descriptive. The headings of the
several sections of this Security Agreement are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
Section 6 Severability. Any provision of this
Security Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
Section 7 Steam Lessee's Duties. Anything contained
herein to the contrary notwithstanding, the Steam Lessee shall
remain liable to perform all of its obligations under or with
respect to the Collateral, and neither shall the Security Agent
have any obligations or liabilities under or with respect to any
Collateral by reason of or arising out of this Security
Agreement, nor shall the Security Agent be required or obligated
in any manner to perform or fulfill any of the obligations of the
Steam Lessee under or with respect to any Collateral.
Section 8 Termination; Release. When all Lessee
Obligations have been indefeasibly paid in full (as determined by
the Owner Participant and the Indenture Trustee), this Security
Agreement shall terminate (except as provided in Section 9.4),
and the Security Agent, at the request and expense of the Steam
Lessee, will promptly execute and deliver to the Steam Lessee the
proper instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the termination of this
Security Agreement, and will duly assign, transfer and deliver to
the Steam Lessee (without recourse and without any representation
or warranty of any kind) such of the Collateral as may be in the
possession of the Security Agent and has not theretofore been
sold or otherwise applied or released pursuant to this Security
Agreement.
Section 9 Reinstatement. This Security Agreement
shall continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Security Agent, the
Owner Trustee, GE Capital, the Administrative Agent or any Holder
in respect of the Lessee Obligations is rescinded or must
otherwise be restored or returned by the Security Agent, the
Owner Trustee, the Indenture Trustee, GE Capital, the Indenture
Trustee, the Administrative Agent or any Holder upon the
insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Steam Lessee or upon the appointment of any
intervenor or conservator of, or trustee or similar official for,
the Steam Lessee or any substantial part of its assets, or upon
the entry of an order by a bankruptcy court avoiding payment of
such amount, or otherwise, all as though such payments had not
been made.
Section 10 Counterparts. This Security Agreement may
be executed in any number of counterparts, each of which, when so
executed and delivered, shall be an original, but all of which
together shall constitute one and the same instrument.
Section 11 GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND
EXCEPT TO THE EXTENT THE VALIDITY OR PERFECTION OF THE SECURITY
INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, ARE GOVERNED BY THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS SECURITY AGREEMENT AND ANY ACTION FOR ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, THE STEAM LESSEE HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-
EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND APPELLATE
COURTS FROM ANY THEREOF. THE STEAM LESSEE IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS
IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE STEAM
LESSEE AT ITS ADDRESS REFERRED TO IN SECTION 9.1. THE STEAM
LESSEE HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN
ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER JURISDICTION.
(c) EACH OF THE STEAM LESSEE AND THE SECURITY
AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER.
Section 12 Assignment to Indenture Trustee. In order
to secure the indebtedness evidenced by the Loan Certificates and
certain other obligations as provided in the Indenture, the
Indenture provides, among other things, for the assignment by the
Owner Trustee to the Indenture Trustee of all of its right, title
and interest in, to and under this Agreement, to the extent set
forth in the Indenture, and for the creation of a Lien on and
security interest in the Lessor's Estate in favor of the
Indenture Trustee, and in furtherance thereof, the Partnership
and the Owner Trustee have entered into the Security Deposit
Agreement with the Security Agent. The Steam Lessee hereby
acknowledges and consents to such assignment and such security
interest and hereby acknowledges that to the extent set forth in
the Indenture, the Indenture Trustee shall have the right in its
own name (in certain cases together with the Owner Trustee and in
other cases to the exclusion of the Owner Trustee, all as set
forth in Section 3.10 of the Indenture) to direct the Security
Agent to take or refrain from taking action under this Agreement,
including the right (i) of the Security Agent to exercise any
election or option, and to make any decision or determination,
and to give any notice, consent, waiver or approval under this
Agreement or in respect thereof, (ii) to exercise any and all of
the rights, powers and remedies of the Security Agent hereunder
and (iii) to receive all moneys payable to the Security Agent
under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized
officers as of the date first above written.
BRANDYWINE WATER COMPANY
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
FLEET NATIONAL BANK, as Security Agent
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
EXHIBIT 10.31
AMENDED AND RESTATED
SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT, dated as of
December 18, 1996 (this "Security Agreement" or this
"Agreement"), made by PANDA-BRANDYWINE, L.P., a Delaware limited
partnership (together with its successors and assigns, the
"Partnership"), in favor of FLEET NATIONAL BANK (formerly known
as Shawmut Bank Connecticut, National Association), as Security
Agent (the "Security Agent") under the Security Deposit Agreement
(as defined in the Participation Agreement referred to below).
W I T N E S S E T H :
WHEREAS, the Partnership, Panda Brandywine Corporation,
a Delaware corporation and the sole general partner of the
Partnership (the "General Partner") and General Electric Capital
Corporation, a New York corporation ("GE Capital" or the "Owner
Participant"), entered into the Construction Loan Agreement and
Lease Commitment dated as of March 30, 1995 (the "Construction
Loan Agreement") pursuant to which GE Capital (i) provided
construction financing for the Project and (ii) issued the
Letters of Credit as collateral security for certain obligations
of the Partnership under the Power Purchase Agreement;
WHEREAS, the Partnership and the Security Agent, for
the benefit of GE Capital and the Owner Trustee (as defined
below), entered into the Security Agreement dated as of March 30,
1995 (as amended, supplemented or otherwise modified prior to the
date hereof, the "Existing Security Agreement") to secure the
payment and performance by the Partnership of all of its
obligations to GE Capital and the Owner Trustee;
WHEREAS, the Security Agent and the Partnership
executed a First Amendment to the Existing Security Agreement,
dated as of October 30, 1996, providing for the release of
certain Collateral described therein in order to facilitate the
transfer of transmission facilities from the Partnership to the
Power Purchaser;
WHEREAS, as contemplated by the Construction Loan
Agreement, the Partnership and the Owner Trustee are entering
into the Facility Lease and the other Lease Documents pursuant to
which, among other things, the Owner Trustee will lease the
Facility to the Partnership;
WHEREAS, the Owner Participant has elected to fund the
Facility Lease with non-recourse indebtedness as a leveraged
lease and, pursuant to Section 9.12 of the Existing Security
Agreement, the parties hereto have agreed to amend and restate
the Existing Security Agreement subject to the terms and
conditions provided herein;
WHEREAS, the Partnership and GE Capital are entering
into the Letter of Credit Reimbursement Agreement to provide for
the continued issuance by GE Capital of the Letters of Credit;
WHEREAS, in order to set forth the rights and
obligations of the Owner Participant, the Owner Trustee, the
Partnership, the General Partner, the Security Agent, the Loan
Participants and the Administrative Agent, the Indenture Trustee
(each as defined below) in connection with the foregoing
transactions and to describe and provide for the transactions
contemplated thereby, (i) the parties referenced in this recital
are entering into the Participation Agreement, (ii) the Owner
Trustee and the Indenture Trustee are entering into the
Indenture, (iii) certain of the Lessee Security Documents are
being amended and restated pursuant to the Amended and Restated
Agreements and (iv) the Construction Loan Agreement is being
terminated;
WHEREAS, it is a condition precedent to the performance
of certain obligations on the Lease Closing Date that the
Partnership shall have executed and delivered this Security
Agreement to the Security Agent, for the benefit of the Owner
Trustee and GE Capital;
WHEREAS, the Partnership desires to execute this Secu
rity Agreement to satisfy the condition described in the
preceding recital;
WHEREAS, pursuant to the terms of the Amended and
Restated Security Deposit Agreement, dated as of the date hereof,
among the Security Agent, the Partnership, the Owner Trustee, the
Security Agent and the Indenture Trustee (as defined below), the
Security Agent has agreed to act as security agent on behalf of
GE Capital, the Owner Trustee and the Indenture Trustee and to
hold the Collateral for the benefit of GE Capital and the Owner
Trustee (and, by collateral assignment, the Indenture Trustee);
NOW, THEREFORE, in consideration of the premises and
other benefits to the Partnership, the receipt and sufficiency of
which are hereby acknowledged, the Partnership hereby covenants
and agrees with the Security Agent, for the benefit of GE Capital
and the Owner Trustee, as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms shall
have the meanings herein specified unless the context otherwise
requires. Such definitions shall be equally applicable to the
singular and plural forms of the terms defined. Capitalized
terms used but not defined herein shall have the meanings
assigned to them in Annex A to the Participation Agreement, dated
as of December 18, 1996 (the "Participation Agreement"), among
the Partnership, the General Partner, GE Capital, Fleet National
Bank (formerly known as Shawmut Bank Connecticut, National
Association), a national banking association, not in its
individual capacity but solely as owner trustee (in such
capacity, the "Owner Trustee", including any successor owner
trustee appointed in accordance with the terms of the Trust
Agreement) under the Trust Agreement, and as Security Agent,
First Security Bank, National Association, a national banking
association, not in its individual capacity but solely as
indenture trustee (in such capacity, the "Indenture Trustee")
under the Indenture, Credit Suisse, a bank organized and existing
under the laws of Switzerland, acting by and through its New York
branch ("Credit Suisse"), as administrative agent (in such
capacity, the "Administrative Agent"), and the other entities
listed on Schedule I to the Participation Agreement the "Loan
Participants"). Commercial terms used herein and not otherwise
defined herein or in Annex A to the Participation Agreement shall
have the meaning specified for such terms in the Uniform
Commercial Code as in effect in the State of New York.
"Chattel Paper" shall have the meaning assigned to that
term under the Uniform Commercial Code as in effect in any
relevant jurisdiction.
"Collateral" shall have the meaning specified in
Section 2.1(a).
"Construction Loan Agreement" shall have the meaning
specified in the Recitals to this Security Agreement.
"Contract Rights" shall have the meaning specified in
Section 6.1(c).
"Contracts" shall mean all contracts to which the
Partnership now is, or hereafter will be, bound, or a party,
beneficiary or assignee, including, without limitation, all of
the Project Documents and the contracts and agreements set forth
on Exhibit A hereto and made a part hereof, all exhibits thereto
and all other instruments, agreements and documents executed and
delivered with respect to such contracts, any guarantees or
letters of credit provided to the Partnership to assure the
performance by any party to any contract and all revenues,
damages, rentals, Proceeds and other sums of money due and to
become due from any of the foregoing, as the same may be
modified, supplemented or amended from time to time in accordance
with their terms.
"Document" shall have the meaning assigned that term
under the Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Equipment" shall mean any "equipment", as such term is
defined in the Uniform Commercial Code as in effect in any
relevant jurisdiction, now or hereafter owned or leased by the
Partnership and, in any event, shall include, but shall not be
limited to, all equipment used in connection with the Project,
all machinery, tools, office equipment, furniture, furnishings,
fixtures, vehicles, motor vehicles, and any manuals,
instructions, blueprints, computer software and similar items
which relate to the above, and any and all additions,
substitutions and replacements of any of the foregoing, wherever
located, together with all improvements thereon and all
attachments, components, parts, equipment and accessories
installed thereon or affixed thereto, but excluding property
owned by the Power Purchaser.
"Existing Security Agreement" shall have the meaning
specified in the Recitals to this Security Agreement.
"Expenses" shall have the meaning specified in Section
8.1.
"Facility Lease" shall mean the Facility Lease, dated
as of the date hereof, between the Owner Trustee and the
Partnership, as amended, supplemented or otherwise modified from
time to time.
"Fixtures" shall have the meaning assigned that term
under the Uniform Commercial Code as in effect in any relevant
jurisdiction and in any event shall include all goods now or
hereafter attached to, placed on, or incorporated in the Site,
but excluding property owned by the Power Purchaser.
"General Intangibles" shall mean "general intangibles"
as such term is defined in the Uniform Commercial Code as in
effect in any relevant jurisdiction, now or hereafter owned by
the Partnership and shall include, but not be limited to, all
trademarks, trademark applications, trademark registrations,
tradenames, fictitious business names, business names, company
names, business identifiers, prints, labels, trade styles and
service marks (whether or not registered), including logos and/or
designs, copyrights, patents, patent applications, goodwill of
the Partnership's business symbolized by any of the foregoing,
trade secrets, license rights, license agreements, permits,
franchises, and any rights to tax refunds to which the
Partnership is now or hereafter may be entitled.
"Governmental Actions" shall mean all permits,
authorizations, registrations, consents, approvals, waivers,
exceptions, variances, claims, orders, judgments and decrees,
licenses, exemptions, publications (to the extent legally binding
upon the Partnership, any other Participant or the Project),
filings (other than filings of a purely ministerial nature),
notices to and declarations of or with any Governmental Authority
and shall include, without limitation, all siting, environmental,
construction and operating permits and licenses that are required
for the construction, use and operation of the Project and all
governmental actions set forth on Exhibit B hereto.
"Indemnitee" shall have the meaning specified in
Section 8.1.
"Indenture" shall mean the Trust Indenture and Security
Agreement, dated as of the date hereof, made by the Owner Trustee
in favor of the Indenture Trustee, as amended, supplemented or
otherwise modified from time to time.
"Instrument" shall have the meaning assigned that term
under the Uniform Commercial Code as in effect in any relevant
jurisdiction.
"Inventory" shall mean all of the inventory of the
Partnership of every type or description, including all inventory
as such term is defined in the Uniform Commercial Code as in
effect in any relevant jurisdiction, now owned or hereafter
acquired and wherever located, whether raw, in process or
finished, all materials usable in processing the same and all
documents of title covering any inventory, including but not
limited to work in process, materials used or consumed in the
Partnership's business, now owned or hereafter acquired or
manufactured by the Partnership and held for sale in the ordinary
course of its business; all present and future substitutions
therefore, parts and accessories thereof and all additions
thereto; and all proceeds thereof and products of such inventory
in any form whatsoever.
"Inventory Records" shall mean all books, records and
other property and General Intangibles at any time relating to
the Inventory.
"Lessee Obligations" shall mean all the unpaid
principal amount of, and accrued interest on (including, without
limitation, interest accruing after the maturity of the Letter of
Credit Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Partnership,
whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) the Letter of Credit Obligations,
all Rent and other obligations payable by the Partnership under
the Facility Lease, the Participation Agreement and the
Reimbursement Agreement and all other obligations and liabilities
of the Partnership and the Partners to GE Capital, the Owner
Trustee, the Security Agent, the Indenture Trustee, the
Administrative Agent, any Holder or any other Indemnitee, whether
direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Facility Lease, the Reimbursement
Agreement, this Agreement, the Participation Agreement, the other
Collateral Security Documents or any other Financing Document and
any other document made, delivered or given in connection
therewith or herewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, fees and disbursements of
counsel) or otherwise.
"Partnership" shall have the meaning specified in the
preamble to this Security Agreement.
"Proceeds" shall mean "proceeds" as such term is
defined in the Uniform Commercial Code as in effect in any
relevant jurisdiction or under other relevant law and, in any
event, shall include, but shall not be limited to, (i) any and
all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Partnership from time to time, and claims for
insurance, indemnity, warranty or guaranty effected or held for
the benefit of the Partnership with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to the Partnership from time to time in
connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any person acting under color of
Governmental Authority) and (iii) any and all other amounts from
time to time paid or payable under or in connection with any of
the Collateral.
"Receivables" shall mean any "Account" as such term is
defined in the Uniform Commercial Code as in effect in any
relevant jurisdiction and in any event shall include, but not be
limited to, all of the Partnership's rights to payment for goods
(including, without limitation, steam and electricity) sold or
leased, or services performed, by the Partnership, whether now in
existence or arising from time to time hereafter, including,
without limitation, rights evidenced by an account, note,
contract, security agreement, chattel paper, or other evidence of
indebtedness or security, together with (i) all security pledged,
assigned, hypothecated or granted to or held by the Partnership
to secure the foregoing, (ii) all of the Partnership's right,
title and interest in and to any goods (including, without
limitation, steam and electricity prior to the sale thereof to
the Steam Host or the Power Purchaser, as the case may be), the
sale of which gave rise thereto, (iii) all guarantees,
endorsements and indemnifications on, or of, any of the
foregoing, (iv) all powers of attorney for the execution of any
evidence of indebtedness or security or other writing in
connection therewith, (v) all books, correspondence, credit
files, records, ledger cards, invoices, and other papers relating
thereto, including without limitation all similar information
stored on a magnetic medium or other similar storage device and
other papers and documents in the possession or under the control
of the Partnership or any computer bureau from time to time
acting for the Partnership, (vi) all evidences of the filing of
financing statements and other statements and the registration of
other instruments in connection therewith and amendments thereto,
notices to other creditors or secured parties, and certificates
from filing or other registration officers, (vii) all credit
information, reports and memoranda relating thereto, and (viii)
all other writings related in any way to the foregoing.
"Security Agreement" shall mean this Security Agree
ment, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
ARTICLE II
ASSIGNMENT AND GRANT OF SECURITY INTERESTS
Section 2.1 Assignment and Grant of Security
Interest. (a) As collateral security for the prompt and com
plete payment and performance when due of all of the Lessee
Obligations, the Partnership hereby assigns and grants to the
Security Agent, for the benefit of GE Capital and the Owner
Trustee (and by collateral assignment, the Indenture Trustee), a
continuing security interest of first priority, in all of the
Partnership's right, title and interest in, to and under (i) all
Receivables, (ii) all Inventory, (iii) all Equipment, (iv) all
General Intangibles, (v) all Contracts and all Contract Rights,
(vi) all amounts from time to time held in any checking, savings,
deposit or other account of the Partnership and all investments
and securities at any time on deposit in such accounts (including
all of the Accounts) and all income or gain earned thereon, (vii)
all Governmental Actions, provided, that any Governmental Action
which by its terms or by operation of law would become void,
voidable, terminable or revocable if mortgaged, pledged or
assigned hereunder or if a security interest therein were granted
hereunder are expressly excepted and excluded from the Lien and
the terms of this Agreement to the extent necessary so as to
avoid such voidness, voidability, terminability or revocability,
(viii) all Fixtures, (ix) without limiting the generality of the
foregoing, all other personal property, rights, interests, goods,
Instruments, Chattel Paper, Documents, credits, claims, demands
and assets of the Partnership whether now existing or hereafter
acquired from time to time, and (x) any and all additions and
accessions to any of the foregoing, all improvements thereto, all
substitutions and replacements therefor and all products and
Proceeds thereof (all of the above collectively, the
"Collateral").
(b) The security interest granted to the Security
Agent, for the benefit of GE Capital and the Owner Trustee,
pursuant to this Security Agreement extends to all Collateral of
the kind which is the subject of this Security Agreement which
the Partnership may acquire at any time during the continuation
of this Security Agreement, whether such Collateral is in transit
or in the Partnership's, the Security Agent's, the Owner
Trustee's, GE Capital's, or any other Person's constructive,
actual or exclusive occupancy or possession.
Section 2.2 Security Interest Absolute. All rights of
the Security Agent and all security interests hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the
Facility Lease, any other Financing Document or any other agree
ment or instrument relating thereto;
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Lessee
Obligations, or any other amendment or waiver of or any consent
to any departure from the Facility Lease, the Reimbursement
Agreement or any other Financing Document;
(c) any exchange, release or non-perfection of
any other collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the
Lessee Obligations; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Partnership or a third party pledgor.
Section 2.3 Power of Attorney. (a) The Partnership
hereby constitutes and appoints the Security Agent or any Person
or agent whom the Security Agent may designate, as the
Partnership's attorney-in-fact, at the Partnership's reasonable
cost and expense, to exercise at any time following the
occurrence and during the continuance of a Reimbursement Event of
Default or a Lease Event of Default all or any of the following
powers, in accordance with and subject to the terms and
conditions of the Project Documents, which, being coupled with an
interest, shall be irrevocable until all of the Lessee
Obligations have been paid in full:
(i) To receive, take, endorse, sign, as
sign and deliver, all in the Security Agent's name
or the Partnership's name, any and all checks,
notes, drafts, and other documents or instruments
relating to the Collateral;
(ii) To receive, open and dispose of all
mail addressed to the Partnership and to notify
postal authorities to change the address for de
livery thereof to such address as the Security
Agent designates;
(iii) To request from account debt
ors of the Partnership in the Partnership's name,
the Security Agent's name, or in the name of the
Security Agent's designee, information concerning
the Receivables and the amounts owing thereon;
(iv) To transmit to account debtors in
debted on Receivables notice of the Security
Agent's interest therein;
(v) To notify account debtors indebted
on Receivables to make payment directly to the
Security Agent;
(vi) To take or bring, in the
Partnership's name or the Security Agent's name,
all steps, actions, suits or proceedings deemed by
the Security Agent to be necessary or desirable to
enforce or effect collection of the Receivables;
(vii) To prepare, sign and file any
Uniform Commercial Code financing statements in
the name of the Partnership as debtor;
(viii) If the Partnership shall have
failed to do so in a timely manner, to take or
cause to be taken all actions necessary to perform
or comply or cause performance or compliance with
the covenants of the Partnership contained in the
Financing Documents;
(ix) To sign and endorse any invoices,
freight or express bills, bills of lading, storage
or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other
documents in connection with any of the Collateral;
(x) To defend any suit, action or
proceeding brought against the Partnership with
respect to any Collateral;
(xi) To settle, compromise or adjust any
suit, action or proceeding described in the
preceding clause and, in connection therewith, to
give such discharges or releases as the Security
Agent may deem appropriate;
(xii) Generally, to sell or transfer
and make any agreement with respect to or
otherwise deal with any of the Collateral as fully
and completely as though the Security Agent were
the absolute owner thereof for all purposes, and
to do, at the Security Agent's option and the
Partnership's expense, at any time, or from time
to time, all acts and things which the Security
Agent deems necessary to protect, preserve or
realize upon the Collateral and the Liens of the
Security Agent thereon;
(xiii) To execute, in connection with
any foreclosure, any endorsements, assignments or
other instruments of conveyance or transfer with
respect to the Collateral; and
(xiv) To exercise the Partnership's
rights under any Contract in accordance with
Section 6.4.
(b) The Partnership hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof.
The Partnership hereby acknowledges and agrees that the Security
Agent shall have no fiduciary duties to the Partnership and the
Partnership hereby waives any claims to the rights of a
beneficiary of a fiduciary relationship hereunder.
ARTICLE III
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Partnership represents, warrants and covenants,
which representations, warranties and covenants shall survive
execution and delivery of this Security Agreement, as follows:
Section 3.1 Validity of Lien. This Security Agreement
is effective to create, as security for the Lessee Obligations, a
legal, valid and enforceable Lien on and security interest in all
of the Collateral in favor of the Security Agent, for the benefit
of GE Capital and the Owner Trustee, superior to and prior to the
rights of all third Persons and subject to no other Liens (other
than Permitted Liens).
Section 3.2 No Liens. (a) The Partnership is, and as
to Collateral acquired by it from time to time after the date
hereof, the Partnership will be, the owner of all Collateral free
from all Liens or other right, title or interest of any Person
(other than Permitted Liens). The Partnership shall defend the
Collateral against all Liens and demands of all Persons at any
time claiming the same or any interest therein adverse to the
Security Agent, the Owner Trustee, GE Capital or the Indenture
Trustee.
(b) There are no financing statements (or similar
statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral, other than the financing statements filed
in favor of the Security Agent for the benefit of the Owner
Trustee (and by collateral assignment, the Indenture Trustee) and
GE Capital to secure the Lessee Obligations, and the Partnership
will not execute or authorize to be filed in any public office
any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements
relating to the Collateral, except financing statements filed or
to be filed in respect of and covering the security interests
granted hereby to the Security Agent.
Section 3.3 Chief Executive Office; Name; Records.
The chief executive office of the Partnership is located at 4100
Spring Valley, Suite 1001, Dallas, Texas 75244; provided that
certain records concerning the Project and certain contracts
relating thereto are kept at the Partnership's office at the
Site. The Partnership will not (a) move its chief executive of
fice (or change the location(s) where records concerning the
Project are kept), or (b) change its name from, nor carry on busi
ness under any name other than "Panda-Brandywine, L.P.", unless
it has complied with the requirements of the last sentence of
this Section 3.3. The originals of all documents evidencing all
Contracts and Receivables of the Partnership, and the only
original books of accounts and records concerning the Collateral
are, and will continue to be, kept at, and controlled and
directed (including, without limitation, for general accounting
purposes) from, such chief executive office (or such other office
set forth above), or at such new location for such chief
executive office as the Partnership may establish in accordance
with the last sentence of this Section 3.3. The Partnership
shall not establish a new location for its chief executive office
or change its name or the name under which it presently conducts
its business until (i) it has given to the Security Agent, the
Administrative Agent and GE Capital not less than 30 days prior
written notice of its intention so to do, clearly describing such
new location or specifying such new name, as the case may be, and
providing such other information in connection therewith as the
Security Agent, the Administrative Agent or GE Capital may
reasonably request, and (ii) with respect to such new location or
such new name, as the case may be, it shall have taken all
action, reasonably satisfactory to the Security Agent, the
Administrative Agent and GE Capital, to maintain the security
interest of the Security Agent, on behalf of the Owner Trustee
and GE Capital, in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect.
Section 3.4 Financing Statements. The Partnership
agrees that it shall ensure that all necessary and appropriate
recordings and filings will be effected by the Security Agent in
all necessary and appropriate public offices (as determined by GE
Capital and the Administrative Agent) so that the Lien created by
the Lessee Security Documents will at all times constitute a
perfected Lien on and security interest in the Collateral prior
and superior to all other Liens (other than Permitted Liens), all
in accordance with the Uniform Commercial Code as enacted in any
and all relevant jurisdictions or any other relevant Law. The
Partnership authorizes the Security Agent to file any such
financing statements in connection with the Lien created by the
Lessee Security Documents without the signature of the Partne
rship.
Section 3.5 Further Actions. The Partnership will, at
its own expense, make, execute, endorse, acknowledge, file and/or
deliver to the Security Agent from time to time such lists,
descriptions and designations of its Collateral, bills of lading,
documents of title, vouchers, invoices, schedules, powers of
attorney, certificates, reports and other assurances or
instruments and take such further steps relating to the
Collateral and other property or rights covered by the security
interest hereby granted, which are necessary or desirable to
create, perfect, preserve, protect or validate any security
interest granted pursuant to this Security Agreement or to enable
the Security Agent to exercise and enforce its rights under this
Security Agreement with respect to such security interest.
Section 3.6 Taxes, Claims, etc. So long as this
Security Agreement is in effect, the Partnership shall pay (a)
all taxes, assessments and governmental charges imposed upon it
or upon its property, and (b) all claims (including, without
limitation, claims for labor, materials, supplies or services)
which might, if unpaid, become a Lien upon its property, unless,
in each case, the validity or amount thereof is subject to
Contest.
Section 3.7 Right of Inspection. The Partnership
shall allow any representative of the Security Agent, the
Administrative Agent or the Owner Participant to visit and
inspect any of the Partnership's properties, including, without
limitation, the Inventory and Equipment, to examine its books of
record and account, including, without limitation, the Inventory
Records, and to make extracts therefrom and to receive true
copies of any papers, documents or instruments relating to the
Collateral, and to discuss its affairs, finances and accounts
with its officers, all at such reasonable times during normal
business hours and at such reasonable intervals as the Security
Agent, the Administrative Agent or the Owner Participant may
request.
Section 3.8 Additional Statements and Schedules. The
Partnership shall execute and deliver to the Security Agent and
the Administrative Agent, from time to time, solely for their
convenience in maintaining a record of the Collateral, such
written statements and schedules as they may reasonably require
designating, identifying or describing the Collateral.
Section 3.9 Warehouse Receipts Non-Negotiable. The
Partnership agrees that if any warehouse receipt or receipt in
the nature of a warehouse receipt is issued with respect to any
of its Inventory, such warehouse receipt or receipt in the nature
thereof shall not be drawn in such a manner as to be "negotiable"
(as such term is used in Section 7-104 of the Uniform Commercial
Code as in effect in any relevant jurisdiction or under other
relevant law).
Section 3.10 Recourse; Limitation of Liability. There
shall be full recourse to the Partnership and all of its assets
for the liabilities of the Partnership under this Security
Agreement and the other Transaction Documents, but in no event
shall any Partner, Affiliate of any Partner, or any officer,
director or employee of the Partnership, any Partner or their
Affiliates or any holder of any equity interest in any Partner be
personally liable or obligated for such liabilities of the
Partnership except as may be specifically provided in any other
Transaction Document to which such Partner is a party or in the
event of fraudulent actions, knowing misrepresentations, gross
negligence or willful misconduct by the Partnership, any Partner
or any of their Affiliates in connection with the financing
contemplated under the Transaction Documents. Subject to the
foregoing limitation on liability, the Security Agent may sue or
commence any suit, action or proceeding against any Partner or
any Affiliate thereof in order to obtain jurisdiction over the
Partnership in order to enforce its rights and remedies
hereunder. Nothing herein contained shall limit or be construed
to limit the liabilities and obligations of any Partner or any
Affiliate thereof in accordance with the terms of any other
Transaction Document creating such liabilities and obligations to
which such Partner or Affiliate is a party.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT
Section 4.1 Location of Inventory and Equipment. The
Partnership agrees that all Inventory and Equipment now held or
subsequently acquired by it shall be kept at (or shall be in
transport to or shall be held in storage for transport to) the
Site, or such new location as the Partnership may establish in
accordance with the last sentence of this Section 4.1. The
Partnership may establish a new location for Inventory and
Equipment only if (i) it shall have given to the Security Agent,
the Administrative Agent and GE Capital 30 days prior written
notice of its intention so to do, clearly describing such new
location and providing such other information in connection there
with as the Security Agent, the Administrative Agent or GE
Capital may reasonably request, and (ii) with respect to such new
location, it shall have taken all action necessary to maintain
the security interest of the Security Agent in the Collateral in
tended to be granted hereby at all times fully perfected and in
full force and effect.
Section 4.2 Inventory Records. The Partnership shall
maintain such current Inventory Records as the Security Agent may
from time to time reasonably request.
ARTICLE V
SPECIAL PROVISIONS CONCERNING RECEIVABLES,
CONTRACTS AND INSTRUMENTS
Section 5.1 Additional Representations and
Warranties. As of the time when each of its Receivables arises,
the Partnership shall be deemed to have represented and warranted
that such Receivable and all records, papers and documents
relating thereto (if any) are genuine and in all respects what
they purport to be, and that all papers and documents (if any)
relating thereto (i) will (subject to dispute, return,
replacement, settlement or compromise) evidence indebtedness
unpaid and owed by such account debtor arising out of the
performance of labor or services or the sale and delivery of the
merchandise listed therein, or both, (ii) will be the only
original writings evidencing and embodying such obligation of the
account debtor named therein (other than copies created for
purposes other than general accounting purposes), (iii) will
(subject to dispute, return, replacement, settlement or
compromise and any limits due to applicable bankruptcy,
insolvency, moratorium or other similar rights affecting
creditors' rights generally and general principles of equity)
evidence true and valid obligations, enforceable in accordance
with their respective terms, not subject to the fulfillment of
any contract or condition whatsoever unless set forth in the
writing and (iv) will be in compliance and will conform with all
applicable requirements of Law.
Section 5.2 Maintenance of Records; Legending of
Records. The Partnership will keep and maintain at its own cost
and expense satisfactory and complete records of its Receivables,
including, but not limited to, records of all payments received
and all credits granted thereon, and the Partnership will make
the same available to the Security Agent and Administrative Agent
for inspection at the Partnership's chief executive office,
without charge to the Security Agent and Administrative Agent, at
such times as the Security Agent and Administrative Agent may
reasonably request. The Partnership shall, without charge to the
Security Agent and Administrative Agent, deliver all tangible
evidence that the Security Agent and Administrative Agent may
request of its Receivables (including, without limitation, all
documents evidencing the Receivables) and books and records to
the Security Agent or to its representatives (copies of which
evidence and books and records may be retained by the
Partnership) at any time upon the Security Agent's or
Administrative Agent's demand. If a Reimbursement Event of
Default or a Lease Event of Default occurs and continues, and if
the Security Agent so directs, the Partnership shall legend in
form and substance satisfactory to the Security Agent, the
Receivables and Contracts, as well as books, records and
documents evidencing or pertaining to the Receivables with an
appropriate reference to the fact that the Receivables and
Contracts have been assigned to the Security Agent, for the
benefit of GE Capital and the Owner Trustee, and that the
Security Agent has a security interest therein.
Section 5.3 Modification of Terms; No Payment to the
Partnership. The Partnership shall not rescind or cancel any
indebtedness evidenced by any Receivable or make any adjustment
with respect thereto, or extend or renew the same, or compromise
or settle any dispute, claim, suit or legal proceeding relating
thereto, or sell any Receivable or interest therein, without the
prior written consent of the Security Agent, the Administrative
Agent and GE Capital. The Partnership will duly fulfill all
obligations on its part to be fulfilled under or in connection
with the Receivables and will do nothing to impair the rights of
the Security Agent in the Receivables.
Section 5.4 Payments Under Project Documents and Receivables.
(a) Notice to Obligors under Project Documents
and Receivables. The Partnership agrees and confirms that it
will notify each party to the Project Documents and each account
debtor or obligor under the Receivables of the grant of the
security interest therein and assignment thereof to the Security
Agent and instruct each of them that all payments due or to
become due and all amounts payable to the Partnership hereunder
shall, until the Lessee Obligations are paid in full, be made
directly to the Security Agent as provided in the Security
Deposit Agreement. Unless notified to the contrary by the
Security Agent, and subject to Section 5.3 of this Security Agree
ment, the Partnership shall, at its expense, enforce collection
of any amounts payable with respect to each of the Receivables.
(b) Non-Payment to the Security Agent. In the
event the Partnership shall receive directly from any party to
the Project Documents or from any account debtor or other obligor
under any Receivable any payments under the Project Documents and
the Receivables otherwise than to the Security Agent, the Partner
ship shall receive such payments in a constructive trust for the
benefit of the Security Agent, shall segregate such payments from
other funds of the Partnership, and, shall forthwith transmit and
deliver such payments to the Security Agent in accordance with
the terms of the Security Deposit Agreement.
Section 5.5 Direction to Account Borrowers,
Contracting Parties; etc. (a) The Partnership agrees that the
Security Agent may, at its option, directly notify the account
debtors or obligors with respect to any Receivables and/or under
any Project Documents to make payments with respect thereto
directly to the Security Agent.
(b) The Partnership agrees to be bound by any
collection, compromise, forgiveness, extension or other action
taken by the Security Agent with respect to the Receivables
and/or Project Documents. Without notice to or assent by the
Partnership, the Security Agent may apply any or all amounts then
in, or thereafter deposited with any financial institution in any
checking, savings, deposit or other account of the Partnership in
accordance with the provisions of the Security Deposit Agreement.
The reasonable costs and expenses (including reasonable
attorneys' fees) of collection, whether incurred by the
Partnership or the Security Agent, shall be borne by the
Partnership.
Section 5.6 Instruments. At such time that a
Reimbursement Event of Default or a Lease Event of Default shall
have occurred and be continuing, the Partnership promptly shall
deliver all Instruments to the Security Agent, appropriately en
dorsed to the order of the Security Agent as further security
hereunder.
ARTICLE VI
SPECIAL PROVISIONS CONCERNING CONTRACTS
Section 6.1 Security Interest in Contract Rights. The
Partnership's assignment and grant, pursuant to Section 2.1, to
the Security Agent, for the benefit of GE Capital and the Owner
Trustee, of a security interest in all of its right, title and
interest in and to each and all of the Contracts and the contract
rights thereunder, includes, but is not limited to:
(a) all (i) rights to payment under any Contract and
(ii) payments due and to become due under any Contract, in
each case whether as contractual obligations, damages or
otherwise;
(b) all of its claims, rights, powers, or privileges
and remedies under any Contract; and
(c) all of its rights under any Contract to make deter
minations, to exercise any election (including, but not
limited to, election of remedies) or option or to give or
receive any notice, consent, waiver or approval together
with full power and authority with respect to any Contract
to demand, receive, enforce, collect or provide receipt for
any of the foregoing rights or any property the subject of
any of the Contracts, to enforce or execute any checks, or
other instruments or orders, to file any claims and to take
any action which, in the reasonable opinion of the Security
Agent, may be necessary or advisable in connection with any
of the foregoing (the Contracts, together with all of the
foregoing in this Section 6.1, the "Contract Rights");
provided, however, that until the occurrence and continuance of a
Reimbursement Event of Default or a Lease Event of Default,
notwithstanding anything else herein to the contrary, the
Partnership may, subject to the terms and provisions of the
Participation Agreement and the other Financing Documents, exclu
sively exercise all of the Partnership's rights, powers,
privileges and remedies under the Contracts.
Section 6.2 Further Protection. The Partnership
warrants and forever shall defend its title to the Contract
Rights against the claims and demands of any Person and hereby
grants the Security Agent full power and authority, upon the
occurrence or during the continuance of a Reimbursement Event of
Default or a Lease Event of Default to take all actions as the
Security Agent reasonably deems necessary or advisable to
effectuate the provisions set forth in this sentence.
Section 6.3 Partnership Remains Liable under
Receivables and Contracts. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any
rights to the Security Agent, the Owner Trustee or GE Capital or
any assignment of rights to the Indenture Trustee) the
Partnership shall remain liable under each of the Receivables and
Contracts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise to each
such Receivable or Contract. None of the Security Agent, the
Owner Trustee, GE Capital, the Indenture Trustee, the
Administrative Agent or the Loan Participants shall have any
obligation or liability under any Receivable (or any agreement
giving rise thereto) or Contract by reason of or arising out of
this Agreement or the receipt by the Security Agent, the Owner
Trustee, GE Capital, the Indenture Trustee, the Administrative
Agent or any Loan Participant of any payment relating to such
Receivable or Contract pursuant hereto or pursuant to the
Security Deposit Agreement, nor shall the Security Agent, the
Owner Trustee, GE Capital, the Indenture Trustee, the
Administrative Agent or any Loan Participant be obligated in any
manner to perform any of the obligations of the Partnership under
or pursuant to any Receivable (or any agreement giving rise
thereto) or under or pursuant to any Contract, to make any pay
ment, to make any inquiry as to the nature or the sufficiency of
any payment received by it or as to the sufficiency of any
performance by any party under any Receivable (or any agreement
giving rise thereto) or under any Contract, to present or file
any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned
to it or to which it may be entitled at any time or times.
Section 6.4 Remedies. Upon the occurrence of any
Reimbursement Event of Default or Lease Event of Default and the
continuance thereof, the Security Agent shall have the rights set
forth in Article VII hereof, and in addition may (a) enforce all
remedies, rights, powers and privileges of the Partnership under
any or all of the Contracts, (b) sell any or all of the Contract
Rights at public or private sale upon at least 10 days' prior
written notice and/or (c) substitute itself or any nominee or
trustee in lieu of the Partnership as party to any of the
Contracts and to notify the obligor of any Contract Right (the
Partnership hereby agreeing to deliver any such notice at the
request of the Security Agent) that all payments and performance
under the relevant Contract shall be made or rendered to the
Security Agent or such other Person as the Security Agent may
designate.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF REIMBURSEMENT
EVENT OF DEFAULT OR LEASE EVENT OF DEFAULT
Section 7.1 Remedies; Obtaining the Collateral upon
Default. Upon the occurrence of any Reimbursement Event of
Default or Lease Event of Default and the continuance thereof,
the Security Agent shall be entitled to exercise all the rights
and remedies of a secured party under the Uniform Commercial Code
as in effect in any relevant jurisdiction to enforce this
Security Agreement and the security interests contained herein,
and, in addition, subject to any mandatory requirements of Law
then in effect, the Security Agent may, in addition to its other
rights and remedies hereunder, including without limitation under
Sections 7.2 and 7.6, and also its (and GE Capital's and the
Owner Trustee's) rights under the other Financing Documents, do
any of the following:
(a) personally, or by trustees or attorneys,
immediately take possession of the Collateral or any part
thereof, from the Partnership or any other Person who then has
possession of any part thereof with or without notice or process
of law, and for that purpose may enter upon the Partnership's or
such other Person's premises where any of the Collateral is
located and remove the same and use in connection with such
removal any and all services, supplies, aids and other facilities
of the Partnership;
(b) instruct the obligor or obligors on any
agreement, instrument or other obligation (including, without
limitation, the Receivables and the Contracts) constituting the
Collateral to make any payment required by the terms of such
instrument or agreement directly to the Security Agent; and
(c) take possession of the Collateral or any part
thereof, by directing the Partnership in writing to turn over the
same to the Security Agent at the Site, in which event the
Partnership shall at its own expense
(i) forthwith turn over the same to the
Security Agent at the Site;
(ii) store and keep any Collateral so
turned over to the Security Agent at the Site pending
further action by the Security Agent as provided in Sec
tion 7.2, and
(iii) while the Collateral shall
be so stored and kept, provide such guards and
maintenance services as shall be necessary to
protect the same and to preserve and maintain them
in good condition.
The Partnership's obligation to turn over the Collateral as set
forth above is of the essence of this Security Agreement and,
accordingly, upon application to a court of equity having
jurisdiction, the Security Agent shall be entitled to obtain a
decree requiring specific performance by the Partnership of said
obligation.
Section 7.2 Remedies; Disposition of the Collateral.
Any Collateral repossessed by the Security Agent under or pursuant
to Section 7.1 and any other Collateral, whether or not so
repossessed by the Security Agent, may, to the extent permitted
by any contract terms governing such Collateral, be sold, leased
or otherwise disposed of under one or more contracts or as an
entirety, and without the necessity of gathering at the place of
sale the property to be sold, and in general in such manner, at
such time or times, at such place or places and on such terms
(whether cash or credit, and in the case of credit, without
assumption of future credit risk) as the Security Agent may, in
compliance with applicable requirements of Law, determine to be
commercially reasonable. Any of the Collateral may be sold,
leased or otherwise disposed of, in the condition in which the
same existed when taken by the Security Agent or after any
overhaul or repair which the Security Agent shall determine to be
commercially reasonable. Any such disposition shall be made upon
not less than 10 days' written notice to the Partnership specify
ing the time such disposition is to be made and, if such
disposition shall be a public sale, specifying the place of such
sale. Any such sale may be adjourned by announcement at the time
and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned. To the extent permitted by applicable requirements of
Law, the Security Agent (or the Owner Trustee, GE Capital, the
Indenture Trustee, the Administrative Agent or any Loan
Participant) may bid for and become the buyer of the Collateral
or any item thereof offered for sale at a public auction without
accountability to the Partnership (except to the extent of
surplus money received as provided in Section 7.4).
Section 7.3 Waiver. (a) Except as otherwise
provided in this Security Agreement, THE PARTNERSHIP HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS,
NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE SECURITY
AGENT'S TAKING POSSESSION OR THE SECURITY AGENT'S DISPOSITION OF
ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL
PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES
AND ANY SUCH RIGHT WHICH THE PARTNERSHIP WOULD OTHERWISE HAVE
UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF
ANY STATE, and the Partnership hereby further waives:
(i) all damages occasioned by such
taking of possession except any damages which are
finally judicially determined to have been the
direct result of the Security Agent's gross
negligence or willful misconduct;
(ii) all other requirements as to
the time, place and terms of sale or other
requirements with respect to the enforcement of
the Security Agent's rights hereunder; and
(iii) all rights of redemption,
appraisement, valuation, stay, extension or
moratorium now or hereafter in force under any
applicable law in order to prevent or delay the en
forcement of this Security Agreement or the abso
lute sale of the Collateral or any portion
thereof, and the Partnership, for itself and all
who may claim under it, insofar as it or they may
now or hereafter lawfully do so, hereby waives the
benefit of such laws.
(b) Without limiting the generality of the
foregoing, the Partnership hereby: (i) authorizes the Security
Agent, in its sole discretion and without notice to or demand
upon the Partnership and without otherwise affecting the obliga
tions of the Partnership hereunder from time to time, to take and
hold other collateral granted to it by any other Person (in
addition to the Collateral) for payment of any Lessee
Obligations, or any part thereof, and to exchange, enforce or
release such other collateral or any part thereof, and to accept
and hold any endorsement or guarantee of payment of the Lessee
Obligations or any part thereof, and to release or substitute any
endorser or guarantor or any other person granting security for
or in any way obligated upon any Lessee Obligations, or any part
thereof; and (ii) waives and releases any and all right to
require the Security Agent to collect any of the Lessee
Obligations from any specific item or items of Collateral or from
any other party liable as guarantor or in any other manner in
respect of any of the Lessee Obligations or from any collateral
(other than the Collateral) for any of the Lessee Obligations.
(c) Any sale of, or the grant of options to
purchase, or any other realization upon, any Collateral shall,
provided that it is done in accordance with applicable law and
this Security Agreement, operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the
Partnership therein and thereto, and shall be a perpetual bar
both at law and in equity against the Partnership and against any
and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from,
through and under the Partnership.
Section 7.4 Application of Proceeds; Partnership
Liable for Deficiency. Except as otherwise specified therein,
the proceeds of any Collateral obtained pursuant to Section 5.4
or 7.1 or disposed of pursuant to Section 7.2 shall be applied,
first, to the payment of any expenses incurred by the Security
Agent in connection with the administration of this Security
Agreement, the custody, preservation or sale of, collection from
or other realization from, any of the Collateral, the exercise or
enforcement of any of its rights hereunder or the failure by the
Partnership to perform or observe any of the provisions hereof,
including all reasonable attorney's fees and second, to the
payment of the Lessee Obligations in accordance with the terms of
the Security Deposit Agreement. Any surplus remaining after
payment in full of all of the Lessee Obligations shall be paid
over to the Partnership or to whomever may be entitled to receive
such surplus. The Partnership shall be liable for any deficiency
remaining after any application of funds pursuant hereto.
Section 7.5 Remedies Cumulative; No Waiver. Each and
every right, power and remedy hereby specifically given to the
Security Agent shall be in addition to every other right, power
and remedy specifically given to the Security Agent (or the Owner
Trustee, GE Capital, the Administrative Agent, the Indenture
Trustee or any Holder) under this Security Agreement and the
other Financing Documents, or now or hereafter existing at law or
in equity, or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing
may be exercised from time to time or simultaneously and as often
and in such order as may be deemed expedient by the Security
Agent. All such rights, powers and remedies shall be cumulative,
and the exercise or the partial exercise of one shall not be
deemed a waiver of the right to exercise of any other. No delay
or omission of the Security Agent in the exercise of any of its
rights, remedies, powers and privileges hereunder or partial or
single exercise thereof, and no renewal or extension of any of
the Lessee Obligations, shall impair any such right, remedy,
power or privilege or shall constitute a waiver thereof.
Section 7.6 Discontinuance of Proceedings. In case
the Security Agent shall have instituted any proceeding to en
force any right, power or remedy under this Security Agreement by
foreclosure, sale, entry or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason or shall have
been determined adversely to the Security Agent, then, in every
such case, the Partnership and the Security Agent shall be
restored to their former positions and rights hereunder with
respect to the Collateral, subject to the security interest
created under this Security Agreement, and all rights, remedies
and powers of the Security Agent shall continue as if no such
proceeding had been instituted.
ARTICLE VIII
INDEMNITY
Section 8.1 Indemnity. (a) The Partnership agrees to
indemnify, reimburse and hold the Security Agent, GE Capital, the
Indenture Trustee, the Administrative Agent, the Loan
Participants and the Owner Trustee and their respective
successors, assigns, officers, directors, employees, and agents
(each individually, an "Indemnitee," and collectively,
"Indemnitees") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs and expenses
(including reasonable attorneys' fees and disbursements) (such
expenses, collectively, the "expenses") of whatsoever kind and
nature imposed on, asserted against or incurred by any of the
Indemnitees in any way relating to or arising out of (i) this
Security Agreement, any other Transaction Document, or the
documents executed in connection herewith and therewith or
connected with the administration of the transactions
contemplated hereby and thereby, or the enforcement of any of the
terms hereof or thereof, or the preservation of any rights
hereunder or thereunder, (ii) the ownership, purchase, delivery,
control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of, the
Collateral (including, without limitation, latent or other
defects, whether or not discoverable, and any claim for patent or
trademark infringement), (iii) the violation of any requirements
of Law (including any Environmental Law) of any Governmental
Authority applicable to the Partnership or the Project, (iv) any
tort (including, without limitation, claims arising or imposed
under the doctrine of strict liability, or for or on account of
injury to or the death of any Person (including any Indemnitee),
or property damage), or (v) any contract claim, excluding (x)
those finally judicially determined to have arisen solely from
the gross negligence or willful misconduct of any Indemnitee or
(y) unless specifically provided for elsewhere in this agreement,
those arising out of the actions of any Indemnitee while in
possession or control of the Collateral.
(b) Without limiting the application of Section
8.1(a), the Partnership agrees to pay, or reimburse the Security
Agent, the Owner Trustee, the Indenture Trustee, the
Administrative Agent, any Loan Participant and GE Capital for any
and all reasonable fees, costs and expenses of whatever kind or
nature incurred in connection with the preservation, protection
or validation of the Security Agent's Liens on, and security
interest in, the Collateral, including, without limitation, all
fees and taxes in connection with the recording or filing of
instruments and documents in public offices, payment or discharge
of any taxes or Liens upon or in respect of the Collateral,
premiums for insurance with respect to the Collateral and all
other fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Security Agent's
interest therein, whether through judicial proceedings or
otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section
8.1(a) or (b), the Partnership agrees to pay, indemnify and hold
each Indemnitee harmless from and against any losses, costs,
damages and expenses which such Indemnitee may suffer, expend or
incur in consequence of or growing out of any failure of the
Partnership to comply with its obligations under this Security
Agreement or any other Transaction Document, or any misrepresenta
tion by Partnership in this Security Agreement or any other
Transaction Document, or in any statement or writing contemplated
by or made or delivered pursuant to or in connection with this
Security Agreement or any other Transaction Document.
(d) If and to the extent that the obligations of
the Partnership under this Section 8.1 are unenforceable for any
reason, the Partnership hereby agrees to make the maximum con
tribution to the payment and satisfaction of such obligations
which is permissible under applicable requirements of Law.
Section 8.2 Lessee Obligations Secured by Collateral.
Any amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement, and any amounts paid by the
Security Agent in preservation of any of its rights or interest
in the Collateral, together with interest on such amounts from
the date paid until reimbursement in full at a rate per annum
equal at all times to the Overdue Rate, shall constitute Lessee
Obligations secured by the Collateral.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices and other
communications to any party hereunder shall be in writing
(including telecopy or similar teletransmission or writing) and
shall be given to such party at its address or telecopy number
set forth on Annex I hereto or such other address or telecopy
number as such party may hereafter specify by written notice to
the other party. Each such notice or other communication shall
be effective (i) if given by telecopy, when such telecopy is
transmitted by confirmed telecopier to the telecopy number
specified in this Section, (ii) if given by mail, 5 days after
such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any
other means (including, without limitation, by air courier), when
delivered at the address specified in this Section.
Section 9.2 Amendment. None of the terms and
conditions of this Security Agreement may be amended, changed,
waived, modified or varied in any manner whatsoever except in
accordance with the provisions of subsection 13.1 of the
Participation Agreement and with the prior written consent of
each of the parties hereto and, unless the Lien of the Indenture
shall have been discharged, the Indenture Trustee.
Section 9.3 Successors and Assigns. This Security
Agreement shall be binding upon the Partnership and its
successors and assigns and shall inure to the benefit of the
Security Agent, GE Capital, the Owner Trustee and their
respective successors and assigns (including the Indenture
Trustee); provided, however, that the Partnership may not assign
or transfer its rights or obligations under this Security
Agreement without the prior written consent of the Owner Trustee
(and to the extent required by the Power Purchase Agreement, the
Power Purchaser), and so long as the Lien of the Indenture shall
not have been discharged, the Indenture Trustee.
Section 9.4 Survival. (a) All agreements,
statements, representations and warranties made by the
Partnership herein or in any certificate or other instrument
delivered by the Partnership or on its behalf under this Security
Agreement shall be considered to have been relied upon by the
Security Agent and shall survive the execution and delivery of
this Security Agreement and the other Transaction Documents
regardless of any investigation made by the Security Agent, or on
its behalf, until the Lessee Obligations shall have been paid in
full.
(b) The indemnity obligations of the Partnership
contained in Article VIII shall continue in full force and effect
notwithstanding the full payment of the Lessee Obligations and
notwithstanding the discharge thereof.
Section 9.5 Headings Descriptive. The headings of the
several sections of this Security Agreement are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
Section 9.6 Severability. Any provision of this
Security Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
Section 9.7 Partnership's Duties. Anything contained
herein to the contrary notwithstanding, the Partnership shall
remain liable to perform all of its obligations under or with
respect to the Collateral, and neither shall the Security Agent
have any obligations or liabilities under or with respect to any
Collateral by reason of or arising out of this Security
Agreement, nor shall the Security Agent be required or obligated
in any manner to perform or fulfill any of the obligations of the
Partnership under or with respect to any Collateral.
Section 9.8 Termination; Release. When all Lessee
Obligations have been indefeasibly paid in full (as determined by
the Owner Participant and the Indenture Trustee), this Security
Agreement shall terminate (except as provided in Section 9.4),
and the Security Agent, at the request and expense of the
Partnership, will promptly execute and deliver to the Partnership
the proper instruments (including Uniform Commercial Code
termination statements on form UCC-3) acknowledging the
termination of this Security Agreement, and will duly assign,
transfer and deliver to the Partnership (without recourse and
without any representation or warranty of any kind) such of the
Collateral as may be in the possession of the Security Agent and
has not theretofore been sold or otherwise applied or released
pursuant to this Security Agreement.
Section 9.9 Reinstatement. This Security Agreement
shall continue to be effective or be reinstated, as the case may
be, if at any time any amount received by the Security Agent, the
Owner Trustee or GE Capital in respect of the Lessee Obligations
is rescinded or must otherwise be restored or returned by the
Security Agent, the Owner Trustee, the Indenture Trustee, the
Administrative Agent, any Holder or GE Capital upon the
insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Partnership or upon the appointment of any
intervenor or conservator of, or trustee or similar official for,
the Partnership or any substantial part of its assets, or upon
the entry of an order by a bankruptcy court avoiding payment of
such amount, or otherwise, all as though such payments had not
been made.
Section 9.10 Counterparts. This Security Agreement may
be executed in any number of counterparts, each of which, when so
executed and delivered, shall be an original, but all of which
together shall constitute one and the same instrument.
Section 9.11 GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND
EXCEPT TO THE EXTENT THE VALIDITY OR PERFECTION OF THE SECURITY
INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, ARE GOVERNED BY THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS SECURITY AGREEMENT AND ANY ACTION FOR ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, THE PARTNERSHIP HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-
EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND APPELLATE
COURTS FROM ANY THEREOF. THE PARTNERSHIP IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PARTNERSHIP
AT ITS ADDRESS REFERRED TO IN SECTION 9.1. THE PARTNERSHIP
HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN
ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER JURISDICTION.
(c) EACH OF THE PARTNERSHIP AND THE SECURITY
AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS SECURITY AGREEMENT OR ANY MATTER ARISING
HEREUNDER.
Section 9.12 Certain Rights of Power Purchaser.
Nothing in this Security Agreement shall be deemed to limit the
provisions of the Consent of the Power Purchaser, which
provisions are solely for the benefit of the Power Purchaser and
not the Partnership. Without limiting the scope of the
foregoing, the Security Agent agrees, for the exclusive benefit
of the Power Purchaser and not the Partnership, that the exercise
of remedies or any similar action under this Security Agreement
is subject to, and shall be conducted in a manner consistent
with, the Power Purchaser's rights under (i) the Consent of the
Power Purchaser and (ii) the Power Purchase Agreement and the
Transfer Agreement (to the extent such rights under the Power
Purchase Agreement and the Transfer Agreement are not explicitly
waived by the Power Purchaser in accordance with the terms of the
Consent of the Power Purchaser).
Section 9.14 Assignment to Indenture Trustee. In
order to secure the indebtedness evidenced by the Loan
Certificates certain other obligations as provided in the
Indenture, the Indenture provides, among other things, for the
assignment by the Owner Trustee to the Indenture Trustee of all
of its right, title and interest in, to and under this Agreement,
to the extent set forth in the Indenture, and for the creation of
a Lien on and security interest in the Lessor's Estate in favor
of the Indenture Trustee, and in furtherance thereof, the
Partnership and the Owner Trustee have entered into the Security
Deposit Agreement with the Security Agent. The Partnership
hereby acknowledges and consents to such assignment and such
security interest and hereby acknowledges that to the extent set
forth in the Indenture, the Indenture Trustee shall have the
right in its own name (in certain cases together with the Owner
Trustee and in other cases to the exclusion of the Owner Trustee,
all as set forth in Section 3.10 of the Indenture) to direct the
Security Agent to take or refrain from taking action under this
Agreement, including the right (i) of the Security Agent to
exercise any election or option, and to make any decision or
determination, and to give any notice, consent, waiver or
approval under this Agreement or in respect thereof, (ii) to
exercise any and all of the rights, powers and remedies of the
Security Agent hereunder and (iii) to receive all moneys payable
to the Security Agent. The Partnership will make all payments
hereunder in accordance with the provisions of Security Deposit
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Security Agreement to be executed and delivered by their duly
authorized officers as of the date first above written.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its sole general partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
FLEET NATIONAL BANK, as Security Agent
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
EXHIBIT 10.32
Exhibit AA to
Participation Agreement
AMENDED AND RESTATED TRUST AGREEMENT
dated as of December 18, 1996
between
GENERAL ELECTRIC CAPITAL CORPORATION,
as Owner Participant
and
FLEET NATIONAL BANK,
as Owner Trustee
230 MW Natural Gas-Fired Qualifying
Cogeneration Facility located in Brandywine,
Maryland
AMENDED AND RESTATED TRUST AGREEMENT
This AMENDED AND RESTATED TRUST AGREEMENT, dated as of
December 18, 1996 between GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation (the "Owner Participant" or "GE Capital")
and FLEET NATIONAL BANK (formerly known as Shawmut Bank
Connecticut, National Association), a national banking
association (the "Owner Trustee").
W I T N E S S E T H :
WHEREAS, the Owner Participant formed the Trust created
by the Trust Agreement dated as of March 30, 1995 (the "Original
Trust Agreement") for the purpose of, among other things as of
the date hereof, (a) leasing the Site from the Partnership
pursuant to the Site Lease and subleasing the Site back to the
Partnership pursuant to the Site Sublease and (b) purchasing the
Facility from the Partnership and leasing the Facility back to
the Partnership pursuant to the Facility Lease, and otherwise
carrying out certain transactions contemplated by the Transaction
Documents;
WHEREAS, the Owner Participant desires to (a) finance a
portion of the purchase price of the Facility by causing the
issuance and sale of Loan Certificates by the Owner Trustee to
the Holders pursuant to a Trust Indenture and Security dated as
of the date hereof (the "Indenture") by the Owner Trustee in
favor of the Indenture Trustee; and (b) secure such Loan
Certificates pursuant to the Indenture;
WHEREAS, in connection with the transactions
contemplated by the foregoing, (a) the Owner Participant, the
Owner Trustee, the Partnership, the General Partner, the
Indenture Trustee, the Administrative Agent, the Security Agent
and the Loan Participants are entering into the Participation
Agreement, dated as of the date hereof (the "Participation
Agreement"), to set forth their respective rights and obligations
with respect thereto and (b) the Owner Participant and the Owner
Trustee are entering into this Amended and Restated Trust
Agreement to amend and restate the Original Trust Agreement; and
WHEREAS, Fleet National Bank is willing to continue to
act as trustee hereunder.
NOW THEREFORE, in consideration of the mutual covenants
and agreements herein contained and for such other good and
valuable consideration, receipt of which is hereby acknowledged,
the parties hereto hereby agree to amend and restate the Original
Trust Agreement as follows:
ARTICLE I
Definitions
SECTION 1.1. Certain Definitions. For all purposes of
this Agreement, the following terms shall have the following
meanings:
"Agreement" shall mean this Trust Agreement, as the
same may be supplemented, amended or otherwise modified from
time to time in accordance with the terms of this Agreement.
"Expenses" shall have the meaning set forth in
Section 7.1 of this Agreement.
"Facility Lease" or "Lease" shall mean the Facility
Lease, dated as of the Lease Closing Date, to be entered
into between the Lessee and the Owner Trustee, as the same
may be supplemented, amended or modified from time to time
in accordance with the terms thereof and of the other
Transaction Documents.
"Lessee" shall mean Panda-Brandywine, L.P. and its
successors and, to the extent permitted by the Lease, its
assigns thereunder.
"Owner Participant" shall mean General Electric Capital
Corporation, a New York corporation, and each other person
or persons that may from time to time become a party to this
Agreement pursuant to the terms of Section 11.9 hereof, and
their respective successors and assigns.
"Owner Trustee" shall mean Fleet National Bank, as
trustee hereunder, and any successor trustee hereunder.
"Trust Estate" shall have the meaning therefor set
forth in Section 2.1 of this Agreement.
SECTION 1.2. Terms Defined Elsewhere. All capitalized
terms used but not defined in this Agreement shall have the
meanings specified in Annex A to the Participation Agreement.
ARTICLE II
Authority to Execute and Perform Various Documents;
Declaration of Trust by Owner Trustee
SECTION 2.1. Authority To Execute and Perform Various
Documents. The Owner Participant hereby authorizes and directs
the Owner Trustee, and the Owner Trustee hereby agrees for the
benefit of the Owner Participant: (a) to execute and deliver the
Facility Lease, the Site Lease, the Site Sublease, the Security
Deposit Agreement, the Participation Agreement, the Indenture,
the Interest Hedging Agreement, the Bill of Sale and the Present
Assignment, (b) to issue and deliver the Loan Certificates to the
Holders pursuant to the Indenture and (c) subject to the terms
and conditions of this Agreement, to execute and deliver all such
further instruments, certificates and documents, and take such
other actions, as may be contemplated by, and to exercise all of
the rights and perform all of the duties and obligations to be
exercised or performed by the Owner Trustee under the Transaction
Documents and the other instruments as set forth therein. The
Owner Trustee further agrees to take such other actions and to
execute, deliver and perform such other agreements, instruments,
documents and certificates as the Owner Participant may from time
to time authorize and direct to give effect to the foregoing.
All of the estate, right, title and interest of the Owner Trustee
in and to the Facility, the Transaction Documents and other
property of the Owner Trustee held pursuant to this Agreement,
including, without limitation, all Basic Rent, Supplemental Rent,
all other sums of any nature whatsoever to be paid or received by
the Owner Trustee under the Facility Lease, the Site Lease, the
Site Sublease or under any other Transaction Document, all of the
right, title and interest of the Owner Trustee under the
Collateral Security Documents and all of the property rights and
interests granted to the Owner Trustee pursuant to the Site
Lease, are hereinafter referred to as the "Trust Estate."
SECTION 2.2. Declaration of Trust by Owner Trustee.
The Owner Trustee hereby declares that it will hold all its
estate, right, title and interest in and to the properties which
are part of the Trust Estate upon the trusts set forth herein and
for the use and benefit of the Owner Participant subject,
however, to the lien and security interest in the Trust Estate
granted to the Indenture Trustee for the benefit of the Holders
as provided in the Indenture so long as the Lien under the
Indenture has not been discharged.
ARTICLE III
Payments
SECTION 3.1. Payments from Trust Estate Only. All
payments to be made by the Owner Trustee under this Agreement
shall be made solely from the income of and the proceeds from the
Trust Estate and only to the extent that the Owner Trustee shall
have received income or proceeds from the Trust Estate, except as
specifically provided in Section 6.1 hereof. The Owner
Participant agrees that it shall look solely to the income of and
proceeds from the Trust Estate to the extent available for
distribution to the Owner Participant as herein provided and
that, except as specifically provided herein, the Owner Trustee
shall not be liable in its individual capacity to the Owner
Participant for any amounts payable under this Agreement or
subject to any liability in its individual capacity under this
Agreement.
SECTION 3.2. Method of Payment. In the case of
distributions that are to be made by the Owner Trustee to the
Owner Participant pursuant to this Agreement, such distributions
shall be paid by the Owner Trustee to the Owner Participant in
accordance with the terms of the Security Deposit Agreement, or
by otherwise crediting the amount to be distributed to the Owner
Participant to an account maintained by the Owner Participant or
such nominee with the Owner Trustee, in immediately available
funds, or by transferring such amount in immediately available
funds to a banking institution with bank wire transfer facilities
for the account of the Owner Participant or such nominee, as
instructed from time to time by the Owner Participant. The Owner
Trustee shall make distributions to the Indenture Trustee and the
Interest Hedging Counterparty by paying the amount to be
distributed to the Indenture Trustee in accordance with the
Indenture and the Security Deposit Agreement.
ARTICLE IV
Distributions
SECTION 4.1. Distribution of Payments. The Owner
Participant and the Owner Trustee acknowledge that the Facility
Lease is security for the Loan Certificates pursuant to the
Indenture and that, so long as the Lien of the Indenture has not
been discharged, all moneys payable by the Lessee to the Owner
Trustee thereunder (other than Excepted Payments) are subject to
priority application in favor of the Indenture Trustee, pursuant
to the terms of the Indenture and the Security Deposit Agreement.
If, pursuant to the provisions of the Security Deposit Agreement
and the Indenture, the Owner Trustee receives any payments and
amounts with respect to the Trust Estate, such amounts shall be
distributed forthwith upon receipt in the following order of
priority: first, so much of such payment or amount as shall be
required to reimburse the Owner Trustee for any fees or Expenses
not reimbursed by the Owner Participant or the Lessee as to which
the Owner Trustee is entitled to be reimbursed hereunder shall be
retained by the Owner Trustee; and, second, the balance, if any,
of such payment or amount remaining thereafter shall be
distributed to the Owner Participant, provided that all amounts
constituting Excepted Payments shall be paid directly to the
Person entitled thereto. In the event that any amounts are
received by the Owner Trustee directly from the Lessee (other
than Excepted Payments) while the Indenture is in force, the
Owner Trustee shall forthwith upon receipt transfer such amounts
to the Security Agent for application in accordance with the
terms of the Security Deposit Agreement.
SECTION 4.2. Distribution of Trust Estate. Whenever
the terms of this Agreement shall require the Owner Trustee to
distribute or transfer the entire Trust Estate to any Person, the
Owner Trustee shall be entitled to retain such moneys as shall
then be held by the Owner Trustee as a part of the Trust Estate
and as shall be required to reimburse the Owner Trustee for any
fees or Expenses not reimbursed by the Owner Participant or the
Lessee as to which the Owner Trustee is entitled to be paid or
reimbursed hereunder.
ARTICLE V
Duties of the Owner Trustee
SECTION 5.1. Notice of Event of Default. In the event
the Owner Trustee shall have knowledge of a default under any
Transaction Document or an Event of Loss or an Event of
Regulation, the Owner Trustee shall give prompt (but in no case
later than two Business Days) telex, telefax, telephonic or
telegraphic notice of such occurrence to the Owner Participant
followed by prompt written confirmation thereof to the Owner
Participant and the Indenture Trustee. Subject to the terms of
Section 5.3 hereof, the Owner Trustee shall take or refrain from
taking such action with respect to such default, not inconsistent
with the provisions of the Transaction Documents, as the Owner
Trustee shall be instructed in writing by the Owner Participant.
If the Owner Trustee shall not have received such written
instructions from the Owner Participant within 20 days after
mailing notice of such default to the Owner Participant, the
Owner Trustee may, subject to instructions received pursuant to
the preceding sentence, take or refrain from taking such action,
but shall be under no duty to, and shall have no liability
(except in the event of its own willful misconduct or gross
negligence) for its failure or refusal to, take or refrain from
taking any action with respect to such default, not inconsistent
with the provisions of the Transaction Documents, as it shall
deem advisable and in the best interests of the Owner
Participant. For all purposes of this Agreement, in the absence
of actual knowledge of an officer in the Corporate Trust
Administration Department of the Owner Trustee, the Owner Trustee
shall not be deemed to have knowledge of a default unless it
receives written notification thereof given by or on behalf of
the Lessee, the Owner Participant or the Indenture Trustee. The
Owner Trustee shall have no duty to inquire as to whether a
default has occurred.
SECTION 5.2. Action upon Instructions. Subject to the
terms of Sections 5.1 and 5.3 hereof, upon the written
instructions of the Owner Participant, the Owner Trustee shall
take or refrain from taking such action or actions not
inconsistent with the terms of the Facility Lease and the other
Transaction Documents as may be specified in such instructions.
SECTION 5.3. Indemnification. The Owner Trustee shall
not be required to take or refrain from taking any action under
this Agreement, the Facility Lease or the other Transaction
Documents (other than the actions specified in the first sentence
of Section 5.1 hereof and the last sentence of Section 5.4
hereof) unless the Owner Trustee shall have been indemnified by
the Owner Participant or any other Person, in manner and form
satisfactory to the Owner Trustee, against any liability, cost or
expense (including reasonable attorneys' fees) that may be
incurred in connection therewith, other than any liability, cost
or expense resulting from the willful misconduct, bad faith or
gross negligence of the Owner Trustee. If the Owner Participant
shall have directed the Owner Trustee to take or refrain from
taking any action under this Agreement, the Facility Lease or the
other Transaction Documents, the Owner Participant agrees to
furnish such indemnity as shall be satisfactory to the Owner
Trustee (provided that the written undertaking of Owner
Participant shall be satisfactory under this sentence) and in
addition pay the reasonable compensation of the Owner Trustee for
services performed or to be performed pursuant to such directive.
The Owner Trustee shall not be required to take any action under
Section 5.1 or 5.2, nor shall any other provision of this
Agreement be deemed to impose a duty on the Owner Trustee to take
any action, if the Owner Trustee shall have been advised by
counsel that such action is contrary to the terms hereof or of
the Facility Lease or any of the other Transaction Documents to
which the Owner Trustee is a party or is otherwise contrary to
law.
SECTION 5.4. No Duties Except as Specified in Trust
Agreement or Instructions. The Owner Trustee shall not have any
duty or obligation to manage, control, use, operate, sell, lease,
dispose of or otherwise deal with the Facility, the Site or any
interest therein or any other part of the Trust Estate, or
otherwise to take or refrain from taking any action under, or in
connection with, any document contemplated hereby to which the
Owner Trustee is a party, except as expressly provided by the
terms of this Agreement or in written instructions from the Owner
Participant received pursuant to Section 5.1 or 5.2 hereof, and
no implied duties or obligations shall be read into this
Agreement against the Owner Trustee. The Owner Trustee
nevertheless shall, in its individual capacity and at its own
cost and expense, and without any right of indemnity in respect
of any such cost or expense under Section 7.1 of this Agreement,
promptly take all actions as may be necessary to discharge any
Liens on any part of the Trust Estate arising by, through or
under the Owner Trustee in its individual capacity, not related
or connected to its ownership interest in the Facility, its
status as lessor under the Facility Lease, the administration of
the Trust Estate or any other transaction contemplated by the
Facility Lease or any of the Transaction documents, and shall
otherwise comply with the terms of the Facility Lease and the
other Lease Documents.
SECTION 5.5. No Action Except Under Specified
Documents or Instructions. The Owner Trustee shall not manage,
control, use, operate, sell, lease, dispose of or otherwise deal
with the Facility, the Site or any other part of the Trust Estate
except (i) in accordance with the terms of this Agreement or any
other Transaction Document to which the Owner Trustee is a party,
(ii) in accordance with the powers granted to, or the authority
conferred upon, the Owner Trustee pursuant to this Agreement or
(iii) in accordance with the written instructions from the Owner
Participant pursuant to Section 5.1 or 5.2 hereof.
SECTION 5.6. Absence of Duties. Except in accordance
with written instructions furnished pursuant to Section 5.1 or
5.2 and except as provided in, and without limiting the
generality of, Sections 5.1, 5.4 and 5.5, the Owner Trustee shall
have no duty (a) to record or file any of the Transaction
Documents, or any notice or financing statement with respect
thereto, to maintain any such recording or filing, or to rerecord
or refile any Transaction Document, (b) to obtain insurance on
the Facility or to effect or maintain any such insurance, whether
or not the Lessee shall be in default with respect thereto, other
than to forward to the Owner Participant any notices, policies,
certificates or binders furnished to the Owner Trustee by the
Lessee or its insurance brokers to the extent that any of the
same shall not state on its face or otherwise that it has been
previously furnished directly to Owner Participant, (c) except as
provided in the last sentence of Section 5.4 hereof, to pay or
discharge any tax, assessment or other governmental charge or any
Lien owing with respect to, or assessed or levied against, any
part of the Trust Estate, (d) to confirm or verify any financial
statements of the Lessee or (e) to inspect the Facility at any
time or ascertain or inquire as to the performance or observance
of any of the covenants of the Lessee in the Transaction
Documents.
ARTICLE VI
The Owner Trustee
SECTION 6.1. Acceptance of Trusts and Duties. (a)
The Owner Trustee accepts the trusts hereby created and agrees to
perform the same but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the Trust Estate in
accordance with the terms of the Security Deposit Agreement and
this Agreement. The Owner Trustee shall not be answerable or
accountable under any circumstances in its individual capacity,
except (i) for its own willful misconduct, bad faith or gross
negligence or its failure to use ordinary care to disburse funds,
(ii) for liabilities that may result from the inaccuracy of any
representation or warranty of the Owner Trustee contained in the
Transaction Documents or from the failure by the Owner Trustee to
perform its obligations under the last sentence of Section 5.4
hereof, or (iii) for taxes, fees or other charges based on or
measured by any fees, commissions or compensation received by the
Owner Trustee for acting as trustee in connection with any of the
transactions contemplated by the Facility Lease or the other
Transaction Documents.
(b) Whether or not expressly so provided, every
provision of this Agreement relating to the conduct or affecting
the liability of or affording protection to the Owner Trustee
shall be subject to the provisions of Section 6.1(a) hereof.
SECTION 6.2. Furnishing of Documents. The Owner
Trustee shall furnish to the Owner Participant, promptly upon
receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other
instruments furnished to the Owner Trustee under this Agreement
or the other Transaction Documents (including, without
limitation, the Power Purchase Agreement) to the extent that any
of the same shall not state on its face or otherwise that it has
been previously furnished directly to the Owner Participant or
the Owner Trustee shall have determined that the same has already
been furnished to the Owner Participant.
SECTION 6.3. No Representations or Warranties as
to the Facility or the Transaction Documents. THE OWNER TRUSTEE
DOES NOT MAKE AND SHALL NOT BE DEEMED TO HAVE MADE (i) ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,
VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY, COMPLIANCE
WITH SPECIFICATIONS, FREEDOM FROM PATENT OR TRADEMARK
INFRINGEMENT, ABSENCE OF LATENT DEFECTS OR FITNESS FOR USE OF THE
FACILITY OR ANY OTHER REPRESENTATION OR WARRANTY OF ANY NATURE
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE FACILITY,
except that the Owner Trustee hereby represents and warrants to
the Owner Participant that the Facility shall be free of Liens
that result from acts of or claims against the Owner Trustee, in
its individual capacity, not related or connected to its
ownership interest in the Facility, its status as lessor under
the Facility Lease, the administration of the Trust Estate or any
other transaction contemplated by the Facility Lease or any of
the Transaction Documents, or (ii) any representation or warranty
as to the validity, legality or enforceability of the Facility
Lease or any of the other Transaction Documents or as to the
correctness of any statement contained therein, except to the
extent that any such statement is expressly made in this
Agreement or is expressly made in any other Transaction Document
as a representation by the Owner Trustee, in its individual
capacity and except that the Owner Trustee, in its individual
capacity, hereby represents and warrants to the Owner Participant
that the execution, delivery and performance of this Agreement,
the Facility Lease and each other Transaction Document to which
it is a party have been duly authorized by all necessary
corporate or other action on its part required to be taken and do
not contravene the Owner Trustee's charter or by-laws or any law
or contractual restriction binding on or affecting the Owner
Trustee, and such agreements have been or will be executed by
duly authorized officers of the Owner Trustee.
SECTION 6.4. No Segregation of Moneys; No Interest.
Except as otherwise provided herein, moneys received by the Owner
Trustee hereunder need not be segregated in any manner except to
the extent required by law and may be deposited under such
general conditions as may be prescribed by law, and the Owner
Trustee shall not be liable for any interest thereon except as
may be agreed to by it.
SECTION 6.5. Reliance; Advice of Counsel. The Owner
Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent,
order, certificate, report, opinion, bond or other document or
paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may
accept a certified copy of a resolution of the Board of Directors
or other governing body of any corporate party as conclusive
evidence that such resolution has been duly adopted by such body
and that the same is in full force and effect. As to any fact or
matter the manner of ascertainment of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof
rely on a certificate, signed by the president or any vice
president and by the treasurer or an assistant treasurer or the
secretary or an assistant secretary of the relevant party, as to
such fact or matter, and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted
to be taken by it in good faith in reliance thereon. In the
administration of the trusts hereunder, the Owner Trustee may
execute any of the trusts or powers hereof and perform its powers
and duties hereunder directly or through agents or attorneys and
may consult with counsel, accountants and other skilled persons
of generally accepted competence to be selected and retained by
it (other than persons regularly employed by it), and the Owner
Trustee shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the advice or
opinion of any such counsel, accountants or other skilled persons
appointed by it hereunder with due care and not contrary to this
Agreement.
SECTION 6.6. Not Acting in Individual Capacity.
Except as provided in this Article VI and as otherwise expressly
provided in this Agreement and elsewhere in the Transaction
Documents, in accepting the trusts hereby created, the Owner
Trustee acts solely as trustee hereunder and not in its
individual capacity and all Persons (other than the Owner
Participant to the extent provided in this Agreement) having any
claim against the Owner Trustee by reason of the transactions
contemplated hereby shall look only to the Trust Estate for
payment or satisfaction thereof, except as specifically provided
in this Article VI or except to the extent the Owner Trustee
shall otherwise expressly agree in this Agreement or in any other
Transaction Document.
SECTION 6.7. Interpretation of Trust Agreement. If
the Owner Trustee is uncertain as to the application of any
provision of this Agreement, or such provision is ambiguous as to
its application or is, or appears to be, in conflict with any
other applicable provision hereof, or if this Agreement permits
any determination by the Owner Trustee or is silent or incomplete
as to the course of action which the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee
may seek instructions from the Owner Participant and shall not be
liable to any Person to the extent that it acts in good faith in
accordance with the instructions of the Owner Participant.
SECTION 6.8. Exculpatory Provisions. Any and all
exculpatory provisions, immunities and indemnities in favor of
the Owner Trustee under this Agreement shall inure to the benefit
of the Owner Trustee as a trustee and in its individual capacity
under or as a party to any Transaction Document or under any
other agreement referred to herein.
SECTION 6.9. Fees; Compensation. Except as provided
in Section 5.3 or 7.1 hereof, the Owner Trustee agrees that it
shall have no right against the Owner Participant for any fee as
compensation for its services hereunder.
ARTICLE VII
Indemnification of Owner Trustee by Owner Participant
SECTION 7.1. Owner Participant to Indemnify Owner
Trustee. The Owner Participant agrees to pay (or reimburse the
Owner Trustee, in its individual capacity, for) all reasonable
fees (including its ongoing administrative fees) and expenses of
the Owner Trustee, in its individual capacity, hereunder,
including, without limitation, the reasonable compensation,
expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee, in its individual
capacity, may employ in connection with the exercise and
performance of its rights and duties hereunder, under the
Facility Lease or any other Transaction Document. The Owner
Participant agrees to assume liability for, and to indemnify the
Owner Trustee, in its individual capacity, against and from, any
and all liabilities, obligations, losses, damages, taxes, claims,
actions, suits, costs, expenses and disbursements (including
legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may be imposed on, incurred by
or asserted at any time against the Owner Trustee, in its
individual capacity, (whether or not indemnified against by other
parties) in any way relating to or arising out of the
administration of the Trust Estate or the action or inaction of
the Owner Trustee, in its individual capacity, hereunder, under
the Facility Lease or any other Transaction Document; provided,
that the Owner Participant shall not be required to indemnify the
Owner Trustee, in its individual capacity, for Expenses arising
or resulting from any of the matters described in the last
sentence of Section 6.1(a) hereof; and provided further that the
Owner Participant shall be required to indemnify the Owner
Trustee only if and to the extent that the Owner Trustee, in its
individual capacity, does not receive payment from the Lessee
within a reasonable period of time after demand on the Lessee
therefor. The indemnities contained in this Section 7.1 shall
survive the termination of this Agreement.
ARTICLE VIII
Termination of Trust Agreement
SECTION 8.1. Termination of Trust Agreement. This
Agreement and the trusts created hereby shall terminate and the
Trust Estate shall, subject to Article IV hereof, be distributed
to the Owner Participant, and this Agreement shall be of no
further force or effect, upon the earlier of (i) the sale or
other final disposition by the Owner Trustee of all property
constituting part of the Trust Estate and the final distribution
by the Owner Trustee of all moneys or other property or proceeds
constituting part of the Trust Estate in accordance with the
terms of Article IV hereof, if at such time the Lessee shall have
fully complied with all the terms of the Facility Lease, and (ii)
21 years less one day after the death of the last survivor of all
of the past and present members of the "Rolling Stones", the
world's greatest rock-and-roll band, and their legitimate
descendants, in each case living on the date of this Agreement,
provided that if this Trust Agreement and the trusts created
hereby shall be or become valid under applicable law for a period
subsequent to the 21st anniversary of the death of such last
survivor, or if legislation shall become effective providing for
the validity thereof for a period in gross exceeding the period
hereinabove stated, then this Agreement and the trusts created
hereby shall not terminate as aforesaid but shall extend to and
continue in effect, but only if such nontermination and extension
shall then be valid under applicable law, until such time as the
same shall, under applicable law, cease to be valid.
SECTION 8.2. Termination at Option of Owner
Participant. The provisions of Section 8.1 hereof
notwithstanding, this Agreement and the trusts created hereby
shall terminate and the Trust Estate shall be distributed to the
Owner Participant, and this Agreement shall be of no further
force and effect, upon the election of the Owner Participant by
notice to the Owner Trustee if such notice shall be accompanied
by the written agreement of the Owner Participant assuming all
the obligations of the Owner Trustee under or contemplated by the
Facility Lease and each other Transaction Document to which the
Owner Trustee is a party, and all other obligations of the Owner
Trustee incurred by it as trustee hereunder. Such written
agreement shall be satisfactory in form and substance to the
Owner Trustee and shall release the Owner Trustee from all
further obligations of the Owner Trustee hereunder and under the
agreements and other instruments referred to in this Section.
SECTION 8.3. Action by Owner Trustee on
Termination. Upon termination pursuant to Section 8.1 or 8.2
hereof, the Owner Trustee shall, subject to the last sentence of
Section 6.1(a) hereof, take such action as may be requested by
the Owner Participant to transfer the Trust Estate to the Owner
Participant including, without limitation, execution of
instruments of transfer or assignment with respect to any
Transaction Documents to which the Owner Trustee is a party.
ARTICLE IX
Successor Owner Trustees, Co-Owner Trustees
and Separate Owner Trustees
SECTION 9.1. Resignation of Owner Trustee;
Appointment of Successor. (a) The Owner Trustee may resign at
any time without cause by giving at least 60 days' prior written
notice to the Owner Participant, the Indenture Trustee and the
Lessee, such resignation to be effective upon the acceptance
pursuant to Section 9.1(b) of the trusteeship by a successor
Owner Trustee. In addition, the Owner Participant may at any
time remove the Owner Trustee without cause by an instrument in
writing delivered to the Owner Trustee and the Lessee, such
removal to be effective upon the acceptance of appointment by a
successor Owner Trustee under Section 9.1(b) hereof. In case of
the resignation or removal of the Owner Trustee the Owner
Participant may appoint a successor Owner Trustee by an
instrument signed by the Owner Participant. If a successor Owner
Trustee shall not have been appointed within 30 days after the
giving of written notice of such resignation or the delivery of
the written instrument with respect to such removal, the Owner
Trustee, the Indenture Trustee or the Owner Participant may apply
to any court of competent jurisdiction to appoint a successor
Owner Trustee to act until such time, if any, as a successor
shall have been appointed as above provided. Any successor Owner
Trustee so appointed by such court shall immediately and without
further act be superseded by any successor Owner Trustee
appointed as above provided within one year from the date of the
appointment by such court.
(b) Any successor Owner Trustee, however appointed,
shall execute and deliver to the predecessor Owner Trustee an
instrument accepting such appointment, and thereupon such
successor Owner Trustee, without further act, shall become vested
with all the estates, properties, rights, powers, duties and
trusts of the predecessor Owner Trustee in the trusts hereunder
with like effect as if originally named the Owner Trustee herein;
but nevertheless, upon the written request of such successor
Owner Trustee, such predecessor Owner Trustee shall execute and
deliver an instrument transferring to such successor Owner
Trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers, duties and trusts of such predecessor
Owner Trustee, and such predecessor Owner Trustee shall duly
assign, transfer, deliver and pay over to such successor Owner
Trustee all moneys or other property then held by such
predecessor Owner Trustee upon the trusts herein expressed.
(c) Any successor Owner Trustee, however appointed,
shall be a bank or trust company incorporated and doing business
within the United States of America and having a combined capital
and surplus of at least $75,000,000, if there be such an
institution willing, able and legally qualified to perform the
duties of the Owner Trustee hereunder upon reasonable or
customary terms; provided, however, that the appointment of such
bank or trust company as successor Owner Trustee shall not
violate any provision of any law or regulation or create a
relationship which would be in violation thereof, and all
consents and approvals of, and filings and declarations with, any
governmental authority which are necessary in connection with
such appointment shall have been obtained or made and shall be in
full force and effect.
(d) Any corporation into which the Owner Trustee may
be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any
corporation to which substantially all the corporate trust
business of the Owner Trustee may be transferred, shall, subject
to the terms of Section 9.1(c) hereof, be the Owner Trustee under
this Agreement without further act.
SECTION 9.2. Co-Owner Trustees and Separate Owner
Trustees. Whenever the Owner Trustee or the Owner Participant
shall deem it necessary or prudent in order either to conform to
any law of any jurisdiction in which all or any part of the Trust
Estate shall be situated or to make any claim or bring any suit
with respect to the Trust Estate or the Facility Lease or any
other Transaction Document, or the Owner Trustee or the Owner
Participant shall be advised by counsel satisfactory to it that
it is so necessary or prudent, the Owner Trustee and the Owner
Participant shall execute and deliver an agreement supplemental
hereto and all other instruments and agreements, and shall take
all other action, necessary or proper to constitute another bank
or trust company or one or more persons (and the Owner Trustee
may appoint one or more of its officers) either as co-trustee or
co-trustees jointly with the Owner Trustee of all or any part of
the Trust Estate, or as separate trustee or separate trustees of
all or any part of the Trust Estate, and to vest in such persons,
in such capacity, such title to the Trust Estate or any part
thereof, and such rights or duties as may be necessary or
desirable, all for such period and under such terms and
conditions as are satisfactory to the Owner Trustee and the Owner
Participant. If any co-trustee or separate trustee shall die,
become incapable of acting, resign or be removed, the title to
the Trust Estate and all rights and duties of such co-trustee or
separate trustee shall, so far as permitted by law, vest in and
be exercised by the Owner Trustee, without the appointment of a
successor to such co-trustee or separate trustee. No appointment
of, or action by, any additional trustee will relieve the Owner
Trustee of any of its obligations under, or otherwise affect any
of the terms of this Agreement or its obligations under the
Transaction Documents. The foregoing notwithstanding, no
appointment of, or action by, any additional trustee will relieve
the Owner Trustee of any of its obligations under, or otherwise
affect any of the terms of, the Indenture and the Loan
Certificates, or affect the interests of the Indenture Trustee or
any Holder.
ARTICLE X
Supplements and Amendments
SECTION 10.1. Supplements and Amendments. At the
written request of the Owner Participant this Agreement shall be
amended by a written instrument signed by the Owner Trustee and
the Owner Participant, but if in the opinion of the Owner Trustee
any instrument required to be so executed adversely affects any
right, duty or liability of, or immunity or indemnity in favor
of, the Owner Trustee under this Agreement or any of the
documents contemplated hereby to which the Owner Trustee is a
party, or would cause or result in any conflict with or breach of
any terms, conditions or provisions of, or default under, the
charter or by-laws of the Owner Trustee, the Transaction
Documents or any other document contemplated hereby to which the
Owner Trustee is a party, the Owner Trustee may in its sole
discretion decline to execute such instrument; provided, however,
that without the consent of the Indenture Trustee, no provision
of this Trust Agreement shall be amended if such amendment would
adversely affect the rights of the Indenture Trustee or the
Holders as are provided in the Transaction Documents.
ARTICLE XI
Miscellaneous
SECTION 11.1. No Legal Title to Trust Estate in Owner
Participant. The Owner Participant shall not have title to any
part of the Trust Estate. No transfer, by operation of law or
otherwise, of any right, title and interest of the Owner
Participant in and to the Trust Estate or hereunder shall operate
to terminate this Agreement or the trusts hereunder or entitle
any successor or transferee of the Owner Participant to an
accounting or to the transfer to it of legal title to any part of
the Trust Estate.
SECTION 11.2. Sale of Trust Estate by Owner Trustee is
Binding. Any sale or other conveyance of any of the Trust Estate
or any interest therein by the Owner Trustee made pursuant to the
terms of this Agreement, the Facility Lease or any other
Transaction Document shall bind the Owner Participant and shall
be effective to transfer or convey all right, title and interest
of the Owner Trustee and the Owner Participant in and to the
Trust Estate. No purchaser or other grantee shall be required to
inquire as to the authorization, necessity, expediency or
regularity of such sale or conveyance or as to the application of
any sale or other proceeds with respect thereto by the Owner
Trustee.
SECTION 11.3. Limitations on Rights of Others.
Nothing in this Agreement, whether express or implied, shall be
construed to give to any person other than the Owner Trustee and
the Owner Participant (and, where specifically noted that a right
exists in favor of the Indenture Trustee, the Indenture Trustee)
any legal or equitable right, remedy or claim under or in respect
of this Agreement, any covenants, conditions or provisions
contained herein or the Trust Estate.
SECTION 11.4. Notices. Unless otherwise expressly
specified or permitted by the terms hereof, all notices shall be
in writing and delivered by hand or mailed by first class mail,
postage prepaid and (a) if to the Owner Trustee, addressed to it
at 777 Main Street, Hartford, Connecticut, 06115, Attention:
Corporate Trust Administration, or to such other address as the
Owner Trustee may have set forth in a written notice to the Owner
Participant, (b) if to the Owner Participant addressed to it at
1600 Summer Street, Stamford, Connecticut, 06905, Attention:
Vice President, Energy Project Operations, or in each case, to
such other address as such Person shall have furnished by notice
to the Owner Trustee and (c) if to the Indenture Trustee,
addressed to it as set forth in the Participation Agreement.
Whenever any notice in writing is required to be given by the
Owner Trustee or the Owner Participant, such notice shall be
deemed given and such requirement satisfied if such notice is
mailed by first class mail, postage prepaid, addressed as
provided above.
SECTION 11.5. Severability. Any provision of this
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 11.6. Limitation on Owner Participant's
Liability. The Owner Participant shall not have any liability
for the performance of the obligations of the Owner Trustee under
this Agreement except as expressly set forth herein.
SECTION 11.7. Separate Counterparts. This Agreement
may be executed by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but
one and the same instrument.
SECTION 11.8. Successors and Assigns. All covenants
and agreements contained herein shall be binding upon, and inure
to the benefit of, the Owner Trustee and its successors and
assigns and the Owner Participant and its successors and, to the
extent permitted by Section 11.9 hereof, its assigns, all as
herein provided. Any request, notice, direction, consent, waiver
or other instrument or action by the Owner Participant shall bind
the successors and assigns of such Owner Participant.
SECTION 11.9. Transfer of Interests. Subject to the
provisions of the Participation Agreement, the Owner Participant
may transfer, sell, assign or otherwise dispose of all or any
part of its interest hereunder. In the event of any sale,
transfer, assignment or other disposition of such interest (the
entity to which such interest is sold, transferred, assigned or
otherwise conveyed being hereinafter called the "Transferee"),
the Transferee shall become a party to this Agreement and shall
agree to be bound by all the terms of and shall undertake all or
an appropriate part of the obligations of the Owner Participant
contained in this Agreement in such manner as is satisfactory to
the Owner Trustee. No such sale, transfer, assignment or other
disposition shall violate any provision of law or regulation or
create a relationship which would be in violation thereof. The
Owner Trustee shall not be on notice of or otherwise bound by any
such sale, transfer, assignment or other disposition unless and
until it shall have received an executed counterpart of the
instrument of such sale, transfer, assignment or other
disposition and such evidence that the same is in accordance with
this Section 11.9 as the Owner Trustee shall reasonably require.
Upon any such disposition to a Transferee as above provided, such
Transferee shall be deemed an "Owner Participant" for all
purposes hereof, and shall be deemed to have made all or an
appropriate part of the payments previously made by its
predecessor Owner Participant and to have acquired an appropriate
interest in the Trust Estate, and each reference herein to the
Owner Participant shall thereafter be deemed to refer to, or to
include, as the case may be, such Transferee.
SECTION 11.10. Headings; No Implied Waiver. The
headings of the various Articles and Sections herein are for
convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions hereof. No term
or provision of this Agreement may be changed, waived, discharged
or terminated orally, but only by an instrument in writing
entered into as provided in Section 10.1; and any such waiver of
the terms hereof shall be effective only in the specific instance
and for the specific purpose given.
SECTION 11.11. Governing Law. This Agreement shall in
all respects be governed by, and construed in accordance with,
the internal laws of the State of Connecticut without regard to
the conflict of laws principles thereof.
SECTION 11.12. Performance by Owner Participant. Any
obligation of the Owner Trustee hereunder or under the Facility
Lease or any other Transaction Document may be performed by the
Owner Participant, and any performance shall not be construed as
a revocation of the trusts created hereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Trust Agreement to be duly executed by their respective officers
hereunto duly authorized, as of the day and year first above
written.
GENERAL ELECTRIC CAPITAL
CORPORATION, as Owner
Participant
By:_________________________
Title:
FLEET NATIONAL BANK, as
Owner Trustee
By: /s/ Kathy A. Larimore
Title: Assistant Vice President
EXHIBIT 10.33
AMENDED AND RESTATED
GENERAL PARTNER PLEDGE AGREEMENT
AMENDED AND RESTATED GENERAL PARTNER PLEDGE AGREEMENT,
dated as of December 18, 1996 (this "Agreement"), made by PANDA
BRANDYWINE CORPORATION, a Delaware corporation (together with its
successors and assigns, the "Pledgor") and the sole general
partner of Panda-Brandywine, L.P., a Delaware limited partnership
(together with its successors and assigns, the "Partnership"), to
FLEET NATIONAL BANK (formerly known as Shawmut Bank Connecticut,
National Association), a national banking association, in its
capacity as Security Agent (the "Security Agent") under the
Security Deposit Agreement (as defined in the Participation
Agreement referred to below).
W I T N E S S E T H :
WHEREAS, the Pledgor is the legal and beneficial owner
of a 50% general partnership interest in the Partnership (such
partnership interest being hereinafter referred to as the
"Partnership Interest");
WHEREAS, the Partnership, the Pledgor and General
Electric Capital Corporation, a New York corporation ("GE
Capital" or the "Owner Participant"), entered into the
Construction Loan Agreement and Lease Commitment dated as of
March 30, 1995 (the "Construction Loan Agreement") pursuant to
which GE Capital (i) provided construction financing for the
Project and (ii) issued the Letters of Credit as collateral
security for certain obligations of the Partnership under the
Power Purchase Agreement;
WHEREAS, the Pledgor entered into the General Partner
Pledge Agreement dated as of March 30, 1995 (as amended,
supplemented or otherwise modified prior to the date hereof, the
"Existing Pledge Agreement"), providing for the collateral
assignment by the Pledgor to the Security Agent of its interest
in the Partnership to secure the Partnership's obligations to GE
Capital and the Owner Trustee (as defined below);
WHEREAS, as contemplated by the Construction Loan
Agreement, the Partnership and the Owner Trustee (as defined
below) are entering into the Facility Lease and the other Lease
Documents pursuant to which, among other things, the Owner
Trustee will lease the Facility to the Partnership;
WHEREAS, the Owner Participant has elected to fund the
Facility Lease with non-recourse indebtedness as a leveraged
lease, and pursuant to Section 34 of the Existing Pledge
Agreement, the parties hereto have agreed to amend and restate
the Existing Pledge Agreement subject to the terms and conditions
provided herein;
WHEREAS, the Partnership and GE Capital are entering
into the Reimbursement Agreement to provide for the continued
issuance by GE Capital of the Letters of Credit;
WHEREAS, in order to set forth the rights and
obligations of the Owner Participant, the Owner Trustee, the
Partnership, the Loan Participants, the Administrative Agent, the
Indenture Trustee and the other parties in connection with the
foregoing transactions and to describe and provide for the
transactions contemplated hereby, (i) the parties hereto are
entering into the Participation Agreement, (ii) the Owner Trustee
and the Indenture Trustee are entering into the Indenture, (iii)
certain of the Lessee Security Documents are being amended and
restated pursuant to the Amended and Restated Agreements and (iv)
the Construction Loan Agreement is being terminated;
WHEREAS, it is a condition precedent to the performance
of certain obligations on the Lease Closing Date that the Pledgor
shall have executed and delivered this Agreement to the Security
Agent, for the benefit of the Owner Trustee and GE Capital (and
by collateral assignment, the Indenture Trustee);
WHEREAS, the Pledgor desires to execute this Agreement
to satisfy the condition described in the preceding recital;
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Defined Terms; Construction.
(a) Unless otherwise defined herein, terms used
herein shall have the meaning set forth in Annex A to the
Participation Agreement dated as of December 18, 1996 (the
"Participation Agreement"), among the Partnership, the General
Partner, the Owner Participant, Fleet National Bank (formerly
known as Shawmut Bank Connecticut, National Association), a
national banking association, not in its individual capacity but
solely as owner trustee (in such capacity, the "Owner Trustee")
under the Trust Agreement and as Security Agent, First Security
Bank, National Association, a national banking association, not
in its individual capacity but solely as indenture trustee (in
such capacity, the "Indenture Trustee") under the Indenture,
Credit Suisse, a bank organized and existing under the laws of
Switzerland, acting by and through its New York branch ("Credit
Suisse"), as administrative agent (in such capacity, the
"Administrative Agent"), and the other entities listed on
Schedule I thereto (the "Loan Participants"). Defined terms in
this Agreement shall include in the singular number the plural
and in the plural number the singular.
(b) The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall,
unless otherwise expressly specified, refer to this Agreement as
a whole and not to any particular provision of this Agreement and
all references to Sections shall be references to Sections of
this Agreement unless otherwise expressly specified.
(c) Unless otherwise expressly specified, any
agreement, contract, or document defined or referred to herein
shall mean such agreement, contract or document in the form
(including all amendments and clarification letters relating
thereto) delivered on the Lease Closing Date as the same may
thereafter be amended, supplemented, or otherwise modified from
time to time in accordance with the terms of such agreement and
the Participation Agreement.
Section 2. Pledge. As security for the Lessee
Obligations and subject to and in accordance with the provisions
of this Agreement, the Pledgor hereby pledges, grants, assigns,
hypothecates, transfers, and delivers to the Security Agent, for
the benefit of GE Capital and the Owner Trustee, a first priority
security interest in the following, whether now owned or
hereafter acquired (the "Collateral"):
(a) all of the Pledgor's general partnership interests
in the Partnership (including, without limitation, the
Partnership Interest and all right, title and interest of
the Pledgor in and to the Transfer Agreement), and all of
the Pledgor's rights (including, without limitation, all
voting rights in or rights to control or direct the affairs
of the Partnership), privileges, authority and powers as
general partner of the Partnership, whether arising under
the terms of the Partnership Agreement, or at law, or
otherwise;
(b) all income, cash flow, revenues, issues, profits,
losses, distributions, payments, and other property of every
kind and variety due, accruing or owing to, or to be turned
over to, or to be disbursed to the Pledgor by the
Partnership in respect of the property described in the
preceding clause (a), including without limitation, all
rights of the Pledgor to allocations of profit and loss,
distributions and all monies and property representing a
distribution in respect of the property described in the
preceding clause (a); and
(c) all proceeds, products and accessions of and to
any of the property described in the preceding clauses (a)
and (b);
provided, however, that notwithstanding any of the foregoing,
none of the Security Agent, the Owner Trustee nor GE Capital
shall acquire any interest in any of Pledgor's obligations
contained in the Partnership Agreement.
Section 3. Security for Lessee Obligations. This
Agreement secures, and the Collateral is collateral security for,
the payment and performance in full when due, whether at stated
maturity, by acceleration or otherwise, of all Lessee Obligations
now or hereafter existing.
Section 4. Delivery of Collateral. All certificates
or instruments representing or evidencing the Collateral have
been or shall be delivered to and shall be held by or on behalf
of the Security Agent pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly
executed undated instruments of transfer or assignment in blank,
all in form and substance reasonably satisfactory to the Security
Agent. If the Pledgor shall become entitled to receive or shall
receive any other Collateral, then the Pledgor shall, except as
otherwise provided in Section 7, accept and hold the same in
trust for the Security Agent and segregated from the other
property or funds of Pledgor, and shall deliver to the Security
Agent forthwith all such other Collateral (except as provided in
Section 7 hereof) in the form received by the Pledgor, to be held
by the Security Agent, subject to the terms hereof, as part of
the Collateral. Upon the occurrence and during the continuance
of a Reimbursement Event of Default or a Lease Event of Default,
the Security Agent shall have the right, at any time in its
discretion and without notice to the Pledgor, to transfer to or
to register in the name of the Security Agent, the Owner Trustee
or GE Capital or any of their respective nominees any or all of
the Collateral.
Section 5. Representations and Warranties. The
Pledgor represents and warrants as follows:
(a) Due Organization. The Pledgor is a
corporation duly organized and validly existing under the laws of
the State of Delaware, and is qualified to own property and
transact business in every jurisdiction where the ownership of
its property and the nature of its business as currently
conducted requires it to be qualified.
(b) Power and Authority. The Pledgor has full
corporate power, authority and legal right to enter into this
Agreement and each other Transaction Document to which it is a
party and to perform its obligations hereunder and thereunder and
to pledge all the Collateral pursuant to this Agreement.
(c) Due Authorization. The pledge of the
Collateral pursuant to this Agreement has been duly authorized by
the Pledgor. This Agreement and each other Transaction Document
to which the Pledgor is a party has been duly authorized,
executed and delivered by the Pledgor.
(d) Enforceability. This Agreement and each
other Transaction Document to which the Pledgor is a party
constitutes the legal, valid and binding obligation of the
Pledgor enforceable against the Pledgor in accordance with its
terms except as enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally and except as
enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity).
(e) No Conflicts. The execution and delivery by
Pledgor of this Agreement and each other Transaction Document to
which the Pledgor is a party, the performance by Pledgor of its
obligations hereunder and thereunder, and the pledge by the
Pledgor of the Collateral pursuant to this Agreement will not (i)
violate the provisions of the Pledgor's Certificate of
Incorporation or By-laws; (ii) violate the provisions of any Law
applicable to the Pledgor; (iii) violate any Contractual
Obligation; or (iv) result in or create any Lien (other than the
Lien created hereby) under, or require any consent which has not
been obtained under any agreement or instrument, or the
provisions of any order or decree binding upon the Pledgor or any
of its properties.
(f) No Consents. No consent of any other party
(including, without limitation, stockholders or creditors of the
Pledgor) and no Governmental Action is required which has not
been obtained either (i) for the execution, delivery and
performance by Pledgor of this Agreement and each other
Transaction Document to which it is a party, (ii) for the pledge
by the Pledgor of the Collateral pursuant to this Agreement, or
(iii) except as otherwise set forth in Section 34 hereof, for the
exercise by the Security Agent of the rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant
to this Agreement (except as may be required in connection with
any disposition of all or any part of the Collateral under any
laws affecting the offering and sale of securities generally).
(g) Not a Utility. The Pledgor is not, and will
not, as a result of becoming a partner in the Partnership, be or
become, or cause the Partnership to be or become: (i) subject to
regulation under Part II or Part III of the Federal Power Act,
except for Sections 202(c), 210, 211, 212, 213, 214 and 305(c) of
the Federal Power Act (16 U.S.C. 824a(c), 824i, 824j, 824k,
824l, 824m and 825d(c), respectively) and the enforcement
provisions of Part III of the Federal Power Act relating thereto;
(ii) an "electric utility company" for purposes of the Holding
Company Act; (iii) subject to state law or regulation respecting
the financial, rate or organizational regulation of electric
utilities; or (iv) subject to regulation as a "steam heating
company" under Article 78, Public Service Commission Law, of the
Annotated Code of Maryland.
(h) Ownership of Collateral. The Pledgor is the
sole legal and beneficial owner of the Collateral free and clear
of any Lien other than Permitted Liens. No security agreement,
financing statement or other public notice with respect to all or
any part of the Collateral is on file or of record in any public
office, except such as may have been filed in favor of the
Security Agent pursuant to this Agreement.
(i) Perfection. The execution and delivery of
this Agreement concurrently with the filing of UCC-1 financing
statements in the filing offices listed on Schedule 1 create a
valid and perfected first priority security interest in the
Collateral securing the payment of the Lessee Obligations.
(j) Chief Executive Office. The chief executive
office of the Pledgor and the office where the Pledgor keeps its
records concerning the Partnership and the Project and all
contracts relating thereto is located at the address specified on
Schedule 2. The Pledgor shall not establish a new location for
its chief executive office or change its name until (i) it has
given the Security Agent, GE Capital and, so long as the
Indenture shall be in effect, the Indenture Trustee, not less
than 30 days' prior written notice of its intention so to do,
clearly describing such new location or specifying such new name,
as the case may be, and (ii) with respect to such new location or
such new name, as the case may be, it shall have taken all
action, reasonably satisfactory to the Security Agent, GE Capital
and, so long as the Indenture shall be in effect, the Indenture
Trustee, to maintain the security interest of the Security Agent,
on behalf of the Owner Trustee, GE Capital and the Indenture
Trustee, in the Collateral intended to be granted hereby at all
times fully perfected and in full force and effect.
(k) Sole Business. The Pledgor is the sole
general partner of the Partnership. The Pledgor is not engaged
in any transaction or activity unrelated to the management,
development, financing, operation and/or maintenance of the
Partnership and the Project.
(l) No Proceedings. There is no action, suit or
proceeding at law or in equity or by or before any Governmental
Authority or arbitral tribunal now pending or, to the best
knowledge of the Pledgor, threatened against the Pledgor (i)
which questions the validity or legality of or seeks damages in
connection with this Agreement or any other Transaction Document
to which Pledgor is a party or (ii) which may reasonably be
expected to have a Material Adverse Effect.
(m) Financial Statements. Each of the financial
statements of the Pledgor for the fiscal year and quarter most
recently ended as of the date hereof has been heretofore
furnished to the Owner Participant and the Administrative Agent,
and each of such financial statements is complete and correct in
all material respects and fairly presents the financial condition
of the Pledgor as at said dates, in conformity with GAAP applied
on a consistent basis, except that the financial statements were
prepared on a cash basis and that certain expenses have not been
capitalized as required by GAAP. Since the date of such annual
financial statement, there has been no Material Adverse Effect.
(n) Partnership Agreement. The copy of the
Partnership Agreement delivered to the Owner Participant and the
Administrative Agent on or prior to the Lease Closing Date is a
true, complete and correct copy of the Partnership Agreement on
the date hereof.
Section 6. Supplements, Further Assurances. The
Pledgor agrees that at any time and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and
deliver all further instruments and documents, and take all
further action that the Security Agent may reasonably request, in
order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Security Agent to
exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of
the foregoing, the Pledgor will execute and file such financing
or continuation statements, or amendments thereto, and such other
instruments, endorsements or notices, as the Security Agent may
deem necessary or desirable in order to perfect and preserve the
Liens created or intended to be created hereby. The Pledgor
hereby authorizes the Security Agent to file any such financing
or continuation statement without the signature of the Pledgor to
the extent permitted by applicable law. A carbon, photographic
or other reproduction of this Agreement shall be sufficient as a
financing statement for filing in any jurisdiction.
Section 7. Rights of Pledgor; etc.
(a) Generally. The Pledgor shall be entitled to
exercise any and all rights pertaining to the Collateral or any
part thereof (including, without limitation, the right to manage
and direct the affairs of the Partnership and the right to
receive distributions in respect of its partnership interest) so
long as (i) no Reimbursement Event of Default or Lease Event of
Default shall have occurred and be continuing and (ii) the
exercise of such rights would not otherwise result in a
Reimbursement Event of Default or a Lease Event of Default. Upon
the occurrence and during the continuance of a Reimbursement
Event of Default or a Lease Event of Default, all rights of the
Pledgor to manage and direct the affairs of the Partnership which
it would otherwise be entitled to exercise pursuant to the
preceding sentence shall cease, and all such rights shall
thereupon become immediately vested in the Security Agent, which
shall thereupon have the sole right (subject to the provisions of
Applicable Law and the Security Deposit Agreement) to manage and
direct the affairs of the Partnership.
(b) Distributions. Unless a Reimbursement Event
of Default or a Lease Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled to receive and retain
any and all distributions paid in respect of the Collateral in
compliance with the terms of the Participation Agreement and the
Security Deposit Agreement; provided, however, that any and all
(i) distributions paid or payable in respect
of or in exchange for any Collateral (whether paid in
cash, securities or other property) in connection with
a partial or total liquidation or dissolution of the
Partnership (other than in connection with any deemed
liquidation on account of a termination of the
Partnership under Section 708(b)(1)(B) of the Code),
and
(ii) all property (whether cash, securities
or other property) paid, payable or otherwise
distributed in redemption of, or in exchange for, the
property described in Section 2(a) above,
shall be, and shall be forthwith delivered to the Security Agent
to hold as, Collateral and shall, if received by the Pledgor, be
received in trust for the benefit of the Security Agent, be
segregated from the other property or funds of the Pledgor, and
be forthwith delivered to the Security Agent as Collateral in the
same form as so received (with any necessary endorsement). Upon
the occurrence and during the continuance of a Reimbursement
Event of Default or a Lease Event of Default, all rights of the
Pledgor to receive the distributions which it would otherwise be
authorized to receive and retain pursuant to the preceding
sentence shall cease, and all such rights shall thereupon become
vested in the Security Agent which shall thereupon have the sole
right to receive and hold as Collateral such distributions.
(c) Amounts Wrongfully Received Held in Trust.
All distributions and other amounts which are received by the
Pledgor contrary to the provisions of Section 7(b) above or the
Participation Agreement shall be received in trust for the
benefit of the Security Agent, shall be segregated from other
funds of the Pledgor and shall be forthwith paid over to the
Security Agent as Collateral in the same form as so received
(with any necessary endorsement).
Section 8. Covenants.
(a) Legal Existence. The Pledgor shall preserve
and maintain (i) its legal existence, as a corporation in good
standing under the laws of the State of Delaware and (ii) its
qualification to do business in every jurisdiction where the
ownership of its property and the nature of its business require
it to be so qualified.
(b) Books, Records and Inspections. The Pledgor
shall keep proper books of record and account in which full, true
and correct entries in conformity with GAAP, except that the
Pledgor's financial statements may be prepared on a cash basis
and that certain expenses may be capitalized other than as
required by GAAP, and all requirements of Law shall be made of
all dealings and transactions in relation to its business and
activities. The Pledgor shall permit officers and designated
representatives of the Security Agent, the Administrative Agent
and the Owner Participant to visit and inspect any of the
properties of the Pledgor, and to examine the books of record and
account of the Pledgor, and discuss the affairs, finances and
accounts of the Pledgor with, and be advised as to the same by,
its and their officers and independent accountants, all upon
reasonable notice and at such reasonable times as the Security
Agent, the Administrative Agent or the Owner Participant may
desire.
(c) Taxes and Claims. The Pledgor shall pay or
cause to be paid when due, all Taxes and all charges,
betterments, or other assessments relating to the Collateral, and
all other lawful claims required to be paid by the Pledgor,
except to the extent any of the same are subject to a Contest.
(d) Compliance with Law. The Pledgor shall
comply with all Laws, except for such noncompliance as could not,
individually or in the aggregate, have a Material Adverse Effect.
(e) Governmental Actions. The Pledgor shall
obtain, maintain and comply with all Governmental Actions
applicable to the Pledgor or the Partnership, except for such
failure or noncompliance as could not, individually or in the
aggregate, have a Material Adverse Effect.
(f) Performance Under Other Agreements. The
Pledgor shall duly perform and observe all of the covenants,
agreements and conditions on its part to be performed and
observed hereunder and under the Participation Agreement and,
unless the Administrative Agent and GE Capital otherwise consent
in writing, duly perform and observe in all respects all of the
covenants, agreements and conditions on its part to be performed
and observed under the other Transaction Documents to which it is
a party.
(g) Remain as General Partner; Nature of
Business. The Pledgor shall remain as the sole general partner
of the Partnership and shall not withdraw as a general partner in
the Partnership. The Pledgor shall not engage in any business
other than being the general partner of the Partnership.
(h) Purchases of Assets. The Pledgor shall not
purchase or acquire any assets other than the purchase of assets
in the ordinary course of business of the Partnership required in
connection with the operation and maintenance of the
Partnership's business in accordance with the Transaction
Documents.
(i) Indebtedness. The Pledgor shall not create,
incur, assume or suffer to exist any Indebtedness other than
Indebtedness of the Partnership that the Partnership is permitted
to incur under the Participation Agreement and on which the
Pledgor is liable solely by virtue of being the general partner
of the Partnership.
(j) Contingent Obligations. The Pledgor shall
not create or become or be liable with respect to any Contingent
Obligation.
(k) No Sale of Collateral; No Liens. The Pledgor
agrees that it will not (i) sell, assign, transfer, exchange or
otherwise dispose of, or grant any option or warrant with respect
to, the Collateral or any interest therein without the prior
written consent of the Security Agent and (ii) except for the
Lien created hereby, create, incur or permit to exist any Lien
(other than Permitted Liens) upon or with respect to any of the
Collateral or any interest therein or any of its other property
or assets. The Pledgor will defend the right, title and interest
of the Security Agent in and to the Collateral against the claims
and demands of all Persons whomsoever.
(l) Fundamental Changes. The Pledgor shall not:
(i) enter into any merger or consolidation, or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution),
discontinue its business or convey, lease, sell, transfer or
otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business or property,
whether now or hereafter acquired, except sales of obsolete
and/or replaced equipment; (ii) acquire by purchase or otherwise
any property or assets of, or stock or other evidence of
beneficial ownership of, any Person; (iii) create or acquire any
Subsidiary; (iv) enter into any partnership or joint venture; or
(v) engage in any business other than (x) holding a general
partnership interest in the Partnership and (y) managing and
directing the affairs of the Partnership as the general partner
of the Partnership.
(m) Advances, Investments and Loans. The Pledgor
shall not lend money or credit or make advances or contributions
to any Person other than the Partnership, or directly or
indirectly purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital
contribution to any Person other than the Partnership.
(n) Partnership Agreement; Transfer Agreement.
The Pledgor shall not agree to or permit (i) the cancellation or
termination of the Partnership Agreement or the Transfer
Agreement or (ii) without the prior consent of the Owner
Participant and the Administrative Agent, any amendment,
supplement, or modification of, or waiver with respect to any of
the provisions of, the Partnership Agreement or the Transfer
Agreement.
(o) Agent for Receipt of Service of Process. The
Pledgor shall appoint and continuously retain a Person acceptable
to the Security Agent as its agent in the State of New York for
receipt of service of process and shall pay all costs, fees and
expenses in connection therewith.
(p) Bankruptcy of the Partnership. The Pledgor
shall not authorize, seek to cause or permit the Partnership to
commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property or to
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or to make a general assignment
for the benefit of the creditors.
Section 9. Security Agent Appointed Attorney-In-Fact.
Upon the occurrence of a Reimbursement Event of Default or a
Lease Event of Default, the Pledgor hereby appoints the Security
Agent or any Person or agent whom the Security Agent may
designate the Pledgor's attorney-in-fact with full authority in
the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, at the Pledgor's cost and expense, at any time and
from time to time in the Security Agent's reasonable discretion
to take any action and to execute any instrument which the
Security Agent may deem necessary or advisable to enforce its
rights under this Agreement, including, without limitation,
authority to receive, endorse and collect all instruments made
payable to the Pledgor representing any distribution, interest
payment or other payment in respect of the Collateral or any part
thereof and to give full discharge for the same.
Section 10. Security Agent May Perform. If the
Pledgor fails to perform any agreement contained herein after
receipt of a written request to do so from the Security Agent,
the Security Agent may itself perform, or cause performance of,
such agreement, and the reasonable expenses of the Security
Agent, including the reasonable fees and expenses of its counsel,
incurred in connection therewith shall be payable by the Pledgor
under Section 19.
Section 11. Reasonable Care. The Security Agent shall
be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equivalent to that
which the Security Agent accords its own property of the type of
which the Collateral consists, it being understood that the
Security Agent shall have no responsibility for (i) ascertaining
or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral,
whether or not the Security Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any
Collateral.
Section 12. No Liability. None of the Security Agent,
the Owner Trustee, GE Capital, the Administrative Agent, the
Indenture Trustee, any Holder nor any of their respective
directors, officers, employees or agents shall be deemed to have
assumed any of the liabilities or obligations of a partner of the
Partnership as a result of the pledge and security interest
granted under or pursuant to this Agreement. None of the
Security Agent, the Owner Trustee, GE Capital, the Administrative
Agent, the Indenture Trustee, any Holder nor any of their
respective directors, officers, employees or agents shall be
liable for any failure to collect or realize upon the Lessee
Obligations or any collateral security or guarantee therefor, or
any part thereof, or for any delay in so doing nor shall it be
under any obligation to take any action whatsoever with regard
thereto.
Section 13. Remedies Upon Default. If a Reimbursement
Event of Default or a Lease Event of Default shall have occurred
and be continuing:
(a) The Security Agent (i) may become a
substitute or additional general partner in the Partnership or
designate another Person to become such substitute or additional
general partner and/or (ii) may manage the business and affairs
of the Partnership as provided in Section 7(a) and/or (iii)
exercise the power of attorney described in Section 9.
(b)(i) The Security Agent may exercise in respect
of the Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights
and remedies of a secured party upon a default under the Uniform
Commercial Code then in effect in the State of New York, or
unless prohibited by Applicable Law, the Uniform Commercial Code
then in effect in any other applicable jurisdiction. The
Security Agent may also in its sole discretion, without notice
except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale or at
any of the Security Agent's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and
upon such other terms as the Security Agent may, in accordance
with Applicable Law, deem commercially reasonable, irrespective
of the impact of any such sales on the market price of the
Collateral at any such sale. Each purchaser at any such sale
shall hold the property sold absolutely, free from any claim or
right on the part of the Pledgor, and the Pledgor hereby waives
(to the extent permitted by law) all rights of redemption, stay
and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or
hereafter enacted. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to
the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification. The Security Agent shall not be
obligated to make any sale of Collateral regardless of notice of
sale having been given. The Security Agent may adjourn any
public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned. The Security Agent shall not incur liability as a
result of the sale of the Collateral, or any part thereof, at any
public or private sale. The Pledgor hereby waives any claims
against the Security Agent arising by reason of the fact that the
price at which any Collateral may have been sold at such a
private sale, if commercially reasonable, was less than the price
which might have been obtained at a public sale, even if the
Security Agent accepts the first offer received and does not
offer such Collateral to more than one offeree.
(ii) The Pledgor recognizes that the Security
Agent may elect in its sole discretion to sell all or a part of
the Collateral to one or more purchasers in privately negotiated
transactions in which the purchasers will be obligated to agree,
among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution
or resale thereof. The Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable than
those obtainable through a public sale (including, without
limitation, a public offering made pursuant to a registration
statement under the Securities Act of 1933, as amended (the
"Securities Act")), and the Pledgor and the Security Agent agree
that such private sales shall be made in a commercially
reasonable manner and that the Security Agent has no obligation
to engage in public sales and no obligation to delay sale of any
Collateral to permit the issuer thereof to register the
Collateral for a form of public sale requiring registration under
the Securities Act.
(c) Any cash held by the Security Agent as
Collateral and all cash proceeds received by the Security Agent
in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral shall, as soon as
reasonably practicable, be applied (after payment of any amounts
payable to the Security Agent pursuant to Section 19 and 20) by
the Security Agent first to the payment of the costs and expenses
of such sale, collection or other realization, if any, including
reasonable compensation to the Security Agent and its agents and
counsel, and all expenses, liabilities and advances made or
incurred by the Security Agent in connection therewith; and
second to the payment of the Lessee Obligations in accordance
with the terms of the Security Deposit Agreement. The
Partnership shall be liable for any deficiency remaining after
any application of funds pursuant hereto. Any surplus of such
cash or cash proceeds held by the Security Agent after payment in
full of such amounts shall be paid over to the Pledgor, or its
successors or assigns, or to whomsoever may be lawfully entitled
to receive such surplus or as a court of competent jurisdiction
may direct.
Section 14. Purchase of the Collateral. The Security
Agent, the Owner Trustee, GE Capital, the Administrative Agent,
the Indenture Trustee, any Loan Participant or the Owner
Participant or any of their respective Affiliates may be a
purchaser of the Collateral or any part thereof or any right or
interest therein at any sale thereof, whether pursuant to
foreclosure, power of sale or otherwise hereunder and the
Security Agent may apply the purchase price to the payment of the
Lessee Obligations secured hereby. Any such purchaser of all or
any part of the Collateral shall, upon any such purchase, acquire
good title to the Collateral so purchased, free of the security
interests created by this Agreement.
Section 15. Notices. All notices, requests and demands
to or upon the respective parties hereto to be effective shall be
in writing (including by telecopy), and shall be deemed to have
been duly given or made when delivered by hand, or five days
after being deposited in the United States mail, postage prepaid,
or, in the case of telecopy notice, when confirmation is
received, or, in the case of a nationally recognized overnight
courier service, one Business Day after delivery to such courier
service, addressed, in the case of each party hereto, at its
address specified below its name on Schedule 2 hereto, or to such
other address as may be designated by any party in a written
notice to the other parties hereto.
Section 16. Continuing Security Interest. This
Agreement shall create a continuing Lien in the Collateral until
the release thereof pursuant to Section 18.
Section 17. Security Interest Absolute. All rights of
the Security Agent and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(i) any lack of validity or enforceability
of any of the Transaction Documents or any other
agreement or instrument relating thereto;
(ii) any change in the time, manner or place
of payment of, or in any other term of, all or any of
the Lessee Obligations, or any other amendment or
waiver of or any consent to any departure from the
Transaction Documents or any other agreement or
instrument relating thereto;
(iii) any exchange, release or non-
perfection of any other collateral, or any release or
amendment or waiver of or consent to any departure from
any guaranty, for all or any of the Lessee Obligations;
or
(iv) any other circumstance which might
otherwise constitute a defense available to, or a
discharge of, the Pledgor.
Section 18. Release. Upon the indefeasible payment in
full of the Lessee Obligations, the Security Agent, upon the
request and at the expense of the Pledgor, shall execute and
deliver all such documentation necessary to release the liens
created pursuant to this Agreement.
Section 19. Expenses. The Pledgor will upon demand pay
to the Security Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, and any transfer taxes,
which the Security Agent may incur in connection with (i) the
custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral pursuant to the
exercise or enforcement of any of the rights of the Security
Agent hereunder or (ii) the failure by the Pledgor to perform or
observe any of the provisions hereof. Any amount payable by the
Pledgor pursuant to this Section shall be payable on demand and
shall constitute Lessee Obligations secured hereby.
Section 20. Indemnity.
(a) The Pledgor agrees to indemnify, reimburse
and hold the Security Agent, the Owner Trustee, in its individual
and trust capacities, GE Capital, the Administrative Agent, the
Indenture Trustee, the Loan Participants, their respective
successors and assigns and their respective officers, directors,
employees, and agents (each individually, an "Indemnitee," and
collectively, "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims,
demands, actions, suits, judgments and any and all costs and
expenses (including reasonable attorneys' fees and disbursements)
(such expenses, for purposes of this Section, hereinafter
"expenses") of whatsoever kind and nature imposed on, asserted
against or incurred by any of the Indemnitees in any way relating
to or arising out of (i) this Agreement or the documents executed
in connection herewith or in any other way connected with the
administration of the Lien or the security interest granted
hereby, or the enforcement of any of the terms hereof, or the
preservation of any rights hereunder, (ii) any failure of the
Pledgor to comply with its obligations under this Agreement, or
any misrepresentation by the Pledgor in this Agreement, or in any
statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement, or (iii) the
ownership, purchase, delivery, control, acceptance, financing,
possession, condition, sale, return or other disposition, or use
of, the Collateral, excluding (x) those finally judicially
determined to have arisen, with respect to any Indemnitee, solely
from the gross negligence or willful misconduct of such
Indemnitee or (y) unless specifically provided for elsewhere in
this Agreement, those arising out of the actions of any
Indemnitee while in possession or control of the Collateral.
(b) Without limiting the application of
subsection (a), the Pledgor agrees to pay, or reimburse the
Security Agent for any and all fees, costs and expenses of
whatever kind or nature incurred in connection with the
preservation, protection or validation of the Security Agent's
Liens on, and security interest in, the Collateral, including,
without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public
offices, payment or discharge of any taxes or Lien upon or in
respect of the Collateral, premiums for insurance with respect to
the Collateral and all other fees, costs and expenses in
connection with protecting, maintaining or preserving the
Collateral and the Security Agent's interest therein, whether
through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or
relating to the Collateral.
Section 21. Lessee Obligations Secured by Collateral.
Any amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement, and any amounts paid by the
Security Agent in preservation of any of its rights or interest
in the Collateral, together with interest on such amounts from
the date paid until reimbursement in full at a rate per annum
equal at all times to the Overdue Rate shall constitute Lessee
Obligations secured by the Collateral.
Section 22. Reinstatement. This Agreement shall
continue to be effective or be reinstated, as the case may be, if
at any time any amount received by the Security Agent, the Owner
Trustee, GE Capital, the Administrative Agent, any Holder or the
Indenture Trustee hereunder, under any other Transaction Document
or pursuant hereto or thereto is rescinded or must otherwise be
restored or returned by the Security Agent, the Owner Trustee, GE
Capital, the Administrative Agent, any Holder or the Indenture
Trustee upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Pledgor or the Partnership or upon the
appointment of any intervenor or conservator of, or trustee or
similar official for, Pledgor or the Partnership or any
substantial part of their respective assets, or upon the entry of
an order by a bankruptcy court avoiding the payment of such
amount, or otherwise, all as though such payments had not been
made.
Section 23. Amendments, etc. No waiver, amendment,
modification or termination of any provision of this Agreement,
or consent to any departure by the Pledgor therefrom, shall in
any event be effective (x) without the written concurrence of the
Security Agent and (y) unless made in accordance with section
13.1 of the Participation Agreement and none of the Collateral
shall be released without the written consent of the Security
Agent. Any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 24. Successors and Assigns. This Agreement
shall be binding upon the Pledgor and its successors and assigns
and shall inure to the benefit of the Security Agent, the Owner
Trustee, GE Capital and, so long as the Indenture shall be in
effect, the Indenture Trustee and their respective successors and
assigns.
Section 25. Survival.
(a) All agreements, statements, representations
and warranties made by the Pledgor herein or in any certificate
or other instrument delivered by the Pledgor or on its behalf
under this Agreement shall be considered to have been relied upon
by the Security Agent and shall survive the execution and
delivery of this Agreement and the other Transaction Documents
regardless of any investigation made by or on behalf of the
Security Agent.
(b) The indemnity obligations of Pledgor
contained in Section 20 shall continue in full force and effect
notwithstanding the full payment of the Lessee Obligations and
notwithstanding the discharge thereof.
Section 26. No Waiver; Remedies Cumulative. No failure
or delay on the part of the Security Agent in exercising any
right, power or privilege hereunder and no course of dealing
between the Pledgor and the Security Agent shall operate as a
waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Security Agent, the Owner Trustee or
GE Capital would otherwise have.
Section 27. Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
Section 28. Headings Descriptive. The headings of the
several Sections and subsections of this Agreement are inserted
for convenience only and shall not in any way affect the meaning
or construction of any provision of this Agreement.
Section 29. Severability. In case any provision in or
obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.
Section 30. Consent to Pledge by General Partner.
Notwithstanding anything to the contrary contained in the
Partnership Agreement, Panda Energy Corporation, a Delaware
corporation, as holder of the Partnership limited partnership
interest, hereby consents to (i) the execution, delivery, and
performance by the Pledgor of this Agreement, (ii) the grant of
the pledge by the Pledgor to the Security Agent, for the benefit
of the Owner Trustee (and, by collateral assignment, the
Indenture Trustee) and GE Capital of its partnership interests in
the Partnership pursuant to this Agreement, (iii) the sale,
transfer, assignment or other disposition (whether through
foreclosure, deed-in-lieu of foreclosure, or otherwise) of such
partnership interests to the Security Agent, its designee, or any
purchaser of such partnership interests pursuant to the exercise
by the Security Agent of its rights and remedies under this
Agreement and (iv) the admission to the Partnership of the
Security Agent, such designee, or such purchaser as a general
partner of the Partnership in connection with the exercise of
such rights and remedies.
Section 31. Conflict with Participation Agreement. In
case of a conflict between any provision of this Agreement and
any provision of the Participation Agreement, the provisions of
the Participation Agreement shall control and govern. No such
conflict shall be deemed to exist merely because this Agreement
imposes greater obligations on the Pledgor than the Participation
Agreement.
Section 32. Recourse Limited to Collateral. The
Security Agent acknowledges and agrees that, except in the case
of fraud, willful misconduct or knowing misrepresentation on the
part of Pledgor, its sole recourse for payment and performance of
the obligations of the Pledgor hereunder shall be to the
Collateral. This provision shall not be deemed to waive any
cause of action the Security Agent may have against any Person
for fraud, willful misconduct or knowing misrepresentation by
such Person.
Section 33. GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF
LAW EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND ANY
ACTION FOR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND APPELLATE COURTS FROM ANY THEREOF. THE PLEDGOR
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS REFERRED TO IN
SECTION 15. THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER JURISDICTION.
(c) EACH OF THE PLEDGOR AND THE SECURITY AGENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
Section 34. Certain Rights of Power Purchaser.
Nothing in this Agreement shall be deemed to limit the provisions
of the Consent of the Power Purchaser, which provisions are
solely for the benefit of the Power Purchaser and not the
Pledgor. Without limiting the scope of the foregoing, the
Security Agent agrees, for the exclusive benefit of the Power
Purchaser and not the Pledgor, that the exercise of remedies or
any similar action under this Agreement is subject to, and shall
be conducted in a manner consistent with, the Power Purchaser's
rights under (i) the Consent of the Power Purchaser and (ii) the
Power Purchase Agreement and the Transfer Agreement (to the
extent such rights under the Power Purchase Agreement and the
Transfer Agreement are not explicitly waived by the Power
Purchaser in accordance with the terms of the Consent of the
Power Purchaser).
Section 35. Assignment to Indenture Trustee.
In order to secure the indebtedness evidenced by the
Loan Certificates and certain other obligations as provided in
the Indenture, the Indenture provides, among other things, for
the assignment by the Owner Trustee to the Indenture Trustee of
all of its right, title and interest in, to and under this
Agreement, to the extent set forth in the Indenture, and for the
creation of a Lien on and security interest in the Lessor's
Estate in favor of the Indenture Trustee, and in furtherance
thereof, the Lessee and the Owner Trustee have entered into the
Security Deposit Agreement with the Security Agent. The Pledgor
hereby acknowledges and consents to such assignment and such
security interest and hereby acknowledges that to the extent set
forth in the Indenture, the Indenture Trustee shall have the
right in its own name (in certain cases together with the Owner
Trustee and in other cases to the exclusion of the Owner Trustee,
all as set forth in Section 3.10 of the Indenture) to direct the
Security Agent to take or refrain from taking action under this
Agreement, including the right (i) of the Security Agent to
exercise any election or option, and to make any decision or
determination, and to give any notice, consent, waiver or
approval under this Agreement or in respect thereof, (ii) to
exercise any and all of the rights, powers and remedies of the
Security Agent hereunder and (iii) to receive all moneys payable
to the Security Agent under this Agreement. The Pledgor agrees
that it will make all payments hereunder in accordance with the
provisions of the Security Deposit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused
their duly authorized officers to execute and deliver this
Agreement as of the date first above written.
PANDA BRANDYWINE CORPORATION,
as Pledgor
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
FLEET NATIONAL BANK (formerly known as
Shawmut Bank Connecticut, National
Association), as Security Agent
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
With Respect to Section 30 only:
PANDA ENERGY CORPORATION,
as limited partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
Exhibit A to
General Partner
Pledge Agreement
ACKNOWLEDGMENT AND CONSENT
Panda-Brandywine, L.P., the Partnership
referred to in the foregoing Amended and Restated General
Partner Pledge Agreement, hereby acknowledges receipt of
a copy thereof and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are
applicable to it.
Panda-Brandywine, L.P. also agrees to make all
payments due to Panda Brandywine Corporation, in its
capacity as general partner of Panda-Brandywine, L.P, in
compliance with the terms of the Participation Agreement
and the Security Deposit Agreement and (i) in the event
that a Reimbursement Event of Default or a Lease Event of
Default shall have occurred and be continuing or (ii) in
connection with a partial or total liquidation or
dissolution of the Partnership (other than in connection
with any deemed liquidation on account of a termination
of the Partnership under Section 708(b)(1)(B) of the
Code, to Fleet National Bank, as Security Agent (the
"Security Agent"), for the benefit of General Electric
Capital Corporation ("GE Capital") and the Owner Trustee
(as defined in the Participation Agreement). Panda-
Brandywine, L.P. further agrees that none of the Security
Agent, the Owner Trustee nor GE Capital will have any of
the obligations of either a general partner or a limited
partner of Panda-Brandywine, L.P. unless such person
affirmatively elects to undertake such obligations in
accordance with the terms of the foregoing General
Partner Pledge Agreement and the Consent of the Power
Purchaser.
December __, 1996
PANDA-BRANDYWINE, L.P.
By Panda Brandywine Corporation,
its general partner
By:________________________________
Name:
Title:
Exhibit B to
General Partner
Pledge Agreement
December __, 1996
Panda-Brandywine, L.P.
4100 Spring Valley
Suite 1001
Dallas, Texas 75244
Gentlemen:
Panda Brandywine Corporation hereby instructs Panda-
Brandywine, L.P. to register the pledge of its general
partnership interest in Panda-Brandywine, L.P. in favor of
Fleet National Bank, as Security Agent (the "Security Agent")
pursuant to the Amended and Restated General Partner Pledge
Agreement, dated as of December __, 1996, between Panda
Brandywine Corporation and the Security Agent.
Very truly yours,
PANDA BRANDYWINE CORPORATION
By___________________________
Title:
FLEET NATIONAL BANK,
as Security Agent
By____________________________
Title:
Exhibit C to
General Partner
Pledge Agreement
December __, 1996
To: Fleet National Bank,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
This statement is to advise you that a pledge of the
following uncertificated security has been registered in the name
of Fleet National Bank, as Security Agent (the "Security Agent"),
as follows:
1. Uncertificated Security:
The entire general partnership interest of Panda
Brandywine Corporation in the undersigned partnership.
2. Registered Owner:
Panda Brandywine Corporation
4100 Spring Valley
Suite 1001
Dallas, Texas 75244
3. Registered Pledgee:
Fleet National Bank, as Security Agent
Taxpayer Identification Number: 060850628
4. There are no liens or restrictions on the
undersigned partnership and no adverse claims to which
such uncertificated security is or may be subject known
to the undersigned partnership, except as set forth in
the Amended and Restated General Partner Pledge
Agreement dated as of December __, 1996 between the
undersigned and the Security Agent.
5. The pledge was registered on December __, 1996.
THIS STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE
ADDRESSEE AS OF THE TIME OF ITS ISSUANCE. DELIVERY OF THIS
STATEMENT, OF ITSELF, CONFERS NO RIGHTS ON THE RECIPIENT. THIS
STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT NOR A SECURITY.
Very truly yours,
PANDA-BRANDYWINE, L.P.
By Panda Brandywine Corporation,
its general partner
By:______________________________
Name:
Title:
EXHIBIT 10.34
AMENDED AND RESTATED
LIMITED PARTNER PLEDGE AGREEMENT
AMENDED AND RESTATED LIMITED PARTNER PLEDGE AGREEMENT,
dated as of December 18, 1996 (this "Agreement"), made by PANDA
ENERGY CORPORATION, a Delaware corporation (together with its
successors and assigns, the "Pledgor") and the sole limited
partner of Panda-Brandywine, L.P., a Delaware limited partnership
(together with its successors and assigns, the "Partnership"), to
FLEET NATIONAL BANK (formerly known as Shawmut Bank Connecticut,
National Association), a national banking association, in its
capacity as Security Agent (the "Security Agent") under the
Security Deposit Agreement (as defined in the Participation
Agreement referred to below).
W I T N E S S E T H :
WHEREAS, the Pledgor is the legal and beneficial owner
of a 50% limited partnership interest in the Partnership (such
partnership interest, being hereinafter referred to as the
"Partnership Interest");
WHEREAS, the Partnership, Panda Brandywine Corporation,
a Delaware corporation, and the sole general partner of the
Partnership (the "General Partner") and General Electric Capital
Corporation, a New York corporation ("GE Capital" or the "Owner
Participant"), entered into the Construction Loan Agreement and
Lease Commitment dated as of March 30, 1995 (the "Construction
Loan Agreement") pursuant to which GE Capital (i) provided
construction financing for the Project and (ii) issued the
Letters of Credit as collateral security for certain obligations
of the Partnership under the Power Purchase Agreement;
WHEREAS, the Pledgor entered into the Limited Partner
Pledge Agreement dated as of March 30, 1995 (as amended,
supplemented or otherwise modified prior to the date hereof, the
"Existing Pledge Agreement"), providing for the collateral
assignment by the Pledgor to the Security Agent of its interest
in the Partnership to secure its obligations to the GE Capital
and the Owner Trustee (as defined below);
WHEREAS, as contemplated by the Construction Loan
Agreement, the Partnership and the Owner Trustee are entering
into the Facility Lease and the other Lease Documents pursuant to
which, among other things, the Owner Trustee will lease the
Facility to the Partnership;
WHEREAS, the Owner Participant has elected to fund the
Facility Lease with non-recourse indebtedness as a leveraged
lease, and pursuant to Section 34 of the Existing Pledge
Agreement, the parties hereto have agreed to amend and restate
the Existing Stock Pledge Agreement subject to the terms and
conditions provided herein;
WHEREAS, the Partnership and GE Capital are entering
into the Reimbursement Agreement to provide for the continued
issuance by GE Capital of the Letters of Credit;
WHEREAS, in order to set forth the rights and
obligations of the Owner Participant, the Owner Trustee, the
Partnership, the Loan Participants, the Administrative Agent, the
Indenture Trustee and the other parties in connection with the
foregoing transactions and to describe and provide for the
transactions contemplated hereby, (i) the parties hereto are
entering into the Participation Agreement, (ii) the Owner Trustee
and the Indenture Trustee are entering into the Indenture, (iii)
certain of the Lessee Security Documents are being amended and
restated pursuant to the Amended and Restated Agreements and (iv)
the Construction Loan Agreement is being terminated;
WHEREAS, it is a condition precedent to the performance
of certain obligations on the Lease Closing Date that the Pledgor
shall have executed and delivered this Agreement to the Security
Agent, for the benefit of the Owner Trustee and GE Capital (and
by collateral assignment, the Indenture Trustee);
WHEREAS, the Pledgor desires to execute this Agreement
to satisfy the conditions described in the preceding recital;
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Defined Terms; Construction.
(a) Unless otherwise defined herein, terms used
herein shall have the meaning set forth in Annex A to the
Participation Agreement dated as of December 18, 1996 (the
"Participation Agreement"), among the Partnership, the General
Partner, the Owner Participant, Fleet National Bank (formerly
known as Shawmut Bank Connecticut, National Association), a
national banking association, not in its individual capacity but
solely as owner trustee (in such capacity, the "Owner Trustee")
under the Trust Agreement and as Security Agent, First Security
Bank, National Association, a national banking association, not
in its individual capacity but solely as indenture trustee (in
such capacity, the "Indenture Trustee") under the Indenture,
Credit Suisse, a bank organized and existing under the laws of
Switzerland, acting by and through its New York branch ("Credit
Suisse"), as administrative agent (in such capacity, the
"Administrative Agent"), and the other entities listed on
Schedule I thereto (the "Loan Participants"). Defined terms in
this Agreement shall include in the singular number the plural
and in the plural number the singular.
(b) The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall,
unless otherwise expressly specified, refer to this Agreement as
a whole and not to any particular provision of this Agreement and
all references to Sections shall be references to Sections of
this Agreement unless otherwise expressly specified.
(c) Unless otherwise expressly specified, any
agreement, contract, or document defined or referred to herein
shall mean such agreement, contract or document in the form
(including all amendments and clarification letters relating
thereto) delivered on the Lease Closing Date as the same may
thereafter be amended, supplemented, or otherwise modified from
time to time in accordance with the terms of such agreement and
the Participation Agreement.
Section 2. Pledge. As security for the Lessee
Obligations and subject to and in accordance with the provisions
of this Agreement, the Pledgor hereby pledges, grants, assigns,
hypothecates, transfers, and delivers to the Security Agent, for
the benefit of GE Capital and the Owner Trustee, a first priority
security interest in the following, whether now owned or
hereafter acquired (the "Collateral"):
(a) all of the Pledgor's limited partnership
interests in the Partnership (including, without limitation,
the Partnership Interest and the Pledgor's right, title and
interest in the Transfer Agreement), and all of the
Pledgor's rights, privileges, authority and powers as
limited partner of the Partnership, whether arising under
the terms of the Partnership Agreement, or at law, or
otherwise;
(b) all income, cash flow, revenues, issues,
profits, losses, distributions, payments, and other property
of every kind and variety due, accruing or owing to, or to
be turned over to, or to be disbursed to the Pledgor by the
Partnership in respect of the property described in the
preceding clause (a), including without limitation, all
rights of the Pledgor to allocations of profit and loss,
distributions and all monies and property representing a
distribution in respect of the property described in the
preceding clause (a); and
(c) all proceeds, products and accessions of
and to any of the property described in the preceding
clauses (a) and (b);
provided, however, that notwithstanding any of the foregoing,
none of the Security Agent, the Owner Trustee nor GE Capital
shall acquire any interest in any of Pledgor's obligations
contained in the Partnership Agreement.
Section 3. Security for Lessee Obligations. This
Agreement secures, and the Collateral is collateral security for,
the payment and performance in full when due, whether at stated
maturity, by acceleration or otherwise, of all Lessee Obligations
now or hereafter existing.
Section 4. Delivery of Collateral. All certificates
or instruments representing or evidencing the Collateral have
been or shall be delivered to and shall be held by or on behalf
of the Security Agent pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly
executed undated instruments of transfer or assignment in blank,
all in form and substance reasonably satisfactory to the Security
Agent. If the Pledgor shall become entitled to receive or shall
receive any other Collateral, then the Pledgor shall, except as
otherwise provided in Section 7, accept and hold the same in
trust for the Security Agent and segregated from the other
property or funds of Pledgor, and shall deliver to the Security
Agent forthwith all such other Collateral (except as provided in
Section 7 hereof) in the form received by the Pledgor, to be held
by the Security Agent, subject to the terms hereof, as part of
the Collateral. Upon the occurrence and during the continuance
of a Reimbursement Event of Default or a Lease Event of Default,
the Security Agent shall have the right, at any time in its
discretion and without notice to the Pledgor, to transfer to or
to register in the name of the Security Agent, the Owner Trustee
or GE Capital or any of their respective nominees any or all of
the Collateral.
Section 5. Representations and Warranties. The
Pledgor represents and warrants as follows:
(a) Due Organization. The Pledgor is a
corporation duly organized and validly existing under the
laws of the State of Delaware, and is qualified to own
property and transact business in every jurisdiction
where the ownership of its property and the nature of its
business as currently conducted requires it to be
qualified.
(b) Power and Authority. The Pledgor has
full corporate power, authority and legal right to enter
into this Agreement and each other Transaction Document
to which it is a party and to perform its obligations
hereunder and thereunder and to pledge all the Collateral
pursuant to this Agreement.
(c) Due Authorization. The pledge of the
Collateral pursuant to this Agreement has been duly
authorized by the Pledgor. This Agreement and each other
Transaction Document to which the Pledgor is a party has
been duly authorized, executed and delivered by the
Pledgor.
(d) Enforceability. This Agreement and
each other Transaction Document to which the Pledgor is a
party constitutes the legal, valid and binding obligation
of the Pledgor enforceable against the Pledgor in
accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, moratorium
or other similar laws affecting creditors' rights
generally and except as enforceability may be limited by
general principles of equity (whether considered in a
suit at law or in equity).
(e) No Conflicts. The execution and
delivery by Pledgor of this Agreement and each other
Transaction Document to which the Pledgor is a party, the
performance by Pledgor of its obligations hereunder and
thereunder, and the pledge by the Pledgor of the
Collateral pursuant to this Agreement will not (i)
violate the provisions of the Pledgor's Certificate of
Incorporation or By-laws; (ii) violate the provisions of
any Law applicable to the Pledgor; (iii) violate any
Contractual Obligation; or (iv) result in or create any
Lien (other than the Lien created hereby) under, or
require any consent which has not been obtained under any
agreement or instrument, or the provisions of any order
or decree binding upon the Pledgor or any of its
properties.
(f) No Consents. No consent of any other
party (including, without limitation, stockholders or
creditors of the Pledgor) and no Governmental Action is
required which has not been obtained either (i) for the
execution, delivery and performance by Pledgor of this
Agreement and each other Transaction Document to which it
is a party, (ii) for the pledge by the Pledgor of the
Collateral pursuant to this Agreement, or (iii) except as
otherwise set forth in Section 34 hereof, for the
exercise by the Security Agent of the rights provided for
in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement (except as may be
required in connection with any disposition of all or any
part of the Collateral under any laws affecting the
offering and sale of securities generally).
(g) Not a Utility. The Pledgor is not,
and will not, as a result of becoming a partner in the
Partnership, be or become: (i) subject to regulation
under Part II or Part III of the Federal Power Act,
except for Sections 202(c), 210, 211, 212, 213, 214 and
305(c) of the Federal Power Act (16 U.S.C. Ss. 824a(c),
824i, 824j, 824k, 824l, 824m and 825d(c), respectively)
and the enforcement provisions of Part III of the Federal
Power Act relating thereto; (ii) an "electric utility
company" for purposes of the Holding Company Act; (iii)
subject to state law or regulation respecting the
financial, rate or organizational regulation of electric
utilities; or (iv) subject to regulation as a "steam
heating company" under Article 78, Public Service
Commission Law, of the Annotated Code of Maryland.
(h) Ownership of Collateral. The Pledgor
is the sole legal and beneficial owner of the Collateral
free and clear of any Lien other than Permitted Liens.
No security agreement, financing statement or other
public notice with respect to all or any part of the
Collateral is on file or of record in any public office,
except such as may have been filed in favor of the
Security Agent pursuant to this Agreement.
(i) Perfection. The execution and
delivery of this Agreement concurrently with the filing
of UCC-1 financing statements in the filing offices
listed on Schedule 1 create a valid and perfected first
priority security interest in the Collateral securing the
payment of the Lessee Obligations.
(j) Chief Executive Office. The chief
executive office of the Pledgor and the office where the
Pledgor keeps its records concerning the Partnership and
the Project and all contracts relating thereto is located
at the address specified on Schedule 2. The Pledgor
shall not establish a new location for its chief
executive office or change its name until (i) it has
given to the Security Agent, GE Capital and, so long as
the Indenture shall be in effect, the Indenture Trustee
not less than 30 days' prior written notice of its
intention so to do, clearly describing such new location
or specifying such new name, as the case may be, and (ii)
with respect to such new location or such new name, as
the case may be, it shall have taken all action,
reasonably satisfactory to the Security Agent, GE Capital
and, so long as the Indenture shall be in effect, the
Indenture Trustee to maintain the security interest of
the Security Agent, on behalf of the Owner Trustee, GE
Capital and the Indenture Trustee, in the Collateral
intended to be granted hereby at all times fully
perfected and in full force and effect.
(k) Sole Limited Partner. The Pledgor is
the sole limited partner of the Partnership. The Pledgor
is not engaged in any transaction or activity unrelated
to the financing of the Partnership and the Project.
(l) No Proceedings. There is no action,
suit or proceeding at law or in equity or by or before
any Governmental Authority or arbitral tribunal now
pending or, to the best knowledge of the Pledgor,
threatened against the Pledgor (i) which questions the
validity or legality of or seeks damages in connection
with this Agreement or any other Transaction Document to
which Pledgor is a party or (ii) which may reasonably be
expected to have a Material Adverse Effect.
(m) Financial Statements. Each of the
financial statements of the Pledgor for the fiscal year
and quarter most recently ended as of the date hereof has
been heretofore furnished to the Owner Participant and
the Administrative Agent, and each of such financial
statements is complete and correct in all material
respects and fairly presents the financial condition of
the Pledgor as at said dates, in conformity with GAAP
applied on a consistent basis, except that the financial
statements were prepared on a cash basis and that certain
expenses have not been capitalized as required by GAAP.
Since the date of such annual financial statement, there
has been no Material Adverse Effect.
(n) Partnership Agreement. The copy of
the Partnership Agreement delivered to the Owner
Participant and the Administrative Agent on or prior to
the Lease Closing Date is a true, complete and correct
copy of the Partnership Agreement on the date hereof.
Section 6. Supplements, Further Assurances. The
Pledgor agrees that at any time and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and
deliver all further instruments and documents, and take all
further action that the Security Agent may reasonably request, in
order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Security Agent to
exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of
the foregoing, the Pledgor will execute and file such financing
or continuation statements, or amendments thereto, and such other
instruments, endorsements or notices, as the Security Agent may
deem necessary or desirable in order to perfect and preserve the
Liens created or intended to be created hereby. The Pledgor
hereby authorizes the Security Agent to file any such financing
or continuation statement without the signature of such Pledgor
to the extent permitted by Applicable Law. A carbon,
photographic or other reproduction of this Agreement shall be
sufficient as a financing statement for filing in any
jurisdiction.
Section 7. Rights of Pledgor; etc.
(a) Generally. The Pledgor shall be
entitled to exercise any and all rights pertaining to the
Collateral or any part thereof (including, without
limitation, the right to receive distributions in respect of
its partnership interest) so long as (i) no Reimbursement
Event of Default or Lease Event of Default shall have
occurred and be continuing and (ii) the exercise of such
rights would not otherwise result in a Reimbursement Event
of Default or a Lease Event of Default. Upon the occurrence
and during the continuance of a Lease Event of Default or a
Reimbursement Event of Default all rights of the Pledgor
which it would otherwise be entitled to exercise pursuant to
the preceding sentence shall cease, and all such rights
shall thereupon become immediately vested in the Security
Agent.
(b) Distributions. Unless a Reimbursement
Event of Default or a Lease Event of Default shall have
occurred and be continuing, the Pledgor shall be entitled to
receive and retain any and all distributions paid in respect
of the Collateral in compliance with the terms of the
Participation Agreement and the Security Deposit Agreement;
provided, however, that any and all
(i) distributions paid or
payable in respect of or in exchange for any
Collateral (whether paid in cash, securities or
other property) in connection with a partial or
total liquidation or dissolution of the
Partnership (other than in connection with any
deemed liquidation on account of a termination of
the Partnership under Section 708(b)(1)(B) of the
Code), and
(ii) all property (whether
cash, securities or other property) paid, payable
or otherwise distributed in redemption of, or in
exchange for, the property described in Section
2(a) above,
shall be, and shall be forthwith delivered to the Security
Agent to hold as, Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the
Security Agent, be segregated from the other property or
funds of the Pledgor, and be forthwith delivered to the
Security Agent as Collateral in the same form as so received
(with any necessary endorsement). Upon the occurrence and
during the continuance of a Reimbursement Event of Default
or a Lease Event of Default, all rights of the Pledgor to
receive the distributions which it would otherwise be
authorized to receive and retain pursuant to the preceding
sentence shall cease, and all such rights shall thereupon
become vested in the Security Agent which shall thereupon
have the sole right to receive and hold as Collateral such
distributions.
(c) Amounts Wrongfully Received Held in
Trust. All distributions and other amounts which are
received by the Pledgor contrary to the provisions of
Section 7(b) above or the Participation Agreement shall be
received in trust for the benefit of the Security Agent,
shall be segregated from other funds of the Pledgor and
shall be forthwith paid over to the Security Agent as
Collateral in the same form as so received (with any
necessary endorsement).
Section 8. Covenants.
(a) Legal Existence. The Pledgor shall
preserve and maintain (i) its legal existence, as a
corporation in good standing under the laws of the State of
Delaware and (ii) its qualification to do business in every
jurisdiction where the ownership of its property and the
nature of its business require it to be so qualified.
(b) Books, Records and Inspections. The
Pledgor shall keep proper books of record and account in
which full, true and correct entries in conformity with
GAAP, except that the Pledgor's financial statements may be
prepared on a cash basis and that certain expenses may be
capitalized other than as required by GAAP, and all
requirements of Law shall be made of all dealings and
transactions in relation to its business and activities.
The Pledgor shall permit officers and designated
representatives of the Security Agent, the Administrative
Agent and the Owner Participant to visit and inspect any of
the properties of the Pledgor, and to examine the books of
record and account of the Pledgor, and discuss the affairs,
finances and accounts of the Pledgor with, and be advised as
to the same by, its and their officers and independent
accountants, all upon reasonable notice and at such
reasonable times as the Security Agent, the Administrative
Agent or the Owner Participant may desire.
(c) Taxes and Claims. The Pledgor shall pay
or cause to be paid when due, all Taxes and all charges,
betterments, or other assessments relating to the
Collateral, and all other lawful claims required to be paid
by the Pledgor, except to the extent any of the same are
subject to a Contest.
(d) Compliance with Law. The Pledgor shall
comply with all Laws, except for such noncompliance as could
not, individually or in the aggregate, have a Material
Adverse Effect.
(e) Governmental Actions. The Pledgor shall
obtain, maintain and comply with all Governmental Actions
applicable to the Pledgor, except for such failure or
noncompliance as could not, individually or in the
aggregate, have a Material Adverse Effect.
(f) Remain as Limited Partner. The Pledgor
shall remain as the sole limited partner of the Partnership
and shall not withdraw as a limited partner in the
Partnership. The Pledgor shall not engage in any business
other than being the limited partner of the Partnership.
(g) No Sale of Collateral; No Liens. The
Pledgor agrees that it will not (i) sell or otherwise
dispose of, or grant any option or warrant with respect to,
the Collateral or any interest therein without the prior
written consent of the Security Agent and (ii) except for
the Lien created hereby, create or permit to exist any Lien
(other than Permitted Liens) upon or with respect to any of
the Collateral or any interest therein or any of its other
property or assets.
(h) Fundamental Changes. The Pledgor shall
not enter into any merger or consolidation, or liquidate,
wind-up or dissolve (or suffer any liquidation or
dissolution) or discontinue its business.
(i) Partnership Agreement; Transfer
Agreement. The Pledgor shall not agree to or permit (i) the
cancellation or termination of the Partnership Agreement or
the Transfer Agreement or (ii) without the prior written
consent of the Owner Participant and the Administrative
Agent, any amendment, supplement, or modification of, or
waiver with respect to any of the provisions of, the
Partnership Agreement or the Transfer Agreement.
(j) Agent for Receipt of Service of Process.
The Pledgor shall appoint and continuously retain a Person
acceptable to the Security Agent as its agent in the State
of New York for receipt of service of process and shall pay
all costs, fees and expenses in connection therewith.
(k) Bankruptcy of the Partnership. The
Pledgor shall not authorize, seek to cause or permit the
Partnership to commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property or to consent to any such
relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding
commenced against it, or to make a general assignment for
the benefit of its creditors.
Section 9. Security Agent Appointed Attorney-In-Fact.
Upon the occurrence of a Reimbursement Event of Default or a
Lease Event of Default, the Pledgor hereby appoints the Security
Agent or any Person or agent whom the Security Agent may
designate the Pledgor's attorney-in-fact with full authority in
the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, at the Pledgor's cost and expense, at any time and
from time to time in the Security Agent's reasonable discretion
to take any action and to execute any instrument which the
Security Agent may deem necessary or advisable to enforce its
rights under this Agreement, including, without limitation,
authority to receive, endorse and collect all instruments made
payable to the Pledgor representing any distribution, interest
payment or other payment in respect of the Collateral or any part
thereof and to give full discharge for the same.
Section 10. Security Agent May Perform. If the
Pledgor fails to perform any agreement contained herein after
receipt of a written request to do so from the Security Agent,
the Security Agent may itself perform, or cause performance of,
such agreement, and the reasonable expenses of the Security
Agent, including the reasonable fees and expenses of its counsel,
incurred in connection therewith shall be payable by the Pledgor
under Section 19.
Section 11. Reasonable Care. The Security Agent shall
be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equivalent to that
which the Security Agent accords its own property of the type of
which the Collateral consists, it being understood that the
Security Agent shall have no responsibility for (i) ascertaining
or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral,
whether or not the Security Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any
Collateral.
Section 12. No Liability. None of the Security Agent,
the Owner Trustee, GE Capital, the Administrative Agent, the
Indenture Trustee, or any Holder nor any of their respective
directors, officers, employees or agents shall be deemed to have
assumed any of the liabilities or obligations of a partner of the
Partnership as a result of the pledge and security interest
granted under or pursuant to this Agreement. None of the
Security Agent, the Owner Trustee, GE Capital, the Administrative
Agent, the Indenture Trustee, or any Holder nor any of their
respective directors, officers, employees or agents shall be
liable for any failure to collect or realize upon the Lessee
Obligations or any collateral security or guarantee therefor, or
any part thereof, or for any delay in so doing nor shall it be
under any obligation to take any action whatsoever with regard
thereto.
Section 13. Remedies Upon Default. If a Reimbursement
Event of Default or a Lease Event of Default shall have occurred
and be continuing:
(a) The Security Agent (i) may become a
substitute or additional limited partner in the Partnership
or designate another Person to become such substitute or
additional limited partner and/or (ii) may exercise the
power of attorney described in Section 9.
(b) (i) The Security Agent may exercise in
respect of the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party upon a
default under the Uniform Commercial Code then in effect in
the State of New York, or unless prohibited by Applicable
Law, the Uniform Commercial Code then in effect in any other
applicable jurisdiction. The Security Agent may also in its
sole discretion, without notice except as specified below,
sell the Collateral or any part thereof in one or more
parcels at public or private sale or at any of the Security
Agent's offices or elsewhere, for cash, on credit or for
future delivery, and at such price or prices and upon such
other terms as the Security Agent may, in accordance with
Applicable Law, deem commercially reasonable, irrespective
of the impact of any such sales on the market price of the
Collateral at any such sale. Each purchaser at any such
sale shall hold the property sold absolutely, free from any
claim or right on the part of the Pledgor, and the Pledgor
hereby waives (to the extent permitted by law) all rights of
redemption, stay and/or appraisal which it now has or may at
any time in the future have under any rule of law or statute
now existing or hereafter enacted. The Pledgor agrees that,
to the extent notice of sale shall be required by law, at
least ten days' notice to the Pledgor of the time and place
of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The
Security Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given.
The Security Agent may adjourn any public or private sale
from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
The Security Agent shall not incur liability as a result of
the sale of the Collateral, or any part thereof, at any
public or private sale. The Pledgor hereby waives any
claims against the Security Agent arising by reason of the
fact that the price at which any Collateral may have been
sold at such a private sale, if commercially reasonable, was
less than the price which might have been obtained at a
public sale, even if the Security Agent accepts the first
offer received and does not offer such Collateral to more
than one offeree.
(ii) The Pledgor recognizes that
the Security Agent may elect in its sole discretion to
sell all or a part of the Collateral to one or more
purchasers in privately negotiated transactions in
which the purchasers will be obligated to agree, among
other things, to acquire the Collateral for their own
account, for investment and not with a view to the
distribution or resale thereof. The Pledgor
acknowledges that any such private sales may be at
prices and on terms less favorable than those
obtainable through a public sale (including, without
limitation, a public offering made pursuant to a
registration statement under the Securities Act of
1933, as amended (the "Securities Act")), and the
Pledgor and the Security Agent agree that such private
sales shall be made in a commercially reasonable manner
and that the Security Agent has no obligation to engage
in public sales and no obligation to delay sale of any
Collateral to permit the issuer thereof to register the
Collateral for a form of public sale requiring
registration under the Securities Act.
(c) Any cash held by the Security Agent as
Collateral and all cash proceeds received by the Security
Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall, as
soon as reasonably practicable, be applied (after payment of
any amounts payable to the Security Agent pursuant to
Section 19 and 20) by the Security Agent first to the
payment of the costs and expenses of such sale, collection
or other realization, if any, including reasonable
compensation to the Security Agent and its agents and
counsel, and all expenses, liabilities and advances made or
incurred by the Security Agent in connection therewith; and
second to the payment of the Lessee Obligations in
accordance with the terms of the Security Deposit Agreement.
The Partnership shall be liable for any deficiency remaining
after any application of funds pursuant hereto. Any surplus
of such cash or cash proceeds held by the Security Agent
after payment in full of such amounts shall be paid over to
the Pledgor, or its successors or assigns, or to whomsoever
may be lawfully entitled to receive such surplus or as a
court of competent jurisdiction may direct.
Section 14. Purchase of the Collateral. The Security
Agent, the Owner Participant, GE Capital, the Administrative
Agent, the Indenture Trustee or any Loan Participant or any of
their respective Affiliates may be a purchaser of the Collateral
or any part thereof or any right or interest therein at any sale
thereof, whether pursuant to foreclosure, power of sale or
otherwise hereunder and the Security Agent may apply the purchase
price to the payment of the Lessee Obligations secured hereby.
Any such purchaser of all or any part of the Collateral shall,
upon any such purchase, acquire good title to the Collateral so
purchased, free of the security interests created by this
Agreement.
Section 15. Notices. All notices, requests and
demands to or upon the respective parties hereto to be effective
shall be in writing (including by telecopy), and shall be deemed
to have been duly given or made when delivered by hand, or five
days after being deposited in the United States mail, postage
prepaid, or, in the case of telecopy notice, when confirmation is
received, or, in the case of a nationally recognized overnight
courier service, one Business Day after delivery to such courier
service, addressed, in the case of each party hereto, at its
address specified below its name on Schedule 2 hereto, or to such
other address as may be designated by any party in a written
notice to the other parties hereto.
Section 16. Continuing Security Interest. This
Agreement shall create a continuing Lien in the Collateral until
the release thereof pursuant to Section 18.
Section 17. Security Interest Absolute. All rights of
the Security Agent and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability
of any of the Transaction Documents or any other agreement
or instrument relating thereto;
(b) any change in the time, manner or place
of payment of, or in any other term of, all or any of the
Lessee Obligations, or any other amendment or waiver of or
any consent to any departure from the Transaction Documents
or any other agreement or instrument relating thereto;
(c) any exchange, release or non-perfection
of any other collateral, or any release or amendment or
waiver of or consent to any departure from any guaranty, for
all or any of the Lessee Obligations; or
(d) any other circumstance which might
otherwise constitute a defense available to, or a discharge
of, the Pledgor.
Section 18. Release. Upon the indefeasible payment in
full of the Lessee Obligations, the Security Agent, upon the
request and at the expense of the Pledgor, shall execute and
deliver all such documentation necessary to release the liens
created pursuant to this Agreement.
Section 19. Expenses. The Pledgor will upon demand
pay to the Security Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, and any transfer taxes
which the Security Agent may incur in connection with (i) the
custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral pursuant to the
exercise or enforcement of any of the rights of the Security
Agent hereunder or (ii) the failure by the Pledgor to perform or
observe any of the provisions hereof. Any amount payable by the
Pledgor pursuant to this Section shall be payable on demand and
shall constitute Lessee Obligations secured hereby.
Section 20. Indemnity.
(a) The Pledgor agrees to indemnify, reimburse
and hold the Security Agent, GE Capital, the Administrative
Agent, the Indenture Trustee and the Loan Participants, the Owner
Trustee (in its individual and trust capacities), their
respective successors and assigns and their respective officers,
directors, employees, and agents (each individually, an
"Indemnitee," and collectively, "Indemnitees") harmless from any
and all liabilities, obligations, damages, injuries, penalties,
claims, demands, actions, suits, judgments and any and all costs
and expenses (including reasonable attorneys' fees and
disbursements) (such expenses, for purposes of this Section,
hereinafter "expenses") of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of (i) this Agreement or the documents
executed in connection herewith or in any other way connected
with the administration of the Lien or the security interest
granted hereby, or the enforcement of any of the terms hereof, or
the preservation of any rights hereunder, (ii) any failure of the
Pledgor to comply with its obligations under this Agreement, or
any misrepresentation by the Pledgor in this Agreement, or in any
statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement, or (iii) the
ownership, purchase, delivery, control, acceptance, financing,
possession, condition, sale, return or other disposition, or use
of, the Collateral, excluding (x) those finally judicially
determined to have arisen, with respect to any Indemnitee, solely
from the gross negligence or willful misconduct of such
Indemnitee or (y) unless specifically provided for elsewhere in
this Agreement, those arising out of the actions of any
Indemnitee while in possession or control of the Collateral.
(b) Without limiting the application of
subsection (a), the Pledgor agrees to pay, or reimburse the
Security Agent for any and all fees, costs and expenses of
whatever kind or nature incurred in connection with the
preservation, protection or validation of the Security
Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in
connection with the recording or filing of instruments and
documents in public offices, payment or discharge of any
taxes or Lien upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other
fees, costs and expenses in connection with protecting,
maintaining or preserving the Collateral and the Security
Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any
actions, suits or proceedings arising out of or relating to
the Collateral.
Section 21. Lessee Obligations Secured by Collateral.
Any amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement, and any amounts paid by the
Security Agent in preservation of any of its rights or interest
in the Collateral, together with interest on such amounts from
the date paid until reimbursement in full at a rate per annum
equal at all times to the Overdue Rate shall constitute Lessee
Obligations secured by the Collateral.
Section 22. Reinstatement. This Agreement shall
continue to be effective or be reinstated, as the case may be, if
at any time any amount received by the Security Agent, the Owner
Trustee, GE Capital, the Administrative Agent, any Holder, or the
Indenture Trustee hereunder, under any other Transaction Document
or pursuant hereto or thereto is rescinded or must otherwise be
restored or returned by the Security Agent, the Owner Trustee, GE
Capital, the Administrative Agent, any Holder or the Indenture
Trustee upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Pledgor or the Partnership or upon the
appointment of any intervenor or conservator of, or trustee or
similar official for, Pledgor or the Partnership or any
substantial part of their respective assets, or upon the entry of
an order by a bankruptcy court avoiding the payment of such
amount, or otherwise, all as though such payments had not been
made.
Section 23. Amendments, etc. No waiver, amendment,
modification or termination of any provision of this Agreement,
or consent to any departure by the Pledgor therefrom, shall in
any event be effective (x) without the written concurrence of the
Security Agent and (y) unless made in accordance with section
13.1 of the Participation Agreement and none of the Collateral
shall be released without the written consent of the Security
Agent. Any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 24. Successors and Assigns. This Agreement
shall be binding upon the Pledgor and its successors and assigns
and shall inure to the benefit of the Security Agent, the Owner
Trustee, GE Capital and, so long as the Indenture shall be in
effect, the Indenture Trustee and their respective successors and
assigns.
Section 25. Survival.
(a) All agreements, statements, representations
and warranties made by the Pledgor herein or in any certificate
or other instrument delivered by the Pledgor or on its behalf
under this Agreement shall be considered to have been relied upon
by the Security Agent and shall survive the execution and
delivery of this Agreement and the other Transaction Documents
regardless of any investigation made by or on behalf of the
Security Agent.
(b) The indemnity obligations of Pledgor
contained in Section 20 shall continue in full force and effect
notwithstanding the full payment of the Lessee Obligations and
notwithstanding the discharge thereof.
Section 26. No Waiver; Remedies Cumulative. No
failure or delay on the part of the Security Agent in exercising
any right, power or privilege hereunder and no course of dealing
between the Pledgor and the Security Agent shall operate as a
waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Security Agent (or the Owner Trustee
or GE Capital) would otherwise have.
Section 27. Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
Section 28. Headings Descriptive. The headings of the
several Sections and subsections of this Agreement are inserted
for convenience only and shall not in any way affect the meaning
or construction of any provision of this Agreement.
Section 29. Severability. In case any provision in or
obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.
Section 30. Consent to Pledge by Limited Partner.
Notwithstanding anything to the contrary contained in the
Partnership Agreement, the General Partner hereby consents to (i)
the execution, delivery, and performance by the Pledgor of this
Agreement, (ii) the grant of the pledge by the Pledgor to the
Security Agent, for the benefit of GE Capital and the Owner
Trustee (and, by collateral assignment, the Indenture Trustee),
of its partnership interests in the Partnership pursuant to this
Agreement, (iii) the sale, transfer, assignment or other
disposition (whether through foreclosure, deed-in-lieu of
foreclosure, or otherwise) of such partnership interests to the
Security Agent, its designee, or any purchaser of such
partnership interests pursuant to the exercise by the Security
Agent of its rights and remedies under this Agreement and (iv)
the admission to the Partnership of the Security Agent, such
designee, or such purchaser as a limited partner of the
Partnership in connection with the exercise of such rights and
remedies.
Section 31. Conflict with Participation Agreement. In
case of a conflict between any provision of this Agreement and
any provision of the Participation Agreement, the provisions of
the Participation Agreement shall control and govern. No such
conflict shall be deemed to exist merely because this Agreement
imposes greater obligations on the Pledgor than the Participation
Agreement.
Section 32. Recourse Limited to Collateral. The
Security Agent acknowledges and agrees that, except in the case
of fraud, willful misconduct or knowing misrepresentation on the
part of Pledgor, its sole recourse for payment and performance of
the obligations of the Pledgor hereunder shall be to the
Collateral. This provision shall not be deemed to waive any
cause of action the Security Agent may have against any Person
for fraud, willful misconduct or knowing misrepresentation by
such Person.
Section 33. GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF
LAW EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND ANY
ACTION FOR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND APPELLATE COURTS FROM ANY THEREOF. THE PLEDGOR
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS REFERRED TO IN
SECTION 15. THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER JURISDICTION.
(c) EACH OF THE PLEDGOR AND THE SECURITY AGENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
Section 34. Certain Rights of Power Purchaser.
Nothing in this Agreement shall be deemed to limit the provisions
of the Consent of the Power Purchaser, which provisions are
solely for the benefit of the Power Purchaser and not the
Pledgor. Without limiting the scope of the foregoing, the
Security Agent agrees, for the exclusive benefit of the Power
Purchaser and not the Pledgor, that the exercise of remedies or
any similar action under this Agreement is subject to, and shall
be conducted in a manner consistent with, the Power Purchaser's
rights under (i) the Consent of the Power Purchaser and (ii) the
Power Purchase Agreement and the Transfer Agreement (to the
extent such rights under the Power Purchase Agreement and the
Transfer Agreement are not explicitly waived by the Power
Purchaser in accordance with the terms of the Consent of the
Power Purchaser).
Section 35. Assignment to Indenture Trustee. In order
to secure the indebtedness evidenced by the Loan Certificates and
certain other obligations as provided in the Indenture, the
Indenture provides, among other things, for the assignment by the
Owner Trustee, to the Indenture Trustee of all of its right,
title and interest in, to and under this Agreement, to the extent
set forth in the Indenture, and for the creation of a Lien on and
security interest in the Lessor's Estate in favor of the
Indenture Trustee, and in furtherance thereof, the Lessee and
Owner Trustee have entered into the Security Deposit Agreement
with the Security Agent. The Pledgor hereby acknowledges and
consents to such assignment and such security interest and hereby
acknowledges that to the extent set forth in the Indenture, the
Indenture Trustee shall have the right in its own name (in
certain cases together with the Owner Trustee and in other cases
to the exclusion of the Owner Trustee, all as set forth in
Section 3.10 of the Indenture) to direct the Security Agent to
take or refrain from taking action under this Agreement,
including the right (i) of the Security Agent to exercise any
election or option, and to make any decision or determination,
and to give any notice, consent, waiver or approval under this
Agreement or in respect thereof, (ii) to exercise any and all of
the rights, powers and remedies of the Security Agent and (iii)
to receive all moneys payable to the Security Agent under this
Agreement. The Pledgor will make all payments hereunder in
accordance with the provisions of the Security Deposit Agreement.
IN WITNESS WHEREOF, the parties hereto have
caused their duly authorized officers to execute and
deliver this Agreement as of the date first above
written.
PANDA ENERGY CORPORATION,
a Delaware corporation,
as Pledgor
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
FLEET NATIONAL BANK,
as Security Agent
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
With Respect to Section 30 only:
PANDA BRANDYWINE CORPORATION,
as general partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
Exhibit A to
Limited Partner
Pledge Agreement
ACKNOWLEDGMENT AND CONSENT
Panda-Brandywine, L.P., the Partnership
referred to in the foregoing Amended and Restated Limited
Partner Pledge Agreement, hereby acknowledges receipt of
a copy thereof and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are
applicable to it.
Panda-Brandywine, L.P. also agrees to make all
payments due to Panda Energy Corporation, in its capacity
as limited partner of Panda-Brandywine, L.P., a Delaware
corporation, in compliance with the terms of the
Participation Agreement and the Security Deposit
Agreement and (i) in the event that a Reimbursement Event
of Default or a Lease Event of Default shall have
occurred and be continuing or (ii) in connection with a
partial or total liquidation or dissolution of the
Partnership (other than in connection with any deemed
liquidation on account of a termination of the
Partnership under Section 708(b)(1)(B) of the Code, to
Fleet National Bank, as Security Agent (the "Security
Agent"). Panda-Brandywine, L.P. further agrees that the
Security Agent will not have any of the obligations of
either a limited partner or a general partner of Panda-
Brandywine, L.P. unless the Security Agent affirmatively
elects to undertake such obligations in accordance with
the terms of the foregoing Amended and Restated Limited
Partner Pledge Agreement and the Consent of the Power
Purchaser.
December __, 1996
PANDA-BRANDYWINE, L.P.
By Panda Brandywine Corporation,
its general partner
By:________________________________
Name:
Title:
Exhibit B to
Limited Partner
Pledge Agreement
December __, 1996
Panda-Brandywine, L.P.
4100 Spring Valley
Suite 1001
Dallas, Texas 75244
Gentlemen:
Panda Energy Corporation, a Delaware corporation,
hereby instructs Panda-Brandywine, L.P. to register the pledge of
its limited partnership interest in Panda-Brandywine, L.P. in
favor of Fleet National Bank, as Security Agent (the "Security
Agent") pursuant to the Amended and Restated Limited Partner
Pledge Agreement, dated as of December __, 1996 between Panda
Energy Corporation and the Security Agent.
Very truly yours,
PANDA ENERGY CORPORATION,
a Delaware corporation
By___________________________
Title:
FLEET NATIONAL BANK,
as Security Agent
By____________________________
Title:
Exhibit C to
Limited Partner
Pledge Agreement
December __, 1996
To: Fleet National Bank,
as Security Agent
777 Main Street
Hartford, Connecticut 06115
Attention: Corporate Trust Administration
This statement is to advise you that a pledge of the
following uncertificated security has been registered in the name
of Fleet National Bank, as Security Agent, as follows:
1. Uncertificated Security:
The entire limited partnership interest of Panda
Energy Corporation in the undersigned partnership.
2. Registered Owner:
Panda Energy Corporation,
a Delaware corporation
4100 Spring Valley
Suite 1001
Dallas, Texas 75244
3. Registered Pledgee:
Fleet National Bank, as Security Agent
Taxpayer Identification Number: 060850628
4. There are no liens or restrictions on the
undersigned partnership and no adverse claims to which
such uncertificated security is or may be subject known
to the undersigned partnership, except as set forth in
the Amended and Restated Limited Partner Pledge
Agreement dated as of December __, 1996 between the
undersigned and Fleet National Bank, as Security Agent.
5. The pledge was registered on December __, 1996.
THIS STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE
ADDRESSEE AS OF THE TIME OF ITS ISSUANCE. DELIVERY OF THIS
STATEMENT, OF ITSELF, CONFERS NO RIGHTS ON THE RECIPIENT. THIS
STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT NOR A SECURITY.
Very truly yours,
PANDA-BRANDYWINE, L.P.
By Panda Brandywine Corporation,
its general partner
By:______________________________
Name:
Title:
EXHIBIT 10.35
AMENDED AND RESTATED
STOCK PLEDGE AGREEMENT
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT, dated as
of December 18, 1996 (this "Agreement"), made by PANDA
INTERHOLDING CORPORATION, a Delaware corporation (together with
its successors and assigns, the "Pledgor") to FLEET NATIONAL BANK
(formerly known as Shawmut Bank Connecticut, National
Association), a national banking association, in its capacity as
Security Agent (the "Security Agent") under the Security Deposit
Agreement (as defined in the Participation Agreement referred to
below).
W I T N E S S E T H :
WHEREAS, the Pledgor is the legal and beneficial owner
of all of the shares of common stock described in Schedule 1
annexed hereto (such shares of common stock together with any
stock options or rights received pursuant to Section 2 hereof,
being hereinafter referred to as the "Pledged Shares") issued by
Panda Brandywine Corporation, a Delaware corporation (the
"General Partner"), Panda Energy Corporation, a Delaware
corporation ("Panda Energy-Delaware") and Brandywine Water
Company, a Delaware corporation (Panda Brandywine Corporation,
Panda Energy-Delaware and Brandywine Water Company being
individually referred to herein as the "Company" and collectively
referred to herein as the "Companies");
WHEREAS, Panda-Brandywine, L.P. (the "Partnership"),
the General Partner and General Electric Capital Corporation, a
New York corporation ("GE Capital" or the "Owner Participant"),
entered into the Construction Loan Agreement and Lease Commitment
dated as of March 30, 1995 (the "Construction Loan Agreement")
pursuant to which GE Capital (i) provided construction financing
for the Project and (ii) issued the Letters of Credit as
collateral security for certain obligations of the Partnership
under the Power Purchase Agreement;
WHEREAS, the Pledgor (or its predecessors in interest,
Panda Holdings Inc., a Delaware corporation, and Panda Energy
Corporation, a Texas corporation ("PEC")) entered into the Stock
Pledge Agreement dated as of March 30, 1995 (as amended,
supplemented or otherwise modified prior to the date hereof, the
"Existing Stock Pledge Agreement"), providing for the collateral
assignment by the Pledgor to the Security Agent of the capital
stock of the Companies to secure the obligations of the
Partnership to GE Capital and the Owner Trustee;
WHEREAS, as contemplated by the Construction Loan
Agreement, the Partnership and the Owner Trustee are entering
into the Facility Lease and the other Lease Documents pursuant to
which, among other things, the Owner Trustee will lease the
Facility to the Partnership;
WHEREAS, the Owner Participant has elected to fund the
Facility Lease with non-recourse indebtedness as a leveraged
lease and in connection therewith, the parties hereto have agreed
to amend and restate the Existing Stock Pledge Agreement subject
to the terms and conditions provided herein;
WHEREAS, the Partnership and GE Capital are entering
into the Reimbursement Agreement to provide for the continued
issuance by GE Capital of the Letters of Credit;
WHEREAS, in order to set forth the rights and
obligations of the Owner Participant, the Owner Trustee, the
Partnership, the Loan Participants, the Administrative Agent, the
Indenture Trustee and the other parties in connection with the
foregoing transactions and to describe and provide for the
transactions contemplated hereby, (i) the parties hereto are
entering into the Participation Agreement, (ii) the Owner Trustee
and the Indenture Trustee are entering into the Indenture, (iii)
certain of the Lessee Security Documents are being amended and
restated pursuant to the Amended and Restated Agreements and (iv)
the Construction Loan Agreement is being terminated;
WHEREAS, it is a condition precedent to the performance
of certain obligations on the Lease Closing Date that the Pledgor
shall have executed and delivered this Agreement to the Security
Agent, for the benefit of the Owner Trustee and GE Capital (and
by collateral assignment, the Indenture Trustee);
WHEREAS, the Pledgor desires to execute this Agreement
to satisfy the condition described in the preceding recital;
NOW, THEREFORE, in consideration of the foregoing
premises and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
Pledgor hereby agrees with the Security Agent, for the benefit of
the Owner Trustee and GE Capital, as follows:
Section 1. Defined Terms; Construction.
(a) Unless otherwise defined herein, terms used
herein shall have the meaning set forth in Annex A to the
Participation Agreement dated as of December 18, 1996 (the
"Participation Agreement"), among the Partnership, the General
Partner, the Owner Participant, Fleet National Bank (formerly
known as Shawmut Bank Connecticut, National Association), a
national banking association, not in its individual capacity but
solely as owner trustee (in such capacity, the "Owner Trustee")
under the Trust Agreement and as Security Agent, First Security
Bank, National Association, a national banking association, not
in its individual capacity but solely as indenture trustee (in
such capacity, the "Indenture Trustee") under the Indenture,
Credit Suisse, a bank organized and existing under the laws of
Switzerland, acting by and through its New York branch ("Credit
Suisse"), as administrative agent (in such capacity, the
"Administrative Agent"), and the other entities listed on
Schedule I thereto (the "Loan Participants"). Defined terms in
this Agreement shall include in the singular number the plural
and in the plural number the singular.
(b) The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall,
unless otherwise expressly specified, refer to this Agreement as
a whole and not to any particular provision of this Agreement and
all references to Sections shall be references to Sections of
this Agreement unless otherwise expressly specified.
(c) Unless otherwise expressly specified, any
agreement, contract, or document defined or referred to herein
shall mean such agreement, contract or document in the form
(including all amendments and clarification letters relating
thereto) delivered on the Lease Closing Date as the same may
thereafter be amended, supplemented, or otherwise modified from
time to time in accordance with the terms of such agreement and
the Participation Agreement.
Section 2. Pledge. As security for the Lessee
Obligations and subject to and in accordance with the provisions
of this Agreement, the Pledgor hereby pledges, grants, assigns,
hypothecates, transfers, and delivers to the Security Agent, for
the benefit of GE Capital and the Owner Trustee, a first priority
security interest in the following (the "Collateral"):
(i) the Pledged Shares, all additional
shares of stock of each Company from time to time
acquired by the Pledgor in any manner (which shares
shall be deemed to be part of the Pledged Shares), and
the certificates representing all such shares and any
interest of the Pledgor in the entries on the books of
any financial intermediary pertaining to such shares;
(ii) all dividends, cash, options,
warrants, rights, instruments and other property or
proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares or the additional
shares; and
(iii) all proceeds of the foregoing
items described in clauses (i) and (ii) above.
Section 3. Security for Lessee Obligations. This
Agreement secures, and the Pledged Shares and the other
Collateral are collateral security for, the payment and
performance in full when due, whether at stated maturity, by
acceleration or otherwise of all Lessee Obligations now or
hereafter existing.
Section 4. Delivery of Collateral. All certificates
or instruments representing or evidencing the Collateral have
been or shall be delivered to and shall be held by or on behalf
of the Security Agent, pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly
executed undated instruments of transfer or assignment in blank,
all in form and substance reasonably satisfactory to the Security
Agent. If the Pledgor shall become entitled to receive or shall
receive any other Collateral, then the Pledgor shall, except as
otherwise provided in Section 7, accept and hold the same in
trust for the Security Agent, and segregated from the other
property or funds of Pledgor, and shall deliver to the Security
Agent, forthwith all such other Collateral (except as provided in
Section 7 hereof) in the form received by the Pledgor, to be held
by the Security Agent, subject to the terms hereof, as part of
the Collateral. Upon the occurrence and during the continuance
of a Reimbursement Event of Default or a Lease Event of Default,
the Security Agent shall have the right, at any time in its
discretion and without notice to the Pledgor, to transfer to or
to register in the name of the Security Agent, the Owner Trustee
or GE Capital or any of their respective nominees any or all of
the Collateral.
Section 5. Representations and Warranties. The
Pledgor represents and warrants as follows:
(a) Due Organization. The Pledgor is a
corporation duly organized and validly existing under the laws of
the State of Delaware, and is qualified to own property and
transact business in every jurisdiction where the ownership of
its property and the nature of its business as currently
conducted requires it to be so qualified.
(b) Power and Authority. The Pledgor has full
corporate power, authority and legal right to enter into this
Agreement and to perform its obligations hereunder and to pledge
all the Collateral pursuant to this Agreement.
(c) Due Authorization. The pledge of the
Collateral pursuant to this Agreement has been duly authorized by
the Pledgor. This Agreement has been duly authorized, executed
and delivered by the Pledgor.
(d) Enforceability. This Agreement constitutes
the legal, valid and binding obligation of the Pledgor
enforceable against the Pledgor in accordance with its terms
except as enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws affecting creditors'
rights generally and except as enforceability may be limited by
general principles of equity (whether considered in a suit at law
or in equity).
(e) No Conflicts. The execution and delivery by
Pledgor of this Agreement, the performance by Pledgor of its
obligations hereunder, and the pledge by the Pledgor of the
Collateral pursuant to this Agreement will not (i) violate the
provisions of the Pledgor's Certificate of Incorporation or
By-laws; (ii) violate the provisions of any Law applicable to the
Pledgor; (iii) violate any Contractual Obligation; or (iv) result
in or create any Lien (other than the Lien created hereby) under,
or require any consent which has not been obtained under any
agreement or instrument, or the provisions of any order or decree
binding upon the Pledgor or any of its properties.
(f) No Consents. No consent of any other party
(including, without limitation, stockholders or creditors of the
Pledgor) and no Governmental Action is required which has not
been obtained either (i) for the execution, delivery and
performance by Pledgor of this Agreement, (ii) for the pledge by
the Pledgor of the Collateral pursuant to this Agreement, or
(iii) for the exercise by the Security Agent of the rights
provided for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement (except as may be required
in connection with any disposition of all or any part of the
Collateral under any laws affecting the offering and sale of
securities generally).
(g) No Proceedings. There is no action, suit or
proceeding at law or in equity or by or before any Governmental
Authority or arbitral tribunal now pending or, to the best
knowledge of the Pledgor, threatened against the Pledgor (i)
which questions the validity or legality of or seeks damages in
connection with this Agreement or any other Transaction Document
to which Pledgor is a party or (ii) which may reasonably be
expected to have a Material Adverse Effect.
(h) Ownership of Collateral. The Pledgor is the
sole legal and beneficial owner of the Pledged Shares free and
clear of any Lien (other than Permitted Liens) other than the
Lien created pursuant to this Agreement.
(i) Validly Issued. All of the Pledged Shares
have been duly authorized and validly issued and are fully paid
and non-assessable.
(j) Perfection. The pledge of the Collateral
delivered to the Security Agent pursuant to this Agreement
creates a valid and perfected first priority security interest in
the Collateral securing the payment of the Lessee Obligations
assuming continued possession thereof by the Security Agent or
its agent.
(k) Percentage Ownership. The Pledged Shares
constitute one hundred percent (100%) of the issued and
outstanding shares of stock of each Company.
Section 6. Supplements, Further Assurances. The
Pledgor agrees that at any time and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and
deliver all further instruments and documents, and take all
further action that the Security Agent may reasonably request, in
order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Security Agent to
exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
Section 7. Voting Rights; Dividends; etc.
(a) The Pledgor shall be entitled to exercise any
and all voting and other consensual rights pertaining to the
Collateral or any part thereof so long as (i) no Reimbursement
Event of Default or Lease Event of Default shall have occurred
and be continuing and (ii) the exercise of such voting and other
consensual rights would not result in a Reimbursement Event of
Default or a Lease Event of Default. Upon the occurrence and
during the continuance of a Reimbursement Event of Default or a
Lease Event of Default all rights of the Pledgor to exercise the
voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to the preceding sentence shall
cease, and all such rights shall thereupon become vested in the
Security Agent, which shall thereupon have the sole right to
exercise such voting and other consensual rights.
(b) The Pledgor shall be entitled to receive and
retain and distribute, by dividend or otherwise, to its
stockholders any and all distributions paid in respect of the
Collateral in compliance with the terms of the Participation
Agreement and the Security Deposit Agreement so long as (i) no
Reimbursement Event of Default or Lease Event of Default shall
have occurred and be continuing and (ii) the receipt of such
distributions would not result in a Reimbursement Event of
Default or in a Lease Event of Default; provided, however, that
any and all
(i) distributions paid or payable in
shares (or rights to shares) of any Company,
(ii) distributions paid or payable in
cash, securities or other property in respect of any
Collateral in connection with a partial or total
liquidation or dissolution, and
(iii) cash, securities or other
property paid, payable or otherwise distributed in
redemption of, or in exchange for, any Collateral,
shall be, and shall be forthwith delivered to the Security Agent
to hold as Collateral and shall, if received by the Pledgor, be
received in trust for the benefit of the Security Agent, be
segregated from the other property or funds of the Pledgor, and
be forthwith delivered to the Security Agent as Collateral in the
same form as so received (with any necessary endorsement). Upon
the occurrence and during the continuance of a Reimbursement
Event of Default or a Lease Event of Default all rights of the
Pledgor to thereafter receive the distributions which it would
otherwise be authorized to receive pursuant to the preceding
sentence shall cease, and all such rights shall thereupon become
vested in the Security Agent which shall thereupon have the sole
right to receive and hold as Collateral such distributions.
(c) All distributions and other amounts which are
received by the Pledgor contrary to the provisions of this
Section or the Participation Agreement shall be received in trust
for the benefit of the Security Agent, shall be segregated from
other funds of the Pledgor, and shall be forthwith paid over to
the Security Agent as Collateral in the same form as so received
(with any necessary endorsement).
(d) In order to permit the Pledgor to exercise
the voting and other rights which it is entitled to exercise
pursuant to subsection (a) above and to receive the distributions
which it is authorized to receive and retain pursuant to
subsection (b) above, the Security Agent shall, if necessary,
execute and deliver (or cause to be executed and delivered) to
the Pledgor all such proxies, dividend payment orders and other
instruments as the Pledgor may reasonably request.
Section 8. Covenants.
(a) Legal Existence. The Pledgor shall preserve
and maintain (i) its legal existence as a corporation in good
standing under the laws of the State of Delaware and (ii) its
qualification to do business in every jurisdiction where the
ownership of its property and the nature of its business require
it to be so qualified.
(b) No Sale of Collateral; No Liens. The Pledgor
agrees that it will not (i) sell or otherwise dispose of, or
grant any option or warrant with respect to, the Collateral or
any interest therein without the prior written consent of the
Security Agent, (ii) except for the Lien created hereby, create
or permit to exist any Lien (other than Permitted Liens) upon or
with respect to any of the Collateral or any interest therein or
(iii) permit any Company to merge or consolidate unless all the
outstanding capital stock of the surviving or resulting
corporation is, upon such merger or consolidation, pledged
hereunder and no cash, securities or other property is
distributed in respect of the outstanding shares of any other
constituent corporation.
(c) Additional Shares. The Pledgor agrees that
it will cause each Company not to issue any stock or other
securities in addition to or in substitution for the Pledged
Shares, unless such stock or securities are pledged to the
Security Agent in accordance with this Agreement. The Pledgor
agrees that it will pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all
additional shares of stock or other securities of each Company.
(d) Agent for Receipt of Service of Process. The
Pledgor shall appoint and continuously retain a Person acceptable
to the Security Agent as its agent in the State of New York for
receipt of service of process and shall pay all costs, fees and
expenses in connection therewith.
(e) Subsidiaries. All Subsidiaries (including
partnerships) incorporated or formed in the United States
(whether now existing or hereafter acquired or formed) of the
Pledgor which are engaged in the financing, development,
construction or operation of independent power production or
energy transmission projects located in the United States
(collectively, "US Cogen Subsidiaries"), other than Panda-
Kathleen, L.P. (the "Kathleen Partnership"), Panda-Kathleen
Corporation ("Panda-Kathleen Corp."), the general partner of the
Kathleen Partnership, and Panda/Live Oak Corporation ("Panda/Live
Oak"), the limited partner of the Kathleen Partnership (the
Kathleen Partnership, Panda-Kathleen Corp. and Panda/Live Oak
hereinafter referred to as the "Kathleen Subsidiaries"), are and
shall continue to be Subsidiaries of the Pledgor; provided that
the Kathleen Subsidiaries are and shall continue to be
Subsidiaries of PEC and provided further that PEC shall cause the
Kathleen Subsidiaries to become Subsidiaries of the Pledgor
within one hundred eighty (180) days following the date of
Financial Closing, if any, or the date of Commercial Operations,
if any (whichever first occurs), with respect to the cogeneration
facility being developed by the Kathleen Partnership (the
"Kathleen Facility"). For the purposes hereof, "Financial
Closing" shall mean the closing of the initial construction or
long-term project financing for the Kathleen Facility, whichever
first occurs. "Commercial Operations" shall mean (i) the
completion of construction and testing and the functioning of the
Kathleen Facility, and (ii) the satisfaction and discharge of all
completion requirements of, and commencement of regular capacity
or reservation payments under, the purchase, transportation or
other off-take or use contracts for the Kathleen Project. The
foregoing notwithstanding, but subject to the provisions of
Section 8(b) hereof and the provisions of the Participation
Agreement, the Pledgor shall be permitted to sell all or any of
the stock of any US Cogen Subsidiary to any Person who is not an
Affiliate of Pledgor.
(f) Bankruptcy of the Companies. The Pledgor
shall not authorize, seek to cause or permit any of the Companies
to commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property or to
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or to make a general assignment
for the benefit of the creditors.
(g) Bankruptcy of Pledgor. PEC shall not
authorize, seek to cause or permit Pledgor to commence a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it
or any substantial part of its property or to consent to any such
relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced
against it, or to make a general assignment for the benefit of
the creditors.
Section 9. Security Agent Appointed Attorney-In-Fact.
Upon the occurrence of a Reimbursement Event of Default or a
Lease Event of Default, the Pledgor hereby appoints the Security
Agent or any Person or agent whom the Security Agent may
designate the Pledgor's attorney-in-fact, with full authority in
the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, at the Pledgor's cost and expense, at any time and
from time to time in the Security Agent's reasonable discretion
to take any action and to execute any instrument which the
Security Agent may deem necessary or advisable to enforce its
rights under this Agreement, including, without limitation,
authority to receive, endorse and collect all instruments made
payable to the Pledgor representing any dividends, interest
payment or other distribution in respect of the Collateral or any
part thereof and to give full discharge for the same.
Section 10. Security Agent May Perform. If the
Pledgor fails to perform any agreement contained herein after
receipt of a written request to do so from the Security Agent,
the Security Agent may itself perform, or cause performance of,
such agreement, and the reasonable expenses of the Security
Agent, including the reasonable fees and expenses of its counsel,
incurred in connection therewith shall be payable by the Pledgor
under Section 19.
Section 11. Reasonable Care. The Security Agent shall
be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equivalent to that
which the Security Agent accords its own property consisting of
negotiable securities, cash or other forms of property as
applicable, it being understood that, subject to the exercise of
such reasonable care, the Security Agent shall have no
responsibility for (i) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not the Security
Agent has or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps to preserve rights against any parties
with respect to any Collateral.
Section 12. No Liability. None of the Security Agent,
the Owner Trustee, GE Capital, the Administrative Agent, the
Indenture Trustee, any Holder nor any of their respective
directors, officers, employees or agents shall be deemed to have
assumed any of the liabilities or obligations of a shareholder of
any of the companies, or of the owner of any Pledged Shares or
any other security included in the Collateral from time to time
as a result of the pledge and security interest granted under or
pursuant to this Agreement. None of the Security Agent, the
Owner Trustee, GE Capital, the Administrative Agent, the
Indenture Trustee, any Holder nor any of their respective
directors, officers, employees or agents shall be liable for any
failure to collect or realize upon the Lessee Obligations or any
collateral security or guarantee therefor, or any part thereof,
or for any delay in so doing nor shall it be under any obligation
to take any action whatsoever with regard thereto.
Section 13. Remedies Upon Default. If a Reimbursement
Event of Default or a Lease Event of Default shall have occurred
and be continuing:
(a)(i) The Security Agent may exercise in respect of
the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and
remedies of a secured party upon a default under the Uniform
Commercial Code then in effect in the State of New York or,
unless prohibited by Applicable Law, the Uniform Commercial Code
in effect in any other applicable jurisdiction. The Security
Agent may also in its sole discretion, without notice except as
specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any exchange,
broker's board or at any of the Security Agent's offices or
elsewhere, for cash, on credit or for future delivery, and at
such price or prices and upon such other terms as the Security
Agent may, in accordance with Applicable Law, deem commercially
reasonable, irrespective of the impact of any such sales on the
market price of the Collateral at any such sale. Each purchaser
at any such sale shall hold the property sold absolutely, free
from any claim or right on the part of the Pledgor, and the
Pledgor hereby waives (to the extent permitted by law) all rights
of redemption, stay and/or appraisal which it now has or may at
any time in the future have under any rule of law or statute now
existing or hereafter enacted. The Pledgor agrees that, to the
extent notice of sale shall be required by law, at least ten
days' notice to the Pledgor of the time and place of any public
sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Security Agent shall not
be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Security Agent may adjourn any
public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned. The Security Agent shall not incur liability as a
result of the sale of the Collateral, or any part thereof, at any
public or private sale. The Pledgor hereby waives any claims
against the Security Agent arising by reason of the fact that the
price at which any Collateral may have been sold at such a
private sale, if commercially reasonable, was less than the price
which might have been obtained at a public sale, even if the
Security Agent accepts the first offer received and does not
offer such Collateral to more than one offeree.
(ii) The Pledgor recognizes that the Security Agent
may elect in its sole discretion to sell all or a part of the
Collateral to one or more purchasers in privately negotiated
transactions in which the purchasers will be obligated to agree,
among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution
or resale thereof. The Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable than
those obtainable through a public sale (including, without
limitation, a public offering made pursuant to a registration
statement under the Securities Act of 1933, as amended (the
"Securities Act")), and the Pledgor and the Security Agent agree
that such private sales shall be made in a commercially
reasonable manner and that the Security Agent has no obligation
to engage in public sales and no obligation to delay sale of any
Collateral to permit the issuer thereof to register the Pledged
Shares for a form of public sale requiring registration under the
Securities Act.
(b) Any cash held by the Security Agent as
Collateral and all cash proceeds received by the Security Agent
in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral shall, as soon as
reasonably practicable, be applied (after payment of any amounts
payable to the Security Agent pursuant to Sections 19 and 20) by
the Security Agent first to the payment of the costs and expenses
of such sale, collection or other realization, including
reasonable compensation to the Security Agent and its agents and
counsel, and all expenses, liabilities and advances made or
incurred by the Security Agent in connection therewith; and
second to the payment of the Lessee Obligations in accordance
with the terms of the Security Deposit Agreement. The
Partnership shall be liable for any deficiency remaining after
any application of funds pursuant hereto. Any surplus of such
cash or cash proceeds held by the Security Agent after payment in
full of such amounts shall be paid over to the Pledgor, or its
successors or assigns, or to whomsoever may be lawfully entitled
to receive such surplus or as a court of competent jurisdiction
may direct.
Section 14. Purchase of the Collateral. The Security
Agent, the Owner Trustee, GE Capital, the Administrative Agent,
the Indenture Trustee, any Loan Participant or any of their
respective Affiliates may be a purchaser of the Collateral or any
part thereof or any right or interest therein at any sale
thereof, whether pursuant to foreclosure, power of sale or
otherwise hereunder and the Security Agent may apply the purchase
price to the payment of the Lessee Obligations secured hereby.
Any such purchaser shall, upon any such purchase, acquire good
title to the Pledged Shares so purchased, free of the security
interests created by this Agreement.
Section 15. Notices. All notices, requests and
demands to or upon the respective parties hereto to be effective
shall be in writing (including by telecopy), and shall be deemed
to have been duly given or made when delivered by hand, or five
days after being deposited in the United States mail, postage
prepaid, or, in the case of telecopy notice, when confirmation is
received, or, in the case of a nationally recognized overnight
courier service, one Business Day after delivery to such courier
service, addressed, in the case of each party hereto, at its
address specified below its name on Schedule 2 hereto, or to such
other address as may be designated by any party in a written
notice to the other party hereto.
Section 16. Continuing Security Interest. This
Agreement shall create a continuing Lien in the Collateral until
the release thereof pursuant to Section 18.
Section 17. Security Interest Absolute. All rights of
the Security Agent and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(i) any lack of validity or
enforceability of any of the Transaction Documents or
any other agreement or instrument relating thereto;
(ii) any change in the time, manner or
place of payment of, or in any other term of, all or
any of the Lessee Obligations, or any other amendment
or waiver of or any consent to any departure from the
Transaction Documents or any other agreement or
instrument relating thereto;
(iii) any exchange, release or non-
perfection of any other collateral, or any release or
amendment or waiver of or consent to any departure from
any guaranty, for all or any of the Lessee Obligations;
or
(iv) any other circumstance which might
otherwise constitute a defense available to, or a
discharge of, the Pledgor.
Section 18. Release. Upon the indefeasible payment in
full of the Lessee Obligations, the Security Agent, upon the
request and at the expense of the Pledgor, shall execute and
deliver all such documentation necessary to release the liens
created pursuant to this Agreement.
Section 19. Expenses. The Pledgor will upon demand
pay to the Security Agent the amount of any and all reasonable
expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, and any transfer taxes
which the Security Agent may incur in connection with (i) the
custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral pursuant to the
exercise or enforcement of any of the rights of the Security
Agent hereunder or (ii) the failure by the Pledgor to perform or
observe any of the provisions hereof. Any amount payable by the
Pledgor pursuant to this Section shall be payable on demand and
shall constitute Lessee Obligations secured hereby.
Section 20. Indemnity. (a) The Pledgor agrees to
indemnify, reimburse and hold the Security Agent, the Owner
Trustee (in its individual and trust capacities), GE Capital, the
Administrative Agent, the Indenture Trustee, the Loan
Participants, their respective successors and assigns and their
respective officers, directors, employees, and agents (each
individually, an "Indemnitee," and collectively, "Indemnitees")
harmless from any and all liabilities, obligations, damages,
injuries, penalties, claims, demands, actions, suits, judgments
and any and all costs and expenses (including reasonable
attorneys' fees and disbursements) (such expenses, for purposes
of this Section, hereinafter "expenses") of whatsoever kind and
nature imposed on, asserted against or incurred by any of the
Indemnitees in any way relating to or arising out of (i) this
Agreement or the certificate executed by the Pledgor in
connection herewith or in any other way connected with the
administration of the Lien or the security interest granted
hereby, or the enforcement of any of the terms hereof, or the
preservation of any rights hereunder, (ii) any failure of the
Pledgor to comply with its obligations under this Agreement, or
any misrepresentation by the Pledgor in this Agreement, or in any
statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement, or (iii) the
ownership, purchase, delivery, control, acceptance, financing,
possession, condition, sale, return or other disposition, or use
of, the Collateral, excluding those (x) finally judicially
determined to have arisen, with respect to any Indemnitee, solely
from the gross negligence or willful misconduct of such
Indemnitee or (y) unless specifically provided for elsewhere in
this Agreement, those arising out of the actions of any
Indemnitee while in possession or control of the Collateral.
(b) Without limiting the application of
subsection (a), the Pledgor agrees to pay, or reimburse the
Security Agent for any and all fees, costs and expenses of
whatever kind or nature incurred in connection with the
preservation, protection or validation of the Security Agent's
Liens on, and security interest in, the Collateral, including,
without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public
offices, payment or discharge of any taxes or Lien upon or in
respect of the Collateral, premiums for insurance with respect to
the Collateral and all other fees, costs and expenses in
connection with protecting, maintaining or preserving the
Collateral and the Security Agent's interest therein, whether
through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or
relating to the Collateral.
Section 21. Lessee Obligations Secured by Collateral.
Any amounts paid by any Indemnitee as to which such Indemnitee
has the right to reimbursement, and any amounts paid by the
Security Agent in preservation of any of its rights or interest
in the Collateral, together with interest on such amounts from
the date paid until reimbursement in full at a rate per annum
equal at all times to the Overdue Rate shall constitute Lessee
Obligations secured by the Collateral.
Section 22. Reinstatement. This Agreement shall
continue to be effective or be reinstated, as the case may be, if
at any time any amount received by the Security Agent, the Owner
Trustee, GE Capital, the Administrative Agent, any Holder or the
Indenture Trustee hereunder, under any other Transaction Document
or pursuant hereto or thereto is rescinded or must otherwise be
restored or returned by such Person upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the
Pledgor or the Partnership or upon the appointment of any
intervenor or conservator of, or trustee or similar official for,
Pledgor or the Partnership or any substantial part of their
respective assets, or upon the entry of an order by a bankruptcy
court avoiding the payment of such amount, or otherwise, all as
though such payments had not been made.
Section 23. Amendments, etc. No waiver, amendment,
modification or termination of any provision of this Agreement,
or consent to any departure by the Pledgor therefrom, shall in
any event be effective (x) without the written concurrence of the
Security Agent and (y) unless made in accordance with Section
13.1 of the Participation Agreement and none of the Collateral
shall be released without the written consent of the Security
Agent. Any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 24. Successors and Assigns. This Agreement
shall be binding upon the Pledgor and its successors and assigns
and shall inure to the benefit of the Security Agent, the Owner
Trustee, GE Capital and, so long as the Indenture shall be in
effect, the Indenture Trustee, and their respective successors
and assigns.
Section 25. Survival.
(a) All agreements, statements, representations
and warranties made by the Pledgor herein or in any certificate
or other instrument delivered by the Pledgor or on its behalf
under this Agreement shall be considered to have been relied upon
by the Security Agent and shall survive the execution and
delivery of this Agreement and the other Transaction Documents
regardless of any investigation made by or on behalf of the
Security Agent.
(b) The indemnity obligations of Pledgor
contained in Section 20 shall continue in full force and effect
notwithstanding the full payment of the Lessee Obligations and
notwithstanding the discharge thereof.
Section 26. No Waiver; Remedies Cumulative. No
failure or delay on the part of the Security Agent in exercising
any right, power or privilege hereunder and no course of dealing
between the Pledgor and the Security Agent shall operate as a
waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Security Agent, the Owner Trustee or
GE Capital would otherwise have.
Section 27. Counterparts. This Agreement may be
executed in any number of counterparts and by the different
parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
Section 28. Headings Descriptive. The headings of the
several Sections and subsections of this Agreement are inserted
for convenience only and shall not in any way affect the meaning
or construction of any provision of this Agreement.
Section 29. Severability. In case any provision in or
obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.
Section 30. Conflict with Participation Agreement. In
case of a conflict between any provision of this Agreement and
any provision of the Participation Agreement, the provisions of
the Participation Agreement shall control and govern. No such
conflict shall be deemed to exist merely because this Agreement
imposes greater obligations on the Pledgor than the Participation
Agreement.
Section 31. Recourse Limited to Collateral. The
Security Agent acknowledges and agrees that, except in the case
of fraud, willful misconduct or knowing misrepresentation on the
part of Pledgor, the sole recourse of the Security Agent for
payment and performance of the obligations of the Pledgor
hereunder shall be to the Collateral. This provision shall not
be deemed to waive any cause of action the Security Agent may
have against any Person for fraud, willful misconduct or knowing
misrepresentation by such Person.
Section 32. GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF
LAW EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT AND ANY
ACTION FOR ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID
COURTS AND APPELLATE COURTS FROM ANY THEREOF. THE PLEDGOR
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PLEDGOR AT ITS ADDRESS REFERRED TO IN
SECTION 15. THE PLEDGOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED IN ANY OTHER JURISDICTION.
(c) EACH OF THE PLEDGOR AND THE SECURITY AGENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
Section 33. Certain Rights of Power Purchaser.
Nothing in this Agreement shall be deemed to limit the provisions
of the Consent of the Power Purchaser, which provisions are
solely for the benefit of the Power Purchaser and not the
Pledgor. Without limiting the scope of the foregoing, the
Security Agent agrees, for the exclusive benefit of the Power
Purchaser and not the Pledgor, that the exercise of remedies or
any similar action under this Agreement is subject to, and shall
be conducted in a manner consistent with, the Power Purchaser's
rights under (i) the Consent of the Power Purchaser and (ii) the
Power Purchase Agreement and the Transfer Agreement (to the
extent such rights under the Power Purchase Agreement and the
Transfer Agreement are not explicitly waived by the Power
Purchaser in accordance with the terms of the Consent of the
Power Purchaser).
Section 34. Assignment to Indenture Trustee.
In order to secure the indebtedness evidenced by the
Loan Certificates, and certain other obligations as provided in
the Indenture, the Indenture provides, among other things, for
the assignment by the Owner Trustee, to the Indenture Trustee of
all of its right, title and interest in, to and under this
Agreement, to the extent set forth in the Indenture, and for the
creation of a Lien on and security interest in the Lessor's
Estate in favor of the Indenture Trustee, and in furtherance
thereof, the Lessee and the Owner Trustee have entered into the
Security Deposit Agreement with the Security Agent. The Pledgor
hereby acknowledges and consents to such assignment and such
security interest and hereby acknowledges that to the extent set
forth in the Indenture, the Indenture Trustee shall have the
right in its own name (in certain cases together with the Owner
Trustee and in other cases to the exclusion of the Owner Trustee,
all as set forth in Section 3.10 of the Indenture) to direct the
Security Agent to take or refrain from taking action under this
Agreement, including the right (i) of the Security Agent to
exercise any election or option, and to make any decision or
determination, and to give any notice, consent, waiver or
approval under this Agreement or in respect thereof, (ii) to
exercise any and all of the rights, powers and remedies of the
Security Agent hereunder and (iii) to receive all moneys payable
to the Security Agent under this Agreement. Pledgor agrees that
it will make all payments payable under this Agreement to the
Security Agent in accordance with the provisions of the Security
Deposit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused their
duly authorized officers to execute and deliver this Agreement as
of the date first above written.
PANDA INTERHOLDING CORPORATION,
as Pledgor
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
FLEET NATIONAL BANK, as Security Agent
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
With respect to Section 8(g) only:
PANDA ENERGY CORPORATION, a
Texas corporation
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
Accepted and Agreed:
PANDA-BRANDYWINE L.P.
By Panda Brandywine Corporation,
its General Partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
PANDA BRANDYWINE CORPORATION
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
PANDA ENERGY CORPORATION, a
Delaware Corporation
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
BRANDYWINE WATER COMPANY
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
Schedule 1 to
Stock Pledge Agreement
Pledged Shares
No. of Par Value of Certificate
Shares Shares Number
Panda 1000 $.01 004
Brandywine
Corporation
Panda 1000 $.01 004
Energy
Corporation
Brandywine 1000 $.01 004
Water
Company
EXHIBIT 10.55.1
AMENDMENT TO SERVICE AGREEMENT
THIS AGREEMENT is made and entered into effective as of the
1st day of January 1997 by and between TRANSCONTINENTAL GAS PIPE
LINE CORPORATION, a Delaware corporation, hereinafter referred to
as "Seller," and PANDA-ROSEMARY, L.P., a Delaware limited
partnership hereinafter referred to as "Buyer,".
WITNESSETH
WHEREAS, pursuant to Order Nos. 636, issued by the Federal
Energy Regulatory Commission (Commission) and Seller's procedures
set forth on page 7 of Seller's August 4, 1993 Order No. 636
Compliance Filing in Docket No. RS92-86, Buyer and Seller entered
into an agreement dated August 20, 1996 ("Agreement") to unbundle
Buyer's firm transportation service under Seller's Rate Schedule
FT-NT and convert such service from part 157 of the Commission's
regulations to service under Part 284(G) of the Commission's
regulations; and
WHEREAS, pursuant to the Commission's December 3, 1996
"Order On Compliance Filing" in Docket No. RP96-211-005, Seller
implemented firm primary-to-primary point open access backhaul
services on its system effective January 1, 1997; and
WHEREAS, Buyer has requested such backhaul service under the
Agreement.
NOW THEREFORE, the parties amend the Agreement as follows:
1. Exhibit A is hereby deleted in its entirety effective
January 1, 1997 and Exhibit A, attached hereto, substituted
therefor.
2. Except as hereinabove amended, the Agreement shall remain in
full force and effect as written.
IN WITNSS WHEREOF, the parties hereto have executed this
Amendment.
TRANSCONTINENTAL GAS PIPE LINE
CORPORATION
By:
Title:
PANDA-ROSEMARY, L.P.
By:
Title:
EXHIBIT A
Buyer's Capacity
Point(s) of Receipt Point(s) of Delivery 1/ Entitlement
(Mcf/day) 2/
The point of Interconnection Pleasant Hill Meter Station, 3,075
between the facilities of Seller's South Virginia
Seller and CNG Transmission Lateral, adjacent to State
Corporation at Leidy in Highway No. 48 approximately
Clinton County, Pennsylvania. 1.5 miles west of the inter-
section of State Highway No. 48
and U.S. Highway No. 301
Northampton County, North
Carolina.
1/ Seller shall redeliver to Buyer or for the account of Buyer
the gas transported hereunder at the prevailing pressures in
Seller's pipeline system, not to exceed maximum allowable
operating pressure.
2/ These quantities do not inclue the additional quantities of
gas retained by Seller for applicable compressor fuel and line
loss make-up provided for in Article V, Paragraph 2 of this
Service Agreement, which are subject to change as provided for
in Article V, Paragraph 2 hereof.
EXHIBIT 10.62.1
PRESENT ASSIGNMENT OF POWER PURCHASE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that PANDA-BRANDYWINE,
L.P. (the "Partnership"), for valuable consideration, receipt of
which is hereby acknowledged, has sold, assigned, transferred,
conveyed and set over and does hereby sell, assign, transfer,
convey and set over unto FLEET NATIONAL BANK (formerly known as
Shawmut Bank Connecticut, National Association), in its capacity
as Owner Trustee for the benefit of General Electric Capital
Corporation, as Owner Participant ("Owner Participant"), its
successors and assigns forever (the "Lessor") all the right,
title and interest of the Partnership in, to and under the Power
Purchase Agreement, dated August 9, 1991, between the Partnership
and Potomac Electric Power Company ("PEPCO"), as amended as of
the date hereof in accordance with the First Amendment thereto,
dated September 16, 1994, and as the same may from time to time
be further amended, modified or supplemented (hereinafter called
the "Assigned Agreement").
So long as the Facility Lease dated as of December 18,
1996 between the Lessor and the Partnership (the "Facility
Lease") shall remain in effect and the Lessor or GE Capital shall
not have notified PEPCO that, pursuant to the exercise of its
rights and remedies under the Facility Lease, the rights, powers,
privileges and benefits of the Partnership hereinafter described
have been terminated, the Partnership shall continue to enjoy and
exercise in its own name all the rights, powers, privileges and
benefits of "Seller" under the Assigned Agreement.
This Assignment shall not cause the Lessor or the Owner
Participant to be under any obligation to the Partnership or to
PEPCO for the performance or observance of any of the
representations, warranties, terms or conditions of the Assigned
Agreement.
Notwithstanding this Assignment, the Partnership shall
be and remain obligated to PEPCO to perform all of the
Partnership's obligations and agreements under the Assigned
Agreement, and PEPCO shall be and remain obligated to the
Partnership to perform all of PEPCO's obligations and agreements
under the Assigned Agreement.
The Partnership does hereby irrevocably constitute and
appoint the Lessor its true and lawful attorney-in-fact with full
and irrevocable power and authority in the place and stead of the
Partnership and in the name of the Partnership or in the name of
the Lessor, for the purpose of carrying out the terms of this
Assignment, to take any and all action and to execute any and all
instruments which may be necessary to accomplish the purposes of
this Assignment. This power-of-attorney is a power coupled with
an interest and shall be irrevocable.
The Partnership hereby represents and warrants that,
other than pursuant to the Collateral Assignment of Power
Purchase Agreement, dated as of March 30, 1995, which has been
terminated, it has not heretofore assigned or otherwise disposed
of or encumbered any right, title or interest of the Partnership
in, to or under the Assigned Agreement or any moneys due or to
become due to the Partnership under or by reason thereof, and
that the Partnership has the right and power to transfer to the
Lessor absolute title to the Partnership's right, title and
interest in, to and under the Assigned Agreement and in and to
all the moneys due and to become due to the Partnership under the
Assigned Agreement.
Nothing in this Present Assignment of Power Purchase
Agreement shall be deemed to limit the provisions of the Amended
and Restated Consent and Agreement, dated as of December 30,
1996, among PEPCO, the Partnership, the Owner Participant, Fleet
National Bank (formerly known as Shawmut Bank Connecticut,
National Association) in its capacities as Owner Trustee and
Security Agent, First Security Bank, National Association, not in
its individual capacity but solely as Indenture Trustee, and
Credit Suisse in its capacity as the Administrative Agent (the
"Consent of Power Purchaser"). Without limiting the scope of the
foregoing, the exercise of remedies or any similar action under
this Present Assignment of Power Purchase Agreement is subject
to, and shall be conducted in a manner consistent with, PEPCO's
rights under (i) the Consent of Power Purchaser, and (ii) the
Assigned Agreement and the Transfer Agreement (to the extent such
rights under the Assigned Agreement and the Transfer Agreement
are not explicitly waived by PEPCO in accordance with the terms
of the Consent of Power Purchaser).
This Assignment shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Partnership has caused this
Assignment to be duly executed and delivered as of December 18,
1996.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION
its General Partner
By: /s/ William C. Nordlund
Title: Senior Vice President
EXHIBIT 10.62.2
PEPCO
AMENDED AND RESTATED
CONSENT AND AGREEMENT
AMENDED AND RESTATED CONSENT AND AGREEMENT ("Consent"),
dated as of December 30, 1996, among POTOMAC ELECTRIC POWER
COMPANY, a District of Columbia and Virginia corporation
("PEPCO"); Panda-Brandywine, L.P., a Delaware limited partnership
(the "Partnership"); FLEET NATIONAL BANK, a national banking
association, formerly known as Shawmut Bank Connecticut, National
Association, in its capacity as Security Agent (the "Security
Agent") under the Security Deposit Agreement (as defined in Annex
A to the Participation Agreement referred to below); FLEET
NATIONAL BANK, a national banking association, formerly known as
Shawmut Bank Connecticut, National Association, not in its
individual capacity, but solely as Owner Trustee (the "Owner
Trustee") under the Trust Agreement (as defined in Annex A to the
Participation Agreement referred to below); GENERAL ELECTRIC
CAPITAL CORPORATION, a New York corporation, as the issuer of the
Letters of Credit under the Reimbursement Agreement (as defined
in Annex A to the Participation Agreement referred to below) (the
"LOC Issuer"); GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation, as the Interest Hedging Counterparty (as defined in
Annex A to the Participation Agreement referred to below) (the
"Interest Hedging Counterparty"); GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation, as the Owner Participant (as
defined in Annex A to the Participation Agreement referred to
below) (the "Owner Participant"); FIRST SECURITY BANK, NATIONAL
ASSOCIATION, a national banking association, not in its
individual capacity but solely as indenture trustee (in such
capacity, the "Indenture Trustee") under the Indenture (as
defined below); and CREDIT SUISSE, a bank organized and existing
under the laws of Switzerland, acting by and through its New York
branch, as administrative agent for the Loan Participants (in
such capacity, the "Administrative Agent"). (The Security Agent,
Owner Trustee, the LOC Issuer, the Interest Hedging Counterparty,
the Owner Participant, Indenture Trustee and Administrative Agent
are hereinafter referred to collectively as the "Collateral
Security Parties" and individually as a "Collateral Security
Party" and whenever "General Electric Capital Corporation" is
referred to herein by such name, it is not acting in any of the
specific roles set forth above).
All capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in
Annex A to the Participation Agreement, as defined below.
References in this Consent to any of the Financing Documents
shall be to the form of such document specified in Exhibit I to
the PEPCO Compliance Certificate attached hereto as Annex A,
unless PEPCO shall have given its written approval to any
amendment, modification or supplement to any such document, in
which case references thereto shall include such amendment,
modification or supplement.
RECITALS
WHEREAS, PEPCO and the Partnership have entered into a
Power Purchase Agreement, dated as of August 9, 1991, as amended
as of the date hereof in accordance with the First Amendment
thereto dated as of September 16, 1994 (as further amended,
modified or supplemented from time to time following the date
first written above in accordance with the terms thereof, the
"Assigned Agreement"); and
WHEREAS, PEPCO, the Partnership, General Electric
Capital Corporation, the Owner Trustee, and the Security Agent
entered into the PEPCO Consent and Agreement dated as of April
10, 1995 (the "Original Consent") in connection with the
Construction Loan Agreement (as defined below); and
WHEREAS, the parties hereto wish to execute and deliver
this Consent in order to amend and restate the Original Consent
and to add new parties thereto; and
WHEREAS, PEPCO, Panda Brandywine Corporation, a
Delaware corporation and the sole general partner of the
Partnership (the "General Partner"), and Panda Energy
Corporation, a Delaware corporation and the sole limited partner
of the Partnership (the "Limited Partner"), have entered into,
and the Partnership has acknowledged and agreed to, an Agreement
With Respect to Transfers of Interests in Panda-Brandywine, L.P.,
dated as of August 8, 1991 (as amended modified or supplemented
from time to time following the date first written above in
accordance with the terms thereof, the "Transfer Agreement"); and
WHEREAS, in order to finance the construction of the
Project, the Partnership and the General Partner entered into a
Construction Loan Agreement and Lease Commitment, dated as of
March 30, 1995, with General Electric Capital Corporation (as
amended, supplemented or otherwise modified from time to time,
the "Construction Loan Agreement") pursuant to which General
Electric Capital Corporation (i) provided construction financing
for the Project and (ii) issued the Letters of Credit as
collateral security for certain obligations of the Partnership
under the Assigned Agreement;
WHEREAS, the Partnership and Chicago Title Insurance
Company, as trustee for the benefit of the Security Agent,
entered into the Deed of Trust and Security Agreement to secure
the payment and performance by the Partnership of all of its
obligations to General Electric Capital Corporation and the Owner
Trustee;
WHEREAS, the Owner Trustee leased the Site from the
Partnership pursuant to the Site Lease and subleased the Site
back to the Partnership pursuant to the Site Sublease;
WHEREAS, the Partnership assigned all of its right,
title and interest in, to and under, and granted a security
interest in, the Assigned Agreement to the Security Agent,
pursuant to (i) the Collateral Assignment of Power Purchase
Agreement, dated as of March 30, 1995, a copy of which is
attached as Exhibit A hereto (the "Assignment"), (ii) the Deed of
Trust and Security Agreement, and (iii) the Security Agreement;
WHEREAS, the construction of the Facility has been
substantially completed and the Date of Substantial Completion
has occurred;
WHEREAS, the Partnership has requested that the Owner
Participant cause the Owner Trustee to purchase the Facility from
the Partnership and lease the same to the Partnership as provided
in the Construction Loan Agreement;
WHEREAS, the Partnership and the Owner Trustee are
entering into the Facility Lease (and, with certain other
parties, entering into the other Lease Documents), pursuant to
which, among other things, the Owner Trustee will lease the
Facility to the Partnership;
WHEREAS, the Partnership, the General Partner and the
LOC Issuer are entering into the Reimbursement Agreement to
provide for the continued issuance by the LOC Issuer to the Power
Purchaser of the Letters of Credit;
WHEREAS, the Owner Participant has elected to fund the
Facility Lease as a leveraged lease pursuant to Section 5.8 of
the Construction Loan Agreement and, in connection therewith, on
the Lease Closing Date (i) the Loan Participant will participate
in the debt financing of a portion of the Owner Trustee's payment
of the Purchase Price for the Facility, (ii) the Owner
Participant will participate in the Owner Trustee's payment of
the Purchase Price by making an equity investment in the Owner
Trustee, and (iii) the Partnership has directed that the Purchase
Price for the Facility be paid to General Electric Capital
Corporation as repayment for the loans made by it under the
Construction Loan Agreement;
WHEREAS, in order to set forth the rights and
obligations of the Owner Participant, the Owner Trustee, the
Security Agent, the Partnership, the General Partner, the
Administrative Agent and the Indenture Trustee, in connection
with the foregoing transactions and to describe and provide for
the transactions contemplated thereby, (i) the foregoing entities
are entering into the Participation Agreement, (ii) the Owner
Trustee and the Indenture Trustee are entering into the
Indenture, (iii) certain of the Lessee Security Documents are
being amended and restated (including, without limitation, the
Security Deposit Agreement), and (iv) the Construction Loan
Agreement is being terminated;
WHEREAS, the obligations of the Partnership under the
Reimbursement Agreement to the LOC Issuer and under the Site
Sublease and the Facility Lease to the Owner Trustee, including
its obligation to repay the LOC Reimbursement Obligations and to
make payments of Rent, are secured by a first assignment of and
prior perfected security interest in all rights and property of
the Partnership, including all of the revenues of the
Partnership, to the Security Agent, as agent for the LOC Issuer,
the Owner Participant, and the Owner Trustee (and by collateral
assignment, the Indenture Trustee) pursuant to the terms and
provisions of the Security Agreement;
WHEREAS, the obligations of the Owner Trustee under the
Indenture to the Indenture Trustee, the Administrative Agent, the
Interest Hedging Counterparty, and the Loan Participants,
including the Owner Trustee's obligations to repay the Interest
Hedging Obligations and the Loan Certificates with interest
thereon, are secured by a first assignment of, and prior
perfected security interest in, all rights and property of the
Owner Trustee, including an assignment by the Owner Trustee of
all of its right, title and interest under the Facility Lease,
the Security Agreement, the Pledge Agreements, the Deed of Trust
and Security Agreement, the Lessee Security Agreements, the
Assigned Agreement and the Collateral to the Indenture Trustee;
WHEREAS, the parties hereto desire that PEPCO
acknowledge the transactions described above and confirm and
reaffirm the rights of the Collateral Security Parties in respect
of the Assigned Agreement;
WHEREAS, each of the General Partner and the Limited
Partner has assigned all its right, title and interest in and to,
and granted a security interest in, its partnership interest and
the Transfer Agreement to the Security Agent, for the benefit of
the Owner Trustee, the LOC Issuer and the Owner Participant,
pursuant to the Pledge Agreements, which interest has been
collaterally assigned to the Indenture Trustee;
WHEREAS, in connection with the execution and delivery
of the Facility Lease, the Partnership will assign all of its
right, title and interest in, to and under the Assigned Agreement
to the Owner Trustee pursuant to the Present Assignment of
Assigned Agreement to be dated as of the Lease Closing Date (the
"Present Assignment", a copy of which is attached as Exhibit B);
WHEREAS, upon the execution and delivery of the Present
Assignment, the Assignment will be terminated as set forth
herein;
WHEREAS, it is a condition precedent (a) to the
Administrative Agent's obligation to make the Loans under the
Indenture, the Interest Hedging Counterparty to enter into the
Interest Hedging Agreement and for the Owner Participant to make
an equity investment, in each case in order to furnish the funds
necessary for the Owner Trustee to effect the proposed sale-
leaseback transaction and, (b) for the LOC Issuer to continue to
issue the Letters of Credit, that PEPCO and the Partnership
execute and deliver this Consent;
WHEREAS, Section 19.1 of the Assigned Agreement
requires PEPCO's prior written consent (i) for the Partnership's
assignment to the Security Agent (under the Assignment) or the
Owner Trustee (under the Present Assignment) of the Partnership's
right, title and interest in, to and under, the Assigned
Agreement and (ii) for any further assignment of the
Partnership's right, title and interest in to and under, the
Assigned Agreement to any of the other Collateral Security
Parties; and
WHEREAS, Subsection 19.1(x) of the Assigned Agreement
requires the Security Agent, the Owner Trustee and any other
assignee of the Partnership's right, title and interest under the
Assigned Agreement, to expressly assume the Partnership's
obligations under the Assigned Agreement; and
WHEREAS, Subsection 18.6(b)(iv) of the Assigned
Agreement contemplates an explicit agreement between a party
providing financing for the Project and PEPCO with respect to the
terms of any foreclosure on Project assets or interests in the
Partnership assigned as security in connection with such
financing;
WHEREAS, PEPCO and the Partnership entered into a
letter agreement dated October 30, 1996 pursuant to the terms of
which, PEPCO accepted transfer of the Transmission Facilities
from the Partnership (as such letter agreement may be further
amended, modified or supplemented from time to time following the
date first written above in accordance with the terms thereof,
the "Transmission Facilities Letter Agreement");
WHEREAS, General Electric Capital Corporation and the
Partners have entered into the Equity Loan Facility Letter
Agreement pursuant to which General Electric Capital Corporation
may make Equity Loans;
NOW, THEREFORE, in consideration of these premises, the
mutual covenants herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the parties
hereto hereby agree as follows:
SECTION 1. CONSENT TO ASSIGNMENT, ETC.
1.1 Consent to Assignment.
(a) PEPCO acknowledges notice and
receipt of, and consents upon the terms and
conditions herein set forth (i) to the
assignment to the Security Agent, for the
benefit of the Owner Trustee, the LOC Issuer,
and the Owner Participant of the
Partnership's right, title and interest in,
to and under the Assigned Agreement pursuant
to the Assignment and the Security Agreement,
(ii) upon execution and delivery of the
Facility Lease, to the assignment of such
right, title and interest to the Owner
Trustee pursuant to the Present Assignment
(the "Assigned Interest"), (iii) to the
collateral assignment by the Owner Trustee of
all its right, title and interest in and to
the Assigned Interest to the Indenture
Trustee pursuant to the Indenture, and (iv)
to the assignment to the Security Agent, for
the benefit of the Owner Trustee, the LOC
Issuer and the Owner Participant (and by
collateral assignment, to the Indenture
Trustee), each of the General Partner's and
the Limited Partner's right, title and
interest in, to and under its partnership
interest and the Transfer Agreement pursuant
to the Pledge Agreements. Notwithstanding
the provisions of the Security Agreement and
the Present Assignment, except as provided in
the following two sentences, neither the
Security Agent, the Owner Trustee, the
Indenture Trustee nor any of the other
Collateral Security Parties shall succeed to
the rights, title, interest and obligations
of the Partnership under, or be substituted
for the Partnership as a party to, the
Assigned Agreement, unless and until such
succession and substitution have been made in
accordance with the provisions of Section
1.2(a) hereof, it being understood that if
the Owner Trustee shall exercise any right to
act as "Seller" under the Assigned Agreement
it shall be subject to the provisions of said
Section 1.2(a) hereof. PEPCO acknowledges
and agrees that upon the occurrence of a
Lease Event of Default under the Facility
Lease and during the continuation thereof,
and subject to prior notice by a Collateral
Security Party to PEPCO, the Security Agent
shall be entitled to make all demands, give
all notices, take all actions and exercise
all rights of the Partnership under the
Assigned Agreement in accordance with the
terms of the Assigned Agreement, provided
that any assignment of rights under the
Assigned Agreement shall also be subject to
Section 1.2(a) of this Consent. The
Partnership agrees that PEPCO is authorized
to act in accordance with the Security
Agent's exercise of the Partnership's rights
in accordance with this Section 1.1, upon
PEPCO's receipt of notice from a Collateral
Security Party, and that PEPCO shall bear no
liability to the Partnership in connection
therewith.
(b) PEPCO's acknowledgement and
consent in Section 1.1(a) hereof are limited
to (i) the assignment to the Security Agent
of the Partnership's right, title and
interest in, to and under the Assigned
Agreement pursuant to the Security Agreement
and the assignment by the Partnership of such
right, title and interest to the Owner
Trustee pursuant to the Present Assignment,
(ii) the collateral assignment of the
Transfer Agreement and the partnership
interests of the General Partner and the
Limited Partner to the Security Agent
pursuant to the Pledge Agreements, and (iii)
the collateral assignment by the Owner
Trustee to the Indenture Trustee pursuant to
the Indenture of all the Owner Trustee's
right, title and interest in the Assigned
Agreement, the Transfer Agreement and such
partnership interests, and are not applicable
to any other Project Document or to any other
Financing Document or any action taken
pursuant to any other Financing Document. By
entering into this Consent, PEPCO is not
waiving (and hereby expressly reserves) its
rights to consent to or otherwise approve any
other assignment beyond those explicitly
listed in this Section 1.1(b).
1.2 Substitute Owner.
(a) Each party hereto agrees that,
if any Collateral Security Party shall notify
PEPCO that a default or an event of default
has occurred and is continuing under any
Financing Document (as such default or event
of default is defined in such Financing
Document) and that such Collateral Security
Party has elected to exercise rights and
remedies it may have under any of the
Financing Documents as a result of such
default or event of default, then, such
Collateral Security Party or its transferee,
or any purchaser of the Assigned Interest at
a foreclosure or other sale shall be
substituted for the Partnership under the
Assigned Agreement, provided that such
substitution shall be subject to (i) the
agreement of such Collateral Security Party,
such transferee or such purchaser, as the
case may be, to assume all of the obligations
of the Partnership under the Assigned
Agreement, the Transmission Facilities Letter
Agreement and the Transfer Agreement in
accordance with Section 1.6 hereof and to be
bound by the terms of the Assigned Agreement,
the Transmission Facilities Letter Agreement,
the Transfer Agreement and this Consent
(which assumption and agreement shall be set
forth in a form reasonably satisfactory to
PEPCO), (ii) the prior written consent of
PEPCO, which consent shall not be
unreasonably withheld or delayed, as long as
PEPCO reasonably determines that such
Collateral Security Party, such transferee or
such purchaser, as the case may be, is a
party that is financially and technically
capable (or, as to technical capability, has
retained an experienced operator who is
technically capable) of completing the
construction of, and operating, the Project
in accordance with the terms of the Assigned
Agreement, and (iii) the receipt of all
necessary governmental and regulatory
approvals required for such substitution, if
any, in form and substance reasonably
satisfactory to PEPCO, the Security Agent,
the Owner Trustee, the Indenture Trustee and
GE Capital. Notwithstanding the foregoing,
no Person shall be substituted for the
Partnership under the Assigned Agreement if,
prior to PEPCO's receipt of notice from any
Collateral Security Party pursuant to this
Section 1.2(a), PEPCO has (i) given the
Partnership a notice of default and intention
to terminate the Assigned Agreement pursuant
to Subsection 15.2(a) of the Assigned
Agreement, and (ii) where applicable, given
the Security Agent, the Owner Trustee, the
Indenture Trustee and the Owner Participant
notice pursuant to Section 1.3 hereof that
the Partnership is in default and that PEPCO
intends to terminate the Assigned Agreement
and the Security Agent, the Owner Trustee,
the Indenture Trustee, or the Owner
Participant has failed to cure such default
within the time period provided to the
Security Agent, the Owner Trustee, the
Indenture Trustee and the Owner Participant
in Section 1.3 hereof to cure such default.
(b) The parties hereto agree that,
if any Collateral Security Party shall notify
PEPCO that a default or an event of default
has occurred and is continuing under any
Financing Document (as such default or event
of default is defined in such Financing
Document) and that such Collateral Security
Party has elected to exercise rights and
remedies it may have under any of the
Financing Documents as a result of such
default or event of default, then, such
Collateral Security Party or its transferee
or any purchaser of a Transfer Interest (as
such term is defined below) at a foreclosure
or other sale shall be substituted for the
Partnership (or the Owner Trustee with
respect to the Facility following the
assignment and sale of the Facility by the
Partnership to the Owner Trustee pursuant to
the Bill of Sale and the Present Assignment
and Section 1.7(a) of this Consent) as the
owner of such Transfer Interest, provided
that such substitution shall be subject to
(i) the agreement of such Collateral Security
Party, such transferee or such purchaser, as
the case may be, to assume all of the
obligations of the Partnership (with respect
to the Transfer Interest) under the Assigned
Agreement, the Transmission Facilities Letter
Agreement, and the Transfer Agreement in
accordance with Section 1.6 hereof and this
Consent and (with respect to the Transfer
Interest) to be bound by the terms of the
Assigned Agreement, the Transfer Agreement,
the Transmission Facilities Letter Agreement
and this Consent (which assumption and
agreement shall be set forth in a form
reasonably satisfactory to PEPCO), (ii) the
prior written consent of PEPCO, which consent
shall not be unreasonably withheld or
delayed, as long as PEPCO reasonably
determines that such Collateral Security
Party, such transferee or such purchaser, as
the case may be, is a party that is
financially and technically capable (or, as
to technical capability, has retained an
experienced operator who is technically
capable) of completing the construction of,
and operating, the Project in accordance with
the terms of the Assigned Agreement, (iii)
the receipt of all necessary governmental and
regulatory approvals required for such
substitution, if any, in form and substance
reasonably satisfactory to PEPCO, the
Security Agent, the Indenture Trustee and the
Owner Participant and (iv), in the case of a
foreclosure sale, compliance with the
provisions of either Subsection 18.6(b)(i) or
Subsection 18.6(b)(ii) of the Assigned
Agreement to PEPCO's reasonable satisfaction
(with such Collateral Security Party being
treated as Financing Parties, the Partnership
being the Seller and the Site being included
within the term "Facility" for purposes of
application of such Subsections).
Notwithstanding the foregoing, no person
shall be substituted for the Partnership (or
the Owner Trustee with respect to the
Facility following the assignment and sale of
the Facility by the Partnership to the Owner
Trustee pursuant to the Bill of Sale and the
Present Assignment and Section 1.7(a) of this
Consent) as the owner of a Transfer Interest
if, prior to PEPCO's receipt of notice from
any Collateral Security Party pursuant to
this Section 1.2(b), PEPCO has given the
Partnership, the Security Agent, the
Indenture Trustee, the Owner Trustee and the
Owner Participant notice pursuant to Section
18.1 or 18.2 of the Assigned Agreement of
PEPCO's intention to exercise its right to
purchase such Transfer Interest. PEPCO
hereby waives during the effectiveness of
this Consent its option under Section 18.1 of
the Assigned Agreement and its right of first
refusal under Section 18.2 of the Assigned
Agreement to purchase a Transfer Interest
that is transferred in accordance with the
requirements of this Section 1.2(b). For
purposes of this Consent, the term "Transfer
Interest" shall be defined as set forth in
the Assigned Agreement, provided, however,
that any such interest shall continue to be
deemed to be a Transfer Interest following
transfer of such interest from the
Partnership to any other Person (including
but not limited to the Owner Trustee, the
Indenture Trustee, the Owner Participant and
the Security Agent), and each subsequent
transfer of such interest.
(c) The parties hereto agree
that, if any Collateral Security Party shall
notify PEPCO that a default or an event of
default has occurred and is continuing under
any Financing Document (as such default or
event of default is defined in such Financing
Document) and that such Collateral Security
Party has elected to exercise any right and
remedy it may have under any Financing
Document, as a result of such default or
event of default to lease the Facility to a
lessee other than the Partnership ("Other
Lessee"), then the Owner Trustee or the
Indenture Trustee may enter into such lease
with such Other Lessee, provided that the
execution of such lease shall be subject to
(i) the agreement of the Other Lessee to sell
the capacity and associated energy of the
Facility to PEPCO in accordance with the
provisions of the Assigned Agreement and the
Transmission Facilities Letter Agreement
(which agreement shall be set forth in a form
reasonably satisfactory to PEPCO), (ii) the
prior written consent of PEPCO, which consent
shall not be unreasonably withheld or
delayed, as long as PEPCO reasonably
determines that such Other Lessee is a party
that is financially and technically capable
(or, as to technical capability, has retained
an experienced operator who is technically
capable) of operating the Project in
accordance with the terms of the Assigned
Agreement, and (iii) the receipt of all
necessary governmental and regulatory
approvals, if any, required for such lease to
the Other Lessee and such sale of capacity
and energy by such Other Lessee to PEPCO, in
form and substance reasonably satisfactory to
PEPCO and the Security Agent, the Indenture
Trustee and the Owner Participant.
(d) The parties hereto agree that,
if a default or an event of default has
occurred and is continuing under any
Financing Document (as such default or event
of default is defined in such Financing
Document) and any Collateral Security Party
elects to exercise any right and remedy it
may have under any Financing Document as a
result of such default or event of default to
take possession of the Facility from the
Partnership, then such Collateral Security
Party shall, during the period of its
possession of the Facility, continue to sell
the capacity and associated energy of the
Facility to PEPCO in accordance with the
provisions of the Assigned Agreement (which
agreement shall be set forth in a form
reasonably satisfactory to PEPCO), subject to
the receipt of all necessary governmental and
regulatory approvals, if any, required for
such sale of capacity and energy to PEPCO, in
form and substance reasonably satisfactory to
PEPCO, the Security Agent, the Owner Trustee,
the Indenture Trustee and the Owner
Participant.
(e) The parties hereto agree that,
if any Collateral Security Party shall notify
PEPCO that a default or an event of default
has occurred and is continuing under any
Financing Document (as such default or event
of default is defined in such Financing
Document) and that such Collateral Security
Party has elected to exercise rights and
remedies it may have under any of the
Financing Documents as a result of such
default or event of default, then, such
Collateral Security Party, its transferee, or
any purchaser of a Seller Interest (as such
term is defined below) at a foreclosure or
other sale shall be substituted for the
General Partner or the Limited Partner, as
the case may be, as the owner of such Seller
Interest, provided that such substitution
shall be subject to (i) the agreement of such
Collateral Security Party, such transferee or
such purchaser, as the case may be, to assume
all of the obligations of the General Partner
or the Limited Partner, as the case may be,
under the Transfer Agreement in accordance
with Section 1.6 hereof and to be bound by
the terms of the Transfer Agreement (and in
the case of the Collateral Security Party or
its transferee, to be bound by the terms of
this Consent) (which assumption and agreement
shall be set forth in a form reasonably
satisfactory to PEPCO), (ii) the prior
written consent of PEPCO, which consent shall
not be unreasonably withheld or delayed, as
long as PEPCO reasonably determines that such
Collateral Security Party, such transferee or
such purchaser, as the case may be, is,
except in the case of a Limited Partner, a
party that is financially and technically
capable (or, as to technical capability, has
retained an experienced operator who is
technically capable) of completing the
construction of, and operating, the Project
in accordance with the terms of the Assigned
Agreement, (iii) the receipt of all necessary
governmental and regulatory approvals
required for such substitution, if any, in
form and substance reasonably satisfactory to
PEPCO, the Security Agent, the Indenture
Trustee and the Owner Participant and (iv),
in the case of a foreclosure sale, compliance
with the provisions of either Subsection
18.6(b)(i) or Subsection 18.6(b)(ii) of the
Assigned Agreement to PEPCO's reasonable
satisfaction (with such Collateral Security
Party being treated as Financing Parties and
the Partnership being the Seller for purposes
of application of such Subsections).
Notwithstanding the foregoing, no Person
shall be substituted for the General Partner
or the Limited Partner, as the case may be,
as the owner of a Seller Interest if, prior
to PEPCO's receipt of notice from any
Collateral Security Party pursuant to this
Section 1.2(e), PEPCO has given the Owner (as
such term is defined in Section 18.3 of the
Assigned Agreement) notice pursuant to
Section 18.3 of the Assigned Agreement of
PEPCO's intention to exercise its right to
purchase the Seller Interest. PEPCO hereby
waives during the effectiveness of this
Consent its right of first refusal under
Section 18.3 of the Assigned Agreement and
the Transfer Agreement to purchase a Seller
Interest that is transferred in accordance
with the requirements of this Section 1.2(e).
For purposes of this Consent, the term
"Seller Interest" shall be defined as set
forth in the Assigned Agreement.
(f) PEPCO, the Collateral Security
Parties and the Partnership agree that,
during the term of the Facility Lease, the
Partnership will not, without the prior
written consent of PEPCO, assign or sublease
or otherwise in any manner deliver, transfer
or relinquish possession of all or any
portion of the Facility or the Site or assign
any of its rights or obligations under the
Facility Lease, except (i) the lease of the
portion of the Distilled Water Facility by
the Partnership, as lessor, to the Steam
Host, as lessee, in the Steam Lease, (ii) the
lease of the Site by the Partnership, as Site
Lessor, to the Owner Trustee, as Site Lessee,
in the Site Lease, (iii) the assignment of a
security interest in the Facility by the
Partnership to the Security Agent in the
Security Agreement, and/or (iv) the
assignment as collateral security by the
Owner Trustee of its right, title and
interest in and to the Facility and the Site
to the Indenture Trustee pursuant to the
Indenture, provided that such exception does
not include any subsequent assignment, lease
or transfer made in accordance with the
provisions of the leases and assignments
referred to in (i), (ii), (iii) and (iv).
(g) The parties hereto agree that
no sale (including, but not limited to, a
foreclosure sale), assignment or other
transfer of the Assigned Interest shall be
made except in accordance with the provisions
of either Section 19.1 of the Assigned
Agreement or Section 1.2(a) of this Consent.
The parties hereto further agree that no sale
(including, but not limited to, a foreclosure
sale), assignment or other transfer of any
interest in the Facility or the Site shall be
made except (i) the assignment of a security
interest in the Facility by the Partnership
to the Security Agent in the Security
Agreement, the lease of the Facility by the
Owner Trustee (as lessor) to the Partnership
(as lessee) under the Facility Lease, the
lease of the Site by the Partnership (as Site
Lessor) to the Owner Trustee (as Site Lessee)
in the Site Lease, the sublease of the Site
by the Owner Trustee (as sublessor) to the
Partnership (as sublessee) in the Site
Sublease and the assignment as collateral
security by the Owner Trustee of its right,
title and interest in and to the Facility and
the Site to the Indenture Trustee pursuant to
the Indenture (provided that the exception
set forth in this subsection (i) does not
include any subsequent sale, assignment or
other transfer made in accordance with the
provisions of the referenced assignment,
leases, and sublease), (ii) the sale of the
Facility to the Partnership (but not to a
designee of the Partnership) at the end of
the Basic Lease Term or Renewal Term in
accordance with Section 12 of the Facility
Lease, or (iii) in accordance with the
provisions of Article XVIII of the Assigned
Agreement or Sections 1.2(b), 1.2(c) or
1.7(a) of this Consent. The parties hereto
agree that no lease of the Facility to any
Person other than the Partnership shall be
made except in accordance with Sections
1.2(c), 1.2(f) or 1.7(a) of this Consent.
The parties hereto agree that no sale
(including, but not limited to, a foreclosure
sale), assignment or other transfer of any
interest in the Partnership shall be made
except in accordance with the provisions of
the Transfer Agreement or Section 1.2(e) of
this Consent.
(h) The parties hereto agree that
neither any of the Collateral Security
Parties nor the Partnership will effect any
sale (including, but not limited to, a
foreclosure sale), assignment, lease or other
transfer of the Facility or the Site unless
the Partnership (or any Person that succeeds
to the Partnership's obligations under the
Assigned Agreement in accordance with the
provisions of the Assigned Agreement or this
Consent) has access to, and use of, the
Facility and the Site on terms that will
enable the Partnership (or such other Person)
to fulfill its obligations to provide
capacity and energy from the Facility to
PEPCO in accordance with the provisions of
the Assigned Agreement.
(i) Each of the Collateral
Security Parties shall provide PEPCO with a
copy of any notice of default or event of
default given under any of the Financing
Documents at the same time that such notice
is provided to any party to such Financing
Document. Each Collateral Security Party
shall also provide PEPCO with at least ten
(10) days' prior written notice of any sale
(including but not limited to a foreclosure
sale), assignment, lease or other transfer of
all or any portion of the Facility, the Site
or a Seller Interest (as such term is defined
in Section 1.2(e) hereof) pursuant to any of
the Financing Documents. The failure of any
Collateral Security Party to give any notice
of default to PEPCO in accordance with this
Section 1.2(i) shall not result in any
liability of such Collateral Security Party,
but no such sale, assignment, lease, or other
transfer of all or any portion of the
Facility, the Site, or a Seller Interest
shall be effective unless the Collateral
Security Party shall have provided PEPCO with
such notice.
(j) Any substitute, successor or
additional Security Agent, Indenture Trustee,
Owner Trustee, Interest Hedging Counterparty,
Owner Participant, Administrative Agent or
LOC Issuer shall agree to be bound by the
terms of this Consent and shall enter into a
supplement to this Consent in form and
substance reasonably satisfactory to PEPCO.
Each Collateral Security Party shall also
cause any receiver acting for, or at the
request of, such Collateral Security Party to
agree to be bound by the terms of this
Consent and to enter into a supplement to
this Consent in form and substance reasonably
satisfactory to PEPCO.
(k) Any Collateral Security Party
that is authorized to provide direction to
the Trustee (as such term is defined in the
Deed of Trust and Security Agreement) shall
cause the Trustee under the Deed of Trust and
Security Agreement to act in a manner
consistent with the rights granted to PEPCO
in this Consent. Without limiting the scope
of the foregoing in any manner, any
instructions or directions that any
Collateral Security Party provides to such
Trustee shall be consistent with the rights
granted to PEPCO in this Consent.
(l) Each party hereto agrees that
the Financing Documents to which it is a
party will not be amended, modified or
supplemented without the prior written
approval of PEPCO (which approval shall not
be withheld unless PEPCO reasonably
determines that such amendment, modification
or supplement would materially impair the
operation of the Facility by the Partnership
as a Facility that is dispatchable by PEPCO
in accordance with the terms and provisions
of the Assigned Agreement or would otherwise
materially impair PEPCO's rights in
accordance with the terms and provisions of
the Assigned Agreement).
(m) The parties hereto agree that
all provisions of this Consent relating to
the sale, assignment, lease or other transfer
of the Facility shall also apply to any sale
(including, but not limited to, a foreclosure
sale) assignment, lease or other transfer of
the electricity produced by the Facility.
(n) Each of the Collateral
Security Parties and the Partnership warrants
and represents to PEPCO that the Collateral
Security Parties are the only Persons that
have been assigned security interests in the
Collateral, and that may exercise rights or
remedies with respect to the Collateral under
the Financing Documents. This warranty and
representation shall survive the execution
and delivery of this Consent and shall
continue in effect as long as the Power
Purchase Agreement and any of the Financing
Documents remain in effect. PEPCO, the
Partnership and the Collateral Security
Parties agree that no Person may exercise any
rights or remedies or similar action with
respect to the Collateral under any of the
Financing Documents unless conducted in a
manner consistent with this Consent and the
rights of the Power Purchaser under the Power
Purchase Agreement and the Transfer Agreement
(to the extent such rights under the Power
Purchase Agreement and the Transfer Agreement
are not explicitly waived by PEPCO in
accordance with the terms of this Consent).
(o) If General Electric Capital
Corporation extends Equity Loans to the
Partners under the Equity Loan Facility
Letter Agreement, it may obtain a second
security interest in some of the Collateral.
Prior to obtaining any such security
interest, General Electric Capital
Corporation shall enter into an appropriate
amendment to this Consent (in form reasonably
satisfactory to PEPCO), agreeing to be bound
by all provisions of this Consent with
respect to such security interest.
(p) (i) Each of Administrative
Agent and Indenture Trustee represents and
warrants, for the sole benefit of PEPCO, that
the Loan Participants shall have no right to
exercise any rights or remedies in respect of
any security interest in the Facility, the
Site, this Consent, the Assigned Agreement or
any Seller Interest (as defined in Section
1.2(e) of this Consent) except by and through
the Administrative Agent or the Indenture
Trustee (as the case may be), in each case
acting in accordance with the terms and
conditions of this Consent.
(ii) Each of LOC Issuer and
Security Agent represents and warrants, for
the sole benefit of PEPCO, that the LOC
Participants, if any, shall have no right to
exercise any rights or remedies in respect of
any security interest in the Facility, the
Site, this Consent, the Assigned Agreement or
any Seller Interest (as defined in Section
1.2(e) of this Consent) except by and through
the LOC Issuer or the Security Agent (as the
case may be), in each case acting in
accordance with the terms and conditions of
this Consent.
(iii) PEPCO shall have no
duty or obligation hereunder to provide any
Loan Participant or LOC Participant with
originals or copies of any notice or other
communication required under this Consent or
the Assigned Agreement or to otherwise take
any action in respect of the Facility, the
Site, this Consent, the Assigned Agreement or
any Seller Interest (as defined in Section
1.2(e) of this Consent) in response to, as a
result of, or in reaction to, any purported
notice, communication, authorization,
direction or instruction from any Loan
Participant or LOC Participant, and the
parties hereto acknowledge and agree that any
such purported communication or notice shall
be void as against PEPCO and that PEPCO shall
have no liability in respect thereof.
(iv) PEPCO shall have the
right, but not the obligation, to demand,
from time to time, a written reaffirmation by
the Administrative Agent and Indenture
Trustee or the LOC Issuer and Security Agent,
as the case may be, of the foregoing
respective representations and warranties in
respect of any purported notices or actions
by any Loan Participant or LOC Participant,
as the case may be, in contravention of the
provisions hereof. The failure of the
Administrative Agent and the Indenture
Trustee or the LOC Issuer and Security Agent,
as the case may be, to provide such
reaffirmation within ten (10) Business Days
of receipt of the above-referenced PEPCO
demand, or the breach of the representations
and warranties set forth in this paragraph
1.2(p), shall be deemed to be a breach of
this Consent.
1.3 Right to Cure.
(a) During the effectiveness of
this Consent, in the event of a failure by
the Partnership to comply with a material
provision of the Assigned Agreement, which
failure is subject to Subsection 15.1(b) of
the Assigned Agreement, PEPCO agrees that the
Owner Trustee, the Owner Participant, the
Indenture Trustee and the Security Agent
shall have the same right, but not the
obligation, to cure the failure as the
Partnership has under Subsection 15.1(b) of
the Assigned Agreement. PEPCO shall give
notice of such failure to the Owner Trustee,
the Owner Participant, the Indenture Trustee
and the Security Agent at the same time it
gives notice thereof to the Partnership
pursuant to Subsection 15.1(b) of the
Assigned Agreement and shall afford the Owner
Trustee, the Owner Participant, the Indenture
Trustee and the Security Agent an
opportunity, concurrently with the
Partnership, to cure such failure within the
same time period provided for cure by the
Partnership as set forth in Subsection
15.1(b) of the Assigned Agreement.
(b) During the effectiveness of
this Consent, if there is an Event of Default
(as such term is defined in the Assigned
Agreement) by the Partnership in the
performance of any of its obligations that is
subject to Subsection 15.1(a), (i), (j), (l)
or (m) (for purposes of this Section 1.3(b),
Events of Default under Subsection 15.1(l)
shall only include Events of Default
involving Fuel Supply Contracts (as such term
is defined in the Assigned Agreement)) of the
Assigned Agreement, PEPCO will not exercise
its right to terminate the Assigned Agreement
until it first gives notice of such Event of
Default to the Owner Trustee, the Owner
Participant, the Indenture Trustee and the
Security Agent and, (i) with respect to an
Event of Default under Subsection 15.1(a)
affords the Owner Trustee, the Owner
Participant, the Indenture Trustee and the
Security Agent, concurrently, a period of
five (5) days from receipt of such notice to
cure such Event of Default, (ii) with respect
to an Event of Default under Subsection
15.1(i) or (j), affords the Owner Trustee,
the Owner Participant, the Indenture Trustee
and the Security Agent, concurrently, a
period of fifteen (15) days from receipt of
such notice to cure such Event of Default,
(iii) with respect to an Event of Default
under Subsection 15.1(m) affords the Owner
Trustee, the Owner Participant, the Indenture
Trustee and the Security Agent, concurrently,
a period of thirty (30) days from receipt of
such notice to cure such Event of Default,
and (iv) with respect to an Event of Default
under Subsection 15.1(l), affords the Owner
Trustee, the Owner Participant, the Indenture
Trustee and the Security Agent, concurrently,
a period of sixty (60) days from receipt of
such notice to cure such Event of Default.
An Event of Default under Subsection 15.1(l)
may be cured by the execution of replacement
Fuel Supply Contracts, subject to the prior
written consent of PEPCO in accordance with
Subsection 8.9(a) of the Assigned Agreement.
(c) The failure of PEPCO to give
any notice of failure or default to the Owner
Trustee, the Owner Participant, the Indenture
Trustee or the Security Agent in accordance
with Section 1.3(a) or 1.3(b) hereof shall
not result in any liability of PEPCO, but no
termination of the Assigned Agreement shall
be effective unless PEPCO shall have provided
the Owner Trustee, the Owner Participant, the
Indenture Trustee and the Security Agent with
notice, and opportunity to cure the failure
or default, as required by Section 1.3(a) or
1.3(b).
(d) The Partnership hereby
irrevocably consents to the exercise by the
Owner Trustee, the Owner Participant, the
Indenture Trustee or the Security Agent of
any cure rights it may have hereunder.
1.4 No Amendments. PEPCO agrees to give the Owner
Trustee, the Owner Participant, the Indenture Trustee and the
Security Agent ten (10) days prior written notice of the pending
execution of any amendment, supplement or modification of the
Assigned Agreement or any waiver or consent with respect thereto.
The failure of PEPCO to give such notice to the Owner Trustee,
the Owner Participant, the Indenture Trustee and the Security
Agent shall not result in any liability of PEPCO, but the
amendment, supplement or modification, waiver or consent as to
which such notice was not delivered shall not be effective
against the Owner Trustee, the Owner Participant, the Indenture
Trustee and the Security Agent unless the Owner Trustee, the
Owner Participant, the Indenture Trustee and the Security Agent,
each at its option, expressly agrees that such amendment,
modification, supplement, waiver or consent shall be effective
against it.
1.5 Replacement Agreement. During the effectiveness
of this Consent, in the event that the Assigned Agreement is (i)
terminated as a result of any bankruptcy or insolvency proceeding
affecting the Partnership, or (ii) terminated by PEPCO pursuant
to Subsection 15.1(f) or (g) of the Assigned Agreement, PEPCO
will, at the option of the Security Agent, which option shall be
exercised within thirty (30) days following such rejection or
termination of the Assigned Agreement, enter into a new agreement
with the Security Agent or its respective transferee or nominee
having terms substantially the same as the terms of such Assigned
Agreement, provided that PEPCO's obligation to enter into such
new agreement shall be subject to (i) the prior written consent
of PEPCO, which consent shall not be unreasonably withheld or
delayed, as long as PEPCO reasonably determines that the Security
Agent, its transferee or nominee, as the case may be, is a party
that is financially and technically capable (or, as to technical
capability, has retained an experienced operator who is
technically capable) of completing the construction of, and
operating, the Project in accordance with the terms of the
Assigned Agreement, and (ii) the receipt of all necessary
governmental and regulatory approvals required for such new
agreement, if any, in form and substance reasonably satisfactory
to PEPCO, the Security Agent, the Indenture Trustee, the Owner
Trustee and the Owner Participant. Notwithstanding the
foregoing, PEPCO shall have no obligation to enter into a new
agreement if, prior to PEPCO's receipt of notice from the
Security Agent pursuant to this Section 1.5, PEPCO has (i) given
the Partnership a notice of default and intention to terminate
the Assigned Agreement pursuant to Subsection 15.2(a) of the
Assigned Agreement (excluding any default under Subsection
15.1(f) or (g) of the Assigned Agreement), and (ii) where
applicable, given the Owner Trustee, the Owner Participant, the
Indenture Trustee and the Security Agent notice pursuant to
Section 1.3 hereof that the Partnership is in default and that
PEPCO intends to terminate the Assigned Agreement and the Owner
Trustee, the Owner Participant, the Indenture Trustee or the
Security Agent has failed to cure such default within the time
period provided to the Owner Trustee, the Owner Participant, the
Indenture Trustee and the Security Agent in Section 1.3 hereof to
cure such default.
1.6 Liability. PEPCO acknowledges and agrees that no
party hereto (other than the Partnership) shall have any
liability or obligation under the Assigned Agreement, the
Transfer Agreement or the Transmission Facilities Letter
Agreement as a result of this Consent or the Financing Documents
nor shall any such party, except during any period described in
the next sentence, be obligated or required to perform any of the
Partnership's or such Partners' obligations under the Assigned
Agreement, the Transfer Agreement or the Transmission Facilities
Letter Agreement. If any Collateral Security Party, its
transferee or another purchaser succeeds to the Partnership's
interests under the Assigned Agreement, assumes the Partnership's
obligations under the Transmission Facilities Letter Agreement or
assumes the Partnership's obligations or a Partner's obligations
under the Transfer Agreement, in accordance with Section 1.2 of
this Consent, whether by foreclosure or otherwise, the party that
succeeds to such interests or obligations shall assume liability
for all of the Partnership's or the Partner's obligations under
the Assigned Agreement, the Transfer Agreement, or the
Transmission Facilities Letter Agreement, as the case may be,
including, but not limited to, payment of all amounts due and
owing to PEPCO under the Assigned Agreement, the Transfer
Agreement, or the Transmission Facilities Letter Agreement,
whether such obligations or amounts shall have accrued before or
after the date of succession. Nothing in this Consent is
intended to or shall relieve the Partnership from any of its
obligations under the Assigned Agreement or the Transmission
Facilities Letter Agreement, or relieve the Partnership or a
Partner from any of its obligations under the Transfer Agreement,
or limit the right of PEPCO to proceed against the Partnership or
any Partner, as the case may be, for recovery in respect of any
default or unperformed obligations under the Assigned Agreement,
the Transfer Agreement or the Transmission Facilities Letter
Agreement. Notwithstanding anything to the contrary contained in
this Consent, in the event that any Collateral Security Party or
its transferee or another purchaser succeeds to the Partnership's
interests under the Assigned Agreement, assumes the Partnership's
obligations under the Transmission Facilities Letter Agreement or
assumes the Partnership's obligations or a Partner's obligations
under the Transfer Agreement, liability in respect of any and all
obligations of such party under the Assigned Agreement, the
Transmission Facilities Letter Agreement or the Transfer
Agreement, as the case may be, shall be limited solely to such
party's interest in the Project and the sole recourse of PEPCO
against such party in seeking enforcement of such obligations
shall be to such party's interest in the Project (and any
officer, director, employee, shareholder, agent or affiliate or
subsidiary thereof shall have no liability with respect thereto).
For purposes of the immediately preceding sentence, a party's
interest in the Project shall include, but shall not be limited
to, the party's interest in the assets of any Partner in which
the party acquires an ownership interest.
1.7 Consent to Sale and Lease; Consent to Leveraged Lease.
(a) PEPCO hereby consents to the
assignment and sale by the Partnership to the
Owner Trustee of all of its right, title and
interest in and to the Facility pursuant to
the Bill of Sale and the Present Assignment,
such sale and assignment to occur on the
Lease Closing Date, provided that
simultaneously with such assignment and sale
the Owner Trustee leases the Facility to the
Partnership in accordance with the Facility
Lease. The Owner Trustee hereby agrees that
any subsequent assignment, sale, or other
transfer of all or part of the Facility by
the Owner Trustee to any Person (other than
the collateral assignment by the Owner
Trustee to the Indenture Trustee pursuant to
the Indenture and a sale of the Facility to
the Partnership at the end of the Basic Lease
Term or any Renewal Term in accordance with
Section 12 of the Facility Lease) shall be
subject to PEPCO's purchase rights under
Sections 18.1 and 18.2 of the Assigned
Agreement and to the provisions of Sections
1.2(b) and 1.2(g) of this Consent. For
purposes of the application of Sections 18.1
and 18.2 of the Assigned Agreement as
provided for in the immediately preceding
sentence, the Owner Trustee shall be deemed
to be the "Seller" as such term is used in
such Sections. If the assignment and sale of
the Facility by the Partnership to the Owner
Trustee is made in accordance with the
foregoing provisions of this Section 1.7(a),
then PEPCO waives any rights it may have to
purchase such Transfer Interest (as such term
is defined in the Assigned Agreement) as a
result of such assignment and sale pursuant
to Sections 18.1 and 18.2 of the Assigned
Agreement.
(b) PEPCO further consents to the
Owner Participant exercising its option under
the Loan Agreement to "leverage" the Facility
Lease on the Lease Closing Date as described
in the WHEREAS clauses hereof by causing the
Owner Trustee to finance a portion of the
purchase price of the Facility payable to the
Partnership pursuant to the Lease Documents.
(c) If any of the Collateral
Security Parties exercises any rights it may
have under any of the Financing Documents to
sell, assign, transfer, grant participations
in, or otherwise dispose of all or any
portion of its participations in any of the
Loans or the Letters of Credit or any of its
right, title and interest in any of the
Financing Documents or any of the Collateral
to any other Person ("Assignees") or engage
in any refinancing with respect to the above,
then prior to such sale, assignment,
transfer, grant or disposal or refinancing,
such Collateral Security Party shall obtain
the agreement of each such Assignee or
refinancing party in writing, in a form
reasonably satisfactory to PEPCO, to be bound
by the provisions of this Consent provided,
however, that the foregoing provisions shall
not apply to any person which shall not
acquire any separate right or any interest in
any of the Collateral except through the
Collateral Security Party exercising such
right.
(d) The Owner Participant agrees
with PEPCO that if the Owner Trustee shall
remain in possession of the Facility at the
end of the Lease Term, then for the remaining
portion, if any, of the Term (as defined in
the Assigned Agreement) the Owner Participant
shall, or shall cause the Owner Trustee to,
sell the capacity and energy of the Facility
to PEPCO in accordance with the provisions of
the Assigned Agreement and the Transmission
Facilities Letter Agreement, and shall
assume, or cause the Owner Trustee to assume
(which assumption shall be set forth in a
form reasonably satisfactory to PEPCO) all of
the obligations of the "Seller" under the
Assigned Agreement (including but not limited
to the provisions of Subsection 2.2 of the
Assigned Agreement), and all of the
obligations of the Partnership under the
Transmission Facilities Letter Agreement. If
any of the other Collateral Security Parties
(other than the Owner Trustee) is in
possession of the Facility at the end of the
Lease Term, then for the remaining portion,
if any, of the Term (as defined in the
Assigned Agreement) such Collateral Security
Party shall sell the capacity and energy of
the Facility to PEPCO in accordance with the
provisions of the Assigned Agreement and the
Transmission Facilities Letter Agreement, and
shall assume (which assumption shall be set
forth in a form reasonably satisfactory to
PEPCO) all of the obligations of the "Seller"
under the Assigned Agreement (including, but
not limited to, the provisions of Subsection
2.2 of the Assigned Agreement), and all of
the obligations of the Partnership under the
Transmission Facilities Letter Agreement.
1.8 Transfer by the Owner Participant. The Owner
Participant agrees to give PEPCO ten (10) days prior written
notice of any transfer by it of any portion of its beneficial
interest under the Trust Agreement or any termination by it of
the Trust Agreement and/or the trust created thereby. Any
transferee of the Owner Participant shall agree in writing (in a
form reasonably satisfactory to PEPCO) to take its interest
subject to the terms of this Consent. If the Trust Agreement or
the trust created thereby shall terminate, the Owner Participant
shall agree in writing (in a form reasonably satisfactory to
PEPCO) to assume all of the agreements of the Owner Trustee
hereunder.
1.9 The LOC Issuer Letters of Credit. PEPCO agrees
that, as of the date hereof, the LOC Issuer is a financial
institution acceptable to PEPCO for purposes of issuing letters
of credit to satisfy the Partnership's obligations to provide the
Interconnection Security, the Performance Security and/or the
Maintenance Reserve, whether or not the LOC Issuer is rated by
Thomson's BankWatch. PEPCO reserves the right to withdraw its
acceptance of the LOC Issuer for this purpose if there is a
material adverse change in the LOC Issuer's financial condition.
In any case, the form of each such letter of credit remains
subject to PEPCO's approval under the Assigned Agreement.
1.10 Breach of Assigned Agreement. The parties hereto
agree that any breach by any party hereto (other than PEPCO) of
any provision of this Consent, shall be deemed to be a failure of
the Partnership to comply with a material provision of the
Assigned Agreement within the meaning of Subsection 15.1(b) of
the Assigned Agreement.
1.11 Reliable Fuel Supply. (a) The parties hereto
understand that PEPCO has the right to give the Partnership a
written notice pursuant to Subsection 15.1(b) of the Assigned
Agreement in the case of a failure by the Partnership to comply
with the provisions of Section 11.2 of the Assigned Agreement due
to the failure of the Partnership to have a reliable supply of
Fuel (as defined in the Assigned Agreement) (a "Fuel Default");
provided, however, that the cure period which must expire before
a Fuel Default becomes an Event of Default under said
Subsection 15.1(b) will not commence unless and until there has
been an actual failure by the Project to perform (by failing to
deliver, in accordance with the Assigned Agreement, Net
Electrical Output (as defined in the Assigned Agreement) to the
Interconnection Point (as defined in the Assigned Agreement) in
response to a PEPCO dispatch) due to such Fuel Default. PEPCO's
notice of a Fuel Default must describe in reasonable detail its
reasons for declaring a default under said Section 11.2, and the
cure period under such Subsection 15.1(b) with respect to such
Fuel Default shall not commence unless the subsequent failure of
the Project to perform is attributable to the reasons set forth
in such notice of Fuel Default. To the extent that a failure to
perform is attributable to the Fuel Default, it is herein called
a "Fuel/Performance Failure". If, in the case of a
Fuel/Performance Failure, at the end of the cure period provided
under said Subsection 15.1(b) with respect to such
Fuel/Performance Failure (as the commencement of such period may
have been deferred in accordance with the first sentence of this
paragraph) the related Fuel Default is not cured or such
Fuel/Performance Failure is continuing, PEPCO will have the right
to give a notice of default and intention to terminate under
Section 15.2 of the Assigned Agreement. To the extent that any
Fuel Default arises out of the implementation of any provision of
any Gas Contract, the Partnership shall not be required to change
or terminate such provision or the implementation thereof in
order to cure such Fuel Default, so long as such Fuel Default is
cured in some other manner.
(b) In consideration of PEPCO's agreement to defer the
commencement of the cure period for a Fuel Default as set forth
above, the Partnership hereby waives, and PEPCO will be relieved
of the obligation to make, Monthly Capacity Payments under the
Assigned Agreement for the period commencing on the date of a
Fuel/Performance Failure and continuing until the date that both
the related Fuel Default is cured and such Fuel/Performance
Failure has ended; provided that the period during which such
Fuel/Performance Failure continues shall not be included in the
calculation of the Equivalent Availability Factor (as defined in
the Assigned Agreement). None of the parties hereto, nor any of
their respective successors and assigns, will challenge the non-
payment of Monthly Capacity Payments pursuant to the first
sentence of this paragraph (b) of this Section 1.11 on the
grounds that said first sentence is invalid or unenforceable
because it should have been approved by a Governmental Authority.
It is understood that PEPCO may, at its option, seek approval of
the provisions of this paragraph (b) of this Section 1.11 from
any such Governmental Authority as it deems appropriate;
provided, however, that, PEPCO agrees that any filing with or
determination by, any such Governmental Authority will not affect
any other provision of this Consent, including without
limitation, the provisions of paragraph (a) of this Section 1.11.
1.12 Financing Documents. For all purposes of the
Assigned Agreement, the "Financing Documents" (as defined
therein) shall be deemed to include, without limitation, the
Financing Documents as defined in Annex A to the Participation
Agreement.
1.13 Transfer Agreement. If the Partnership is no
longer the owner or lessee of the Project and is no longer a
party to the Assigned Agreement, then any breach by the
Partnership, the General Partner or the Limited Partner of any
obligation under the Transfer Agreement shall not be a default
under the Assigned Agreement. The foregoing is without
derogation of the provisions of the third sentence of Section 1.6
hereof. Whenever any provision contained herein requires a party
to assume the Transfer Agreement, such obligation may be
fulfilled by such party entering into a separate agreement with
PEPCO on the same terms and conditions as the Transfer Agreement,
provided that the Transfer Agreement is also amended as necessary
to reflect any changes resulting from such assumption.
1.14 Performance and Maintenance Reserve. (a) If
PEPCO shall draw on a letter of credit issued to fund the
Performance Security required by Section 4.5 of the Assigned
Agreement because such letter of credit is expiring without being
renewed, then PEPCO shall hold the proceeds of such draw for the
purposes and uses provided in said Section 4.5 until an escrow
account is established in accordance with said Section 4.5, at
which time such proceeds shall be deposited in such escrow
account.
(b) If PEPCO shall draw on a letter of credit issued
to fund the Maintenance Reserve required by Section 8.7 of the
Assigned Agreement because such letter of credit is expiring
without being renewed, then PEPCO shall hold the proceeds of such
draw for the purposes and uses provided in said Section 8.7 until
a Maintenance Reserve is established in accordance with said
Section 8.7, at which time such proceeds shall be deposited in
such Maintenance Reserve.
SECTION 2. PAYMENTS
The Partnership hereby directs PEPCO to pay all moneys
due and to become due to the Partnership under the Assigned
Agreement directly to Fleet National Bank, as Security Agent, 777
Main Street, Hartford, Connecticut 06115, Attention: Corporate
Trust Administration, for deposit in the Revenue Account, or to
such other person or in such other manner as the Security Agent
may from time to time specify in writing to PEPCO, without
offset, abatement, withholding or reduction except as provided or
permitted by the Assigned Agreement.
SECTION 3. REPRESENTATIONS OF PARTIES.
3.1 Representations of the Owner Participant.
The Owner Participant hereby represents,
as of the date hereof, that:
(a) This Consent has been duly
authorized, executed and delivered by the
Owner Participant, and is in full force and
effect on the day hereof; and
(b) This Consent is a valid, legal
and binding obligation of the Owner
Participant, enforceable against the Owner
Participant in accordance with its terms,
except (i) as such enforceability may be
limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar
laws now or hereafter in effect relating to
creditors' rights generally, and (ii) to the
extent that the remedies of specific
performance, injunctive relief and other
forms of equitable relief are subject to
equitable defenses, the discretion of the
court before which any proceeding therefor
may be brought, and the principles of equity
in general.
3.2 Representations of the Security Agent, in its
individual capacity.
The Security Agent, in its individual
capacity, hereby represents, as of the date
hereof, that:
(a) This Consent has been duly
authorized, executed and delivered by the
Security Agent, and is in full force and
effect on the day hereof; and
(b) This Consent is a valid, legal
and binding obligation of the Security Agent,
enforceable against the Security Agent in
accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, or
other similar laws now or hereafter in effect
relating to creditors' rights generally, and
(ii) to the extent that the remedies of
specific performance, injunctive relief and
other forms of equitable relief are subject
to equitable defenses, the discretion of the
court before which any proceeding therefor
may be brought, and the principles of equity
in general.
3.3 Representations of the Partnership.
The Partnership hereby represents, as of
the date hereof, that:
(a) This Consent has been duly
authorized, executed and delivered by the
Partnership, and is in full force and effect
on the day hereof; and
(b) This Consent is a valid, legal
and binding obligation of the Partnership,
enforceable against the Partnership in
accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, or
other similar laws now or hereafter in effect
relating to creditors' rights generally, and
(ii) to the extent that the remedies of
specific performance, injunctive relief and
other forms of equitable relief are subject
to equitable defenses, the discretion of the
court before which any proceeding therefor
may be brought, and the principles of equity
in general.
3.4 Representations of PEPCO.
PEPCO hereby represents, as of the date
hereof, that:
(a) This Consent has been duly
authorized, executed and delivered by PEPCO,
and is in full force and effect on the day
hereof; and
(b) This Consent is a valid, legal
and binding obligation of PEPCO, enforceable
against PEPCO in accordance with its terms,
except (i) as such enforceability may be
limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar
laws now or hereafter in effect relating to
creditors' rights generally, and (ii) to the
extent that the remedies of specific
performance, injunctive relief and other
forms of equitable relief are subject to
equitable defenses, the discretion of the
court before which any proceeding therefor
may be brought, and the principles of equity
in general; and
(c) PEPCO has not delivered to the
Partnership any notice under Section 15.1 of
the Assigned Agreement or notice of default
and intention to terminate under Subsection
15.2(a) of the Assigned Agreement; and
(d) PEPCO has no notice of, and
has not consented to, any previous assignment
by the Partnership of all or any part of the
Partnership's rights under the Assigned
Agreement, other than (i) the Assignment and
Security Agreement, dated as of December 2,
1993, between the Partnership and United
Engineers & Constructors Inc. dba Raytheon
Engineers & Constructors ("Raytheon") (as
consented to by PEPCO pursuant to the terms
of the Consent and Agreement, dated as of
December 2, 1993, among PEPCO, the
Partnership and Raytheon), (ii) the Amended
and Restated Assignment and Security
Agreement, dated as of March 23, 1994,
between the Partnership and General Electric
Capital Corporation, as agent for the Lenders
(as consented to by PEPCO pursuant to the
Amendment to Consent and Agreement, dated as
of March 23, 1994, among PEPCO, the
Partnership, Raytheon, and General Electric
Capital Corporation (as Agent)) and (iii) the
Assignment (as consented to by PEPCO pursuant
to the Original Consent).
3.5 Representations of the Interest Hedging
Counterparty.
The Interest Hedging Counterparty hereby
represents, as of the date hereof, that:
(a) This Consent has been duly
authorized, executed and delivered by the
Interest Hedging Counterparty, and is in full
force and effect on the day hereof; and
(b) This Consent is a valid, legal
and binding obligation of the Interest
Hedging Counterparty, enforceable against the
Interest Hedging Counterparty in accordance
with its terms, except (i) as such
enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, or
other similar laws now or hereafter in effect
relating to creditors' rights generally, and
(ii) to the extent that the remedies of
specific performance, injunctive relief and
other forms of equitable relief are subject
to equitable defenses, the discretion of the
court before which any proceeding therefor
may be brought, and the principles of equity
in general.
3.6 Representations of the Administrative Agent.
The Administrative Agent hereby
represents, as of the date hereof, that:
(a) This Consent has been duly
authorized, executed and delivered by the
Administrative Agent, and is in full force
and effect on the day hereof; and
(b) This Consent is a valid, legal
and binding obligation of the Administrative
Agent, enforceable against the Administrative
Agent in accordance with its terms, except
(i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization,
moratorium, or other similar laws now or
hereafter in effect relating to creditors'
rights generally, and (ii) to the extent that
the remedies of specific performance,
injunctive relief and other forms of
equitable relief are subject to equitable
defenses, the discretion of the court before
which any proceeding therefor may be brought,
and the principles of equity in general.
3.7 Representations of the Indenture Trustee, in its
individual capacity.
The Indenture Trustee, in its individual
capacity, hereby represents, as of the date
hereof, that:
(a) This Consent has been duly
authorized, executed and delivered by the
Indenture Trustee, and is in full force and
effect on the day hereof; and
(b) This Consent is a valid, legal
and binding obligation of the Indenture
Trustee, enforceable against the Indenture
Trustee in accordance with its terms, except
(i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization,
moratorium, or other similar laws now or
hereafter in effect relating to creditors'
rights generally, and (ii) to the extent that
the remedies of specific performance,
injunctive relief and other forms of
equitable relief are subject to equitable
defenses, the discretion of the court before
which any proceeding therefor may be brought,
and the principles of equity in general.
3.8 LOC Issuer.
LOC Issuer hereby represents, as of the
date hereof, that:
(a) This Consent has been duly
authorized, executed and delivered by LOC
Issuer, and is in full force and effect on
the day hereof; and
(b) This Consent is a valid, legal
and binding obligation of the LOC Issuer,
enforceable against the LOC Issuer in
accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, or
other similar laws now or hereafter in effect
relating to creditors' rights generally, and
(ii) to the extent that the remedies of
specific performance, injunctive relief and
other forms of equitable relief are subject
to equitable defenses, the discretion of the
court before which any proceeding therefor
may be brought, and the principles of equity
in general.
3.9 Representations of the Owner Trustee, in its
individual capacity.
The Owner Trustee, in its individual
capacity, hereby represents, as of the date
hereof, that:
(a) This Consent has been duly
authorized, executed and delivered by the
Owner Trustee, and is in full force and
effect on the day hereof; and
(b) This Consent is a valid, legal
and binding obligation of the Owner Trustee,
enforceable against the Owner Trustee in
accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, or
other similar laws now or hereafter in effect
relating to creditors' rights generally, and
(ii) to the extent that the remedies of
specific performance, injunctive relief and
other forms of equitable relief are subject
to equitable defenses, the discretion of the
court before which any proceeding therefor
may be brought, and the principles of equity
in general.
SECTION 4. MISCELLANEOUS
4.1 Notices. All notices and other communications
hereunder shall be in writing, shall refer on their face to the
Assigned Agreement (although failure to so refer shall not render
any such notice or communication ineffective), shall be sent by
personal delivery or by a nationally recognized courier service
(with a receipt for delivery), and shall be directed (a) if to
PEPCO, in accordance with Section 19.2 of the Assigned Agreement,
(b) if to General Electric Capital Corporation, in any role
hereunder, at 1600 Summer Street, Stamford, Connecticut 06927,
attention, Vice President, Energy Project Operations and
Transportation and Industrial Financing Division, (c) if to the
Partnership, at 4100 Spring Valley, Suite 1001, Dallas, Texas
75244, (d) if to the Security Agent or the Owner Trustee, at 777
Main Street, Hartford, Connecticut 06115, Attention: Corporate
Trust Administration, (e) if to the Indenture Trustee, at 79
South Main Street, 3rd Floor, Salt Lake City, Utah 84111,
Attention: Corporate Trust Services, (f) if to the
Administrative Agent, at 11 Madison Avenue, 19th Floor, New York,
New York 10010-3629, Attention: Global Project Finance, or (g)
to such other address or addressee as any party may designate by
notice given pursuant hereto. Such notice sent as aforesaid
shall be deemed to have been duly given or made when delivered by
hand or, in the case of a nationally recognized overnight courier
service one Business Day after delivery to such courier service.
4.2 Governing Law. THIS CONSENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
4.3 Counterparts. This Consent may be executed in any
number of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together
constitute one and the same instrument.
4.4 Headings Descriptive. The headings of the several
Sections and subsections of this Consent are inserted for
convenience only and shall not in any way affect the meaning or
construction of any provision of this Consent.
4.5 Severability. In case any provision in or
obligation under this Consent shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby.
4.6 Amendment, Waiver. Neither this Consent nor any
of the terms hereof may be terminated, amended, supplemented,
waived or modified except by an instrument in writing signed by
each party hereto.
4.7 Successors and Assigns. (a) The Collateral
Security Parties may each assign its rights and obligations under
this Consent (i) as specifically contemplated by Section 1.8
hereof (in the case of the Owner Participant), or (ii) to any
other Person, subject in the case of this clause (ii) to the
prior written consent of PEPCO, which consent shall not be
unreasonably withheld. The Partnership may assign its rights and
obligations under this Consent, subject to the prior written
consent of the Collateral Security Parties and PEPCO, which
consent shall not be unreasonably withheld. PEPCO may assign its
rights and obligations under this Consent, subject to the prior
written consent of the Owner Participant, the Indenture Trustee
and the Security Agent; provided, however, that such consent
shall not be required prior to an assignment to a wholly-owned
subsidiary of PEPCO which is an assignee of the Assigned
Agreement; provided, further, that, unless expressly agreed
otherwise by the Owner Participant, the Indenture Trustee, the
Security Agent and the Owner Trustee, no assignment, whether or
not consented to, shall relieve PEPCO of its obligations
hereunder in the event its assignee fails to perform.
(b) This Consent shall be binding upon the
successors and permitted assigns of the parties and shall enure
to the benefit of the parties and their respective successors and
permitted assigns. Without limiting the scope of the foregoing,
PEPCO's rights and obligations under this Consent shall be
binding upon, and enure to the benefit of, Constellation Energy
Corporation ("Constellation") as successor to PEPCO, effective
upon the merger of PEPCO and Constellation. Furthermore, PEPCO's
rights and obligations under the Assigned Agreement and the
Transfer Agreement shall be binding upon, and enure to the
benefit of, Constellation as successor to PEPCO, effective upon
the merger of PEPCO and Constellation.
4.8 Waiver of Trial by Jury. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS CONSENT OR
ANY MATTER ARISING HEREUNDER.
4.9 No Amendment. Notwithstanding any other provision
of this Consent (i) nothing herein set forth is intended to or
shall amend, modify or in any other way change the Assigned
Agreement, the Transfer Agreement or the Transmission Facilities
Letter Agreement and (ii) except as explicitly set forth in
Sections 1.2(b), 1.2(e), 1.3 and 1.7(a) hereof, PEPCO does not
waive any rights it may have pursuant to the Assigned Agreement,
the Transfer Agreement, or the Transmission Facilities Letter
Agreement and each of the Collateral Security Parties explicitly
acknowledges PEPCO's rights under these Agreements.
4.10 Conflict. This Consent sets forth the terms and
conditions upon which PEPCO consents to the assignment of the
Assigned Agreement pursuant to the Security Agreement and the
Present Assignment. Solely insofar as PEPCO is concerned, to the
extent that there is a conflict between any term or provision set
forth in this Consent and any term or provision of the Security
Agreement or the Facility Lease or any other Financing Document
(other than this Consent), the terms and provisions of this
Consent shall govern. Solely insofar as PEPCO is concerned and
without limiting the extent of the foregoing in any manner, the
parties hereto agree that (i) any purported bar, waiver or
similar limitation on PEPCO's rights with respect to the
Partnership, the Partnership's present or future property, the
Assigned Agreement, the Transfer Agreement, the Transmission
Facilities Letter Agreement or this Consent that is set forth in
the Security Agreement, the Present Assignment, the Loan
Agreement, the Facility Lease or any other Financing Document
(other than this Consent) shall not have any force or effect with
respect to PEPCO and (ii) to the extent that there is a conflict
between any term or provision of the Assigned Agreement, the
Transfer Agreement or the Transmission Facilities Letter
Agreement and any term or provision of the Security Agreement,
the Present Assignment, the Facility Lease or any other Financing
Document (other than this Consent), the terms and provisions of
the Assigned Agreement, the Transfer Agreement or the
Transmission Facilities Letter Agreement shall govern.
4.11 Written Confirmation. Upon the request of the
Owner Participant, the Indenture Trustee, the Security Agent, or
the Owner Trustee, PEPCO hereby agrees to negotiate a supplement
to this Consent, in form and substance reasonably satisfactory to
the Owner Participant, the Security Agent, the Owner Trustee and
PEPCO, confirming the rights and obligations of any permitted
successor or assignee of the Owner Trustee, the Owner
Participant, the Indenture Trustee or the Security Agent under
this Consent.
4.12 Compliance Certificate. PEPCO hereby agrees to
execute and deliver a compliance certificate addressed to the
Owner Trustee, the Owner Participant, the Indenture Trustee and
the Partnership in the form of Annex A hereto and such compliance
certificate is hereby incorporated herein by reference as if a
part of this Consent.
4.13 Termination of Assignment. The parties hereto
agree that upon the execution and delivery of the Present
Assignment the Assignment shall automatically terminate without
further action of any kind whatsoever.
4.14 Amendment and Restatement. The Original Consent
is hereby amended and restated in its entirety as set forth in
this Consent.
4.15 Instructions of Various Parties. PEPCO shall
have no liability to any party hereto for accepting and following
any notice, instruction, authorization or other action by any
party hereto that is authorized hereby to give any such notice,
instruction or authorization or take any such action. Without
limiting the generality of the foregoing, in the event that PEPCO
shall receive contrary notices, instructions, authorizations or
other actions from any such parties, then PEPCO may request
definitive instructions on how to proceed from the Security
Agent.
4.16 Authorization to Agent and Trustees. Each party
hereto (other than PEPCO) hereby authorizes and directs the
Security Agent, the Indenture Trustee and the Owner Trustee to
execute, deliver and perform this Consent.
IN WITNESS WHEREOF, the parties have caused this
Consent to be duly executed and delivered by their officers
thereunto duly authorized as of the date first above written.
POTOMAC ELECTRIC POWER COMPANY
By: /s/ William R. Gee, Jr.
Name: William R. Gee, Jr.
Title: Vice President, Energy Planning
& Economy
FLEET NATIONAL BANK, a national banking
association, as Security Agent
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
FLEET NATIONAL BANK, not in its
individual capacity, but solely
as Owner Trustee
By: /s/ Kathy A. Larimore
Name: Kathy A. Larimore
Title: Assistant Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Michael J. Tzougrakis
Name: Michael J. Tzougrakis
Title: Manager of Operations
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation, its
sole general partner
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
CREDIT SUISSE, a bank organized and
existing under the laws of Switzerland,
acting through its New York branch,
as Administrative Agent
By: /s/ Louis D. Laconetti /s/ Kevin V. Soucy
Name: Louis D. Laconetti Kevin V. Soucy
Title: Associate Associate
FIRST SECURITY BANK, not in its
individual capacity, but solely as
Indenture Trustee
By: /s/ C. Scott Nielsen
Name: C. Scott Nielsen
Title: Vice President
The undersigned hereby acknowledge and consent to the
foregoing Consent and Agreement.
PANDA BRANDYWINE CORPORATION
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
PANDA ENERGY CORPORATION
By: /s/ William C. Nordlund
Name: William C. Nordlund
Title: Senior Vice President
EXHIBIT A
TO PEPCO CONSENT
COLLATERAL ASSIGNMENT OF POWER PURCHASE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that PANDA-BRANDYWINE, L.P.
(the "Partnership"), for a valuable consideration, receipt of
which is hereby acknowledged, has, as of this 30th day of March,
1995, sold, assigned, transferred, conveyed and set over and does
hereby sell, assign, transfer, convey and set over unto SHAWMUT
BANK CONNECTICUT, NATIONAL ASSOCIATION, in its capacity as
Security Agent (the "Security Agent") under the Security Deposit
Agreement (as defined in the Loan Agreement referred to below),
its successors and assigns, in connection with the transactions
contemplated by the Construction Loan Agreement and Lease
Commitment, dated as of March 30, 1995, between General Electric
Capital Corporation ("GE Capital"), the Partnership and Panda-
Brandywine Corporation (as amended, supplemented or otherwise
modified from time to time, the "Loan Agreement"; capitalized
terms used herein and not otherwise defined shall have the
respective meanings set forth in the Loan Agreement), all the
right, title and interest of the Partnership in, to and under
(including all moneys due and to become due to the Partnership
under), and does hereby grant to the Security Agent, for the
benefit of GE Capital and the Owner Trustee, a first priority
security interest in the Power Purchase Asreement, dated August
9, 1991, between the Partnership and Potomac Electric Power
Company ("PEPCO"), as amended as of the date hereof in accordance
with the First Amendment thereto, dated September 16, 1994 (and
as the same may from time to time be further amended,
supplemented or otherwise modified, the "Assigned Agreement").
This Assignment is made as collateral security for all
obligations of the Partnership to GE Capital and the Owner
Trustee under the Loan Agreement, the Site Sublease, the Facility
Lease and the other Transaction Documents and is subject to all
of the terms and conditions of (i) the Deed of Trust and Security
Agreement and (ii) the Security Agreement. All the right, title
and interest of the Partnership in, to and under the Assigned
Agreement shall from the date hereof constitute part of the
"Trust Property" as defined in the Deed of Trust and Security
Agreement and the "Collateral" as defined in the Security
Agreement, for all purposes of such agreements.
The Partnership hereby irrevocably authorizes and directs
PEPCO to pay all moneys, if any, due and to become due under or
by reason of the Assigned Agreement directly to Shawmut Bank
Connecticut, National Association, as Security Agent, 777 Main
Street, Hart ford, Connecticut 06115, Attention: Corporate Trust
Administration, for deposit in the Revenue Account, or to such
other person or in such other manner as the Security Agent or GE
Capital may hereafter from time to time specify to PEPCO in
writing, until such time as the Security Agent or GE Capital
shall notify PEPCO that this Assignment has been terminated and
released.
This Assignment shall not cause the Security Agent, the
Owner Trustee or GE Capital to be under any obligation to the
Partnership or to PEPCO for the performance or observance of any
of the representations, warranties, terms or conditions of the
Assigned Agreement.
Notwithstanding this Assignment, the Partnership shall be
and remain obligated to PEPCO to perform all of the Partnership's
obligations and agreements under the Assigned Agreement, and
PEPCO shall be and remain obligated to the Partnership to perform
all of PEPCO's obligations and agreements under the Assigned
Agreement.
The Partnership does hereby irrevocably constitute and
appoint the Security Agent its true and lawful attorney-in-fact
with full and irrevocable power and authority in the place and
stead of the Partnership and in the name of the Partnership or in
the name of the Security Agent, for the purpose of carrying out
the terms of this Assignment, the Deed of Trust and Security
Agreement and the Security Agreement, to take any and all action
and to execute any and all instruments which may be necessary to
accomplish the purposes of this Assignment. This power-of-
attorney is a power coupled with an interest and shall be
irrevocable.
The Partnership hereby represents and warrants that it has
not heretofore assigned or otherwise disposed of or encumbered
any right, title or interest of the Partnership in, to or under
the Assigned Agreement or any moneys due or to become due to the
Partnership under or by reason thereof, and that the Partnership
has the right and power to transfer to the Security Agent, on
behalf of the Owner Trustee and GE Capital, absolute title to the
Partnership's right, title and interest in, to and under the
Assigned Agreement and in and to all the moneys due and to become
due to the Partnership under the Assigned Agreement.
Nothing in this Collateral Assignment of Power Purchase
Agreement shall be deemed to limit the provisions of the Consent
of Power Purchaser. Without limiting the scope of the foregoing,
the exercise of remedies or any similar action under this
Collateral Assignment of Power Purchase Agreement is subject to,
and shall be conducted in a manner consistent with, PEPCO's
rights under (i) the Consent of Power Purchaser, and (ii) the
Assigned Agreement and the Transfer Agreement (to the extent such
rights under the Assigned Agreement and the Transfer Agreement
are not explicitly waived by PEPCO in accordance with the terms
of the Consent of Power Purchaser).
This Assignment shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Partnership has caused this
Assignment to be duly executed and delivered as of the date first
above written.
PANDA-BRANDYWINE, L.P.
By: PANDA BRANDYWINE CORPORATION,
its General Partner
By: /s/ Robert W. Carter
Title: President
EXHIBIT B To Consent
PRESENT ASSIGNMENT OF Assigned Agreement
[SEE EXHIBIT 10.62.1 TO THIS REGISTRATION STATEMENT]
EXHIBIT 10.63
EXECUTION COPY
PANDA-BRANDYWINE LIMITED PARTNERSHIP
AMENDED AND RESTATED
TURNKEY COGENERATION FACILITY AGREEMENT
BETWEEN
PANDA-BRANDYWINE, L.P.
AND
RAYTHEON ENGINEERS & CONSTRUCTORS, INC.
Dated as of March 30, 1995
AMENDED AND RESTATED
TURNKEY COGENERATION FACILITY AGREEMENT
DATED AS OF MARCH 30, 1995
BETWEEN PANDA-BRANDYWINE, L.P. AND
RAYTHEON ENGINEERS & CONSTRUCTORS, INC.
Table of Contents
ARTICLE I
GENERAL MATTERS 2
1.01 Contract Documents 2
1.02 Definitions 4
1.03 Description of Plant 16
1.04 General Scope of Work; Applicable Standards 16
1.05 Contract Price and Payment Thereof 19
1.06 Construction Lender's Requirements and Lien Waivers 21
1.07 Financing of Plant 23
ARTICLE II
CONTRACTOR'S SUPPLY OF PLANT 24
2.01 Commencement of Performance 24
2.02 Commencement of Construction 24
2.03 Time Allowed for Performance 24
2.04 Matters Pertaining to Job or Plant Site 24
2.05 Permits and Authorizations; Easements and Rights of Way 25
2.06 Compliance with Law and PEPCO Contracting Practices 26
2.07 Quality of Workers 27
2.08 Identification of Workers and Vehicles 28
2.09 Project Management 28
2.10 Methods of Work 29
2.11 Cooperation with Other Contractors 29
2.12 Safety Measures, Contractor Negligence and
Protection of Property 29
2.13 Inspection and Testing of Work in Progress 30
2.14 Defective Work 30
2.15 Changes 31
2.16 Drawings and Engineering Data 35
2.17 Contractor's Environmental Obligations 36
ARTICLE III
ADDITIONAL OBLIGATIONS OF CONTRACTOR 38
3.01 Operating and Maintenance Manuals 38
3.02 Training of Owner's Personnel 39
3.03 Subcontractors 39
3.04 Claims and Liens for Labor and Materials 40
3.05 Taxes 41
3.06 Parent Guaranty 42
3.07 Risk of Loss; Passing of Title 42
3.08 Insurance 43
3.09 Claims of Patent Infringement and
Misappropriation of Proprietary Information 47
3.10 Spare Parts Availability 48
3.11 Additional Documentation 49
3.12 Technical Support and Development 49
3.13 Temporary Office Quarters 50
3.14 Letters of Credit 50
3.15 Grubbing and Clearing of Job Site 51
3.16 Temporary Road 52
3.17 Punch List 52
3.18 Road Easements 52
ARTICLE IV
CERTAIN OBLIGATIONS OF OWNER 53
4.01 Contract Administration 53
4.02 Fuel Supply 53
4.03 Permit Applications 53
4.04 Gas and Electric Interconnection Facilities 54
4.05 Job Site Access 55
4.06 Owner's Cooperation 55
4.07 Owner's Representative 56
4.08 Unreasonable Interference 56
4.09 Permits 56
4.10 Taxes 57
4.11 Reimbursement of Taxes Paid 57
4.12 Third Party Cooperation 57
4.13 Right to Construct; Survey of Plant Site 58
4.14 Notice to Contractor 58
4.15 Notice of Project Funding 58
4.16 Insurance 58
ARTICLE V
CONTRACTOR'S GUARANTEES AND WARRANTIES 60
5.01 Warranties 60
5.02 Time of Completion of Plant 64
5.03 Equipment and Services 69
5.04 Performance Guarantees 69
5.05 PEPCO Interconnect and Transmission Facilities 74
ARTICLE VI
START UP, PERFORMANCE TESTS AND ACCEPTANCE 74
6.01 Commencement of Testing and Start-Up 74
6.02 Initial Operation 74
6.03 Performance Tests 75
6.04 Final Acceptance and Substantial Completion of the Plant 76
ARTICLE VII
FORCE MAJEURE AND OWNER CAUSED DELAY 79
7.01 Force Majeure 79
7.02 Owner Caused Delay 81
ARTICLE VIII
TERMINATION OF AGREEMENT 82
8.01 Termination for Owner's Convenience 82
8.02 Termination for a Party's Default 82
8.03 Termination by Reason of Insolvency, etc. 84
8.04 Suspension of Work or Termination of Agreement
by Contractor 85
8.05 [Deleted] 86
8.06 Effect of Termination; Post-Termination
Obligations of Parties 86
8.07 Consequences of Suspension of Work by Owner 88
ARTICLE IX
INDEMNIFICATION; LIABILITY LIMITATION 88
9.01 Indemnification of the Parties 88
9.02 Owner's Environmental Indemnification 89
9.03 Limitation of Remedies 90
ARTICLE X
DISPUTES 91
10.01 Arbitration of Disputes 91
10.02 Selection of Arbitrators 92
10.03 Place, Time and Procedure 92
10.04 Winner Take All 92
10.05 Binding Award 93
10.06 Contractor To Continue Work 93
ARTICLE XI
MISCELLANEOUS PROVISIONS 93
11.01 Interest on Overdue Payments 93
11.02 Contractor's Records 94
11.03 Confidentiality of Information 94
11.04 Status of Contractor 95
11.05 Notices 95
11.06 Entire Agreement; Amendment of Agreement 96
11.07 Waiver of Rights 97
11.08 Severability of Provisions 97
11.09 Assignment; Effect of Agreement 97
11.10 Governing Law; Interpretation 98
11.11 Survival 98
Exhibit A - Scope of Work
Exhibit B - Special Conditions
Exhibit C - Legal description of Plant Site
Exhibit D - Milestone Payment Schedule
Exhibit E - Form of Milestone Payment Certificate
Exhibit F - List of governmental permits and property rights
Exhibit G - Air Permit Application Emission Rates
Exhibit H - Form of Certificate for Waiver of Liens
Exhibit I - Utilization of Small Business Concerns and Small
Business Concerns Owned and Controlled by Socially
and Economically Disadvantaged Individuals.
Exhibit J - Clearing & Grubbing Specifications
Exhibit K - Contractor's Rate Schedule
Exhibit L - Power Purchase Agreement between Potomac Electric
Power Company and Panda-Brandywine, L.P., dated
August 9, 1991, as amended.
Exhibit M - Steam Sales Agreement
Exhibit N - Contractor Critical Date Schedule
Exhibit O - Raytheon Parent Guaranty
Exhibit P - Exhibit P - Distilled Water Facility Scope of Work
Exhibit Q - Conditions Listed in Application of Panda-
Brandywine for a Certificate of Public Convenience
and Necessity for the Construction of a 248 MW
Generating Station, PSC Case 8488
Exhibit R - Temporary Road
Exhibit S - Change Orders Executed Prior to the Date of this
Agreement
Exhibit T - Pending or Known Potential Change Orders
Exhibit U - Lay Down Agreement
AMENDED AND RESTATED
TURNKEY COGENERATION FACILITY AGREEMENT
This AGREEMENT ("Agreement") dated as of March 30, 1995
by and between Panda-Brandywine L.P., a Delaware limited
partnership, having its headquarters at 4100 Spring Valley, Suite
1001, Dallas, Texas 75244, (hereinafter called "Owner") and
Raytheon Engineers & Constructors, Inc. (formerly known as United
Engineers & Constructors Inc., dba Raytheon Engineers &
Constructors), a Delaware corporation having an office at 13105
Northwest Freeway, Suite 200, Houston, Texas 77040 (hereinafter
called "Contractor").
W I T N E S E T H:
WHEREAS, Owner proposes to build a cogeneration
facility on its property located south of Brandywine, Maryland,
in Prince George's County, for the purpose of supplying electric
power to Potomac Electric Power Company ("PEPCO") and thermal
energy to a distilled water facility (the "Steam Host"); and
WHEREAS, Owner wishes to have Contractor design,
construct and start-up such cogeneration facility (the "Plant")
under a Turnkey Firm-Fixed Price agreement; and
WHEREAS, Contractor after thoroughly and fairly
evaluating the Plant, is willing to design, construct and startup
the Plant under a Turnkey Firm-Fixed Price agreement on the
terms and conditions hereinafter set forth;
WHEREAS, Contractor and Owner entered into a Turnkey
Cogeneration Facility Agreement dated as of December 2, 1993 (the
"Original EPC Contract") and hereby wish to amend and restate the
Original EPC Contract in its entirety.
NOW, THEREFORE, in consideration of the premises, and
their mutual promises and covenants herein contained, Owner and
Contractor hereby agree that the Original EPC Contract be amended
and restated to read in its entirety as follows:
ARTICLE I
GENERAL MATTERS
1.01 Contract Documents
This Agreement consists of the following writings:
(a) This document.
(b) Exhibit A - Scope of Work
(c) Exhibit B - Special Conditions.
(d) Exhibit C - Legal description of Plant Site.
(e) Exhibit D - Milestone Payment Schedule.
(f) Exhibit E - Form of Milestone Payment Certificate.
(g) Exhibit F - Lists of governmental permits, authorizations,
property easements and rights-of-way.
(h) Exhibit G - Air Permit Application Emission Rates
(i) Exhibit H - Form of Certificate for Waiver of Liens.
(j) Exhibit I - Utilization of Small Business
Concerns and Small Business Concerns Owned and Controlled by
Socially and Economically Disadvantaged Individuals.
(k) Exhibit J - Clearing and Grubbing Specifications
(l) Exhibit K - Contractor's Rate Schedule
(m) Exhibit L - Power Purchase Agreement between
Potomac Electric Power Company and Panda-Brandywine, L.P., dated
August 9, 1991, as amended.
(n) Exhibit M - Steam Sales Agreement
(o) Exhibit N - Contractor Critical Date Schedule
(p) Exhibit O - Raytheon Parent Guaranty
(q) Exhibit P - Distilled Water Facility Scope of Work
(r) Exhibit Q - Conditions Listed in Proposed
Orders of Hearing Examiner for Certificate of Public Convenience
and Necessity
(s) Exhibit R - Temporary Road.
(t) Exhibit S - Change Orders Executed Prior to
the Date of this Agreement
(u) Exhibit T - Pending or Known Potential Change Orders
(v) Exhibit U - Lay Down Agreement
Copies of Exhibits A through U are attached to this
document. This document and such exhibits (hereinafter
sometimes referred to collectively as "the Contract Documents")
are, but only if so explicitly stated, intended to be
complementary, and in such case, anything required by that
document is as binding as if required by all documents. However,
in the event of any conflict or inconsistency between this
Agreement and any Exhibit, this Agreement shall prevail over
such Exhibit.
1.02 Definitions
As used in this Agreement, the following terms shall
have the meanings set forth below:
(a) "Affiliate" means, in relation to any Person,
any Person: (i) which directly or indirectly controls, or is
controlled by, or is under common control with, such other
Person; or (ii) which directly or indirectly beneficially owns or
holds fifty-one percent (51%) or more of any class of voting
stock of such other Person; or (iii) which has fifty-one percent
(51%) or more of any class of voting stock that is directly or
indirectly beneficially owned or held by such other Person, or
(iv) who either holds a general partnership interest in such
other Person or such other Person holds a general partnership
interest in the Person.
(b) "Agreement" means this "Amended and Restated
Turnkey Cogeneration Facility Agreement", dated as of March 30,
1995 by and between Panda-Brandywine, L.P. and Raytheon Engineers
& Constructors, Inc., as the same may be further amended,
supplemented or otherwise modified from time to time.
(c) "Applicable Laws" means any statute, law,
regulation, permit, license, ordinance, rule, judgment, order,
decree, directive, guideline or policy (to the extent mandatory)
or any similar form of decision or determination by, or any
interpretation or administration of, any of the foregoing by any
Federal, state or local government, any political subdivision or
any governmental, quasi-governmental, judicial, public or
statutory instrumentality, administrative agency, authority, body
or other entity with jurisdiction over the Plant, the Job Site,
the performance of the Work or other services to be performed
under this Agreement.
(d) "Applicable Permits" means the permits for
the Plant, both obtained and un-obtained, listed in Exhibit F,
including any variances or waivers in effect from time to time.
If any permit is unobtained, the contents of the application
therefor shall be a "permit" for all purposes hereunder.
(e) "Applicable Standards" shall have the meaning
set forth in Section 1.04(c).
(f) "Business Day(s)" means Monday through Friday
excluding holidays recognized by PEPCO. As of the date of this
Agreement, these holidays include New Year's Day, Martin Luther
King's Birthday, Inauguration Day, Washington's Birthday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Day
after Thanksgiving, and Christmas Day.
(g) "Change of Law" has the meaning set forth in
Section 2.06(a).
(h) "Changes" and "Change Order" have the
meanings set forth in Section 2.15.
(i) "Commencement of Construction" or "Commence
Construction" means the date when continuing work has started on
the Plant with the pouring of concrete foundations for the
structures to be erected and the equipment to be installed at the
Plant Site.
(j) "Commercial Operation" means the date when
the Forty-Eight (48) Hour Net Electrical Output Performance Test
required under Section 19.5.1.1 of the Scope of Work (under the
procedure set forth in Section 19.5.2) has been successfully
completed within one hundred and ten percent (110%) of the Net
Plant Heat Rate Guarantee and the Independent Engineer (as such
engineer is defined in the PEPCO Contract) acknowledges, as of
the date of such Forty-Eight Hour (48) Net Electrical Output
Performance Test, that the Plant has successfully completed the
"Net Capability" test described in Appendix D of the Power
Contract.
(k) "Completion Certificate" means a document
issued by Owner upon Final Acceptance of the Plant.
(l) "Construction Lender" means the institutional
person or persons providing financing to Owner for the entire
expected cost of the development, construction, design,
engineering and procurement of the Plant and items relating
thereto.
(m) "Construction Lender's Engineer" means
Pacific Energy Systems, Inc., or any successor entity as
appointed by Construction Lender.
(n) "Construction Loan Agreement" means the
agreement (and all documents relating thereto) between the Owner
and Construction Lender pursuant to which Construction Lender
agrees to provide construction financing for the Plant.
(o) "Contract Documents" means this document and
the Exhibits described in Section 1.01 as a group.
(p) "Contract Price" has the meaning set forth in
Section 1.05(a).
(q) "Contract Price Discount" shall mean a
reduction in the total Contract Price, as adjusted by this
Agreement, for the decrease in the value of the Work and the
Plant as a result of untimely Commercial Operation or failure to
meet any Performance Guarantee.
(r) "Contractor" means Raytheon Engineers &
Constructors, Inc. (formerly known as United Engineers &
Constructors Inc. dba Raytheon Engineers & Constructors), a
Delaware corporation, including its employees, directors and
officers.
(s) "Contractor Critical Date Schedule" means the list
of construction milestones, displayed in Exhibit N hereto.
(t) "Cost Plus Formula" means the price of a Change Order
determined in accordance with Exhibit K.
(u) "CPM Schedule" means a document that shows
the planned progression of the Work.
(v) "Defect or Deficiency" means, any designs,
engineering, software, drawings, components, tools, supplies,
equipment, materials, installation, construction, workmanship or
work, (i) that does not materially conform to the Scope of Work,
the Final Plans and the specifications (ii) that is not of
uniform good quality, free from material defects or deficiencies
in design, application, manufacture or workmanship, or that
contains materially improper or inferior workmanship or (iii)
that either would materially and adversely affect (x) the
performance of the Plant under normal operating conditions
(unless, in the alternative, Contract Price Discount for such
defect or deficiencies has been paid) or (y) the continuous safe
operation of the Plant during the Plant's design life, all as
determined by reference to Prudent Utility Practices. The term
"Defects or Deficiencies" shall neither be construed to include
material damage caused by Owner's acts or omissions to the extent
arising out of abuse, misuse, negligence in operations,
maintenance and repair (unless such act or omission was taken or
made at the direction of the Contractor) or failure to follow
Contractor's or vendor's recommendations and directions and
Prudent Utility Practices nor shall the term "Defects or
Deficiencies" be construed to include ordinary wear and tear,
erosion, corrosion, and deterioration (unless as a result of a
defect or deficiency) or any other defect or deficiency that has
no material impact on the Plant's appearance, operation, or
useful life.
(w) "Drawings" means all drawings (except detailed
manufacturing drawings) diagrams, illustrations, schedules,
and performance charts, including data in the form of electronic
media, prepared by Contractor or any subcontractor, manufacturer
or supplier for delivery to Owner in accordance with this
Agreement which illustrates any of the materials, supplies or
Equipment or any other portion of the Work, either in
components or as completed.
(x) "Early Completion Bonus" means the bonus
payable to Contractor for achieving Commercial Operation of the
Plant prior to the Guaranteed Completion Date.
(y) "Substantial Completion Bonus" means the
bonus payable to Contractor for achieving Substantial Completion
prior to October 31, 1996 and/or September 30, 1996.
(z) "Substantial Completion" has the meaning set
forth in Section 6.04(f) below.
(aa) "Final Acceptance" has the meaning set forth
in Section 6.04(a).
(bb) "Final Plans" has the meaning set forth in
Section 2.16(b).
(cc) "Financial Closing" means the date on which
Owner executes the necessary documents to borrow, on a long term
basis, the funds necessary to construct the Plant.
(dd) "Force Majeure" has the meaning set forth in
article VII.
(ee) "Force Majeure Event" means an event of Force
Majeure.
(ff) "Forced Outage" has the same meaning as
"forced outage" under the Power Contract.
(gg) "Forty-eight (48) Hour Net Electrical Output
Performance Test" has the meaning set forth in Section 19.5.1.1
of the Scope of Work.
(hh) "Guaranteed Completion Date" means the date
set forth in Section 2.03 for the Commercial Operation of the
Plant.
(ii) "Hazardous Material" means any substance
deemed as hazardous by any federal, state or local agency with
jurisdiction over the Site.
(jj) "Interconnect Facilities" means all
facilities (except for Transmission Facilities) necessary to
enable PEPCO to receive the electrical power from the Plant,
including but not limited to, all metering devices, transformers
and associated equipment, communications equipment, relay and
switching equipment, circuit breakers and other protective
devices and safety equipment, and telecommunications equipment,
wherever located.
(kk) [Intentionally Deleted]
(ll) "Job Site" means the Plant Site, the laydown
area, or other areas, access to which by Contractor is pursuant
to an easement or license obtained by Owner for the benefit of
Contractor, and any other areas where Contractor may temporarily
obtain care, custody and control, use, easement or license for
purposes directly, indirectly or incidentally related to
performance of, or as an accommodation to, the Work.
(mm) "Letter Of Credit" has the meaning set forth
in Section 3.14.
(nn) "Loan Agreement" means that certain agreement
executed between Owner and Contractor on December 2, 1993, as
amended by the Amended and Restated Development Loan Agreement
dated as of March 23, 1994 among the Owner, General Electric
Capital Corporation, as agent and a lender and the Contractor, as
a lender, as the same may be amended, supplemented or otherwise
modified from time to time.
(oo) "Milestone Payment" means an installment of
the Contract Price to be paid as provided in Exhibit D.
(pp) "Milestone Payment Certificate" means that
certificate, in the form of Exhibit E, which is submitted by
Contractor to Owner prior to the making of a Milestone Payment by
Owner.
(qq) "Milestone Payment Schedule" means that
schedule of Milestone Payments which is set forth in Exhibit D.
(rr) "Net Plant Heat Rate" and "Net Plant Heat
Rate Guarantee" have the meanings set forth in Section 5.04(b).
(ss) "Net Plant Heat Rate Test" means the test so
described in Section 19.5.1.2 of the Scope of Work.
(tt) "Net Power Output" means the electrical
energy output of the Plant (net of auxiliary load of the Plant)
in kilowatt hours metered by the PEPCO-owned metering equipment
and delivered at the Interconnection Facilities.
(uu) "Net Power Output Guarantee" have the
meanings set forth in Section 5.04(a).
(vv) "Nominal Operating Conditions" means those
values specified in Scope of Work.
(ww) "O&M Contractor" means an organization
selected by Owner for the operation and maintenance of the Plant,
subsequent to Commercial Operation.
(xx) "Over-Funding Letter of Credit" has the
meaning set forth in Section 3.14(c).
(yy) "Owner" means Panda-Brandywine, L.P., a
Delaware limited partnership.
(zz) "Owner Caused Delay" means, a delay of
material effect, to the extent caused by Owner's failure to
perform under this Agreement, that actually and demonstrably
causes a material and corresponding delay in Contractor's efforts
hereunder.
(aaa) "Owner's Engineer" means
Gilbert/Commonwealth, Inc., a Delaware corporation, or the
successor entity as appointed by Owner.
(bbb) "Owner's Representative" means the
representative of Owner designated pursuant to Section 4.07.
(ccc) "PEPCO" means Potomac Electric Power Company,
a Virginia and District of Columbia corporation.
(ddd) "PEPCO Contract" or "Power Contract" means
the agreement between Panda-Brandywine, L.P. and PEPCO, executed
on August 9, 1991, as amended from time to time.
(eee) "Performance Guarantees" shall mean the
guarantees described in Section 5.04 of this Agreement.
(fff) "Performance Tests" means the Forty-Eight
(48) Hour Net Electrical Output Performance Test, Net Plant Heat
Rate Test, the Two-Hundred (200) Hour Capacity Test, the Stack
Test and the Noise Test, all more fully described in Section 19.5
of the Scope of Work.
(ggg) "Performance Tests Notice" has the meaning
set forth in Section 6.03(a).
(hhh) "Person" means an individual, partnership,
corporation, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental
authority, or other entity of whatever nature.
(iii) "Plant" means the cogeneration facility and
distilled water facility described in the first preamble to this
document and in Section 1.03.
(jjj) "Plant Site" means that certain piece of real
property owned or controlled by Owner, located south of
Brandywine, Maryland, in Prince George's County, and more
particularly described in Exhibit C, on which the parties
acknowledge that the Plant will be constructed.
(kkk) "Noise Test" means the test so described in
Section 19.5.1.5 of the Scope of Work.
(lll) "Pre-Existing Hazardous Material" means
Hazardous Material that existed on or in the Job Site and Plant
Site prior to Site Mobilization.
(mmm) "Road Easements" means, collectively, (i) the
Lay Down Agreement ("Lay Down Agreement") between Owner and
Prince George's County attached hereto as Exhibit U, with only
such changes as are approved by both Contractor and Owner and
(ii) the Betty Boulevard Temporary Construction Easement dated as
of December 23, 1994 between Owner and Brandywine D.C., Inc. with
Montgomery Ward (as addressee of such Agreement only).
(nnn) "Project Manager" means the person designated
by Contractor as having the centralized responsibility, authority
and supervisory power of Contractor for design, construction,
testing and start-up of the Plant, as well as all matters
relating to the administration of the provisions of this
Agreement.
(ooo) "Project Engineering Manager" means the
person designated by Contractor as having the responsibility,
authority, and supervisory power over the engineering and design
of the Plant.
(ppp) "Project Funding" means the date upon which
all conditions precedent to the availability of funds to Owner
under the Construction Loan Agreement have been satisfied or
waived and there is also an expectation by Owner that
disbursements under the Construction Loan Agreement will
thereafter take place in the ordinary course of business without
interruption.
(qqq) "Prudent Utility Practices" means the
practices generally followed by the United States electric
utility industry with respect to design, construction,
operation, and maintenance of electric generating, transmission,
and distribution facilities (including but not limited to, the
engineering, operating and safety practices generally followed by
the electric utility industry).
(rrr) "Punch List" means that list prepared by
Owner with Contractor's assistance, detailing all Punch List
Items.
(sss) "Punch List Item(s)" means only those items
of unfinished Work that do not, in any material way, affect the
safety, reliability, performance or operation of the Plant under
all operating and climatic conditions.
(ttt) "Qualified Insurer" has the meaning set forth
in Section 3.08 of this Agreement.
(uuu) "Raytheon Parent Company" has the meaning set
forth in Section 3.06 of this Agreement.
(vvv) "Scope of Work" means the Plant and distilled
water facility specifications, technical requirements and other
provisions set forth in Exhibits A and P respectively and the
clearing and grubbing and temporary road work set forth in
Sections 3.15 and 3.16 and Exhibits J and R hereto, and all
modifications or additions thereto set forth in the Change Orders
attached hereto in Exhibit S or any Change Orders adopted
pursuant to Section 2.15 below after April 10, 1995.
(www) "Site Manager" means an employee of
Contractor, working under the supervision of the Project Manager,
located at the Job Site on a daily basis.
(xxx) "Site Mobilization" means the date on which
Contractor commences and continues construction on the Job Site.
(yyy) "Special Conditions" means the Special
Conditions referred to in Exhibit B.
(zzz) "Specifications" means the plans, drawings,
specifications (as updated to reflect all changes) and Final
Plans created by Contractor, its vendors or sub-contractors.
(aaaa) "Stack Test" shall have the meaning set forth
in Section 19.5 of the Scope of Work.
(bbbb) "Start-up Energy" means the net electric
energy delivered at the PEPCO Interconnection Facilities
associated with the start-up testing of the Plant prior to
Commercial Operation as metered by PEPCO's metering equipment.
(cccc) "Steam Host" has the meaning set forth in the
preamble of this Agreement.
(dddd) "Stipulated Interest Rate" means the lesser
of (1) interest at the annual rate quoted from time to time by
Citibank, N.A., New York, N.Y., as its base rate plus one percent
(1%) or (2) the maximum rate permitted by applicable law for
loans to corporate borrowers.
(eeee) "Substantial Subcontractor" shall have the
meaning set forth in Section 1.06(d) of this Agreement.
(ffff) "Termination Payment" has the meaning set
forth in Section 8.06(a).
(gggg) "Transmission Facilities" means the
transmission lines and associated equipment for connecting the
Plant at Interconnect Facilities to PEPCO's Burches Hill 230kV
substation.
(hhhh) "Turnkey Firm-Fixed Price" means the
Contractor controlling the means, method, sequencing and course
of Work to perform its underlying obligation that it owes to
Owner under this Agreement, to wit: the obligation to provide
the Plant, that is (i) capable in all material respects of
performing Owner's obligations to PEPCO and the Steam Host under
the Power Contract and the Steam Sales Agreement, respectively,
under those operating conditions required by PEPCO and the Steam
Host, (ii) in accordance with the Scope of Work (except as the
Contractor's payment of Contract Price Discounts in lieu of
Contractor's obligation to meet the Performance Guarantees),
(iii) complete at or before the Guaranteed Completion Date
(except as the Contractor's payment of Contract Price Discounts
in lieu of Contractor's obligation to meet Guaranteed Completion
Date) and (iv) in accordance with the Contract Price, as such may
be adjusted hereunder.
(iiii) "Two-Hundred (200) Hour Capacity Test" shall
have the meaning set forth in Section 19.5.1.3 of the Scope of
Work.
(jjjj) "Work" has the meaning set forth in Section
1.04(a).
1.03 Description of Plant
The Plant shall consist of two (2) General Electric
model MS 7001 EA gas combustion turbine generators, two (2) heat
recovery steam generators, one (1) condensing steam turbine
generator and all ancillary equipment, structures and other
improvements to the Plant Site and the distilled water facility,
all as more particularly described in the Scope of Work. The
Plant shall be situated on the Plant Site as described in Exhibit C.
1.04 General Scope of Work; Applicable Standards
(a) Contractor shall, at its own expense, design,
engineer, manage, supply all labor, equipment and materials for,
construct, start up, and carry out Performance Tests on the
Plant, all on a Turnkey Firm-Fixed Price basis, in accordance
with the Contractor's Critical Date Schedule listed as Exhibit N,
the Scope of Work and other performance requirements of
Contractor set forth in this Agreement, all as modified or
amended by any Change Order attached hereto as Exhibit S and any
Change Order adopted pursuant to Section 2.15 of this Agreement
after April 10, 1995 (all of the foregoing obligations of
Contractor being collectively referred to in this Agreement as
the "Work").
(b) This is a turnkey contract. Thus, components, when
installed and operating in various configurations, could result
in overall system performance in excess of that required by the
Scope of Work as a result of Contractor having obtained, on a
component-by-component basis, performance specifications superior
to those that would be required merely to meet, when combined in
the Plant's systems with all components, the Performance
Guarantees. Owner acknowledges that such design and performance
margins are obtained by Contractor at Contractor's expense to
protect Contractor against the risk that Contractor will be
unable to meet one or more Performance Guarantees, and that Owner
is merely an incidental beneficiary of any such superior
performance in any component. Contractor shall at all times
specify the configuration for operating the Plant and its
individual components, in any way necessary, in combination or
individually, that permit Contractor to meet any Performance
Guarantee, including, for example, requiring greater performance
by one component to make up for deficiencies in performance in
one or more of the other components, so long as operation of any
component is in accordance with Prudent Utility Practices and at
a performance level that equals or exceeds that contained in the
Scope of Work.
(c) The Plant and the Work shall, at a minimum,
meet or exceed the standards and quality of a utility-grade Plant
as generally described in this Agreement and be capable of
performing the obligations of Owner under the PEPCO Contract
while delivering the required steam or thermal energy to the
Steam Host, without violating any Applicable Laws or Applicable
Permits. All items of equipment and improvements comprising the
Plant shall be designed, manufactured, installed and tested where
applicable in accordance with the latest editions (as in effect
on June 30, 1994) of the published standards ("Applicable
Standards") of the organizations listed in Section 2.1 of the
Scope of Work. Contractor shall notify Owner of any standards of
the above listed organizations, of which it becomes aware, that
are inconsistent with each other and advise Owner of the manner
in which it intends to resolve such inconsistency in the exercise
of good engineering judgment and Prudent Utility Practices.
(d) Except as may be otherwise specifically
provided in the Scope of Work, the Plant shall also be designed,
constructed and manufactured to operate in accordance with the
standards promulgated pursuant to the following licenses, permits
and statutes (including the regulations issued thereunder), as in
effect on June 30, 1994, to the extent that such statutes are
applicable: (i) Federal Statutes -- Clean Air Act (42 U.S.C.A.
Par. 7401, et. seq.); Clean Water Act (33 U.S.C.A. Par. 1251, et seq.);
Resource Conservation and Recovery Act (42 U.S.C.A. Par. 6901, et.
seq.); the Public Utility Regulatory Policies Act (16 U.S.C.
Par. 2601); and the Occupational Safety and Health Act of 1970, as
amended (29 U.S.C. Par. 651, et seq.), (ii) the Conditions listed in
the Final Orders of the Hearing Examiner for the Certificate of
Public Convenience and Necessity attached hereto as Exhibit Q
issued by the Maryland Public Service Commission to Owner, and
(iii) all other applicable state or local statutes, regulations,
ordinances, order of any kind provided, however, that nothing
herein shall obligate Contractor to obtain any permit or
approvals under such statute for the construction or operation of
the Plant, other than as specified in Section 2.05(a).
1.05 Contract Price and Payment Thereof
(a) Owner shall pay Contractor the sum of one
hundred eighteen million two hundred fifty-eight thousand eight
hundred sixteen dollars ($118,258,816) (the "Contract Price"), as
full payment for all Work to be performed by Contractor under
this Agreement. Notwithstanding the foregoing, Contractor shall
be entitled to a price increase (not to exceed $3,400,000
regardless of any Change Order entered into prior to April 10,
1995) for construction of a distilled water facility to be part
of the Plant pursuant to the Scope of Work set forth in Exhibit P
hereto and Agreement Change Request/Change Order No. 004 dated
May 2, 1994 and ACR No. 004 Rev. 2 dated October 10, 1994 between
Contractor and Owner set forth in Exhibit S hereto. Contractor
represents that the Change Orders set forth in Exhibit S hereto
are the only existing Change Orders and the Change Orders listed
in Exhibit T are the only pending or known potential Change
Orders that Contractor is aware of as of April 10, 1995.
Excluding the price increase of up to $3,400,000 for construction
of a distilled water facility and any Early Completion Bonus or
Substantial Completion Bonus earned by Contractor as described
below, the Contract Price of one hundred eighteen million two
hundred fifty-eight thousand eight hundred sixteen dollars
($118,258,816) includes all Contract Price modifications set
forth in all Change Orders entered into by Owner and Contractor
on or prior to April 10, 1995. Notwithstanding any other
provision (unless specifically otherwise provided herein), all
Change Orders attached hereto as Exhibit S are hereby
incorporated into this Agreement and made a part of this
Agreement as of the date hereof.
(b) Subject to the provisions of paragraph (d) of
this Section 1.05, the Contract Price shall be payable in
accordance with the Milestone Payment Schedule included in this
Agreement as Exhibit D, and after the Project Manager has
delivered to Owner's Representative a Milestone Payment
Certificate in the form attached hereto as Exhibit E.
(c) Within thirty (30) days after its receipt of
an invoice on or before the 16th day of the month for all
Milestones certified in the month represented by the invoice,
Owner shall pay to Contractor the amount that remains after the
deduction from the Milestone Payment requested of (i) any portion
thereof that Owner disputes as not being due and owing, (ii) any
overpayment made by Owner for any previous period, and (iii) any
past-due Contract Price Discount due Owner hereunder plus
interest thereon at the Stipulated Interest Rate from the due
date thereof. The payment made by Owner shall be accompanied by
a written notice to Contractor specifying the amount of each
deduction and setting forth the reason(s) why the deduction is
justified. Failure or forbearance on the part of Owner in
withholding any amounts due under a Milestone Payment shall not
be construed as accepting or acquiescing to any disputed claims.
If any such amount deducted from the requested amount is
subsequently determined, by agreement of the parties or by
arbitration pursuant to Article X, to have been unjustifiably so
deducted, Contractor shall be entitled to payment of such amount,
plus interest thereon, at the Stipulated Interest Rate from the
date that such amount should have been paid, in an invoice
submitted by it to Owner after the determination or, if final
payment thereunder has been previously made, then in a written
demand. Pending the resolution of any disputed Milestone
Payment, Contractor shall continue performance of the Work.
(d) The making of any Milestone Payment by Owner
shall not constitute an admission by it that the Work covered by
such payment (or any Work previously performed) is satisfactory
or timely performed, and it shall have the same right to
challenge the satisfactoriness and timeliness of such Work as if
it had not made such payment. If, after any such payment has
been made, it is subsequently determined by agreement of the
Parties or by arbitration pursuant to Article X that Contractor
was not entitled to all or a portion of any such payment,
Contractor shall refund all or a portion of such payment to Owner
with interest thereon at the Stipulated Interest Rate from the
date that Contractor received such payment to the date of refund.
1.06 Construction Lender's Requirements and Lien Waivers
(a) Contractor acknowledges that Owner will
borrow certain funds from the Construction Lender to finance the
construction of the Plant and that, as a condition to making
loans to Owner, the Construction Lender may from time to time
require certain documents from Contractor and its subcontractors,
materialmen and suppliers. In that connection, Contractor agrees
to furnish to the Construction Lender, and to use all reasonable
efforts to cause its subcontractors, materialmen and suppliers to
furnish to the Construction Lender, such written information,
certificates, copies of invoices and such receipts, lien waivers
(upon payment), affidavits and other like documents as the
Construction Lender may reasonably request. At the closing of
the Construction Loan Agreement, Contractor shall state in
writing as a condition precedent to financing, whether or not it
is satisfied with Owner's performance to that date.
(b) As a condition precedent to the making of any
payment hereunder, Owner may require that Contractor and each of
its Substantial Subcontractors (as that term is defined below)
supply Owner with a certificate (in substantially the same form
as Exhibit H attached hereto, "mutatis mutandis") stating that
all amounts due to Contractor (excluding known disputed amounts
noted in the certificate) and its subcontractors have been paid.
Contractor shall obtain such certificates simultaneously with the
payment to a Substantial Subcontractor, or as soon thereafter as
possible, and submit the same upon request of the Construction
Lender.
(c) Contractor hereby subordinates any liens or
security interests to which it may be entitled by law or under
the provisions of this Agreement to any lien or security interest
granted in favor of the Construction Lender. In addition,
Contractor shall submit proof satisfactory to Owner that it has
included in each subcontract entered into by it with a
Substantial Subcontractor a requirement that any lien or security
interest to which such Substantial Subcontractor may be entitled
thereunder or by law shall be subordinate and inferior to any
lien and security interest granted in favor of the Construction
Lender.
(d) A "Substantial Subcontractor" for purposes of
Paragraph (c) above is a subcontractor, materialman or supplier,
whose contract or contracts with Contractor call for a payment or
payments by Contractor totalling at least $150,000.
1.07 Financing of Plant
(a) This Agreement shall be the document referred
to in the Construction Loan Agreement as the agreement between
the Owner and Contractor for the Work.
(b) The Construction Loan Agreement will require
that so long as Owner is not in default under the Construction
Loan Agreement and Contractor is not in default hereunder, and
provided that all other conditions precedent set forth in the
Construction Loan Agreement have been satisfied, the Construction
Lender shall, under the terms of the Construction Loan Agreement,
disburse funds for the purpose of Owner making the payments
called for by this Agreement, except for those payments that are
disputed in accordance with this Agreement.
(c) Contractor shall promptly execute any
additional customary documentation reasonably requested by
Construction Lender, including but not limited to documents
evidencing Contractor's consent to assignment of this Agreement
to Construction Lender.
ARTICLE II
CONTRACTOR'S SUPPLY OF PLANT
2.01 Commencement of Performance
Contractor shall (i) immediately recommence performance
for the timely progression and completion of all Work (including
design, engineering, procurement and construction of a distilled
water facility in accordance with Exhibit P and construction of a
temporary road and clearing and grubbing in accordance with
Sections 3.15 and 3.16 hereof and Exhibits J and R), in
accordance with this Agreement and (ii) except for pending or
known potential agreement change requests submitted by Contractor
to Owner set forth in Exhibit T hereto prior to Contractor's
execution hereof, waive all claims it may have against Owner and
all excuses to performance under this Agreement, which have
accrued up to April 10, 1995.
2.02 Commencement of Construction
Subject to Project Funding occurring by April 11, 1995,
Contractor shall Commence Construction on or before August 9,
1995.
2.03 Time Allowed for Performance
Contractor shall perform the Work so that Commercial
Operation of the Plant will occur on or before October 31, 1996,
as may be adjusted in accordance with this Agreement ("Guaranteed
Completion Date"); provided, however, that this date shall not be
further modified by any Change Order set forth in Exhibit S or
Exhibit T hereto.
2.04 Matters Pertaining to Job or Plant Site
(a) Contractor shall be solely responsible for
performing any preliminary Work on the Job Site necessary for
Commencement of Construction to occur, including removal of all
impediments to performing Work on the Job Site, above or below
ground. Contractor shall keep the Job Site and the Plant in a
generally clean condition during construction of the Plant
without impeding the carrying out of the Work, and upon
completing the Plant the Contractor shall leave the Job Site free
of undesired materials (except for stored equipment and supplies
needed in connection with the Plant's operation) and in a clean
condition.
(b) Except as may be otherwise provided in Sections
2.17(d) and (e) and 9.02 below, Contractor assumes the
risk of all surface conditions at the Job Site.
(c) Within ten (10) days after Project Funding (and
following execution of this Agreement with respect to
clearing and grubbing and temporary road construction work), the
employees and agents of Contractor and its subcontractors and
suppliers will have uninterrupted access to the Job Site, subject
only to such restrictions as may be reasonably imposed by Owner
in order to assure that only authorized persons enter the Job
Site. As used above, the references to uninterrupted access
contemplate that not only will the individuals referred to be
able to enter upon and leave the Job Site but that they also will
be able to bring onto and remove from the Job Site any and all
kinds of personal property required for performance of the Work.
2.05 Permits and Authorizations; Easements and Rights of Way
(a) Contractor shall, at its own expense, obtain,
or cause to be obtained, all permits and authorizations necessary
for it and its subcontractors and suppliers to do business in the
State of Maryland and in the municipality and county where the
Plant Site is situated. Contractor shall also obtain any local
building permits required in order for it to perform the Work,
and Owner agrees to reimburse Contractor for plan fees, permit
fees and inspection fees, actually paid to governmental agencies
by Contractor.
(b) Notwithstanding the provisions of paragraph
(a), Contractor shall, to the best of its knowledge, prior to
Project Funding, independently identify in writing all other
necessary governmental requirements for the construction of the
Plant not already identified in this Agreement or shall agree
that there are not any other governmental requirements required
to construct the Plant in compliance with the Scope of Work,
other than those governmental approvals already identified in
this Agreement.
2.06 Compliance with Law and PEPCO Contracting Practices
(a) Contractor shall, and shall cause all of its
subcontractors and shall cause all other persons that it has
a right to direct who are engaged in the performance of any of
the Work to comply with all Applicable Laws, Applicable Permits
and the regulations thereunder pertaining to performance of the Work,
including without limitation any which may be enumerated in the Scope
of Work and those relating to hours of work, the payment of employees
and adherence to required safety standards. In addition,
Contractor shall comply with the following Federal Acquisition
Regulations: (i) Equal Opportunity, CFR 52.222-26; (ii)
Affirmative Action for Special Disabled and Vietnam Era
Veterans, 48 CFR 52.222-35; (iii) Affirmative Action for
Handicapped Workers, 48 CFR 52.222-36, (iv) Utilization of Small
Business Concerns and Small Disadvantaged Business Concerns, 48
CFR 52.219-8, and (v) Clean Air and Water, CFR 52.223-2. If,
after June 30, 1994, any law or regulation materially affecting
Contractor's performance of the Work is adopted, or changed
("Change of Law"), with the direct result that Contractor is
materially delayed in or prevented from performing its
obligations under this Agreement (or Contractor's cost of
performing the Work is materially increased), then such Change of
Law shall be treated as a Change Order in accordance with Section
2.15; provided, however, that any requirements by any public
authorities for more stringent monitoring and reporting standards
and parameters for the Plant's continuous emission monitoring
system from those specified in Exhibit A hereto shall constitute
a Change Order notwithstanding that notice of such possibility
occurred prior to July 1, 1994. If the parties are unable to
agree on the result of a Change of Law, then the dispute shall be
resolved in accordance with Article X hereof.
(b) Contractor shall comply with PEPCO's
"Minority Class Owned and Controlled Business Policies" contained
in Exhibit I attached hereto.
2.07 Quality of Workers
Contractor shall employ in the construction of the Work
only workers, whether supervisors, skilled workers or laborers,
who are competent to perform their assigned duties and shall use
all reasonable efforts to see that its subcontractors adhere to
the same standard with respect to their workers. In addition,
the Contractor shall only employ workers who are members in good
standing with the union of their respective trade. The Contract
Price reflects the use of union labor and Contractor shall not
seek a Change Order due to the cost of union labor.
2.08 Identification of Workers and Vehicles
Contractor shall cause its, and its subcontractors'
workers, vehicles and self-propelled equipment entering on the
Job Site to be identified as required by Special Condition 13.
2.09 Project Management
(a) During the performance of the construction
Work, Contractor shall maintain an office at the Job Site, as
required by Special Condition 7, and shall also maintain
continuously at the Job Site adequate management, supervisory,
administrative, security and technical personnel, including the
Site Manager, to ensure expeditious and competent handling of all
matters related to the Work, according to its determination of
the staffing required for this purpose. Contractor has
designated a management team, and any future members must be
approved by Owner in writing prior to his/her designation.
Contractor will not re-assign the Project Manager, Project
Engineering Manager or Site Manager without Owner's prior written
consent.
(b) Contractor shall promptly replace its Project
Manager, Project Engineering Manager or Site Manager, upon
written request of Owner, if such individual is disorderly or if
in Owner's reasonable opinion, such individual is otherwise
incompetent for his position and responsibilities.
(c) Project management, engineering and
procurement shall be performed by personnel assigned to
Contractor's Houston, Texas office.
2.10 Methods of Work
Contractor shall inform Owner in advance concerning its plans
for carrying out each phase of the Work.
2.11 Cooperation with Other Contractors Contractor shall cooperate
and cause its subcontractors to cooperate with Owner and other
unrelated contractors who may be working nearby at the Job Site
with a view toward assuring that neither Contractor, nor any of
its subcontractor(s) hinders or increases, or makes more
difficult than necessary the work being done by Owner and other
unrelated contractors.
2.12 Safety Measures, Contractor Negligence and Protection
of Property
(a) Contractor shall comply with the requirements of
Special Condition 22 relating to safety and accident protection
and with the requirements of Special Condition 23 relating to
protection against fire.
(b) [deleted]
(c) Prior to Commercial Operation, but always
subject to the provisions of Section 9.01, Contractor shall be
responsible for the protection of all persons (including members
of the public), employees of Owner and employees of Contractor,
other contractors or sub-contractors and all public and private
property including structures, sewers and service facilities
above and below ground, along, beneath, above, across or near the
Plant Site or Job Site, or other persons or property that are in
any manner affected by the prosecution of the Work. After
Commercial Operation, but always subject to the provisions of
Section 9.01, Owner shall be responsible for the protection of
all persons (including members of the public), employees of Owner
and employees of Contractor, other contractors or sub-contractors
and all public and private property including structures, sewers
and service facilities above and below ground, along, beneath,
above, across or near the Plant Site or Job Site, or other
persons or property that are in any manner affected by the
prosecution of the Work.
2.13 Inspection and Testing of Work in Progress
Each item of equipment or material to be supplied by
Contractor shall be subject to inspection and testing during and
upon completion of its fabrication and installation in accordance
with the provisions of the Scope of Work and Special Condition
26, and Contractor shall give Owner the notice of readiness for
inspection required by Special Condition 26 and provide Owner
each month during performance of the Work a schedule of all
testing proposed for the following three-month period in
compliance with the requirements of the Scope of Work. In
addition to any inspection agent Owner may designate, Contractor
will also permit PEPCO's representatives, Owner's Engineer and
Construction Lender's Engineer to inspect, test, and observe the
Work from time to time; provided, however, that PEPCO's
representatives, Owner's Engineer and/or Construction Lender's
Engineer shall have no authority or responsibility for such Work
and shall not unreasonably interfere with Contractor's execution
of the Work.
2.14 Defective Work
Prior to Commercial Operation, Contractor shall at its
own expense correct or replace any Work that contains a Defect or
Deficiency, or is not otherwise in accordance with the Scope of
Work; provided however, that once the warranty period referred to
in Section 5.01(c) has begun, Contractor's obligation to repair
or replace defective Work shall be governed exclusively by the
warranty provisions of such Section. Materials and equipment
that are replaced, if situated on the Job Site or Plant Site,
shall be removed by it from the Job Site at Contractor's expense.
2.15 Changes
(a) Owner may at any time, by written notice to
Contractor, request an addition to or a deletion from the Work or
other changes in the Work (hereinafter "Change" or "Changes"),
which may have the effect of increasing or decreasing the
Contract Price, shortening or lengthening the Guaranteed
Completion Date, modifying Contractor's warranty obligations
under this Agreement, or requiring modification of Contractor
warranties in Article V. Contractor shall make a written
response to any requested Change within fourteen (14) days after
receiving it or, if it fails to do so, shall be deemed to have
accepted the proposed Change unconditionally and without
additional consideration, in which event such Change shall be
deemed to become part of this Agreement. If Contractor believes
that giving effect to such Change will increase or decrease its
cost of performing the Work, shorten or lengthen the time needed
for completion of the Work, or require modification of its
warranties in Article V or require a modification of any other
provisions of this Agreement, its response to the Change request
shall set forth the Change or Changes that Contractor deems
necessary and its justification for such Changes together with
any necessary alterations or amendments to this Agreement. If
Contractor does not provide a written response to Owner
specifying the effect of such Changes as to cost, time and
warranty obligations of Work within fourteen (14) days of Owner's
notice under this Section 2.15(a), then Contractor waives any
claims or offsets against Owner as a result of the Change Order,
provided, however, that notwithstanding the foregoing, if such
Changes as to cost, time and warranty obligations of the Work
cannot be determined within the 14 day period, and Contractor
submits notice within such fourteen (14) day period that the
Changes will have an effect on costs, time or warranty
obligations and provides the expected date (which shall be as
soon as reasonably practicable) for cost, time or warranty effect
response, Contractor shall not be deemed to have waived such
claims or offsets. If Owner accepts the Change(s) (together with
any necessary alterations or amendments to this Agreement)
proposed by Contractor, or if the parties agree upon a
modification of such proposed Change(s), the parties shall then
sign a change order ("Change Order") setting forth the agreed
upon Change in the Work and agreed upon amendments to this
Agreement, and such Change Order shall operate as an amendment to
this Agreement. If there occurs a Change of Law that has a
material impact on the Work, each party shall bargain reasonably
and in good-faith for the execution of a mutually acceptable
Change Order. Owner may request a Change Order to require
Contractor's compliance with such Change of Law.
(b) Owner may at any time, by written notice to
Contractor, propose Changes in the Work or the CPM Schedule due
to a Force Majeure Event or an Owner Caused Delay. If there is a
material impact on Work or the CPM Schedule as a result of such
Force Majeure Event or an Owner Caused Delay, then the parties
agree to bargain reasonably and in good-faith for the execution
of a mutually acceptable Change Order.
(c) Contractor may at any time, by written notice
to Owner, propose Changes in the Work and if such proposed
Changes are agreed to by Owner they shall be set forth in a
Change Order signed by the parties, with the same effect as a
Change Order pursuant to paragraph (a) of this Section 2.15. If
Contractor believes that such Change Order will increase or
decrease its cost of performing the Work, lengthen or shorten the
time needed for completion of the Work, or require modification
of its warranties in Article V or require a modification of any
other provisions of this Agreement, it shall set forth its
justification for such Changes and the effect of such Changes.
If Contractor does not provide a written notice to Owner
specifying the effect of such Changes as to cost, time and
warranty obligations of Work within five days of proposing a
Change Order under this Section 2.15(c), then Contractor waives
any claims or offsets against Owner as a result of the Change
Order. For purposes of this Section 2.15, a Contractor requested
Change Order involving a Change in the location of the Plant on
the Job Site shall be considered within the general scope of this
Agreement.
(d) Contractor may at any time, by written notice to
Owner, propose Changes in the Work to the extent of a Force Majeure
Event; provided, however, such Force Majeure Event will have a schedule
impact that will actually, demonstrably, adversely and
materially affect Contractor's ability to meet agreed project
milestones. Contractor may at any time, by written notice
to Owner, propose Changes in the Work due to an Owner Caused
Delay, provided, however, such Owner Caused Delay has a
demonstrable material cost increase or schedule impact that will
actually, demonstrably, adversely and materially affect
Contractor's ability to meet agreed project milestones, or both.
If Owner agrees that Contractor has met all of the forgoing
condition precedents, then Owner and Contractor will sign a
mutually acceptable Change Order.
(e) Any Contractor response to a Change Order
under paragraphs (a) or (b) and any Contractor proposed Change
Order under paragraph (c) or (d), shall be accompanied by a
proposed all-inclusive final lump sum cost to Owner. In the
event that the parties are unable to reach a mutually acceptable
agreement on an all inclusive final lump sum cost to Owner,
Contractor agrees to perform the Change Order using the Cost Plus
Formula as consideration for the Change Order.
(f) A Change Order initiated by either party may
have the effect of either increasing or decreasing the Contract
Price. Any Contract Price increase or decrease resulting from a
Change Order taking effect under this Section 2.15 shall become
an addition or deletion to the Milestone Payment or Payments to
which it properly belongs. In the event that Owner and
Contractor are unable to reach agreement on Change Orders under
this Agreement as proposed by either Owner or Contractor, at the
direction of the Owner, Owner's proposed Changes shall become
effective, Contractor shall continue to perform the Work in
accordance with Owner's Change Order on a Cost Plus Formula basis
and the parties will resolve such Changes in accordance with
Article X of this Agreement.
2.16 Drawings and Engineering Data
(a) Contractor shall comply with the provisions
of Special Condition 1 pertaining to drawings and engineering
data. Contractor shall maintain at the Job Site one copy of all
specifications, Drawings, detailed construction drawings, Change
Orders and other modifications in good order and marked to record
all changes made during construction.
(b) Contractor shall furnish Owner with documents
that correctly reflect, with substantial completeness, the Plant
or the portion of the Work against which a Milestone Payment
Certificate is issued at the time the Milestone Payment
Certificate is issued. Except as provided in Section 8.06, final
Specifications, final Drawings and final detailed operating
drawings ("Final Plans"), if not furnished earlier, shall be
furnished to Owner upon Contractor's request for a Completion
Certificate of the Plant or upon termination of this Agreement
prior to issuance of a Completion Certificate for the Plant.
Such Final Plans shall include as-built drawings (in both hard
copy and magnetic media at no extra charge to Owner), P&ID
drawings, underground structure drawings, electric one-line's,
electric schematics and connection diagrams.
(c) Within twenty-five (25) days after Financial
Closing, Contractor shall furnish Owner with conceptual
engineering drawings and the specifications pertaining to the
electric generators and step-up transformers of the Plant,
including demonstrations that (i) the requirements for reactive
supply facilities at the Plant will be met, and (ii) the Plant
will meet the guidelines and performance standards for parallel
operation set forth in PEPCO's "Guidelines and Performance
Standards for Parallel Operation of Customer Generation Equipment
on the PEPCO System", Revision "D", dated 8-12-88, attached to
this Agreement in Scope of Work.
2.17 Contractor's Environmental Obligations
(a) Contractor shall and shall cause its
Subcontractors to (i) comply with all laws regarding Hazardous
Material, (ii) comply with all environmental permits and licenses
and (iii) apply for, obtain, comply with, maintain and renew all
permits required of Contractor by laws regarding Hazardous
Material and necessary, customary or advisable for the
construction activities contemplated by this Agreement.
(b) Contractor shall conduct its activities under
this Agreement, and shall cause each of its Subcontractors and
vendors to conduct its activities, in a manner designed to
prevent pollution of the environment or any other release of any
Hazardous Material by Contractor and its Subcontractors and
vendors in a manner or at a level requiring remediation pursuant
to any law.
(c) Contractor shall not cause or allow the
release or disposal of Hazardous Material at the Plant Site,
bring Hazardous Material to the Plant Site, or transport
Hazardous Material from the Plant Site, except in accordance with
the laws regarding Hazardous Material. Contractor shall cause
all Hazardous Material brought onto or generated at the Job Site
by it or its Subcontractors or vendors, if any, (i) to be
transported only by carriers maintaining valid permits and
operating in compliance with such permits and laws regarding
Hazardous Material pursuant to manifest and shipping documents
identifying only Contractor as the generator of waste or person
who arranged for waste disposal, and (ii) to be treated and
disposed of only at treatment, storage and disposal facilities
maintaining valid permits operating in compliance with such
permits and laws regarding Hazardous Material, from which there
has been and will be no release of Hazardous Material.
(d) If Contractor or any of its Subcontractors or
vendors releases any Hazardous Material on, at, or from the Job
Site, or becomes aware of any third person who releases Hazardous
Material on, at, or from the Job Site during the Work, Contractor
shall immediately notify Owner in writing. If Contractor's work
involved the area where such release occurred, Contractor shall
immediately stop any Work affecting the area. Contractor shall,
at its sole expense, diligently proceed to take all necessary or
desirable remedial action to clean up fully the contamination
caused by (i) any knowing or negligent release by Contractor or
any of its Subcontractors or vendors of any Pre-Existing
Hazardous Material or (ii) any release of Hazardous Material that
was brought onto or generated at the Job Site by Contractor or
any of its Subcontractors or vendors, whether on or off the Job
Site.
(e) If Contractor discovers any Hazardous
Material that has been stored, released or disposed of at the Job
Site by a person or entity other than Contractor, its
Subcontractors and vendors, Contractor shall immediately notify
Owner in writing. If Contractor's Work involves the area where
such a discovery was made, Contractor shall immediately stop any
work affecting the area and Owner shall determine a reasonable
course of action. Contractor shall not, and shall cause its
subcontractors and vendors to not, knowingly or negligently take
any action that may exacerbate any such contamination. If Owner
desires Contractor to perform all or part of any remediation or
evacuation that may become necessary as a result of the discovery
of any such Hazardous Material, it shall request a Change Order
pursuant to Section 2.15(a) hereof; provided, however, that,
notwithstanding the provisions of Section 2.15(a), (b) and (e)
hereof, Contractor shall not itself be obliged to proceed with
any such environmental remediation work unless and until Owner
and Contractor shall have agreed upon mutually satisfactory terms
and conditions for the Change Order, including, without
limitation, any appropriate supplemental environmental
indemnification necessary to protect Contractor from liabilities
it incurs as a result of performing such remediation. Contractor
shall cooperate with and assist Owner in making the Job Site
available for taking necessary remedial steps to clean up any
such contamination at Owner's request and expense.
ARTICLE III
ADDITIONAL OBLIGATIONS OF CONTRACTOR
3.01 Operating and Maintenance Manuals
Contractor shall supply Owner with manuals or handbooks
which provide, either in such a single manual or handbook or
collectively, complete operating and maintenance instructions for
each major piece of equipment and system of the Plant. Each such
manual or handbook shall comply with the requirements of Special
Condition 27 and the Scope of Work as to quantity, content, the
time when such manuals are to be supplied to Owner and shall be
substantially complete and delivered to Owner on Commercial
Operation.
3.02 Training of Owner's Personnel
During the construction of the Plant, and prior to the
date of Commercial Operation, Contractor shall provide, at its
own expense, a training program in Plant operation and
maintenance for Owner's Plant personnel and the O&M Contractor's
Plant personnel ("O&M Personnel"). The training program provided
by Contractor shall (i) include classroom and field training,
(ii) include all manuals, drawings, and other educational
materials necessary or desirable for the adequate training of O&M
Personnel, and (iii) establish quality controls so that O&M
Personnel are suitably trained and capable of operating and
maintaining the Plant after Commercial Operation. Contractor
shall make every reasonable effort to use the O&M Personnel
during Plant start-up and initial operation; however, neither
Owner nor O&M Contractor shall be obligated to supply personnel
for the construction of the Plant. Contractor shall be totally
responsible for directing, coordinating and monitoring O&M
Personnel during Plant start-up and initial Plant operations.
The cost of the O&M Personnel's travel, lodging, food and other
living expenses shall be borne by Owner.
3.03 Subcontractors
Contractor shall be free to subcontract to others the
performance of various portions of the Work. Except for
Affiliates of Contractor, Contractor shall not subcontract a
"substantial" (as defined below) portion of the Work to any one
subcontractor without first obtaining Owner's approval of the
proposed subcontractors, which approval shall not be unreasonably
withheld or delayed; provided that for any subcontract which is
not for a "substantial" portion of the Work but for which the
contract price exceeds $1,000,000, Contractor shall give prior
notice to Owner of the proposed subcontractor and consult with
Owner (and Construction Lender) regarding the merits of such
selection. For the purpose of obtaining Owner's approval,
Contractor may submit from time to time a list of subcontractors
proposed for a substantial portion of the Work. The
subcontracting of any portion or portions of the Work shall not
in any way relieve Contractor of full responsibility for the
proper and timely performance of the subcontracted Work or
otherwise relieve Contractor of any obligations under this
Agreement, whether or not such obligations are related to
subcontracted Work. For the purpose of this Section 3.03, a
portion of the Work shall be deemed to be "substantial" if it
represents at least two percent (2%) in contract value of the
total Work.
3.04 Claims and Liens for Labor and Materials
If any act or omission (or alleged act or omission) of
Contractor, or any subcontractor or other person providing labor
or materials in connection with the Work, results in or gives
rise to any lien or other charge against or security interest on
or in the Plant Site or any fixtures, personalty or equipment
included in the Work (whether or not any such lien, charge, or
security interest is valid or enforceable as such), Contractor
shall at no cost, charge or expense to Owner discharge and cause
the same to be released, by payment or the posting of an
appropriate surety bond, not later than thirty (30) days after it
receives a written demand for the discharge of same from Owner.
Notwithstanding the foregoing provision, as long as Owner, in its
sole discretion, determines that the Plant Site and the
improvements thereon will not be subject to any liability,
penalty or forfeiture, Contractor may contest the validity,
enforceability or applicability of any such lien, charge or
security interest in which event Owner shall provide such
cooperation as Contractor may reasonably request. Contractor
shall indemnify Owner against, and hold it harmless from, any
liability, damage, loss, claim, demand, cost or expense
(including attorneys' fees from legal professionals that Owner
retains) suffered or incurred by Owner in connection with any
such lien, charge or security interest. This Section 3.04 shall
survive Final Acceptance and the termination of this Agreement.
3.05 Taxes
Contractor shall pay all customs duties and other
Federal, state, local and foreign taxes that become payable in
connection with its performance of the Work, except for
applicable sales, excise, use or similar taxes which shall be
paid by Owner. Most of the cost of the equipment and materials
purchased for the Plant should qualify for exemption from
Maryland sales and use taxes under either the sale-for-resale
exemption in section 11-101(e) or the manufacturing exemption in
section 11-210 of the Maryland tax statutes. Contractor will use
all reasonable efforts to claim these exemptions. In the event
Contractor pays any taxes that are the responsibility of Owner
under this section, Contractor will send Owner copies of the tax
forms and Owner will promptly reimburse Contractor therefor.
3.06 Parent Guaranty
Contractor shall provide prior to Project Funding to
Owner, in the form of Exhibit O, a corporate guaranty of Raytheon
Company, a Delaware corporation ("Raytheon Parent Company"), for
the benefit of Owner and Construction Lender under terms and
conditions acceptable to Owner and Construction Lender
("Corporate Guaranty"). In order to provide Owner and
Construction Lender with evidence of Contractor's and Raytheon
Parent Company's financial ability to complete the Plant,
Contractor agrees to provide the financial statements of Raytheon
Parent Company within forty-five (45) days of the date such
statements are published. The failure of Contractor to provide a
suitable Corporate Guaranty of Raytheon Parent Company prior to
Project Funding shall constitute a default by Contractor pursuant
to Section 8.02 and will give rise to the remedies set forth in
Section 8.06(b). Any Corporate Guaranty shall require Raytheon
Parent Company to pay the reasonable costs and expenses,
including attorneys' fees, of collection from Raytheon Company in
the event of a default by Contractor or Raytheon Company.
3.07 Risk of Loss; Passing of Title
(a) All risk of damage to or destruction of the
Plant shall belong to Contractor until Commercial Operation, and
to Owner after Commercial Operation of the Plant. In the event
of any such damage or destruction to the Plant while the risk of
such damage or destruction belongs to Contractor, Contractor
shall at its own expense repair or replace the damaged or
destroyed property.
(b) Unless and to the extent earlier elected by
Owner following payment therefor, all materials, supplies and
equipment furnished by Contractor for incorporation in the Plant
shall become the property of Owner at Commercial Operation of the
Plant.
3.08 Insurance
(a) Prior to commencing any construction pursuant
to this Agreement and continuing until Owner has issued Final
Acceptance of the Plant as provided in Section 6.04, Contractor
shall maintain in force insurance policies providing the
following coverages:
Amount of Coverage
Type of Coverages of Insurance Policy
Worker's Compensation
that complies with the laws of
the State of Maryland Statutory
Employer's Liability
Insurance $1,000,000
Comprehensive General
Liability Insurance,
occurrence form, for
all locations, including but
not limited to coverage for
demolition of any building or
structure, collapse, blasting
excavation below surface of
the ground, operations,
broad form contractual
liability covering all liabilities
assumed by Contractor, property
damages and personal injury $25 Million per occurrence
Comprehensive automobile
liability, on an occurrence basis
including coverage for all owned,
leased, or non-owned licensed
automotive equipment $25 Million per occurrence,
(b) [deleted]
(c) Each insurance policy required by this
Section 3.08 shall be written on an occurrence basis, unless it
is unavailable except on a claims-made basis. Subject to the
limits on amounts and coverages specified in Section 3.08(a)
hereof, Contractor shall name Owner, PEPCO, and Construction
Lender as additional insureds on Contractor's liability policies
required to be carried by Contractor by the provisions of Section
3.08(a) of this Agreement but only to the extent of actual
liabilities expressly assumed by Contractor under this Agreement
and in no event shall Owner be afforded separate, supplemental,
or "other" insurance coverage for its own acts or omissions
(including Owner's negligence) by virtue of so being named such
additional insureds. Each insurance policy shall provide, either
in its printed text or by endorsement, (i) that it shall be
primary with respect to the interest of Owner, Construction
Lender and PEPCO (including their officers, directors and
employees) and that any other insurance maintained by Owner,
Construction Lender or PEPCO is in excess and not contributory to
the insurance provided in this Section 3.08 in all instances
regardless of any like insurance coverage that Owner,
Construction Lender and PEPCO may have but only to the extent of
actual liabilities expressly assumed by Contractor under this
Agreement.
(d) Contractor shall require the issuers of the
Comprehensive General Liability Insurance to amend such insurance
policy required by this Section 3.08 to: (i) include Owner,
Construction Lender and PEPCO, their directors, officers and
employees as additional insureds, but only to the extent of
actual liabilities expressly assumed by Contractor under this
Agreement and in no event shall Owner be afforded separate,
supplemental, or "other" insurance coverage for its own acts or
omissions (including Owner's negligence) by virtue of so being
named such additional insureds, (ii) include a waiver of all
rights of subrogation against PEPCO, Construction Lender and
Owner, their directors, officers and employees, but only to the
extent of actual liabilities expressly assumed by Contractor
under this Agreement, (iii) contain a severability of interest
provision, (iv) provide that none of PEPCO, Construction Lender
or Owner, their directors, officers or employees shall be liable
for the payment of premiums under such policy, (v) provide that
complete copies of all inspection or other reports required or
performed for the insurer shall be provided to both Owner,
Construction Lender and PEPCO within thirty (30) days of delivery
to Contractor, (vi) provide that Owner, Construction Lender and
PEPCO must be given at least thirty (30) days' prior written
notice (and Contractor will use all reasonable efforts to require
sixty (60) days' prior written notice) of any change in, non-
renewal or cancellation of such coverages which are initiated by
insurer, and (vii) provide that Owner, Construction Lender and
PEPCO must be given at least thirty (30) days' prior written
notice (and Contractor will use all reasonable efforts to require
sixty (60) days' prior written notice) of any change in, non-
renewal or cancellation of such coverages initiated by
Contractor. In addition to the endorsements described above,
Contractor shall require all insurers under this Section 3.08 to
provide PEPCO, Construction Lender and Owner with certificates of
insurance evidencing the policies and endorsement upon
Commencement of Construction, (or issuance of such policies, if
earlier) and on each issuance anniversary while such insurance is
in effect.
(e) The foregoing provisions of this Section 3.08
notwithstanding, if any insurance coverage specified above is
unavailable from an insurer rated "A-" or higher by Best's
Insurance Guide (a "Qualified Insurer"), or is available from a
Qualified Insurer only in an amount less than that required,
Contractor shall (i) in the event of such unavailability, provide
the most nearly comparable coverage that is available from a
Qualified Insurer, or (ii) in the event of any such limited
availability, provide the maximum amount of coverage that is
available from a Qualified Insurer. Contractor shall have a duty
to semi-annually confirm that such required insurance is
available, and if available, Contractor shall immediately become
obligated to secure the same.
(f) All insurance policies providing the
coverages required by this Section 3.08 shall be written by
insurance carriers reasonably acceptable to Owner, PEPCO and
Construction Lender. Contractor shall provide from each insurer
a certificate to Owner, PEPCO and Construction Lender, reasonably
satisfactory to Owner, PEPCO and Construction Lender as to form
and substance, describing the insurance policies required under
this Section 3.08.
(g) Nothing in this Section 3.08 shall be deemed
to limit Contractor's liability under this Agreement to the
insurance coverages required by this Section.
(h) Except for the coverage limits of liability
for insurance companies set forth in Section 3.08(a), no
limitation of liability provided to Contractor under this
Agreement is intended nor shall run to the benefit of any
insurance company or in any way prejudice, alter, diminish,
abridge or reduce, in any respect, the amount of proceeds of
insurance otherwise payable to Owner, PEPCO, or Construction
Lender under coverage required to be carried by Contractor under
this Agreement, it being the intent of the parties that the full
amount of insurance coverage bargained for be actually available
notwithstanding any limitation of liability contained in this
Agreement.
3.09 Claims of Patent Infringement and Misappropriation of
Proprietary Information
Contractor agrees that it will, at its own expense,
defend and indemnify Owner against, and hold Owner harmless from,
all damages and costs resulting from any suit or proceeding
instituted against Owner insofar as such suit or proceeding is
based on any claim that any equipment, constitutes an
infringement of a United States patent or a patent issued in the
country of such equipment's manufacture or that proprietary
information of others has been misappropriated in connection with
construction of the Plant, provided that Owner gives Contractor
prompt written notice of the institution of such suit or
proceeding, permits Contractor to defend against same through
counsel retained by Contractor and approved by Owner, and gives
Contractor all information, assistance and authority necessary to
enable it to defend against such suit or proceeding. At its
option, Contractor may either procure for Owner the right to
continue using the alleged infringing equipment or replace or
modify such equipment so that it becomes non-infringing provided
that the replaced or modified equipment performs in accordance
with the Specifications. This indemnity shall survive
termination of this Agreement.
3.10 Spare Parts Availability
(a) Contractor agrees to use all reasonable
efforts to obtain from General Electric Corporation ("GE") or the
appropriate Affiliate thereof an assignable guaranty that GE will
have available for purchase by Owner for a period of five (5)
years from Commercial Operation all GE Spare Parts (as defined
below) required to keep the Plant in good operating condition, it
being understood that some of such parts are not "shelf items"
and will have to be manufactured by GE after it receives an order
for them. In addition, Contractor agrees to use all reasonable
efforts to make spare parts other than GE Spare Parts available
for purchase by Owner for a period of five (5) years from
Commercial Operation to the extent that Contractor is able to
obtain them from the manufacturer who supplied them for the Plant
as originally built. Should it be unable to obtain such spare
parts from such manufacturer, it further agrees to use all
reasonable efforts to find another source that can supply them.
For the purpose of this Section 3.10, GE Spare Parts consist of
replacements for parts manufactured by GE included in the Plant
as originally built but do not include replacements for parts
purchased from other manufacturers included in the Plant as
originally built.
(b) Contractor shall be responsible for obtaining
and for the cost of all spare parts required for Plant start-up
and testing. Owner shall be responsible for obtaining all spare
parts required for the normal operation of the Plant. Owner
shall have ordered such operational spare parts by the
commencement of startup operations at the Plant. Contractor may
use Owner's operational spare parts in stock in connection with
its startup and testing of the Plant; provided that such spare
parts used by Contractor shall be promptly replaced at
Contractor's expense.
3.11 Additional Documentation
(a) In addition to all other reports or documents
required under this agreement, Contractor will provide Owner, at
least one hundred and seventy (170) days prior to Guaranteed
Completion Date, with at least two (2) sets of generator
manufacturer's capability curves, relay types, instrument
transformer types including curves, and proposed relay settings
for review and inspection.
(b) In addition to Contractor's obligations under
Section 11.02 Contractor will provide Owner with any reasonably
necessary assistance, including all documents, cost information
and other information that Owner believes necessary, in a form
acceptable to Owner, for Owner's federal, state or local tax
filings, exemptions or position advocated by Owner, including,
without limitation, sales, use and property taxes; provided,
however, that such access to cost information (and other
information) shall be limited to an independent auditor of
Owner's choice that agrees to keep secret from Owner,
Contractor's costs, internal accounting, Subcontractor costs, or
numbers expressed by Contractor in any document as a multiplier
or percentage.
3.12 Technical Support and Development
(a) Contractor shall provide any assistance
necessary concerning Owner's efforts to obtain any government
certificate, permit or approval described in Exhibit F,
including, but not by way of limitation, witnesses testimony,
depositions, preparation of exhibits, technical calculations, and
meetings. Upon the occurrence of Project Funding, Contractor
shall be paid for all Work performed prior to Project Funding
from the initial draw of Project Funding.
3.13 Temporary Office Quarters
Contractor shall provide Owner's Representative,
Owner's Engineer and Construction Lender's Engineer with
reasonably adequate office space, including all utilities,
contemporaneously with the existence of Contractor's site office
specified in Section 2.09. For purposes of this Section 3.13,
"reasonably adequate" would at a minimum include facilities
comparable to those of Contractor's site office (including all
utilities except for telephone).
3.14 Letters of Credit
(a) At Project Funding, Contractor shall provide
Owner with a letter of credit, issued in a form and from a
financial institution acceptable to Owner and Construction
Lender, in their sole discretion ("Acceptable LC Issuer"), in an
amount equal to the product of the total Milestone Payments
(actually paid) multiplied by 0.1 (the "Letter of Credit").
Owner shall have the unconditional right to draw upon such Letter
of Credit for Contract Price Discounts, damages, compensation or
otherwise under Sections 3.04, 5.02, 5.04, or for the completion
of Punch List Items if Contractor has failed to complete such
Punch List Items by the date agreed upon pursuant to Section 6.04
or for any other purpose specified in the draw certificate to the
Letter of Credit.
(b) Owner shall reduce the Letter of Credit at
Commercial Operation to an amount equal to the greater of five
(5) percent of the Milestone Payments made up to and including
Commercial Operation or the expected cost (as determined in
Owner's reasonable opinion) to complete Punch List Items. At
Final Acceptance, Owner shall further reduce the Letter of Credit
to an amount equal to twice the cost (as determined in Owner's
reasonable opinion) for completing all Punch List Items. Upon
completion of the Punch List Owner shall return the Letter of
Credit to the issuing bank with instructions for cancellation.
(c) Contractor shall provide a second irrevocable
letter of credit in the amount of $3 million to cover a period of
over-funding by Owner to Contractor (the "Over Funding Letter of
Credit"). Such Over-Funding Letter of Credit shall be issued in
a form and from a financial institution acceptable to Owner and
Construction Lender. Such Over-Funding Letter of Credit shall be
effective two months after Project Funding and shall expire eight
months after Project Funding, at which time Owner shall return
the Over-Funding Letter of Credit to the issuing bank for
cancellation. Owner shall have the unconditional right to draw
upon such Over-Funding Letter of Credit only in the event that
Contractor has been provided notice of Termination for Default in
accordance with Section 8.02(a) and Contractor has failed to cure
such default in accordance with Section 8.02(a).
3.15 Grubbing and Clearing of Job Site
Contractor shall clear and grub the Job Site prior to
Commencement of Construction, in accordance with Exhibit J and
shall, subject to the provisions of Section 2.17(e) and 9.02, be
responsible for all conditions on the Job Site after the date of
this Agreement.
3.16 Temporary Road
Contractor shall provide a temporary construction road
allowing ingress and egress to the Job Site.
3.17 Punch List
No later than 14 days after Commercial Operation,
Contractor shall prepare and submit to Owner, a comprehensive
list of items to be completed or connected. Within fourteen (14)
days of receipt of Contractor's list, Owner shall prepare a
"Punch List" which may include items on Contractor's list as well
as items which are not on such list.
3.18 Road Easements
The Road Easements are in form and substance
satisfactory to Contractor and the rights granted therein are
adequate for the purposes for which they are intended. Except to
the extent that the configuration of Betty Boulevard shown on
Exhibit A to the Lay Down Agreement differs from that described
in the Scope of Work, Contractor assumes and agrees to perform
all of the obligations and liabilities of Owner under the Road
Easements, all as part of the Work hereunder. The additional
costs to comply with the configuration as shown in Exhibit A to
the Lay Down Agreement may be subject to a Change Order. If
Contractor suffers material interference with its intended use of
the lay down area specified in the Lay Down Agreement other than
on account of Contractor's nonperformance of its obligations
under the Lay Down Agreement (after reasonable efforts to
mitigate such interference) Contractor may be entitled to an
appropriate Change Order.
ARTICLE IV
CERTAIN OBLIGATIONS OF OWNER
4.01 Contract Administration
During Contractor's performance of the Work, Owner
shall maintain an office at its headquarters in Dallas, Texas to
receive notices, other communications and documents from
Contractor. Any such notice, other communication or document
delivered by Contractor to Owner's Representative shall be deemed
to have been delivered to Owner.
4.02 Fuel Supply
Prior to and including the first actual or attempted
run for each of the Performance Tests listed in Section 1.02
(fff), Owner shall supply all gas and fuel oil at the Job Site
needed by Contractor in connection with the installation,
adjustment and testing of the Plant. For required runs of such
tests which were failed or aborted, Owner shall supply, at
Contractor's expense, all gas and fuel oil at the Job Site needed
by Contractor in connection with the installation, adjustment and
testing of the Plant. In the event PEPCO purchases test energy
generated by gas or fuel oil supplied by Owner at Contractor's
expense, Owner will offset the cost of such gas or fuel with
associated payments of test energy actually paid by PEPCO to
Owner, but only up to the cost of such gas or fuel oil. All gas
and fuel oil supplied by Owner hereunder shall comply in all
material respects with the fuel specifications in Appendix H to
Exhibit A hereunder.
4.03 Permit Applications
If any application for a permit or authorization that
Contractor is required to obtain under Section 2.05(a) must be in
Owner's name, or otherwise requires action or cooperation by
Owner, Owner shall upon request by Contractor sign such
application or take such action or provide such cooperation, as
reasonably appropriate. Owner reserves the right to review any
such application of Contractor, provided, however, that Owner's
exercise of such right shall not unreasonably delay Contractor's
filing of such application or, under any circumstances, be
considered an approval of the necessity, effect or contents of
such application or the related permit.
4.04 Gas and Electric Interconnection Facilities
(a) Owner shall furnish or cause to be furnished
the natural gas interconnection flange, up to and including the
metering station at least four (4) months prior to Guaranteed
Completion Date. Contractor shall be responsible for all other
Work on the natural gas interconnection flange on the Plant Site.
(b) Owner shall furnish or cause to be furnished
the Interconnection Facilities four (4) months prior to
Guaranteed Completion Date, as adjusted by Force Majeure and
Owner Caused Delays, if any. Owner shall be responsible in
general for timely performance of those obligations of PEPCO
required of it hereunder.
(c) Owner shall furnish or cause to be furnished
the interconnection with Southern Maryland Electric Cooperative
(SMECO) for the permanent facilities (such as the warehouse,
office building, and distilled water facility) seven months (7)
prior to Guaranteed Completion Date as adjusted by Force Majeure
and Owner Caused Delays, if any.
(d) Owner shall furnish or cause to be furnished
sufficient power to the extent needed by Contractor for facility
startup and checkout of Plant system and equipment normally
powered from utility supplied backfeed through the main power
transformers seven (7) months prior to Guaranteed Completion Date
as adjusted by Force Majeure and Owner Caused Delays, if any.
Contractor is responsible for the cost of such power had it been
purchased from SMECO under SMECO Schedule GS-9 for rates in
effect at that time, Owner will reimburse Contractor the
difference. If Owner requests Contractor to furnish such power
for a portion of that period, Owner will reimburse Contractor in
accordance with Exhibit K for the actual costs associated with
temporary diesel generators (rental cost, fuel, additional
facilities, operation and maintenance, permitting and noise
abatement, as required), or equivalent, alternative, temporary
start-up source of power that are greater than the cost of such
power if it had been purchased from the SMECO under SMECO
Schedule GS-9.
4.05 Job Site Access
Owner shall obtain at its own expense any easements and
rights of way over the property of others as required, in order
that the personnel and construction equipment of Contractor and
its subcontractors and suppliers have ingress to and egress from
the Job Site, except for any transportation rights of way,
permits, or easements.
4.06 Owner's Cooperation
Owner shall cooperate in all material respects to
permit Contractor to perform hereunder and shall make reasonable
efforts to supply to Contractor, in a timely manner, either
directly or indirectly, material information and data that is
available to Owner and that is required for the Performance of
the Work.
4.07 Owner's Representative
Owner shall designate a representative who shall have
authority to administer this Agreement on behalf of Owner,
approve Contractor's submissions hereunder, inspect and have
authority to accept the Work, as reasonably necessary for
Contractor's performance of the Work.
4.08 Unreasonable Interference
Owner shall not interfere unreasonably with
Contractor's performance of its obligations under this Agreement.
4.09 Permits
Except as provided in paragraph (a) of Section 2.05,
Owner shall obtain at its own expense all Applicable Permits,
including without limitation any permit or authorization required
under the Public Utility Regulatory Policies Act of 1978, as
amended, (hereinafter "PURPA"), environmental permits, zoning
permits, Certificates of Necessity and Convenience from
regulatory authorities, Power Plant Industrial Fuel Use Act
permits, and any permits required in relation to water use, sewer
construction or the disposal of wastes from the Plant. A list
prepared by Owner (and reviewed by Contractor) of all
governmental permits and authorizations required to be obtained
by it under this paragraph in connection with the construction of
the Plant, and of all easements and rights of way (if any) needed
for the purpose set forth in the preceding sentence, is attached
hereto as Exhibit F, and is hereby represented by Owner to have
specified correctly all material permits Owner is required to
obtain under this Agreement. Prior to Commencement of
Construction at the Job Site, Owner shall deliver to Contractor
evidence reasonably satisfactory to Contractor that all permits,
authorizations, easements and rights of way listed in Exhibit F
necessary to begin construction of the Plant have been received
by Owner or, if any such required permit or authorization has not
actually been issued, that it has been approved for issuance, or
in the opinion of Owner, will be approved for issuance.
4.10 Taxes
Owner shall pay all real property taxes assessed
against the Plant Site and any permanent use charges or
assessments such as water or sewer, but excluding temporary
charges for construction utilities, which shall be Contractor's
responsibility.
4.11 Reimbursement of Taxes Paid
Except for those taxes Owner contests in good faith,
Owner shall reimburse Contractor for all applicable sales, use,
excise, value added, or other taxes or duties for which
Contractor is liable by law or regulation, in connection with its
purchase of equipment and materials to be incorporated in the
Plant. Owner shall not be liable for any taxes based on or
related to Contractor's or a subcontractor's work force or
Contractor's income or a subcontractor's income. In any
situation where Owner is required to pay additional state and
local income taxes because Contractor failed to follow
instructions of Owner appropriately, Contractor shall be
responsible for the cost of such taxes.
4.12 Third Party Cooperation
Owner shall notify any third party for witnessing
Performance Tests. Owner shall be entitled to request Contractor
to reasonably reschedule Performance Tests to accommodate the
schedules of persons whom the Owner deems necessary to attend the
Performance Tests. Contractor shall be responsible for notifying
any equipment supplier or vendor representative that it deems
necessary to be present at the Performance Tests.
4.13 Right to Construct; Survey of Plant Site
On or before Project Funding, Owner shall deliver to
Contractor (i) a copy of the final Maryland Certificate of Public
Convenience and Necessity (which is no longer open for judicial
appeal) issued by the Maryland Public Service Commission and an
officer's certificate of Owner stating that it has the permission
to build and operate the Plant on the Plant Site (provided,
however, that Owner has previously delivered to Contractor a
statement that Owner has permission from the landowners for
Contractor to commence clearing and grubbing and construct the
temporary road prior to Project Funding) and (ii) a complete and
correct survey of the Plant Site showing, among other things, the
location of all easements and rights of way and the location of
all means of ingress to and egress from the Site which will be
available to Contractor.
4.14 Notice to Contractor
Any notice must be delivered by Owner to Contractor in
the manner described in Section 11.05, except as otherwise agreed
in writing by the parties.
4.15 Notice of Project Funding
Owner shall give Contractor prompt notice of the date
of Project Funding.
4.16 Insurance
(a) Owner at its sole cost and expense shall
provide and maintain an All Risk Installation and Builder's Risk
Insurance Policy (the "Builder's Risk Policy") in an amount at
least equal to the full replacement value of the Project. A
Certificate of Insurance evidencing the Builder's Risk Insurance
coverage and the Delay in Opening Insurance Policy shall be
furnished to Contractor prior to field mobilization by
Contractor. Contractor and its subcontractors of any tier shall
be named an additional insured thereunder only as their
respective interest may appear.
(b) The Builder's Risk Policy shall contain the
following terms:
(i) Contract Prices and Perils Insured: an
amount equal to the full replacement value of the Work
for "all risks" of physical loss or damage except as
hereinafter provided, including coverage for earth
movement, flood, boiler & machinery, transit and off
site storage accident exposure, start-up and testing
coverage until Final Acceptance but excluding
Contractor's tools, construction aids and equipment.
In addition, Construction Lender, Contractor and its
subcontractors of any tier and their assigns shall be
named as additional insureds as their respective
interests may appear under the Builders' Risk Policy.
(ii) Subject to insurance company underwriting
and approval, Delay in Opening Insurance shall be
provided and maintained by Owner in an amount covering
a period of indemnity equal to twelve (12) months.
Such Delay in Opening Insurance shall only apply in the
event of physical loss or damage to the Work caused by
an insured peril as described in Section 4.16(b)(i)
above. Owner shall apply proceeds thereof to defray
and offset Owner's losses and costs in lieu of the
Contract Price Discounts due Owner if such loss or
costs arise under an insured peril under the Builder's
Risk Policy.
(c) Should a loss be sustained under the
Builder's Risk Policy, such loss will be adjusted by Owner and/or
Construction Lender with the insurance companies. Contractor
will assist the Owner and Construction Lender in the adjustment
of losses. Contractor shall replace or repair any loss or damage
(so long as Contractor is compensated therefor from any proceeds
received as a result of such loss) and complete the work in
accordance with this Agreement. Contractor shall assist the
Owner and Construction Lender in the adjustment of losses.
ARTICLE V
CONTRACTOR'S GUARANTEES AND WARRANTIES
5.01 Warranties
(a) The Contractor warrants that the Plant shall
be constructed with new parts and equipment of good quality.
(b) The Contractor warrants that, at Final
Acceptance, the Work and the Plant, individually and together,
(i) conform with, and are in all material respects, designed and
constructed in accordance with the Final Plans and specifications
as such shall have evolved and been completed by Contractor, (ii)
conform with, and are designed and constructed in accordance with
Prudent Utility Practices, Applicable Laws and Applicable Permits
at the time of Final Acceptance, (iii) contains materials and
equipment suitable for use under the operating and climatic
conditions described in the Scope of Work, (iv) demonstrates Work
performed in a good and workmanlike manner, and (v) as designed
and supplied by the Contractor to Owner under this Agreement,
individually and collectively, do not constitute an infringement
of any patent or the misappropriation of any trade secret.
(c) Contractor warrants that the Work and the
Plant shall conform to the requirements of this Agreement and
will be free from Defects or Deficiencies until the later of (i)
one year following Commercial Operation or (ii) one year from the
discovery and repair of any such Defect or Deficiency, (but in no
event later than the second anniversary of Final Acceptance);
provided that if a particular item is repaired, replaced or
renewed one time and becomes defective again during the
applicable warranty period, then Contractor agrees that: (x)
unless the problem has caused a performance deficiency as to
which a Contract Price Discount has been paid; or (y) unless
Contractor can demonstrate to Owner's reasonable satisfaction
that there is not an unreasonable risk of the reoccurrence of
such problem; Contractor will undertake a technical analysis of
the problem and clear the "root cause". If within the period
described above, the Work or the Plant is found to contain
Defects or Deficiencies, Contractor shall at its expense, except
for costs associated with warranty replacement of General
Electric supplied combustion turbine generator and steam turbine
generator components and General Electric warranty repairs and/or
adjustments for the combustion turbine and steam turbine
generator components (which will be at Owner's expense) correct,
repair or replace such Defect or Deficiency as promptly as
practicable upon being given timely notice thereof. If
Contractor fails to make good the Defect or Deficiency noticed
herein in a timely manner, Owner, at its option, may correct the
Defect or Deficiency and the cost thereof shall be charged to the
Contractor and may be deducted from any amounts due, or which
thereafter became due to Contractor, or if no amounts are or
become due, the difference shall be promptly paid to Owner by
Contractor plus any and all other damages to which Owner may be
entitled hereunder on account of Contractor's default. The only
warranties made by Contractor are those expressly enumerated in
this Article V. Any other statement of fact or descriptions
expressed in this Agreement shall not be deemed to constitute a
warranty of the Work or any part thereof. THE WARRANTIES SET
FORTH IN THIS SECTION 5.01 ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, WHETHER STATUTORY, EXPRESS OR IMPLIED (INCLUDING ALL
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE AND ALL WARRANTIES ARISING FROM COURSE OF DEALING AND
USAGE OF TRADE).
The foregoing sentence is not intended to disclaim any
other obligations of Contractor set forth herein (including under
Section 1.04).
(d) In the Scope of Work, there may be certain
specifications, ratings, and other performance characteristic
descriptions related to various components procured by
Contractor, which components will become a part of the Plant.
Owner expressly acknowledges that, to the extent that final
component performance specifications, ratings or descriptions
exceed those set forth in the Scope of Work, they are in no way
binding on Contractor as enforceable component performance
obligations hereunder nor do they create any rights or remedies
for the Owner against Contractor. With respect to matters of
component performance, it is the intent of this Agreement that
Contractor, as a Turnkey Firm-Fixed Price contractor, be
obligated only for compliance with the Performance Guarantees as
set forth in Section 5.04 and the Plant warranties set forth in
Sections 5.01(a),(b) and (c). However, this Section 5.01(d) is
not intended in anyway to relieve the Contractor from any of its
obligations under the standards, specifications and descriptions
contained in this Agreement or the Scope of Work.
(e) If after Commercial Operation, the Contractor
neglects to make or undertake with due diligence to make the
necessary correction of a Defect or Deficiency, within twenty
(20) days after Owner gives Contractor notice of a Defect or
Deficiency Owner shall have the authority to make the correction
itself or order the Work to be done by a third party, and the
cost of the corrections shall be borne by the Contractor. Owner
shall be permitted to make repairs or replacements on equipment
without affecting the warranty or without prior notice to the
Contractor so long as repair or replacement involves the correct
installation of spare parts. Owner shall also be permitted to
adjust or test equipment as outlined in the instruction manuals
provided by the Contractor.
(f) In the event of an emergency and, in the
reasonable judgment of Owner, the delay that would result from
giving formal notice to Contractor would cause serious loss or
damage which could be prevented by immediate action, any action
including correction of Defects and Deficiencies may be done by
Owner or a third party chosen by Owner, without giving prior
notice to the Contractor, and the reasonable cost of correction
shall be paid by the Contractor in the case of a Defect or
Deficiency. In the event such action is taken by Owner, the
Contractor shall be promptly notified, and shall assist whenever
and wherever possible in making the necessary corrections.
(g) In the event that it is necessary (in order
to fulfill Contractor's warranty obligations under Article V) to
dismantle piping, ducts, machinery, equipment or other Work
furnished or performed by the Contractor in order to obtain
access to the Work, to correct a Defect or Deficiency, the cost
of all such dismantling and reassembly will be borne by the
Contractor.
5.02 Time of Completion of Plant
(a) Contractor guarantees to Owner that
Commercial Operation of the Plant will occur no later than the
Guaranteed Completion Date for the Plant, or Contractor shall
refund a Contract Price Discount therefor as provided below.
Owner's right to terminate this Agreement because of Contractor's
default of its obligations under this paragraph (a) shall be
governed by Section 8.02(a). Should Commercial Operation of the
Plant occur after the Guaranteed Completion Date, Contractor
shall refund to Owner a Contract Price Discount as the exclusive
remedy only for Contractor's failure to meet the Guaranteed
Completion Date, the sum of: (i) eighty thousand dollars
($80,000) per day for each day (or portion thereof) that
Commercial Operation of the Plant occurs after the Guaranteed
Completion Date.
(b) [Intentionally deleted]
(c) Anything in paragraph (a) above to the
contrary notwithstanding, the total Contract Price Discount
refundable under this Section 5.02 shall not exceed $14,400,000.
The Contract Price Discount provided by this Section 5.02 is in
addition to the Contract Price Discount provided by Section 5.04
and all warranty claims under Section 5.01.
(d) Owner shall invoice Contractor monthly for
amounts of Contract Price Discount payable pursuant to this
Section 5.02. Any such invoice shall be payable within thirty
(30) days after Contractor's receipt of such invoice. Owner
shall also have the right to offset any past-due Contract Price
Discount payable by Contractor to Owner against Milestone
Payments or draw upon the Letter of Credit therefor under Section
3.14 hereof.
(e) In the event that Commercial Operation of the
Plant occurs prior to the Guaranteed Completion Date, Owner shall
pay Contractor an Early Completion Bonus as follows:
(i) Sixteen thousand six hundred dollars
($16,600) per day for each day (or portion thereof)
that Commercial Operation of the Plant occurs on or
before October 31, 1996 but only for those days of
early completion during the month of October 1996;
(ii) Forty thousand dollars ($40,000) per day for
each day (or portion thereof) that Commercial Operation
of the Plant occurs on or before September 30, 1996 and
on or after August 1, 1996 and shall apply for all days
of early completion during the months of September 1996
and August 1996.
No Early Completion Bonus shall be paid for any early completion
days occurring prior to August 1, 1996.
(f) In the event that Substantial Completion of
the Plant occurs on or prior to October 31, 1996, Owner shall pay
Contractor a Substantial Completion Bonus of $300,000. In the
event that Substantial Completion of the Plant occurs on or prior
to September 30, 1996, Owner shall pay Contractor an additional
Substantial Completion Bonus of $300,000, or a total aggregate
Substantial Completion Bonus of $600,000. No Substantial
Completion Bonus shall be paid if Substantial Completion of the
Plant occurs after October 31, 1996.
(g) (i) The aggregate of any Early Completion
Bonus and/or Substantial Completion Bonus shall be payable to
Contractor in three (3) interest-free (until due, owing and
unpaid), equal quarterly payments out of "Distributable Cash" (as
hereinafter defined) three (3) Business Days after each of the
three "Basic Rent Payment Dates" (as such term is defined in
Appendix A to the Construction Loan Agreement and Lease
Commitment dated as of March 30, 1995, among Owner, Panda
Brandywine Corporation and General Electric Capital Corporation)
immediately following Final Acceptance of the Plant. Any amounts
not paid hereunder due to the inadequacy of "Distributable Cash"
shall be carried over for payment (with interest thereon accruing
at the Stipulated Interest Rate) three (3) Business Days after
the next Basic Rent Payment Date (it being understood that no
equity distributions may be made to any partner of the Owner
until any due or past-due Early Completion Bonus or Substantial
Completion Bonus amount is paid to Contractor).
(ii) Contractor understands and agrees that the
distributions of Distributable Cash may be restricted by the
Construction Loan Agreement now or in the future and that the
Security Deposit Agreement may be changed to provide for the
payment of additional amounts to other parties (whether now or
hereafter provided for in the Security Deposit Agreement). The
Contractor agrees that its right to receive Early Completion
and/or the Substantial Completion Bonus is not a debt of the
Owner. Contractor also agrees that any default, breach,
rejection or repudiation by Owner of any obligation or provision
contained in these Sections 5.02(e), (f) and (g) shall not be a
default by Owner under this Agreement; provided, however, that if
Owner repudiates (a) its obligations to make payments first to
Contractor before any distributions to any other person, or (b)
to cause the Security Agent to make payments to Contractor
required by Section 5.02(g)(iv) hereof, as to which, in both
cases, Contractor shall have a legal claim sounding in debt, but
only against such Distributable Cash held by Owner but not paid
to Contractor when owed, and in no event shall Contractor
terminate this Agreement on account of any such repudiation. In
no event shall Contractor make any claim against or assert any
lien on the Facility or any other asset of Owner by reason of the
matters set forth in these Sections 5.02(e), (f) and (g). The
obligations to pay Early Completion and/or Substantial Completion
Bonus shall be non-recourse to Owner except to the extent Owner
receives Distributable Cash, and then recourse shall be limited
to such Distributable Cash. Contractor agrees that it shall have
no right to institute any action or proceeding or otherwise take
any action against the Construction Lender or any security agent
or owner trustee with respect to these Sections 5.02(e), (f) and
(g). Contractor further agrees that it shall have no right to
institute any action or proceeding or otherwise take any action
against Owner to enforce payment or performance of any obligation
or agreement contained in these Sections 5.02(e), (f) and (g)
unless and until the Construction Lender have been paid in full
all amounts outstanding under any of the Construction Loan
Agreement and such Agreement has terminated; provided, however,
that Contractor shall have the right to seek to compel specific
performance of Owner's obligations set forth in these Sections
5.02(e), (f) and (g).
(iii) For purposes of these Sections 5.02(e), (f)
and (g), (A) "Distributable Cash" shall mean, at any time in
question, all cash then distributable to Owner pursuant to
Section 4.9(b) of the Security Deposit Agreement, but only if the
conditions in such Section to distribution have been satisfied;
and (B) "Security Deposit Agreement" shall mean that certain
Security Deposit Agreement dated as of March 30, 1995 among the
Owner, Panda Brandywine Corporation, General Electric Capital
Corporation and Shawmut Bank Connecticut, National Association,
as security agent, owner trustee and lessor, as such agreement
may be amended, modified or supplemented from time to time.
(iv) For so long as the Security Deposit
Agreement is in effect, Owner agrees to cause the Security
Deposit Agent to promptly distribute to Contractor, on a
quarterly basis, to the extent of funds available therefor, the
Distributable Cash, if any, payable to Contractor hereunder, as
provided in this Section 5.02(g) and pursuant to the terms of the
Security Deposit Agreement, in all cases senior and prior to any
payments of Distributable Cash to any other person.
(v) If the Security Deposit Agreement shall be
amended or terminated so that cash is no longer distributed to
Owner thereunder, but is distributed to Owner free and clear of
any lien of the Construction Lender pursuant to some other
agreement, then "Distributable Cash" shall mean such cash being
distributed to Owner pursuant to such other agreement. If the
Construction Lender is paid in full all amounts outstanding under
the Construction Loan Agreement and such Agreement has been
terminated, then "Distributable Cash" shall mean all revenues of
the Plant.
(h) The provisions of Sections 5.02(e), (f) and
(g) above represent the entire agreement of the parties
concerning the payment of an Early Completion Bonus and
Substantial Completion Bonus and supersede, and shall not be
modified by, any Change Order set forth in Exhibit S hereto.
5.03 Equipment and Services
Upon Final Acceptance of the Plant or the earlier
termination of this Agreement, Contractor shall assign to Owner
all warranties received by it from subcontractors or suppliers of
goods and services used in the Work. Such assignment of
warranties to Owner must also allow Owner to further assign such
warranties. However, in the event that Owner makes any warranty
claim against Contractor with respect to goods or services
supplied in whole or in part by any such subcontractor or
supplier, Contractor shall be entitled to enforce for its own
benefit any warranty given by such subcontractor or supplier with
respect to such goods and services.
5.04 Performance Guarantees
(a) Net Power Output Guarantee. Contractor
guarantees to Owner that the Net Power Output of the Plant will
be 230,000 kilowatts at Commercial Operation, corrected to 92o F
dry bulb 50% relative humidity with 34,000 lbs/hr of saturated
steam at 15 psig at the process interface and 80% of condensate
returned with no boiler blowdown (the "Net Power Output
Guarantee"). Contractor shall be able to declare Commercial
Operation notwithstanding its failure to achieve the Net Power
Output Guarantee by electing to make a Contract Price Discount
payment for such failure in the amount of $1000 per kilowatt that
the Net Power Output (as corrected in this paragraph) is less
than the Net Power Output Guarantee; provided, however, that no
such election may be made by Contractor unless and until
Contractor has achieved a Net Power Output of 210,000 kilowatts
or greater (as corrected in this paragraph). Contractor shall
provide a notice and declaration to Owner that: (a) a 210,000
kilowatt (or greater) Net Power Output (as corrected in this
paragraph) has been achieved in accordance with the terms of this
Agreement; and (b) Commercial Operation is hereby declared by
Contractor, to be effective for all purposes of this Agreement as
of the date of such notice and declaration. Any Contract Price
Discount owing to Owner in consequence thereof shall be paid in
accordance with Section 5.04(c).
(b) Net Plant Heat Rate Guarantee. Contractor
guarantees to Owner that the net heat rate of the Plant (the "Net
Plant Heat Rate") will not exceed 7,124 Btu/kWh LHV when firing
design basis natural gas, as determined by the Net Plant Heat
Rate Test corrected to 92 degrees F dry bulb 50% relative
humidity with 34,000 lbs/hr of saturated steam at 15 psig at the
process interface and 80% of condensate returned with no boiler
blowdown (the "Net Plant Heat Rate Guarantee"). Should the
actual Net Plant Heat Rate as determined by the Net Plant Heat
Rate Test be greater than the Net Plant Heat Rate Guarantee plus
the Dead Band Tolerance, Contractor shall refund to Owner, as a
Contract Price Discount and cost adjustment for such deficiency
in actual Net Plant Heat Rate, a sum equal to forty-five thousand
dollars ($45,000) for each Btu/kWh in excess of the Net Plant
Heat Rate Guarantee plus the Dead Band Tolerance. The Dead Band
Tolerance of the Net Plant Heat Rate shall be plus or minus two
(2) percent of the Net Plant Heat Rate Guarantee.
(c) Maximum Contract Price Discount. Owner shall
invoice Contractor, for such Contract Price Discount payable by
Contractor pursuant to this Section 5.04, promptly after the
final test performed pursuant to Section 6.04(b) demonstrates
that the Plant has failed to achieve the Net Plant Heat Rate
Guarantee and/or Net Power Output Guarantee thereby resulting in
a deficiency. Any such invoice shall be payable within thirty
(30) days after Contractor's receipt of such notice. The
Contract Price Discount provided by this Section 5.04 is in
addition to the Contract Price Discount provided by Section 5.02
and the warranty claims pursuant to Section 5.01. Anything in
paragraphs (a) and (b) above to the contrary notwithstanding, the
total and cumulative Contract Price Discount payable under
Sections 5.02 and 5.04 shall not exceed twenty-five percent (25%)
of the Contract Price.
(d) Emissions Guarantee. Contractor guarantees
that the emission of air contaminants into the atmosphere from
the Plant will meet the emissions limitations (as demonstrated
through the use of the air quality sampling criteria and the
techniques referenced therein) of the EPA Prevention of
Significant Deterioration ("PSD") permit and the permits granted
pursuant to the CPCN proceeding, attached hereto in Exhibit G.
(e) Noise Abatement Guarantee. Contractor
guarantees the Plant will function at a noise level that does not
exceed that required by the State of Maryland and Prince George's
County requirements at the property line (and at any other point
of measurement required by law) of the Plant Site under all
normal operating conditions in accordance with Section 20.5 of
the Scope of Work.
(f) Fuel Oil Net Power Output. After Commercial
Operation is achieved, the Net Power Output shall be demonstrated
during a six hour test when firing distillate fuel oil following
the procedures set forth in Section 6.03. During this test, the
Net Power Output corrected to 92 degrees F dry bulb 50% relative
humidity with 34,000 lbs/hr of saturated steam at the process
interface and 80% of condensate returned with no boiler blowdown
shall be greater than or equal to the Net Power Output as
corrected to the same conditions as determined during the 48 hour
test on natural gas.
If the Net Power Output when firing distillate fuel oil
is less than the Net Power Output when firing natural gas and
less than 230,000 KW after appropriate test correction factors,
then Contractor shall either (i) implement corrective measures
and retest to achieve the required output level, or (ii) elect to
pay a Contract Price Discount of $1,000 per kilowatt that the Net
Power Output is less than the Net Power Output level on natural
gas.
In the event that Net Power Output during the
distillate fuel oil test is greater than the natural gas Net
Power Output, or is greater than or equal to 230,000 KW,
Contractor shall be deemed to have passed this distillate fuel
oil test.
(g) Determination of Compliance. Contractor's
compliance with the guarantees set forth in paragraph (a), (b),
(d) and (e) of this Section 5.04, or the degree of its failure to
comply with any such guarantee, shall be determined on the basis
of the Performance Tests of Section 6.03 and the results of such
tests shall be conclusive for such purpose.
(h) Net Power Output Bonus. In the event that
Contractor achieves a Net Power Output (as corrected in Paragraph
5.04(a)) in excess of the Net Power Output Guarantee (as such Net
Power Output is determined by the last Forty Eight (48) Hour
Performance Test), then in such event, a bonus shall be owing to
Contractor from Owner in an amount that is the aggregate of $300
per kilowatt by which such Net Power Output exceeds the Net Power
Output Guarantee; provided, however, that no bonus shall be paid
for any Net Power Output in excess of 233,000 KW. Such bonus
shall be paid within 30 days after Final Acceptance.
(i) Net Plant Heat Rate Bonus. In the event that
Contractor achieves a Net Plant Heat Rate (as corrected in
Paragraph 5.04(b)) that is less than the Net Plant Heat Rate
Guarantee less the Dead Band Tolerance (as such Net Plant Heat
Rate is determined by the Net Plant Heat Rate Test), then, in
such event, a bonus shall be owing to Contractor from Owner in an
amount that is the aggregate of $22,500 per Btu/kWh by which such
Net Plant Heat Rate is less than the Net Plant Heat Rate
Guarantee less the Dead Band Tolerance. Such bonus shall be paid
within 30 days after Final Acceptance.
5.05 PEPCO Interconnect and Transmission Facilities
Contractor covenants that neither it nor its Sub
Contractors will tamper with PEPCO's side of the Interconnect
Facilities or the Transmission Facilities on the line side of the
Plant's line disconnect switch without the prior written consent
of Owner and PEPCO; except in situations where such actions are
taken to prevent immediate injury, death, or property damage, and
Contractor uses all reasonable efforts to provide Owner and PEPCO
with advance notice of the need for such actions.
ARTICLE VI
START UP, PERFORMANCE TESTS AND ACCEPTANCE
6.01 Commencement of Testing and Start-Up
The Contractor shall provide Owner with at least thirty
30 days advance notice of any testing of the Plant that involves
delivering energy to PEPCO. After the Plant has been
substantially completed whereby it can operate normally and
continuously under all operating conditions, the Contractor shall
start-up and test the Plant in accordance with Scope of Work and
this Article VI. No test under this Section 6.01 that delivers
net electrical output shall be conducted unless Contractor gives
prior notice to Owner's representative.
6.02 Initial Operation
Following the start-up of the Plant as provided for in
Section 6.01, the Plant will be subject to trial operation, field
checkout and demonstration of full load operation in accordance
with the provisions of Scope of Work.
6.03 Performance Tests
(a) When, after completion of the start-up, trial
operation, field checkout and demonstration of full load
operation in accordance with the provisions of Scope of Work,
Contractor determines to its satisfaction that the Plant has been
substantially completed and is capable of being operated safely
in accordance with the requirements of this Agreement (although
other minor portions of the Plant not essential to its safe and
reliable operation may remain to be completed), it shall deliver
to Owner a written notice so stating (a "Performance Test(s)
Notice") and specifying a date for commencement of any or all of
the Performance Tests. Contractor shall deliver the Performance
Test(s) Notice at least five (5) Business Days prior to the
commencement of the Performance Test(s). If Owner, within three
(3) Business Days after its receipt of such Performance Test(s)
Notice, delivers to Contractor a written notice (i) denying that
the Plant has been substantially completed or that it is capable
of being operated safely under all conditions in accordance with
the requirements of this Agreement, and (ii) stating the facts
upon which such reasonable denial is based, then upon receipt of
such notice Contractor shall take such action as is appropriate
to remedy the conditions described in such notice. Following any
such remedial action, Contractor may deliver to Owner a new
Performance Test(s) Notice conforming to the requirements of this
paragraph (a), and the provisions of this paragraph (a) shall
apply with respect to such new Performance Test(s) Notice in the
same manner as they applied with respect to the original
Performance Test(s) Notice. The foregoing procedure shall be
repeated as often as necessary until Owner no longer rejects the
Performance Test(s) Notice.
(b) The Performance Test(s) shall be carried out
in accordance with Exhibit A.
6.04 Final Acceptance and Substantial Completion of the
Plant
(a) Contractor may, by written notice to Owner,
request that the Plant be accepted as complete, (i) when the
Performance Tests, mechanical calibrations, electrical continuity
and ground fault tests have been completed, and any Defects and
Deficiencies found have been corrected to Owner's satisfaction,
(ii) the Plant has been constructed in accordance with the Final
Plans and specifications, (iii) the Plant has been synchronized
with PEPCO electrical grid, (iv) no defective or incomplete
portions of the Work exist that could have a materially negative
impact on the normal operation or performance of the Plant and
(v) completion of all remaining Punch List Items will not
interrupt, disrupt or interfere with the normal operation or
performance of the Plant, (vi) thermal energy is available from
the Plant to the Steam Host on a normal and uninterrupted basis
and (vii) the certificate has been delivered pursuant to
Paragraph 6.04(d) below ("Final Acceptance"). A team consisting
of representatives of Owner, Construction Lender and Contractor
shall then make a final inspection of the Plant. Should Owner's
representatives disagree with a contention by Contractor's
representatives that the Plant is complete and in compliance with
the requirements of this Agreement, Contractor's sole remedy is
to submit the dispute to arbitration under Article X.
(b) If the Plant fails any part of its original
Performance Tests, Contractor shall take appropriate corrective
action and the Performance Tests shall then be performed again.
If the Plant fails any part of the retest, Contractor shall take
appropriate corrective action and the Performance Tests shall be
repeated. If six months have elapsed from the date of Commercial
Operation, and the Plant continues to fail the Performance Tests
Contractor shall pay Owner the Contract Price Discount refundable
pursuant to Section 5.04 hereof.
(c) Except as provided in Section 9.01 hereof
with respect to indemnification for third party claims, and
Contractor's obligation to achieve mechanical completion, Owner
shall have no claim against Contractor under this Agreement with
respect to and to the extent that any such claim relates to a
Defect or Deficiency that, is subsumed within, or contributes to
a performance deficiency; provided, however, that such
performance deficiency must have been previously compensated for
by a Contract Price Discount.
(d) After Owner has accepted the Plant and the
Plant is complete, including Punch List Items, Owner shall upon
written request by Contractor issue it a Completion Certificate
evidencing its final acceptance of the Plant as a whole. In the
event that only Punch List Items remain to be completed, Owner
shall issue the Completion Certificate if Contractor agrees that
the Punch List Items will be corrected to Owner's satisfaction
within a reasonable period of time, but in no event later than
six (6) months from Commercial Operation and in the case of
freeze protection, it will be complete by the later of Commercial
Operation or November 1, 1996.
(e) As a condition precedent to Final Acceptance,
Contractor shall submit a signed Certificate that the Plant has
been constructed in accordance with all governmental requirements
identified either by Owner or Contractor pursuant to this
Agreement.
(f) Subsequent to running the first successful
Forty-eight (48) Hour Net Electric Output Performance Test,
Contractor shall provide written notice to Owner that the Plant
has achieved "Substantial Completion" (i) when Commercial
Operation has been achieved under normal operating conditions,
including a plant staff at the ordinary manning level for
continuous operation and (ii) all air emission tests on design
basis natural gas comply with the criteria of Applicable Permits
and Section 5.04(d) under normal operating conditions, including
a plant staff at the ordinary manning level for continuous
operation (it being understood that state certification is not
required) and (iii) an aggregate potential Contractor liability
formula described as follows has been met: the sum of the
potential maximum amount of Net Power Output Contract Price
Discount plus potential maximum amount of Net Plant Heat Rate
Contract Price Discount plus Guaranteed Completion Date Contract
Price Discount plus potential maximum amount of expected cost to
complete construction plus potential maximum amount of Punch List
is less than or equal to $15,000,000 (with the Net Power Output
and Net Plant Heat Rate Test performed in accordance with Article
VI of this Agreement and the Contract Price Discounts in
accordance with Article V). The date of Contractor's written
notice under this Section shall be the date of "Substantial
Completion" (provided "Substantial Completion" shall have
actually occurred, as determined by Construction Lender's
Engineer).
ARTICLE VII
FORCE MAJEURE AND OWNER CAUSED DELAY
7.01 Force Majeure.
(a) Subject to the parties obligations under this
Article VII, a party shall not be considered to be in default
with respect to any obligation (except for the obligation to pay
money) if it is prevented from fulfilling such obligation by
reason of a Force Majeure Event. For purposes of this Agreement,
Force Majeure shall mean an event, condition, or circumstance
beyond the reasonable control and without the fault or negligence
of the Party claiming Force Majeure, that, despite all reasonable
efforts of the Party claiming Force Majeure to prevent it, causes
a material delay or disruption in the performance of any
obligation imposed hereunder. Force Majeure shall include,
without limitation, acts of God, natural disasters, fires,
earthquakes, lightning, floods, storms, civil disturbances,
riots, war, the action of a court or action or failure to act on
the part of any governmental body having or asserting
jurisdiction that is binding upon the Parties and has been
opposed by all reasonable means, strikes, lockouts or other labor
disputes, or such other causes or events to the extent beyond the
reasonable control, and without the fault or negligence, of the
Party relying thereon as justification for not performing an
obligation or complying with any condition required of such Party
under this Agreement. For the avoidance of doubt, the term
"Force Majeure" does not include changes that affect the cost or
availability of equipment, nor shall strikes, lockouts or other
labor disputes with respect to the employees of the Contractor or
any subcontractor (other than General Electric or any other
subcontractor who cannot be replaced without causing a material
delay or disruption in the performance of this Agreement).
(b) A party may only assert a Force Majeure Event
as an excuse to performance under this Agreement if the non
performing party upon the occurrence of a Force Majeure Event:
(i) immediately and continuously uses all reasonable efforts to
alleviate and mitigate the cause and effect of the Force Majeure
Event, (ii) provides accurate notice to the other party
describing the date, expected duration, cause and nature of the
Force Majeure event as well as its effect on Commercial
Operation, if any, within the earlier of: (x) five (5) [Business]
Days after obtaining knowledge of such Force Majeure Event or (y)
in any event sixty (60) calendar days after the commencement of
the Force Majeure Event, (iii) promptly and without delay
provides status reports to the other party as often as the other
party may reasonably request, and (iv) provides written notice to
the other party immediately upon resumption of the excused
performance. The parties agree that any failure by a party to
adhere in all material respects to the provisions of this Section
7.01 shall be deemed a waiver by that party to relief under this
Article VII; provided however that the non-performing party must
strictly adhere to all notice requirements under this Section
7.01.
(c) Anything in this Agreement to the contrary
notwithstanding, (i) the provisions of this Article VII shall not
extend Contractor's time for performance under Section 2.03
beyond the latest date that the "Actual Commercial Operation
Date" may occur under the Power Contract; provided, however,
that, if termination of this Agreement occurs under the last
sentence of Section 8.02(b) by reason of Force Majevre, Owner's
rights and remedies shall be limited to those afforded to it by
Sections 8.06(b) and (c) below and (ii) any excuse for
performance of Work under this Article VII shall be no greater in
scope or duration than that required as a direct result of the
impact of the Force Majeure Event.
(d) Owner shall not be responsible for the cost
of de-mobilization and/or remobilization if Contractor has a
Force Majeure Event.
7.02 Owner Caused Delay
Contractor's time of performance under this Agreement
shall be extended if, and to the extent, Contractor is able to
demonstrate to Owner that Contractor has suffered a material and
adverse impact on its obligation to achieve Commercial Operation
(or any other project schedule obligations) by reason of Owner's
failure to perform its obligations hereunder. Contractor's
rights under this section are conditioned on Contractor: (i)
delivering detailed written notice to Owner within five (5) days
after Owner's acts or omissions describing the consequences of
the Owner Caused Delay on the Guaranteed Completion Date (or any
other project schedule obligations) and (ii) providing all
assistance reasonably necessary to Owner for the elimination or
mitigation of the Owner Caused Delay.
ARTICLE VIII
TERMINATION OF AGREEMENT
8.01 Termination for Owner's Convenience
Owner may terminate this Agreement at any time for its
convenience. This Agreement may be terminated under this Section
8.01 by giving Contractor written notice of termination. Upon
receiving any such notice of termination, Contractor shall stop
performing the Work and shall cancel as quickly as possible all
orders placed by it with subcontractors and suppliers and shall
use all reasonable efforts to minimize cancellation charges.
8.02 Termination for a Party's Default
(a) If either party commits a material breach of
its obligations under this Agreement (other than a failure by
Owner to make a Milestone Payment when it becomes due (which
failure is exclusively governed by Section 8.04), the other party
(hereinafter the "Non-Defaulting Party") may give such party in
default (the "Defaulting Party") a written notice describing such
default in reasonable detail and demanding that the Defaulting
Party cure it. If the Defaulting Party does not cure the default
within fifteen (15) days after its receipt of such notice or, if
the default is such that it cannot be cured within such period of
time, does not promptly commence action designed to cure such
default within a reasonable period of time and thereafter
diligently pursues such cure to completion (not to exceed 180
days), the Non-Defaulting Party shall have the right to terminate
this Agreement by written notice to the Defaulting Party, without
prejudice to any other remedies which are available to the Non-
Defaulting Party by reason of the Defaulting Party's default.
Except as provided in paragraph (b) of this Section 8.02, Owner
may not terminate this Agreement for a default by Contractor in
meeting the Guaranteed Completion Date so long as both (i)
Contractor diligently pursues actions which are reasonably
calculated to achieve Commercial Operation within such 180 days
and (ii) Contractor pays and continues to pay Owner up to the
limitation set forth in Section 5.02(c) the Contract Price
Discount set forth in Section 5.02 for the failure to meet such
Guaranteed Completion Date.
(b) Notwithstanding Contractor's efforts to cure
a default pursuant to paragraph (a) of this Section, Owner shall
have the right to terminate this Agreement upon ten (10) days'
prior written notice to Contractor if (i) Contractor fails to
meet any critical milestone listed in Exhibit N, Contractor
Critical Date Schedule. In addition, if, one hundred eighty
(180) days before June 1, 1997 (except to the extent that the
latest date for the "Actual Commercial Operation Date" under the
Power Contract is extended by PEPCO beyond June 1, 1997), Owner
should have good reason to believe that, because of a breach or
breaches of Contractor's obligations under this Agreement
(including but not limited to a failure by Contractor to
diligently carry out performance of the Work), Commercial
Operation of the Plant will not occur by June 1, 1997 (except to
the extent that the latest date for the "Actual Commercial
Operation Date" under the Power Contract is extended by PEPCO
beyond June 1, 1997) then in such event, Owner shall be entitled
by written demand to insist that Contractor furnish to Owner,
within thirty days from the date of such demand, a plan prepared
by Contractor showing the ability of Contractor to recover
schedule to the extent required to meet the then-required date
for achieving Commercial Operation (the "Plan"). For a period of
ten business days after Contractor's submittal of the Plan,
either party may demand and be entitled to meet with the other
for the purposes of discussing the merits of the Plan. At the
end of such ten (10) Business Day discussion period, if Owner
continues to have good reason to believe that, because of a
breach or breach of Contractor's obligations under this Agreement
that Commercial Operations will not occur by the then-required
date, Owner shall have the right to terminate this Agreement;
provided, however that if such termination is due to Force
Majeure, Contractor shall not be deemed to be in default of this
Agreement; and provided, further, that in such a case Owner shall
only have the right to terminate this Agreement and avail itself
of the rights and remedies of Sections 8.06(b) and (c) below as a
result of such termination.
(c) In the event of termination by the Owner
pursuant to paragraph (b) of this Section 8.02, Owner's rights
and Contractor's obligations resulting from such termination
shall be determined pursuant to Section 8.06.
(d) Contractor's rights in the event that Owner
does not make a Milestone Payment when it becomes due shall be
governed by Section 8.04.
8.03 Termination by Reason of Insolvency, etc.
Either party may terminate this Agreement by written
notice to the other party if the latter party (a) commences a
voluntary proceeding under any Federal or state bankruptcy,
insolvency or reorganization law, or (b) has such a proceeding
filed against it and fails to have such proceeding stayed or
vacated within forty-five (45) days, or (c) upon the end of any
such stay, fails to have such involuntary proceeding vacated
within thirty (30) days thereafter, or (d) admits the material
allegations of any petition in bankruptcy filed against it, or
(e) is adjudged bankrupt, or (f) makes a general assignment for
the benefit of its creditors, or if a receiver is appointed for
all or a substantial portion of such party's assets and is not
discharged within sixty (60) days after his appointment. Any
termination of this Agreement pursuant to this Section 8.03 shall
be considered to be by reason of anticipatory breach of contract,
and such termination shall be without prejudice to any rights the
terminating party may have by reason of such anticipatory breach.
8.04 Suspension of Work or Termination of Agreement by
Contractor
(a) In the event that Owner fails to make any
undisputed payment (in the reasonable opinion of Owner) to
Contractor by the date such payment becomes due, Contractor may
give written notice ("First Notice") pursuant to this Section
8.04. If the sum owed, plus interest thereon as provided in
Section 11.01 from the date payment was due to the date of
payment, is not made within fifteen (15) days after the date of
Owner's receipt of such First Notice ("First Cure Period"), then
Contractor shall have, at its option, the right to suspend its
performance of the Work.
(b) If the Contractor suspends performance
hereunder pursuant to paragraph (a), Contractor may give a second
written notice ("Second Notice") of its intent to terminate this
Agreement. If all amounts due, including interest, are not made
within ten (10) days after such Second Notice, Contractor shall
have the right to terminate this Agreement immediately.
8.05 [Deleted]
8.06 Effect of Termination; Post-Termination Obligations of Parties
(a) Upon Owner's termination of this Agreement
pursuant to Section 8.01 or Contractor's termination of this
Agreement due to a default by Owner pursuant to Sections 8.02(a),
8.03 or 8.04, Contractor shall be entitled to receive a
termination payment (the "Termination Payment") equal to the sum
of (i) that portion of the Contract Price that is applicable to
Work completed up to the date of termination that has not
previously been paid to Contractor, (ii) the costs reasonably
incurred by Contractor in withdrawing its equipment and personnel
from the Job Site and in otherwise demobilizing, and (iii) the
costs reasonably incurred by Contractor in terminating contracts
with subcontractors and suppliers pertaining to the Work.
Representatives of Owner and Contractor shall determine the
Contract Price amount referred to in clause (i) above in
accordance with the Milestone Payment Schedule in Exhibit D, and
Contractor shall document the costs claimed under clause (ii) and
(iii) above to Owner's satisfaction and shall supply Owner copies
of the subcontractor and supplier invoices covering amounts
claimed under clause (iii) above. Contractor shall submit an
invoice to Owner for the Termination Payment with the supporting
information and documents referred to above, and Owner shall pay
such invoice within thirty (30) days after its receipt of same
unless it disputes certain elements thereof, in which event only
the undisputed portion of the Termination Payment need be made
within such 30-day period and the dispute over the remainder of
the claimed Termination Payment may be submitted to arbitration
pursuant to Article X.
(b) If the Owner terminates this Agreement
pursuant to Sections 8.02 or 8.03, Contractor shall be liable to
Owner for all costs and expenses reasonably incurred by Owner in
completing the Plant or in correcting deficiencies in the Work to
the extent that the Contract Price payments made to Contractor
together with such costs and expenses exceed the Contract Price.
Contractor shall not be entitled to receive any Termination
Payment as a result of Owner's termination pursuant to Section
8.02 or 8.03.
(c) Upon a termination of this Agreement,
pursuant to this Article VIII, Contractor shall leave the Job
Site and Owner shall take possession of the Job Site and of the
equipment, materials, and supplies at the Job Site, in transit,
or otherwise (and the warranties associated therewith) to which
Owner has title pursuant to Section 3.07 subject to the
provisions of Section 8.01 (if they are applicable) Owner may
then finish the Work by whatever method it may deem expedient.
Upon written request by Owner, Contractor agrees, in connection
with any such termination, to promptly assign any contract rights
(including warranties, licenses and patents) that it may have to
other equipment, materials and supplies intended for delivery and
incorporation in the Plant. Contractor shall also, in connection
with a termination under this Article VIII furnish Owner with
copies of all specifications, final detailed operational
drawings, manuals and other records described in Section 1 of the
Special Conditions for the equipment and materials paid for
improvements to realty made prior to the date of termination to
the extent that such Specifications, etc. have not previously
been delivered to Owner.
8.07 Consequences of Suspension of Work by Owner
In the event Owner suspends the Work without
terminating this Agreement such suspension shall be treated as an
Owner Caused Delay (subject to the requirements of Section 7.02)
for all purposes hereunder and Contractor shall have the option
to terminate this Agreement if the duration of such delays and
suspensions (occurring after Project Funding) exceed, in the
aggregate, 180 days. In the event of such Contractor
termination, Contractor shall have the same remedies and
obligations as if Owner had terminated this Agreement for
convenience pursuant to Section 8.01 hereof.
ARTICLE IX
INDEMNIFICATION; LIABILITY LIMITATION
9.01 Indemnification of the Parties
(a) To the extent and in proportion to their
respective shares of negligence, each party shall defend and
indemnify the other party (and in the case of Contractor's
indemnification obligations, PEPCO and Construction Lender) its
directors, officers and employees (collectively "Indemnitees")
against, and hold them harmless from, any and all losses, claims,
suits, liabilities and legal expenses, directly or indirectly,
arising out of, resulting from or related to third party claims
associated with this Agreement or the Work, including any damage
to or destruction of property of third parties, or death of or
bodily injury to persons (whether they are employees of the
Indemnitees or any Subcontractor or are persons unaffiliated with
the Plant or the Work); provided, however, that the party against
whom indemnification is sought shall be promptly notified in
writing of any such claim or suit brought against any such
Indemnitee (within ten (10) days in the case of a suit).
(b) Contractor shall also defend and indemnify
Indemnitees against, and hold them harmless from that portion of
any and all losses, claims, suits, liabilities, damages, of
whatever kind or nature, legal and other expenses, (including
without limitation, cleanup costs, study and investigative costs
and attorneys' and experts' fees and disbursements) incurred by
or asserted against Indemnitees arising directly or indirectly
from the exacerbation of any Pre-Existing Hazardous Material
known to Contractor, or in cases when Contractor has acted
wilfully and such conduct has materially exacerbated the
condition from that originally discovered by Contractor; from
disposal of any Hazardous Material generated or brought on the
Job Site by Contractor, its Subcontractors, and vendors; or from
Contractor's breach of any obligations set forth in Section
2.17(a), (c), (d) and (e). Contractor shall be responsible for
that portion of costs for the removal and remediation of any
contamination covered by this indemnification at no additional
cost to Owner.
9.02 Owner's Environmental Indemnification
Owner shall defend and indemnify Contractor against,
and hold them harmless from and against, any and all losses,
claims, suits, liabilities, damages, of whatever kind or nature,
and legal and other expenses (including without limitation,
cleanup costs, study and investigative costs and attorneys' and
experts' fees and disbursements) incurred by or asserted against
Contractor arising directly or indirectly from Pre-Existing
Hazardous Material on the Site, except to the extent that
Contractor's act or omissions have been negligent or willful and
thereby caused a release of Pre-Existing Hazardous Material or
rendered removal or remediation of Pre-Existing Hazardous
Material more costly.
9.03 Limitation of Remedies
(a) Except as specifically provided by this
Agreement Contractor shall not be liable to Owner under any
theory for incidental or consequential damages, including but not
limited to loss of revenues or profit, by reason of anything done
or omitted to be done by it under or in connection with this
Agreement.
(b) Except as otherwise provided below, anything
herein to the contrary notwithstanding, Contractor's aggregate
and cumulative liability to Owner, whether such liability arises
in contract, tort (including negligence) strict liability or
otherwise, shall in no event exceed 30% (excluding claims for
indemnification arising under Section 9.01 above where a limit of
liability of 40% of the Contract Price shall exist separately
from other limits imposed hereby, e.g. Contractor could be liable
for indemnification claims up to 40% of the Contract Price plus
other claims up to 30% of the Contract Price hereunder) of the
Contract Price. In the event that Contractor fails to achieve
mechanical completion of the Plant or in the event that Owner
finishes the Plant and attains mechanical completion after
termination of this Agreement due to a default by Contractor
hereunder, Contractor's aggregate and cumulative liability to
Owner hereunder shall be increased to 50% of the Contract Price
from 30% of the Contract Price.
(c) The remedies provided for herein are
expressly agreed between the parties to be exclusive with respect
to claims arising under contract (including breach of contract),
tort (including negligence), strict liability or otherwise, and
are in lieu of all other remedies that may be available to the
parties at law or in equity; and in particular Contract Price
Discounts shall be the exclusive remedy of Owner against
Contractor for Contractor's failure to meet Guaranteed Completion
Date or to achieve the Performance Guarantees, as respectively
appropriate.
(d) Releases from, indemnities against and
limitations on, liability and remedies, expressed in this
Agreement are intended to and shall apply even in the event of
fault, negligence, or strict liability of the party released,
indemnified, or whose liability or remedies are limited.
ARTICLE X
DISPUTES
10.01 Arbitration of Disputes
Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, now or in the future,
which cannot be resolved amicably by the parties shall be settled
by arbitration in accordance with the Construction Industry
Arbitration Rules of the American Arbitration Association,
provided, however, that such rules will be subordinate to the
specific provisions of this Article.
10.02 Selection of Arbitrators
Any party electing to arbitrate a dispute shall furnish
a written notice thereof, containing its nomination for
arbitrator, to the other party, whereupon the receiving party
shall, within ten working days thereafter, by return written
notice, designate its nomination for arbitrator. The Arbitrators
shall be three in number, with each party selecting one
arbitrator and the two selected arbitrators choosing a third.
Should either party refuse or neglect to join in the appointment
of the arbitrations, the arbitrator selected by the other party
shall be the sole arbitrator of the dispute.
10.03 Place, Time and Procedure
The place of arbitration shall be Dallas, Texas unless
in any particular case the parties agree upon a different venue.
Within ten days after the parties agree on the third arbitrator,
the three arbitrators shall convene by teleconference and
establish the time and procedure for arbitration; provided,
however, the arbitrators must use their best efforts to establish
the arbitration as soon as practicable, but no later than twenty
one (21) days from such teleconference.
10.04 Winner Take All
In order to avoid situations where disputes are
resolved by compromise rather than on the merits, the arbitration
panel shall, on or before the date of the hearing of the matter,
be instructed in a writing executed by both parties to rule
entirely in favor of the party more nearly correct, on an issue
by issue basis, it being the intent hereof that each party face
an "all or nothing" outcome. The losing party shall bear all of
the winning party's costs and expenses, including attorneys'
fees, as well as the related costs and expenses of the
arbitrators and the American Arbitration Association.
10.05 Binding Award
The award of the arbitrators shall be final and binding
upon the parties, a judgment of which may be entered in any court
having jurisdiction thereof.
10.06 Contractor To Continue Work
Except as provided in Section 8.04 for nonpayment of an
undisputed Milestone Payment, Contractor shall not suspend Work
as a result of any dispute submitted to arbitration, unless
otherwise agreed by Owner and Contractor in writing.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01 Interest on Overdue Payments
Any undisputed sum payable by either party (the
"Debtor") to the other party (the "Creditor") which remains
unpaid by the Debtor more than fifteen (15) days after the Debtor
has requested payment of such sum, shall accrue interest at the
Stipulated Interest Rate from such due date until the date that
payment of such sum is made. If not paid earlier, any such
accrued interest shall be payable whenever any payment on account
of the overdue principal sum is made. The foregoing provision
for the payment of interest by the Debtor on any overdue sum owed
by it to the Creditor shall not be deemed to excuse late payment
of such sum by the Debtor, and the Creditor's entitlement to such
interest shall be in addition to any other remedies available to
it herein. A Milestone Payment Certificate shall be deemed a
request for payment on the date it is delivered, complete and
accurate, to Owner and Construction Lender.
11.02 Contractor's Records
Contractor shall maintain proper and complete records
substantiating all expenses and charges. Notwithstanding Section
3.11, upon reasonable advance notice from Owner that it wishes to
inspect them, Contractor shall make records pertaining to Work
performed on a Cost Plus Formula basis available, at the Job Site
or Contractor's office in the United States and during normal
business hours, for inspection and copying by representatives of
Owner until the end of two years after the Plant has been
accepted pursuant to Section 6.04. Should any such record
disclose that Owner has overpaid or underpaid Contractor,
Contractor shall, in the case of an overpayment, refund the
amount of the overpayment to Owner upon demand and, in the case
of an underpayment, to be entitled to receive the amount of the
underpayment from Owner upon demand. Interest shall be payable
on any such amount that is refundable to the Owner or to the
Contractor at the Stipulated Interest Rate from the date that
Contractor received such overpayment or underpayment,
respectively to the date of the refund.
11.03 Confidentiality of Information
Each party agrees to preserve the confidentiality of
and not make any unauthorized use of any information made
available to it by the other party that is confidential or
proprietary in nature, or is otherwise clearly identified as not
to be made public, and each party agrees to use all reasonable
efforts to preserve the confidentiality of any other information
made available to it by the other party that is of a confidential
or proprietary nature. For the purposes of this Section 11.03,
confidential or proprietary information includes but is not
limited to (a) the negotiations leading to and the terms of this
Agreement, (b) all documents, data, drawings, studies,
projections, plans and other information, whether written or
oral, which relate to economic benefits to either party pursuant
to this Agreement or costs of design, construction or operation
of the Plant, including, without limitation, the cost and
quantities of fuel, and (c) all plans, drawings, documents,
studies, and other information relating to design, construction,
and operation of the Plant. The foregoing notwithstanding,
neither party shall be required to keep confidential any
information that becomes public through no fault on its part, and
the obligations of each party under this Section 11.03 shall
expire five (5) years after the Plant has been accepted under
Section 6.04, or five (5) years after termination of this
Agreement if Final Acceptance is not achieved.
11.04 Status of Contractor
Contractor shall perform the Work as an independent
contractor and not as an agent of Owner.
11.05 Notices
Any notice by one party to the other required or
permitted by this Agreement shall be in writing and shall be
deemed to have been given when actually received at the address
of the parties set forth below or, in the case of Contractor, it
shall be deemed received when actually sent by Owner to the
Project Manager:
If to Owner: Panda-Brandywine, L.P.
4100 Spring Valley
Suite 1001
Dallas, Texas 75234 Attention:
Chairman & General Counsel &
Brandywine Project Manager
Owner's site manager Panda-
Brandywine, L.P.
6433 S. Crane Highway
Upper Marlboro, MD 20772
Attention: Site Manager
If to Contractor: Raytheon Engineers &
Constructors, Inc.
13105 Northwest Freeway Suite 200
Houston, Texas 77040 Attention:
V.P. & General Manager
Copy to: J.A. Jean
Contract Manager
However, either party may at any time and from time to
time change the address for communications to it by delivering
written notice of the change of address to the other party. The
parties may develop other notice procedures, such procedures, and
the parties' agreement to follow the same, to be set forth in
writing.
11.06 Entire Agreement; Amendment of Agreement
This Agreement contains the entire agreement of Owner
and Contractor relating to the Turnkey Firm-Fixed Price
construction of the Plant and supersedes and replaces any prior
oral or written agreements or understandings between them
relating to the subject matter of this Agreement. No amendment
or modification of this Agreement shall be effective unless set
forth in a writing signed by both parties. Contractor agrees to
make such modifications of this Agreement as may be reasonably
requested of Owner by Construction Lender or PEPCO.
11.07 Waiver of Rights
No failure by either party to insist upon the strict
performance of any term, covenant or condition of this Agreement,
or to exercise any right or remedy upon breach of any provision
hereof, and no acceptance of payment or performance during the
continuation of any such breach, shall constitute a waiver of any
term, covenant or condition herein or a waiver of any subsequent
breach or default in the performance of any term, covenant or
condition herein.
11.08 Severability of Provisions
In the event that any provision of this Agreement, or
the application thereof, is held by any court of competent
jurisdiction to be illegal or unenforceable, the parties shall
attempt in good faith to agree upon an equitable adjustment to
this Agreement in order to overcome to the extent possible the
effect of such illegality or unenforceability, and the validity
and enforceability of the remaining portions of this Agreement
shall not be affected.
11.09 Assignment; Effect of Agreement
(a) Neither party shall assign this Agreement
without first obtaining the prior written consent of the other
party, provided that without obtaining the consent of the other
party Owner may assign this Agreement to any wholly owned
Affiliates of Owner, parent or other entity whose voting
securities are at least fifty-one percent owned by Owner or the
Construction Lender or any other Lender holding a security
interest in the Plant.
(b) Subject to the provisions of paragraph (a)
above, this Agreement shall enure to the benefit of and be
binding upon Owner and Contractor and their respective successors
and assigns. Nothing in this Agreement shall be deemed to confer
any rights on any third party as a third party beneficiary of
this Agreement except to the extent specifically provided in
Article IX.
11.10 Governing Law; Interpretation
This Agreement shall be governed by and construed in
accordance with the law of the State of Maryland, excluding
choice of law rules which may call for the application of the law
of another jurisdiction. The Article headings in this Agreement
are intended for convenience in identifying subject matter only
and shall be disregarded in any interpretation of this Agreement.
11.11 Survival
All indemnities and guaranties given herein by the
parties and the other obligations of the parties contained in
Article X and the following Sections of this Agreement shall
survive Final Acceptance and the termination of this Agreement:
1.05(d), 2.03, 2.14, 3.04, 3.05, 3.09, 3.10, 4.07 to 4.13, 4.17,
5.01, 5.02, 5.03, 5.04, 5.05, 8.06, Articles IX, X, and XI.
IN WITNESS WHEREOF, each party has caused multiple
originals of this Agreement to be signed respectively by its name
and on its behalf by a general partner and an officer thereunto
duly authorized, as of the day and year first above mentioned.
PANDA-BRANDYWINE, L.P. RAYTHEON ENGINEERS &
by its General Partner, CONSTRUCTORS, INC.
Panda-Brandywine Corporation
By: /s/ Ted C. Hollon By: /s/
Title: Vice President Construction Title: Sr. Vice President
EXHIBIT 10.66
GAS SALES AGREEMENT
between
COGEN DEVELOPMENT COMPANY
as Seller
and
PANDA- BRANDYWINE, L.P.
as Buyer
Any person receiving a copy of this
Agreement, is subject to and agrees to be
bound by the provisions of Section 19.5
hereof regarding the confidentiality of the
provisions of this Agreement.
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS OF TERMS 1
Section 1.1 Definitions 1
ARTICLE II CONDITIONS 9
Section 2.1 Seller's Conditions 9
Section 2.2 Buyer's Conditions 9
Section 2.3 Financial Closing 11
Section 2.4 Notifications 11
ARTICLE III QUANTITIES AND GAS CLASSIFICATIONS 12
Section 3.1 Purchase and Sale 12
Section 3.2 Gas Classifications 12
Section 3.3 Make-Up 13
Section 3.4 Gas Allocation 14
Section 3.5 Regularly Scheduled Outages 14
Section 3.6 Buyer's Right to Resell Gas 15
Section 3.7 Testing Service 15
Section 3.8 Processing 15
ARTICLE IV SCHEDULING OF DELIVERIES 16
Section 4.1 Quantity 16
Section 4.2 Delivery Rates 18
Section 4.3 Gas Imbalances 18
Section 4.4 Transportation 18
ARTICLE V SELLER'S WARRANTY 19
Section 5.1 Seller's Warranty 19
ARTICLE VI TERM 19
Section 6.1 Term 19
ARTICLE VII PRICE 19
Section 7.1 Gas Prices 19
Section 7.2 Taxes and Royalties 22
Section 7.3 Gas Market Price Ceiling 23
Section 7.4 Change in Index 24
ARTICLE VIII BILLINGS AND PAYMENTS 24
Section 8.1 Seller's Billings 24
Section 8.2 Buyer's Payment 24
Section 8.3 Buyer's Billings and Seller's Payments 24
Section 8.4 Verification 25
Section 8.5 Failure to Pay 25
Section 8.6 Corrections of Errors 26
ARTICLE IX SPECIFICATIONS 26
Section 9.1 Specifications 26
Section 9.2 Non-Conforming Gas 27
ARTICLE X POSSESSION AND TITLE 27
Section 10.1 Warranty of Title 27
Section 10.2 Possession 27
ARTICLE XI BUYER'S REPRESENTATIONS AND WARRANTIES 28
Section 11.1 Representations and Warranties 28
Section 11.2 Buyer's Covenants 29
ARTICLE XII SELLER'S REPRESENTATIONS, WARRANTIES AND
COVENANTS 29
Section 12.1 Representations and Warranties 29
Section 12.2 Covenants 30
ARTICLE XIII FORCE MAJEURE 36
Section 13.1 Definition 36
Section 13.2 Burden of Proof 38
Section 13.3 Effect of Event of Force Majeure 38
Section 13.4 Settlement of Strikes, Lockouts, or Other
Labor Disputes 38
Section 13.5 Force Majeure Curtailment 39
Section 13.6 Termination Due to Extended Event of
Force Majeure 39
ARTICLE XIV GOVERNMENTAL ACTION 40
Section 14.1 Governmental Action 40
ARTICLE XV TRANSFER AND ASSIGNMENT 40
Section 15.1 Assignments 40
ARTICLE XVI NOTICE 41
Section 16.1 Notice 41
ARTICLE XVII SUSPENSION, MITIGATION, DEFAULT AND REMEDIES 42
Section 17.1 Seller's Failure To Deliver 42
Section 17.2 Event of Default 44
Section 17.3 Remedies for Breach 46
Section 17.4 Special Termination Event 49
ARTICLE XVIII ARBITRATION 51
Section 18.1 Arbitration of Disputes 51
Section 18.2 Appointment of Board 52
Section 18.3 Hearing and Decision 52
Section 18.4 Effect of Decision 52
ARTICLE XIX MISCELLANEOUS PROVISIONS 53
Section 19.1 Captions 53
Section 19.2 Choice Of Law 53
Section 19.3 Other Agreements 53
Section 19.4 Binding Effect 53
Section 19.5 Confidentiality 53
Section 19.6 NonWaiver of Defaults 54
Section 19.7 Written Amendments 55
Section 19.8 Severability and Renegotiation 55
Section 19.9 Survival 55
Section 19.10 Further Assurances 55
Section 19.11 Limitation of Liability 55
Section 19.12 Waiver of UCC Warranties 56
Section 19.13 Counterpart 56
Section 19.14 Winding Up 56
Section 19.15 Preparation 56
Section 19.16 Seller's Reservation 56
APPENDIX I
Adjustment to Agreement Resulting From First Amendment of
Power Contract Not Becoming Effective
EXHIBIT A
Form of Consent and Agreement
EXHIBIT B
Form of Opinion of Counsel
EXHIBIT C
Governmental Approvals
EXHIBIT D
Form of Guaranty
GAS SALES AGREEMENT
This GAS SALES AGREEMENT ("Agreement") dated as of the 30th day
of March, 1995, by and between Cogen Development Company, a
Michigan corporation ("Seller"), and Panda-Brandywine, L.P., a
Delaware limited partnership ("Buyer"), acting by and through its
general partner, Panda Brandywine Corporation, a Delaware
corporation. Seller and Buyer are sometimes referred to herein
individually as a "Party" and collectively as "Parties".
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of selling natural
gas; and
WHEREAS, Buyer proposes to construct and operate a natural gas
and oil-fired cogeneration facility having a net electrical
capability of up to approximately 230 megawatts, to be located
near Brandywine, Maryland and which is expected to commence
commercial operation after June 1, 1996; and
WHEREAS, Seller owns, controls or has or will obtain rights to
quantities of Gas to sell to Buyer and has entered into or will
enter into gas transportation agreements necessary to effect
delivery of Gas hereunder at the Delivery Points; and
WHEREAS, subject to the terms and conditions of this Agreement,
Seller desires to sell and deliver Gas to Buyer and Buyer desires
to purchase and receive Gas from Seller;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and intending to be legally bound,
Seller and Buyer agree as follows:
ARTICLE I
DEFINITIONS OF TERMS
Section 1.1 Definitions. For purposes of this Agreement, the
following capitalized terms and phrases shall have the meanings
set forth below or given them in the provisions hereof cited:
"Additional Proposed Reserves" shall have the meaning set
forth in Section 12.2(d).
"Agreement" means this Gas Sales Agreement between Cogen
Development Company and Panda-Brandywine, L.P., as it may be
amended from time to time.
"Agreement Year" means the twelve- (12) month period
beginning on the Initial Delivery Date, and the twelve- (12)
month period beginning on each succeeding anniversary of the
Initial Delivery Date.
"ANR Charge" shall have the meaning set forth in Section
7.1(a)(iii).
"Best Efforts" means every reasonable effort that can be
taken in good faith under the circumstances in pursuit of
the objective described, consistent with applicable and
customary commercial standards and the affected Party's
total capability to perform.
"Business Day" means each Day, Monday through Friday, except
holidays, from 8:00 a.m. to 5:00 p.m. Eastern Time.
"Buyer's Cover Standard" shall have the meaning set forth in
Section 17.1.
"Buyer's Credit" shall have the meaning set forth in Section
7.1(d).
"Buyer's Delivery Point" means the "primary delivery point"
specified from time to time in the Columbia FT Agreement.
"British Thermal Unit" (or "Btu") shall have the meaning
ascribed in the FERC Gas Tariff of Columbia Gas Transmission
or such other Pipeline(s) that may operate a Delivery
Point(s).
"Columbia FT Agreement" means the Amended and Restated FTS
Service Agreement, dated March 23, 1995, between Buyer and
Columbia Gas Transmission, as such agreement may be amended
from time to time. A copy of the Columbia FT Agreement is
appended to the Precedent Agreement.
"Columbia Gas Transmission'' means Columbia Gas Transmission
Corporation, its successors and permitted assigns.
"Consent and Agreement" means the Financing Document
substantially in the form of Exhibit A attached hereto, by
which Seller consents to the assignment of this Agreement by
Buyer to the Financing Parties to secure Buyer's
indebtedness under the Financing Documents, as such
Financing Document may be amended from time to time.
"Cove Point Agreement" means the FTS Service Agreement,
dated as of March 30, 1995, between Buyer and Cove Point
LNG, as such agreement may be amended from time to time.
"Cove Point LNG" means Cove Point LNG Limited Partnership,
its successors and permitted assigns.
"Day" means the twenty-four- (24) hour period commencing at
8:00 a.m. Eastern Time.
"Dedicated Reserves" shall have the meaning set forth in
Section 12.2(d).
"Delivery Point" or "Delivery Point(s)" mean(s):
(a) (i)with respect to Gas Scheduled for delivery within the MDFQ,
the primary point(s) of receipt set forth in the Columbia FT
Agreement or an appendix or attachment thereto; and
(ii) with respect to Gas Scheduled for delivery within
the MDIQ, the point(s) of receipt set forth in the
Columbia IT Agreement, or an appendix or attachment
thereto; and
(b) such other primary or secondary points as the Parties
may agree from time to time subject to the prior written
consent of the Financing Parties.
"Dispatchable Gas" shall have the meaning set forth in
Section 3.2(c).
"Dth" means one (1) dekatherm, which shall equal one (1)
MMBtu.
"Event of Default" shall have the meaning set forth in
Section 17.2.
"Event of Force Majeure" shall have the meaning set forth in
Section 13.1.
"Extended Term" shall have the meaning set forth in Section 6.1.
"Facility" means the electric and steam cogeneration
facility to be constructed and operated by Buyer and located
near Brandywine, Maryland.
"FERC" means the Federal Energy Regulatory Commission or any
successor agency, department or instrumentality of the
United States government.
"FERC Regulated Facilities" means those interstate gas
transmission facilities owned and operated by a FERC-
regulated interstate pipeline company, which are located on
the discharge side of any field compression units, are
subject to the jurisdiction of FERC and are currently
classified as transmission facilities by FERC for rate-
making purposes.
"FERC Tariff" means the tariff of a FERC regulated pipeline
that is effective and on file with the FERC.
"Financial Closing" means the initial funding of the
construction financing of the Facility upon terms and
conditions acceptable to Buyer in its sole discretion.
"Financing Documents" mean any and all loan agreements,
notes, indentures, security agreements, subordination
agreements, mortgages, partnership agreements, subscription
agreements, participation agreements and other documents
relating to the construction, interim and long-term
financing (both debt and any third party equity) of the
Facility and any refinancing thereof (including a lease or a
leveraged lease pursuant to which Buyer is the lessee of the
Facility) provided by the Financing Parties, including any
and all modifications, extensions, renewals, and
replacements of any such agreements and documents.
"Financing Parties" mean General Electric Capital
Corporation and, in accordance with the terms and conditions
of the Consent and Agreement, (i) any and all successor
lenders providing the construction, interim or long-term
financing or refinancing of the Facility (including a lease
or a leveraged lease), and any trustee(s) or agent(s) acting
on their behalf, and (ii) any and all successor equity
investors providing any such financing or refinancing of the
Facility, and any trustee(s) or agent(s) acting on their
behalf.
"Firm Basis" means the obligation of Seller to deliver and
Buyer to receive Gas within the MDFQ at the Delivery
Point(s), as Scheduled by Buyer or Fuel Manager, without
interruption for any reason, except to the extent permitted
hereunder.
"Firm Transportation Agreements" means the Columbia FT
Agreement, the Cove Point Agreement, and the Washington Gas
Agreement, and such other firm transportation agreement
between the Buyer and a Pipeline.
"Fuel Manager" means Cogen Development Company, or any
person, company or entity that succeeds to the rights and
obligations of Cogen Development Company as Buyer's fuel
manager for the Facility pursuant to the Fuel Supply
Management Agreement.
"Fuel Supply Management Agreement" means the Fuel Supply
Management Agreement, dated as of March 30, 1995, between
Buyer and Cogen Development Company, dated March 30, 1995,
as amended from time to time.
"Fuel Use" means the quantity of Gas Buyer must provide
Columbia Gas under the Columbia FT Agreement and the
Columbia IT Agreement, or which Buyer must provide to
another of the Pipeline(s) at a Delivery Point, for company
use, lost and unaccounted-for quantities as required under
the effective FERC Gas Tariff of Columbia Gas Transmission
or another of the Pipeline(s), as the case may be.
"Gas" means natural gas meeting the quality specifications
set forth in Article IX.
"Gas Imbalance" means the quantity of Gas equal to the
difference between (i) the quantity of Gas Scheduled at a
Delivery Point during any period, and (ii) the quantity of
Gas delivered or caused to be delivered by Seller or
received by Buyer, or for Buyer's account, as the case may
be, at such Delivery Point during such period.
"Gas Market Price Ceiling" (or "GMPC") shall have the
meaning set forth in Section 7.3.
"Governmental Approval(s)" mean(s) all permits,
authorizations, registrations, consents, approvals, waivers,
exceptions, variances, claims, orders, judgments and
decrees, licenses, exemptions, publications (to the extent
legally binding upon a Party), filings (other than filings
of a purely ministerial nature), notices to and declarations
of or with any Governmental Authority.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Index Price" shall have the meaning set forth in Section
7.1(b).
"Initial Delivery Date" means the "Actual Commercial
Operation Date," as defined in the Power Contract; provided,
such Day shall not be earlier than June 1, 1996.
"Interest Rate" means the annual rate of interest, computed
monthly and prorated daily, equal to the Prime Rate plus one
percent (1%). For purposes hereof, the "Prime Rate" means
the rate of interest publicly announced from time to time by
The Chase Manhattan Bank, N.A. (or its successor) as its
prime commercial lending rate or, if lower, the maximum non-
usurious rate of interest allowed by the laws of the State
of Maryland.
"Interruptible Basis" means the obligation of Seller to
deliver Gas to the Delivery Point(s), as Scheduled by Buyer
or Fuel Manager, except when despite Seller's Best Efforts,
Seller is unable to deliver Gas to the Delivery Point(s) as
Scheduled by Buyer or Fuel Manager.
"Interruptible Gas" shall have the meaning set forth in
Section 3.2(d).
"Last Cure Date" shall have the meaning set forth in Section
17.4.
"Leap Year" means any calendar year in which there are 366
calendar days.
"Limited Dispatch Commodity Charge" shall have the meaning
set forth in Section 7.1(a).
"Limited Dispatch Demand Charge" shall have the meaning set
forth in Section 7.1(a).
"Limited Dispatch Gas" shall have the meaning set forth in
Section 3.2(a).
"Limited Dispatch Make-Up Gas" shall have the meaning set
forth in Section 3.3(a).
"Market Cost Basis Charge" means, with respect to
Dispatchable Gas or Interruptible Gas, the market price of
Gas, as determined by Seller, for the Day on which Buyer has
requested Seller to sell and deliver Dispatchable Gas or
Interruptible Gas to Buyer hereunder.
"Maximum Daily Firm Quantity" (or "MDFQ") means a quantity
of Gas, up to 24,240 MMBtu per Day (plus Fuel Use), as
Scheduled by Buyer or Fuel Manager and which Seller shall
sell and deliver to the Delivery Point(s), and Buyer shall
purchase from Seller, during a Day on a Firm Basis.
"Maximum Daily Interruptible Quantity" (or "MDIQ") means a
quantity of Gas, up to 24,240 MMBtu per Day (plus Fuel Use),
as Scheduled by Buyer or Fuel Manager and which Seller shall
sell and deliver to the Delivery Point(s), and Buyer shall
purchase from Seller, during a Day on an Interruptible
Basis.
"Minimum Dedicated Quantity" shall have the meaning set
forth in Section 12.2(d).
"Minimum Limited Dispatch Quantity" means, with respect to
an Agreement Year, a quantity of Limited Dispatch Gas equal
to 2,299,500 MMBtu (or 2,305,800 MMBtu if the Agreement Year
is a Leap Year), which quantity is subject to adjustment as
provided in Appendix I hereof, less any quantities of
Limited Dispatch Gas during an Agreement Year that Seller is
unable to deliver to the Delivery Point(s) for any reason or
Buyer is unable to receive due to an Event of Force Majeure
or a Regularly Scheduled Outage (which quantities during any
Day of a Regularly Scheduled Outage shall be equal to 7,000
MMBtu, which quantity is subject to adjustment as provided
in Appendix I).
"Minimum Scheduled Dispatch Quantity" means a quantity of
Scheduled Dispatch Gas for a Month equal to the product of
(i) .80, multiplied by (ii) the quantity of Scheduled
Dispatch Gas Buyer or Fuel Manager has Scheduled for
delivery during such Month, less any quantities of Scheduled
Dispatch Gas that Seller is unable to deliver to the
Delivery Point(s) for any reason or Buyer is unable to
receive due to an Event of Force Majeure during such Month.
"MMBtu" means one million (1,000,000) Btu's.
"Month" means the period beginning at 8:00 a.m. Eastern Time
on the first Day of a given calendar month and ending at
8:00 a.m. Eastern Time on the first day of the next
succeeding calendar month.
"Notice" means a written communication between the Parties
given in accordance with the provisions of this Agreement.
"Owner" means any affiliate of Seller that owns gas reserves
that are the subject of any provision of Section 12.2(d).
"Parent Guaranty" means the Guaranty provided by MCN
Corporation in the form attached as Exhibit D hereto.
"Pipeline(s)" means Columbia Gas Transmission, Cove Point
LNG, and Washington Gas Light, and any other transporter of
Gas purchased by Buyer under this Agreement that is
downstream of one of the Delivery Point(s) and with which
Buyer has a firm (in the case of the MDFQ) or interruptible
(in the case of the MDIQ) transportation agreement.
"Power Contract" means the Power Purchase Agreement, dated
August 9, 1991, between Buyer and the Power Purchaser, as it
may be amended from time to time.
"Power Purchaser" means Potomac Electric Power Company
("PEPCO"), its successors and permitted assigns.
"Power Purchaser Consent" means the Consent and Agreement
dated as of March 30, 1995, among the Power Purchaser,
Buyer, General Electric Capital Corporation and Shawmut Bank
Connecticut, National Association, as Security Agent and
Owner Trustee, as the same may from time to time be amended,
modified or supplemented.
"Precedent Agreement" means the Precedent Agreement, dated
February 25, 1994, between Columbia Gas Transmission and
Buyer.
"Principal Term" shall have the meaning set forth in Section
6.1.
"Proposed Reserves" shall have the meaning set forth in
Section 12.2(d).
"Qualified Supplier" shall have the meaning set forth in
Section 17.3(c).
"Regularly Scheduled Outage" shall have the meaning set
forth in Section 3.5.
"Remaining Contract Obligations" shall have the meaning set
forth in Section 7.3(c).
"Replacement Cost" shall have the meaning set forth in
Section 17.3(c).
"Replacement Gas Supply" shall have the meaning set forth in
Section 17.3(c).
"Reserve Report" shall have the meaning set forth in
Section 12.2(d).
"Schedule" or "Scheduled" means when used in reference to
Buyer or Fuel Manager, to nominate the quantities that Buyer
will receive at the Delivery Point(s) for shipment to the
Facility or for resale or release, including making all
necessary and timely nominations with the Pipelines).
"Scheduled Dispatch Gas" shall have the meaning set forth in
Section 3.2(b).
"Scheduled Dispatch Charge" shall have the meaning set forth
in Section 7.1(b).
"Scheduled Dispatch Make-Up Gas" shall have the meaning set
forth in Section .3(b).
"Seller Fuel Default" shall have the meaning set forth in
Section 17.4.
"Seller's Gas Reserves" means proved gas reserves owned by
Seller or Owner.
"Swap Average Price" shall have the meaning set forth in
Section 17.4.
"Swap Margin" shall have the meaning set forth in Section
17.4.
"Swap Price" shall have the meaning in Section 17.4.
"Taxes" mean all ad valorem, property, occupation,
severance, production, gathering, pipeline, gross
production, gross receipts, use, consumption, sales, excise
and any other similar taxes, governmental charges, fees and
assessments, other than income taxes.
"Treasury Rate" shall have the meaning set forth in Section
17.3(c).
"Washington Gas Agreement" means the Gas Transportation and
Supply Agreement, dated November 10, 1994, between Buyer and
Washington Gas Light, as such agreement may be amended from
time to time.
"Washington Gas Light" means Washington Gas Light Company,
its successors and permitted assigns.
ARTICLE II
CONDITIONS
Section 2.1 Seller's Conditions. Seller in its sole discretion
but acting in good faith may terminate this Agreement, without
further obligation or liability, by Notice given to Buyer if, by
the dates set forth below, any or all of the following conditions
have not been satisfied or waived:
(a) As of Financial Closing, all representations and
warranties of Buyer contained in Section 11.1 of this
Agreement shall be true in all material respects as if such
representations and warranties were made at and as of the
Financial Closing.
(b) As of Financial Closing, no Event of Default, or event
which with notice or passage of time, or both, would become
an Event of Default of the type described in Section 17.2,
shall have occurred and be continuing.
(c) As of December 1, 1997, Buyer shall have commenced
commercial operation of the Facility.
If Seller does not terminate this Agreement pursuant to this
Section 2.1, at the Financial Closing Seller shall deliver
to Buyer and the Financing Parties a Notice stating that the
conditions set forth in this Section 2.1 (except pursuant to
Section 2.1(c)), have been satisfied or waived. The dates
by which the conditions in this Section 2.1 must be
satisfied shall be extended by an Event of Force Majeure,
but in no event shall such dates be extended by more than
one (1) year.
Section 2.2 Buyer's Conditions. Buyer in its sole discretion
but acting in good faith may terminate this Agreement (provided,
that it receives the prior written consent of the Financing
Parties), without further obligation or liability by Notice given
to Seller if at any time Buyer determines that it is reasonably
likely that, by the dates set forth below, any or all of the
following conditions will not have been satisfied or waived:
(a) As of Financial Closing, all representations and
warranties of Seller contained in this Agreement shall be
true in all material respects as if such representations and
warranties were made at and as of the Financial Closing.
(b) As of Financial Closing, no Event of Default, or event
which with notice or passage of time, or both, would become
an Event of Default of the type described in Section 17.2,
shall have occurred and be continuing.
(c) As of Financial Closing, Seller shall have performed
under and shall have fulfilled in all material respects all
of Seller's Covenants set forth in Section 12.2 that are
required to be performed and fulfilled at or prior to the
date of Financial Closing.
(d) As of Financial Closing, Seller shall have duly
authorized, executed and delivered the Consent and
Agreement, opinions of counsel, including an opinion of
counsel reasonably satisfactory to Buyer and Financing
Parties in substantially the form of Exhibit B hereto, and
other documents reasonably requested by the Financing
Parties.
(e) On or before June 1, 1997, the following conditions
shall be completed to the reasonable satisfaction of Buyer:
(i) Columbia Gas Transmission shall have been granted
and accepted all approvals from the FERC for the
construction and operation of the facilities necessary
to provide service to Buyer under the Columbia FT
Agreement; such approvals shall be final and non-
appealable; and such facilities shall be operational.
(ii) Buyer shall have executed agreements with Cove
Point LNG obligating Cove Point LNG to provide for
Buyer up to 24,000 MMBtu per Day of firm transportation
service and up to 24,000 MMBtu per Day of interruptible
transportation service.
(iii) Cove Point LNG shall have been granted and
accepted all approvals from the FERC necessary to
provide firm and interruptible transportation service
to Buyer and such approvals shall be final and non-
appealable.
(iv) Buyer and Washington Gas Light shall have executed
an agreement for the transportation of Gas from the
facilities of Cove Point LNG to the Facility, and
Washington Gas Light shall have completed construction
and made operational the facilities necessary to
provide service under such agreement.
(v) Washington Gas Light shall have been granted and
accepted all approvals from the Maryland Public Service
Commission necessary to provide service to Buyer under
the Washington Gas Agreement, and such approvals shall
be final and non-appealable.
(vi) Buyer shall have commenced commercial operation of
the Facility.
(f) On or before the Financial Closing, Power Purchaser and
Financing Parties shall have reviewed and approved the
provisions of all of Buyer's gas supply and transportation
contracts, including this Agreement.
(g) On or before Financial Closing, Seller shall have
delivered the Parent Guaranty. If Buyer does not cancel this
Agreement pursuant to this Section 2.2, at the Financial
Closing Buyer shall deliver to Seller and the Financing
Parties a Notice stating that the conditions set forth in
this Section 2.2 (except pursuant to Section 2.2(e)) have
been satisfied or waived. The dates by which the conditions
in this Section 2.2 must be satisfied shall be extended by
an Event of Force Majeure, but in no event shall such dates
be extended by more than one (1) year.
Section 2.3 Financial Closing.
(a) Either Party, in its sole discretion, may cancel this
Agreement, without further obligation or liability, by
Notice given to the other Party at any time after October 1,
1995, which date may be extended to January 1, 1996 at the
option of Buyer, or at another date mutually agreed to by
the Parties, if the Financial Closing has not yet occurred.
If neither Party has elected to cancel this Agreement
pursuant to this Section 2.3, at the Financial Closing each
Party shall deliver to the other Party and the Financing
Parties a written Notice stating that such Party permanently
waives any right it may have to cancel the Agreement
pursuant to this Section 2.3, but without prejudice to any
other rights and remedies such Party may have arising out of
this Agreement.
(b) Seller agrees to deliver the Consent and Agreement and
opinion of counsel contemplated by Section 2.2(d) at the
Financial Closing.
(c) The outside date for Financial Closing set forth in
paragraph (a) of this Section 2.3 is not intended to imply
that the Parties have until such date to try to satisfy the
conditions in Section 2.1 and 2.2 which must be satisfied
by Financial Closing. Such conditions should be fulfilled by
the time Buyer expects Financial Closing to occur.
Section 2.4 Notifications. The Parties shall promptly notify
one another when and as the conditions that pertain to them under
Sections 2.1, 2.2 and 2.3, respectively, are satisfied or waived.
ARTICLE III
QUANTITIES AND GAS CLASSIFICATIONS
Section 3.1 Purchase and Sale. Subject to the terms and
conditions of this Agreement, commencing on the Initial Delivery
Date and on each subsequent Day during the term of this
Agreement, Seller shall sell and deliver and Buyer shall purchase
and receive a quantity of Gas at the Delivery Point(s) (i) up to
the MDFQ on a Firm Basis, and (ii) up to the MDIQ on an
Interruptible Basis. For purposes of determining the quantities
of Gas constituting the MDFQ and MDIQ on any Day, the first
24,240 MMBtu of Gas per Day (plus Fuel Use) Scheduled by Buyer or
Fuel Manager for delivery during a Day, regardless of the
classification of such Gas pursuant to Sections 3.2(a), (b), (c)
or 3.3, shall be considered part of the MDFQ, and the remaining
quantities of Gas (plus Fuel Use) Scheduled by Buyer or Fuel
Manager for delivery during a Day shall be considered part of the
MDIQ.
Section 3.2 Gas Classifications. Gas shall be classified under
this Agreement as follows:
(a) Limited Dispatch Gas. (i) Seller shall sell and
deliver to, and Buyer shall purchase and receive at, the
Delivery Point(s), on a Firm Basis, a quantity of Gas
Scheduled by Buyer or Fuel Manager for delivery during a Day
pursuant to Section 4.1 that is not less than 6,000 MMBtu of
Gas per Day or more than 8,000 MMBtu of Gas per Day (such
quantity of Gas, "Limited Dispatch Gas"). The Limited
Dispatch Gas shall constitute a portion of the MDFQ.
Subject to Section 3.3(a), during each Agreement Year Buyer
shall take or pay for a quantity of Limited Dispatch Gas at
least equal to the Minimum Limited Dispatch Quantity, unless
Seller waives such minimum take requirement. Buyer's
obligation to Schedule a quantity of Limited Dispatch Gas
for delivery during a Day shall be relieved due to an Event
of Force Majeure or Seller's failure to deliver such
quantity of Gas during a Day for any reason.
(b) Scheduled Dispatch Gas. Seller shall sell and deliver
to, and Buyer shall purchase and receive at, the Delivery
Point(s), on a Firm Basis, a quantity of Gas Scheduled by
Buyer or Fuel Manager for delivery during a Day pursuant to
Section 4.1, up to the difference between (i) 24,240 MMBtu
of Gas (plus Fuel Use) per Day, and (ii) the quantity of
Limited Dispatch Gas Scheduled for delivery during such Day
(such quantity of Gas, "Scheduled Dispatch Gas". The
quantity of Scheduled Dispatch Gas Scheduled for delivery
during a Day shall constitute a portion of the MDFQ.
Subject to Section 3.3(b), during each Month Buyer shall
take or pay for a quantity of Scheduled Dispatch Gas at
least equal to the Minimum Scheduled Dispatch Quantity,
unless Seller waives such minimum take requirement.
(c) Dispatchable Gas. Seller shall sell and deliver on a
Firm Basis, and Buyer shall purchase and receive, at the
Delivery Point(s) a quantity of Gas Scheduled by Buyer or
Fuel Manager for delivery during a Day pursuant to Section
4.1, up to the difference between (i) 24,240 MMBtu of Gas
(plus Fuel Use), and (ii) the sum of (A) the Limited
Dispatch Gas Scheduled for delivery during such Day, and (B)
the Scheduled Dispatch Gas Scheduled for delivery during
such Day (such quantity of Gas, "Dispatchable Gas". The
quantity of Dispatchable Gas Scheduled for delivery during a
Day shall constitute a portion of the MDFQ.
(d) Interruptible Gas. Seller shall use its Best Efforts
to sell and deliver to, and Buyer shall purchase and receive
at, the Delivery Point(s), on an Interruptible Basis, a
quantity of Gas Scheduled by Buyer or Fuel Manager for
delivery during a Day pursuant to Section 4.1, up to 24,240
MMBtu of Gas (plus Fuel Use) per Day (such quantity of Gas,
" Interruptible Gas". The quantity of Interruptible Gas
Scheduled for delivery during a Day shall constitute all or
a portion of the MDIQ. Seller shall be obligated to sell
and deliver Interruptible Gas only if Seller and Buyer agree
to a Market Cost Basis Charge pursuant to Section 7.1(c).
Section 3.3 Make-Up. If Buyer pays for but fails to take the
Minimum Limited Dispatch Quantity during any Agreement Year
or the Minimum Scheduled Dispatch Quantity during any Month,
then Buyer shall have the right to receive the quantities of
Limited Dispatch Gas or Scheduled Dispatch Gas Buyer has
paid for but not received as follows:
(a) With respect to Limited Dispatch Gas that Buyer has
paid for but not received (the "Limited Dispatch Make-Up
Gas"), Buyer may exercise its right to take and receive the
Limited Dispatch Make-Up Gas during the next ensuing
Agreement Year. To the extent Buyer has deficient receipts
of Limited Dispatch Gas during the last Agreement Year, the
term of this Agreement shall be extended up to one (1)
calendar year to permit receipts of Limited Dispatch Make-Up
Gas by Buyer. Buyer shall Schedule the delivery of Limited
Dispatch Make-Up Gas at the Delivery Points) in accordance
with Section 4.1. If the sum of the Limited Dispatch
Commodity Charge and the ANR Charge under Section 7.1a) in
effect for the Month in which such Limited Dispatch Make-Up
Gas is delivered by Seller exceeds the sum of the Limited
Dispatch Commodity Charge and the ANR Charge Buyer
previously paid for such Limited Dispatch Make-Up Gas,
Seller's invoice for the Month in which such Limited
Dispatch Make-Up Gas is delivered shall reflect the
difference between the two prices, and Buyer shall pay such
difference in accordance with Article VIII. The period
during which Buyer may request delivery of Limited Dispatch
Make-Up Gas shall be extended by any period(s) during which
performance of this Agreement may be suspended due to an
Event of Force Majeure or any period(s) during which Seller
fails to deliver the quantities of Limited Dispatch Make-Up
Gas requested by Buyer.
(b) With respect to Scheduled Dispatch Gas Buyer has paid
for but not received (the "Scheduled Dispatch Make-Up Gas"),
Buyer may exercise its right to take and receive the
Scheduled Dispatch Make-Up Gas in any Month during the next
ensuing six (6) Months. Buyer shall pay Seller each Month
that any Scheduled Dispatch Make-Up Gas is outstanding an
amount equal to the product of (i) $0.05, multiplied by (ii)
the total amount of Scheduled Dispatch Make-Up Gas
outstanding on the first Day of each Month. To the extent
Buyer has deficient receipts of Scheduled Dispatch Gas
during the last Month of the last Agreement Year, the term
of this Agreement shall be extended up to six (6) Months to
permit receipts of Scheduled Dispatch Make-Up Gas by Buyer.
Buyer shall Schedule the delivery of Scheduled Dispatch Make-
Up Gas at the Delivery Point(s) in accordance with Section
4.1. If the Scheduled Dispatch Charge under Section 7.1(b)
in effect for the Month in which such Scheduled Dispatch
Make-Up Gas is delivered by Seller exceeds the Scheduled
Dispatch Charge Buyer previously paid for such Scheduled
Dispatch Make-Up Gas, Seller's invoice for the Month in
which such Scheduled Dispatch Make-Up Gas is delivered shall
reflect the difference between the two prices, and Buyer
shall pay such difference in accordance with Article VIII.
If the Scheduled Dispatch Charge under Section 7.1(b) in
effect for the Month in which Buyer fails to take the
Minimum Scheduled Dispatch Quantity exceeds the Scheduled
Dispatch Charge in effect for the Month when such Scheduled
Dispatch Make-Up Gas is delivered, Seller shall credit the
invoice sent to Buyer following the Month in which such
Scheduled Dispatch Make-Up Gas is delivered to reflect the
difference in the two prices. The period during which Buyer
may request delivery of Scheduled Dispatch Make-Up Gas shall
be extended by any period(s) during which performance of
this Agreement may be suspended due to an Event of Force
Majeure or any period(s) during which Seller fails to
deliver the quantities of Scheduled Dispatch Make-Up Gas
requested by Buyer.
Section 3.4 Gas Allocation. Gas delivered for the account of
Buyer at the Delivery Point(s) under this Agreement shall be
allocated to each classification of Gas set forth in Section 3.2
based on the quantity of each classification of Gas Scheduled by
Buyer or Fuel Manager pursuant to Section 4.1 and in the
following sequence: first, Limited Dispatch Gas; second,
Scheduled Dispatch Gas; third, Dispatchable Gas; fourth, Limited
Dispatch Make-Up Gas; fifth, Scheduled Dispatch Make-Up Gas; and
sixth, Interruptible Gas. The quantities of Limited Dispatch
Gas, Scheduled Dispatch Gas, Dispatchable Gas, Limited Dispatch
Make-Up Gas and Scheduled Dispatch Make-Up Gas Scheduled by Buyer
or Fuel Manager for delivery during a Day must fall within the
MDFQ.
Section 3.5 Regularly Scheduled Outages. Buyer shall be
entitled in each Agreement Year during the term of this Agreement
to declare Regularly Scheduled Outages, which are understood by
the Parties to include, but not be limited to, instances when the
Facility is not operating as a result of normal and routine
maintenance or repair. Regularly Scheduled Outages shall not
include instances when the Facility is not operating due to an
Event of Force Majeure. Not later than thirty (30) Days prior to
the beginning of a calendar year, Buyer shall submit to Seller an
estimate of the time and duration of Buyer's Regularly Scheduled
Outages during such calendar year. Buyer shall provide Seller
Notice of any Regularly Scheduled Outage planned for a Month no
later than four (4) Days prior to the earliest of the applicable
nomination deadlines on the Pipeline(s) for the Month in which
the Regularly Scheduled Outage is to occur. Regularly Scheduled
Outages shall not exceed a total of thirty (30) Days in any
Agreement Year; provided, however, in any Agreement Year during
which Buyer must perform a major turbine overhaul at the
Facility, which shall occur no more frequently than once during
any five (5) consecutive Agreement Years, Buyer's Regularly
Scheduled Outages shall not exceed a total of forty-five (45)
Days in any such Agreement Year. Seller shall be under no
obligation to deliver Gas to Buyer, nor shall Buyer be obligated
to Schedule, receive or pay for Gas delivered or deliverable by
Seller, during any Regularly Scheduled Outage of which Seller is
notified pursuant to this Section 3.5. Buyer shall remain
responsible for the payment of the Limited Dispatch Demand Charge
during a Regularly Scheduled Outage. If Buyer Schedules a
quantity of Gas in accordance with the provisions of Article IV
for delivery on any Day that would otherwise be a Day during a
Regularly Scheduled Outage, such Day shall not be considered a
Regularly Scheduled Outage Day.
Section 3.6 Buyer's Right to Resell Gas. Buyer or, at Buyer's
request, Fuel Manager may, without restriction under this
Agreement, resell or release Gas sold to Buyer under this
Agreement to any third party, including but not limited to
Washington Gas Light pursuant to the Washington Gas Agreement.
Section 3.7 Testing Service. Prior to the Initial Delivery
Date, Buyer may request Seller to sell and deliver quantities of
Gas to Buyer at the Delivery Point(s) for purposes of testing the
Facility. Buyer shall provide Seller with thirty (30) Days prior
written Notice of Buyer's intent to commence testing of the
Facility. Seller shall use its Best Efforts to sell and deliver
quantities of Gas to the Delivery Point(s) for testing on an
Interruptible Basis. Quantities of Gas used for testing the
Facility shall be priced as Interruptible Gas pursuant to Article
VII.
Section 3.8 Processing. Seller shall have the right to process
or permit the processing of Gas prior to delivery to Buyer at the
Delivery Point(s) in such a manner and to such extent as Seller
may consider necessary or expedient, so long as such processing
does not cause the Gas to fail to meet the quality specifications
set forth in Article IX. In the event Seller elects to process
the Gas, as between Seller and Buyer, any hydrocarbons removed
shall be the sole responsibility of Seller and all costs, claims
or damages related thereto shall be paid by Seller and Seller
shall indemnify and hold Buyer harmless therefrom.
ARTICLE IV
SCHEDULING OF DELIVERIES
Section 4.1 Quantity. Commencing with the Initial Delivery Date
and continuing throughout the term of this Agreement, Buyer or
Fuel Manager shall provide Seller with nominations showing the
Limited Dispatch Gas quantity, the Scheduled Dispatch Gas
quantity, the Dispatchable Gas quantity, the Limited Dispatch
Make-Up Gas quantity, the Scheduled Dispatch Make-Up Gas
quantity, and the Interruptible Gas quantity, that Buyer or Fuel
Manager Schedules to be delivered or caused to be delivered by
Seller on each Day to the Delivery Points), in accordance with
the following procedures:
(a) (i) Buyer or Fuel Manager shall advise Seller by
preliminary Notice at least forty-five (45) days in
advance of the date which Buyer expects will be the
Initial Delivery Date. Buyer or Fuel Manager shall
advise Seller by subsequent Notice at least ten (10)
days prior to the date that will be the Initial
Delivery Date. Buyer or Fuel Manager shall set forth
in the preliminary Notice and the subsequent Notice the
quantities of Limited Dispatch Gas and Scheduled
Dispatch Gas to be delivered by Seller to Buyer or for
Buyer's account at the Delivery Point(s) for each Day,
commencing with the Initial Delivery Date, for the
Month in which the Initial Delivery Date occurs. The
quantities of Limited Dispatch Gas and Scheduled
Dispatch Gas that Buyer specifies in the preliminary
Notice shall be considered an estimate of the
quantities of Gas Buyer intends to purchase and receive
during the Month in which the Initial Delivery Date
occurs, and Buyer shall not be obligated to purchase
and receive such quantities of Gas. The quantities of
Limited Dispatch Gas and Scheduled Dispatch Gas that
Buyer specifies in the subsequent Notice shall be
considered Scheduled in accordance with the terms set
forth in this Article IV, and Seller shall be obligated
to sell and deliver and Buyer shall be obligated to
purchase and receive such Scheduled quantities
commencing on the Initial Delivery Date in accordance
with the terms of this Agreement.
(ii) If the Initial Delivery Date does not occur
on the first Day of a calendar Month, Seller shall be
obligated to use Best Efforts to sell and deliver
Limited Dispatch Gas and Scheduled Dispatch Gas during
the Month in which the Initial Delivery Date occurs and
if, despite its Best Efforts, Seller is unable to sell
and deliver Limited Dispatch Gas or Scheduled Dispatch
Gas to Buyer during such Month, to such extent Buyer
shall instead purchase Dispatchable Gas or
Interruptible Gas hereunder during such Month. To the
extent Seller is unable to sell and deliver Limited
Dispatch Gas on any Day during such Month, the Minimum
Limited Dispatch Quantity for the first Agreement Year
shall be reduced to reflect Seller's inability to
deliver Limited Dispatch Gas during any such Day.
(b) Commencing with the Month in which the Initial Delivery
Date occurs, not later than two Days prior to the earliest
first-of-the-Month nomination deadline of the Pipeline(s),
Buyer or Fuel Manager shall, subject to Section 4.1(d),
provide a Notice to Seller specifying the amount of Limited
Dispatch Make-Up Gas, Scheduled Dispatch Make-Up Gas,
Limited Dispatch Gas and Scheduled Dispatch Gas that Buyer
desires to purchase and receive on each Day during the
following Month. Such Notice shall include necessary Fuel
Use. During the following Month, Buyer or Fuel Manager may,
upon twenty-four (24) hours Notice to Seller (or such
shorter time as Seller may permit), change the quantity of
Limited Dispatch Gas, Scheduled Dispatch Gas, Limited
Dispatch Make-Up Gas or Scheduled Dispatch Make-Up Gas
Scheduled for delivery at the Delivery Point(s) during a
Day.
(c) Commencing with the Month in which the Initial Delivery
Date occurs, Buyer or Fuel Manager may provide Notice to
Setter specifying the quantity of Dispatchable Gas and
Interruptible Gas that Buyer desires to purchase and receive
at the Delivery Point(s) during each Day of the Month.
Buyer or Fuel Manager shall provide Seller with such Notice
at least twenty-four (24) hours prior to the Day for
delivery of such Dispatchable Gas or Interruptible Gas, or
upon such shorter time as Seller may permit. Such Notice
shall include necessary Fuel Use.
(d) Seller shall notify Buyer or Fuel Manager, not later
than twenty-four (24) hours after Seller's receipt of
Buyer's nomination under Section 4.1(a) or (b) or one (1)
hour after Seller's receipt of Buyer's nomination under
Section 4.1(c) or the last sentence of Section 4.1(b), by
telephone, confirmed by facsimile, of the quantities of
Limited Dispatch Make-Up Gas, Scheduled Dispatch Make-Up
Gas, Limited Dispatch Gas, Scheduled Dispatch Gas,
Dispatchable Gas or Interruptible Gas, as the case may be,
to be delivered by Seller to each Delivery Point. The
aforesaid notification by Seller shall be consistent with
Buyer's or Fuel Manager's nominations with Columbia Gas
Transmission or such other Pipeline(s), as applicable, for
Buyer's use of the Delivery Point(s).
(e) During each Day, Buyer or Fuel Manager may submit to
Seller a request to change the quantities of Limited
Dispatch Make-Up Gas, Scheduled Dispatch Make-Up Gas,
Limited Dispatch Gas, Dispatchable Gas and Interruptible Gas
that Buyer or Fuel Manager has Scheduled for delivery at the
Delivery Point(s) during such Day. Seller shall use its
reasonable efforts to satisfy such requests.
(f) The procedures set forth in Section 4.1 shall not alter
Seller's obligations to deliver or cause to be delivered, or
Buyer's obligations to Schedule, receive or cause to be
received, any quantity of Gas pursuant to Article III.
(g) Seller shall cause personnel to be available twenty-
four (24) hours each Day to accept nominations submitted by
Buyer to Seller pursuant to this Section 4.1.
(h) Provided that Seller or an affiliate of Seller is
acting as Fuel Manager, Seller hereby agrees that any Notice
given to the Fuel Manager with respect to Scheduling the
delivery of Gas under this Agreement shall be considered
received by Seller within two (2) hours after the Fuel
Manager received such Notice from Buyer.
Section 4.2 Delivery Rates. Seller shall endeavor to deliver
and Buyer shall endeavor to receive Gas hereunder at uniform
hourly and daily rates of flow. Because of the inability of
Seller and Buyer to maintain precise control over Gas flow, the
quantity of Gas delivered or received hereunder on any Day or
during any Month may vary within the tolerances set forth in the
effective FERC Tariff of Columbia Gas Transmission. Deliveries
and receipts of Gas under this Agreement by Seller and Buyer that
vary from the quantities of Gas Scheduled by Buyer or Fuel
Manager, but that are within the tolerances set forth in the
effective FERC Tariff of Columbia Gas Transmission, shall not be
considered by either Party to be an Event of Default under this
Agreement.
Section 4.3 Gas Imbalances. Seller and Buyer agree to cooperate
with each other to minimize Gas Imbalances and to deliver and
receive quantities of Gas to each of the Delivery Point(s) equal
to the quantities of Gas Scheduled for delivery and receipt at
each of such points for the Day. If, notwithstanding their
cooperative efforts, a Gas Imbalance shall occur, and such
imbalance is not timely corrected, the Parties shall determine as
soon as possible whether the Gas Imbalance was caused by the
action or inaction of Seller or Buyer. If it is determined that
Seller caused the Gas Imbalance, as between Seller and Buyer,
Seller shall be responsible for payment of all costs, charges,
and penalties assessed by a gas transporter for the Gas
Imbalance. If it is determined that Buyer caused the Gas
Imbalance, as between Seller and Buyer, Buyer shall be
responsible for payment of all costs, charges, and penalties
assessed by a gas transporter for the Gas Imbalance.
Section 4.4 Transportation. Seller shall be responsible for
transportation of Gas sold and delivered hereunder to the
Delivery Point(s), including the cost of such transportation.
Buyer shall be responsible for transportation of the Gas
purchased and received hereunder from the Delivery Point(s) to
the Facility, including the cost of such transportation.
ARTICLE V
SELLER' S WARRANTY
Section 5.1 Seller's Warranty. Throughout the term of this
Agreement, Seller represents and warrants to Buyer that Seller
(i) shall beneficially own and produce or otherwise control
sufficient reserves of Gas or deliverable Gas supplies, and has
or will have entered into firm gas gathering, firm transportation
agreements or other firm upstream gas transportation arrangements
adequate and sufficient to satisfy Seller's firm obligations
under this Agreement, and (ii) possesses or will possess the
financial ability and the right to sell and deliver Gas from such
reserves or deliverable Gas supplies to Buyer in fulfillment of
Seller's firm obligations.
ARTICLE VI
TERM
Section 6.1 Term. Subject to the other provisions of this
Agreement, including Appendix I, this Agreement shall become
effective as of the date first above written and shall continue
in full force and effect through the end of the fifteenth (15th)
Agreement Year ("Principal Term"). The Agreement shall be
extended for an additional term of two (2) Agreement Years (the
"Extended Term"), unless either Party provides at least nine (9)
Month's prior Notice to the other Party of its intent to
terminate this Agreement at the conclusion of the Principal Term.
Subject to Section 3.3, the term of this Agreement shall not be
extended as a result of any suspension of Buyer's or Seller's
obligations or performance hereunder due to an Event of Force
Majeure.
ARTICLE VII
PRICE
Section 7.1 Gas Prices. Subject to the other terms and
conditions of this Agreement, the price for Gas sold and
purchased hereunder shall be as follows:
(a) Limited Dispatch Gas: The price of Limited Dispatch
Gas received by Buyer each Month shall be equal to the sum
of the Limited Dispatch Demand Charge, the total Limited
Dispatch Commodity Charges and the total ANR Charges for the
Month, less Buyer's Credit.
(i) The Limited Dispatch Demand Charge for a Month
shall equal $21,292 for Agreement Years one through
five. For each Agreement Year thereafter, the Limited
Dispatch Demand Charge shall be determined by adding
$1,064 to the Limited Dispatch Demand Charge in effect
on the last Day of the previous Agreement Year.
(ii) (A) The Limited Dispatch Commodity Charge,
effective as of June 1, 1996 shall equal $2.33 per
MMBtu. The total Limited Dispatch Commodity
Charges that Buyer shall pay to Seller during any
Month shall equal the product of (1) the Limited
Dispatch Commodity Charge in effect during the
Month, multiplied by (2) the total quantity of
Limited Dispatch Gas Seller delivers to the
Delivery Point(s) during the Month. If the
Initial Delivery Date occurs after June 1, 1996,
the Limited Dispatch Commodity Charge shall
escalate at a rate of 4% annually, prorated
Monthly, until the Initial Delivery Date.
(B) At the end of each Agreement Year (the
"Escalation Date"), the Limited Dispatch Commodity
Charge shall escalate. Effective each Escalation
Date, the Limited Dispatch Commodity Charge shall
be determined by multiplying (1) the Limited
Dispatch Commodity Charge in effect on the Day
before the Escalation Date, times (2) 1.04.
(iii) (A) The initial ANR Charge for a Month
shall equal $0.10 per MMBtu. The total ANR Charges
that Buyer shall pay to Seller during any Month
shall equal the product of (1) the ANR Charge in
effect during the Month, multiplied by (2) the
total quantity of Limited Dispatch Gas Seller
delivers to the Delivery Point(s) during such
Month.
(B) The initial ANR Charge shall remain in effect
for Agreement Years one (1) through five (5~. For
each Agreement Year thereafter, the ANR Charge
shall be determined by adding $0.005 per MMBtu to
the ANR Charge in effect on the last Day of the
previous Agreement Year.
(iv) Fuel Use quantities for Limited Dispatch Gas shall
be priced as Scheduled Dispatch Gas.
(v) If at the end of an Agreement Year, Buyer fails to
take during such Agreement Year a quantity of Limited
Dispatch Gas greater than or equal to the Minimum
Limited Dispatch Quantity, Buyer shall pay Seller an
amount equal to the product of (A) the sum of Limited
Dispatch Commodity Charge and the ANR Charge in effect
for such Agreement Year, multiplied by (B) the positive
difference, if any, between (1) the Minimum Limited
Dispatch Quantity, and (2) the total quantity of
Limited Dispatch Gas Buyer received from Seller during
such Agreement Year. Seller shall include any amounts
due under this Section 7.1(a)(v) in the first invoice
following the end of such Agreement Year and Buyer
shall make payment of such amount in accordance with
Article VIII.
(b) Scheduled Dispatch Gas
(i) The price of Scheduled Dispatch Gas received by
Buyer each Month shall be equal to the total Scheduled
Dispatch Charge for the Month.
(A) The Scheduled Dispatch Charge shall equal the
sum of (1) the NYMEX settlement price for the
delivery Month contract averaged over the last
three (3) trading Days of the Month, and (2) a
margin of $0.50 per MMBtu (as adjusted pursuant to
Section 7.1(b)(i)(C) below) (such sum, the "Index
Price"); provided, however, in no event shall the
Index Price exceed the Gas Market Price Ceiling
(as defined in Section 7.3).
(B) The total Scheduled Dispatch Charges that
Buyer shall pay to Seller during any Month shall
equal the product of (1) the Scheduled Dispatch
Charge in effect for such Month, multiplied by (2)
the greater of (x) the total quantity of Scheduled
Dispatch Gas Buyer receives at the Delivery
Point(s) during such Month, and (y) the Minimum
Scheduled Dispatch Quantity in effect for such
Month.
(C) The margin set forth in Section
7.1(b)(i)(A)(2) shall remain in effect for
Agreement Years one (1) through five (5). For
each Agreement Year thereafter, the margin shall
be determined by adding $0.005 per MMBtu to the
margin in effect on the last Day of the previous
Agreement Year.
(ii) Buyer may, by written Notice, request that the
pricing methodology set forth in paragraph (i) of this
Section 7.1(b) and/or the GMPC be reviewed and revised
in the event that the "Commodity Index" under the Power
Contract is revised. The Parties shall undertake any
such review in good faith. If the Parties are unable
to agree on an appropriate revision to such pricing
methodology within thirty (30) Days after such revision
in the Power Contract is effective, then the review of
the pricing methodology set forth in paragraph (i) of
this Section 7.1(b) or the GMPC shall be submitted to
arbitration pursuant to Article XVIII.
(c) Dispatchable Gas and Interruptible Gas: The price for
Dispatchable Gas or Interruptible Gas delivered by Seller
during a Day shall be the total Market Cost Basis Charges
for the Month.
(i) Seller shall notify Buyer of the Market Cost Basis
Charge for Dispatchable Gas or Interruptible Gas (as
the case may be) no later than two hours after
receiving Buyer's or Fuel Manager's notice specifying
the quantity of Dispatchable Gas or Interruptible Gas
that Buyer desires to purchase. If Buyer, in its
reasonable discretion, determines that the Market Cost
Basis Charge Seller is offering for Dispatchable Gas or
Interruptible Gas (as the case may be) is not
economical in relation to existing market conditions,
then Buyer may (A) purchase Dispatchable Gas from
Seller at the average of the high and low prices as
reported in Gas Daily "Daily Price Survey" for
"Appalachia, Columbia" for the Day such quantities of
Gas are delivered by Seller, or (B) obtain supplies
from a third party supplier in lieu of purchasing
Dispatchable Gas or Interruptible Gas from Seller
during the remainder of the Month in which Buyer made
its determination.
(ii) The total Market Cost Basis Charges that Buyer
shall pay to Seller during any Month shall equal the
product of (1) the Market Cost Basis Charge in effect,
multiplied by (2) the total quantity of Dispatchable
Gas or Interruptible Gas (as the case may be) Seller
delivers to the Delivery Point(s) during the Month at
the effective Market Cost Basis Charge.
(d) Price Credit. For each MMBtu of Gas received by Buyer
at the Delivery Point(s) during a Month, Seller shall pay a
credit to Buyer of $0.10 per MMBtu for Agreement Years one
through five ("Buyer's Credit"). For each Agreement year
thereafter, the Buyer's Credit shall be determined by adding
$0.005 per MMBtu to the Buyer's Credit in effect on the last
Day of the previous Agreement Year. In no event shall the
Price Credit due in any Month exceed the Limited Dispatch
Demand Charge then in effect.
Section 7.2 Taxes and Royalties.
(a) Seller agrees to pay or cause to be paid to the persons
or entities entitled thereto all Taxes, royalties and other
like charges applicable to the Gas sold and delivered under
this Agreement prior to its delivery to Buyer or for Buyer's
account at the Delivery Point(s), and Buyer agrees to pay or
cause to be paid all Taxes or other charges applicable to
the Gas at and after its sale and delivery to Buyer or for
Buyer's account at the Delivery Point(s) (including, without
limitation, all Taxes applicable as a result of the transfer
of title to the Gas sold hereunder). If Buyer is entitled
to purchase Gas free from any Taxes, Buyer shall furnish
Seller the necessary exemption or resale certificate
covering the Gas delivered hereunder. Should either Party
be required to pay any Taxes that are the responsibility of
the other Party hereunder, the Party paying such Taxes shall
invoice the amount of such Taxes to the other Party. If
Buyer is responsible for Taxes paid by Seller, Seller shall
invoice the amount of such Taxes, in addition to the amount
that Seller shall otherwise invoice and Buyer shall pay such
additional amounts invoiced. If Seller is responsible for
Taxes paid by Buyer, Buyer shall offset the amount of such
Taxes against any invoice Seller sends to Buyer. Buyer and
Seller shall seek to pass through the expense of all Taxes
to the Power Purchaser to the extent permitted by the Power
Contract or applicable law, so long as such action shall not
have any adverse effect on Buyer not compensated for by
Seller.
(b) Seller shall indemnify Buyer and its officers,
directors, employees, agents, and partners and save each of
them harmless from all suits, actions, debts, accounts,
damages, costs, losses, and expenses (including reasonable
attorneys' fees and court costs) arising from or out of or
relating to the existence of adverse claims of any or all
persons to Gas delivered by Seller to Buyer under this
Agreement, or royalties, license fees, or charges thereon
that are applicable to such Gas before its delivery to Buyer
at the Delivery Point(s), and all Taxes applicable to Gas
before its delivery to Buyer at the Delivery Point(s) and
payable by Seller under Section 7.2(a). Buyer shall
indemnify Seller and its officers, directors, employees,
agents and shareholders and save each of them harmless from
all suits, actions, debts, accounts, damages, costs, losses
and expenses (including reasonable attorneys' fees and court
costs) arising from or out of or relating to Taxes or other
charges applicable to Gas after its delivery to Buyer at the
Delivery Point(s) or payable by Buyer under Section 7.2(a).
Section 7.3 Gas Market Price Ceiling. (a) The Gas Market Price
Ceiling ("GMPC") for each Month during the term of this Agreement
shall equal the sum of (i) $0.60, plus (ii) the product of (A)
1.02, multiplied by (B) the unweighted average of the following
three (3) gas market indices available for the Month in which the
GMPC is calculated:
(i) Natural Gas Clearinghouse, "Survey of Domestic
Spot Market Prices", For Markets Accessed By ANR
Pipeline, Eunice, Louisiana, for the Month of
deliveries under the column "This Month".
(ii) Natural Gas Intelligence Gas Price Index, "Spot
Gas Price", delivered to pipelines, 30-Day Supply
Transactions under the South Louisiana Region, ANR
Pipeline, Contract Index for the Month of deliveries.
(iii) Natural Gas Week, "Spot Prices On Interstate
Pipeline Systems", Delivered-to-Pipeline ($/MMBtu),
under ANR Pipeline, Southeast: Patterson, Louisiana,
Bid Week, for the Month of deliveries.
Section 7.4 Change in Index. In the event any price index
relied on by the Parties in this Article VII to determine the
price for Gas sold and purchased under this Agreement is no
longer published or otherwise available, the Parties shall meet
and negotiate in good faith to replace such price index with
another price index that is similar in all material respects to
the index being replaced.
ARTICLE VIII
BILLINGS AND PAYMENTS
Section 8.1 Seller's Billings. (a) On or before the fifteenth
(15th) Day of each Month after a Month in which Gas was delivered
to Buyer, Seller shall provide Buyer an invoice (i) for the
amount due Seller for the Gas delivered by Seller to Buyer or for
Buyer's account during such Month under this Agreement, and (ii)
for any amounts then due hereunder pursuant to Buyer's take or
pay and other obligations. Such invoice shall specify the
classification of Gas, the quantity of each classification of Gas
delivered, and (as applicable) the price of Gas delivered by
Seller on each Day of the Month. When necessary information is
available to Seller, Seller shall provide, in a succeeding
Month's invoice, an adjustment based on any difference between
the actual quantity of Gas delivered during a prior Month and the
quantity of Gas upon which such prior Month's invoice was based.
Section 8.2 Buyer's Payment. Subject to the other provisions of
this Article VIII, Buyer shall pay Seller the amounts invoiced
under this Article VIII by wire transfer in accordance with
Seller's instructions. Buyer shall make payment of the amounts
invoiced under this Article VIII by the thirtieth (30th) Day of
the Month in which the invoice was sent; provided, however, such
payment date may be extended until the fifth (5th) Day of the
following Month if Buyer does not receive a disbursement from the
Financing Parties pursuant to the Financing Documents enabling
Buyer to pay Seller's invoice by the twenty-fifth (25th) Day of
the Month. If presentation of an invoice to Buyer occurs after
the fifteenth (15th) Day of a Month, then the due date for
payment shall be extended by the number of Days such invoice was
delayed.
Section 8.3 Buyer's Billings and Seller's Payments. With
respect to any amounts due and owing by Seller to Buyer
hereunder, other than those amounts due pursuant to Section 17.3
hereof, Buyer shall provide Seller an invoice for any such
amounts, together with reasonable supporting documentation
supporting such invoiced amount. Seller shall make payments to
Buyer of the invoiced amounts within twenty-five (25) Days from
the Day such invoice is received.
Section 8.4 Verification. Each Party shall have the right at
reasonable hours and upon reasonable Notice to examine on any
Business Day the books, records and charts of the other Party
relating to the delivery of Gas under this Agreement during the
previous twenty-four (24) Month period, to the extent necessary
to verify the accuracy of any invoice, chart or computation made
under or pursuant to the provisions of this Agreement. All
invoices shall be deemed final and binding on the Parties
hereunder unless a Party has notified the other Party of a
dispute of any invoiced amount on or before twenty-four (24)
Months after the date of the invoice. Subject to the foregoing,
any payment hereunder shall be without prejudice to the right of
a Party to dispute the accuracy or validity of an invoice. The
foregoing provisions shall not apply to Section 17.3 hereof or
any amounts payable thereunder, including, without limitation,
amounts calculated pursuant to Section 17.1 hereof.
Section 8.5 Failure to Pay; Disputed Billings.
(a) Subject to the invoice due date being extended pursuant
to Section 8.2, should Buyer fail to pay the full amount due
on any statement or invoice by the last Day of the Month in
which the invoice is issued by Seller, then interest on the
unpaid balance shall accrue at the Interest Rate from the
first Day of the next Month until the same is paid. Should
Seller fail to pay the full amount due on any statement or
invoice issued by Buyer pursuant to Section 8.3, then
interest on the unpaid balance shall accrue at the Interest
Rate from the Day next following the Day such payment is due
until the same is paid.
(b) Any provision of this Agreement to the contrary
notwithstanding, except for the last sentence of this
paragraph (b), upon reasonable cause Buyer or Seller may in
good faith dispute the accuracy of all or any portion of any
invoice submitted by the other Party pursuant to this
Agreement, and in such event:
(i) The Party disputing the invoice shall pay the
other Party the undisputed portion of an invoice by its
due date;
(ii) The Party disputing the invoice shall, on or
before the due date for payment of an invoice, notify
the other Party of the reasonable cause on which the
invoice is disputed; and
(iii) If (i) and (ii) above are complied with, the
Parties shall continue to perform their respective
obligations under this Agreement until such dispute is
resolved.
The Parties shall endeavor in good faith to resolve any and all
disputes (including disputes arising under Section 8.6)
concerning an invoice by mutual agreement within thirty (30) Days
after the due date of such invoice. Should the Parties be unable
to resolve a dispute concerning an invoice within such thirty-
(30) Day period, either Party may request that officers of the
Parties at the level of Vice President or above shall meet to
resolve the dispute in good faith within thirty (30) Days of the
request. If the officers of the Parties are unable to resolve
the dispute within such thirty- (30) Day period, then either
Party may submit the dispute to binding arbitration pursuant to
Article XVIII. Notwithstanding the above, if the amount in
dispute under an invoice equals or exceeds $100,000, then either
Party may request that officers of the Parties at the level of
Vice President or above meet within ten (10) Days after the
request to resolve the dispute in good faith. If the officers of
the Parties are unable to resolve the dispute within ten (10)
Days of their first meeting, then either Party may submit the
dispute to binding arbitration pursuant to Article XVIII. The
foregoing provisions of this paragraph (b) shall not apply to
Section 17.3 hereof or any amounts payable thereunder including,
without limitation, amounts calculated pursuant to Section 17.1
hereof.
Section 8.6 Corrections of Errors. In the event either Party
determines that there is an error in the amount previously billed
and/or paid pursuant to any invoice rendered by Seller or Buyer,
the error shall be adjusted within thirty (30) Days of a final
determination by the Parties that an error has occurred;
provided, however, any claim for such error shall be made within
twenty-four (24) Months from the date of the invoice. If the
error resulted in an overcharge and the invoice has been paid,
the billing Party shall refund the amount of the overcharge to
the other Party. If the error resulted in an undercharge and the
invoice has been paid, the receiving Party shall pay the amount
of the undercharge to the billing Party. In the case of any
payment due as a result of an error, such payment shall be made
on or before the next due date for payment of Seller's regular
monthly invoices under Section 8.3, following the final
determination of the amount of the payment. The foregoing
provisions shall not apply to Section 17.3 hereof or any amount
payable thereunder including, without limitation, amounts
calculated pursuant to Section 17.1 hereof.
ARTICLE IX
SPECIFICATIONS
Section 9.1 Specifications. Seller shall deliver Gas of a
quality and at a pressure necessary to effect delivery of such
Gas into the facilities of the Pipeline(s) operating a Delivery
Point(s). The specifications for Gas measurement, quality,
delivery pressure and heating value determination shall be in
accordance with the effective FERC Tariff of the Pipeline(s)
operating the Delivery Point(s) where Gas is delivered under this
Agreement. Measurement of Gas delivered by Seller to Buyer
hereunder shall be based on the meters owned and operated by the
Pipeline(s) operating the Delivery Point(s) where Gas is
delivered under this Agreement.
Section 9.2 Non-Conforming Gas. All Gas delivered to Buyer at a
Delivery Point(s) shall satisfy the quality specifications set
forth in the effective FERC Tariff of the Pipeline(s) operating
the Delivery Point(s). If at any time the quality of Gas
delivered by Seller at a Delivery Point(s) fails to conform to
the specifications set forth in the effective FERC Tariff of the
Pipeline(s) operating the Delivery Point(s), Buyer shall notify
Seller of such deficiency and may, at Buyer's option, refuse to
accept delivery of such Gas pending correction of the deficiency
by Seller. Upon Seller's failure promptly to remedy any
deficiency in quality, Seller shall be deemed to have an
unexcused failure to deliver such Gas hereunder, and, Buyer may,
pursuant to Section 17.1(d) hereof, procure an equivalent
quantity of Gas or other fuel from sources other than Seller and
seek the appropriate remedies set forth in Article XVII hereof.
ARTICLE X
POSSESSION AND TITLE
Section 10.1 Warranty of Title. Seller warrants that at the
time of delivery of Gas at the Delivery Point(s), Seller shall
have good and valid title to all Gas sold and delivered to Buyer
under this Agreement free and clear of all liens, encumbrances
and claims whatsoever. Seller shall indemnify Buyer and save it
harmless from all suits, actions, debts, accounts, damages,
costs, losses and expenses (including reasonable attorneys' fees)
arising from or out of adverse claims of any or all persons to
the Gas.
Section 10.2 Possession. Possession of and title to Gas sold by
Seller to Buyer hereunder shall pass from Seller to Buyer at the
Delivery Point(s). As between Seller and Buyer, Seller shall be
deemed to be in exclusive control and possession and have title
to and be responsible for such Gas until delivery of the Gas at
the Delivery Point(s), at and after which Buyer shall be deemed
to be in exclusive control and possession of and have title to
and be responsible for such Gas. As between them, Seller and
Buyer each assumes full responsibility and liability for and
shall indemnify, defend and save harmless the other Party and its
officers, directors, employees, agents, shareholders and partners
from all liability and expense (including, without limitation,
reasonable attorneys' fees) on account of any and all damages,
claims or actions, including damage to property or injury to or
death of persons, arising from any act or accident occurring
while title to the Gas is vested in the indemnifying Party as
provided herein, except to the extent caused by the gross
negligence or willful misconduct of any indemnified Party.
ARTICLE XI
BUYER'S REPRESENTATIONS AND WARRANTIES
Section 11.1 Representations and Warranties. Buyer represents
and warrants to Seller as follows:
(a) Buyer is a limited partnership validly existing, and in
good standing under the laws of the State of Delaware and is
duly qualified and in good standing as a limited partnership
in the State of Maryland. Buyer has all requisite
partnership power and authority to enter into and perform
this Agreement. The general partner of Buyer is Panda
Brandywine Corporation, a corporation validly existing and
in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance of this
Agreement, and the transactions contemplated hereby, have
been duly authorized by Buyer and the general partner acting
on behalf of Buyer. This Agreement has been duly executed
and delivered by Buyer and constitutes the legal, valid and
binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, subject, however, to applicable
bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting creditor's rights generally and
except as the enforceability thereof may be limited by
general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
(c) The execution, delivery and performance by Buyer of
this Agreement do not and will not (i) materially violate,
constitute a material default under or materially conflict
with any provision of Buyer's limited partnership agreement,
(ii) violate, constitute a default under or conflict with
any other agreement or instrument to which Buyer is a party
or by which Buyer is bound, (iii) violate any existing
statute or law or any judgment, decree, order, regulation or
rule of any court or governmental authority applicable to
Buyer, or (iv) under existing law or under any other
agreement to which Buyer is a party or by which it is bound
require Buyer to obtain any consent, approval or
authorization of, or make designation, declaration or filing
with, any Governmental Authority.
(d) There are no suits, judicial or administrative actions,
proceedings or investigations (including, without
limitation, bankruptcy, reorganization or insolvency
actions, proceedings or investigations) that is pending or,
to the best knowledge of Buyer, threatened against Buyer
that (i) challenge the validity of this Agreement or the
transactions contemplated hereby, (ii) seek to restrain or
prevent any action taken or to be taken by Buyer in
connection with this Agreement, or (iii) if such were
adversely determined, would reasonably be expected to have a
material adverse effect upon Buyer's ability to perform its
obligations hereunder, except, in the case of this clause
(iii), for proceedings relating to the application and
issuance of Governmental Approval(s) for or related to the
Facility.
Section 11.2 Buyer's Covenants
(a) As of Financial Closing, the Financing Document
providing for the disbursement of Buyer's revenues arising
from the operation of the Facility shall provide for the
payment of amounts due under Section 3.3 and Section 7.1 of
this Agreement prior to payment of "Basic Rent" (as defined
in the Financing Documents) for the Facility due to
Financing Parties (except following and during the
continuance of an Event of Default under this Agreement or a
default by Buyer under the Financing Documents).
(b) Buyer shall provide Seller, as they become available,
annual-audited and quarterly-unaudited financial statements
for the Buyer, and annual operating reports, for the
Facility (to the extent such reports are available). Buyer
shall not be obligated to develop such statements or reports
solely for purposes of this Agreement. To the extent such
statements or reports are available, Buyer shall provide
them within sixty (60) Days of their availability.
ARTICLE XII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 12.1 Representations and Warranties. Seller represents
and warrants to Buyer as follows:
(a) Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Michigan, and is duly qualified and in good standing as a
corporation in all jurisdictions in which performance
hereunder by Seller is required. Seller has all requisite
power and authority to enter into and perform this
Agreement.
(b) The execution, delivery and performance of this
Agreement and the other documents and instruments to be
delivered by Seller pursuant hereto, and the transactions
contemplated hereby and thereby, have been duly authorized
by Seller. This Agreement has been, and each such other
document or instrument will be, duly executed and delivered
by Seller and constitutes, or upon such execution and
delivery will constitute, a legal, valid and binding
obligation of Seller, enforceable against Seller in
accordance with its respective terms, subject, however, to
applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting creditors' rights
generally and except as the enforceability thereof may be
limited by general principles of equity (regardless of
whether considered in a proceeding in equity or at law)
(c) The execution, delivery and performance by Seller of
this Agreement and the other documents and instruments to be
delivered by Seller pursuant hereto, and the transactions
contemplated hereby and thereby, do not and will not (i)
violate or conflict with any provision of Seller's
certificate of incorporation or by-laws, (ii) violate,
constitute a default under or conflict with any agreement or
instrument to which Seller is a party or by which Seller is
bound, or (iii) violate any existing statute or law or any
judgment, decree, order, regulation or rule of any court or
governmental authority applicable to Seller.
(d) There are no suits, judicial or administrative actions,
proceedings, or investigations (including, without
limitation, bankruptcy, reorganization or insolvency
actions, proceedings or investigations) pending or, to
Seller's best knowledge, threatened that (i) challenge the
validity of this Agreement or the other documents and
instruments to be delivered by Seller pursuant to this
Agreement, or the transactions contemplated hereby or
thereby, (ii) seek to restrain or prevent any action taken
or to be taken by Seller in connection with this Agreement,
or under the other documents and instruments to be delivered
by Seller pursuant to this Agreement, or (iii) if adversely
determined, could have a material adverse effect upon
Seller's ability to perform its obligations hereunder or
under the other documents and instruments to be delivered by
Seller pursuant to this Agreement.
(e) No Governmental Approvals are required for the Seller
to execute, deliver and perform this Agreement, except for
(i) those Governmental Approvals listed in Exhibit C hereto,
each of which has been obtained, is in full force and
effect, and is final and not subject to appeal, and (ii)
routine state or local Governmental Approvals not related to
the regulation of public utilities which may be required to
be obtained after the Initial Delivery Date in order to
obtain and deliver Gas under the Agreement, and Seller has
no reason to believe such future Governmental Approvals will
not be obtained in a timely manner in the ordinary course of
business.
Section 12.2 Covenants. From the date hereof throughout the
term of this Agreement, Seller shall, unless otherwise consented
to by Buyer in writing:
(a) Obtain and maintain, in full force and effect, all
Governmental Approval(s), if any, necessary for Seller's
execution, delivery and performance of this Agreement.
(b) Cooperate in good faith with and provide all reasonable
assistance to Buyer in providing reasonably requested
information to Power Purchaser, Washington Gas Light or any
prospective Financing Party in connection with Buyer's
negotiation of financing for the Facility, and cooperate in
good faith with Buyer in its effort to achieve Financial
Closing by entering into such agreements and executing such
instruments and documents as may be reasonably requested by
Power Purchaser or Financing Parties to achieve Financial
Closing and as are in good faith mutually agreeable to the
Parties. Buyer agrees to allow Seller to delete any price
information Seller reasonably believes to be commercially
sensitive from any copy of this Agreement provided to
Washington Gas Light.
(c) At the request of Buyer, meet with Buyer and Financing
Parties to discuss any necessary amendment or modification
of this Agreement to effectuate the delivery of Gas under
this Agreement in the event that Columbia Gas Transmission
does not receive a certificate of public convenience and
necessity from FERC authorizing Columbia Gas Transmission to
construct the facilities necessary to provide Buyer with
24,240 Dth per Day of firm transportation service.
(d) (I) (A) Subject to the confidentiality
restrictions of Section 19.5, during the term of
this Agreement, Seller agrees to provide Buyer and
Financing Parties within ninety (90) Days of the
end of each calendar year a copy of a letter
("Letter") from an officer of Seller or Owner
certifying that the Seller's Gas Reserves have
been estimated in accordance with generally
accepted petroleum engineering and evaluation
principals, which estimates are set forth in a
reports) prepared by independent petroleum
engineers ("Reserve Report"). Such Letter, which
shall be based on the Reserve Report, shall set
forth a summary of Seller's Gas Reserves and shall
represent whether, to Seller's best knowledge
after due inquiry, expected future production from
Seller's Gas Reserves in the aggregate wilt be
greater than the quantity of gas committed by
Seller or Owner during the term of this Agreement
for delivery on a firm basis and at a fixed price,
fixed escalation rate or pre-determined price
stream under contracts having a term that ends
more than five (5) years after the close of the
calendar year (the "Reserve Year") covered by the
Letter ("Total Firm Commitments"). The Reserve
Report shall be based upon the same studies used
in connection with Seller's or Owner's audited
financial statements. If Seller's Gas Reserves
exceed Total Firm Commitments no action need be
taken. If Total Firm Commitments exceed Seller's
Gas Reserves then Seller shall have six (6) Months
from the close of the Reserve Year to take such
action necessary so that Seller's Gas Reserves
equal or exceed Total Firm Commitments. If Seller
fails to do so within the six (6) Months provided
above, then within nine (9) Months of the close of
the Reserve Year, Seller shall provide Buyer and
Financing Parties a list identifying the specific
Seller's Gas Reserves ("Proposed Reserves") which
Seller proposes to dedicate or cause Owner to
dedicate to the Agreement that are in Seller's
opinion reasonably sufficient to fulfill Seller's
obligation to sell and deliver the quantity of
Limited Dispatch Gas for the remaining term of
this Agreement ("Minimum Dedicated Quantity").
(B) With such list identifying the Proposed
Reserves, Seller shall provide Buyer and Financing
Parties a Reserve Report reasonably acceptable to
Buyer and Financing Parties that sufficiently
demonstrates that the Proposed Reserves will be
reasonably sufficient to meet the Minimum
Dedicated Quantity. If after reviewing the
Reserve Report, Buyer and Financing Parties
reasonably agree that the Proposed Reserves will
provide Seller's Gas Reserves reasonably
sufficient to meet the Minimum Dedicated Quantity,
Seller shall, within thirty (30) Days, dedicate or
cause Owner to dedicate to this Agreement the
Proposed Reserves (such Gas reserves, the
"Dedicated Reserves"). If after reviewing the
Reserve Report, Buyer and Financing Parties
reasonably determine that the Proposed Reserves
will not be reasonably sufficient to satisfy the
Minimum Dedicated Quantity, Buyer's and Financing
Parties' objection shall be resolved in accordance
with the procedures described in Section
12.2(d)(v).
(ii) If Seller is required to provide or cause Owner to
provide Dedicated Reserves pursuant to Section
12.2(d)(i), within ninety (90) Days after the beginning
of each calendar year, Seller shall provide Buyer and
Financing Parties with a Reserve Report for the
Dedicated Reserves. If after reviewing such Reserve
Report, Buyer and Financing Parties reasonably
determine within said ninety (90) Day period that the
Dedicated Reserves are no longer sufficient to meet the
Minimum Dedicated Quantity, Buyer and Financing Parties
shall promptly notify Seller of their determination.
Upon receiving such Notice from Buyer, if in agreement,
Seller shall within thirty (30) Days thereof provide
Buyer and Financing Parties a list of proposed
additional Seller's Gas Reserves to dedicate or cause
Owner to dedicate to the Agreement ("Additional
Proposed Reserves") along with a Reserve Report for
such reserves. If (x) Seller disagrees with Buyer's
Notice, or if (y) within thirty (30) Days after
receiving such list of Additional Proposed Reserves and
Reserve Report from Seller, Buyer and Financing Parties
reasonably believe that such Additional Proposed
Reserves will not, when added to the Dedicated
Reserves, meet the Minimum Dedicated Quantity, the
matter shall be resolved in accordance with the
procedures described in Section 12.2(d)(v). If Buyer
and Financing Parties fail to respond to the Reserve
Report or list submitted by Seller within said thirty-
(30) Day period, Buyer and Financing Parties shall be
deemed to have accepted such report or list and such
Additional Proposed Reserves shall become Dedicated
Reserves.
(iii) (A) Seller shall have the right from
time to time to make substitutions to the
Dedicated Reserves ("Substitute Reserves"). If
Seller elects to make such a substitution, Seller
shall provide Buyer and Financing Parties written
Notice of the election accompanied by a list of
the proposed Substitute Reserves for the Dedicated
Reserves Seller proposes to release or cause Owner
to release from dedication to the Agreement, a
Reserve Report for Seller's proposed Substitute
Reserves, and a written certification that to
Seller's best knowledge after due inquiry the
proposed substitution of reserves will not reduce
the level of Dedicated Reserves below the Minimum
Dedicated Quantity.
(B) No substitution of reserves shall be
effective until Seller has provided Buyer and
Financing Parties with the information set forth
above and Buyer and Financing Parties have
provided Seller with a written consent of the
substitution, which consent shall not be
unreasonably withheld. Should Buyer and Financing
Parties fail to state objections to the proposed
substitution within thirty (30) Days after receipt
of Seller's proposal, Buyer and Financing Parties
shall be deemed to have consented to the
substitution. Upon the effectiveness of the
substitution, Substitute Reserves shall be
considered Dedicated Reserves. If the Buyer and
Financing Parties state any objections, they shall
be resolved in accordance with the procedures
described in Section 12.2(d)(v).
(iv) (A) Seller shall have the right from time to
time to release or cause Owner to release reserves
from dedication to the Agreement. If Seller
proposes to release or cause Owner to release
reserves from dedication to the Agreement, Seller
shall provide written Notice to Buyer and
Financing Parties of its proposed release
accompanied by a list of the proposed Dedicated
Reserves Seller proposes to release or cause Owner
to release and a written certification that to
Seller's best knowledge after due inquiry the
release of such reserves will not reduce the level
of Dedicated Reserves below the Minimum Dedicated
Quantity.
(B) No release of Dedicated Reserves shall be
effective until Seller has provided Buyer and
Financing Parties with the information set forth
above and Buyer and Financing Parties have
provided Seller with a written consent of the
release, which shall not be unreasonably withheld.
Should Buyer and Financing Parties fait to state
objections to the proposed release within thirty
(30) Days after receipt of Seller's proposal,
Buyer and Financing Parties shall be deemed to
have consented to the release. If the Buyer and
Financing Parties shall have any objections, they
shall be resolved in accordance with the
procedures described in Section 12.2(d)(v).
(v) If there is a disagreement or objection over the
reserves Seller proposes to dedicate or cause Owner to
dedicate to this Agreement, the following procedures
shall apply: Within thirty (30) Days of a Party's
objection, Buyer, Seller and Financing Parties shall
meet and shall attempt to mutually agree to the
reserves to be dedicated to this Agreement within
fifteen (15) Days of the Parties' first meeting. If
the Parties cannot mutually agree to the reserves to be
dedicated to this Agreement within such fifteen- (15)
Day period, either of the Parties may request that
officers of the Parties at the level of Vice President
or above shall meet and attempt to resolve the dispute.
If the dispute cannot be resolved within fifteen (15)
Days of their first meeting, the Parties may submit the
dispute to binding arbitration under Article XVIII of
the Agreement. The board of arbitration shall consist
of experts in the field of Gas reserve analysis.
(vi) To the extent that Seller is required to dedicate
or cause Owner to dedicate Seller's Gas Reserves to
this Agreement, Seller may release or cause to be
released such reserves from the dedication to this
Agreement if (A) Seller submits Reserve Reports to
Buyer and Financing Parties for three (3) consecutive
years after initial dedication demonstrating that
Seller's Gas Reserves are greater than the Total Firm
Commitments or (B) Seller submits to Buyer and
Financing Parties a Reserve Report demonstrating that
Seller's Gas Reserves are greater than or equal to 125%
of Total Firm Commitments.
(vii) Upon request, Seller shall afford Buyer and
Financing Parties the reasonable opportunity to review
such well production records, engineering reserve data,
and other information as Buyer and Financing Parties
may reasonably require in regard to Seller's
representation that Seller's Gas Reserves are at least
equal to the Total Firm Commitments, or in regard to
the quantity of Dedicated Reserves, subject to the
aforesaid confidentiality requirements.
(viii) The Parties agree to execute and file (or
cause to be executed and filed) of record a mutually
agreed memorandum and such other documents, which
reasonably relate to the dedication, release or
substitution of Dedicated Reserves, and are consistent
with the Parties' respective rights and obligations
under this Agreement, in the appropriate office(s)
where real estate property records are kept.
(ix) Seller's or Owner's commitment of Seller's Gas
Reserves to the Agreement shall at all times be subject
to Seller's reservations stated herein; and provided,
further, that Seller reserves the right on a daily
basis to sell to other parties any and all production
from the Dedicated Reserves which is not purchased by
Buyer on such Day. Seller agrees that Seller or Owner
shall not dedicate or cause a dedication of any of
Seller's Gas Reserves comprising the Dedicated Reserves
to any other Gas supply agreement unless the same has
been released from dedication hereunder.
(x) Seller's or Owner's commitment of the Dedicated
Reserves is from Seller's or Owner's interests as a
whole in the Seller's Gas Reserves of the then existing
wells and any new wells Seller or Owner may thereafter
drill or cause to be drilled in connection with the
Dedicated Reserves. The Buyer and Financing Parties
acknowledge that Seller can make no representations
beyond its best knowledge after due inquiry and no
guarantees concerning the estimated future levels of
production available for delivery from the Dedicated
Reserves. As to the acceptability of the Dedicated
Reserves, Buyer and Financing Parties shall rely on
their own independent estimates, their own evaluation
of the Reserve Reports provided by Seller, other
evaluation, studies, inspections, and review of the
wells, acreage, and the Gas available for delivery
therefrom. It is expressly understood that the
determination whether conditions permit or justify the
drilling of any new wells shall be made by Seller or
Owner in its sole discretion, and that nothing in this
Agreement shall be interpreted as a requirement or
obligation on Seller's or Owner's part to conduct any
new drilling at any time.
(xi) Seller reserves the right in its sole discretion
to utilize additional production available from sources
other than the Dedicated Reserves to supply Buyer with
Gas under this Agreement.
(xii) In all instances, the control, management and
operation of Seller's or Owner's properties comprising
Seller's Gas Reserves shall be and remain reserved as
the exclusive right of Seller or Owner, free from any
and all control by Buyer and Financing Parties. Seller
or Owner may, in its sole judgment, repair, rework or
abandon any wells; pool or unitize leases with any
other leases; or surrender or permit the lapse of its
leases or mineral rights. Seller reserves the right
for itself and Owner to use Gas produced from Seller's
Gas Reserves or the Dedicated Reserves for field
operations, to fulfill lessor obligations, and to
process any Gas before delivery for extraction of
liquid hydrocarbons so long as the Gas after processing
still meets the applicable quality specifications under
the Agreement. Seller shall not be held liable for
loss of lease or mineral rights through clerical error
or administrative oversight not materially affecting
the Dedicated Reserves.
(xiii) (A) Upon not less than thirty (30) Days
prior Notice being given to Buyer and Financing
Parties, Seller or Owner may sell, assign or
transfer all or any portion of the Dedicated
Reserves without the prior written consent of
Buyer and Financing Parties unless any such sale,
assignment, or transfer would reasonably be likely
to have a material adverse effect on Seller's
ability to perform its obligations hereunder to
Buyer; provided, no such consent of Buyer and
Financing Parties shall be required in the event
of a merger, reorganization, consolidation, or
sale of all or substantially all of Seller's or
Owner's, as the case may be, assets to an
affiliated subsidiary or parent company under
common control with Seller or Owner so long as
such successor remains or agrees to be fully bound
by and assume Seller's or Owner's, as the case may
be, obligations under this Agreement. To the
extent any sale, transfer or assignment of
Dedicated Reserves reduces the Dedicated Reserves
below the Minimum Dedicated Quantity, Seller shall
propose Substitute Reserves in place of the
Dedicated Reserves being sold, transferred or
assigned by Seller or Owner in accordance with
Section 12.2(d)(iii).
(B) Nothing herein shall prevent Seller or Owner
from pledging, mortgaging, or otherwise
encumbering all or any portion of Seller's Gas
Reserves and properties as security for
indebtedness; provided, however, with respect
solely to the Dedicated Reserves, should Seller or
Owner at any time receive a notice of default in
respect of such pledge, mortgage, or other
encumbrance which would reasonably be likely to
have a material adverse effect on Seller's ability
to perform its obligations regarding such
reserves, Seller shall promptly give Buyer and
Financing Parties Notice thereof and if said
default continues and is not cured for a period of
thirty (30) Days after the Notice, upon Buyer's
and Financing Parties' request, Seller shall
promptly propose Additional Proposed Reserves or
Substitute Reserves sufficient to satisfy the
Minimum Dedicated Quantity in accordance with
Subsections 12.2(d)(ii) or 12.2(d)(iii).
(xiv) Seller represents and warrants that the
Dedicated Reserves shall not, at the time of their
dedication to the Agreement, be dedicated to the
performance of Seller's or Owner's obligations under
other Gas supply agreements of Seller or Owner and that
Seller or Owner shall not in the future dedicate all or
any portion of the Dedicated Reserves to the
performance of Seller's or Owner's obligations under
other Gas supply agreements of Seller or Owner unless
and until released from dedication hereunder.
(xv) If Owner fails to take action consistent with the
requirements of this Section 12.2(d) for any reason,
such failure shall be deemed to be a material breach of
this Agreement by Seller.
(xvi) For purposes of this Section 12.2(d),
Financing Parties shall designate one agent to receive
Notices, the Letter and Reserve Reports and to exercise
the rights of Financing Parties herein.
ARTICLE XIII
FORCE MAJEURE
Section 13.1 Definition.
(a) An "Event of Force Majeure" with respect to Buyer's
obligations means an act of God; strikes, lockouts, or other
industrial disturbances; acts of the public enemy; wars;
blockades; insurrections; riots; epidemics; landslides;
lightning; earthquakes; fires; storms; hurricanes; floods;
washouts; arrests and restraints of governments and people;
civil disturbances; explosions; breakage or accident to
machinery including the Facility; failure or inability of
any person to obtain any Governmental Approval(s); a binding
present or future governmental law, regulation or order or
court order or orders of any regulatory body having
jurisdiction that materially adversely affects Buyer's
physical ability to perform under this Agreement; breakage
or freezing of lines of pipe or wells; curtailment of firm
pipeline transportation service on a Pipeline; the necessity
for making repairs or alterations to machinery (including
the Facility) or lines of pipe; inability to obtain
necessary materials, supplies, licenses, pelts (or
unavoidable delays, after the exercise of due diligence, in
acquiring materials, supplies, licenses or permits); as to
any Pipeline, an event of force majeure as defined in an
applicable tariff or service agreement; an event of force
majeure as defined in the Power Contract; or any other
causes, whether of the kind herein enumerated or otherwise,
that is not within the control of Buyer and that by the
exercise of due diligence Buyer could not have prevented or
is unable to overcome; provided, however, that (i) changes
in market conditions for gas or for electricity or thermal
energy produced from the Facility, (ii) failure of Buyer to
pay and perform its obligations under the Firm
Transportation Agreements, or an increase in the cost of
transportation service provided under such Agreements, and
(iii) failure of the Power Purchaser, or any other purchaser
of electricity from the Facility, to accept and pay for
electricity, or failure of Buyer's steam purchaser to
purchase and accept steam (other than as a result of an
event of force majeure relating solely to the failure of the
Power Purchaser's or steam purchaser's ability to perform
under the Power Contract or any other power purchase
contract entered into by Buyer or the contract for the
purchase of steam produced at the Facility), shall not
constitute an Event of Force Majeure.
(b) Any "Event of Force Majeure" with respect to Seller's
obligations with respect to the MDFQ means:
(i) Failure or refusal by Columbia Gas Transmission to
accept Gas tendered by Seller at the Delivery Point(s)
in accordance with this Agreement and such failure or
refusal is not caused by or due to a failure by Seller
to comply with any contracts, laws or regulations;
(ii) Failure of Seller to deliver Gas to the Delivery
Point(s) by reason of a binding future governmental
law, order, or decree; court order; order of a
regulatory body having jurisdiction; arrests and
restraints of governments and peoples; and acts of the
public enemy or wars (such enumerated events shall be
collectively referred to as "Limited Force Majeure
Events") provided that:
(A) such Limited Force Majeure Events apply
generally and not just to Seller and/or its
affiliates; and
(B) such interruption is not caused by Seller,
for whatever reason, choosing not to comply with
such laws, orders or decree or failing to obtain
any Governmental Approval; and
(C) such Limited Force Majeure Event prevents
other Gas suppliers from delivering Gas to Buyer's
Delivery Point and Buyer is also not able to
obtain supplies of Gas at Buyer's Delivery Point;
or
(iii) With respect to any FERC Regulated Facilities
upon which Seller is shipping Gas to the Delivery
Point(s) pursuant to a firm transportation contract
with the pipeline company owning and operating such
Facilities, an event of "force majeure" as declared
under and in accordance with the FERC Tariff covering
such Facilities.
(c) Any "Event of Force Majeure" with respect to Seller's
obligations with respect to the Interruptible Gas means the
"Events of Force Majeure" as defined in Section 13.1(a).
Section 13.2 Burden of Proof. The burden of proof as to whether
an Event of Force Majeure has occurred shall be upon the Party
claiming an Event of Force Majeure.
Section 13.3 Effect of Event of Force Majeure. If either Party
is rendered wholly or partially unable to perform its obligations
(other than accrued obligations to make payments) under this
Agreement because of an Event of Force Majeure, that Party's
obligations that are affected by the Event of Force Majeure shall
be suspended to the extent so affected during the continuation of
such inability to perform; provided, however:
(a) The non-performing Party, as soon as reasonably
practicable after learning of its inability to perform due
to an Event of Force Majeure, shall provide Notice to the
other Party giving the particulars of the occurrence,
including an estimate of its expected duration and probable
impact on the performance of its obligations under this
Agreement, and shall continue to furnish timely regular
reports with respect thereto during the Event of Force
Majeure;
(b) The non-performing Party shall use its Best Efforts to
continue to perform its obligations under this Agreement,
notwithstanding the Event of Force Majeure, and to use due
diligence to remedy the Event of Force Majeure;
(c) The non-performing Party shall provide the other Party
with prompt Notice of the cessation of the Event of Force
Majeure giving rise to the suspension of performance; and
(d) No obligation of either Party that was to be performed
prior to the occurrence of the Event of Force Majeure shall
be suspended as a result of that occurrence, unless such
Event of Force Majeure prevents the performance of such
obligation.
Section 13.4 Settlement of Strikes, Lockouts or Other Labor
Disputes. Nothing in this Article XIII shall require the
settlement of any strike, walkout, lockout or other labor dispute
on terms that, in the sole judgment of the Party involved in the
dispute, are contrary to that Party's interest. It is understood
and agreed that the settlement of strikes, walkouts, lockouts, or
other labor disputes shall be entirely within the discretion of
the Party having the difficulty.
Section 13.5 Force Majeure Curtailment.
(a) In the event that, as a result of an Event of Force
Majeure, Seller is rendered unable on any Day, wholly or in
part, to sell and deliver at any specific Delivery Point the
quantity of Gas that Seller has obligated itself to deliver
to its customers (including Buyer) at that specific Delivery
Point, then Seller shall curtail deliveries at each such
Delivery Point affected by said Event of Force Majeure to
all such customers (including Buyer) in the following order
of priority:
(i) first, under natural gas sales contracts on an
interruptible basis;
(ii) second, deliveries of Gas to the Delivery Point(s)
under this Agreement within the MDFQ and other firm gas
supply agreements Seller has entered into with third
parties, pro rata based on the quantities of Gas
nominated for delivery under the affected agreements on
the Day on which the Event of Force Majeure occurs.
(b) To the extent and for as long as Seller is unable to
deliver to the Delivery Point(s) the quantity of Gas
nominated by Buyer or Fuel Manager due to an Event of Force
Majeure, Buyer may purchase replacement supplies of Gas from
a third party supplier.
(c) In the event that, as a result of an Event of Force
Majeure, Buyer is rendered unable on any Day, wholly or in
part, to buy and receive at any specific Delivery Point the
quantity of Gas that Buyer or Fuel Manager has Scheduled for
delivery during such Day at that specific Delivery Point,
then Buyer shall curtail deliveries at that specific
Delivery Point made by third party suppliers prior to
deliveries at that specific Delivery Point made by Seller
under this Agreement to the extent Buyer's curtailment of
such third party deliveries will not result in Buyer's
breach of a Gas supply agreement Buyer has with such third
party supplier.
Section 13.6 Termination Due to Extended Event of Force Manure.
In the event that an Event of Force Majeure prevents Seller from
delivering or Buyer from receiving Gas under this Agreement and
such Event of Force Majeure or the effect thereof shall continue
for more than twelve (12) consecutive Months, then the Party that
has not claimed suspension of its obligations because of the
Event of Force Majeure may terminate this Agreement without
continuing liability by either Party to the other Party, except
for obligations previously accrued hereunder, upon sixty (60)
Days' prior Notice to the Party that has claimed suspension of
its obligations; provided, however, such termination shall not be
effective if the cause of the Event of Force Majeure is remedied
within such sixty- (60) Day notice period. Any Party that is
prevented by any Event of Force Majeure from performing hereunder
shall use due diligence to remedy such condition at the earliest
practicable date.
ARTICLE XIV
GOVERNMENTAL ACTION
Section 14.1 Governmental Action. If an order issued by any
court, regulatory or other governmental authority materially
affects Buyer's ability to perform under the Power Contract,
Buyer may request that Buyer, Seller and other necessary parties
meet to discuss mutually agreeable modifications or supplements
to this Agreement as may be necessary to enable Buyer to perform
under the Power Contract in light of such governmental action.
Nothing in this Section 14.1 shall obligate either Party to agree
or enter into any such modification or supplement to this
Agreement, and any such modification or supplement shall be
entered into at the sole discretion of each of the Parties.
ARTICLE XV
TRANSFER AND ASSIGNMENT
Section 15.1 Assignments.
(a) Except as specified in Section 15.1(b), the rights and
obligations of the Parties to this Agreement may not be
assigned by either Party, except upon the express written
consent of the other Party. In the event an assignment is
made and consented to, the assigning Party shall (unless
such consent states otherwise) be released and discharged
from all obligations to the other Party hereunder thereafter
arising, and such assignee shall be substituted in place of
the assigning Party herein.
(b) Any party which shall succeed by purchase, merger, or
consolidation to the properties, substantially or in their
entirety, of Buyer or of Seller, as the case may be, shall
be entitled to the rights and shall be subject to the
obligations of its predecessor in title under this
Agreement. To the extent acknowledged by Seller in the
Consent and Agreement, Buyer shall have the right, without
the consent of Seller but upon Notice to Seller, to assign
all of its rights and interests (but not its obligations)
under this Agreement to the Financing Parties as security
for Buyer's obligations under the Financing Documents.
Subject to the Consent and Agreement, Seller acknowledges
that upon an event of default by Buyer under the terms of
such Financing Documents, any of the Financing Parties may
(but shall not be obligated to) assume or cause its designee
or a new lessee or purchaser of the Facility to assume all
of the interests, rights, and obligations of Buyer
thereafter arising under this Agreement. Seller may,
without the consent of Buyer but upon Notice to Buyer, and
with the prior written consent of the Financing Parties,
which consent will not be unreasonably withheld, assign its
rights and obligations to a wholly-owned subsidiary of MCN
Corporation, provided that such wholly-owned subsidiary is
not subject to regulation as a public utility under state or
federal law and the Parent Guaranty continues to guaranty
the performance and payment obligations of Seller under this
Agreement. Such assignee shall supply documentation similar
to that supplied by Seller in connection with this
Agreement.
ARTICLE XVI
NOTICE
Section 16.1 Notice. Except as otherwise provided in Section
4.1, every Notice, communication, invoice or nomination
provided for in this Agreement shall be in writing directed
to the Party to whom given, made or delivered at such
Party's address as follows (or as otherwise directed in
writing by such Party):
SELLER: Cogen Development Company
150 West Jefferson Ave.
Suite 1800
Detroit, MI 48226
Attention: Joseph L. Roberts, Jr.
Telephone: (313) 256-5870
Telecopy: (313) 256-5851
BUYER: Panda-Brandywine, L. P.
4100 Spring Valley Road,
Suite 1001
Dallas, Texas 75244
Attention: Fuel Manager
Telephone: (214) 980-7159
Telecopy: (214) 980-6815
(Emergency Telecopy): (214) 980-4125
FINANCING PARTIES: General Electric Capital
Corporation
1600 Summer Street
Stamford, Connecticut 06927
Attention: Vice President, Energy
Project Operations Global Project &
Structured Finance
Either Party may change its address by giving written Notice of
such change to the other Party. Any Notice, communication,
nomination, or invoice or other document given or delivered under
this Agreement by mail shall be deemed received by the addressee
at the end of the third (3rd) Business Day after the date of
mailing by prepaid, registered or certified U.S. mail. If any
such Notice, communication, nomination, invoice or other document
is delivered by hand, overnight courier or by confirmed
telecopier to the addressee, receipt shall be deemed to have
occurred as soon as such delivery or transmission has been
effected.
ARTICLE XVII
SUSPENSION, MITIGATION, DEFAULT AND REMEDIES
Section 17.1 Seller's Failure To Deliver; Buyer's and Seller's
Mitigation.
(a) If and to the extent, on any Day, there is a failure by
Seller to sell and deliver a quantity of Gas under the MDFQ
in accordance with the terms of this Agreement for any
reason, except to the extent prevented by an Event of Force
Majeure or permitted variations in the delivery of Gas
within firm transportation tolerances, Buyer may purchase
replacement fuel (either Gas or fuel oil) from a third party
supplier, and Seller shall promptly provide notice to Buyer
of such failure and shall pay to Buyer as liquidated damages
an amount equal to either of the following, as applicable :
(i) On any Day during which Buyer's use of fuel oil at
the Facility in lieu of the unexcused quantity of Gas
Seller fails to deliver under this Agreement would not
violate any of the Governmental Approval(s), including
the Governmental Approval relating to the Facility's
air emissions, and Buyer (or Washington Gas Light
solely to the extent permitted under the Washington Gas
Agreement) is able to obtain replacement fuel (either
Gas or fuel oil) Seller shall pay Buyer as liquidated
damages an amount equal to the positive difference, if
any, between (A) the costs Buyer (or Washington Gas
Light under the Washington Gas Agreement) incurs to
obtain replacement fuel (either Gas or fuel oil),
including the actual cost of the fuel, the cost of
transporting such fuel, any imbalance penalties or
charges a pipeline transporter assesses as a result of
Seller's failure to deliver, all other costs and
charges directly arising out of the procurement and
transportation of such fuel, and, without duplication
of any of the foregoing costs, any transportation cost
included in clause (B) below which Buyer is unable to
avoid, minus (B) the sum of the price Buyer would have
paid hereunder for the unexcused quantity of Gas Seller
failed to deliver, plus the cost of transporting such
quantity of Gas to the Facility; or
(ii) On any Day during which Buyer's use of fuel oil at
the Facility in lieu of the unexcused quantity of Gas
Seller fails to deliver would violate any of the
Governmental Approval(s), including the Governmental
Approval relating to the Facility's air emissions, or
Buyer is unable to obtain replacement fuel (either Gas
or fuel oil), and Buyer is therefore unable to operate
the Facility in whole or in part, Seller shall pay
Buyer as liquidated damages, the positive amount, if
any, equal to (A) the extent of the total reduction in
"Monthly Capacity Payments" (as defined in the Power
Contract) due to Buyer from the Power Purchaser as a
result of a reduction in the "Equivalent Availability
Factor" (as defined in the Power Contract) and the loss
of all or a portion of a "Monthly Energy Payment" (as
defined in the Power Contract) under the Power
Contract, which reduction or loss results directly from
Buyer's inability to deliver capacity or energy to the
Power Purchaser during the period of Seller's unexcused
failure to deliver a quantity of Gas, less (B) net
expenses saved or which Buyer did not incur to operate
the Facility during Seller's unexcused failure to
deliver, including without limitation the costs Buyer
would have otherwise incurred for Gas, water,
chemicals, supplemental power, and other significant
variable costs directly related to the production of
power.
(b) The Parties acknowledge that it would be difficult or
impossible at the time of Seller's unexcused failure to
deliver Gas under this Agreement to measure the actual
damages suffered by Buyer under the circumstances set forth
in Section 17.1(a). Accordingly, the Parties agree that the
amount of liquidated damages specified in Section 17.1(a) is
reasonable as of the date hereof, and Seller agrees not to
contest the validity or amount of such liquidated damages.
(c) Buyer's remedy under this Section 17.1 shall be in
addition to Buyer's right to seek specific performance of or
terminate this Agreement (if Seller's failure to sell and
deliver Gas to Buyer constitutes an Event of Default under
Section 17.2) and Buyer's right to recover Replacement Cost
under Section 17.3(c), but in lieu of other remedies
available to Buyer under Section 17.3(b).
(d) If there is an unexcused failure by Seller to deliver
any quantity of Gas pursuant to this Agreement with respect
to which Buyer shall exercise its rights under this Section
17.1, Buyer shall attempt to mitigate the effect of such
failure by using its commercially reasonable efforts,
consistent with the amount of Notice provided pursuant to
Section 17.1(a) hereof, the immediacy of Buyer's Gas
consumption needs, the quantities involved, and the
anticipated length of such failure by Seller, to obtain Gas
at a price reasonable for the area of delivery (i.e., the
Facility) ("Buyer's Cover Standard"); provided, Buyer shall
be entitled to obtain replacement fuel at any price if,
using Buyer's Cover Standard, Buyer reasonably determines
that fuel might not otherwise be immediately delivered to
the Facility. If the period of such failure to deliver Gas
extends beyond the period estimated by Seller in its Notice,
Buyer may continue to obtain replacement fuel for the period
that Buyer reasonably estimates that such failure will
continue and Buyer shall pay for the applicable costs in
accordance with this Section 17.1(d).
(e) If there is an unexcused failure by Buyer to perform
its obligations hereunder, then Seller shall use its due
diligence, acting in a commercially reasonable manner, to
mitigate the effect of such failure, including, attempting
to secure the highest alternative market for Seller's Gas,
consistent with the quantities involved, the length of such
failure by Buyer, and market conditions.
Section 17.2 Event of Default. An Event of Default under this
Agreement shall be deemed to exist upon the occurrence of any one
or more of the following events:
(a) Failure by either Party to make payment of any amounts
due to the other Party under this Agreement and such failure
continues for a period of fifteen (15) Days after receipt of
Notice of non-payment; provided, however, that if a Party is
stayed or otherwise prevented from giving such Notice by
court order or otherwise by operation of law, an Event of
Default shall be deemed to have automatically occurred after
the lapse of thirty (30) Days after such amount became
payable and regardless of any such Notice; or
(b) (i) An unexcused failure by Seller to deliver a
quantity of Gas Scheduled for delivery within the MDFQ
as follows:
(A) Seller delivers none of the Gas Scheduled for
delivery on any Day within the MDFQ for a total of
twenty (20) consecutive Days; or
(B) Seller delivers less than 50% of the quantity
of Gas Scheduled for delivery on any Day within
the MDFQ for a total of thirty (30) Days within a
rolling twelve (12) Month period; or
(C) Seller delivers less than 75% of the quantity
of Gas Scheduled for delivery on any Day within
the MDFQ for a total of sixty (60) Days within a
rolling twelve (12) Month period; or
(D) Seller delivers less than 90% of the quantity
of Gas Scheduled for delivery on any Day within
the MDFQ for a total of ninety (90) Days within a
rolling twelve (12) Month period.
(ii) An unexcused failure by Seller to deliver Gas
Scheduled for delivery within the MDFQ may fall within
each of the conditions set forth in Section 17.2(b)(i)
concurrently to the extent applicable. Nothing in this
Section 17.2 shall excuse Seller's obligation to pay
liquidated damages under Section 17.1(a) and the
payment of such liquidated damages shall not cure the
default arising on account of Seller's non-delivery.
(c) A material breach of any other covenant or other
obligation in this Agreement or the Consent and Agreement or
any representation or warranty made by a Party herein or in
the Consent and Agreement shall prove to have been incorrect
in any material respect as of the date made, and (i) such
breach or incorrect statement continues and is not cured for
a period of thirty (30) Days after Notice of such non-
performance from the other Party, or (ii) if within such
thirty- (30) Day period the non-performing Party commences
and proceeds with due diligence to cure the breach or
incorrect statement and the breach or incorrect statement is
not cured within ninety (90) Days or such longer period of
time agreed to by the Parties in writing as being necessary
for the Party to cure the breach or incorrect statement with
al] due diligence; provided, however, that if a Party is
stayed or otherwise prevented from giving such Notice by
court order or otherwise by operation of law, an Event of
Default shall be deemed to have automatically occurred if
such failure continues for a period of thirty (30) days
after the occurrence thereof; or
(d) The Parent Guaranty shall cease to be in full force and
effect or MCN Corporation shall materially breach any of its
obligations thereunder.
(e) If by order of a court of competent jurisdiction, a
receiver or liquidator or trustee of a Party or MCN
Corporation shall be appointed and such receiver, liquidator
or trustee shall not have been discharged within a period of
sixty (60) Days; or if by decree of such a court, either of
the Parties or MCN Corporation shall be adjudicated bankrupt
or insolvent under applicable law or any substantial part of
the property of such Party or MCN Corporation shall have
been sequestered, or such decree shall have continued
undischarged and unstayed for a period of sixty (60) Days
after the entry thereof; or if a petition to declare
bankruptcy or to reorganize either of the Parties or MCN
Corporation pursuant to any of the provisions of the
Bankruptcy Code, or pursuant to any other similar state
statute or law apply cable to such Party or MCN Corporation,
as now or hereafter in effect , shall be filed against such
Party or MCN Corporation and shall not be dismissed with
sixty (60) Days after such filing; or
(f) If either of the Parties or MCN Corporation shall file a
voluntary petition in bankruptcy under any provision of any
applicable bankruptcy or insolvency law or shall consent to
the filing of any bankruptcy or reorganization petition
against it under any similar law; or, without limitation of
the generality of the foregoing, if either of the Parties or
MCN Corporation 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 Bankruptcy
Code, or pursuant to any other similar statute applicable to
such Party or MCN Corporation, as now or hereafter in
effect, or an answer admitting the material allegations of a
petition filed against it in such a proceeding; or if either
of the Parties or MCN Corporation shall make a general
assignment for the benefit of its creditors; or if either of
the Parties or MCN Corporation shall admit in writing its
inability to pay its debts generally as they become due; or
if either of the Parties or MCN Corporation shall consent to
the appointment of a receiver or receivers, or trustee or
trustees, or liquidator or liquidators of it or of all or of
any part of its property.
Section 17.3 Remedies for Breach. Should an Event of Default
occur and be continuing, the Party not in default shall
thereafter have the right:
(a) In the case of an Event of Default under Section
17.2(a) hereof, to immediately suspend its performance under
this Agreement, and to terminate this Agreement upon Notice
if after a suspension period of at least forty-five (45)
Days, the Event of Default is not cured, provided, that if a
party is stayed or otherwise prevented by operation of law
from giving such Notice, such termination shall
automatically occur at the end of such 45-Day period or, in
the case of any other Event of Default, to immediately
suspend its performance hereunder and at any time to
terminate this Agreement; provided, however, any such
termination shall occur within 180 Days of the Event of
Default or such longer period to the extent such termination
is stayed or otherwise prevented by operation of law; and
(b) To pursue any other remedy provided under this
Agreement or now or hereafter existing at law or in equity
(except to the extent such remedy is limited by Sections
17.1 and 19.11) or otherwise as expressly stated herein; and
(c) If an Event of Default by Seller has occurred (whether
or not this Agreement has been terminated in respect
thereof), Buyer may elect, in addition to any other remedy
available to Buyer under this Agreement, but without
duplication of amounts paid under Section 17.1(a), to
determine, as of a date chosen by Buyer occurring on or
after the date of such Event of Default (the "Determination
Date") the Replacement Cost (as hereinafter defined) for all
of the Remaining Contract Obligations (as hereinafter
defined), in which case Seller agrees to pay such
Replacement Cost to Buyer by wire transfer in accordance
with Buyer's instructions within twenty (20) Days after
Seller's receipt of Buyer's invoice, setting forth the basis
for deriving such Replacement Cost, provided, that if Buyer
is stayed or otherwise prevented by operation of law from
delivering such invoice, such Replacement Cost shall become
automatically due and payable on the Determination Date. On
the Determination Date, this Agreement shall automatically
terminate, unless such termination had already occurred. In
the same manner and on the same date that the Replacement
Cost becomes due and payable hereunder, Seller shall also
pay to Buyer (i) damages calculated pursuant to Section 17.1
for each Day up to the Determination Date that Seller would
have had to pay as damages to Buyer under said Section 17.1
on account of a failure by Seller to deliver a quantity of
Gas on such Day, (ii) any amounts that Buyer has previously
paid to Seller under Section 3.2 and Article VII which Buyer
has not made up pursuant to Section 3.3 and any amounts
which Seller owes under Section 8.6 hereof, and (iii) all
other amounts then due from Seller hereunder. Seller shall
pay to Buyer interest at the Interest Rate on all amounts
payable under this Section 17.3 from the date such amounts
become due to the date of payment thereof. For purposes of
this Section 17.3, the following terms shall have the
indicated meanings:
The "Replacement Cost" shall be a lump sum payment
amount equal to the present value of the sum of the
following amounts, discounted, in the case of periodic
payments, to the Determination Date on an annual basis
at the applicable "Treasury Rate":
(A) the amount by which (y) the cost of the
Replacement Gas Supply, based on terms and
conditions that are reasonable (giving
consideration to, among other things, Buyer's need
to obtain a replacement contract or contracts in a
timely manner that is satisfactory to Power
Purchaser in order to fulfill Buyer's obligations
under its project agreements) under conditions
existing on the Determination Date, exceeds (z)
the aggregate contract price hereunder that the
Buyer would have paid to Seller if Seller
delivered the Remaining Contract Obligations,
under conditions existing at the Determination
Date, to Buyer hereunder, which cost of the
Replacement Gas Supply shall be determined by
Buyer in a reasonable manner; provided, that for
purposes of determining such cost, Buyer may, at
its option, arrange for a replacement contract or
contracts from a Qualified Supplier or Suppliers
on terms and conditions reasonably acceptable to
Buyer and Financing Parties for the sale and
delivery to Buyer of quantities of Gas up to the
Remaining Contract Obligations, in which case the
cost of the Replacement Gas Supply shall be
conclusively determined based on the cost
established by such contract or contracts to the
extent of the portion of the Remaining Contract
Obligations covered thereby, and such cost
established by such contracts shall be deemed
irrebuttably to be the most reasonable cost
available for the Replacement Gas Supply; plus
(B) the amount of all transportation and other
costs and incidental charges and expenses,
including, without limitation, the cost of
obtaining a "firm" receipt point or points for Gas
other than the Delivery Point(s) (including any
contribution-in-aid of construction), that would
be incurred by Buyer in connection with obtaining
the Remaining Contract Obligations under a
Replacement Gas Supply, except for those
transportation costs for which Buyer is obligated
to pay under this Agreement as of the
Determination Date; plus
(C) the cost of any swap or option which Buyer
obtains or pays for in connection with the
Replacement Gas Supply.
"Replacement Gas Supply" shall mean the substitute
supply of Gas that Buyer must acquire to replace the
Remaining Contract Obligations.
"Qualified Supplier" shall mean a natural gas supplier
which is reasonably acceptable to Buyer and Financing
Parties; provided that the creditworthiness of such
supplier must be acceptable to the Financing Parties in
their sole discretion. To the extent that such natural
gas supplier is affiliated with Buyer, to be considered
a Qualified Supplier, the price offered by such
affiliate must be comparable to an offer submitted by
an unaffiliated supplier with similar credit and gas
supply characteristics as Buyer's affiliated gas
supplier.
"Remaining Contract Obligations" shall mean, at any
time in question, the sum of the Maximum Daily Firm
Quantities for each Day remaining in the Principal Term
(as adjusted pursuant to Appendix I hereto) or the
Extended Term, if applicable, of this Agreement.
"Treasury Rate" shall mean (i) if on the Determination
Date the last day of the remaining term of this
Agreement (assuming that it was not being terminated
early pursuant hereto) (the "Final Day") occurs less
than one year after the Determination Date, the average
yield to maturity on a government bond equivalent basis
of the applicable United States Treasury Bill due the
week of the Final Day and (ii) if the Final Day occurs
one year or more after the Determination Date, the
average yield of the most actively traded United States
Treasury Note (as reported by Cantor Fitzgerald
Securities Corp. on Page 5 of Telerate Systems Inc., a
financial news service, or if such report is not
available, a source deemed comparable by an independent
investment banking institution of national standing
appointed by the Buyer (an "Independent Investment
Banker") corresponding in maturity to the Final Day (or
if there is no corresponding maturity, an interpolation
of the two nearest maturities determined by the
Independent Investment Banker), in each case under (i)
and (ii) above determined by the Independent Investment
Banker based on the bid prices as of 10:00 a.m., New
York time, on the second business day preceding the
Determination Date.
(d) The parties agree that any amounts payable under
Sections 17.1 and 17.3 are a reasonable estimate of the
measure of harm that Buyer would actually suffer under the
circumstances with respect to the time periods for which the
payments are made; that the actual harm that Buyer would
suffer with respect to such time periods would be difficult
or impossible to establish) and that the amounts determined
under Sections 17.1 and 17.3, as applicable, are reasonable
and do not constitute penalties and may not therefore be
challenged or avoided.
(e) Notwithstanding anything to the contrary herein, in the
case of an Event of Default by Buyer, Seller shall not be
entitled to suspend or terminate its performance hereunder
unless Seller shall have complied with the terms and
conditions of the Consent and Agreement.
(f) Notwithstanding any other provision of this Agreement
to the contrary, in the case of an Event of Default by
Seller, Buyer shall not be entitled to terminate this
Agreement or enter into a contract for Replacement Gas
Supply pursuant to the provisions of Section 17.3(c) without
the express prior written consent of the Financing Parties.
(g) Upon the occurrence of an Event of Default with respect
to either of the Parties hereunder, such defaulting Party
shall be obligated to pay to the other Party all costs and
expenses (including reasonable legal fees) incurred by such
other Party in exercising, enforcing or defending its rights
and remedies under this Agreement on account of such Event
of Default.
(h) Section 17.3 shall survive the termination of this
Agreement.
Section 17.4 Special Termination Event
(a) If the Power Purchaser shall give the Buyer notice of a
Fuel Default (as defined in Section 1.11 of the Power
Purchaser Consent) which notice describes as one of its
reasons any fact or circumstance relating to Seller, MCN
Corporation or any of their respective affiliates, or any of
the transactions contemplated by this Agreement or the Fuel
Supply Management Agreement or the performance or
nonperformance by Seller, MCN Corporation or any of their
respective affiliates of this Agreement, the Fuel Supply
Management Agreement, or any guaranty of any thereof (such
an alleged Fuel Default being herein called, a "Seller Fuel
Default"), then Buyer shall give Seller written notice of
such Seller Fuel Default, and Buyer and Seller, together
with the Financing Parties, shall promptly meet to discuss
such Seller Fuel Default. Seller shall in good faith use
its Best Efforts to promptly cure such Seller Fuel Default
to the satisfaction of Power Purchaser. Notwithstanding any
other provision of this Agreement, if a Fuel/Performance
Failure (as defined in Section 1. 11 of the Power Purchaser
Consent) shall occur before the Power Purchaser shall agree
that the Seller Fuel Default has been cured, then on the
date (the "Last Cure Date") which is the later of (a) thirty
(30) Days after Seller is notified of the Seller Fuel
Default or (b) the date on which the Power Purchaser alleges
that a Fuel/Performance Failure related to such Seller Fuel
Default has occurred, Buyer may, and at the direction of the
Financing Parties shall, immediately terminate this
Agreement by giving written notice to Seller unless on or
prior to the Last Cure Date Power Purchaser shall agree, in
writing, that both such Fuel/Performance Failure and Seller
Fuel Default have been cured. Upon such termination, Buyer
and Seller shall be relieved of all their obligations
hereunder, except that Buyer shall pay to Seller any unpaid
amounts owed to Seller under this Agreement as of the date
of such termination and Seller shall pay to Buyer any unpaid
amounts owed to Buyer under this Agreement as of the date of
such termination, including, without limitation, any amounts
payable to Buyer under Sections 3.3 or 8.6 hereof. The
Parties shall in good faith try to settle the respective
amounts, if any, owed to each other, within thirty (30) Days
after such termination. This Section 17.4 shall be without
derogation of the Parties' rights and remedies, including
the remedies of termination and damages under Section 17.3,
in the case of an Event of Default by either Party.
(b) (i) In the event of a termination by Buyer
pursuant to Section 17.4(a), for each Month following
the determination of the Swap Price (as determined
below) until the Month in which the Principal Term
would have ended, Buyer shall pay to Seller a portion
of "Distributable Cash" (as defined below) equal to the
positive difference between (A) the product of (x) the
Limited Dispatch Commodity Charge that would have been
in effect for such Month, multiplied by (y) the Minimum
Limited Dispatch Quantity that would have been in
effect for the Agreement Year in which such Month falls
divided by twelve (12), minus (B) the product of (x)
the Swap Price then in effect, multiplied by (y) the
Minimum Limited Dispatch Quantity in effect for the
Agreement Year in which such Month falls divided by
twelve (12) (such difference, the "Differential
Amount". The Swap Price shall be equal to the sum of
(A) the Swap Average Price, plus (B) the Swap Margin.
At the end of what would have been an Agreement Year
had this agreement not been terminated, the Swap Price
shall escalate. Effective on the date that would have
been an Escalation Date had this Agreement not been
terminated, the Swap Price shall be determined by
multiplying (A) the Swap Price in effect on the Day
before the Escalation Date, times (B) 1.04. The Swap
Average Price shall be determined as follows: Within
thirty (30) Days after the Day Buyer terminates this
Agreement pursuant to Section 17.4(a), the Parties
shall request that Merrill Lynch, AIG and Phibro Energy
each quote an "ask" price and a "bid" price for 7,000
MMBtu per Day of Gas at the NYMEX Henry Hub price
through the end of the Principal Term, assuming an
annual escalation rate of four percent (4%). The Swap
Average Price shall equal the arithmetic average of the
ask prices and bid prices received by the Parties for
the first year. If Merrill Lynch, AIG or Phibro Energy
no longer provides ask or bid price quotes, the Parties
shall mutually agree to a substitute third party to
provide an ask price and a bid price quote. The Swap
Margin as of the Initial Delivery Date shall equal
$0.40 per MMBtu. Effective each Escalation Date, until
this Agreement is terminated pursuant to Section 17.4,
the Swap Margin shall be determined by multiplying (A)
the Swap Margin in effect on the Day before the
Escalation Date, times (B) 1.04.
(ii) The provisions of this Section 17.4(b) shall not
apply, and no amount shall be due and payable under
this Agreement, if this Agreement is terminated for any
reason other than pursuant to Section 17.4(a),
regardless of whether a Fuel Default or
Fuel/Performance Default has occurred or is existing on
or before the effective date of termination.
(iii) Notwithstanding anything to the contrary
contained herein, upon the occurrence of an
"Enforcement Act" (as defined below), any and all of
Seller's rights arising under this Section 17.4(b),
including but not limited to Seller's right to payment
of the Differential Amounts for periods prior to the
Enforcement Act, shall immediately cease and terminate
and be of no further force or effect.
(iv) Seller understands and agrees that distributions
of Distributable Cash may be restricted by the
Financing Documents now or in the future and that the
Security Deposit Agreement may be changed to provide
for the payment of additional amounts to other parties
(whether now or hereafter provided for in such Security
Deposit Agreement). The Seller agrees that its right
to receive Differential Amounts is not a debt of the
Buyer. Seller also agrees that any default, breach,
rejection or repudiation by Buyer of any obligation or
provision contained in this Section 17.4(b) shall not
be a default by Buyer under this Agreement, including,
without limitation, for purposes of Section 17.2
hereof; provided, however, that Seller shall have the
right to seek to compel specific performance of Buyer's
obligations set forth in this Section 17.4. In no
event shall Seller make any claim against or assert any
lien on the Facility or any other asset of Buyer by
reason of the matters set forth in this Section
17.4(b). Buyer's obligation to pay Differential
Amounts shall be non-recourse to Buyer except to the
extent Buyer receives Distributable Cash, and then
recourse shall be limited to such Distributable Cash.
Seller agrees that it shall have no right to institute
any action or proceeding or otherwise take any action
against any Financing Party or any security agent or
owner trustee with respect to this Section 17.4(b).
Seller further agrees that it shall have no right to
institute any action or proceeding or otherwise take
any action against Buyer to enforce payment or
performance of any obligation or agreement contained in
this Section 17.4(b) unless and until the Financing
Parties have been paid in full all amounts outstanding
under any of the Financing Documents and such Financing
Documents have terminated; provided, however, that
Seller shall have the right to seek to compel specific
performance of Buyer's obligations set forth in Section
17.4(b).
(v) For purposes of this Section 17.4(b), (A)
"Distributable Cash" shall mean, at any time in
question, all cash then distributable to Buyer pursuant
to Section 4.9(b) of the Security Deposit Agreement,
but only if the conditions in such Section to
distribution have been satisfied; (B) "Security Deposit
Agreement" shall mean that certain Security Deposit
Agreement, dated as of March 30, 1995, among the Buyer,
Panda Brandywine Corporation, General Electric Capital
Corporation and Shawmut Bank Connecticut, National
Association, as security agent, owner trustee and
lessor, as such agreement may be amended, supplemented
or modified from time to time; and (C) the term
"Enforcement Act" shall mean the sale or transfer of
the Facility or the partnership interests in the Buyer
or the stock of the general and/or limited partner of
Buyer to any of the Financing Parties or to any third
parties pursuant to (1) the request of the Financing
Parties on account of an Event of Default under the
Financing Documents, or (2) a foreclosure action or
proceeding in accordance with the Financing Documents,
or (3) the exercise of other rights and remedies by the
Financing Parties under the Financing Documents.
(vi) For so long as the Security Deposit Agreement is
in effect, Buyer agrees to cause the Security Agent
under such Security Deposit Agreement to promptly
distribute to Seller, on a quarterly basis, to the
extent funds are available therefor, the Distributable
Cash, if any, payable to Seller hereunder, as provided
in Section 17.4(b)(i) and pursuant to the terms of the
Security Deposit Agreement.
(vii) If the Security Deposit Agreement shall be
amended or terminated so that cash is no longer
distributed to Buyer thereunder, but is distributed to
Buyer free and clear of any lien of the Financing
Parties pursuant to some other agreement, then
"Distributable Cash" shall mean such cash being
distributed to Buyer pursuant to such other agreement.
If the Financing Parties are paid in full all amounts
outstanding under the Financing Documents and such
Financing Documents have been terminated, then
"Distributable Cash" shall mean all revenues of the
Buyer's Facility.
(c) Section 17.4(b) shall survive the termination of this
Agreement.
ARTICLE XVIII
ARBITRATION
Section 18.1 Arbitration of Disputes. Except as otherwise
provided in this Agreement, any disagreement, dispute,
controversy or claim arising out of or relating to this
Agreement, or the interpretation hereof, or any arrangements
relating hereto or contemplated herein or the breach, termination
or invalidity hereof, shall be settled exclusively and finally by
arbitration. It is specifically understood and agreed that any
disagreement, dispute or controversy which cannot be resolved
between the Parties, including without limitation any matter
relating to the interpretation of this Agreement, shall, upon
election by either Party' be submitted to arbitration
irrespective of the magnitude thereof, the amount in controversy
or whether such disagreement, dispute or controversy would
otherwise be considered justifiable or ripe for resolution by a
court or arbitral tribunal. Should either Party submit a request
for arbitration to determine whether an Event of Default has
occurred or whether and when a termination of the Agreement will
or had occurred prior to expiration of the Principal Term, or
Extended Term if applicable, the Party seeking to declare such
Event of Default and/or terminate this Agreement may do so and
may exercise its remedies as provided herein notwithstanding the
pending arbitration request or proceeding and such declaration
and/or termination shall be effective, provided, nothing shall
preclude the other Party from seeking and recovering damages
through the above procedure for a wrongful declaration of an
Event of Default or a wrongful termination; provided, however,
that a request for arbitration by Buyer shall prevent such a
declaration or termination by Seller if Seller is seeking to do
so for any reason other than nonpayment by Buyer for Gas
delivered by Seller. Except as otherwise provided in the
immediately preceding sentence, the Parties shall be obligated to
continue performance under this Agreement during the pendency of
dispute resolution provided for herein. Except as otherwise
provided in Article VIII hereof, any dispute or arbitration, or
request therefor, will not prevent any amount payable by either
Party hereunder from becoming due as provided herein nor suspend
the obligation of such Party to make such payment when due;
provided that nothing shall preclude the paying Party from
seeking to recover such payment through the arbitration procedure
to the extent such payment was not due and owing hereunder.
Section 18.2 Appointment of Board. Any dispute between Seller
and Buyer submitted to arbitration pursuant to this Article XVIII
shall be detained by a board of arbitration consisting of three
(3) arbitrators to be selected for each such dispute as follows:
either Party may, at the time a board of arbitration is desired,
notify the other that the dispute is to be resolved pursuant to
this Article XVIII. The notice of arbitration shall not be
effective or valid unless the notifying Party includes in such
notice the name of one arbitrator. The other Party shall, within
fifteen (15) Days thereafter, select an arbitrator and notify the
Party desiring arbitration of the name of such arbitrator. If
such other Party shall fail to name a second arbitrator within
such fifteen- (15) Day period, the notifying Party shall select
the second arbitrator and give written notice to the other Party
of the selection of the second arbitrator and the second
arbitrator's identity. The two (2) arbitrators chosen shall,
within ten (10) Days after notice is given of the appointment of
the second arbitrator, choose a third arbitrator. In the event
of their failure to do so within ten (10) Days, either Party to
this Agreement may in like manner, on reasonable notice to the
other Party, apply to the Chief Judge, or his designee, of the
United States District Court for the District of Maryland for the
appointment of a third arbitrator. The arbitrators selected to
act hereunder shall be qualified by education, experience and
training to pass upon the particular question in dispute and
shall have had no financial interest in or have been an officer,
director or employee of either Party. Washington, D.C. shall be
the site of the arbitration hearing. The arbitrators shall not
have jurisdiction or authority to add to, detract from, or alter
in any way the provisions of this Agreement.
Section 18.3 Hearing and Decision. Applying the commercial
rules of the American Arbitration Association, the board of
arbitration shall promptly hear and determine (after giving the
Parties due notice of hearing and reasonable opportunity to be
heard) the question(s) submitted and shall render their decision
in writing within ninety (90) Days after appointment of the third
arbitrator.
Section 18.4 Effect of Decision; Costs. The written decision of
a majority of the board of arbitration shall be final and binding
upon the Parties as to each question submitted, and the Parties
shall abide by and comply with such decision and a judgment may
be entered upon such decision or award in a court of competent
jurisdiction. Such written decision may be issued with or
without an opinion; provided, however, if any Party requests a
written opinion with regard to a decision, one shall be issued
expeditiously, but its issuance shall not delay compliance with
the implementation of such decision. Each Party shall bear the
cost of the services and the expenses of the arbitrator(s)
appointed by it. Buyer and Seller shall equally bear the cost of
the services and the expense of the third arbitrator. All other
costs of arbitration proceedings, including legal costs and costs
of witnesses and employees, shall be paid by the Party bearing
such cost, unless the board of arbitration determines that the
claim giving rise to the arbitration proceeding is without merit,
in which case all such costs shall be the responsibility of the
Party raising such claim.
ARTICLE XIX
MISCELLANEOUS PROVISIONS
Section 19.1 Captions. The headings used throughout this
Agreement are inserted for reference purposes only and are not to
be considered or taken into account in construing the terms or
provisions of any Article or Section hereof nor to be deemed in
any way to qualify, modify or explain the effect of any such
provisions or terms.
SECTION 19.2 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, CONSTRUED IN ACCORDANCE WITH AND ENFORCED PURSUANT TO THE
LAWS OF THE STATE OF MARYLAND, EXCLUDING ANY CONFLICT-OF-LAW
RULES WHICH WOULD DIRECT THE APPLICATION OF THE LAW OF MOTHER
JURISDICTION.
Section 19.3 Other Agreements. This Agreement constitutes the
entire Agreement between the Parties relating to the subject
matter hereof and supersedes any other agreements, written or
oral, between the Parties concerning the subject matter.
Section 19.4 Binding Effect. The terms and provisions of this
Agreement, and the respective rights and obligations hereunder of
Seller and Buyer, shall be binding upon, and inure to the benefit
of, their respective successors and permitted assigns. Nothing
expressed or implied in this Agreement is intended to confer any
rights on any Person other than Buyer, Seller, the Financing
Parties and their respective successors and permitted assigns
and, solely with respect to Section 17.1(a)(i), Washington Gas
Light.
Section 19.5 Confidentiality. Each Party agrees that it will
maintain this Agreement, and all parts and contents thereof, or
any information exchanged under Articles XI, XII, XV and XVIII
thereof, in strict confidence, and that it will not cause or
permit disclosure of same to any unaffiliated third party without
the express written consent of the other Party; provided,
however, that disclosure by a Party is permitted in the event and
to the extent that:
(a) Such Party is required by a court or governmental
agency exercising jurisdiction over the subject matter
hereof, by order or by regulation, to make such a disclosure
(provided, however, that in the event either Party becomes
aware of a judicial or administrative proceeding that has
resulted or may result in such an order requiring
disclosure, it shall (i) so notify the other Party
immediately, (ii) utilize with the other Party all
reasonably available means to limit the scope of the order
or regulation requiring disclosure, and (iii) take with the
other Party all actions reasonably necessary to prevent
disclosure to the public as a result of disclosure to the
court or administrative body);
(b) Disclosure is necessary to obtain any Government
Approval covered or contemplated by this Agreement; or
(c) Disclosure is required in the course of routine audit
procedures or pursuant to the rules or requirements of any
securities exchange on which a Party's securities are listed
or securities commission having jurisdiction over a Party.
Provided that it secures from such persons an agreement to
preserve the confidentiality hereof in accordance with this
Section 19.5 reasonably acceptable in form and substance to
Seller, Buyer also may disclose the contents hereof to Washington
Gas Light, Power Purchaser or Financing Parties (or their
attorneys, consultants and agents) to the extent required by
Buyer's contracts with such persons or as necessary for Buyer to
obtain financing from such Financing Parties as well as to
Buyer's attorneys, consultants and agents. Likewise, Seller may
disclose the contents hereof to its affiliates and to third
parties from which Seller seeks financing, and to Seller's or the
third party's attorneys, consultants or agents, provided that it
secures from such third parties an agreement to preserve the
confidentiality hereof in accordance with this Section 19.5
reasonably acceptable in form and substance to Buyer. Buyer
agrees to allow Seller to delete any pricing information Seller
reasonably believes to be commercially sensitive from any copy of
this Agreement provided to Washington Gas Light.
Section 19.6 NonWaiver of Defaults No waiver by either Party of
any default of the other Party under this Agreement shall operate
as a waiver of a future default, whether of a like or different
character.
Section 19.7 Written Amendments. No modification of the terms
and provisions of this Agreement shall be or become effective
except by written amendment executed by the Parties.
Section 19.8 Severability and Renegotiation. Should any
provision of this Agreement for any reason be declared or
rendered invalid or unenforceable by any law or final and non
appealable order of any court or regulatory body having
jurisdiction, such law or decision shall not affect the validity
of the remaining portions, and the remaining portions shall
remain in force and effect as if this Agreement had been executed
without the invalid or unenforceable portion. In the event any
provision(s) of this Agreement is declared invalid or
unenforceable and the invalidity or unenforceability of such
provision(s) materially alters the economic bargain of the
Parties, this Agreement shall remain in full force and effect if
the Parties are able to promptly negotiate in good faith a new
provision(s) to eliminate the invalid or unenforceable
provision(s) and to restore this Agreement as nearly as possible
to its original effect, consistent with the original intent of
the Parties.
Section 19.9 Survival. Any provision(s) of this Agreement that
expressly or by implication comes into or remains in force
following the termination or expiration of this Agreement shall
survive the termination or expiration of this Agreement.
Section 19.10 Further Assurances. The Parties shall execute or
provide such additional documents including, without limitation,
the Consent and Agreement, limited opinions of counsel,
certificates, or similar documents, and shall cause such
additional action to be taken as may be requested by a Party if
in the reasonable good faith judgment of both Parties, such
action is reasonably necessary or desirable, to effect or
evidence the provisions of this Agreement and the transactions
contemplated hereby.
Section 19.11 Limitation of Liability. Notwithstanding anything
to the contrary in this Agreement, neither Buyer nor Seller, nor
any of their directors, trustees, agents, shareholders, partners,
affiliates, officers or employees shall be liable to the other
Party, its directors, trustees, agents, shareholders, partners,
affiliates, officers or employees, whether as a result of breach
of contract, breach of warranty, tort liability (including both
negligence and strict liability), strict liability or otherwise,
for incidental, special, indirect, punitive or consequential
damages whatsoever, including without limitation, loss of profits
or revenue, of any nature connected with or resulting from non-
performance or breach of this Agreement, except to the extent
that Sections 17.1 and 17.3 may be deemed to contain such
damages.
Section 19.12 Waiver of UCC Warranties. BUYER ACKNOWLEDGES THAT
IT HAS ENTERED INTO THIS AGREEMENT AND IS CONTRACTING FOR THE
GOODS AND SERVICES TO BE SUPPLIED BY SELLER BASED SOLELY ON THE
EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN AND,
SUBJECT TO THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH
HEREIN, ACCEPTS SUCH GOODS AND SERVICES " AS-IS " AND "WITH ALL
FAULTS." EXCEPT AS TO THE EXPRESS REPRESENTATIONS AND WARRANTIES
SET FORTH HEREIN, SELLER EXPRESSLY NEGATES ANY OTHER
REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED,
WITH RESPECT TO SUCH GOODS AND SERVICES, INCLUDING, WITHOUT
LIMITATION, ANY REPRESENTATION OR WARRANTY WITH RESPECT TO (A)
CONFORMITY TO MODELS OR SAMPLES, ( B ) MERCHANTABILITY, OR ( C )
FITNESS FOR ANY PARTICULAR PURPOSE.
Section 19.13 Counterpart. This Agreement may be executed in
multiple counterparts each of which shall constitute an original,
but all of which together shall constitute one and the same
instrument.
Section 19.14 Winding-Up. Upon the termination, expiration or
cancellation of this Agreement and the expiration of the Parties'
obligations hereunder, any amounts due and owing to either of the
Parties shall be paid pursuant to the terms hereof, and any
corrections or adjustments to payments previously made shall be
determined and any refunds or payments due either of the Parties
made at the earliest possible time, and any Gas Imbalances shall
be corrected within sixty (60) Days. The Parties' obligations,
as provided in this Agreement, shall remain in effect solely for
the purpose of complying under this section until the obligations
have been fulfilled.
Section 19.15 Preparation. This Agreement was negotiated by
both Parties hereto with advice of counsel to the extent deemed
necessary by each Party, and shall not be construed against
either Party by reason of its preparation.
Section 19.16 Seller's Reservation. Seller reserves unto itself
the sole and exclusive right to operate its Gas reserves and
supplies without interference by Buyer or any third party, except
as may be expressly provided by other provisions of this
Agreement.
IN WITNESS WHEREOF, intending to be legally bound, the Parties
hereto have caused this Agreement to be entered into by their
duly authorized officers or representatives as of the day and
year first above written.
SELLER: COGEN DEVELOPMENT COMPANY
By: /s/ Daniel L. Schiffer
_____________________________________
Name: Daniel L. Schiffer
_____________________________________
Title: Secretary
_____________________________________
BUYER: PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation , its
General Partner
By: /S/ Ralph T. Killian
_____________________________________
Name: Ralph T. Killian
_____________________________________
Title: Vice President
_____________________________________
Exhibit A to
Gas Sales
Agreement
CONSENT AND AGREEMENT
CONSENT AND AGREEMENT (the "Consent"), dated as of March
30, 1995, among COGEN DEVELOPMENT COMPANY, a Michigan corporation
("Contract Party"), PANDA-BRANDYWINE, L.P., a Delaware limited
partnership (the "Partnership"), GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation ("GE Capital") and SHAWMUT BANK
CONNECTICUT, NATIONAL ASSOCIATION, in its capacity as Security Agent
(the "Security Agent") under the Security Deposit Agreement (as
defined in the Loan Agreement referred to below).
All capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in Appendix A to the
Loan Agreement, as defined below.
W I T N E S S E T H
WHEREAS, Contract Party and the Partnership have entered
into the Gas Sales Agreement, dated March 30, 1995 (the Gas Sales
Agreements"), providing for among other things, the sale of natural
gas, and the Fuel Supply Management Agreement, dated March 30, 1995
(the "Fuel Management Agreement), providing for, among other things,
the management of the Partnership's gas supply arrangements (the Gas
Sales Agreement and the Fuel Management Agreement, as amended,
supplemented or otherwise modified from time to timer the "Assigned
Agreements");
WHEREAS, in order to finance the construction of the
Project, the Partnership has entered into a Construction Loan
Agreement and Lease Commitment, dated as of March 30, 1995, with GE
Capital (as amended, supplemented or otherwise modified from time to
time, the "Loan Agreement") pursuant to which GE Capital would,
subject to the terms and conditions contained therein, among other
things, (i) make loans to the Partnership and issue certain letters
of credit for the account of the Partnership for the purpose of
providing construction financing for the Project (all extensions of
credit made pursuant to the Loan Agreement being referred to herein
as the Loans), (ii) (acting through the Owner Trustee established for
the benefit of GE Capital) lease the Site from the Partnership and
sublease the Site back to the Partnership and (iii) (acting through
the Owner Trustee established for the benefit of GE Capital) upon
completion of the Project, purchase the Facility from the Partnership
and lease the Facility back to the Partnership pursuant to the
Facility Lease;
WHEREAS, as security for the repayment of the Loans to GE
Capital and its obligations under the Site Sublease and the Facility
Lease to the Owner Trustee, the Partnership has assigned all of its
right, title and interest in, to and under, and granted a security
interest in, the Assigned Agreements to the Security Agent, for the
benefit of the Owner Trustee and GE Capital, pursuant to (i) the
Collateral Assignment of Gas Sales Contract, dated as of the date
hereof, and the Collateral Assignment of the Fuel Management
Contract, dated as of the date hereof (the "Assignments"), copies of
which are attached as Exhibit A), (ii) the Deed of Trust and Security
Agreement, dated as of the date hereof, between the Partnership and
Chicago Title Insurance Company, as trustee for the benefit of the
Security Agent, as the same may be amended, supplemented or otherwise
modified from time to time (the "Deed of Trust"), and (iii) the
Security Agreement, dated as of the date hereof, between the
Partnership and the Security Agent, as amended, supplemented or
otherwise modified from time to time (together with the Assignments
and the Deed of Trust, the "Security Agreements");
WHEREAS, it is a condition precedent to GE Capital's
obligation to make the Loans under the Loan Agreement that the
Contract Party and the Partnership execute and deliver this Consent;
NOW THEREFORE, in consideration of good and valuable
consideration, the receipt of which is hereby acknowledged, and
intending to be legally bound, Contract Party, the Partnership, GE
Capital and the Security Agent hereby agree as follows, anything in
the Assigned Agreements to the contrary notwithstanding.
SECTION 1. CONSENT TO ASSIGNMENT, SALE AND LEASE ETC.
1.1 Consent to Assignment. Contract Party (a) consents to the pledge
and assignment to the Security Agent, for the benefit of the Owner
Trustee and GE Capital, of all of the Partnership's right, title and
interest in, to and under the Assigned Agreements pursuant to the
Security Agreement (the "Assigned Interest"), and (b) acknowledges
the right of the Security Agent in the exercise of its rights and
remedies under the Security Agreement to make all demands, give all
notices, take all actions and exercise all rights of the Partnership
under the Assigned Agreements; provided that, insofar as the Security
Agent exercises any of its rights under the Assigned Agreements or
makes any claims with respect to payments or other obligations under
the Assigned Agreements, the terms and conditions of the Assigned
Agreements applicable to such exercise of rights or claims shall
apply to the Security Agent to the same extent as to the Partnership.
1.2 Substitute Owner. Contract Party agrees that, if GE Capital, the
Owner Trustee or the Security Agent shall notify Contract Party that
an Event of Default under the Loan Agreement or a Lease Event of
Default under the Facility Lease has occurred and is continuing and
that the Security Agent has elected to exercise its rights and
remedies pursuant to the Security Agreement, then the Security Agent,
or the Security Agent's transferee or any purchaser of the Assigned
Interest, in each case, which party has elected to assume the rights
and obligations of the Partnership under the Assigned Agreements (the
"Substitute Owner"), shall be substituted for the Partnership under
the Assigned Agreements.
l.3 Right to Cure. In the event of a default by the Partnership in
the performance of any of its obligations under the Assigned
Agreements, or upon the occurrence or non-occurrence of any event or
condition under the Assigned Agreements which would immediately or
with the passage of any applicable grace period or the giving of
notice, or both, enable Contract Party to terminate or suspend its
obligations under the Assigned Agreements (hereinafter a "default"),
Contract Party may suspend performance in accordance with the
Assigned Agreements but will not terminate the Assigned Agreements
until it first gives prompt written notice of such default to GE
Capital and the Security Agent and affords GE Capital and the
Security Agent a period of at least 60 days (or if such default is a
nonmonetary default, such longer period as is required so long as GE
Capital or the Security Agent has commenced and is diligently
pursuing appropriate action to cure such default) from receipt of
such notice to cure such default; provided, however, that if GE
Capital or the Security Agent is prohibited by any process, stay or
injunction issued by any governmental authority or by any bankruptcy
or insolvency proceeding involving the Partnership from curing any
such default, the time periods specified herein for curing a default
shall be extended for the period of such prohibition.
1.4 No Amendments. Contract Party will not, without the prior written
consent of the Security Agent or GE Capital, enter into any
amendment, supplement, assignment, transfer or other modification of
the Assigned Agreements, or enter into any consensual cancellation or
termination of the Assigned Agreements, or assign or otherwise
transfer (or consent to any such assignment or transfer by the
Partnership of) any of its right, title and interest thereunder.
l.5 Replacement Agreement. In the event that the Assigned Agreements
are terminated as a result of any bankruptcy or insolvency proceeding
affecting the Partnership, Contract Party will, at the option of the
Security Agent, enter into a new agreement with the Security Agent or
its transferee or nominee having terms substantially the same (except
for economic terms, which shall be exactly the same) as the terms of
such Assigned Agreements, provided, that the Security Agent, or its
transferee or nominee, shall have first made payment of unpaid
amounts due under Section 3.3 and Section 7.1 of the Gas Sales
Agreement and Article VI of the Fuel Management Agreement.
1.6 No Liability. Contract Party acknowledges and agrees that the
Security Agent, the Owner Trustee and GE Capital (and each transferee
of the Security Agent, the Owner Trustee and GE Capital) shall not
have any liability or obligation under the Assigned Agreements as a
result of this Consent, the Security Agreement or otherwise, nor
shall the Security Agent, the Owner Trustee nor GE Capital nor any
transferee of such person, except during any period in which such
person has elected to become a Substitute Owner pursuant to
subsection l.2, be obligated or required to perform any of the
Partnership is obligations under the Assigned Agreements or to take
any action to collect or enforce any claim for payment assigned under
the Security Agreement; provided that under no circumstances shall
the Security Agent, the Owner Trustee or GE Capital (or any
transferee) have any liability or obligation respecting events which
occurred prior to the date of its becoming a Substitute Owner.
Notwithstanding anything to the contrary contained in this Consent,
in the event that the Security Agent, the Owner Trustee, GE Capital,
any transferee, or another purchaser succeeds to the Partnership's
interest, then liability in respect of any and all obligations of
such successor under the Assigned Agreements shall be limited solely
to such successor's interest in the Project and the sole recourse of
Contract Party in seeking enforcement of such obligations shall be to
such successor's interest in the Project (and no officer, director,
employee, shareholder, agent or affiliate or subsidiary of such
successor shall have any liability with respect thereto).
l.7 Performance under Assigned Agreements. Contract Party shall
perform and comply with all terms and provisions of the Assigned
Agreements to be performed or complied with by it and shall maintain
the Assigned Agreements in full force and effect in accordance with
its terms.
l.8 Delivery of Notices. Contract Party shall deliver to GE Capital
and the Security Agent, concurrently with the delivery thereof to the
Partnership, a copy of each notice, request or demand given by
Contract Party pursuant to the Assigned Agreements.
1.9 Consent to Sale and Lease; Consent to Leveraged Lease. Contract
Party consents to (a) the assignment and sale by the Partnership to
the Owner Trustee of all of its right, title and interest in and to
the Facility, such sale and assignment to occur on the Lease Closing
Date and (b) the subsequent lease by the Owner Trustee to the
Partnership of the Facility for the Basic Term and any renewal terms,
as agreed upon by the parties to the Facility Lease, such lease to
occur on the Lease Closing Date. Contract Party further consents to
GE Capital exercising its option under the Loan Agreement to
"leverage" the Facility Lease by causing the Owner Trustee to enter
into a loan agreement, as borrower, to finance (or refinance) a
portion of the purchase price of the Facility payable to the
Partnership, and agrees that any lender under such loan agreement
shall, until such loan agreement is paid in full, enjoy jointly with,
or in certain cases to the exclusion of, GE Capital and the Security
Agent, all rights of "GE Capital" and the "Security Agent" hereunder.
SECTION 2. PAYMENTS
Contract Party will pay all moneys due and to become due to the
Partnership under the Assigned Agreements directly to Shawmut Bank
Connecticut, National Association, as Security Agent, 777 Main
Street, Hartford, Connecticut 06115, Attention: Corporate Trust
Administration, for deposit in the Revenue Account (except for
payment under Section 17.3 of the Gas Sales Agreement, which shall be
directed to the Special Payments Account), or to such other person or
in such other manner as GE Capital or the Security Agent may from
time to time specify in writing to Contract Party, without offset,
abatement, withholding or reduction except as provided or permitted
by the Assigned Agreements.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF CONTRACT PARTY
Contract Party makes the following representations and warranties for
the benefit of GE Capital and the Security Agent:
3.l The Contract Party is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan
and is duly qualified and authorized to do business and is in good
standing as a foreign corporation in every jurisdiction in which it
owns or leases real property or in which the nature of its business
requires it to be so qualified, and has all requisite power and
authority, corporate and otherwise, to enter into and to perform its
obligations hereunder and under the Assigned Agreements, and to carry
out the terms hereof and thereof and the transactions contemplated
hereby and thereby.
3.2 Approval. The execution, delivery and performance by Contract
Party of this Consent and the Assigned Agreements do not require any
approval or consent of any holder (or any trustee for any holder) of
any indebtedness or other obligation Contract Party or of any other
person or entity, except approvals or consents which have been
obtained or which are otherwise required as described in Section 3.7
hereof.
3.3 Execution, Delivery; Binding Agreements. Each of this Consent and
the Assigned Agreements is in full force and effect, has been duly
executed and delivered by Contract Party, and constitutes the legal,
valid and binding obligation of Contract Party, enforceable against
Contract Party in accordance with its terms except as the
enforceability thereof may be limited by (a) bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights generally and (b) general equitable principles
(whether considered in a proceeding in equity or at law).
3.4 Litigation. There is no legislation, litigation, action, suit,
adverse proceeding or investigation pending or (to the best of
Contract Party's knowledge after due inquiry) threatened, against
Contract Party before or by any court, administrative agency,
arbitrator or governmental authority, body or agency which, if
adversely determined, individually or in the aggregate, (i) could
adversely affect the performance by Contract Party of its obligations
hereunder or under the Assigned Agreements or (ii) questions the
validity, binding effect or enforceability hereof or of the Assigned
Agreements, any action taken or to be taken pursuant hereto or
thereto or any of the transactions contemplated hereby or thereby.
3.5 Compliance with Other Instruments etc. The execution, delivery
and performance by Contract Party of this Consent and the Assigned
Agreements, and the consummation of the transactions contemplated
hereby and thereby, will not result in any violation of any term of
any contract or agreement to which it is a party or by which it or
its property is bound, or of any license, permit, franchise,
judgment, writ, injunction, decree, order, charter, law, ordinance,
rule or regulation applicable to it.
3.6 No Default or Amendment. Neither the Contract Party nor, to the
best of Contract Party's knowledge after due inquiry, any other party
to the Assigned Agreements is in default of any of its obligations
thereunder. Contract Party and, to best of Contract Party's knowledge
after due inquiry, each other party to the Assigned Agreements have
complied with all conditions and agreements contained in the Assigned
Agreements required to be performed or complied with by such party
prior to the date hereof. To the best of Contract Party's knowledge
after due inquiry, no event or condition exists which would, either
immediately or with the passage of any applicable grace period or
giving of notice, or both, enable either Contract Party or the
Partnership to terminate or suspend its obligations under the
Assigned Agreements. The Assigned Agreements have not been amended,
modified or supplemented in any manner.
3.7 Governmental Approval. No consent, order, authorization, waiver,
approval or any other action by, or registration, declaration or
filing with, any Governmental Authority (collectively the
"Approvals") is required to be obtained by the Contract Party in
connection with the execution, delivery or performance of the
Assigned Agreements or this Consent or the consummation of the
transactions contemplated hereunder or thereunder, except for routine
Governmental Approvals not related to the regulation of public
utilities which may be required to be obtained after the Initial
Delivery Date (as defined in the Assigned Agreement) in order to
obtain and deliver gas under the Assigned Agreement, and Contract
Party has no reason to believe such future Governmental Approvals
will be obtained in a timely manner in the ordinary course of
business.
3.8 No Previous Assignments. Contract Party has no notice of, and has
not consented to, any previous assignment by the Partnership of all
or any part of its rights under the Assigned Agreements.
3.9 Representations and Warranties. All representations, warranties
and other statements made by Contract Party to the Partnership in the
Assigned Agreements were true and correct as of the date when made
and are true and correct as of the date of this Consent.
SECTION 4. MISCELLANEOUS
4.1 Notices. All notices and other communications hereunder shall be
in writing, shall refer on their face to the Assigned Agreements
(although failure to so refer shall not render any such notice or
communication ineffective), shall be sent by first class mail, by
personal delivery or by a nationally recognized courier service, and
shall be directed (a) if to Contract Party, in accordance with the
Assigned Agreements, (b) if to GE Capital, at 1600 Summer Street,
Stamford, Connecticut 06927, attention Vice President, Energy Project
Operations, (c) if to the Partnership, at 4100 Spring Valley, Suite
1001, Dallas, Texas 75244, or (d) if to the Security Agent, at 777
Main Street, Hartford, Connecticut 06115, Attention: Corporate Trust
Administration, or {e) to such other address or addressee as any
party may designate by notice given pursuant hereto.
4.2 Governing Law. THIS CONSENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
4.3 Counterparts. This Consent may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the
same instrument.
4.4 Headings Descriptive. The headings of the several Sections and
subsections of this Consent are inserted for convenience only and
shall not in any way affect the meaning or construction of any
provision of this Consent.
4.5 Severability. In case any provision in or obligation under this
Consent shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
4.6 Amendment, Waiver. Neither this Consent nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified
except by an instrument in writing signed by Contract Party and GE
Capital.
4.7 Successors and Assigns; Leverage of Lease. This Consent shall be
binding upon Contract Party and its permitted successors and assigns
and shall inure to the benefit of the Security Agent, the Owner
Trustee, GE Capital and their respective successors and assigns,
including any lender referred to in subsection 1.9.
4.8 Further Assurances. Each of Contract Party and the Partnership
hereby agrees to execute and deliver all such instruments and take
all such action as may be necessary to effectuate fully the purposes
of this Consent, including to confirm the rights of any permitted
successor or assignee of GE Capital or the Owner Trustee (including
any lender referred to in subsection 1.9) under this Consent.
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Consent, or have caused this Consent to be duly
executed and delivered by their Authorized Officers, as of the date
first above written.
COGEN DEVELOPMENT COMPANY
By:
Name:
Title:
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its general partner
By:
Name:
Title:
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION, as Security Agent
By:
Nate:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name:
Title:
Exhibit D to
Gas Sales
Agreement
GUARANTY
GUARANTY, dated as of March 30, 1995, made by MCN CORPORATION, a
Michigan corporation ("Guarantor"), in favor of PANDA-BRANDYWINE, L.P.,
a Delaware limited partnership, and its successors and permitted
assigns as Buyer under the Agreement (as hereafter defined) ("Buyer").
W I T N E S S E T H :
WHEREAS, Buyer has entered into a Gas Sale Agreement dated as of
March 30, 1995, with Cogen Development Company, a Michigan corporation
("Seller") (said agreement, including all documents incorporated
therein by reference, as the same may hereafter by amended,
supplemented or otherwise modified from time to time, being herein
called the "Agreement"), pursuant to which Seller will sell and Buyer
will purchase natural gas for use in the production of steam and
electricity at a facility to be constructed and owned by Buyer in
Brandywine, Maryland; and
WHEREAS, Seller is a wholly-owned subsidiary of Guarantor and
Guarantor will obtain benefits as a result of the Agreement; and
WHEREAS, Buyer has entered into the Agreement on the condition
that Guarantor shall have executed and delivered to Buyer this
Guaranty.
NOW, THEREFORE, in consideration of the premises and in order to
induce Buyer to enter into and perform under the Agreement, Guarantor
hereby agrees as follows:
(1) Defined Terms. The following terms shall have the following
meanings:
"Contractual Obligations" shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement,
instrument or undertaking to which such Person is a party or by which
it or any of its property is bound.
"GAAP" shall mean generally accepted accounting principles as in
effect from time to time in the United States of America.
"Governmental Authority" shall mean any nation or government, any
state, or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Obligations" shall mean all payment and performance obligations
of Seller under the Agreement, including, but not limited to, Seller's
obligation to supply and transport gas and to indemnify the Buyer, in
accordance with the Agreement, and all payment and performance
obligations which may arise upon breach by Seller of, or failure to
timely perform, any of its obligations thereunder.
"Requirement of Law" shall mean, as to any Person, the Certificate
of Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its properties or to which such Person or any of its properties
is subject.
"Person" shall mean an individual, corporation, voluntary
association, joint stock company, business trust, partnership or other
entity.
(2) Guaranty. Guarantor hereby unconditionally and irrevocably
guarantees to Buyer the prompt and complete performance and payment by
Seller when due of the Obligations. Guarantor further agrees to pay any
and all expenses (including, without limitation, all reasonable fees
and disbursements of counsel) which may be paid or incurred by the
Buyer in enforcing, or obtaining advice of counsel in respect of, any
of its rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting
against, the Guarantor under this Guaranty. This Guaranty shall remain
in full force and effect until the Agreement has expired in accordance
with its terms, and the Obligations have been satisfied.
(3) No Subrogation Contribution, Reimbursement or Indemnity. The
Guarantor agrees that notwithstanding any payment or payments made by
the Guarantor hereunder, the Guarantor will not have, and hereby waives
and disclaims, any claim or right against the Seller by way of
subrogation or otherwise in respect of any payment that the Guarantor
may be required to make hereunder, until the Obligations have been paid
and performed in full and the Agreement has been terminated. Guarantor
hereby further irrevocably waives all contractual, common law,
statutory or other rights of reimbursement, contribution or indemnity
(or any similar right) from or against Seller which may have arisen in
connection with this Guaranty until the Obligations have been paid and
performed in full and the Agreement has been terminated.
(4) Amendments. etc. with respect to the Obligations. Guarantor
shall remain obligated hereunder notwithstanding that, without any
reservation of rights against Guarantor, and without notice to or
further assent by Guarantor, any demand for payment or performance of
any of the Obligations made by Buyer may be rescinded by Buyer and any
of the Obligations continued, and the Obligations, or the liability of
any other party upon or for any part thereof, or any collateral
security or guaranty therefor or right offset with respect thereto,
may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or
released by Buyer, and the Agreement and any other documents executed
and delivered in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as Buyer may deem
advisable from time to time, and any collateral security, guaranty or
right of offset at any time held by Buyer for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released.
Buyer shall not have any obligation to protect, secure, perfect or
insure any lien or security interest at any time held by it as security
for the Obligations or for this Guaranty or any property subject
thereto.
(5) Guaranty Absolute and Unconditional . Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by Buyer upon this
Guaranty or acceptance of this Guaranty; the Obligations, and any and
all of them, shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Guaranty; and all dealings
between Seller or Guarantor, on the one hand, and Buyer, on the other,
shall likewise be conclusively presumed to have been had or consummated
in reliance upon this Guaranty. This Guaranty shall remain in full
force and effect notwithstanding any change in the corporate
relationship of Guarantor and Seller. Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or
nonpayment to or upon Seller or Guarantor with respect to the
Obligations. This Guaranty shall be construed as a continuing, absolute
and unconditional guaranty of payment and performance without regard to
(a) the validity or enforceability of the Agreement or any of the
Obligations or guaranty or right of offset with respect thereto at any
time or from time to time held by Buyer, (b) any defense (other than a
defense of payment or performance of the Obligations or any other
defense available to Seller as set forth in the Agreement) set-off or
counterclaim, which may at any time be available to or be asserted by
Seller against Buyer, or (c) any other circumstance whatsoever (with or
without notice to or knowledge of Seller or Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of Seller for the Obligations, or of Guarantor under this
Guaranty, in bankruptcy or in any other instance. When Buyer is
pursuing its rights and remedies hereunder against Guarantor r Buyer
may, but shall be under no obligation to' pursue such rights and
remedies as it may have against Seller or any other Person or against
any collateral security or guaranty for the Obligations or any right of
offset with respect thereto, and any failure by Buyer to pursue such
other rights or remedies or to collect any payments from Seller or any
such other Person or to realize upon any such collateral security or
guaranty or to exercise any such right of offset, or any release of
Seller or any such other Person or of any such collateral security,
guaranty or right of offset, shall not relieve Guarantor of any
liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of
Buyer against Guarantor.
(6) Reinstatement. This Guaranty shall continue to be effective,
or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise
be restored or returned by Buyer on account of the insolvency,
bankruptcy, dissolution, liquidation or reorganization of Seller or
upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for' Seller or any
substantial part of its property, or otherwise, all as though such
payments had not been made.
(7) Payments. Guarantor hereby agrees that the Obligations will be
paid to Buyer without set-off (except as may be available to Seller
under the Agreement) or counterclaim in U.S. Dollars at such office as
Buyer shall designate in written notice to Guarantor.
(8) Representations and Warranties. Guarantor represents and
warrants to Buyer:
(a) Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Michigan and has
the corporate power and authority and the legal right to own and
operate its property, and to conduct the business in which it is
currently engaged;
(b) Guarantor has the corporate power and authority and the legal
right to execute and deliver, and to perform its obligations under,
this Guaranty, and has taken all necessary corporate action to
authorize its execution, delivery and performance of this Guaranty;
(c) this Guaranty has been duly executed by Guarantor and
constitutes a legal, valid and binding obligation of Guarantor
enforceable in accordance with its terms;
(d) the execution, delivery and performance of this Guaranty will
not violate any provision of any requirement of law or contractual
obligation of Guarantor and will not result in or require the creation
or imposition of any lien, claim or encumbrance on any of the
properties or revenues of Guarantor pursuant to any Requirement of Law
or Contractual Obligation of Guarantor;
(e) no consent or authorization of, filing with, or other act by
or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person tincturing, without limitation, any
stockholder or creditor of Guarantor) is required in connection with
the execution, delivery, performance, validity or enforceability of
this Guaranty;
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
Guarantor, is threatened by or against Guarantor or against any of its
properties or revenues (i) with respect to this Guaranty or any of the
transactions contemplated hereby, (ii) which if adversely determined
would have a material adverse effect on the business, operations,
property or financial or other condition of Guarantor or its ability to
perform its obligations under this Guaranty;
(g) the audited financial statement of the Guarantor and its
consolidated subsidiaries as of December 31, 1994, and the related
consolidated statement of income and retained earnings for the fiscal
year then ended reported on by Deloitte & Touche (copies of which have
heretofore been furnished to the Financing Parties (as defined in the
Agreement)) have been prepared in accordance with GAAP applied
consistently throughout the period involved, are complete and correct
and present fairly the financial condition of Guarantor as at such date
and the results of its operations for such fiscal year; since such date
there has been no material adverse change in the business, operations,
property or financial or other condition of Guarantor. Guarantor has no
material contingent obligations, contingent liability or liability for
taxes, long-term lease or unusual forward or long term commitment which
is not reflected in the foregoing statements or in the notes thereto
other than any such obligations, liabilities or commitments which were
not required to be shown thereon or disclosed therein in accordance
with GAAP;
(h) Guarantor is not in default in any material respect in the
payment or performance of any agreement or undertaking to which it is a
party, or by which it or any of its material properties or assets may
be bound, which default would materials y adversely affect its business
or financial condition or its ability to perform its obligations under
this Guaranty, and no default in the payment or performance of any
agreement or undertaking hereunder has occurred and is continuing;
(9) Covenants. (a) Guarantor hereby covenants and agrees that
Guarantor will furnish to Buyer, promptly upon becoming aware of the
existence of any default under the Agreement, a written notice
specifying the nature and period of existence thereof and what action
Guarantor is taking or proposes to take with respect thereto.
(b) If at any time the Guarantor shall consolidate or merge with
any other person or entity or shall sell, lease or otherwise transfer
substantially of its assets to any other person or entity, and
Guarantor shall not be the successor or acquiring corporation, then the
Guarantor shall cause the successor or acquiring person or entity to
assume in writing all of the Guarantor's liabilities hereunder.
(10) Severability. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
(11) Paragraph Headings. The paragraph headings used in this
Guaranty are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the
interpretation hereof.
(12) No Waiver; Cumulative Remedies. Buyer shall not, by any act
(except by a written instrument pursuant to paragraph 13 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any default under or
breach of the Agreement or in any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising,
on the part of Buyer, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. A waiver by Buyer of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy
which Buyer would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided
by law.
(13) Waivers and Amendments: Successors and Assigns. None of the
terms or provisions of this Guaranty may be waived, amended,
supplemented or otherwise modified except by a written instrument
executed by Guarantor and Buyer. This Guaranty shall be binding upon
the successors and assigns of Guarantor and shall inure to the benefit
of Buyer and its successors and assigns; provided that Guarantor may
not assign this Guaranty without the prior written consent of Buyer.
Buyer shall have the right, without the consent of Guarantor, but upon
not ice to Guarantor, to assign all its rights and interests under this
Guaranty to the Financing Parties, as security for its obligations
under the Financing Documents (as defined in the Agreement).
(14) Notices. All notices and communications under this Guaranty
shall be deemed given, (a) upon delivery, if delivered in writing
personally, (b) five (5) days after deposit in a U.S. Postal Office
mail box, (c) the day after it is received, if it is delivered by
overnight courier, or (d) upon the effective sending of electronic
transmission, facsimile, telex or telegram, to the addresses set forth
below or such other address as the receiving party has designated by a
notice :
MCN Corporation
500 Griswold Street
Detroit, MI 4822 6
Attn: Daniel L . Shiffer
Telephone: (313) 256-5206
(313) 965-0009
(5) GOVERNING LAW: CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS
GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. GUARANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS GUARANTY OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF MAY BE BROUGHT AGAINST
IT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS GUARANTY, GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-
EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
GUARANTOR AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW . NOTHING
HEREIN SHALL AFFECT THE RIGHT OF BUYER TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST GUARANTOR IN ANY OTHER JURISDICTION.
(16) VENUE. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY ACTION DESCRIBED IN PARAGRAPH IS, OR THAT SUCH
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT, AND AGREES NOT
TO PLEAD OR CLAIM THE SAME.
(17) Further Documents . Guarantor agrees to execute such
additional documents as may be reasonably necessary or desirable to
effect or evidence the provisions of this Guaranty.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered by its officer "hereunto duly authorized as of
the date first above written.
MCN CORPORATION
BY:
TITLE:
EXHIBIT 10.72
AMENDED AND RESTATED
SITE LEASE
Dated as of December 18, 1996
between
PANDA-BRANDYWINE, L.P.,
as Site Lessor
and
FLEET NATIONAL BANK
(not in its individual capacity but
solely as Owner Trustee),
as Site Lessee
______________________________
Real Property Located in the County of
Prince George's, Maryland
______________________________
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS 1
ARTICLE II
LEASE OF SITE; TERM;
ELECTION TO TERMINATE; REMOVAL 2
SECTION 2.1. Lease of Site; Term 2
SECTION 2.2. Election to Terminate 2
ARTICLE III
TITLE; SEVERANCE AGREEMENT 3
SECTION 3.1. Title 3
SECTION 3.2. Severance Agreement 3
ARTICLE IV
RENTAL PAYMENTS 3
SECTION 4.1. Rental Payments 3
SECTION 4.2. Method of Payment 4
ARTICLE V
RETURN OF SITE 4
ARTICLE VI
QUIET ENJOYMENT 4
ARTICLE VII
USE OF SITE 5
ARTICLE VIII
EASEMENTS 5
SECTION 8.1. Grant of Easements 5
SECTION 8.2. Exercise of Easements 5
SECTION 8.3. Dedications; Joinder in Recording 5
SECTION 8.4. Termination 6
SECTION 8.5. Easements Appurtenant; No Interference 6
ARTICLE IX
LIENS 6
ARTICLE X
UNDERTAKINGS OF SITE LESSOR 7
SECTION 10.1. Sufficiency of Site Lease; Maintenance 7
SECTION 10.2. Site Lessor to Defend Title 7
ARTICLE XI
TAXES AND CLAIMS 7
SECTION 11.1. Before Lease Termination Date 7
SECTION 11.2. After Lease Termination Date 7
SECTION 11.3. Apportionment 8
SECTION 11.4. Indemnification 8
SECTION 11.5. Additional Indemnification by Site Lessor 9
SECTION 11.6. Survival 9
ARTICLE XII
INSURANCE 10
ARTICLE XIII
CONDEMNATION 10
ARTICLE XIV
SITE LEASE DEFAULTS; REMEDIES 10
ARTICLE XV
SUBLEASE; ASSIGNMENT 11
ARTICLE XVI
LIMITATION OF LIABILITY 12
ARTICLE XVII
NOTICES 13
ARTICLE XVIII
BINDING EFFECT 13
ARTICLE XIX
MISCELLANEOUS 13
SECTION 19.1. Severability 13
SECTION 19.2. Amendments 13
SECTION 19.3. Headings 14
SECTION 19.4. Counterparts 14
SECTION 19.5. GOVERNING LAW 14
SECTION 19.6. No Merger 14
SECTION 19.7. Recording 14
SECTION 19.8. Assignment to Indenture Trustee 14
SECTION 19.9. Certain Rights of Power Purchaser 15
SECTION 19.10. Subordination 16
Schedule 1 Legal Description of Site
Exhibit A Memorandum of Lease
AMENDED AND RESTATED SITE LEASE
AMENDED AND RESTATED SITE LEASE (this "Site Lease")
dated as of December 18, 1996 between PANDA-BRANDYWINE, L.P., a
Delaware limited partnership having an address at 4100 Spring
Valley, Suite 1001, Dallas, Texas 75244, as lessor (the
"Partnership" or "Site Lessor"), and FLEET NATIONAL BANK
(formerly known as Shawmut Bank Connecticut, National
Association), a national banking association, not in its
individual capacity but solely as Owner Trustee under the Trust
Agreement (as defined in the Participation Agreement referred to
below), as lessee (the "Owner Trustee" or "Site Lessee"), having
an address at 777 Main Street, Hartford, Connecticut 06115.
RECITALS:
A. Site Lessor is the owner of the Site (as defined
below).
B. Site Lessor and Site Lessee have entered into that
certain Site Lease dated as of March 30, 1995 (the "Original Site
Lease") pursuant to which, Site Lessor leased to Site Lessee, and
Site Lessee leased from Site Lessor, the Site together with Site
Lessor's interest in the Easements, upon the terms and conditions
set forth in the Original Site Lease. A memorandum of the
Original Site Lease has been recorded among the Land Records of
Prince George's County, Maryland and the Land Records of Charles
County, Maryland (the "Land Records") and all appropriate
transfer and recording taxes have been paid. Site Lessor and
Site Lessee have amended the Original Site Lease pursuant to a
First Amendment to Site Lease dated as of October 30, 1996 (the
"First Amendment") and a Second Amendment to Site Lease dated as
of December 18, 1996 (the "Second Amendment") (the Original Site
Lease, as amended by the First Amendment and the Second
Amendment, the "Existing Site Lease"). The First Amendment and
the Second Amendment released Site Lessor's interest in the
Easements from the premises demised by the Existing Site Lease.
A First Amendment to Memorandum of Lease dated as of October 30,
1996 and a Second Amendment to Memorandum of Lease dated as of
December 18, 1996 have been recorded in the Land Records.
C. Site Lessor and Site Lessee have agreed to amend
and restate the Existing Site Lease as provided herein.
AGREEMENT:
In consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Site Lessor and
Site Lessee, intending to be legally bound hereby, hereby agree
to amend and restated the Existing Site Lease as follows:
ARTICLE I
DEFINITIONS
For purposes of this Site Lease, capitalized terms used
herein and not otherwise defined herein shall have the respective
meanings assigned to them in Annex A to the Participation
Agreement, dated as of the date hereof (as the same may be
amended, supplemented or otherwise modified from time to time,
the "Participation Agreement"), among Site Lessor, the Panda
Brandywine Corporation, General Electric Capital Corporation,
Site Lessee, the Security Agent, Credit Suisse, as administrative
agent (the "Administrative Agent"), First Security Bank, National
Association (not in its individual capacity but solely as
indenture trustee (in such capacity, the "Indenture Trustee")
under the Indenture) and the other entities listed on Schedule I
to the Participation Agreement (the "Loan Participants") (such
definitions to be equally applicable to both the singular and
plural forms of the terms defined). Any term defined by
reference to an agreement, instrument or other document shall
have the meaning so assigned to it whether or not such document
is in effect. Unless otherwise indicated, references in this
Site Lease to sections, paragraphs, clauses, appendices,
schedules and exhibits are to the same contained in or attached
to this Site Lease.
ARTICLE II
LEASE OF SITE; TERM;
ELECTION TO TERMINATE; REMOVAL
SECTION 2.1. Lease of Site; Term. Site Lessor hereby
leases and demises to Site Lessee, and Site Lessee hereby leases
and hires from Site Lessor, upon and subject to the terms and
conditions hereof, the parcels of land described in Schedule 1
hereto (the "Site"), TO HAVE AND TO HOLD for a term (the "Site
Lease Term") which shall commence on the date hereof and shall
expire on the earlier of (i) November 1, 2037, and (ii) the
termination of the Facility Lease pursuant to Section 9(c), 9(d)
or 12(b) thereof.
SECTION 2.2. Election to Terminate. Site Lessee may
at any time following the Lease Termination Date at its option,
terminate this Site Lease and the Site Lease Term upon payment of
$1 to Site Lessor. Upon such termination all of Site Lessee's
obligations and liabilities hereunder, including its obligation
to make rental payments hereunder, shall automatically terminate.
ARTICLE III
TITLE; SEVERANCE AGREEMENT
SECTION 3.1. Title. Site Lessor warrants and
represents that (a) it has good and marketable and indefeasible
fee simple title in and to the Site and (b) upon execution and
delivery of this Site Lease, Site Lessee will have (i) good
leasehold title in and to the Site and (ii) good title to the
easements granted to it pursuant to Article VIII hereof, in each
case free and clear of all liens and encumbrances except for
Permitted Liens. Site Lessor further warrants and represents
that such Permitted Liens do not and will not materially
adversely affect the use of the Site, the Facility, and the
easements granted to Site Lessee pursuant to Article VIII hereof,
as contemplated by the Participation Agreement, the Facility
Lease and the other Financing Documents.
SECTION 3.2. Severance Agreement. It is the
intention of Site Lessor and Site Lessee that the Facility and
each portion thereof, and all repairs, replacements,
substitutions and additions thereto, whether now or at any time
hereafter located on the Site, are severed, and shall remain
severed, from the Site even if physically attached, are and shall
remain personal property, and are not and shall not be fixtures
or an accession to the Site, the title thereto being separate and
distinct from the title to the Site, and shall be treated as
personal property with respect to the rights of all Persons
whatsoever and for all purposes of the Participation Agreement,
this Site Lease, the Site Sublease, and the Facility Lease, and
title to the Facility shall not, except as specifically
contemplated by the Financing Documents, be affected in any way
by any instrument dealing with the Site or any part thereof.
Notwithstanding the foregoing, if contrary to the intention of
Site Lessor and Site Lessee, any Governmental Authority with
jurisdiction over the Site determines that any portion of the
Facility is a fixture or accession to the Site, such portion of
the Facility shall constitute part of the Site being leased
hereunder.
ARTICLE IV
RENTAL PAYMENTS
SECTION 4.1. Rental Payments. For the period
commencing on the date hereof and ending on the earlier of (x)
the end of the Site Lease Term and (y) the Lease Termination Date
(but only if on such Lease Termination Date, no Event of Default
or Lease Event of Default shall have occurred and be continuing),
the rent payable by Site Lessee hereunder for the lease of the
Site and the grant of the easements granted pursuant to Article
VIII hereof shall be $1 per year. Site Lessee agrees to pay the
sum of $20 towards such rent in advance upon the execution of
this Site Lease. After the Lease Termination Date (but only if
on such Lease Termination Date, no Event of Default or Lease
Event of Default shall have occurred and be continuing) to the
end of the Site Lease Term, Site Lessee shall pay to Site Lessor,
for the lease of the Site and the grant of the easements granted
pursuant to Article VIII hereof, the Fair Market Rental Value of
the Site and the grant of the easements granted pursuant to
Article VIII hereof, for such period. Such rent shall be payable
quarterly in arrears during the period commencing on the Lease
Termination Date (but only if on such Lease Termination Date, no
Event of Default or Lease Event of Default shall have occurred
and be continuing) and ending on the last day of the Site Lease
Term.
SECTION 4.2. Method of Payment. Rental payments
(other than the rental payment made on the date hereof) shall be
paid to Site Lessor to a bank account with a bank designated by
Site Lessor. Each such payment shall be made by Site Lessee in
immediately available funds by 12:00 noon, New York City time, on
the scheduled date on which such payment shall be due, unless
such scheduled date shall not be a Business Day, in which case
such payment shall be due and payable on the next succeeding
Business Day.
ARTICLE V
RETURN OF SITE
On the last day of the Site Lease Term, Site Lessee
shall peaceably and quietly surrender possession of the Site to
Site Lessor free and clear of all liens and encumbrances except
for Permitted Liens.
ARTICLE VI
QUIET ENJOYMENT
Site Lessor warrants and covenants that neither it nor
any of its successors or assigns shall disturb Site Lessee's
peaceful and quiet use and possession of the Site and will take
no action in violation of Site Lessee's rights to possession and
use of the Facility, the Site and the easements granted to Site
Lessee pursuant to Article VIII hereof in accordance with the
terms of this Site Lease and the other Financing Documents.
ARTICLE VII
USE OF SITE
Site Lessee shall use the Site only for legitimate
business purposes and, so long as the Power Purchase Agreement is
in full force and effect, in a manner consistent with the terms
thereof, and Site Lessee shall not use the Site or permit the
Site to be used for any unlawful use or any use that constitutes
a public or private nuisance upon the Site or any part thereof or
in any manner which will violate or breach the provisions of any
Governmental Actions. After the Lease Termination Date, upon the
request of Site Lessee, Site Lessor shall cooperate with Site
Lessee in obtaining the valid and effective issuance, or, as the
case may be, transfer or amendment of all Governmental Actions
necessary or, in the reasonable opinion of Site Lessee, desirable
for the ownership, operation and possession of the Site by Site
Lessee or any permitted transferee, lessee or assignee thereof of
the Facility or the possession and use of any property covered by
this Site Lease until the expiration or termination of the Site
Lease Term.
ARTICLE VIII
EASEMENTS
SECTION 8.1. Grant of Easements. Subject to the
provisions of Section 8.2 hereof, Site Lessor hereby covenants
and agrees to grant to Site Lessee from time to time such
easements, if any, in, to, over, under and across the lands, if
any, owned by Site Lessor adjacent to the Facility as Site Lessee
shall reasonably determine to be necessary or desirable in
connection with the construction, use, operation or maintenance
of the Facility.
SECTION 8.2. Exercise of Easements. Except as
otherwise provided under the Facility Lease, Site Lessee shall be
responsible for the construction, installation, maintenance and
repair of all improvements and equipment installed by it pursuant
to the easements referred to in this Article VIII.
SECTION 8.3. Dedications; Joinder in Recording.
The parties hereto shall each, to the extent necessary and to the
extent the same shall not result in the loss of compensation
otherwise obtainable from condemnation, join in the execution of
such instruments as may be required by any Governmental Authority
or Applicable Law in order to effectuate widenings of streets or
the installation of public utilities and similar utility
easements under and across portions of the Site. Each party
hereto shall comply, at the expense of Site Lessor, with each
reasonable request of the other party hereto to join in the
execution, delivery and recordation of such instruments as may be
required to locate a specific easement granted herein.
SECTION 8.4. Termination. The easements granted
pursuant to this Article VIII shall terminate at the end of the
Site Lease Term, and Site Lessee shall, upon request and at the
cost and expense of Site Lessor, execute and deliver such
instruments as Site Lessor may reasonably require to confirm the
termination of Site Lessee's interest therein.
SECTION 8.5. Easements Appurtenant; No
Interference. The easements granted to Site Lessee pursuant to
this Article VIII shall be deemed to be appurtenant to the Site
and shall be for the benefit of Site Lessee and its permitted
successors and assigns and any sublessee of the Site or any part
thereof. Site Lessor shall not grant or convey any easement or
other interest that, if used or enjoyed in accordance with its
terms, would interfere with the use and enjoyment of the
Facility, the Site or the easements granted pursuant to this
Article VIII or the operation of the Facility by Site Lessee (or
Lessee under the Facility Lease) or its successors, assigns or
sublessees at any time during the Site Lease Term.
ARTICLE IX
LIENS
From the date hereof until the Lease Termination Date,
Section 7(a) of the Facility Lease and subsection 7.4 of the
Participation Agreement shall apply with respect to Liens on or
with respect to the Site and the Site Lessee's title thereto or
interest therein. During the period, if any, from the Lease
Termination Date to the end of the Site Lease Term, (i) Site
Lessee will keep, or cause to be kept, the Site free and clear of
all Liens in favor of any Person claiming by, through or under
Site Lessee (excluding Site Sublessee under the Site Sublease and
any Person claiming by, through or under Site Sublessee) except
for Permitted Liens and Liens based upon amounts the payment of
which is either not yet delinquent or is bonded, provided that
Site Lessee shall not be required to discharge any such Lien
during any period that Site Lessee shall in good faith be
contesting the validity or the amount of any such Lien so long as
such contest shall not involve any substantial risk of any
material adverse effect on the ability of Site Lessee to perform
its obligations under this Site Lease, or any danger of civil or
criminal liability being imposed on Site Lessor, and (ii) Site
Lessor will keep, or cause to be kept, the Site and the easements
granted pursuant to Article VIII hereof free and clear of Liens
(other than Permitted Liens) in favor of any Person claiming by,
through or under Site Lessor.
ARTICLE X
UNDERTAKINGS OF SITE LESSOR
SECTION 10.1. Sufficiency of Site Lease; Maintenance.
Site Lessor covenants, represents and warrants to Site Lessee
that the Site is sufficient and will, at all times during the
Site Lease Term, be sufficient, or, if the same shall cease to be
so sufficient, Site Lessor will at its expense take such action,
including the conveyance of easements and the grant of common
facilities rights, as is reasonable or necessary, in order to
provide Site Lessee with reasonable means of connecting,
operating, maintaining, modifying, replacing, renewing, repairing
and removing the Facility. In addition, Site Lessor shall use
its reasonable efforts to provide fire and water systems
necessary to maintain, protect and preserve the Site and the
Facility. At all times during the Site Lease Term, Site Lessor,
at its expense, shall maintain the Site in accordance with
Applicable Laws and Prudent Utility Practice, so that it will be
available for the operation of the Facility, including, without
limitation, the maintenance of bridges, roads, equipment, pumps
and pipelines located on the Site.
SECTION 10.2. Site Lessor to Defend Title. Site Lessor
shall, at all times, at Site Lessor's cost and expense, warrant
and defend the leasehold estate in the Site and title to the
easements granted to Site Lessee pursuant to Article VIII hereof
conferred on Site Lessee by this Site Lease, as represented in
subsection 3.9 of the Participation Agreement.
ARTICLE XI
TAXES AND CLAIMS
SECTION 11.1. Before Lease Termination Date. During
the period from the date hereof until the Lease Termination Date,
Section 6.11 of the Participation Agreement and Section 7(a) of
the Facility Lease shall apply with respect to any and all Taxes
and Claims (as defined below) incurred or asserted in any way
relating to, or arising out of, the Site.
SECTION 11.2. After Lease Termination Date. During
the period, if any, from the Lease Termination Date to the end of
the Site Lease Term, Site Lessee shall pay or cause to be paid,
before delinquency, any and all Taxes (including, without
limitation, income and franchise taxes of Site Lessee or any
Affiliate of Site Lessee) assessed, levied, imposed upon or to
become due and payable out of or in respect of the use,
ownership, possession, operation, control or maintenance of the
Site, and Site Lessor shall pay or cause to be paid, before
delinquency, any and all other Taxes (including, without
limitation, income and franchise taxes of Site Lessor or any
Affiliate) in any way relating to or arising out of the Site;
provided, however, that neither Site Lessee nor Site Lessor shall
be required to pay any Tax payable by it pursuant to the
preceding provisions of this Section 11.2 if it shall be
contesting in good faith the validity thereof, so long as such
contest does not involve any risk of the sale, forfeiture,
interference with the use of or loss of any material part of the
Facility or the Site.
SECTION 11.3. Apportionment. If after the Lease
Termination Date and during the Site Lease Term, the Site shall
not be separately assessed but shall be assessed as part of a
larger tract of land, Site Lessor and Site Lessee shall apportion
any Tax resulting from such assessment. Site Lessee's
proportionate share of any such Tax shall be determined by
multiplying the amount of such Tax by a fraction, the numerator
of which shall be the acreage of the Site, and the denominator of
which shall be the acreage of all the land covered by such Tax.
Before the calculation of each party's proportionate share of
such Tax, the amount of any such Tax shall be reduced by an
amount equal to that amount of such Tax attributable to all
improvements located on the larger tract, inclusive of the Site
(including, but not limited to, the Facility). The amount of
Site Lessee's proportionate share of the Tax so calculated shall
be increased by the amount of the Tax allocable to those
improvements owned by Site Lessee and the amount of Site Lessor's
proportionate share of the Tax so calculated shall be increased
by the amount of the Tax allocable to those improvements owned by
Site Lessor. Site Lessor and Site Lessee shall each, on request
of the other, apply individually (if legally required) or join in
the other's application (if legally required) for separate
assessments for the Facility and the Site.
SECTION 11.4. Indemnification. During the period, if
any, from the Lease Termination Date to the end of the Site Lease
Term, Site Lessor and Site Lessee each agrees, subject to the
indemnification provisions of the Financing Documents, to assume
liability for and to indemnify, protect, save and keep harmless
the other party and the other party's permitted successors,
assigns, shareholders, officers, directors and agents, from and
against any and all liabilities, obligations, losses, damages,
penalties, claims, actions, suits, judgments, legal fees, costs,
expenses and disbursements, excluding Taxes (herein collectively
called "Claims"), incurred by or asserted against such other
party, whether or not such other party shall also be indemnified
as to any such Claim by any other Person, in any way relating to
or arising out of the conduct, operation or management of, or any
work, act or thing done in or on, or any accident, injury or
damage caused to any person or property in or on (i) the land
owned or occupied by Site Lessor adjacent to the Site, in the
case of Site Lessor or (ii) the Site, in the case of Site Lessee;
provided, however, that one party shall not be required to
indemnify the other party for (x) any Claim resulting from acts
which constitute the willful misconduct or gross negligence of
such other party or (y) any Claim resulting directly from a
transfer by such other party of all or part of its interest in
this Site Lease or the Site, other than to the party otherwise
indemnified or as a result of a Lease Event of Default or Site
Lease Event of Default. To the extent that one party, in fact,
receives indemnification payments from the other party under the
indemnification provisions of this Section 11.4, the indemnifying
party shall be subrogated, to the extent of such indemnity paid,
to such indemnified party's rights with respect to the
transaction or event requiring or giving rise to such indemnity.
SECTION 11.5. Additional Indemnification by Site
Lessor. Site Lessor hereby assumes liability for and agrees to
indemnify, protect, save and keep harmless Site Lessee and its
permitted successors, assigns, shareholders, officers, directors
and agents from and against any and all Claims in any way
relating to or arising out of the condition of the Site,
including, without limitation, those arising from any act of the
Site Lessor, (i) at the time Site Lessee enters into possession
thereof pursuant to this Site Lease and (ii) at any time prior to
the Lease Termination Date, but not with respect to any condition
caused by the gross negligence or willful misconduct of Site
Lessee. Without in any way limiting the obligation of Site
Lessor to indemnify and hold harmless Site Lessee herein or
pursuant to any other Financing Document, Site Lessor agrees to
indemnify, protect, save and keep harmless Site Lessee and its
successors, assigns, shareholders, officers, directors and agents
from and against all Claims (including response costs such as
clean-up, removal or mitigation costs) in any way relating to or
arising out of the presence or release of any Hazardous Substance
(i) on the Site (A) at the time Site Lessee enters into
possession thereof pursuant to the Site Lease and (B) at any time
prior to the Lease Termination Date or (ii) resulting, directly
or indirectly, from the activities of Site Lessor, its agents,
employees, affiliates or contractors.
SECTION 11.6. Survival. The obligations of Site
Lessor and Site Lessee under this Article XI shall survive the
expiration or termination of this Site Lease and are expressly
made for the benefit of, and shall be enforceable by, the
indemnified party. The extension of any applicable statute of
limitations by one party shall not affect the survival of the
other party's obligations, as the case may be, under this Article
XI. All payments required to be paid pursuant to this Article XI
shall be made directly to, or as otherwise required by, the
indemnified party upon written demand.
ARTICLE XII
INSURANCE
During the period, if any, from the Lease Termination
Date to the end of the Site Lease Term, Site Lessor and Site
Lessee shall maintain or cause to be maintained in effect, with
insurers of recognized responsibility, insurance policies with
respect to the Site, and any improvements or equipment installed
by such party pursuant to the easements referred to in Article
VIII, insuring against such loss or damage to the person and
property of others from such risks and in such amounts as owners
of similar properties maintain with respect to such property;
provided, however, that such party may self-insure against such
risks, by deductible provisions or otherwise, to the extent that
equally creditworthy responsible owners of similar properties
self-insure against such risks with respect to such property.
Any insurance policies maintained in accordance with the
preceding sentence shall name the other party as an additional
insured thereunder.
ARTICLE XIII
CONDEMNATION
If after the Lease Termination Date, all or a
substantial portion of the Site is condemned or transferred in
lieu of condemnation and the remainder is not sufficient to
permit operation of the Facility on a commercial basis, the Site
Lease Term shall terminate at the time title vests in the
condemning authority, and the net proceeds of the condemnation
shall be divided between Site Lessor and Site Lessee in
proportion to the Fair Market Sales Values of their respective
interests in the property condemned. If an insubstantial portion
of the Site is condemned at any time, the Site Lease Term shall
not terminate and the net proceeds of the condemnation shall be
used first to restore the Site, with the balance divided between
Site Lessor and Site Lessee in proportion to the Fair Market
Sales Values of their interests in the property condemned. For
the purposes of this Article XIII the net proceeds of a
condemnation shall mean the total condemnation proceeds less the
costs and expenses incurred in connection with the condemnation
(including legal fees).
ARTICLE XIV
SITE LEASE DEFAULTS; REMEDIES
The term "Site Lease Default", whenever used herein,
shall mean the following event but only if such event occurs
after the Lease Termination Date:
Site Lessee shall fail to pay rent pursuant to Section
4.1 hereof, shall fail to comply with the provisions of
Article IX hereof or shall fail to pay any amounts under
Section 11.2, Section 11.4 and Article XII hereof within 15
days after payment thereof shall have become due and
demanded by Site Lessor.
Upon the occurrence of a Site Lease Default and so long
as the same shall be continuing, Site Lessor may, at its option,
declare this Site Lease to be in default by written notice to
such effect given to Site Lessee and at any time thereafter, so
long as Site Lessee has not remedied all continuing Site Lease
Defaults, Site Lessor may exercise the following remedies, as
Site Lessor in its sole discretion shall elect:
Site Lessor may exercise any right or remedy that may
be available to it under Applicable Law (including, without
limitation, the offsetting of any sums owing to Site Lessor
hereunder against sums owing by Site Lessor in its capacity
as lessee under the Facility Lease) or proceed by
appropriate court action to enforce the terms hereof or to
recover damages for the breach hereof except that Site
Lessor shall not exercise any right or remedy that may be
available to it hereunder or at law or in equity to rescind
or terminate this Site Lease or take possession of the Site
or the easements granted pursuant to Article VIII hereof.
ARTICLE XV
SUBLEASE; ASSIGNMENT
Site Lessee will not sublease the Site or assign this
Site Lease, except that:
(a) Site Lessee may sublease the Site to the
Partnership (the "Site Sublessee") pursuant to the Site
Sublease; and
(b) At any time after the Lease Termination Date or
the Facility Lease has been declared to be in default
pursuant to Section 15 thereof, Site Lessee may sublease the
Site or assign this Site Lease or any rights hereunder to
any Person in connection with the sale or lease or other
disposition of the Facility or any interest therein to such
Person.
Upon the assumption by any assignee of the obligations of Site
Lessee hereunder, the Site Lessee so assigning shall be
automatically released from such obligations.
ARTICLE XVI
LIMITATION OF LIABILITY
16.1 Partnership. There shall be full recourse to the
Partnership and all of its assets for the liabilities of the
Partnership under this Site Lease, but in no event shall any
Partner, Affiliate of any Partner, or any officer, director or
employee of the Partnership, any Partner or their Affiliates or
any holder of any equity interest in any Partner be personally
liable or obligated for such liabilities of the Partnership,
except as may be specifically provided in any other Financing
Document to which such Partner is a party or in the event of
fraudulent actions, knowing misrepresentations, gross negligence
or willful misconduct by the Partnership, any Partner or any of
their Affiliates in connection with this Site Lease. Subject to
the foregoing limitation on liability, Site Lessee may sue or
commence any suit, action or proceeding against any Partner or
any Affiliate in order to obtain jurisdiction over the
Partnership to enforce its rights and remedies hereunder.
Nothing herein contained shall limit or be construed to limit the
liabilities and obligations of any Partner or Affiliate thereof
in accordance with the terms of any other Financing Document
creating such liabilities and obligations to which such Partner
or Affiliate is a party.
16.2 Owner Trustee. Fleet National Bank is entering
into this Site Lease solely as Owner Trustee under the Trust
Agreement and not in its individual capacity. Accordingly,
except as may be expressly provided to the contrary, each of the
representations, warranties, undertakings and agreements herein
made on the part of the Site Lessee, is made and intended not as
a personal representation, warranty, undertaking or agreement by
or for the purpose or with the intention of binding Fleet
National Bank personally, but is made and intended for the
purpose of binding only the Trust Estate. This Site Lease is
executed and delivered by the Site Lessee solely in the exercise
of the powers expressly conferred upon it as trustee under the
Trust Agreement; and no personal liability or responsibility is
assumed hereunder by or shall at any time be enforceable against
Fleet National Bank or any successor in trust on account of any
action taken or omitted to be taken or any representation,
warranty, undertaking or agreement hereunder of the Site Lessee,
either expressed or implied, all such personal liability, if any,
being expressly waived by the parties hereto, except that the
parties hereto, or any Person acting by, through or under them,
making a claim hereunder, may look to the Trust Estate for
satisfaction of the same and Fleet National Bank or its successor
in trust, as applicable, shall be personally liable for its own
gross negligence or willful misconduct in the performance of its
duties as Owner Trustee or otherwise.
ARTICLE XVII
NOTICES
Unless otherwise specifically provided for herein, all
notices, consents, directions, approvals, instructions, requests
and other communications required or permitted by the terms
hereof to be given to each party hereto shall be in writing, and
shall become effective when delivered in the manner and to the
address specified in the Participation Agreement.
ARTICLE XVIII
BINDING EFFECT
The terms and provisions of this Site Lease and the
respective rights and obligations hereunder of Site Lessee and
Site Lessor shall be binding upon, and inure to the benefit of,
their respective permitted successors and assigns. Site Lessor
agrees that in the event of the appointment of any successor
trustee or additional trustee pursuant to the terms of the Trust
Agreement and the Participation Agreement which succeeds to the
rights, duties, powers and title of the lessor under the Facility
Lease and Site Lessee hereunder, respectively, such successor
trustee or additional trustee shall succeed to all the rights,
duties, powers and titles of Site Lessee hereunder (or to such
lesser extent as provided for in the appointment of such
successor trustee or additional trustee) without the necessity of
any consent or approval by Site Lessor and without in any way
altering the terms of this Site Lease or Site Lessee's
obligations hereunder. Site Lessee shall give Site Lessor prompt
written notice of any appointment of a successor trustee or
additional trustee.
ARTICLE XIX
MISCELLANEOUS
SECTION 19.1. Severability. Any provision of this
Site Lease that shall be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the
parties hereto hereby waive any provision of law that renders any
provision hereof prohibited or unenforceable in any respect.
SECTION 19.2. Amendments. Neither this Site Lease nor
any of the terms hereof may be terminated, amended, supplemented,
waived or modified other than (x) by an instrument in writing
signed by the party against which the enforcement of the
termination, amendment, supplement, waiver or modification shall
be sought and (y) pursuant to the provisions of the Participation
Agreement.
SECTION 19.3. Headings. The headings of the various
Articles and Sections of this Site Lease are for convenience of
reference only and shall not modify, define or limit any of the
terms or provisions hereof.
SECTION 19.4. Counterparts. This Site Lease may be
executed by the parties hereto in separate counterparts, each of
which when so executed and delivered shall be an original, but
all such counterparts shall together constitute but one and the
same instrument.
SECTION 19.5. GOVERNING LAW. THIS SITE LEASE SHALL IN
ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF MARYLAND.
SECTION 19.6. No Merger. There shall not be any
merger of the leasehold estate created hereunder with the fee
estate in the Site or any part thereof or with any other estate
in the Site by reason of the fact that the same Person may
simultaneously acquire, own or hold, as the case may be, directly
or indirectly, (a) the leasehold estate created hereunder or any
interest in or Lien upon the leasehold estate created hereunder,
and (b) the fee estate in the Site or any part thereof or any
other estate in the Site or any interest in or Lien upon such fee
estate or upon such other estate in the Site, unless and until
all Persons having any interest in or Lien upon (i) the leasehold
estate created hereunder and (ii) the fee estate in the Site or
any part thereof or such other interest in the Site, shall join
in a written instrument effecting such merger and shall duly
record the same among the Land Records of Prince George's County,
Maryland.
SECTION 19.7. Recording. Site Lessor and Site Lessee
have recorded among the Land Records a Memorandum of Lease, a
First Amendment to Memorandum of Lease and a Second Amendment to
Memorandum of Lease reflecting the terms of the Existing Site
Lease. Site Lessor and Site Lessee agree that an Amended and
Restated Memorandum of Lease substantially in the form annexed
hereto as Exhibit A shall be recorded among the Land Records of
Prince George's County, Maryland, as soon as possible after the
execution hereof. The memorandum shall expressly state that it
is executed pursuant to provisions contained in this Site Lease,
and is not intended to vary the terms and conditions hereof.
SECTION 19.8. Assignment to Indenture Trustee. In
order to secure the indebtedness evidenced by the Loan
Certificates and certain other obligations as provided in the
Indenture, the Indenture provides, among other things, for the
assignment by the Site Lessee to the Indenture Trustee of all of
its right, title and interest in, to and under this Site Lease,
to the extent set forth in the Indenture, and for the creation of
a Lien on and security interest in the Lessor's Estate in favor
of the Indenture Trustee, and in furtherance thereof, Site Lessor
and Site Lessee have entered into the Security Deposit Agreement.
Site Lessor hereby acknowledges and consents to such assignment
and such security interest and hereby acknowledges that to the
extent set forth in the Indenture, the Indenture Trustee shall
have the right in its own name (in certain cases together with
the Site Lessee and in other cases to the exclusion of the Site
Lessee, all as set forth in Section 3.10 of the Indenture) to
take or refrain from taking action under this Site Lease,
including the right (i) of the Site Lessee to exercise any
election or option, and to make any decision or determination,
and to give any notice, consent, waiver or approval under this
Site Lease or in respect thereof, (ii) to exercise any and all of
the rights, powers and remedies of the Site Lessee hereunder and
(iii) to receive all moneys payable to the Site Lessee under this
Site Lease. Site Lessor will make all payments in accordance
with the Security Deposit Agreement.
SECTION 19.9. Certain Rights of Power Purchaser.
Nothing in this Site Lease shall be deemed to limit the
provisions of the Consent of the Power Purchaser, which
provisions are solely for the benefit of the Power Purchaser and
not the Site Lessee. Without limiting the scope of the
foregoing, Site Lessor agrees, for the exclusive benefit of the
Power Purchaser and not the Site Lessee, that the exercise of
remedies or any similar action under this Site Lease is subject
to, and shall be conducted in a manner consistent with, the Power
Purchaser's rights under (i) the Consent of the Power Purchaser
and (ii) the Power Purchase Agreement and the Transfer Agreement
(to the extent such rights under the Power Purchase Agreement and
the Transfer Agreement are not explicitly waived by the Power
Purchaser in accordance with the terms of the Consent of the
Power Purchaser).
SECTION 19.10. Subordination. Site Lessor and Site
Lessee hereby acknowledge and agree that this Site Lease is
subordinate to the terms of the Deed of Trust and Security
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the day and year first
above written.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its general partner
By: ________________________
Name:
Title:
FLEET NATIONAL BANK,
not in its individual capacity but
solely as Owner Trustee
By: _____________________________
Name:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this ___ day of December, 1996
the above-named _________________, _______________, of FLEET
NATIONAL BANK, a national banking association, as Owner Trustee,
and acknowledged the foregoing to be his free act and deed in his
said capacity and the free act and deed of said FLEET NATIONAL
BANK, as Owner Trustee.
Notary Public
Type or print name:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this ___ day of December, 199
the above-named ______________, ________________ of PANDA
BRANDYWINE CORPORATION, the general partner of PANDA-BRANDYWINE,
L.P., a Delaware limited partnership, and acknowledged the
foregoing to be his free act and deed in his said capacity and
the free act and deed of said PANDA BRANDYWINE CORPORATION, and
PANDA-BRANDYWINE, L.P.
Notary Public
Type or print name:
Schedule 1
DESCRIPTION OF SITE
Exhibit A to Site Lease
AMENDED AND RESTATED
MEMORANDUM OF LEASE
Notice is hereby given of the following AMENDED AND
RESTATED SITE LEASE:
SITE LESSOR: PANDA-BRANDYWINE, L.P., a Delaware limited
partnership having an address at 4100 Spring
Valley, Suite 1001, Dallas, Texas 75244.
SITE LESSEE: FLEET NATIONAL BANK (formerly known as
Shawmut Bank Connecticut, National
Association), a national banking association,
not in its individual capacity but solely as
owner trustee, having an address at 777 Main
Street, Hartford, Connecticut 06115.
DATE OF EXECUTION: As of March 30, 1995, as amended by a First
Amendment dated as of October 30, 1996 and a
Second Amendment dated as of December 18,
1996, and as amended and restated as of
December 18, 1996 by an Amended and Restated
Site Lease.
LEASED PREMISES: Parcels of land described in Schedule 1
attached (the "Site") located in Prince
George's County Maryland.
It is the intention of the Site Lessor and
the Site Lessee that the Facility (as defined
in the Site Lease) and each portion thereof,
and all repairs, replacements, substitutions
and additions thereto, whether now or at any
time hereafter located on the Site, are severed,
and shall remain severed, from the Site even if
physically attached, are and shall remain
personal property, and are not and shall not
be fixtures or an accession to the Site, the
title thereto being separate and distinct
from the title to the Site, and shall be
treated as personal property with respect to
the rights of all persons whatsoever and for
all purposes of the Financing Documents (as
defined in the Site Lease), and title to the
Facility shall not, except as specifically
contemplated by the Financing Documents, be
affected in any way by any instrument dealing
with the Site or any part thereof.
Notwithstanding the foregoing, if contrary to
the intention of Site Lessor and Site Lessee,
any Governmental Authority (as defined in the
Site Lease) with jurisdiction over the Site
determines that any portion of the Facility
is a fixture or accession to the Site, such
portion of the Facility shall constitute part
of the Site being leased under the Site
Lease.
TERM OF LEASE: From March 30, 1995 until the earlier of
(i) November 1, 2037, and (ii) the
termination of the contemporaneous lease of
personal property from Site Lessee to Site
Lessor pursuant to Section 9(c), 9(d) or
12(b) of such lease.
OPTION TO PURCHASE: None.
RIGHT OF FIRST
REFUSAL: None.
RIGHT TO RENEW
OR EXTEND: None.
The parties hereto further expressly acknowledge that
this Amended and Restated Memorandum of Lease is being executed
pursuant to the provisions of the Amended and Restated Site Lease
and is not intended to vary the terms or conditions of the
Amended and Restated Site Lease.
Executed as a sealed instrument as of this 18th day of
December, 1996.
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its general partner
By: _________________________
Name:
Title:
FLEET NATIONAL BANK, not in its
individual capacity but solely as
owner trustee
By: ______________________________
Name:
Title:
This is to certify that the within instrument was
prepared under the supervision of the undersigned who is an
attorney admitted to practice before the Court of Appeals of
Maryland.
___________________________
Name:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this ___ day of December, 1996,
the above-named _________________, _________________, of FLEET
NATIONAL BANK, a national banking association, as Owner Trustee,
and acknowledged the foregoing to be his free act and deed in his
said capacity and the free act and deed of said FLEET NATIONAL
BANK, as Owner Trustee.
Notary Public
Type or print name:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this ___ day of December, 1996
the above-named ______________, ________________ of PANDA
BRANDYWINE CORPORATION, the general partner of PANDA-BRANDYWINE,
L.P., a Delaware limited partnership, and acknowledged the
foregoing to be his free act and deed in his said capacity and
the free act and deed of said PANDA BRANDYWINE CORPORATION, and
PANDA-BRANDYWINE, L.P.
Notary Public
Type or print name:
EXHIBIT 10.73
AMENDED AND RESTATED
SITE SUBLEASE
Dated as of December 18, 1996
between
FLEET NATIONAL BANK
(not in its individual capacity but
solely as Owner Trustee),
as Sublessor
and
PANDA-BRANDYWINE, L.P.,
as Sublessee
Real Property Located in the County of
Prince George's, Maryland
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 2
1.1 Defined Terms 2
1.2 Other Definitional Provisions 2
SECTION 2. DEMISING PROVISIONS 2
2.1 Sublease 2
2.2 Severance 3
SECTION 3. TERM 3
SECTION 4. USE 3
SECTION 5. RENT 4
SECTION 6. POSSESSION AND QUIET ENJOYMENT 4
SECTION 7. NO MERGER OF TITLE 4
SECTION 8. RESPONSIBILITY OF SUBLESSOR 4
SECTION 9. SURRENDER 5
SECTION 10. MISCELLANEOUS 5
10.1 Notices 5
10.2 Amendments 5
10.3 Headings, etc. 5
10.4 Successors and Assigns 5
10.5 GOVERNING LAW 6
10.6 Severability 6
10.7 Limitation of Liability 6
10.8 Recording 7
10.9 Sublease; Assignment 7
10.10 Assignment to Indenture Trustee 7
10.11 Subordination 8
Schedule A Legal Description of the Site
Schedule B Description of the Facility
Schedule C-1 Description of the Distilled Water Facility
Exhibit A Memorandum of Lease
AMENDED AND RESTATED
SITE SUBLEASE
AMENDED AND RESTATED SITE SUBLEASE (this "Site
Sublease") dated as of December 18, 1996 made between FLEET
NATIONAL BANK (formerly known as Shawmut Bank Connecticut
National Association), a national banking association, not in its
individual capacity but solely as Owner Trustee under the Trust
Agreement (as defined in the Participation Agreement referred to
below), as sublessor (the "Owner Trustee" or "Sublessor"), and
PANDA-BRANDYWINE, L.P., a Delaware limited partnership
("Partnership" or "Sublessee"), as sublessee.
RECITALS:
A. Sublessor is the owner of a leasehold estate in the
real property described on Schedule 1 hereto (the "Site") under
the terms of the Site Lease dated as of March 30, 1995, as
amended by a First Amendment thereto dated as of October 30, 1996
and a Second Amendment thereto dated as of December 18, 1996, and
as further amended and restated pursuant to the Amended and
Restated Site Lease dated as of the date hereof (as the same may
be further amended, supplemented or otherwise modified from time
to time, the "Site Lease") a memorandum of which has been
recorded among the Land Records of Prince George's County,
Maryland and the Land Records of Charles County, Maryland (the
"Land Records").
B. Sublessor is the owner of a natural gas-fired
cogeneration facility and a distilled water facility more
particularly described in Schedule 2 attached hereto (the
"Facility") which is or will be located on the Site.
C. Pursuant to the Facility Lease (the "Facility
Lease"), Sublessor has leased and demised the Facility to
Sublessee.
D. Sublessor and Sublessee have entered into that
certain Site Sublease dated as of March 30, 1995 (the "Original
Site Sublease") pursuant to which, Sublessor subleased to
Sublessee, and Sublessee subleased from Sublessor, the Site upon
the terms and conditions set forth in the Original Site Sublease.
A memorandum of the Original Site Sublease has been recorded
among the Land Records and all appropriate transfer and recording
taxes have been paid. Sublessor and Sublessee have amended the
Original Site Sublease pursuant to a First Amendment to Site
Sublease dated as of October 30, 1996 (the "First Amendment") and
a Second Amendment to Site Sublease dated as of December 18, 1996
(the "Second Amendment") (the Original Site Sublease, as amended
by the First Amendment and the Second Amendment, the "Existing
Site Sublease"). The First Amendment and the Second Amendment
released Sublessor's interest in the Easements from the premises
demised by the Existing Site Sublease. A First Amendment to
Memorandum of Lease dated as of October 30, 1996 and a Second
Amendment to Memorandum of Lease dated as of December 18, 1996
have been recorded in the Land Records.
E. Sublessor and Sublessee have agreed to amend and
restate the Existing Site Sublease as provided herein.
AGREEMENT:
In consideration of the mutual agreements herein
contained and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Sublessor and
Sublessee, intending to be legally bound hereby, hereby agree to
amend and restate the Existing Site Sublease as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings assigned to
them in Annex A to the Participation Agreement, dated as of the
date hereof (as the same may be amended, supplemented or
otherwise modified from time to time, the "Participation
Agreement"), among Sublessee, the Panda Brandywine Corporation,
General Electric Capital Corporation, Sublessor, the Security
Agent, Credit Suisse, as administrative agent (the
"Administrative Agent"), First Security Bank, National
Association (not in its individual capacity but solely as
indenture trustee (in such capacity, the "Indenture Trustee")
under the Indenture) and the other entities listed on Schedule I
to the Participation Agreement (the "Loan Participants") (such
definitions to be equally applicable to both the singular and
plural forms of the terms defined). Any term defined by
reference to an agreement, instrument or other document shall
have the meaning so assigned to it whether or not such document
is in effect.
1.2 Other Definitional Provisions. The words
"hereof," "herein" and "hereunder" and words of similar import
when used in this Site Sublease shall refer to this Site Sublease
as a whole and not to any particular provision hereof. Section,
subsection, Appendix, Exhibit and Schedule references contained
in this Site Sublease are references to Sections, subsections,
Appendices, Exhibits and Schedules in or to this Site Sublease
unless otherwise specified.
SECTION 2. DEMISING PROVISIONS
2.1 Sublease. Sublessor hereby demises and subleases
to Sublessee and Sublessee hereby subleases and hires from
Sublessor, upon and subject to the terms and conditions
hereinafter set forth, the Site and any and all additions,
alterations and improvements from time to time included in the
Site, excluding the Facility (which Site, additions, alterations
and improvements are hereinafter referred to as the "Site"), TO
HAVE AND TO HOLD the same, subject as aforesaid, unto Sublessee
and Sublessee's successors and assigns, commencing on the date
hereof and continuing for the term described in Section 3 hereof.
Sublessee acknowledges that it subleases and hires and takes the
Site "as is" and Sublessor has not made any covenants,
representations or warranties about the Site other than those
expressly set forth herein.
2.2 Severance. It is the intention of the Sublessor
and the Sublessee that the Facility and each portion thereof, and
all repairs, replacements, substitutions and additions thereto,
whether now or at any time hereafter located on the Site, are
severed, and shall remain severed, from the Site even if
physically attached, are and shall remain personal property, and
are not and shall not be fixtures or an accession to the Site,
the title thereto being separate and distinct from the title to
the Site, and shall be treated as personal property with respect
to the rights of all Persons whatsoever and for all purposes of
the Participation Agreement, the Site Lease, this Site Sublease
and the Facility Lease, and title to the Facility shall not,
except as specifically contemplated by the Financing Documents,
be affected in any way by any instrument dealing with the Site or
any part thereof. Notwithstanding the foregoing, if contrary to
the intention of Sublessor and Sublessee, any Governmental
Authority with jurisdiction over the Site determines that any
portion of the Facility is a fixture or accession to the Site,
such portion of the Facility shall constitute part of the Site
being leased hereunder.
SECTION 3. TERM
The term of this Site Sublease shall commence on the
date hereof and shall end on the earlier to occur of (i)
expiration or earlier termination of the Facility Lease (taking
into account any renewals of the term thereof) and (ii) the day
before the date of expiration or termination of the Site Lease.
SECTION 4. USE
During the term of this Site Sublease, the Site and the
Easements shall be used by Sublessee as provided in the Site
Lease. Sublessee shall perform all the terms, covenants and
conditions to be performed by Sublessor under the Site Lease
other than any obligation of Sublessor contained in Article IX
and Sections 11.2 and 11.4 thereof.
SECTION 5. RENT
As rent for the Site for the term hereof, Sublessee
shall pay rent of $1 per year. Sublessee agrees to pay to
Sublessor the sum of $20 towards such rent in advance upon
execution of this Site Sublease.
SECTION 6. POSSESSION AND QUIET ENJOYMENT
Subject to the provisions of the Site Lease, and so
long as no Lease Default or Lease Event of Default shall have
occurred and be continuing, neither Sublessor nor any of its
permitted successors and assigns shall disturb Sublessee's
peaceful and quiet use and possession of the Site, and Sublessee
shall enjoy all rights of Sublessor under the Site Lease;
provided, however, Sublessor shall not be responsible for the
acts of predecessors in title to Sublessor. Sublessor warrants
that, as of the date hereof, it has not heretofore assigned or
encumbered its interests acquired pursuant to the Site Lease or
any part thereof.
SECTION 7. NO MERGER OF TITLE
There shall be no merger of this Site Sublease or the
leasehold estate created by this Site Sublease with any estate in
the Facility or other estate in the Site or any part thereof by
reason of the fact that the same Person may acquire, own or hold,
directly or indirectly, (a) this Site Sublease or any interest in
this Site Sublease or in any such leasehold estate and (b) any
estate in the Facility or other estate in the Site or any part
thereof or any interest in such estate, and no such merger shall
occur unless and until all Persons having any interest (including
a security interest) in (i) this Site Sublease or the leasehold
estate created by this Site Sublease and (ii) any estate in the
Facility or other estate in the Site or any part thereof, shall
join in a written instrument effecting such merger and shall duly
record the same among the Land Records.
SECTION 8. RESPONSIBILITY OF SUBLESSOR
Sublessor shall have no duty, responsibility, liability
or obligation to Sublessee in respect of the Site for the use,
maintenance or condition of the Facility, except as provided in
Section 6 hereof and in the Site Lease (which obligations are
hereby incorporated herein by reference). Sublessor shall have
no liability or obligation whatsoever to Sublessee under this
Site Sublease by reason of termination of the Site Lease in the
absence of any breach by Sublessor of its express affirmative
obligations to Sublessee hereunder or under the Site Lease.
SECTION 9. SURRENDER
At the termination of this Site Sublease, Sublessee
shall forthwith quit and surrender the Site and the Easements and
deliver the Site and the Easements to Sublessor in the same
condition, reasonable wear and tear excepted, as on the date
hereof. Subject to any applicable provisions of the Site Lease
and except as provided in Section 8 of the Facility Lease, all
improvements affixed to the Site and the Easements shall be and
remain the property of Sublessor from and after the termination
of this Site Sublease.
SECTION 10. MISCELLANEOUS
10.1 Notices. Unless otherwise specifically provided
for herein, all notices, consents, directions, approvals,
instructions, requests and other communications required or
permitted by the terms hereof to be given to each party hereto
shall be in writing, and shall become effective when delivered in
the manner and to the address specified in the Participation
Agreement.
10.2 Amendments. Neither this Site Sublease nor any
of the terms hereof may be terminated, amended, supplemented,
waived or modified orally, but only (x) by an instrument in
writing signed by the party against which enforcement of the
termination, amendment, supplement, waiver or modification shall
be sought and (y) pursuant to the provisions of the Participation
Agreement.
10.3 Headings, etc. The headings of various Sections
and subsections of this Site Sublease are for convenience of
reference only and shall not modify, define, expand or limit any
of the terms or provisions hereof.
10.4 Successors and Assigns. The terms of this Site
Sublease shall be binding upon and inure to the benefit of
Sublessee and Sublessor and their permitted respective successors
and assigns. Sublessee agrees that in the event of the
appointment of any successor trustee or additional trustee
pursuant to the terms of the Trust Agreement and the
Participation Agreement which succeeds to the rights, duties,
powers and title of the lessor under the Facility Lease and
Sublessor hereunder, respectively, such successor trustee or
additional trustee shall succeed to all the rights, duties,
powers and titles of Sublessor hereunder (or to such lesser
extent as provided for in the appointment of such successor
trustee or additional trustee) without the necessity of any
consent or approval by Sublessee and without in any way altering
the terms of this Sublease or Sublessee's obligations hereunder.
Sublessor shall give Sublessee prompt written notice of any
appointment of a successor trustee or additional trustee.
Sublessee shall attorn to any such successor trustee or
additional trustee.
10.5 GOVERNING LAW. THIS SITE SUBLEASE HAS BEEN
DELIVERED IN AND SHALL BE GOVERNED BY AND BE CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND.
10.6 Severability. Any provision of this Site
Sublease that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the
remaining provisions hereof, and such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
10.7 Limitation of Liability. (a) There shall be
full recourse to the Partnership and all of its assets for the
liabilities of the Partnership under this Site Sublease, but in
no event shall any Partner, Affiliate of any Partner, or any
officer, director or employee of the Partnership, any Partner or
their Affiliates or any holder of any equity interest in any
Partner be personally liable or obligated for such liabilities of
the Partnership, except as may be specifically provided in any
other Financing Document to which such Partner is a party or in
the event of fraudulent actions, knowing misrepresentations,
gross negligence or willful misconduct by the Partnership, any
Partner or any of their Affiliates in connection with this Site
Sublease. Subject to the foregoing limitation on liability,
Sublessor may sue or commence any suit, action or proceeding
against any Partner or any Affiliate in order to obtain
jurisdiction over the Partnership to enforce its rights and
remedies hereunder. Nothing herein contained shall limit or be
construed to limit the liabilities and obligations of any Partner
or Affiliate thereof in accordance with the terms of any other
Financing Document creating such liabilities and obligations to
which such Partner or Affiliate is a party.
(b) Fleet National Bank is entering into this Site
Sublease solely as Owner Trustee under the Trust Agreement and
not in its individual capacity. Accordingly, except as may be
expressly provided to the contrary, each of the representations,
warranties, undertakings and agreements herein made on the part
of the Sublessor, is made and intended not as a personal
representation, warranty, undertaking or agreement by or for the
purpose or with the intention of binding Fleet National Bank
personally, but is made and intended for the purpose of binding
only the Trust Estate. This Site Sublease is executed and
delivered by the Sublessor solely in the exercise of the powers
expressly conferred upon it as trustee under the Trust Agreement;
and no personal liability or responsibility is assumed hereunder
by or shall at any time be enforceable against Fleet National or
any successor in trust on account of any action taken or omitted
to be taken or any representation, warranty, undertaking or
agreement hereunder of the Sublessor, either expressed or
implied, all such personal liability, if any, being expressly
waived by the parties hereto, except that the parties hereto, or
any Person acting by, through or under them, making a claim
hereunder, may look to the Trust Estate for satisfaction of the
same and Fleet National Bank or its successor in trust, as
applicable, shall be personally liable for its own gross
negligence or willful misconduct in the performance of its duties
as Owner Trustee or otherwise.
10.8 Recording. Sublessor and Sublessee have recorded
among the Land Records a Memorandum of Lease, a First Amendment
to Memorandum of Lease and a Second Amendment to Memorandum of
Lease reflecting the terms of the Existing Site Sublease.
Sublessor and Sublessee agree that an Amended and Restated
Memorandum of Lease substantially in the form annexed hereto as
Exhibit A shall be recorded among the Land Records of Prince
George's County as soon as possible after the execution hereof.
The memorandum shall expressly state that it is executed pursuant
to provisions contained in this Site Sublease, and is not
intended to vary the terms and conditions hereof.
10.9 Sublease; Assignment. Sublessee will not sub-
sublease the Site or assign this Site Sublease, except that
Sublessee may sub-sublease the Site to Brandywine Water Company
pursuant to the Steam Lease.
10.10 Assignment to Indenture Trustee. In order to
secure the indebtedness evidenced by the Loan Certificates and
certain other obligations as provided in the Indenture, the
Indenture provides, among other things, for the assignment by the
Sublessor to the Indenture Trustee of all of its right, title and
interest in, to and under this Site Sublease, to the extent set
forth in the Indenture, and for the creation of a Lien on and
security interest in the Lessor's Estate in favor of the
Indenture Trustee, and in furtherance thereof, Sublessor and
Sublessee have entered into the Security Deposit Agreement.
Sublessee hereby acknowledges and consents to such assignment and
such security interest and hereby acknowledges that to the extent
set forth in the Indenture, the Indenture Trustee shall have the
right in its own name (in certain cases together with the
Sublessor and in other cases to the exclusion of the Sublessor,
all as set forth in Section 3.10 of the Indenture) to take or
refrain from taking action under this Site Sublease, including
the right (i) of the Sublessor to exercise any election or
option, and to make any decision or determination, and to give
any notice, consent, waiver or approval under this Site Sublease
or in respect thereof, (ii) to exercise any and all of the
rights, powers and remedies of the Sublessor hereunder and (iii)
to receive all moneys payable to the Sublessor under this Site
Sublease. Sublessee will make all payments in accordance with
the Security Deposit Agreement.
10.11 Subordination. Sublessor and Sublessee hereby
acknowledge and agree that this Site Sublease is subordinate to
the terms of the Deed of Trust and Security Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Site Sublease to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above
written.
FLEET NATIONAL BANK, not in its
individual capacity but solely as
Owner Trustee
By: _____________________________
Name:
Title:
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its general partner
By: ________________________
Name:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this ___ day of December, 1996,
the above-named _________________, ________________, of FLEET
NATIONAL BANK, a national banking association, as Owner Trustee,
and acknowledged the foregoing to be his free act and deed in his
said capacity and the free act and deed of said FLEET NATIONAL
BANK, as Owner Trustee.
Notary Public
Type or print name:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this ___ day of December, 1996,
the above-named ______________, _________________ of PANDA
BRANDYWINE CORPORATION, the general partner of PANDA-BRANDYWINE,
L.P., a Delaware limited partnership, and acknowledged the
foregoing to be his free act and deed in his said capacity and
the free act and deed of said PANDA BRANDYWINE CORPORATION, and
PANDA-BRANDYWINE, L.P.
Notary Public
Type or print name:
Schedule A
to the
Site Sublease
DESCRIPTION OF THE SITE
Schedule B
to the
Site Sublease
FACILITY DESCRIPTION
The Brandywine Cogeneration facility is a 230 megawatt
natural gas-fired electric generating power plant located in
Prince George's County, Maryland. This facility consists of, but
is not limited to, the following equipment:
Steam Generator
Air Pollution Control Equipment
Turbine Generator
Condenser
Cooling Tower
Distributed Control System
Instrumentation
Switchyard
Fuel Handling
Fans
Feedwater Pumps
Circulation Pumps
Fire Protection
Demineralizer
Piping and Valves
Electrical and Wiring
Concrete
Insulation
Buildings
Distilled Water Facility (described on Schedule B-2
attached hereto)
Schedule B-2
to the
Site Sublease
DISTILLED WATER FACILITY DESCRIPTION
The Distilled Water facility is located in Prince
George's County, Maryland. This facility consists of, but is not
limited to, the following:
Part I
Piperacks and miscellaneous supports (including grating)
Packaged distilled water system
Distilled water storage tank - 220,000 gallons
Truck filling pumps
Sump pumps
12" steam supply from Facility
Piping for Distilled Water Facility systems: circ. water, drains,
pump suction and discharge, tank, sumps, fire protection,
acid, potable water, including safety shower and eye wash
station
Electrical equipment including: MCCs, transformer, circuit
breakers, panels and local control stations
Raceway including conduit, cable tray and fittings
Wire, cable and terminations
Lighting, grounding and miscellaneous systems
Instrumentation
Insulation
Part II
Structural excavation for foundations
Backfill and placement for foundations
Paving required including subbase and base course
Chain link fence
Drainage pipe
Catch basins
Landscaping - trees and shrubs
Foundations and slabs for building, tank, equipment, sumps,
piperack and loading/unloading area
Painting
Pre-engineered building - 40'x50'x26' (including doors, HVAC and
fire protection)
Exhibit A to Site Sublease
AMENDED AND RESTATED
MEMORANDUM OF LEASE
Notice is hereby given of the following AMENDED AND
RESTATED SITE SUBLEASE:
SUBLESSOR: FLEET NATIONAL BANK (formerly known as
Shawmut Bank Connecticut, National
Association), a national banking association,
not in its individual capacity but solely as
owner trustee, having an address at 777 Main
Street, Hartford, Connecticut 06115.
SUBLESSEE: PANDA-BRANDYWINE, L.P., a Delaware
limited partnership, having an address at
4100 Spring Valley, Suite 1001, Dallas, Texas
75244.
DATE OF EXECUTION: As of March 30, 1995, as amended by a First
Amendment dated as of October 30, 1996 and a
Second Amendment dated as of December 18,
1996, and as amended and restated as of
December 18, 1996 by an Amended and Restated
Site Sublease.
SUBLEASED PREMISES: Parcels of land described in Schedule 1
attached (the "Site") located in Prince
George's County, Maryland.
It is the intention of the Sublessor and the
Sublessee that the Facility (as defined in the
Site Sublease) and each portion thereof, and all
repairs, replacements, substitutions and additions
thereto, whether now or at any time hereafter
located on the Site, are severed, and shall
remain severed, from the Site even if
physically attached, are and shall remain
personal property, and are not and shall not
be fixtures or an accession to the Site, the
title thereto being separate and distinct
from the title to the Site, and shall be
treated as personal property with respect to
the rights of all persons whatsoever and for
all purposes of the Financing Documents (as
defined in the Site Sublease), and title to
the Facility shall not, except as
specifically contemplated by the Financing
Documents, be affected in any way by any
instrument dealing with the Site or any part
thereof. Notwithstanding the foregoing, if
contrary to the intention of Sublessor and
Sublessee, any Governmental Authority (as
defined in the Site Sublease) with
jurisdiction over the Site determines that
any portion of the Facility is a fixture or
accession to the Site, such portion of the
Facility shall constitute part of the Site
being leased under the Site Sublease.
TERM OF LEASE: From March 30, 1995 until the earlier to
occur of (i) expiration or earlier
termination of the contemporaneous lease of
personal property from Sublessor to Sublessee
and (ii) the day before the date of
expiration or termination of the Site Lease
(as defined in the Site Sublease).
OPTION TO PURCHASE: None.
RIGHT OF FIRST
REFUSAL: None.
RIGHT TO RENEW
OR EXTEND: None.
The parties hereto further expressly acknowledge that
this Amended and Restated Memorandum of Lease is being executed
pursuant to the provisions of the Amended and Restated Site
Sublease and is not intended to vary the terms or conditions of
the Amended and Restated Site Sublease.
Executed as a sealed instrument as of the 18th day of
December, 1996.
FLEET NATIONAL BANK,
not in its individual capacity but
solely as owner trustee
By: _______________________________
Name:
Title:
PANDA-BRANDYWINE, L.P.
By: Panda Brandywine Corporation,
its General Partner
By: __________________________
Name:
Title:
This is to certify that the within instrument was
prepared under the supervision of the undersigned who is an
attorney admitted to practice before the Court of Appeals of
Maryland.
_______________________________
Name:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this ___ day of December, 1996,
the above-named _________________, ________________, of FLEET
NATIONAL BANK, a national banking association, as Owner Trustee,
and acknowledged the foregoing to be his free act and deed in his
said capacity and the free act and deed of said FLEET NATIONAL
BANK, as Owner Trustee.
Notary Public
Type or print name:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
PERSONALLY APPEARED on this ___ day of December, 1996,
the above-named ______________, _________________ of PANDA
BRANDYWINE CORPORATION, the general partner of PANDA-BRANDYWINE,
L.P., a Delaware limited partnership, and acknowledged the
foregoing to be his free act and deed in his said capacity and
the free act and deed of said PANDA BRANDYWINE CORPORATION, and
PANDA-BRANDYWINE, L.P.
Notary Public
Type or print name:
EXHIBIT 12.00
PANDA INTERFUNDING CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31, Nine Months Ended September 30,
1991 1992 1993 1994 1995 1995 1995 1996 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Pro Forma) (Pro Forma)
Income (loss) before minority interest $ 3,573 $ 4,957 $ 4,502 $ 5,242 $ 3,045 $(6,682) $ 2,786 $(1,630) $(6,653)
and extraordinary items
Interest expenses 15,414 11,478 11,066 11,018 11,716 21,875 8,525 11,096 16,406
Amortization of Debt issue costs 493 436 502 600 554 312 409 395 251
Capitalized interest 803 5,793 5,793 3,258 9,679 9,679
Total fixed charges 15,907 11,914 11,568 12,421 18,063 27,980 12,192 21,170 26,336
Earnings before fixed charges 19,480 16,871 16,070 16,860 15,315 15,505 11,720 9,861 10,004
Ratio of earnings to fixed charges 1.22 1.42 1.39 1.36 .85 .55 .96 .47 .38
Deficiency in coverage of fixed charges $(2,748) $(12,475) $ (472) $(11,309) $(16,332)
</TABLE>
EXHIBIT 16.00
January 10, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We have read the disclosures contained in "Management's
Discussion and Analysis of Financial Condition and Results
of Operations, Change in Independent Accountant" in Amendment
No. 1 to the Registration Statement on Form S-1 (333-14495
and 333-14495-01) of Panda Funding Corporation and Panda
Interfunding Corporation and are in agreement with the
statements contained therein.
Yours very truly,
/s/ Price Waterhouse LLP
Price Waterhouse LLP
EXHIBIT 23.01
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1
to Registration Statement No. 333-14495 of Panda Funding
Corporation and Panda Interfunding Corporation of our report
dated January 10, 1997 (which expresses an unqualified
opinion and includes an explanatory paragraph relating to
the restatement of such financial statements) on the
consolidated financial statements of Panda Interfunding
Corporation appearing in the Prospctus, which is a part of
such Registration Statement, and to the reference to us
under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Dallas, Texas
January 10, 1997
EXHIBIT 23.03
[ICF Resources Incorporated Letterhead]
January 10, 1997
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, TX 75244
RE: Consultant's Report
Ladies and Gentlemen:
We consent to the use of (i) our report entitled
"Independent Panda-Brandywine Pro Forma Projections" and our
Update Report, dated January 10, 1997, related thereto, and (ii)
our report entitled "Summary of the Consolidated Pro Formas of
the Panda Rosemary and Panda Brandywine Power Projects" dated
January 10, 1997 in the Prospectus (the "Prospectus") relating to
the offering of Pooled Project Bonds, Series A-1 due 2012 offered
by Panda Funding Corporation and included in the registration
statement on Form S-1 by Panda Interfunding Corporation, and the
inclusion of such reports and certificates as Appendices to the
Prospectus.
We also consent to the statements by Burns & McDonnell in
their report (and the summary thereof) included in the
Prospectus, that they have relied on our report entitled
"Independent Assessment of the Dispatchability of the Panda-
Rosemary Project,"
We also consent to the statements by C.C. Pace Resources,
Inc., in their report included in the Prospectus, that they have
relied on our reports referenced above.
We also consent to the statements by Pacific Energy Systems,
Inc., in their report included in the Prospectus, that they have
relied on our reports referenced above.
We also hereby consent to being referred to (i) under the
term "Consolidating Engineer" provided that it is understood that
ICF Resources Incorporated did not perform engineering services
in connection with its work relating to the Prospectus, and (ii)
as experts under the heading "Independent Engineers and
Consultants" in the Prospectus.
All of the above-referenced ICF Resources Incorporated
reports were prepared pursuant to the terms of Consulting
Agreement(s) between ICF Resources and Panda Energy International.
ICF RESOURCES INCORPORATED
By: /s/ B.S. Venkateshwara
Name: B.S. Venkateshwara
Title: Vice President
EXHIBIT 23.04
[BURNS & MCDONNELL LETTERHEAD]
January 10, 1997
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Re: Independent Engineer's Report
Ladies and Gentlemen:
We consent to the use of our report entitled "Panda-Rosemary
Cogeneration Condition Assessment Report for Potential
Investors at the Request of Panda Energy Corporation" and
the Update Report dated January 10, 1997, related thereto
in the Prospectus (the "Prospectus") relating to the
offering of Pooled Project Bonds, Series A-1 due 2012
offered by Panda Funding Corporation and included in the
registration statement on Form S-1 by Panda Interfunding
Corporation and Panda Funding Corporation, and to the
inclusion of such report and update as an Appendix to the
Prospectus.
We also consent to the statements by ICF Resources,
Incorporated in their reports (and the summaries thereof)
included in the Prospectus, that they have relied on our
report referenced above, and we authorize such reliance.
We also hereby consent to the reference to us as experts
under the heading "Experts-Independent Engineers and
Consultants" in the Prospectus.
BURNS & MCDONNELL
By: /s/ Michael W. McComas
Name: Michael W. McComas
Title: Vice President
EXHIBIT 23.05
[BENJAMIN SCHLESINGER AND ASSOCIATED, INC. LETTERHEAD]
JANUARY 10, 1997
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Re: Fuel Consultant's Report
Ladies and Gentlemen:
We consent to the use of our report entitled "Assessment of
Fuel Price, Supply and Delivery Risks for the Panda-Rosemary
Cogeneration Project" and the Officer's Certificate, of even
date herewith, related thereto in the Prospectus (the
"Prospectus") relating to the offering of Pooled Project
Bonds, Series A-1 due 2012 offered by Panda Funding Corporation
and included in the registration statement on Form S-1 by
Panda Interfunding Corporation and Panda Funding Corporation,
and to the inclusion of such report and certificate as an
Appendix to the Prospectus.
We also hereby consent to the reference to us as experts
under the heading "Experts-Independent Engineers and
Consultants" in the Prospectus.
BENJAMIN SCHLESINGER AND ASSOCIATES, INC.
By: /s/ Benjamin Schlesinger
Name: Benjamin Schlesinger, Ph.D.
Title: President
EXHIBIT 23.06
[PACIFIC ENERGY SYSTEMS, INC. LETTERHEAD]
January 10, 1997
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Re: Independent Engineer's Report
Ladies and Gentlemen:
We consent to the use of our report entitled "Independent
Engineer's Report, Panda-Brandywine Cogeneration Project"
and our Update Report dated January 10, 1997, related
thereto in the Prospectus (the "Prospectus") relating to the
offering of Pooled Project Bonds, Series A-1 due 2012
offered by Panda Funding Corporation and included in the
registration statement on Form S-1 by Panda Interfunding
Corporation and Panda Funding Corporation, and to the
inclusion of such report and update as an Appendix to the
Prospectus.
We also consent to the statement by ICF Resources, Incorporated
in their reports (and the summaries thereof) included in the
Prospectus, that they have relied on our report above and we
authorize such reliance.
We also consent to the statement of C.C. Pace Resources, Inc.,
in their report included in the Prospectus, that they have
relied on our report referenced above and we authorize such
reliance.
We also hereby consent to the reference to us as experts
under the heading "Experts-Independent Engineers and
Consultants" in the Prospectus.
PACIFIC ENERGY SYSTEMS
By: /s/ John R. Martin
John R. Martin, P.E.
President
EXHIBIT 23.07
[C.C. PACE RESOURCES, INC. LETTERHEAD]
January 10, 1997
Panda Interfunding Corporation
Panda Funding Corporation
c/o Panda Energy International, Inc.
4100 Spring Valley Road
Suite 1001
Dallas, Texas 75244
Re: Fuel Consultant's Consent
Ladies and Gentlemen:
We consent to the use in the Prospectus constituting part of
the registration statement on Form S-1 by Panda Interfunding
Corporation and Panda Funding Corporation relating to the
offering of Pooled Project Bonds, Series A-1 due 2012 by
Panda Funding Corporation (the "Prospectus") of our report
dated July 2, 1996 entitled "Panda-Brandywine, L.P.
Generating Facility Fuel Consultant's Report" (the "Report")
and our supplemental update letter dated January 10, 1997
related thereto, which are included as an Appendix to the
Prospectus, and to the reference to us as experts under the
heading "Experts-Independent Engineers and Consultants" in
the Prospectus.
We also consent to the statements by ICF Resources,
Incorporated in their reports included in the Prospectus,
that they have relied on the Report and we authorize such
reliance.
C.C. PACE RESOURCES, INC.
By: /s/ Daniel E. White
Daniel E. White
Title: Senior Vice President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form S-1
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> SEP-30-1996 DEC-31-1995
<CASH> 6,574,499 3,036,238
<SECURITIES> 0 0
<RECEIVABLES> 7,279,292 5,199,999
<ALLOWANCES> 0 0
<INVENTORY> 3,243,548 3,084,168
<CURRENT-ASSETS> 17,124,528 11,333,069
<PP&E> 288,162,688 237,801,668
<DEPRECIATION> (24,167,695) (21,008,036)
<TOTAL-ASSETS> 317,229,230 242,849,404
<CURRENT-LIABILITIES> 16,589,380 18,457,226
<BONDS> 404,950,386 234,608,361
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (104,310,536) (47,051,849)
<TOTAL-LIABILITY-AND-EQUITY> 317,229,230 242,849,404
<SALES> 21,883,962 30,331,515
<TOTAL-REVENUES> 22,495,204 31,226,783
<CGS> 7,813,737 9,347,707
<TOTAL-COSTS> 9,074,621 11,169,083
<OTHER-EXPENSES> 6,359,426 10,344,460
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 11,095,941 11,715,929
<INCOME-PRETAX> (4,034,784) (2,002,689)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,034,784) (2,002,689)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (21,336,550) 0
<CHANGES> 0 0
<NET-INCOME> (25,371,334) (2,002,689)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
EXHIBIT 99.01
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
__________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON
THE EXPIRATION DATE.
PANDA FUNDING CORPORATION
4100 Spring Valley Road, Suite 1001
Dallas, Texas 75244
LETTER OF TRANSMITTAL
To Tender for Exchange
11-5/8% Pooled Project Bonds, Series A due 2012
Exchange Agent:
BANKERS TRUST COMPANY
Facsimile Transmission:
(212) 250-6392
Confirm by telephone to:
Mr. Matthew Seeley
(212) 250-6657
By Certified Mail/Hand Delivery/Overnight Courier:
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Mr. Matthew Seeley
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated
_____________, 1997, (as the same may be amended or supplemented from
time to time, the "Prospectus") of Panda Funding Corporation, a
Delaware corporation (the "Issuer"), and this Letter of Transmittal
for 11-5/8% Pooled Project Bonds, Series A due 2012 which may be
amended from time to time (this "Letter of Transmittal"), which
together constitute the Issuer's offer (the "Exchange Offer") to
exchange $1,000 principal amount of its 11-5/8% Pooled Project Bonds,
Series A-1 due 2012 (the "Exchange Bonds") which have been registered
under the Securities Act of 1933, as amended (the "Securities Act")
for each $1,000 in principal amount of its outstanding 11-5/8% Pooled
Project Bonds, Series A due 2012 (the "Old Bonds") which were issued
and sold in a transaction exempt from registration under the
Securities Act. Each term used herein with its initial letter
capitalized and not otherwise defined herein shall have the meaning
assigned to such term in the Prospectus.
Only a registered holder of the Old Bonds may tender such Old
Bonds in the Exchange Offer. Any beneficial owner whose Old Bonds are
registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender should contact the
registered holder promptly and instruct such registered holder to
tender on such beneficial owner's behalf. To tender in the Exchange
Offer, a holder must, prior to the Expiration Date, either (a)
complete and sign this Letter of Transmittal (or a facsimile thereof),
in accordance with the instructions contained herein and in the
Prospectus, and deliver such Letter of Transmittal, together with any
signature guarantees and any other documents required by this Letter
of Transmittal, to the Exchange Agent at its address set forth on the
cover page of this Letter of Transmittal and the tendered Old Bonds
must either be (i) physically delivered to the Exchange Agent or (ii)
transferred by book-entry to the account maintained by the Exchange
Agent at The Depository Trust Company ("DTC") and a confirmation of
such book-entry transfer must be received by the Exchange Agent prior
to the Expiration Date, or (b) comply with the guaranteed delivery
procedures set forth under the caption "The Exchange Offer -
Guaranteed Delivery Procedures" in the Prospectus (see Instruction 3)
in the event a holder's Old Bonds are not immediately available, or
time will not permit such holder's Old Bonds or any other required
documents to reach the Exchange Agent prior to the Expiration Date.
To be validly tendered, the Old Bonds, together with a properly
completed Letter of Transmittal (or facsimile thereof), executed by
the holder of record thereof, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at the
address set forth on the cover page of this Letter of Transmittal
prior to 5:00 p.m., New York City time, on the Expiration Date, except
as otherwise provided under the guaranteed delivery procedures.
Upon satisfaction or waiver of the conditions of the Exchange
Offer, the Issuer will accept for exchange any and all Old Bonds which
are properly tendered and not withdrawn prior to the Expiration Date.
For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted properly tendered Old Bonds when, as and if the Issuer has
given oral or written notice thereof to the Exchange Agent. The
Exchange Agent will act as agent for the tendering holders of Old
Bonds for the purpose of receiving the Exchange Bonds from the Issuer
and transmitting the Exchange Bonds to each holder exchanging Old
Bonds.
The Instructions included with this Letter of Transmittal must be
followed in their entirety. Questions and requests for assistance or
for additional copies of the Prospectus or this Letter of Transmittal
may be directed to the Exchange Agent, at the address listed above, or
William C. Nordlund, General Counsel of the Issuer, at (972) 980-7159,
4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE
INSTRUCTIONS TO THIS LETTER OF TRANSMITTAL, CAREFULLY
BEFORE COMPLETING ANY BOX BELOW
List in Box 1 below the Old Bonds of which you are the registered
holder. If the space provided in Box 1 is inadequate, list the
certificate numbers and principal amount of Old Bonds on a separate
signed schedule and affix that schedule to this Letter of Transmittal.
TO BE COMPLETED BY ALL TENDERING HOLDERS
BOX 1
DESCRIPTION OF OLD BONDS TENDERED
(Attach additional signed pages, if necessary)
Aggregate
Name(s) and address(es), and if Principal Aggregate
applicable DTC account numbers, of Certificate Amount Principal
Registered Holder(s) of Old Bonds Number(s) Represented Amount
exactly as name(s) appear(s) on of Old Bonds(1) by Certicate(s) Tendered(2)
Old Bonds Certificate(s)
Totals:
(1) Need not be completed if Old Bonds are being
tendered by book-entry transfer.
(2) Unless otherwise indicated, the entire principal
amount of Old Bonds represented by a certificate or
book-entry confirmation delivered to the Exchange Agent
will be deemed to have been tendered. All tenders must
be in integral multiples of $1,000 of principal amount.
BOX 2
BENEFICIAL OWNER(S)
State of Principal Residence of Principal Amount of Tendered Old Bonds
Each Beneficial Owner of Tendered Held for Account of Beneficial Owner
Old Bonds
Ladies and Gentlemen:
The undersigned hereby tenders the Old Bonds described in Box 1
above pursuant to the terms and conditions described in the Prospectus
and this Letter of Transmittal. The undersigned is the registered
owner of all the tendered Old Bonds and the undersigned represents
that it has received from each beneficial owner of tendered Old Bonds
a duly completed and executed form of "Instruction to Registered
Holder from Beneficial Owner" accompanying this Letter of Transmittal,
instructing the undersigned to take the action described in this
Letter of Transmittal. Subject to, and effective upon, the acceptance
for exchange of the Old Bonds tendered with this Letter of
Transmittal, the undersigned exchanges, assigns and transfers to, or
upon the order of, the Issuer all right, title and interest in and to
the Old Bonds tendered.
The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent the agent and attorney-in-fact of the undersigned (with
full knowledge that the Exchange Agent also acts as the agent of the
Issuer) with respect to the tendered Old Bonds, with full power of
substitution, to: (a) deliver certificates for such Old Bonds to or
for the order of the Issuer; (b) deliver Old Bonds and all
accompanying evidence of transfer and authenticity to, or upon the
order of, the Issuer, upon receipt by the Exchange Agent, as the
undersigned's agent, of the Exchange Bonds to which the undersigned is
entitled upon the acceptance by the Issuer of the Old Bonds tendered
in the Exchange Offer; and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Old Bonds, all in
accordance with the terms of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed irrevocable and coupled with
an interest.
The undersigned hereby represents and warrants that the
undersigned has full right, power and authority to tender, exchange,
assign and transfer the Old Bonds tendered hereby and that the Issuer
will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Issuer to be necessary
or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned agrees that acceptance of any tendered Old Bonds
by the Issuer and the issuance of Exchange Bonds (together with the
guaranty of Panda Interfunding Corporation (the "Company") with
respect thereto) in exchange therefor shall constitute performance in
full by the Issuer and the Company of their obligations under the
Registration Rights Agreement (as defined in the Prospectus) and that,
upon the issuance of the Exchange Bonds, the Issuer and the Company
will have no further obligations or liabilities thereunder (except in
certain limited circumstances as set forth therein). By tendering Old
Bonds, the undersigned certifies, acknowledges and agrees that (a) the
Exchange Bonds to be acquired by the undersigned and any beneficial
owner(s) of such Old Bonds ("Beneficial Owner(s)") in connection with
the Exchange Offer are being acquired by the undersigned and such
Beneficial Owner(s) in the ordinary course of business of the
undersigned and any Beneficial Owner(s); (b) the undersigned (other
than a broker-dealer referred to clause (g) below) and each Beneficial
Owner are not participating and do not intend to participate in the
distribution (within the meaning of the Securities Act) of the
Exchange Bonds; (c) the undersigned and each Beneficial Owner have no
arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the
Exchange Bonds; (d) the undersigned and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange
Offer for the purpose of distributing the Exchange Bonds must comply
with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction of
the Exchange Bonds acquired by such person and cannot rely on the
position of the staff of the Commission that is discussed under "The
Exchange Offer - Resales of Exchange Bonds" in the Prospectus; (e) the
undersigned and each Beneficial Owner understand that a secondary
resale transaction described in clause (d) above should be covered by
an effective registration statement containing the selling security
holder information required by Item 507 of Regulation S-K of the
Commission; (f) neither the undersigned nor any Beneficial Owner is an
"affiliate" (within the meaning of Rule 405 promulgated under the
Securities Act) of the Company or the Issuer, or if it is an
affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable;
and (g) each broker-dealer that receives Exchange Bonds for its own
account in exchange for Old Bonds, where such Old Bonds were acquired
by such broker-dealer as a result of market making activities or other
trading activities, will deliver a prospectus in connection with any
resale of such Exchange Bonds. By so acknowledging and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned acknowledges that the tender of Old Bonds in the
Exchange Offer will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the
conditions of the Exchange Offer. The undersigned understands that
the Issuer may accept the undersigned's tender by giving oral or
written notice of acceptance to the Exchange Agent, at which time the
undersigned's right to withdraw such tender will terminate. All
authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the undersigned,
and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns. Tenders may be withdrawn
only in accordance with the procedures set forth in the Instructions
contained in this Letter of Transmittal.
Unless otherwise indicated in Box 4 or 5 below, the Exchange
Agent will issue and deliver Exchange Bonds (and, if applicable, any
Old Bonds not tendered or exchanged but represented by a certificate
also encompassing Old Bonds which are tendered or exchanged) to the
undersigned at the address set forth in Box 1 above, or if tenders are
made by book-entry transfer, by crediting the undersigned's account
maintained at DTC.
The undersigned acknowledges that the Exchange Offer is subject
to the more detailed terms set forth in the Prospectus and, in case of
any conflict between the terms of the terms of the Prospectus and this
Letter of Transmittal, the Prospectus shall prevail.
___ CHECK HERE IF TENDERED OLD BONDS ARE ENCLOSED HEREWITH.
___ CHECK HERE IF TENDERED OLD BONDS ARE BEING DELIVERED BY BOOK-
ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT WITH DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Account Number
Transaction Code Number
___ CHECK HERE IF TENDERED OLD BONDS ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s)
Date of Execution of Notice of Guaranteed Delivery
Window Ticket Number (if available)
Name of Institution which Guaranteed Delivery
Account Number (if delivered by book-entry transfer)
___ CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name
Address
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
TO BE COMPLETED BY ALL TENDERING HOLDERS
BOX 3
PLEASE SIGN HERE
WHETHER OR NOT OLD BONDS ARE BEING
PHYSICALLY TENDERED HEREBY
This box must be signed by registered holder(s) of Old Bonds
as their name(s) appear on certificate(s) for Old Bonds, or
by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Letter of
Transmittal. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a
fiduciary or representative capacity, such person must set
forth his or her full title below. (See Instruction 4)
X
X
Signature(s) of Owner(s) or Authorized Signatory
Date:
Name(s):
(Please Print)
Capacity:
Address:
(Include Zip Code)
Area Code and Telephone No.:
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (See Instruction 4)
Certain Signatures Must Be Guaranteed by an Eligible
Institution
(Name of Eligible Institution Guaranteeing Signatures)
(Address (including zip code) and Telephone Number
(including area code) of Firm)
(Authorized Signature)
(Title)
(Printed Name)
Date:
PAYOR'S NAME: PANDA FUNDING CORPORATION
SUBSTITUTE
FORM W-9
Part 1-Please Social Security Number
Provide Your
TIN in the Box at OR
Right and Certify
Department of the by Signing and Employer ID Number
Treasury Internal Dating Below
Revenue Service
Payor's Request for Part 2-Certification-Under Penalties Part 3-
Taxpayer of Perjury, I certify: Awaiting
Identification
Number (TIN) (1) The number shown on TIN
this form is my correct
Taxpayer Identification
Number (or I am waiting for
a number to be issued to
me), and
(2) I am not subject to
back withholding because
(a) I am exempt from backup
withholding, (b) I have not
been notified by the
Internal Revenue Service
(the "IRS") that I am
subject to backup
withholding as a result of
a failure to report all
interest or dividends, or
(c) the IRS has notified me
that I am no longer subject
to backup withholding.
Certification Instructions -
You must cross out item (2)
above if you have been
notified by the IRS that you
are subject to backup
withholding because of under
reporting interest or
dividends on your tax return.
However, if after being
notified by the IRS that you
were subject to backup
withholding you received
another notification from the
IRS stating that you are no
longer subject to backup
withholding, do not cross out
item (2).
SIGNATURE DATE
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO
THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer
identification number has not been issued to me, and either
(a) I have mailed or delivered an application to receive a
taxpayer identification number to the appropriate Internal
Revenue Service Center or Social Security Administration
Office or (b) I intend to mail or deliver such an
application in the near future. I understand that if I do
not provide a taxpayer identification number within sixty
(60) days, 31% of all reportable payments made to me
thereafter will be withheld until I provide such a number.
Signature Date
BOX 4 BOX 5
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 6 and 7) (See Instructions 6 and 7)
To be completed ONLY if To be completed ONLY if
certificates for Old Bonds in certificates for Old Bonds in
a principal amount not a principal amount not
exchanged, or Exchange Bonds, exchanged, or Exchange Bonds,
are to be issued in the name are to be sent to someone
of someone other than the other than the person whose
person whose signature signature appears in Box 3 or
appears in Box 3, or in the to an address other than that
case of Old Bonds delivered shown in Box 1.
by book-entry transfer which
are not exchanged, are to be
credited to an account
maintained at DTC other than
the account indicated above.
Issue: Deliver:
(check appropriate boxes) (check appropriate boxes)
Old Bonds not tendered to: Old Bonds not tendered to:
Exchange Bonds to: Exchange Bonds to:
(Please Print) (Please Print)
Name: Name:
Address: Address:
Credit DTC Account Number (if
applicable):
Please complete the Substitute Please complete the Substitute Form W-9
Substitute Form W-9
Tax Identification or Social Tax Identification or Social
Security Number: Security Number:
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates.
Certificates for Old Bonds or a confirmation of book-entry transfer,
as the case may be, as well as a properly completed and duly executed
Letter of Transmittal and any other documents required by this Letter
of Transmittal, must be received by the Exchange Agent at its address
set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date.
THE METHOD OF DELIVERY OF THE OLD BONDS AND THIS LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS
AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL,
IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY
SERVICE. IF DELIVERY IS TO BE MADE BY MAIL, IT IS SUGGESTED THAT THE
HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE. DELIVERY WILL BE DEEMED MADE WHEN ACTUALLY RECEIVED
BY THE EXCHANGE AGENT. NO LETTER OF TRANSMITTAL OR THE OLD BONDS
SHOULD BE SENT TO THE ISSUER OR THE COMPANY.
2. Beneficial Owner Instructions to Registered Holders. Any
Beneficial Owner whose Old Bonds are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact the registered holder promptly and
instruct such registered holder to tender on such Beneficial Owner's
behalf. See "Instructions to Registered Holder from Beneficial
Owner" accompanying this Letter of Transmittal.
3. Guaranteed Delivery Procedures. If a holder of Old Bonds
desires to tender such Old Bonds and if the Old Bonds are not
immediately available, or time will not permit such holder's Old Bonds
or any other required documents to reach the Exchange Agent before
5:00 p.m., New York City time, on the Expiration Date, a tender for
exchange may be effected if: (a) the tender for exchange is made by
or through an Eligible Institution; (b) prior to 5:00 p.m., New York
City time, on the Expiration Date, the Exchange Agent has received
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or hand
delivery) setting forth the name and address of the holder of the Old
Bonds and the principal amount of Old Bonds tendered for exchange,
stating that tender is being made thereby and guaranteeing that,
within five Business Days after the Expiration Date, the duly executed
Letter of Transmittal, properly completed and validly executed,
together with the Old Bonds in proper form for transfer (or
confirmation of book-entry transfer of such Old Bonds into the
Exchange Agent's account with DTC), and any other documents required
by this Letter of Transmittal and the instructions thereto, will be
deposited by the Eligible Institution with the Exchange Agent; and (c)
such properly completed and executed Letter of Transmittal, as well as
the certificate(s) representing all tendered Old Bonds in proper form
for transfer (or confirmation of book-entry transfer of such Old Bonds
into the Exchange Agent's account with DTC) and all other documents
required by this Letter of Transmittal, are received by the Exchange
Agent within five Business Days after the Expiration Date.
4. Signatures on this Letter of Transmittal; Guarantee of
Signatures; Bond Powers. If this Letter of Transmittal is signed by
the holder(s) of Old Bonds tendered hereby, the signature must
correspond with the name(s) as written on the face of the
certificate(s) for such Old Bonds, without alteration, enlargement or
any change whatsoever. If any of the Old Bonds tendered hereby are
owned by two or more joint owners, all owners must sign this Letter of
Transmittal. If any tendered Old Bonds are held in different names on
several certificates, it will be necessary to complete, sign and
submit as many separate copies of this Letter of Transmittal as there
are names in which certificates are held.
Signatures on a Letter of Transmittal must be guaranteed unless
the Old Bonds tendered pursuant thereto are (a) tendered by a
registered holder of the Old Bonds who has not completed the Box 4
entitled "Special Issuance Instructions" or Box 5 entitled "Special
Delivery Instructions" in this Letter of Transmittal or (b) tendered
for the account of an Eligible Institution (as defined below). In the
event that signatures on a Letter of Transmittal are required to be
guaranteed, such guarantee must be by a firm that is a member of a
registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or
trust company having an office or correspondent in the United States,
or by an entity that is otherwise an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Securities Exchange Act
of 1934, as amended (an "Eligible Institution").
If this Letter of Transmittal is signed by a person other than
the registered holder of any Old Bonds listed therein, such Old Bonds
must be endorsed by the registered holder or accompanied by a properly
completed bond power or other written instrument of transfer in form
satisfactory to the Issuer in its sole discretion, signed by such
registered holder as such registered holder's name appears on such Old
Bonds. If this Letter of Transmittal is signed by the registered
holder and (a) the entire principal amount of the holder's Old Bonds
is tendered or (b) untendered Old Bonds are to be issued to the
registered holder, then the registered holder need not endorse any
certificates for tendered Old Bonds or provide a separate bond power.
In any other case, the registered holder must transmit a separate bond
power with this Letter of Transmittal.
If this Letter of Transmittal or any Old Bonds or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing,
and proper evidence satisfactory to the Issuer of their authority to
so act must be submitted.
5. Tax Identification Number. Unless an exemption applies
under the applicable law and regulations concerning "backup
withholding" of federal income tax, the Exchange Agent will be
required to withhold, and will withhold, 31% of the gross proceeds
otherwise payable to a holder pursuant to the Exchange Offer if the
holder does not provide his or her taxpayer identification number
(social security number or employer identification number) and certify
that such number is correct. Each tendering holder should complete and
sign the Substitute Form W-9 included as part of this Letter of
Transmittal so as to provide the information and certification
necessary to avoid backup withholding, unless an applicable exemption
exists and is proved in a manner satisfactory to the Issuer and the
Exchange Agent. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
The Issuer reserves the right in its sole discretion to take
whatever steps it deems necessary to comply with the Issuer's
obligation regarding backup withholding.
6. Partial Tenders; Withdrawals. If less than the entire
principal amount of any Old Bond is tendered, the tendering holder
must fill in the principal amount tendered in the fourth column of Box
1 above. The entire principal amount of Old Bonds represented by a
certificate delivered to the Exchange Agent or transferred by book-
entry to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. In the case of Old Bonds tendered by
delivery of a certificate, a certificate for Old Bonds in a principal
amount not accepted for exchange or not tendered will be issued to and
sent to the holder, unless otherwise provided in Box 4 or 5, as soon
as practicable after the Expiration Date. In the case of Old Bonds
tendered by a book-entry transfer, the principal amount not accepted
for exchange or not tendered will be credited to the account
maintained by the holder with DTC, unless otherwise provided in Box 4,
as soon as practicable after the Expiration Date.
Tenders of Old Bonds may be withdrawn at any time prior to the
Expiration Date. Thereafter, such tenders are irrevocable. To withdraw
a tender of Old Bonds in the Exchange Offer, a written notice of
withdrawal, delivered by hand, mail or facsimile transmission, must
(a) be received by the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date at the address set forth on the
cover hereof, (b) specify the name of and be signed by the registered
holder of such Old Bonds in the same manner as the applicable Letter
of Transmittal (including any required signature guarantees) as set
forth in "The Exchange Offer - Procedures for Tendering" in the
Prospectus, (c) specify the name of the person identified in this
Letter of Transmittal as having tendered the Old Bonds to be withdrawn
and (d) specify the aggregate principal amount represented by such
withdrawn Old Bonds. If Old Bonds have been tendered pursuant to the
procedures for book-entry transfer as set forth herein, any notice of
withdrawal must also specify the name and number of the account at DTC
to be credited with the withdrawn Old Bonds. Withdrawals of tenders
of Old Bonds may not be rescinded, and any Old Bonds withdrawn will
thereafter be deemed not validly tendered for purposes of the Exchange
Offer; provided, however, that withdrawn Old Bonds may be re-tendered
by again complying with the procedures for tendering Old Bonds
described herein at any time prior to 5:00 p.m., New York City time,
on the Expiration Date.
All questions as to the validity, form and eligibility (including
time of receipt) of notices of withdrawal will be determined by the
Issuer, such determination to be final and binding. None of the
Company, the Issuer, the Exchange Agent or any other person will be
under any duty to give notification of any defects or irregularities
in any notice of withdrawal of Old Bonds or incur any liability for
failure to give any such notification.
7. Special Issuance and Delivery Instructions. Tendering
holders must indicate in Box 4 or 5, as applicable, the name and
address to which the Exchange Bonds or certificates for principal
amounts of Old Bonds not tendered or not accepted for exchange are to
be issued and/or sent, if different from the name and address of the
person signing this Letter of Transmittal. In the case of issuance in
a different name, the tax identification number of the person named
must also be indicated. Holders tendering Old Bonds by book-entry
transfer may request that principal amounts of Old Bonds not tendered
or not accepted for exchange be credited to such account maintained at
DTC as such holder may designate.
8. Transfer Taxes. The Issuer will pay all transfer taxes, if
any, applicable to the transfer of Old Bonds to it or its order
pursuant to the Exchange Offer. If, however, the Exchange Bonds or
Old Bonds not exchanged are to be delivered to, or are to be issued in
the name of, any person other than the record holder, or if tendered
certificates are recorded in the name of any person other than the
person signing this Letter of Transmittal, or if a transfer tax is
imposed by any reason other than the transfer of Old Bonds to the
Issuer or its order pursuant to the Exchange Offer, then the amount of
such transfer taxes (whether imposed on the record holder or any other
person) will be payable by the tendering holder. If satisfactory
evidence of payment of taxes or exemption from taxes is not submitted
with this Letter of Transmittal, the amount of transfer taxes will be
billed directly to the tendering holder.
Except as provided in this Instruction 8, it will not be
necessary for transfer tax stamps to be affixed to the certificates
listed in this Letter of Transmittal.
9. Validity of Tenders. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance of Old
Bonds tendered for exchange will be determined by the Issuer in its
sole discretion, whose determination will be final and binding. The
Issuer reserves the absolute right to reject any or all tenders that
are not in proper form or the acceptance of which would, in the
opinion of the Issuer or counsel for the Issuer, be unlawful. The
Issuer also reserves the right to waive certain of the conditions to
the Exchange Offer or any irregularities or defects in the tender of
Old Bonds. The Issuer's interpretation of the terms and conditions of
the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding on all persons. Unless waived,
any irregularities in connection with tenders of Old Bonds must be
cured within such time as the Issuer shall determine. Neither the
Company, the Issuer, the Exchange Agent nor any other person shall be
under any duty to give notifications of defects or irregularities in
such tenders or shall incur any liability for failure to give such
notification. Tenders of Old Bonds will not be deemed to have been
made until any defects with respect to such tenders have been cured or
waived.
10. Waiver of Conditions. The Issuer reserves the absolute
right to amend or waive any of the specified conditions in the
Exchange Offer in the case of any Old Bonds tendered.
11. Mutilated, Lost, Stolen or Destroyed Certificates. Any
holder whose certificates for Old Bonds have been mutilated, lost,
stolen or destroyed should contact the Exchange Agent at the address
indicated above for further instructions.
12. Requests for Assistance or Additional Copies. Questions
relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus or this Letter of Transmittal, may
be directed to the Exchange Agent at the address listed above, or
William C. Nordlund, General Counsel of the Issuer, at (972) 980-7159,
4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244.
IMPORTANT: This Letter of Transmittal (together with certificates
representing tendered Old Bonds or a confirmation of a book-entry
transfer and all other required documents) must be received by the
Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
EXHIBIT 99.02
NOTICE OF GUARANTEED DELIVERY
for tender of
11-5/8% Pooled Project Bonds, Series A due 2012
of
Panda Funding Corporation
This form or one substantially equivalent hereto must be used to
accept the Exchange Offer (as defined below) if the 11-5/8% Pooled Project
Bonds, Series A due 2012 (the "Old Bonds") of Panda Funding Corporation
(the "Issuer") are not immediately available or if the procedure for book-
entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) as set forth in the Prospectus dated
January ___, 1997 (as the same may be amended or supplemented from time to
time, the "Prospectus") of the Issuer under the caption "The Exchange Offer
- - Procedures for Tendering" and in the Letter of Transmittal. Such form
may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or letter to the Exchange Agent. Each term used herein with
its initial letter capitalized and not otherwise defined shall have the
meaning assigned to such term in the Prospectus.
TO:
BANKERS TRUST COMPANY
(the "Exchange Agent")
Facsimile Transmission:
(212) 250-6392
Confirm by telephone to:
Mr. Matthew Seeley
(212) 250-6657
By Certified Mail/Hand Delivery/Overnight Courier:
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Mr. Matthew Seeley
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged,
the principal amount of Old Bonds set forth below pursuant to the
guaranteed delivery procedures described in the Prospectus and the Letter
of Transmittal.
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1997, unless
extended by the Issuer. With respect to the Exchange Offer, "Expiration
Date" means such time and date, or if the Exchange Offer is extended, the
latest time and date to which the Exchange Offer is so extended by the
Issuer.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees
in bankruptcy and other legal representatives of the undersigned.
Name(s) of Record Holders: Principal amount of Old Bonds tendered:
$
Certificate Nos. of Old Bonds (if available):
(Please Type or Print)
Address:
IF OLD BONDS WILL BE DELIVERED BY BOOK
Area Code and ENTRY TRANSFER, CHECK BOX AND PROVIDE THE
Telephone No.: DEPOSITORY TRUST COMPANY ACCOUNT
NUMBER:
Capacity (full title), if signing
in a representative capacity:
Account No.:
Tax Payer Identification
or Social Security Number:
SIGNATURES
Signature of Record Holder
Signature of Record Holder (if more than one)
Dated:
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the
United States or an entity that is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), hereby guarantees
(a) that the above-named person(s) own(s) the above-described securities
tendered hereby within the meaning of Rule 10b-4 under the Exchange Act,
(b) that such tender of the above-described securities complies with Rule
10b-4, and (c) that delivery to the Exchange Agent of securities tendered
hereby, in proper form for transfer, or confirmation of book-entry transfer
of such securities into Exchange Agent's account at The Depository Trust
Company pursuant to the procedure for book-entry transfer, in either case
with delivery of a properly completed and duly executed Letter of
Transmittal and any other required documents, is being made within five
Business Days after the Expiration Date.
(Name of Firm) (Authorized Signature)
Address:
Title:
Name:
(please type or print)
Area Code and
Telephone No.:
Date:
Fax No.:
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OLD BONDS WITH THIS NOTICE.
OLD BONDS MUST BE SENT TO THE EXCHANGE AGENT WITH A PROPERLY COMPLETED AND
DULY EXECUTED LETTER OF TRANSMITTAL.
